an experimental investigation of the patterns of international trade this study is the first attempt to create and study a laboratory economy with some of the prominent features of an international economic system the concept of multiple countries in which each country has its own technology preferences and resource endowments is introduced and operationalized the questions posed in the study are related to the law of comparative advantage factor price equalization terms of trade efficiency in production and exchange as guided by multiple and interacting markets and the effects of tariffs on international transactions the study builds on previous work in the experimental study of general equilibrium phenomena

impact of loss aversion on the newsvendor game with product substitution abstract this paper studies a newsvendor game in which two substitutable products are sold by two different retailers newsvendors with loss averse preferences each loss averse retailer facing stochastic customer demand and deterministic substitution rate will make an order quantity decision to maximize his expected utility since product substitution causes two retailers to make decisions in a competitive environment game theory is used to find the retailers optimal order quantities it is shown that under certain conditions there exists a unique nash equilibrium in the newsvendor game under a symmetry assumption each retailer s equilibrium order quantity is decreasing in the loss aversion coefficient and increasing in the substitution rate further if the effect of loss aversion on the order quantity is strong enough to dominate the effect of competition the total inventory level of a decentralized supply chain will be lower than that of a centralized supply chain numerical experiments are conducted to illustrate our results

the competitive newsboy we consider a competitive version of the classical newsboy problem in which a firm must choose an inventory or production level for a perishable good with random demand and the optimal solution is a fractile of the demand distribution and investigate the impact of competition upon industry inventory a splitting rule specifies how initial industry demand is allocated among competing firms and how any excess demand is allocated among firms with remaining inventory we examine the relation between equilibrium inventory levels and the splitting rule and provide conditions under which there is a unique equilibrium our most general result is that if all excess demand is reallocated i e there is perfect substitutability then competition never leads to a decrease in industry inventory

costly buyer search in laboratory markets with seller advertising in this experiment sellers simultaneously choose prices and advertising strategies buyers either purchase at an advertised price or search sequentially for other prices in the unique symmetric equilibrium sellers charge a high unadvertised price or advertise a price chosen from a lower interval increases in search or advertising costs raise equilibrium prices and affect equilibrium advertising intensity empirical results are consistent with most comparative static predictions sellers however price much lower and advertise more intensely than predicted consequently market outcomes more closely resemble a perfect information bertrand like equilibrium than the imperfect information mixed strategy equilibrium with significant seller market power

an experimental study of price dispersion in an optimal search model with advertising abstract this paper reports a laboratory experiment to study pricing and advertising behavior with costly buyer search sellers simultaneously post prices and may incur a cost to advertise this price in the unique symmetric equilibrium sellers either charge a high unadvertised price or randomize in an interval of lower advertised prices increases in search or advertising costs raise equilibrium prices and equilibrium advertising intensity decreases with lower search costs and higher advertising costs our experimental results support these comparative static predictions and sellers also post high unadvertised prices as predicted in all treatments however sellers advertise more intensely than in equilibrium

stochastic programming for decentralized newsvendor with transshipment abstract this paper discusses a family of two stage decentralized inventory problems using a unifying framework taxonomy depicted as a multilevel graph this framework allows us to model and link different problems of competing retailers who independently procure inventory in response to uncertain demand and anticipated inventory decisions of other retailers in this family of problems in the ex post stage the retailers exercise recourse actions in response to the realized demand and competitors chosen procurement levels for example retailers could coordinate inventory transshipment to satisfy shortage with overage based on profit sharing agreements our framework provides a unifying parsimonious view using a single methodological prism for a variety of problems equally importantly as recourse options are laid out our framework clarifies and contributes a modeling connection between problems in a clear taxonomy of models this unifying perspective explicitly links work that appeared in isolation and offers future research directions

market contestability in the presence of sunk entry costs this article extends previous laboratory experimental research to examine the competitive discipline of contested markets with a natural monopoly type cost structure where sunk costs are neither zero nor infinite several alternative conjectures as to how or whether sunk costs can weaken the discipline of contested markets are presented and interpreted in the context of the experimental design sunk costs are found to weaken the support for strong interpretations of the contestable markets hypothesis and thus yield a wide diversity of dynamic patterns of market performance yet the disciplining power of contestability remains impressive with no indications of sustained monopoly pricing

