unequal pricing in the information economy implications for consumer welfare this article presents an economic analysis of information good pricing and consumer welfare and discusses the implications of price discrimination in the information economy it argues that network externalities coupled with information asymmetry enable a dominant marketer to price unequally extracting late adopters surplus to compensate for the loss from early adopters in the short term the minority early adopters benefit by paying less but in the long term the majority late adopters suffer by paying more considering that late adopters are likely to be at a disadvantage in resources this discriminatory pricing amounts to the poor subsidizing the rich based on this analysis implications for consumer welfare are discussed

the competitive effects of partial equity interests and joint ventures abstract antitrust authorities should consider the trade off between enhanced efficiency and reduced competition in cases of partial ownership this paper examines the competitive effects side of that trade off in the context of a modified cournot model we show that in markets where entry is difficult partial ownership arrangements could result in less output and higher prices than otherwise even if the ownership shares are relatively small these effects arise solely because these arrangements link the fortunes of actual or potential competitors producing a positive correlation among their profits in this sense the effects are purely structural they arise not because of increased opportunities for collusion or changes in the concentration of control but because the linking of profits reduces each firm s incentive to compete since these links internalize free rider problems associated with policing collusion and investing in entry deterrence however they could also enhance cartel stability and profitability

the principal agent relationship with an informed principal ii common values in many circumstances a principal may have relevant private information when she proposes a contract to an agent we analyze such a principal agent relationship as a noncooperative game the principal proposes a contract which is accepted or rejected by the agent who for most of our analysis has no private information the contract is executed if accepted otherwise the reservation allocation takes effect this allocation may be determined by a pre existing contract which the principal by her proposal is attempting to renegotiate or it may simply be the no trade point in this paper we assume that the principal s information directly affects the agent s payoff before solving the game we discuss pareto efficiency with asymmetric information we define an incentive compatible allocation to be weakly interim efficient wie if there exists no alternative incentive compatible allocation that both parties prefer for all possible beliefs that the agent might have about the principal s private information type we show that any wie allocation is interim efficient ie for some beliefs the rothschild stiglitz wilson rsw allocation relative to the reservation allocation l is the allocation that maximizes the payoff of each type of principal within the class of incentive compatible allocations that guarantee the agent at least the utility he gets from a irrespective of his beliefs about the principal s type the equilibrium set of the contract proposal game consists of the allocations that weakly pareto dominate the rsw allocation thus there is a unique equilibrium outcome if and only if the latter is ie and the equilibrium outcome is the rsw allocation itself after characterizing the equilibrium allocations we study those that are renegotiation proof when either the principal or the agent leads the renegotiation we then compare our contract proposal game which is a signaling model with its screening counterpart we conclude by extending our results to the case in which the agent as well as the principal has private information under the assumption of quasi linear preferences

some models for estimating technical and scale inefficiencies in data envelopment analysis in management contexts mathematical programming is usually used to evaluate a collection of possible alternative courses of action en route to selecting one which is best in this capacity mathematical programming serves as a planning aid to management data envelopment analysis reverses this role and employs mathematical programming to obtain ex post facto evaluations of the relative efficiency of management accomplishments however they may have been planned or executed mathematical programming is thereby extended for use as a tool for control and evaluation of past accomplishments as well as a tool to aid in planning future activities the ccr ratio form introduced by charnes cooper and rhodes as part of their data envelopment analysis approach comprehends both technical and scale inefficiencies via the optimal value of the ratio form as obtained directly from the data without requiring a priori specification of weights and or explicit delineation of assumed functional forms of relations between inputs and outputs a separation into technical and scale efficiencies is accomplished by the methods developed in this paper without altering the latter conditions for use of dea directly on observational data technical inefficiencies are identified with failures to achieve best possible output levels and or usage of excessive amounts of inputs methods for identifying and correcting the magnitudes of these inefficiencies as supplied in prior work are illustrated in the present paper a new separate variable is introduced which makes it possible to determine whether operations were conducted in regions of increasing constant or decreasing returns to scale in multiple input and multiple output situations the results are discussed and related not only to classical single output economics but also to more modern versions of economics which are identified with contestable market theories

