strategic buyers and exclusionary contracts this paper characterizes equilibrium exclusionary contracts between buyers an incumbent firm and a potential entrant when buyers can either vertically integrate or contract with the outside entrant in this setting exclusionary contracts are generally shown to be efficient and to deter inefficient entry that would otherwise occur with multiple unorganized buyers equilibrium contracts are shown to take a divide and conquer form and in some cases to deter some efficient entry in such cases efficient contracting can be restored by a policy that prohibits price discrimination and gives agents free reign to sign exclusionary agreements copyright 1994 by american economic association

truth effort and the legal battle in lawsuits relative success depends upon two main factors the true degree of fault and the efforts invested on eachside a proposed litigation success function displays thisdependence while satisfying other essential properties undertwo different protocols nash cournot and stackelberg solutions are obtained for the litigation efforts proportionate success and values of the lawsuit on each side outcomes are evaluated in terms of two normative criteria i achieving justice interpreted as equality between defendantfault and relative plaintiff success and ii minimizingaggregate litigation cost achievement of these aims isdetermined by the decisiveness of litigation effort relativeto true fault

the competitive effects of vertical agreements for many years there were few distinctions drawn between horizontal and vertical agreements both were considered anticompetitive and subject to per se condemnation under the antitrust laws recently however this approach has come under attack and what was once the conventional wisdom is no longer so indeed there is growing acceptance of the view that vertical agreements can rarely have anticompetitive consequences per se legality would then be the appropriate standard in this paper we investigate the competitive implications of a particular vertical agreement the imposition of exclusive dealing requirements by a manufacturer on his distributors however to maintain the focus of the analysis we do not consider ultimate welfare gains or losses in an early application of economic analysis to this practice aaron director and edward levi 1956 suggest that exclusive dealing would be anticompetitive if it raised entry costs for rivals our object following this conjecture see their p 293 is to examine the market conditions under which exclusive dealing impedes entry howard marvel 1982 dealt with the practice of exclusive dealing he provides an efficiency rationale for exclusive dealing ignores the prospect that anticompetitive effects may follow and concludes that exclusive dealing ought therefore to be treated as legal per se p 25 this paper examines the possible anticompetitive effects neglected by marvel i market conditions for exclusive dealing

1 000 cash back the pass through of auto manufacturer promotions automobile manufacturers frequently use promotions involving cash incentives while payments are nominally directed to either customers or dealers the ultimate beneficiary of the promotion depends on the outcome of price negotiation we use program evaluation methods to compare the incidence of these two types of promotions customers obtain 70 to 90 percent of a customer rebate but only 30 to 40 percent of a dealer discount promotion a 500 difference for a typical promotion our leading hypothesis is that pass through rates differ because of information asymmetries customer rebates are well publicized to customers while dealer discount promotions are not

equilibrium in auctions with entry the authors model entry incentives in auctions with risk neutral bidders and characterize a symmetric equilibrium in which the number of entrants is stochastic the presence of too many potential bidders raises coordination costs that detract from welfare the authors show that the seller and society can benefit from policies that reduce market thickness i e the relative abundance of buyers their analysis extends well known revenue equivalence and ranking theorems but also demonstrates that variations in the auction environment affect optimal policies e g reservation prices in ways not anticipated by models that ignore entry copyright 1994 by american economic association

the role of market forces in assuring contractual performance the conditions under which transactors can use the market repeat purchase mechanism of contract enforcement are examined increased price is shown to be a means of assuring contractual performance a necessary and sufficient condition for performance is the existence of price sufficiently above salvageable production costs so that the nonperforming firm loses a discounted steam of rents on future sales which is greater than the wealth increase from nonperformance this will generally imply a market price greater than the perfectly competitive price and rationalize investments in firm specific assets advertising investments thereby become a positive indicator of likely performance

on the simple economics of advertising marketing and product design we propose a framework for analyzing transformations of demand such transformations frequently stem from changes in the dispersion of consumers valuations which lead to rotations of the demand curve in many settings profits are a u shaped function of dispersion high dispersion is complemented by niche production and low dispersion is complemented by mass market supply we investigate numerous applications including product design advertising marketing and sales advice and the construction of quality differentiated product lines we also suggest a new taxonomy of advertising distinguishing between hype which shifts demand and real information which rotates demand