inventory management under market size dynamics we investigate the situation where a customer experiencing an inventory stockout at a retailer potentially leaves the firm s market in classical inventory theory a unit stockout penalty cost has been used as a surrogate to mimic the economic effect of such a departure in this study we explicitly represent this aspect of consumer behavior incorporating the diminishing effect of the consumers leaving the market upon the stochastic demand distribution in a time dynamic context the initial model considers a single firm we allow for consumer forgiveness where customers may flow back to the committed purchasing market from a nonpurchasing latent market the per period decisions include a marketing mix to attract latent and new consumers to the committed market and the setting of inventory levels we establish conditions under which the firm optimally operates a base stock inventory policy the subsequent two models consider a duopoly where the potential market for a firm is now the committed market of

informative advertising with differentiated products in this paper we study the role of promotional expenditures by sellers in a model of product differentiation advertising conveys full and accurate information about the characteristics of products heterogeneous consumers who have no source of information other than advertisements seek to purchase the products that best fit their needs despite the roles played by advertising in improving the matching of products and consumers and in increasing the elasticity of demand faced by each firm we find that the market determined levels of advertising are excessive given the extent of diversity in the market we derive a promotional equilibrium based on a specific information transmission technology paying explicit attention to the structure of consumer information and its impact on firms demand curves this allows us to study the effects of changes in the advertising technology including an increased ability to target messages to specific groups of consumers on the equilibrium in the product market we find that decreased advertising costs may reduce profits by increasing the severity of price competition

strategic information manipulation in duopolies abstract this paper studies a duopoly market in which firms can draw inferences concerning uncertain market demand from observations of their outputs and market price firms may adjust their outputs away from myopically optimal levels to affect the informativeness of the market price because firms quantities are observed firms can manipulate the extent to which belief revision occurs rather than the direction in which beliefs are revised as in signal jamming models we develop conditions and present examples under which the value of information is positive and negative and under which firms will increase or decrease quantity to manipulate information journal of economic literature classification numbers d80 l13

competition and outsourcing with scale economies scale economies are commonplace in operations yet because of analytical challenges relatively little is known about how firms should compete in their presence this paper presents a model of competition between two firms that face scale economies i e each firm s cost per unit of demand is decreasing in demand a general framework is used which incorporates competition between two service providers with price and time sensitive demand a queuing game and competition between two retailers with fixed ordering costs and pricesensitive consumers an economic order quantity game reasonably general conditions are provided under which there exists at most one equilibrium with both firms participating in the market we demonstrate in the context of the queuing game that the lower cost firm in equilibrium may have a higher market share and a higher price an enviable situation we also allow each firm to outsource their production process to a supplier even if the supplier s technology is no better than the firms technology and the supplier is required to establish dedicated capacity so the supplier s scale can be no greater than either firm s scale we show that the firms strictly prefer to outsource we conclude that scale economies provide a strong motivation for outsourcing that has not previously been identified in the literature

divided opinion on the fair minimum wage act of 2013 random or systematic differences this paper analyses economists support for the fair minimum wage act of 2013 i find systematic differences between those supporting the legislation and those opposing it with support higher among females young labour economists and those located further from chicago

equilibrium with product differentiation tive consumer formulations is used to examine the properties of single and multiple price equilibria conditions under which decreases in the intensity of consumer preferences reduce price are given it is shown that with certain types of demand curves entry can eliminate price cost markups even given product differentiation if competition is localized it is demonstrated that entry does not affect the markup finally the effect of spurious product differentiation on price is examined