a study of cartel stability the joint executive committee 1880 1886 this article employs weekly time series data on the joint executive committee railroad cartel from 1880 to 1886 to test empirically the proposition that observed prices reflected switches from collusive to noncooperative behavior an equilibrium model of dynamic oligopoly with asymmetric firms together with explicit functional form assumptions about costs and demand determines the estimating equations and stochastic structure of the econometric model the hypothesis that no switch took place so that price and quantity movements were solely attributable to exogenous shifts in the demand and cost functions is then tested against this alternative and rejected

the efficiency of competitive equilibria in insurance markets with asymmetric information abstract this paper addresses the relationship between competitive equilibria and efficient allocations in an insurance market with asymmetric information using the definition of second best efficiency proposed by harris and townsend 1981 for environments characterized by informational assmmetry the efficiency properties of several proposed market equilibria are examined we find an analogue to the first optimality theorem a miyazaki wilson equilibrium always results in a second best allocation

health insurance without single crossing why healthy people have high coverage standard insurance models predict that people with high risks have high insurance coverage it is empirically documented that people with high income have lower health risks and are better insured we show that income differences between risk types lead to a violation of single crossing in an insurance model where people choose treatment intensity we analyse different market structures and show the following if insurers have market power the violation of single crossing caused by income differences and endogenous treatment choice can explain the empirically observed outcome our results do not rely on differences in risk aversion between types

on the performance of universities in north rhine westphalia germany government s redistribution of funds judged using dea efficiency measures abstract in fandel and gal 2001 fandel g gal t 2001 redistribution of funds for teaching and research among universities the case of north rhine westphalia european journal of operational research 130 111 120 a solution for a real process of redistributing funds for teaching and research among the universities in north rhine westphalia in germany according to specific criteria was presented the solution was based on aggregated proportional data and was determined by a negotiation process now that the absolute data with respect to the different subject areas of the universities are available it is studied to which extent the results of the redistribution can be justified by the relative efficiency measures using data envelopment analysis moreover the inefficiencies or slacks respectively in the usage of personnel give reasons to reallocate the staff among the universities or to reduce it correspondingly

entry in monopoly market this paper develops new empirical models of market concentration from game theoretic models of entry we construct our models from inequality conditions that describe entrants equilibrium strategies in simultaneous move and sequential move games and use them to study the effects of entry in isolated monopoly markets for new automobiles from estimates of the market size necessary to support one and two dealers we conclude that monopoly dealers do not block the entry of a second dealer we also find that entry does not cause price cost margins to fall by much

optimum advertising policy over time for subscriber service innovations in the presence of service cost learning and customers disadoption abstract on the theoretical side this paper characterizes qualitatively optimal advertising policy for new subscriber services a monopolistic market is analyzed first for which customers disadoption discounting of future profits streams and a service cost learning curve are allowed after characterizing the optimal policy for a general diffusion model the results pertaining to a specific diffusion model for which advertising affects the coefficient of innovation that incorporates the disadoption rate are reported the results of the theoretical research show that the advertising policy of the service firm in the presence of customers disadoption could be very different from the same when disadoption is ignored on the empirical side four alternative diffusion models are estimated and their predictive powers using a one step ahead forecasting procedure compared the diffusion data analyzed are related to the canadian cable tv industry empirical research findings suggest that the specific diffusion model considered above is not only of theoretical appeal but also of major empirical relevance the analytical findings of the study are documented in six theoretical propositions for which proofs are provided in a separate appendix the results of a related numerical experiment together with the analytical findings pertaining to the competitive role of advertising are included managerial implications of the study together with directions for future research are also discussed

the existence of equilibrium in discontinuous economic games ii applications in part i of this study we established two existence theorems for mixed strategy equilibrium in games with discontinuous payoff functions see theorems 4 4 and 5 5 in dasgupta and maskin 1986 hereafter d m 1986 in this second part we use the second of these two theorems to prove the existence of mixed strategy equilibrium in some wellknown discontinuous economic games that fail to have pure strategy equilibria the models we analyse are the bertrand edgeworth example of price setting duopolists with capacity constraints see section 2 2 price competition among firms producing differentiated products hotelling 1929 and d aspremont gabszewicz and thisse 1979 see section 2 3 spatial competition eaton and lipsey 1975 and shaked 1975 see section 3 and models of market dependent information rothschild and stiglitz 1976 and wilson 1977 section 4 the paper concludes section 5 with a classification of these models