is the linkage principle valid evidence from the field we present field evidence involving experienced bidders tha t supports the linkage principle specifically the prediction that in affiliat ed values auction environments the expected revenues generated at open outcry ascending bid english auctions are higher than those under other auction formats that reveal less information to participants using field data from a large seller of automobiles whi ch experimented with different selling formats we find that the seller s average r evenues were significantly higher under an english auction than under a dynamic internet auction that revealed far less information to bidders 1 introduction and motivation in an influential and classic paper milgrom and weber 1982 derived a powerful result and coined the term linkage principle to describe it simply put in auction environments having affiliated values the linkage principle state s that a seller can expect to increase revenues by providing more information to bidders both before and during the auction an implication of the linkage principle is that open outcry ascending price auctions often referred to as english auctions will on average earn more revenue for the seller than sealed bid auctions under which no information is released or similar auction formats that reveal less information to pot ential buyers according to perry and reny 1999 the linkage principle has come to be considered one of the fundamental lessons provided by auction theory well known exceptions to the linkage principle exist for example within independent private values environments the celebrated revenue equivalence theorem first outlined by vickrey 1961 1962 and then proven by riley and samuelson 1981 as well as myerson 1981 states that any auction format that has the same probability of assigning a winning bidder generates the same expected revenue to the seller in particular the revenue equivalence theorem predicts that the expected revenues earned by the seller at sealed bid auctions will be the same as those earned at english auctions at least when the distribution from which the values are drawn is the same for all potential buyers who are also risk neutral thus the presence of some degree of dependence or a common value component in the signals of potential buyers is critical to the validity of the linkage princi ple the affiliated values model is a generalization of the common value model developed by wilson 1977 under affiliation the conditional expectation of any monotonic function of the signals of all bidders is an increasing function of any individual bidder s own signal when the signals of bidders are dependent in this manner information released by the seller or information the seller provides concerning the bids made by other participants by virtue of the seller s choice of auction format helps bidders refine their beliefs concer ning the true value of the object for sale which in turn induces them to bid more aggressively than they would in the absence of such information while one can imagine circumstances under which the release of information could adversely affect the outcome at an auction for example if the seller released information concerning problems with the object for sale or when low bids by some bidders convince other bidders that the item is worth less than they originally thought the remarkable feature of the linkage principle i s that ex ante providing more information raises the expected revenues to the seller milgrom and weber 1982 have summarized the implications of the linkage principle succinctly honesty is the best policy

the evolution of economic institutions as a propagation process based on some notions from recent game theoretic approaches to explain the emergence of institutions a model is put forward which implies some generalizations and extensions first the evolution of institutions is interpreted as a diffusion process this interpretation provides a general formal framework to cover both the case of strategic and that of non strategic interaction second different forms of interdependency effects between the individuals involved are identified as making the crucial difference between the case where institutions emerge spontaneously in an unorganized form and the case where they do not

auctions with a stochastic number of bidders abstract auction theory is generalized by allowing the number of bidders to be stochastic in a first price sealed bid auction with bidders having constant absolute risk aversion the expected selling price is higher when the bidders do not know how many other bidders there are than when they do know this thus the seller should conceal the number of bidders if he can moreover a bidder s ex ante expected utility is the same whether or not there is a policy of concealing the number of bidders concealment therefore pareto dominates announcement with risk neutral bidders the optimal auction is the same whether or not the bidders know who their competitors are

a non cournot model of voluntary collective action the interaction of selfish rational actors in the provision of a public good is analyzed in an attempt to explain recent experimental findings as well as real world cases of voluntary collective action the model which allows for more sophisticated behavior than that assumed by the conventional cournot theory predicts a higher level of collective action that that theory the impacts of income effects and of the price elasticity of demand for the public good are given special emphasis

contests with limited resources abstract many interesting phenomena electoral competition r d races lobbying are instances of multiple simultaneous contests with unconditional commitment of limited resources specifically the following game is analyzed two players compete in a number of simultaneous contests the players have limited resources budgets and must decide how to allocate these to the different contests in each contest the player who expends more resources than his adversary wins a corresponding prize mixed strategy equilibria are characterized in the case of identical values and budgets and the connections with the classical blotto game are analyzed