consumer search costs and market performance i introduction one of the seminal developments leading to the information economics revolution in the 1970s and 19c0s was diamond s 1971 theoretical result that in the absence of publicly posted price information the existence of even a small search cost could lead to monopoly pricing the intuition is straightforward no buyer with one price quote would want to search for a second unless it is likely that the buyer would encounter a price reduction that covers the search cost thus each seller has an incentive to price slightly above any common price and the noncooperative equilibrium in a single stage game yields a monopoly price this result is viewed as a paradox since a small search cost produces high prices but a zero search cost would produce the usual bertrand incentives that drive prices to competitive levels in the absence of capacity constraints and other imperfections 1 recent theoretical work has focused on finding a resolution to the paradox stahl 1989 for example generates a smooth transition between competitive and monopoly outcomes as the fraction of consumers with zero search costs increases from zero to one interestingly stahl finds that increasing the number of sellers makes pricing more monopolistic holding the number of informed buyers constant bagwell and ramey 1992 propose an alternative resolution that applies to an infinitely repeated market game where sellers who raise prices can develop a reputation that can affect sales in future periods bagwell and ramey show that buyers can obtain lower equilibrium prices by following a loyalty boycott search rule where low pricing sellers are rewarded with repeated purchases and high pricing sellers are punished with switching the price predictions vary continuously between monopoly and competitive levels depending on the size of the consumer search cost the policy relevance of the diamond paradox depends on whether there are realistic market environments in which small reductions in the availability of price information can cause large price increases 2 due to the difficulty of controlling and measuring information flows in natural markets the laboratory represents an ideal place to evaluate the diamond paradox and proposed resolutions the only experimental analysis of these issues is reported by grether schwartz and wilde 1988 who observed monopoly pricing in three of four predicted cases these results are suggestive but not definitive for reasons discussed below in particular as grether schwartz and wilde 1988 328 observe all four cases involved the same group of subjects to the extent possible this paper reports an experiment consisting of twelve market sessions designed to assess the effects of public price information the markets are conducted as normal posted offer markets except that buyers must pay a small cost each time they approach a different seller in baseline posted offer treatments all prices are publicly displayed to buyers while in search treatments prices are not publicly displayed in brief we find that prices approach competitive levels under the posted offer treatment and prices are significantly higher under the search treatment nevertheless the diamond prediction of monopoly pricing under search is not observed although increases in search costs do raise prices these results indicate that economists should take a more careful look at attempts to resolve the diamond paradox by introducing other factors that may impede monopoly pricing in markets with consumer search the paper is organized as follows our two primary treatments are outlined in section ii and results are presented in section iii the failure to observe the diamond monopoly price prediction motivated additional research on the effects of reputations and search costs which is presented in section iv the final section contains a conclusion ii

the value of information in efficient risk sharing arrangements suppose that agents share risks in competitive markets we show that better information makes everyone worse off if the economy has a representative agent that is the economy s demand for state contingent consumption equals the demand of a hypothetical agent who owns all the economy s wealth the representative agent moreover is normatively unrepresentative although each agent dislikes information the representative agent is indifferent although we emphasize pure exchange our results imply that a representative agent model might seriously misstate the welfare effects of improved information in an economy with production and risk sharing even if it performs well otherwise

is there a consensus among economists in the 1990 s in a 1976 survey kearl et al 1979 hereafter the 1976 survey concluded that the then widespread perception that there was little agreement among professional economists on matters of theory or policy was simply wrong however the most casual empiricism namely the continuing popularity of jokes about disagreements among economists suggests the perception of noneconomists has not changed much since the 1970 s what is the present state of consensus among economists this question is of interest because more than a decade has elapsed since the 1976 survey and during this time many issues confronting economists and the composition of the profession have changed 1 benjamin m friedman and lawrence h summers 1991 p ix for example have asserted that economic thinking in many subfields of the discipline now differs markedly from what it was in 1970 consensus among european economists has been examined by bruno s frey et al 1984 martin ricketts and edward shoesmith 1990 1992 focus exclusively on british economic opinion this paper provides the first general analysis of opinions of u s economists in more than a decade i the survey and questionnaire

large newsvendor games we consider a game called newsvendor game where several retailers who face a random demand can pool their resources and build a centralized inventory that stocks a single item on their behalf profits have to be allocated in a way that is advantageous to all the retailers a game in characteristic form is obtained by assigning to each coalition its optimal expected profit we consider newsvendor games with possibly an infinite number of newsvendors we prove in great generality results about balancedness of the game and we show that in a game with a continuum of players under a nonatomic condition on the demand the core is a singleton for a particular class of demands we show how the core shrinks to a singleton when the number of players increases