optimal pricing of new subscription services analysis of a market experiment there are now available a number of new subscription services that comprise a dual pricing system of a monthly access fee rental and a per minute usage charge examples include cellular phones the internet and pay tv the usage and retention of such services depend on the absolute and relative prices of this dual system for instance a moderate access fee but a low usage charge might initially appeal to customers but later a low usage customer might find the monthly fee unjustified and thereby relinquish the service providers of such services therefore usually offer several pricing packages to cater to differing customer needs the purpose of this study is to derive a revenue maximizing strategy for subscription services that is the combination of access and usage price that maximizes revenue over a specified time period an additional objective is to determine access and usage price elasticities because they have historically played an important role in theoretical pricing models the application area is the cellular phone market but for a new rather than an existing product to help gauge the likely usage rates and customer retention a field experiment is conducted in which several alternative price combinations are used specifically a sample of potential residential customers most of whom did not have an existing cell phone were divided into four treatment groups the first group were not charged an access fee but did have to pay a small per minute usage charge the second group also paid a small usage charge but in addition had three access price increases over the duration of the trial the third group paid no access fee but had usage charge increases while the fourth group had both access fee and usage charge increases usage levels for each respondent are recorded as is their month of dropout if they discontinue the service an initial examination of the data shows that higher access fees result in higher customer attrition and higher usage cost results in lower usage furthermore usage and retention are related in that declining usage levels over time often signal impending customer attrition hence two phenomena need to be modeled usage of the service and customer retention conditional on usage some seasonal effects are also observed and are allowed for in the model modeling customer attrition simultaneously with usage is important because ignoring customer attrition will likely result in an underestimate of price sensitivity this results from a censoring effect whereby respondents who remain in the trial tend to be wealthier and hence less price sensitive given the known problems of ignoring customer attrition we develop a theoretical model of usage which explicitly incorporates attrition by extending a time series model introduced by hausman and wise 1979 we make two extensions of the hausman and wise model the first is to generalize it from two to many time periods and the second is to allow for respondent heterogeneity by incorporating latent classes we fit the model by maximum likelihood and find that a two segment model is best in addition we examine the predictive validity of our model and find it to be reasonably good in general the results show that access and usage prices have different relative effects on demand and retention there are five key results first access price has some effect on usage but a much stronger effect on retention second usage price has a strong effect on usage and a moderate effect on retention in that if usage price increases so much that usage declines then lower usage levels results in higher attrition third access price elasticity is about half that of usage price with both elasticities generally being much smaller than 1 indicating relative inelasticity for this particular service fourth customer attrition rate churn is much more sensitive to access than usage price and last if just observed usage is examined and customer attrition is ignored then price sensitivity is very likely to be substantially underestimated on the order of 45 in our case finally when developing the revenue maximizing price combination we allow for the cost of customer acquisition by using some typical advertising to sales ratios for the telecommunications industry we find that the revenue maximizing price is 27 70 per month for the access fee and 0 81 per minute for the airtime charge these values are in line with current access fees and usage costs in the given market

advanced x efficiencies for ccr and bcc models towards peer based dea controlling abstract classical ccr and bcc dea models follow a general concept they allow each dmu to evaluate its in efficiency in the most favorable way and then propose input reduction and or output raise so as to follow its best practice units a first step beyond this self appraisal is the consideration of x efficiencies thus evaluating dmus with optimal weights of a peer doing this for all possible peers yields a cross efficiency matrix either for ccr or for bcc models this matrix might help to find a fair peer for the remaining dmus in a second step recent contributions analyze for ccr models how such x evaluated dmus might improve their efficiency with respect to a peer s weight system in these models even free variation of inputs outputs is possible rather than reduction and or raise such models will be portrayed here and generalized for variable returns to scale the remaining discomfort which a dmu might feel with the choice for peer among business rivals leads to the concept of a virtual peer vp this paper proposes such a peer as a consensual option for all dmus now for either return to scale ccr and bcc for an input or output oriented focus and by free variation of inputs and outputs they can meet the requirements of vp the dmus pay a heavy price however the peer controls their respective weights and even their activities he is a dictator