information and subsidies complements or substitutes abstract does providing information about a product influence the impact of price subsidies on purchases this question is particularly relevant for health products in developing countries where both informational campaigns and price subsidies are common policy instruments we conduct a field experiment in zambia and find that providing information about a new version of a product significantly increases the impact of price subsidies on take up taken alone the information manipulation has no significant impact on demand while the price subsidy substantially increases demand however the evaluation of either intervention in isolation fails to capture the significant complementarity between the two

on the distribution of federal taxes and expenditures and the new war between the states as federal government expenditures have grown there has been an increasing awareness of the distribution of taxes and expenditures across states states in the northeast have claimed that sunbelt states have been getting more than their fair share of federal spending with the sunbelt states denying the charge a theory of political coalitions is developed to explain why the sunbelt should be unable to receive differentially high expenditures although the sunbelt may pay less than a proportional amount in taxes because of its relatively low income an empirical test shows that the data are in agreement with this theory

primaries and the new hampshire effect candidates for u s presidential elections are determined through sequential elections in single states the primaries we develop a model in which candidates can influence their winning probability in electoral districts by spending money on campaigning the equilibrium replicates several stylized facts very well campaigning is very intensive in the first district the outcome of the first election then creates an asymmetry in the candidates incentives to campaign in the next district which endogenously increases the equilibrium probability that the first winner wins in further districts on the normative side our model oers a possible explanation for the sequential organization it leads in expectation to a lower level of advertising expenditures than simultaneous elections moreover if one of the candidates is the more eective campaigner sequential elections also perform better with regard to the selection of the best candidate

efficiency in auctions with private and common values an experimental study this discussion has resulted in a publication in the american economic review 2002 92 3 625 43 auctions are generally not efficient when the object s expected value depends on private and common value information we report a series of first price auction experiments to measure the degree of inefficiency that occurs with financially motivated bidders while some subjects fall prey to the winner s curse they weigh their private and common value information in roughly the same manner as rational bidders with observed efficiencies close to predicted levels increased competition and reduced uncertainty about the common value positively affect revenues and efficiency the public release of information about the common value also raises efficiency although less than predicted

the role of information in medical markets an analysis of publicly reported outcomes in cardiac surgery during the past two decades several public and private organizations have initiated programs to report publicly on the quality of medical care provided by specific hospitals and physicians these programs have sparked broad debate among economists and policy makers concerning whether and to what extent they have improved or harmed medical productivity we take advantage of a cross sectional time series of different hospitals to address two fundamental questions about quality reporting first we examine whether report cards affect the distribution of patients across hospitals second we determine whether report cards lead to improved medical quality among hospitals identified as particularly bad or good performers our data are from the longest standing effort to measure and report health care quality the cardiac surgery reporting system csrs in new york state using data for 1991 through 1999 we find that csrs affected both the volume of cases and future quality at hospitals identified as poor performers poor performing hospitals lost relatively healthy patients to competing facilities and experienced subsequent improvements in their performance as measured by risk adjusted mortality this abstract was borrowed from another version of this item

the competitive effects of vertical agreements comment recent economic analyses of vertical restraints and integration emphasize the circumstances under which these arrangements are socially efficient efficiency claims have proven contentious however for exclusive dealing a vertical restraint that prohibits any outlet carrying a manufacturer s product from stocking substitute brands this paper analyzes the impact of exclusive dealing on competition and allocative efficiency opinions expressed on the impact of exclusive dealing range from the extreme view that it is invariably anticompetitive to the view that it is always procompetitive the u s supreme court has concluded that in hundreds if not thousands of communities where there is a single retailer for a product

the competitive effects of vertical agreements comment in a recent paper comanor and frech 1985 cf claim that a manufacturer enjoying a product differentiation advantage could impose exclusive dealing on distributors while also raising its wholesale price the two consumer groups in the model would then pay higher prices than under nonexclusive dealing cf also suggest that exclusive dealing is more likely to emerge when product differentiation is relatively strong cf s analysis does not carefully incorporate the constraints imposed by dealer rationality doing so within cf s model i reach opposite conclusions exclusive dealing will be accepted only if the manufacturer reduces its wholesale price to dealers relative to nonexclusive dealing price rises to one group of consumers but falls to the other moreover exclusive dealing is more likely to emerge when product differentiation is relatively weak

