1,721,045 research outputs found
Choosing price or quantity? The role of delegation and network externalities
Full text linkWe consider a differentiated duopoly and endogenise the firm choice of the strategy variable (price or quantity) to play on the product market in the presence of network externalities. We model this choice by assuming both competition between entrepreneurial (owner-managed) firms and competition between managerial firms in which market decisions are delegated from owners to revenue-concerned managers. While network externalities are shown not to alter the symmetric equilibrium quantity choice arising in the no-delegation case, sufficiently strong network effects allow us to eliminate the multiplicity of equilibria under delegation and lead to a unique equilibrium in which both firms choose price
A convex mapping for the first order approach. A note
Full text linkThe first order approach to solving the standard one-dimensional principal-agent model is conditional upon the relevant stochastic production function obeying two noteworthy restrictions: that the Likelihood Ratio be monotonically increasing in output, and that the distribution function be convex in effort. It is usually claimed that such conditions are very restrictive, as very few of the standard probability distributions satisfy both properties. The purpose of this note is to show that some simple transformations or parametrizations are available, that enable one to work out convenient distributions with the required propertie
Price Competition in International Mixed Oligopolies
Full text linkIn this paper we analyze the effects of international competition in a mixed oligopoly framework, with price competition and differentiated products. The properties of equilibria, and the impact of policy measures such as privatizations and cross-border acquisitions, are studied both in a single-country and in a two-country framework, under the hypothesis that all firms share the same linear technology. Besides showing that the international competition in a mixed market allows for efficiency gains which are consistent with binding budget constraints for the public firm, we identify the market structures and the competitive environment which support welfare enhancing privatization policies, independently of any exogenous or endogenous cost differential between public and private producers. In particular, we suggest that the cross-country distribution of firms, the degree of product substitutability and the overall density of the market are the key elements in the assessment of the desirability of public ownership
Quantity competition, endogenous motives and behavioral heterogeneity
No full textThe article shows that strategic quantity competition can be characterized by behavioral heterogeneity, once competing firms are allowed in a pre-market stage to optimally choose the behavioral rule they will follow in their strategic choice of quantities. In particular, partitions of the population of identical firms in which some of them are profit maximizers while others follow an alternative criterion, turn out to be deviation-proof equilibria both in simultaneous and sequential game structures. Our findings that in a strategic framework heterogeneous behavioral rules may be consistent with individual incentives is a first attempt to provide a game-theoretic microfoundation of heterogeneity
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