market equilibrium with hidden knowledge and self selection the problem of the existence of a competitive equilibrium in models with hidden knowledge and self knowledge has been discussed previously by m rothschild and j e stiglitz 1976 c a wilson 1977 and j g riley 1979 recent analyses of such models by i cho and d kreps 1986 and riley argue for a particular outcome the pareto dominant separating zero profit one the authors prove the existence of such an outcome under very general conditions and generalizing the reactive equilibrium concept introduced by riley they prove this outcome is the unique reactive equilibrium copyright 1987 by the econometric society

demand pricing and regulation evidence from the cable tv industry subsequent to the nationwide deregulation of the cable tv industry a number of questions have been raised concerning the conduct of cable firms answers to these questions turn upon a fundamental set of issues regarding the economic relationships of demand pricing and regulation in this article we empirically examine these relationships for the period prior to deregulation a number of basic findings emerge among these we find that the demand for basic cable service ranges from being generally inelastic in rural areas to elastic in large urban markets the elasticity of demand for pay cable services is typically well in excess of unity also while regulation did not lead to economically efficient marginal cost prices for basic cable service it did act to keep prices below monopoly levels moreover our examination reveals some significant differences in the effectiveness of the various types of regulation practiced in the pre deregulation period

on pricing of multiple bundles of products and services this paper considers the pricing decision faced by a seller of bundles composed of a service and an associated product offered to customers on a subscription basis using a two part tariff scheme an optimal pricing policy that maximizes the profit of a firm is obtained using a dynamic programming approach and it is found that in the long run there is an optimal number of customers associated to each bundle due to managerial purposes two suboptimal fixed price policies are derived and compared to the optimal pricing policy the conditions under which it is profitable for the firm to expand its offer from one to two bundles is studied finally it is concluded that introducing a fee for subscribed customers to deter the switching from one bundle to the other increases the profitability of the firm

a game theoretic foundation of competitive equilibria with adverse selection equilibria with adverse selection we construct a fully specified extensive form game that captures competitive markets with adverse selection in particular it allows firms to offer any finite set of contracts so that cross subsidization is not ruled out moreover firms can withdraw from the market after initial contract offers have been observed we show that a subgame perfect equilibrium always exists and that in fact when withdrawal is costless the set of subgame perfect equilibrium outcomes may correspond to the entire set of feasible contracts we then focus on robust equilibria that exist both when withdrawal costs are zero and when they are arbitrarily small but strictly positive we show that the miyazaki wilson contracts are the unique robust equilibrium outcome of our game this outcome is always constrained efficient and involves cross subsidization from low to high risk agents that is increasing in the share of low risks in the population under weak conditions on risk preferences

neutrally optimal mechanism under adverse selection the canonical insurance problem abstract this paper revisits the problem of adverse selection in the insurance market of rothschild and stiglitz 1976 we extend the three stage game in hellwig 1987 by allowing firms to endogenously choose whether or not to pre commit on their contractual offers menus we show how this mechanism can deliver the miyazaki wilson spence allocation as the unique perfect bayesian equilibrium this allocation is the unique incentive efficient and individually rational maximizer of the utility of the most profitable type in fact given that the informed player has only two types it is the unique core allocation and thus the unique neutral optimum in the sense of myerson 1983

marketing mix variables and the diffusion of successive generations of a technological innovation abstract research addressing the diffusion of successive generations of technological innovations has generally ignored the impact of marketing mix variables as a result there have been several calls for the development of multiple generation models that incorporate marketing mix variables the authors develop a model of first time sales and subscriptions for successive generations of a technological innovation which explicitly captures the effects of marketing mix variables through a proportional hazards framework the empirical analysis estimates the impact of price for two generations of cellular telephones in a european country the results suggest that there are important substantive insights to be gained from the parameter estimates for this marketing mix variable when intergenerational interdependencies are considered for example although the time path of the estimated price elasticities in a multiple generation setting closely follows those reported previously for single generations the auth

efficient competitive equilibria with adverse selection do walrasian markets function orderly in the presence of adverse selection in particular is their outcome efficient when exclusive contracts are enforceable this paper addresses these questions in the context of a rothschild stiglitz insurance economy we identify an externality associated with the presence of adverse selection as a special form of consumption externality consequently we show that competitive equilibria always exist but are not typically incentive efficient however as markets for pollution rights can internalize environmental externalities markets for consumption rights can be designed to internalize the consumption externality due to adverse selection with such markets competitive equilibria exist and incentive constrained versions of the first and second welfare theorems hold