do prediction markets aid defenders in a weak link contest abstract laboratory experiments have demonstrated that prediction market prices weakly aggregate the disparate information of the traders about states moves of nature however in many practical applications one is attempting to predict the move of a strategic rival this is particularly important in aggressor defender contests this paper reports an experiment where the defender may have the advantage of observing a prediction market on the aggressor s action the results of the experiments indicate that the use of prediction markets does not increase the defender s win rate prediction markets contain reliable information regarding aggressors decisions that is not being exploited by defenders and the existence of a prediction market does not alter the behavior of the aggressor whose behavior is being forecast

on the dampening of competition effect of exclusive dealing the authors compare and contrast the profit and welfare effects of exclusive dealing sales through a common retailer and vertical integration as did y j lin 1990 the authors find that imperfectly competitive manufacturers prefer to impose exclusive dealing on their retailers unlike lin the authors find that welfare is higher under exclusive dealing than when products are sold through a common retailer this finding suggests a new interpretation of the standard stations v united states 1949 antitrust case copyright 1993 by blackwell publishing ltd

the competitive effects of exclusive dealing evidence from the u s beer industry abstract several recent theoretical articles have modeled the effects of exclusive dealing contracts that restrict dealers to selling a single brand yet detailed empirical analysis of the impact of exclusivity on actual market outcomes has been lacking i analyze a unique set of firm level data on nearly 400 beer distributors in the united states the impacts of economies of scale and restrictions on distributor promotional activities on the use of exclusive dealing are measured as well as the effects of exclusivity on costs prices and output the results support the view that exclusive dealing serves to minimize manufacturer dealer incentive conflicts and enhances social welfare

sorting in the used car market after the volkswagen emission scandal the disclosure of the vw emission manipulation scandal caused a quasi experimental market shock in the observable quality of vw diesel vehicles we consider a classical model for adverse selection and sorting to derive an empirically testable hypothesis about the impact of observable quality on the supply of used cars we test the hypothesis with data collected from an online car selling platform which reflects about 50 of the german used car market the empirical approach is based on a conditional difference in differences method we find that the supply of used vw diesel vehicles increases after the vw emission scandal this finding is consistent with the predictions of the theoretical model furthermore we find the positive supply effects increase with the probability of manipulation

exclusive dealing limiting outside activity and conflict of interest exclusive dealing is one of a number of non price vertical restraints that have become the subject of considerable scrutiny and rethinking both in the courts and in the academic literature 2 8 10 17 because of its association with antitrust law the emphasis of the exclusive dealing literature 3 7 13 16 21 has been on whether exclusive dealing can enhance or protect a firm s market power exclusive dealing and related restrictions on agent activities however are far more widespread than can credibly be attributed to antitrust considerations or interfirm strategic behavior the range of instances where exclusive dealing broadly construed applies is quite large including the familiar manufacturer retailer relationship as well as other situations where there may be a conflict of interest the decision to hire a worker to do a job or to have the job done by an independent contractor could be interpreted as the decision whether a firm wants its workers to exclusively deal their labor the exclusivity question arises in less formal or familiar settings as well should one for example permit a babysitter to have friends visit or should her attention be exclusively directed toward one s children should a university permit its faculty to engage in outside consulting or non university sponsored research or should it lay down rules restricting the time available for outside activities or the types of outside research that can be carried out antitrust courts and legal commentators over the past ten years especially since sylvania 4 have come to view non price vertical restraints more benignly than in the past 2 299 304 15 17 18 20 benign neglect however offers no help to a firm wondering whether to institute exclusive dealing not only may the costs and benefits of doing so be subtle but the decision may be controversial among the affected parties in the conventional exclusive dealing case retailers may not want a major supplier to cut them off if they continue to sell another manufacturer s product and will likely demand to be compensated for their lost business opportunities exclusive dealing may be viewed as the limiting version of a policy to limit outside activities by agents the purpose of this paper is to set out a very general neoclassical choice framework to discover conditions in which exclusive dealing or limitations on outside activities to mitigate conflicts of interest can enhance the operating efficiency of a vertical relationship a specific goal

