club good intermediaries abstract the emergence and ubiquitous presence in everyday life of digital goods such as songs movies and e books give renewed salience to the problem of providing public goods with exclusion because digital goods are typically traded via intermediaries like itunes amazon and netflix the question arises as to the optimal pricing mechanism for such club good intermediaries we derive the direct bayesian optimal mechanism for allocating club goods when the mechanism designer is an intermediary that neither produces nor consumes the goods and we develop an indirect mechanism that implements this mechanism we also derive sufficient conditions for the intermediary optimal mechanism to be implementable with revenue sharing contracts which are widely used in e business

bank risk within and across equilibria abstract the global financial crisis highlighted that the financial system can be most vulnerable when it seems most stable this paper models non linear dynamics in banking small shocks can lead from an equilibrium with few bank defaults straight to a full freeze the mechanism is based on amplification between adverse selection on banks funding market and moral hazard in bank monitoring our results imply trade offs between regulators microprudential desire to shield individual weak banks and the macroprudential consequences of doing so moreover limiting bank reliance on wholesale funding always reduces systemic risk but limiting the correlation between bank portfolios does not

platform competition in two sided markets many if not most markets with network externalities are two sided to succeed platforms in industries such as software portals and media payment systems and the internet must get both sides of the market on board accordingly platforms devote much attention to their business model that is to how they court each side while making money overall this paper builds a model of platform competition with two sided markets it unveils the determinants of price allocation and end user surplus for different governance structures profit maximizing platforms and not for profit joint undertakings and compares the outcomes with those under an integrated monopolist and a ramsey planner jel l5 l82 l86 l96

evolving market structure an ace model of price dispersion and loyalty we present an agent based computational economics ace model of the wholesale sh market in marseille two of the stylized facts of that market are high loyalty of buyers to sellers and persistent price dispersion although it is every day the same population of sellers and buyers that meets in the same market hall in our ace model sellers decide on quantities to supply prices to ask and how to treat loyal customers while buyers decide which sellers to visit and which prices to accept learning takes place through reinforcement the model explains both stylized facts price dispersion and high loyalty in a coevolutionary process buyers learn to become loyal as sellers learn to o er higher utility to loyal buyers while these sellers in turn learn to o er higher utility to loyal buyers as they happen to realize higher gross revenues from loyal buyers the model also explains the e ect of heterogeneity of the buyers we analyze how this leads to subtle di erences in the shopping patterns of the di erent types of buyers and how this is

cascading contingent protection and vertical market structure abstract cascading contingent protection may occur when protection of an upstream industry transfers injury to the downstream industry and increases the likelihood that this industry asks and receives protection this paper examines cascading protection within a sequential petitioning model where the upstream industry acts as leader the analysis identifies market structure and the vertical linkage between the upstream and the downstream industry as important determinants of the occurrence of cascading protection it is shown that the circumstances which make cascading protection more likely to occur also make it more likely that this protection has serious negative welfare consequences

bertrand competition for inputs and walrasian outcomes market making by merchants who obtain stock from suppliers and resell it to con sumers is modeled as a two stage pricing game with winner take all c ompetition for the inputs in contrast to fixed capacity models the re is a unique subgame perfect nash equilibrium spne which is walr asian for elastic demand and non walrasian for inelastic demand alte rnatively when merchants first sell forward contracts to consumers a nd then compete for supplies the unique spne is always walrasian th us the author has an equilibrium model in which walrasian price aris es not from the benevolent actions of a fictitious auctioneer but fr om optimal price setting behavior of merchants copyright 1988 by american economic association

bertrand competition with subcontracting we investigate how the possibility of subsequently subcontracting production to each other influences rivals initial competition for a contract or a market as a two stage game in its first stage the two firms engage in price competition to supply a contract or a market in the second stage the firms may subcontract production to each other it is supposed that the firms produce the identical product with the same strictly convex cost function the incentive for subcontracting comesfrom the strictly convex production costs a firm is obliged to supply the entire quantity demanded at its quoted price our analysis discloses that if the winner of the game s first stage determines the terms of the subcontract in its second stage there exists a unique subgame perfect nash equilibrium spne in pure strategies in which the firms bid the same price in the first stage and both receive zero profits on the other hand if the loser of the game s first stage sets the terms of the subcontract in the second stage there exists a unique spne in pure strategies in which the firms bid the same price in the first stage and both receive positive profits the presence of the possibility of subcontracting supports a unique spne in pure strategies even though no actual subcontracting may occur the spne price is below the socially optimal price in the first case and is above it in the second case we also consider other modes of sharing the gains from subcontracting between the two firms such as the nash bargaining solution