an example of non existence of riley equilibrium in markets with adverse selection abstract rothschild and stiglitz 1976 proposed a model of a competitive market with adverse selection and showed that a pure strategy nash equilibrium may not exist among the solutions proposed to deal with this problem a particularly influential one is the notion of riley or reactive equilibrium riley 1979 we give an example that shows that a riley equilibrium may not exist if consumers are not ordered

multimarket contact and collusive behavior traditional analyses of industrial behavior typically link the exercise of market power in an industry to internalfeatures such as demand conditions concentration and barriers to entry nevertheless some economists have remained concerned that external factors such as contact across markets may also play a significant role in determining the level of competitiveness in any particular industry in this article we examine the effect of multimarket contact on the degree of cooperation that firms can sustain in settings of repeated competition we isolate conditions under which multimarket contact facilitates collusion and show that these collusive gains are achieved through modes of behavior that have been identified in previous empirical studies of multimarketfirms

collusive conduct in duopolies multimarket contact and cross ownership in the mobile telephone industry the deregulation of the telecommunications industry has resulted in a variety of industry structures which have been created in hopes of increasing competition one example is the licensing of cellular telephone services in the united states where the fcc created duopolies in which two firms were granted licenses to compete in strictly defined product and geographic markets taking advantage of the unique regulatory environment we test to what degree duopolistic competition leads to competitive market outcomes we find that cross ownership and multimarket contact are important factors in explaining non competitive prices

price competition with reduced consumer switching costs the case of wireless number portability in the cellular phone industry wireless number portability wnp is a telecommunication regulatory policy that requires cellular phone service providers to allow customers who switch service subscriptions to retain their original phone numbers the right to retain the number lowers the switching cost for a consumer thus the purpose of the policy is to induce more competition and facilitate the growth of new or small service providers in this paper we show that wnp drives market price downward as expected but with a surprising twistrather than helping the smaller firms grow the policy may accelerate the process of market concentration we find that the main contributing factor to this peculiarity is the discriminatory pricing scheme prevalent in the industrythat is a service provider charges a lower per minute fee for the calls initiated and received within the same network than for the calls connected across two networks under this pricing scheme a consumer who subscribes to a larger network would benefit more than if subscribing to a smaller network despite the relatively higher fixed access fee that the former may charge by lowering the barrier of switching wnp creates a market condition conducive for a larger network to gain market share we support our analysis with the empirical evidence gathered from hong kong where wnp was adopted in march 1999

incentive efficient price systems in large insurance economies with adverse selection we decentralize incentive efficient allocations in large adverse selection economies by introducing a competitive market for mechanisms that is for menus of contracts facing a budget constraint informed individuals purchase lottery tickets to enter mechanisms whereas firms sell tickets and supply slots at mechanisms at given prices beyond optimization market clearing and rational expectations an equilibrium requires that firms cannot favorably change or cut prices an equilibrium exists and is incentive efficient an equilibrium can be computed as the solution to a programming problem that selects the incentive efficient outcome preferred by the highest type within an appropriately defined set for two types economies this is the only equilibrium outcome

market power and price increases for basic cable service since deregulation since the deregulation of rates for basic cable television service increases in price have outpaced the rate of inflation this article examines whether or not cable systems increased market power or their increased exercise of market power explains these price increases an estimated quasi supply function for cable systems before and after deregulation implies that real basic cable prices increased 18 since deregulation holding quality and other costs constant accounting for 43 of the total real price increase a demand equation is also estimated and the estimated demand elasticity of basic cable does not change after deregulation implying that this 18 real price increase is due to greater exercise of existing market power made possible by the elimination ofprice regulation rather than to an increase in market power caused by a change in the demand elasticity for cable

uncertain lifetimes and the welfare enhancing properties of annuity markets and social security this paper explores the implications of social security programs and annuity markets through which agents who are characterized by different distributions of length of lifetime share deathrelated risks when annuity markets operate a non discriminatory social security program affects only the intragenerational allocation of resources in the absence of private information regarding individual survival probabilities such a program will lead to a non optimal intragenerational allocation of resources however the presence of adverse selection considerations gives rise to a pareto improving role for a mandatory non discriminatory social security program