the hayek hypothesis in experimental auctions institutional effects and market power the hayek hypothesis in experimental auctions institutional effects and market power we report twelve market experiments utilizing a seller market power supply and demand structure where two of five sellers can unilaterally increase their profit by withholding supply the data indicate that both the double auction and posted offer institutions result in traders extracting the bulk of the potential gains from exchange in the market however prices generally occur above the competitive equilibrium prediction market power in the form of strategic supply withholding does not appear to be responsible for the supra competitive prices i introduction one important result arising from experimental market research is that the information flows and contracting rules which define the institutional structure of a market can exert a pronounced influence on market performance such institutional features may be more important than some traditional structural characteristics in determining whether market outcomes will correspond to the predictions of the competitive model in particular a large and growing body of experimental data suggests that markets can generate efficient outcomes even when there are a relatively small number of buyers and sellers with incomplete information on the underlying structure of the market based on evidence from a wide variety of experimental double auction markets vernon smith 1982 167 has expressed this more formally as the hayek hypothesis markets economize on information in the sense that strict privacy together with the public messages of the market are sufficient to produce efficient ce competitive equilibrium outcomes in this statement however the notion of an efficient ce outcome could be interpreted as 1 a simple efficiency claim that all exchange surplus will be extracted or 2 a price claim that all exchange surplus will be extracted via trades at the competitive equilibrium price a recent study by holt langan and villamil 1986 hereafter hlv examines the validity of the hayek hypothesis using the double auction institution and a market structure designed to provide a rather difficult test for the competitive model hlv s market power design provides a subset of sellers with an incentive to unilaterally generate a price increase via the strategic withholding of supply the resulting price deviation from the competitive equilibrium is substantial but results in a relatively small loss of market efficiency thus the price interpretation of the hayek hypothesis is violated in this design if holders of market power recognize their position and successfully affect prices to their advantage the efficiency interpretation however will still hold approximately even with the successful exercise of market power in fact the price interpretation of the hayek hypothesis tends to break down in hlv s markets but the efficiency interpretation tends to hold hlv report deviations from the competitive equilibrium price consistent with the exercise of market power in three of five seller market power experiments they also conjecture that deviations from the competitive equilibrium may increase as participants become more experienced with the trading institution this paper reports the results of twelve experiments that build on hlv s research our experiments compare market performance in hlv s seller market power smp design using both the double auction and posted offer trading institutions our purpose in conducting these experiments is twofold first we are interested in examining the effects of changes in trading institutions on deviations from the competitive equilibrium price in the smp design second to the extent that competitive equilibrium price deviations are observed we are interested in assessing whether the exercise of market power in the form of strategic withholding is the source of these deviations

technical note robust newsvendor competition under asymmetric information we generalize analysis of competition among newsvendors to a setting in which competitors possess asymmetric information about future demand realizations and this information is limited to knowledge of the support of demand distribution in such a setting traditional expectation based optimization criteria are not adequate and therefore we focus on the alternative criterion used in the robust optimization literature the absolute regret minimization we show existence and derive closed form expressions for the robust optimization nash equilibrium solution for a game with an arbitrary number of players this solution allows us to gain insight into the nature of robust asymmetric newsvendor competition we show that the competitive solution in the presence of information asymmetry is an intuitive extension of the robust solution for the monopolistic newsvendor problem which allows us to distill the impact of both competition and information asymmetry in addition we show that contrary to the intuition a competing newsvendor does not necessarily benefit from having better information about its own demand distribution than its competitor has

transparency in markets for experience goods experimental evidence we propose an experimental design to investigate the role of information disclosure in the market for an experience good the market is served by a duopoly of firms that choose both the quality and the price of their product consumers differ in their taste for quality and choose from which firm to buy we compare four different treatments in which we vary the degree to which consumers are informed about quality contrary to theoretical predictions firms do not differentiate quality under full information rather both tend to offer products of similar high quality entailing more intense price competition than predicted by theory under no information we observe a lemons outcome where quality is low at the same time firms manage to maintain prices substantially above marginal cost in two intermediate treatments quality is significantly higher than the no information level and there is evidence that prices become better predictors of quality taken together these findings suggest that information disclosure is a more effective tool to raise welfare and consumer surplus than theory would lead one to expect jel l15 c91 d82

uncertainty and shopping behaviour an experimental analysis this paper reports experimental tests of three search equilibrium models these models which differ only in the search strategies available to the buyers have qualitatively different predictions that is equilibria price distributions single price equilibria at the competitive price and at the monopoly price and two price equilibria the experimental outcomes generally were consistent with the models predictions this suggests that debate on the utility of this class of models should shift to the realism of the models assumptions rather than focus on their ability to characterize market outcomes also since the basic models have been validated the project of analyzing experimentally the results of relaxing some of their assumptions seems worthwhile

