1,720,982 research outputs found
Price discrimination and the location choice of a durable goods monopoly
No full textDelivered pricing by a spatial monopoly amounts to third degree price discrimination. Well known results in spatial economics show that the monopolist location choice is efficient under delivered pricing and generally inefficient under mill pricing. By contrast, the present paper shows that if the monopolist sells a durable good the location is inefficient also under delivered pricing . Under mill pricing the same inefficiency occur
Unexploited comparative advantages in a differentiated duopoly
No full textThe present paper analyses the question whether firms choose product varieties for which they enjoy a comparative advantage with respect to their rivals. In a limited set-up, that of a vertically differentiated duopoly, it is here found that firms may not choose in such an optimal way, but rather end up in “perverse” equilibria where the firm most efficient in producing a high quality variant of a product produces instead the low quality one, and leaves to the less efficient rival the high quality position
"Innocuous" minimum quality standards
No full textThe present note shows that "innocuous" Minimum Quality Standards, namely below the lowest quality level in a market, may have effects on equilibrium outcomes. Such a MQS reduces the incentive to invest in R&D by the quality-leading firm
Exit, sunk costs, and the selection of firms
Full text linkThis paper aims to identify the cost characteristics of exiting firms whenever firms are playing an infinite horizon supergame with time-invariant cost and demand functions. With more than two firms, the problem of which firms exit is quite similar to a coalition formation one. Solving this coalition formation problem, we obtain that the exiting firms are those with higher average cost functions whenever reentry is costless while, whenever reentry is unprofitable, the exiting firms are those with lower marginal (and possibly) average cost functions. Since reentry costs are typically sunk, our analysis points out that the presence of sunk costs affects not only the size (as it is well known) but also the composition of the industry
Good vs. bad characteristics in vertical differentiation
No full textWe consider a vertically differentiated duopoly where product quality is defined as the combination of N characteristics. Good (respectively, bad) characteristics are those which increase (decrease) utility with respect to the status quo. We prove that maximum (minimum) differentiation obtains along all characteristics respect to which marginal profits are positive (negative)
Debt restructuring with multiple creditors and the role of exchange offers
Full text linkExploiting the analogy with the public provision of a public good, this paper studies debt restructuring with an arbitrary number of creditors using mechanism design. Creditors differ in the value they expect to receive in bankruptcy, and this value is private information. As with public goods, too little debt forgiveness is graned in equilibrium relative to the first bes
Imperfect information and employment variability : a note
No full textThis paper studies the effects of uncertainty about the workers' skills or productivity on the hiring decisions of a monopolistic firm. When productivity is not observable, and cannot be conditioned upon, less-than-full information is shown to impart a downward bias to hirings across all states of nature. The reason is that the firm, by keeping employment lower than under full information, exploits its hiring decisions in order is shape the probability distribution of workers' types at the firm level
Market-share import restraints in oligopoly
No full textThe paper contributes to the theory of proportional import restraints, that is restraints that are defined in terms of percentage market shares instead of in terms of volume of imports. It is shown that an increase in the market share of foreign firms from zero has a negative effect locally on domestic welfare. In the case of a domestic oligopoly, domestic firms may prefer a proportional restraint over an equivalent volume restrain
Rationing in a durable goods monopoly
No full textWe offer a new explanation of equilibrium rationing. As is well known, a monopolist selling a durable good and not able to commit to a price sequence has an incentive to lower the price once the consumers with the greatest willingness to pay have bought, but this induces consumers to postpone purchases. We show that rationing reduces the incentive to lower future prices and may allow the monopolist to increase his discounted profi
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