insurance self control and contract flexibility we study a competitive insurance market in which some consumers have too optimistic expectations regarding their future use of preventive measures when contracts are long term and inflexible such naive consumers would increase the costs of insurance for low risk consumers the competitive insurance market therefore offers flexible contracts that allow for switching between different tariffs sophisticated consumers choose a partial insurance tariff and remain low risks naive consumers choose the same tariff but later switch to full insurance and become high risks if there are sufficiently many naive consumers they pay a transfer to sophisticated consumers so that high risks subsidize low risks in contrast there are no such transfers when contracts are short term the model generates novel implications for the time frame of insurance contracts and insurance requirements

pareto optima and competitive equilibria with adverse selection and moral hazard this paper explores the extent to which standard general equilibrium analysis of pareto optima and of competitive equilibria can be applied to environments with moral hazard and adverse selection problems allowing for lotteries contracts with random components we first establish that an adverse selection insurance economy a moral hazard insurance economy a signaling economy and a private information labor market economy are all special cases of a simple general structure we then show that techniques for characterizing pareto optimal contracts as solutions to concave programming problems are useful and nice and appear to be broadly applicable allowing for lotteries we show how to characterize the optimal allocations for the adverse selection insurance and labor market economies we then show that standard existence and optimality theorems for competitive equilibria apply in the linear space containing lotteries if agents with characteristics which are distinct and privately observed at the time of initial trading enter the economy wide resource constraints in a homogeneous way other kinds of diversity are not critical for economies with moral hazard which satisfy the homogeneity condition competitive contract markets single out a subset of the optima and thus can be consistent with apparent unemployment and with a random allocation of labor supplied though all households are averse to risk the adverse selection insurance and signaling economies however do not satisfy the homogeneity condition and are difficult to decentralize efficiently with a price system

a consensual peer based dea model with optimized cross efficiencies input allocation instead of radial reduction abstract data envelopment analysis dea is a method for estimating in efficiencies of decision making units dmus by means of weighted output to input ratios being the weights optimal virtual prices of such ex post activities for all units the cross efficiency matrix then evaluates these output to input relations with respect to all optimal price systems and hence permits efficiency rankings for the dmus by aggregating the matrix entries line and or columnwise in this contribution the classical input oriented dea approach is generalized twofold its first aim is an optimal efficiency improving input allocation rather than a mere radial input reduction the second aim is the choice of a peer dmu the price system of which is acceptable for the remaining units as free input allocation permits substitutional effects and so rises productivities in view of possible peers and for all units it supports such consensual choice numerical examples show the positive effects of the new concept

conjectures firm characteristics and market structure abstract this paper makes use of a unique data set to investigate how firms in the vancouver british columbia retail gasoline market view their rivals and how consumers in turn view these firms own and rival price elasticities of demand conjectural variations and lerner indices are estimated for thirteen service stations in a submarket of vancouver these variables are then related to firm characteristics such as type of ownership degree of horizontal and vertical integration and type of service in this way systematic patterns in seller behavior and in buyer attitudes are revealed

signalling to experts we study competitive equilibria in a signalling economy with heterogeneously informed buyers in terms of the classic spence 1973 the quarterly journal of economics 87 355 374 model of job market signalling firms have access to direct but imperfect information about worker types in addition to observing their education firms can be ranked according to the quality of their information i e their expertise in equilibrium some high type workers forgo signalling and are hired by better informed firms which make positive profits workers education decisions and firms use of their expertise are strategic complements allowing for multiple equilibria that can be pareto ranked we characterize wage dispersion and the extent of signalling as a function of the distribution of expertise among firms our model can also be applied to a variety of other signalling problems including securitization corporate financial structure insurance markets or dividend policy

nash equilibrium in competitive insurance i formalize a rather stylized insurance market with adverse selection as a standard duopoly i formally specify demand functions and profits and prove that a nash equilibrium in pure strategies exists if and only if the well known rothschild stiglitz allocation is efficient