experimentation and learning in a differentiated products duopoly abstract this paper explores price setting behavior in the context of a duopoly in which firms are uncertain about the degree of product differentiation firms learn from the difference in their realized demands in light of the price differential the informativeness of this market experiment is shown to be increasing in size of the price differential in markets with highly substitutable products price dispersion is enhanced as firms adjust their prices so as to generate more information in markets with highly differentiated products firms compress their prices as they prefer to reveal less about the extent of product differentiation journal of economic literature classification numbers d43 d83 l13

views among economists professional consensus or point counterpoint to what degree do economists disagree about key economic questions we provide evidence by using the responses to a series of questions posed to a distinguished panel of economists put together by the chicago school of business based on our analysis we find a broad consensus on these many different economic issues particularly when the past economic literature on the question is large any differences are unrelated to observable characteristics of the panel members other than men being slightly more likely to express an opinion these differences are idiosyncratic with no support for liberal versus conservative camps

the effect of the minimum wage on the fast food industry using a longitudinal survey of fast food restaurants in texas the authors examine the impact of recent increases in the federal minimum wage on a low wage labor market less than 5 of fast food restaurants were using the new youth subminimum wage in july august 1991 even though the vast majority paid a starting wage below the new hourly minimum wage immediately before it became effective although some restaurants increased wages beyond the level needed to comply with higher minimum wages in both 1990 and 1991 those federal minimum wage increases greatly compressed the distribution of starting wages in the texas fast food industry two findings at variance with conventional predictions are that 1 employment increased more in those firms likely to have been most affected by the 1991 minimum wage increase than in other firms and 2 price changes were unrelated to mandated wage changes

the role of inventory in delivery time competition the paper operationalizes the notion of shortage cost by considering the behavior of customers and competing firms and examines the role of inventory in response time competition we start with a single firm production control model in which customers are characterized by their preferences of price quality and delivery time the optimal production inventory policy and the optimal choice between make to order and make to stock operations are determined in simple newsboy like formulas the basic model is then extended to an n firm market game in which firms compete for orders from the aspect of early delivery one could think of this setting as an oligopoly racing market the analysis shows that competition can breed a demand for produce to stock just as other economic phenomena such as economies of scale uncertainty or seasonality can induce make to stock and that delivery time competition increases the buyer s welfare while decreasing the producer s welfare

what makes people think like economists evidence on economic cognition from the survey of americans and economists on the economy abstract the positive economic beliefs of economists and the general public systematically differ what factors make noneconomists think more like economists using the survey of americans and economists on the economy this paper shows people think more like economists 1 if they are well educated 2 if they are male 3 if their real income rose over the last 5 years 4 if they expect their real income to rise over the next 5 years or 5 if they have a high degree of job security however neither high income nor ideological conservatism have this effect my findings for education gender and income have close parallels in political science on tests of objective political knowledge the better educated and males score higher controlling for numerous other variables and the independent effect of income is minor

economists views about parameters values and policies survey results in labor and public economics specialists in labor economics and public economics at 40 leading research universities provided opinions of policy proposals quantitative best estimates and 95 percent confidence intervals for economic parameters and answers to values questions regarding income redistribution efficiency versus equity and individual versus social responsibility their positions on policy are more closely related to their values than to their estimates of relevant economic parameters average best estimates of the economic parameters agree well with the relevant literature but individual best estimates are usually widely dispersed the individual 95 percent confidence intervals are much narrower than the substantial cross respondent variation in estimates would warrant

costly buyer search in a differentiated products model an experimental study this study examines whether the content of buyer information and the timing of its dissemination affects seller market power we construct laboratory markets with differentiated goods and costly buyer search in which sellers simultaneously post prices the experiment varies the information on price or product characteristics that buyers learn under different timing assumptions pre and postsearch generating four information treatments theory predicts that price information lowers the equilibrium price but information about product characteristics increases the equilibrium price that is contrary to intuition the presence of informed buyers may impart a negative externality on other uninformed buyers data support the model s negative externality result when sellers face a large number of robot buyers that are programmed to search optimally observed prices conform to the model s comparative statics and are broadly consistent with predicted levels with human buyers however excessive search instigates increased price competition and sellers post prices that are significantly lower than predicted