5 information impact and allocation rules in auctions with affiliated private values a laboratory study in affiliated private value auctions each bidder has perfect information regarding his her own value for the object at auction but higher values of the item for one bidder make higher values for other bidders more likely we report on a series of experiments examining three key implications of these auctions i in a first price auction public information about rivals values increases expected revenue ii an english auction increases expected revenue compared to a first price auction and iii a second price auction is isomorphic to an english auction in examining these issues we compare predictions of some ad hoc bidding models with nash equilibrium predictions in the first price auction experiments nash equilibrium bidding theory organizes the data better than either of two ad hoc bidding models public information about others valuations does increase average revenue but the increase in revenue is smaller and less reliable than predicted under risk neutral nash equilibrium bidding lower average revenue might be attributed to risk aversion while the high variability is attributed to a sizable frequency of individual bidding errors relative to the theory bidding theory precisely organizes english auction outcomes after a brief initial learning period the dominant strategy equilibrium does not organize second price auctions nearly as well as market prices persistently exceed predicted prices the difference between english and second price outcomes is attributed to effects of different information flows inherent in the structure of the two institutions on eliminating bidding errors revenue impacts of these two institutions relative to a first price auction are examined in light of observed bidding patterns

the value of public information in monopoly the logic of the linkage principle of milgrom and weber 1982 extends to price discrimination a non linear pricing monopolist who sells to a single buyer always prefers to commit to publicly reveal information a liated to the valuation of the buyer

downstream vertical foreclosure and upstream innovation i examine a link between downstream foreclosure and upstream innovation the crucial ingredient of the model is the presence of dynamic economies of scale upstream in the form of competition in r d the reason an upstream supplier has a captive buyer is to force rival suppliers to incur the disadvantages of low scale production and discourage them from innovating the downstream buyer is offered favorable terms and is convinced to sign an exclusive supply contract and accept captivity in this context downstream foreclosure may reduce consumer welfare

information disclosure as a matching mechanism theory and evidence from a field experiment market outcomes depend on the quality of information available to its participants we measure the effect of information disclosure on market outcomes using a large scale field experiment that randomly discloses quality information in wholesale automobile auctions we argue that buyers in this market are horizontally differentiated across cars that are vertically ranked by quality this implies that information disclosure helps match heterogeneous buyers to cars of varying quality causing both good and bad news to increase competition and revenues the data confirm these hypotheses these findings have implications for the design of other markets including e commerce procurement auctions and labor markets jel c93 d44 d82 l15

stability and competitive equilibrium in trading networks we introduce a model in which agents in a network can trade via bilateral contracts we find that when continuous transfers are allowed and utilities are quasi linear the full substitutability of preferences is sufficient to guarantee the existence of stable outcomes for any underlying network structure furthermore the set of stable outcomes is essentially equivalent to the set of competitive equilibria and all stable outcomes are in the core and are efficient by contrast for any domain of preferences strictly larger than that of full substitutability the existence of stable outcomes and competitive equilibria cannot be guaranteed

the effect of information on product quality evidence from restaurant hygiene grade cards this study examines the effect of an increase in product quality information to consumers on e rms choices of product quality in 1998 los angeles county introduced hygiene quality grade cards to be displayed in restaurant windows we show that the grade cards cause i restaurant health inspection scores to increase ii consumer demand to become sensitive to changes in restaurants hygiene quality and iii the number of foodborne illness hospitalizations to decrease we also provide evidence that this improvement in health outcomes is not fully explained by consumers substituting from poor hygiene restaurants to good hygiene restaurants these results imply that the grade cards cause restaurants to make hygiene quality improvements

on the failure of the linkage principle in multi unit auctions it is shown that the linkage principle milgrom and weber 1982 does not extend to the multi unit auction setting an analysis of the equilibium bidding strategies is carried out for the general two agent two unit vickrey auction in order to provide economic insight into the nature of the failure in addition an explicit counterexample is provided both authors acknowledge support from the binational science foudation grant 9500023 1 reny also acknowledges support from the national science foundation grant sbr 970932 and the university of pittsburgh s faculty of arts and sciences