competitive pooling rothschild stiglitz reconsidered we build a model of competitive pooling which incorporates adverse selection and signaling into general equilibrium pools are characterized by their quantity limits on contributions households signal their reliability by choosing which pool to join in equilibrium pools with lower quantity limits sell for a higher price even though each household s deliveries are the same at all pools the rothschild stiglitz model of insurance is included as a special case we show that by recasting their hybrid oligopolistic competitive story in our perfectly competitive framework their separating equilibrium always exists even when they say it does not and is unique

competitive insurance markets under adverse selection and capacity constraints abstract ever since the seminal work by rothschild and stiglitz q j econom 90 1976 629 on competitive insurance markets under adverse selection the problem of non existence of equilibrium in pure strategies has received much attention in the literature we extend the original analysis by considering firms which face capacity constraints which might be due to limited capital we show that under mild assumptions an equilibrium exists where every consumer obtains his appropriate rothschild stiglitz contract

constrained efficient equilibria in selection markets with continuous types abstract we prove the existence of the constrained efficient miyazaki 1977 wilson 1977 spence 1978 equilibrium in competitive markets with adverse selection when the distribution of unobservable types is continuous our existence proof applies under extremely general assumptions about individual preferences when we restrict preferences to have the widely used in the selection markets literature quasilinear form we characterize the properties of this equilibrium by developing a simple and computationally efficient numerical method for constructing it applying this method we show in a natural setting how one would compute the equilibrium allocation potentially facilitating empirical work using the mws equilibrium we illustrate this empirical application in the context of policy interventions and show that the welfare implications of a coverage mandate critically hinge on whether the market implements a constrained efficient allocation like the mws equilibrium or a constrained inefficient allocation like in azevedo and gottlieb 2017

non discriminating renegotiation in a competitive insurance market abstract a variant of the rothschild stiglitz model of a competitive insurance market is considered where each uninformed firm is allowed to renegotiate the contracts that its customers initially sign subject to the restriction that renegotiated contracts be offered to all the firm s customers such non discriminating renegotiation is shown to weaken the profitability of cream skimming to the extent that there exists a unique equilibrium outcome this outcome is that of miyazaki and spence i e the incentive compatible pair of zero profit contracts if efficient and the incentive compatible zero profit pair of contracts maximizing low risk utility otherwise

competitive markets without commitment in the presence of a time inconsistency problem with agency contracts we show that competitive markets can implement allocations that pareto dominate those achieved by a benevolent government and they induce more effort we analyze a model with moral hazard and a two sided lack of commitment after agents have chosen their work firms can modify contracts and agents can switch firms if the ex post market outcome satisfies a weak notion of competitiveness and sufficiently separates individuals it is pareto superior to a government s allocation with a complete breakdown of incentives moreover competitive markets without commitment implement more effort in equilibrium under general conditions

multimarket contact competition and pricing in banking abstract in this paper we assess the impact of multimarket contact of banks on their market power by means of a simultaneous equation model in which the divergence of price from marginal cost is a function of multimarket linkages the model is estimated using aggregate data from the italian regions for the years 1997 2009 our results show that multimarket contact is positively and significantly correlated to the market power index and is also connected to both home and non home market concentration the evidence is robust to changes in model specification and multimarket contact measures and supports the idea that firms which have a greater amount of contact are more likely to collude

demand and innovation in services the case of mobile communications abstract this paper aims to analyse the pricing strategies of mobile communications operators and examine the role of demand characteristics in the development of new tariff plans in so doing we depart from a traditional industrial organization approach to price discrimination and interpret new tariff plans as innovations in the spirit of schumpeter we look at competition in this sector as depending upon this form of innovation and we argue that given the specific features of the industry the development of new tariff plans is strongly related to the users characteristics and behaviour our main point is that in a context of uncertainty demand affects firms innovative strategies in two ways first by providing information on user behaviour and by increasing the capability of market segmentation and second by providing the incentives to innovate this argument is supported by an empirical analysis carried out on the basis of an original dataset which includes all the tariff plans on offer in the history of the italian market between 1992 and 2005 we find that both a firm s installed customer base and the level of market saturation play a role in shaping firms innovative pricing strategies in terms of the number and characteristics of the new tariff plans