multilateral bargaining and downstream competition we examine multilateral bargaining in vertical supply relationships that involve an upstream manufacturer who sells through two competing retailers in these relationships the negotiations are interdependent and bargaining externality may arise across the retailers in addition the timing by which the manufacturer negotiates with the retailers becomes important in simultaneous bargaining the retailers negotiate without knowing if an agreement has been reached in the other retail channel whereas in sequential bargaining the retailer in the second negotiation is able to observe whether an agreement was reached in the first negotiation we show that simultaneous bargaining is optimal for the manufacturer when the retail prices and profitability are similar and sequential bargaining is preferred when the dispersion in the retail prices is sufficiently large as a result of ex post renegotiations the manufacturer may strategically stock out the less profitable retailer who charged a relatively low retail price and exclusively supply only the retailer who charged a relatively high retail price and maintained high channel profitability moreover ex post multilateral bargaining can buffer downstream competition and thus lead to positive retail profits even in markets that are close to perfect competition

price competition in a capacity constrained duopoly abstract this paper characterizes the set of nash equilibria in a model of price setting duopoly in which each firm has limited capacity and demand is continuous and decreasing in general there is a unique equilibrium so that comparative static exercises are meaningful the properties of the equilibrium conform with a number of stylized facts the equilibrium prices are lower the smaller is demand relative to capacity when demand is in an intermediate range the firms use mixed strategies they randomly hold sales if capacities are chosen simultaneously before prices the set of equilibrium capacities coincides with the set of cournot quantities

financial intermediation and the optimal tax system in this paper a stylized general equilibrium model is constructed to analyze the relative efficiency of taxing financial intermediaries a crucial feature of the model is that tax collection costs are endogenous i e they result from primitive assumptions about information and transaction costs instead of being assumed ad hoc the model provides useful insights into the welfare costs and incidence of banks reserve requirements or equivalently of a tax on deposits in particular it is shown that a tax on bank deposits can be part of an optimal tax system provided banks monopoly power is significant however if the banking industry is perfectly competitive the first dollar of revenue is more efficiently collected by a uniform capital income tax although a strictly positive welfare loss is incurred

a bargaining model of financial intermediation abstract in a financial market the investor searches for investment projects and bargains with the entrepreneur about the financial contract alternatively he may delegate search and bargaining to a financial intermediary delegation generates a commitment advantage in bargaining it may however induce excessively risky investments because the investor cannot monitor the intermediary s search behavior this restricts the parameter constellations under which equilibrium intermediation occurs competition may not reduce the intermediaries profits to zero because of incentive restrictions

credit and sharecropping in agrarian societies this paper considers a model of linkage between land labor and credit transactions in the context of sharecropping the paper s objectives are a to derive and characterize the equilibrium in a model of a land scarce labour abundant economy under sharecropping given an infinitely elastic supply of identical sharecroppers at a reservation utility and b to demonstrate that in an imperfect market a landlord may offer credit to his tenant sometimes even at a subsidized rate of interest without necessarily insisting that the sharecropper borrow only from him precluding an involuntary linkage between credit and land transations it has been demonstrated that regardless of the presence or absence of linkage or any other control by the landlord as long as he can vary the size of the plot given to a tenant and there are enough potential tenants in equilibrium contracts a tenants utility under sharecropping will be the same as that which he could have obtained as a full time wage laborer this result implies that policies other than land reform will not affect the welfare of tenants

banks as coordinators of economic growth and stability microfoundation for macroeconomy with externality abstract competition among banks promotes growth and stability for an economy with production externality following arrow and debreu 1954 6 i formulate a standard growth model with externality a two period version of romer 1986 39 as a game among consumers firms and intermediaries the walrasian equilibrium with an auctioneer does not achieve the social optimum without an auctioneer or intermediaries i show that no nash equilibrium exists with several banks strategically intermediating capital a nash equilibrium emerges with a realistic institution i e an interbank market with a negotiation process in the loan market the equilibrium outcome is uniquely determined and socially optimal