the impact of buyers expectations on entry deterrence abstract a model of entry deterrence is presented in which consumers are perfectly informed about an incumbent monopolist s product quality but are imperfectly informed about the qualities of potential entrants to deter entry the monopolist chooses a higher price and quality than he would in the absence of an entry threat

endogenous conjectural variations in oligopoly abstract conventional oligopoly theories provide no mechanism for oligopolists to learn from their experience of other firms behavior in forming conjectural variations this paper explores two approaches to the solution of this problem in the first the consistent conjectures approach oligopolists passively react to changes in other firms outputs so as to keep their own profits at a maximum other firms correctly anticipate these reactions in the second approach the matching behavior approach firms actively choose reactions which will induce other firms to reduce their outputs again these reactions are correctly anticipated by the other firms the implications of these alternative models are derived and contrasted with the implications of the cournot and joint profit maximization models

appropriation violent enforcement and transaction costs a critical survey this paper focuses on the extension of transaction costs to appropriative activity and coercive power in the property rights approach it has been argued that including the costs of appropriation and violent enforcement in transaction costs is based on the assumption that coaseian bargaining can be extended to any institutional scenario i e voluntary as well as coercive exchange however voluntary transactions cannot capture the logic of coercive power this means that the assumption of an efficient political market is not valid and that the political coase theorem lacks the logical consistency to provide a cornerstone for political theory

6 revenue effects and information processing in english common value auctions an experiment analyzing behavior in english common value auctions is reported english auctions raise more revenue than first price auctions only when bidders do not suffer from a strong winner s curse agents employ other bidders dropout prices along with their private information as nash bidding theory predicts however a simple and natural signal averaging rule which does not require recognizing the adverse selection effect of winning the auction better characterizes the data than the nash rule monte carlo simulations using fiml estimates of the signal averaging rule predict a number of data characteristics not directly employed in the estimation procedure copyright 1996 by american economic association

vote buying general elections we examine the consequences of vote buying assuming this practice were allowed and free of stigma two parties compete in a binary election and may purchase votes in a sequential bidding game via up front binding payments and or campaign promises platforms that are contingent on the outcome of the election we analyze the role of the parties and voters preferences in determining the winner and the payments to voters

multi battle contests an experimental study this study examines behavior of subjects in simultaneous and sequential multi battle contests in simultaneous contests subjects make positive bids in each battle 80 of the time and bids fall within the predicted boundaries however 35 of the time subjects make positive bids in only two instead of all three battles and they significantly overuse moderately high bids in sequential contests theory predicts sizable bids in the first battle and no bids in the subsequent battles contrary to this prediction subjects significantly underbid in the first battle and overbid in subsequent battles consequently instead of always ending in the second battle contest proceeds to the third battle 38 of the time finally in both simultaneous and sequential settings subjects make higher aggregate bids than predicted resulting in negative expected payoffs

strategic behaviour of incumbent firms in the uk abstract the main purpose of this paper is to examine the incidence of strategic behaviour in the uk by means of a questionnaire study performed across three broad manufacturing industries food electrical engineering and chemicals of the strategies which have received substantial theoretical attention r d and advertising appear widely used patenting pricing and excess capacity much less so vertical instruments such as purchasing policy also stand out as important but possibly only a minority of firms in our sample actively pursue strategic instruments

asymmetric information adverse selection and online disclosure the case of ebay motors since the pioneering work of akerlof 1970 economists have been aware of the adverse selection problem that information asymmetries can create in used goods markets the remarkable growth in online auctions of used goods where buyers generally purchase sight unseen therefore poses a puzzle i argue that given a means for credible information disclosure sellers will voluntarily disclose their private information to buyers through online media this limits information asymmetries and adverse selection to test this theory i examine the role of information in a large online used car market ebay motors i nd that sellers selectively disclose information that information asymmetries are reduced by these disclosures and that online media such as photos text and graphics provide a rich environment for information disclosure