optimal service speeds in a competitive environment this is a study of the economic behavior of vendors of service in competition a simple model with two competing exponential servers and poisson arrivals is considered each server is free to choose his own service rate at a cost per time unit that is strictly convex and increasing there is a fixed reward to a server for each customer that he serves the model is designed to study one specific aspect of competition namely competition in speed of service as a means for capturing a larger market share in order to maximize long run expected profit per time unit a two person strategic game is formulated and its solutions are characterized depending on the revenue per customer served and on the cost of maintaining service rates the following three situations may arise i a unique symmetric strategic nash equilibrium in which expected waiting time is infinite ii a unique symmetric strategic equilibrium in which expected waiting time is finite and iii several nonsymmetric strategic equilibria with infinite expected waiting time an explicit expression for the market share of each server as a function of the service rates of the two servers is also given

economic search an experimental study this paper presents results of experiments designed to test several of the hypotheses present in the theoretical literature on optimal economic search first we test whether the subjects searchers actually search for wages in ways that are consistent with setting an optimal reservation wage we then proceed to determine experimentally the effects of risk aversion increased search costs changes in risk brought about by a mean preserving transformation of the distribution of wage offers the presence or absence of recall the existence of a finite horizon and the searcher s state of knowledge about the underlying distribution of wages in general we find that the searchers exhibit behavior that is consistent with that predicted by theory differences between risk neutral and risk averse searchers are found and the responses of both groups to changes in search costs in the degree of risk or in the state of knowledge are consistent with theoretical predictions

consumer information and firm pricing negative externalities from improved information we analyze the effect of consumer information on firm pricing in a model where consumers search for prices and matches with products we consider two types of consumers uninformed consumers do not know in advance their match values with firms whereas informed consumers do prices are lower the greater the proportion of uninformed consumers hence uninformed consumers exert a positive externality on the others in contrast to standard results this leads to socially excessive investment in gathering prior information when aggregate demand is price sensitive

single period single product newsvendor model with random supply shock abstract in order to investigate the efficiency of policies made by the industrial administration office iao for short so as to keep market order the authors propose a shocked inventory model of one product with both genuine and counterfeit qualities the checking policies made by the iao are considered to be a random shock for the inventory model by examination of the qualities of the products which will expropriate the counterfeit products the paper makes two contributions first while discussing several conditions the authors provide a basic theory which is a kind of extension of the newsvendor problem and prove some properties of the optimal policies for the shocked inventory model with a fixed random checking rate second the authors give some recommendations as to how the iao can formulate its checking policies an example demonstrates the relationship between checking policies and optimal inventory policies

contestability in the presence of an alternate market an experimental examination most earlier experimental tests ofthe contestable market hypothesis assume a zero opportunity cost of entry this design feature makes interpretation of results in terms of entry behavior problematic the experimental study that i report tests contestability with the addition of an alternate market that yields a positive profit with certainty this safe haven operationalizes a positive opportunity cost of entry hit and run entry is observed in the experiments adjusted mean prices are not significantly different from the zero opportunity cost case two methodological questions are also examined in one treatment sellers price offers are allowed only in 0 25 increments the simplification of the sellers decision space makes collusive arrangements more probable secondly market outcomes using human subject buyers are compared with outcomes from experiments with computer simulated demand the disciplining effect of human subject buyers results in market prices that converge to competitive levels more quickly the theory of contestable markets as presented by william baumol in his 1981 address as outgoing president of the american economic association has received considerable attention since its introduction the thesis of contestability is that we can model a market that attains a competitive outcome without the large numbers price taking assumption in the perfectly contestable market envisioned by baumol and others we would observe the efficient competitive price in equilibrium even with few or only one active seller the threat of entry is the disciplining force that sustains the efficient price as an equilibrium previous experimental tests of the contestable market hypothesis for the natural monopoly case all include at least two active firms pricing in every period the laboratory outcomes of these markets are indistinguishable from the destructive competition that has historically concerned scholars sharkey 1982 one can assert that the competitive prices that result from these natural monopoly markets are due to cutthroat competition because that market is the only game in town the study of the contestable natural monopoly that i report allows subjects the option of earning a normal rate of return in an alternate market thus there is at least the possibility that we can observe a single active seller choosing the efficient price