a walrasian theory of markets with adverse selection the paper describes a walrasian theory of markets with adverse selection and shows how refinements of equilibrium can be used to characterize uniquely the equilibrium outcome equilibrium exists under standard conditions it is shown that under certain conditions a stable set exists and is contained in a connected set of equilibria for generic models there exists a stable outcome that is all the equilibria in the stable set have the same outcome these ideas are applied to markets with one sided and two sided uncertainty under standard monotonicity conditions it is shown that the stable outcome is separating and implies a particular pattern of matches of buyers and sellers

living by the golden rule multimarket contact in the u s airline industry this paper examines empirically the effects of multimarket contact on pricing in the u s airline industry the analysis of the time series and cross sectional variability of airline fares in the 1000 largest domestic city pair routes reveals the presence of statistically significant and quantitatively important multimarket effects fares are higher in city pair markets served by carriers with extensive interroute contacts these findings are consistent with the claims of industry experts that airlines live by the golden rule i e that they refrain from initiating aggressive pricing actions in a given route for fear of what their competitors might do in other jointly contested routes during his testimony mr steven b elkins senior director of marketing systems development for northwest airlines cited an example in which northwest lowered fares on night flights that were flying with empty seats in a number of routes from minneapolis and upper midwest cities to various west coast cities he said that continental airlines swiftly responded by cutting prices in important northwest markets mr elkins s memo advises northwest pricing analysts we will live by the golden rule in his testimony he explained that the golden rule in that context was that i did not want my pricing analyst initiating actions in another carrier s market like chicago for fear of what that other carrier might do to retaliate wall street journal october 9 1990 p b1

dynamic pricing for subscription services this paper investigates the use of pricing schemes in subscription services that consist of various combinations of activation subscription and cancellation fees when customers exclusively consider what is directly perceivable the activation fee starts low and increases as the network grows penetration strategy whereas the cancellation fee starts high and decreases as the network grows skimming strategy the activation and cancellation fees take various other forms otherwise the subscription fee remains low at the early stages and increases only when a reasonable number of subscribers is secured finally the authors discuss the theoretical and managerial implications of their findings

pricing patterns of cellular phones and phonecalls a segment level analysis one expectation of the u s federal communications commission fcc in the early stages of the cellular communications industry was that the presence of two licensees in each market would ensure competition and thereby result in declining prices over time for both cellular phones handsets and phonecalls however industry observers have noted recently that although the price of handsets has declined over time the price of the phonecalls has not we investigate this interesting pricing issue by modeling the market interaction between the providers of cellular services and also their interaction with customers using a game theoretic framework a critical assumption in the development of our model is that there exist segments of customers with different valuations usage levels and price sensitivities for cellular service empirically we provide support for the existence of two customer segments viz business professional and personal from both secondary data on industry usage and revenue and primary data collected from a conjoint analysis study of cellular service customers from the latter source we also establish that the business professional customers are more sensitive to prices of phonecalls than the personal segment from our analytical model we characterize the conditions under which penetration and skimming pricing strategies for the handsets are profit maximizing from the sellers standpoint and derive the corresponding price of phonecalls one of our main analytical results is that a competitive structure can result in lower prices over time for the handset but higher prices for the phonecalls depending on production costs of the handset we are thus able to provide a theoretical explanation for the observed price patterns for the handset and phonecalls

constrained efficiency with adverse selection and directed search abstract this paper studies constrained efficiency in guerrieri et al s 2010 model of adverse selection and directed search buyers post contracts and sellers with private information about their type direct their search toward their preferred contract buyers and sellers then match bilaterally and trade if the guerrieri shimer wright equilibrium fails to achieve the first best then the planner subject to the frictions of the environment achieves strictly higher welfare than the equilibrium i e the equilibrium is not ex ante constrained efficient under certain conditions the planner achieves an allocation that even pareto dominates the equilibrium i e the equilibrium is not interim constrained efficient under other conditions the planner can completely undo the effects of adverse selection and achieves the first best cross subsidization is the key to these results

team production in competitive labor markets with adverse selection abstract team production is a frequent feature of modern organizations combined with team incentives team production can create externalities among workers since their utility upon accepting a contract depends on their team s performance and therefore on their colleagues productivity we study the effects of such externalities in a competitive labor market if workers have private information on their productivity we find that in any competitive equilibrium there must be pareto efficient separation of workers according to their productivity we further find that externalities facilitate equilibrium existence where under a particular condition on workers indifference curves even arbitrarily small externalities guarantee equilibrium existence