are exports a monotonic function of exchange rate volatility evidence from disaggregated pork exports production and marketing lags in agri food supply chains often force agricultural producers and food processors to commit to output targets before prices and exchange rates are realized a theoretical model illustrates how the processor s degree of risk aversion and domestic sales may cause the relationship between volatility of the exchange rate and exports to be non monotonic the relationship between exchange rate volatility and quebec pork exports to the united states and japan is investigated using linear and non linear estimation methods the results support the hypothesis that the relationship between exports and volatility is non monotonic

upstream capacity constraint and the preservation of monopoly power in private bilateral contracting this article presents a model of private vertical contracting with a capacity constrained monopolistic supplier i consider full capacity beliefs that are consistent with an upstream capacity constraint and are wary when the constraint is tight or production is costless i show that facing a capacity constraint the supplier may preserve its monopoly power in equilibrium this result stands in sharp contrast to the standard result that the supplier cannot preserve its monopoly power which holds under the usual implicit assumption of an infinite production capacity

market making oligopoly this paper analyzes price competition between market makers who set costly capacity constraints before they intermediate between producers and consumers the unique equilibrium outcome with pure strategies at the capacity stage is the cournot outcome the paper thus provides a rationale for cournot type competition between market makers this contrasts with previous findings in the literature where due to the absence of capacity constraints that are set ex ante the bertrand result typically obtains

price setting merchants in a simple trade model abstract in lieu of a fictitious walrasian auctioneer price determination in a simple two country two good trade model is explicitly modelled as the strategic price setting behavior of merchants the results depend on the order in which countries are visited and whether or not the supply is backward bending theorem 1 establishes sufficient conditions for the walrasian outcome to be the unique subgame perfect nash equilibrium spne theorem 2 shows when the unique spne is non walrasian

banking competition and market efficiency this paper analyses competition among financial intermediaries in a set up where financial intermediaries economize on duplicated monitoring diamond 1984 we analyse two different games in which both direct trade and indirect trade are available we show that in general equilibrium outcomes are inefficient so that diamond s efficiency result is fragile intermediation may increase rather than decrease transaction costs disintermediation may also be an equilibrium we discuss the role played by the nonconvexities of banks technology and that played by competition for deposits and loans

reach for the stars a strategic bidding game we examine two sided competition in a duopoly market for differentiated products downstream the two firms compete in prices upstream they compete in bidding to hire talent input and there is one unique superstar the outcome depends on the downstream effect of only one firm employing the superstar when this intensifies downstream competition both firms are worse off than they would be if no superstar talent were available when the hiring of the superstar softens downstream competition both firms benefit but a winner s curse emerges in which the firm winning the superstar talent earns less profit than its rival

educational financing and lifetime earnings this paper formulates and estimates a dynamic programming model of optimal educational financing decisions the main purpose of the paper is to measure the effect of short term parental cash transfers received during school on educational borrowing and in school work decisions and on post graduation lifetime earnings the estimated parameters of the model imply that parental cash transfers do not significantly influence post graduation lifetime earnings long term factors such as family background and prior human capital investments are more important parental cash transfers do however significantly determine the decision to borrow or work during school and the level of lifetime consumption

the role of interbank markets in monetary policy a model with rationing the empirical research on monetary transmission has reported a number of puzzles challenging extant theoretical models of the transmission mechanism in this paper we argue that asymmetric information in the interbank market may be important to have a better understanding of the mechanisms at work in the transmission process we show that asymmetric information may induce an equilibrium with rationing this in turn has two major implications first it reconciles the apparent irresponsiveness of business investment to the user cost of capital with the large impact of monetary policy magnitude puzzle and second it shows that this impact will not be limited to short term credit supply but will also affect long term lending even if the corresponding interest rate is unaffected composition puzzle

competition and collusion with fixed output in many industries output is fixed by exogenous constraints so firms compete by allocating a given stock of supplies between different markets this paper shows that collusion in such industries leads firms to shift output from high margin markets to low margin markets as a result welfare is generally reduced although prices decrease in some markets and increase in others

sufficient decisions in multi sided and multiproduct markets we show that in many models where firms make multiple decisions analysis can be made more tractable by re formulating the model into one in which each firm makes a single choice which we call a sufficient decision the transformation allows application of standard techniques in these settings including pass through for tax incidence and upward pricing pressure for merger analysis the transformation works because the assumption of profit maximization links the firms decisions together examples include models of monopoly and oligopoly in two sided markets where a natural sufficient decision may be the number of transactions that the firm facilitates and multiproduct markets