a laboratory study of duopoly price competition with patient buyers i introduction two extreme forms of pricing behavior sometimes called the bertrand paradox and the diamond paradox emerge from a single distinguishing assumption bertrand 1883 assumes that a buyer knows ex ante the prices of all sellers and notes that with homogeneous goods a single competitive price emerges even among a small number of sellers because at any slightly higher price at least one seller can increase his profit by engaging in undercutting in diamond s 1971 model on the other hand a buyer first chooses a seller and then receives the price quote ex post even with infinitesimal search cost in equilibrium a buyer searches only one seller and all sellers charge the monopoly price the only difference between the two formulations is whether sellers price ex ante or ex post 1 intuitively however there is no strong rationale for preferring either assumption for when price information is acquired this is especially so since the law of one price is known to fail and persistent price dispersion is widely observed even in essentially homogenous goods markets e g baye morgan and scholten 2004 brynjolfsson and smith 2000 sorensen 2000 most of the theoretical literature that models price dispersion has employed costly buyer search e g salop and stiglitz 1977 1982 stahl 1989 1996 stigler 1961 or costly seller advertising butters 1977 robert and stahl 1993 to generate dispersed prices 2 gale 1988 on the other hand models price dispersion in a rather stark form using only two sellers and one buyer this can provide a modeling foundation for some types of multilateral bargaining such as in concentrated intermediate goods markets sellers are uncertain whether the buyer is receiving price offers from both ex ante pricing or one ex post pricing of them at any given time if the buyer s sample contains both offers with a positive but not certain probability gamma a unique dispersed price equilibrium exists that shifts systematically with gamma extending this static model to multiround pricing with time discounting gale examines the impact of greater buyer patience modeled as a higher discount factor on the equilibrium price level and price dispersion this is intended to approximate market conditions with many buyers where trade continues over time as can occur also in durable goods settings as buyers become more patient sellers must compete not only with the other seller but also with their own future price offers consequently the equilibrium price distribution becomes concentrated at lower prices this article presents the first laboratory experiment that studies the interaction of buyer patience and search with multiround pricing by competing sellers specifically we focus on prices posted by competing sellers in a noisy search environment where buyers can wait for more price offers this enables us to explore how the timing of buyer s purchase decisions influences sellers pricing strategy which is not captured by the stationary equilibrium of the theoretical model the experiment includes both a static treatment where agents have only one opportunity to trade each period and a dynamic treatment where trading opportunities may continue for future rounds of price offers with a positive and known probability 3 one interpretation of these single round trading and multiple round trading treatments is that the former refers to a disposable goods and the latter to a durable goods environment the model s predictions that prices decrease if the buyer is more patient or is more likely to receive both price offers are intuitive but the available evidence from previous durable goods and bargaining experiments provides only weak support for theory furthermore implications of multiple price offers from competing sellers have never been studied previously in experiments with durable goods and multiple round trading which have focused on single seller environments

buyer search and price dispersion a laboratory study we study markets with costly buyer search in which sellers simultaneously post prices buyers costlessly observe one or with probability 1 q two of the posted prices and can accept one or pay to search again the experiment varies q the search cost and the number of buyers equilibrium theory predicts a unified very low high price for q 0 q 1 and predicts specific distributions of dispersed prices for q 1 3 and 2 3 actual prices conform closely to the predictions in some treatments buyers reservation prices are biased away from the extremes however and sellers prices have positive autocorrelation and cross sectional correlation

introduction of a second channel implications for pricing and profits in this paper we study the optimal pricing strategies when a product is sold on two channels such as the internet and a traditional channel we assume a stylized deterministic demand model where the demand on a channel depends on prices degree of substitution across channels and the overall market potential we first study four prevalent pricing strategies which differ in the degree of autonomy for the internet channel for a monopoly we provide theoretical bounds for these pricing strategies we also analyze the duopoly case where an incumbent mixed retailer faces competition with a pure retailer and characterize price equilibria finally through a computational study we explore the behavior price and profits under different parameters and consumer preferences for the alternative channels

economists policy views and voting in spring 2003 a survey of 1000 economists was conducted using a randomly generated membership list from the american economics association the survey contained questions about 18 policy issues voting behavior and several background variables the response was 264 nonblank surveys the responses show that most economists are supporters of safety regulations gun control redistribution public schooling and anti discrimination laws they are evenly mixed on personal choice issues military action and the minimum wage most economists oppose tighter immigration controls government ownership of enterprise and tariffs in voting the democratic republican ratio is 2 5 1 these results are compared to those of previous surveys of economists we itemize a series of important questions raised by these results