price discontinuities in an online market for used cars we study the price setting behavior in a competitive market for used cars and provide empirical evidence for coarse information processing based on detailed field data from one of europe s largest online marketplaces for automotive vehicles we document systematic and sizable price discontinuities at salient car age and mileage thresholds the price difference between two otherwise identical cars across registration years where one was first registered in january and the other in december of the previous year is up to five times larger than that between two cars first registered in any two subsequent months within a registration year a similar pattern can be observed in the mileage dimension at 10 000 km odometer marks which is in line with earlier findings in the literature being able to study discontinuities along two dimensions of the same good allows us to further our understanding toward a more general notion of inattentive behavior while our results are compatible with a behavioral model of l

strategic aspects of vertical delegation abstract this paper offers an overview of the strategic aspects of situations where either institutionally or contractually a firm delegates some of its decisions to another firm a subsidiary an internal division etc delegation may have several kinds of strategic benefits in the short term it may improve the competitive position of the firm or induce a more lenient behavior from its competitors in the long run it may be used to deter the entry of potential competitors to foreclose market access or to induce actual competitors to exit the paper analyzes the trade off between these possible benefits and the agency costs of delegation and emphasizes the key issues of credibility and commitment

an equilibrium analysis of the simultaneous ascending auction we provide a bayes nash equilibrium analysis of the simultaneous ascending auction saa when local bidders interested in a single item compete against global bidders interested in aggregating many items we first assume that each local bidder values only a specific item e g the license for the region where it has monopoly power and that global bidders valuation functions are convex for this environment we show that a global bidder faces an exposure problem with adverse consequences for revenue and efficiency in the limit when the number of items grows large the saa is revenue and efficiency equivalent to the vickrey clarke groves vcg mechanism we extend our analysis to include the case where items are substitutes for local bidders so that price arbitrage will occur as observed in many spectrum auctions this environment which combines substitutes and complements results in an aggravated exposure problem consequently the saa is no longer efficient and may yield dramatically lower revenues than the vcg mechanism finally we relax the assumption that global bidders valuation functions are convex by considering an environment with medium sized global bidders who demand fewer than all items we show that global bidders divide the market at low prices when market sharing is feasible while they engage in mutually destructive bidding when there is a fitting problem in both cases the saa again underperforms relative to the vcg mechanism

war and conflict in economics theories applications and recent trends we review the main economic models of war and conflict these models vary in details but their implications are qualitatively consistent highlighting key commonalities across a variety of conflict settings recent empirical literature employing both laboratory and field data in many cases confirms the basic implications of conflict theory however this literature also presents important challenges to the way economists traditionally model conflict we finish our review by suggesting ways to address these challenges

equilibrium transformations and the revenue equivalence theorem i develop a method that transforms an equilibrium strategy profile from one auction to another the method is constructive and does not require complicated computation this provides a new approach to revenue equivalence and extends the theorem to domains where it had not previously been known in particular to simultaneous multiple object auctions with complete information and to auction environments having correlated private values and common values

selective contracts foreclosure and the chicago school view abstract i examine a mechanism by which exclusive supply contracts may inefficiently deter entry into the market in the model the incumbent supplier selectively offers contracts only to some buyers and convinces them to consent by guaranteeing them low prices the contracts strengthen the monopoly position of the incumbent supplier and allow it to extract rents from the remaining buyers that were not offered contracts aside from the favorable contract terms buyers have another reason to consent to the exclusivity scheme the latter raises the input costs of rival buyers that were not offered contracts the model has potential applications to the recent microsoft antitrust case 1994 i define exclusive supply contract as an agreement under which an upstream firm becomes the exclusive supplier of a downstream firm the downstream firm is prohibited from buying from other suppliers