comparative advertising disclosing horizontal match information improved consumer information about horizontal aspects of products of similar quality leads to better consumer matching but also to higher prices so consumer surplus can go up or down while profits rise with enough quality asymmetry though the higher quality and hence larger firm s price falls with more information so both effects benefit consumers this occurs when comparative advertising is used against a large firm by a small one comparative advertising as it imparts more information therefore helps consumers although it also improves the profitability of the small firm overall welfare goes down because of the large loss to the attacked firm

rationalizability learning and equilibrium in games with strategic complementarities we study a rich class of noncooperative games that includes models of oligopoly competition macroeconomic coordination failures arms races bank runs technology adoption and diffusion r d competition pretrial bargaining coordination in teams and many others for all these games the sets of pure strategy nash equilibria correlated equilibria and rationalizable strategies have identical bounds also for a class of models of dynamic adaptive choice behavior that encompasses both best response dynamics and bayesian learning the players choices lie eventually within the same bounds these bounds are shown to vary monotonically with certain exogenous parameters we study the class of noncooperative supermodular games introduced by topkis 1979 and further analyzed by vives 1985 1989 who also pointed out the importance of these games in industrial economics supermodular games are games in which each player s strategy set is partially ordered the marginal returns to increasing one s strategy rise with increases in the competitors strategies so that the game exhibits strategic complementarity 2 and if a player s strategies are multidimensional marginal returns to any one com ponent of the player s strategy rise with increases in the other components this class turns out to encompass many of the most important economic applications of noncooperative game theory in macroeconomics diamond s 1982 search model and bryant s 1983 1984 rational expectations models can be represented as supermodular games in each of these models more activity by some members of the economy raises the returns to increased levels of activity by others in oligopoly theory some models of bertrand oligopoly with differentiated products qualify as supermodu lar games in these games when a firm s competitors raise their prices the marginal profitability of the firm s own price increase rises a similar structure is present in games of new technology adoption such as those of dybvig and spatt 1983 farrell and saloner 1986 and katz and shapiro 1986 when more users hook into a communication system or more manufacturers adopt an interface standard the marginal return to others of doing the same often rises similarly in some specifications of the bank runs model introduced by diamond and dybvig 1983 when more depositors withdraw their funds from a bank it is more worthwhile for other depositors to do the same in the warrant exercise

aggregation and imperfect competition on the existence of equilibrium we present a new approach to the theory of imperfect competition and apply it to study price competition among differentiated products the central result provides general conditions under which there exists a pure strategy price equilibrium for any number of firms producing any set of products this includes products with multi dimen sional attributes in addition to the proof of existence we provide conditions for uniqueness our analysis covers location models the characteristics approach and probabilistic choice together in a unified framework to prove existence we employ aggregation theorems due to prekopa 1971 and borell 1975 our companion paper caplin and nalebuff 1991 introduces these theorems and develops the application to super majority voting rules we present a new approach to the theory of imperfect competition and apply it to study price competition among differentiated products the central result is that there exists a pure strategy price equilibrium for any number of firms producing any set of products in addition to the proof of existence we provide conditions for uniqueness our model both unites diverse strands of the earlier literature and opens up uncharted areas for future analysis in particular we expand the traditional one dimensional framework to allow for multi dimen sional product differentiation our approach involves twin restrictions on consumer preferences one on individuals preferences the other on the distribution of preferences across society these are generalizations of the restrictions supporting 64 majority rule presented in caplin and nalebuff 1988 to prove existence we apply a new technique of aggregation this technique is valuable in a variety of other problems in the companion paper we use the aggregation result to generalize our earlier work on 64 majority rule and to characterize the relationship between the distribution of human capital and the distribution of income caplin and nalebuff 1991 there are additional applications in statistics and in search theory we begin with a brief review of the early literature on imperfect competition describing in more detail the existence problem and previous solutions section 3 presents our twin assumptions and shows that they cover many standard cases in section 4 we introduce the aggregation theorem and use it in the analysis of demand functions the proof of existence of equilibrium is in section

true monopolistic competition as a result of imperfect information the paper restates hart s 1985a 1985b definition of large group monopolistic competition distinguishes it from oligopolistic competition and raises the question of whether there are reasonable circumstances that give rise to true monopolistic competition as defined the purpose is to show that consumers imperfect information may create conditions that will turn an otherwise oligopolistic market into a truly monopolistically competitive one