strategic exclusion of the highest valued bidders in wholesale automobile auctions by restricting bidders to be qualified dealers wholesale automobile auctions exclude the bidders who place the highest value on the vehicles consumers this article provides an explanation for this puzzling entry restriction by modeling the inventory management decisions of a firm if an automobile dealer has more vehicles in inventory than is optimal it cannot reduce its inventory by selling directly to consumers without impacting the demand for the automobiles that remain however if the dealer sells his her excess inventory to a competitor the demand for his her remaining vehicles increases as the competitor responds by acquiring fewer additional vehicles we demonstrate that for any market demand function and any cost of the competitor acquiring additional vehicles a dealer with excess inventory does better by selling a subset of its vehicles to a competitor rather than directly to consumers we discuss the market for wholesale automobiles in relation to other markets where goods are also auctioned but where entry is not restricted to qualified dealers doing so allows us to compare our inventory management explanation to common explanations provided by industry practitioners we find that intuitive alternative stories do not consistently explain practices across markets jel d44 l11 l62 i introduction sellers rarely take steps to exclude buyers from the opportunity to purchase even in special cases where entry restrictions are observed sellers rarely exclude those buyers who place the highest value on the goods for sale we present one market where this exact type of entry restriction is common and provide a simple rationale in particular this article considers the wholesale market for automobiles where most automobiles are sold in auctions and the majority of automobile auction houses restrict entry such that only licensed automobile dealers are allowed to bid and consumers are expressly excluded 1 to explain why automobile auctions are closed to consumers we argue that entry restrictions are a strategic response to the structure of the market for automobiles because of fluctuations in the arrival of trade in vehicles some dealers in some periods have more vehicles than they find it profitable to sell in that period as a result these dealers are willing to participate in dealer only auctions because these exclusionary auctions allow dealers to reduce their inventory without cannibalizing demand in the secondary market we consider this type of entry restrictions to be especially puzzling because a market exists for consumers to pay dealers to get them into automobile auctions see www dealerlicensepros com who say that potential dealers need a license so that they can get into dealer only auctions to maximize profits as a result these entry restrictions clearly present a binding constraint because consumers are willing to pay to enter the auction house but are only able to do so illicitly by finding a dealer who is willing to violate the auction rules or by obtaining a dealer s license simply for the purpose of buying a vehicle for their own use further examples include www dealerlicense com who discusses that unlicensed dealers are not being able to buy cars at exclusive dealer only car auctions and numerous online forums where consumers discuss ways to circumvent entry restrictions by paying dealers who will sneak them into an auction for a fee e g see a discussion of fees upwards of 500 for entry to buy a single vehicle ask metafilter com 2 our story is centered around the inventory management decisions of firms in the automobile industry if an automobile dealer has more vehicles in inventory than is optimal it cannot reduce his her inventory by selling directly to consumers without impacting the demand for the automobiles that remain however if the dealer sells his her excess inventory to a competitor the demand for his remaining vehicles increases as the competitor responds by acquiring fewer additional vehicles

a tribute to earl a thompson and in his own words a summary of his general economic and social theory brilliant but little known in part because his style was dense and crucial papers unpublished earl thompson reformulated standard theory to achieve policy relevance focusing on significant rent seeking inefficiencies stemming from private information and transaction costs drawing on history he showed a vast array of institutions to be efficient which economists had previously found to be inefficient modeled governments and their nature defined government s functions and showed why dominant states rise and fall

upfront payments and exclusion in downstream markets although upfront payments are often observed in contracts between manufacturers and retailers little is known about their competitive effects or the role retailers play in securing them in this article we consider a model in which two competing retailers make take it or leave it offers to a common manufacturer we find that upfront payments are a feature of equilibrium contracts and in all equilibria only one retailer buys from the manufacturer these findings support the claims of small manufacturers who argue that they are often unable to obtain widespread distribution for their products because of upfront payments copyright 2007 rand

the impact of public information on bidding in highway procurement auctions a number of papers in the theoretical auction literature show that the release of information regarding the seller s valuation of an item can cause bidders to bid more aggressively this widely accepted result in auction theory remains largely untested in the empirical literature recent theoretical work has also shown that this effect can be more pronounced in auctions with larger common cost uncertainty we examine the impact of a policy change by the oklahoma department of transportation that led to the release of the state s internal estimate of the costs to complete highway construction projects we perform a differences in differences analysis comparing bidding in texas a state that had a uniform policy of revealing the same information all throughout the period of analysis to bidding in oklahoma our results show that in comparison to texas auctions the average bid in oklahoma fell after the change in engineers cost estimate ece policy this decline in bids was even larger for projects where the common uncertainty in costs is greater moreover the within auction standard deviation of bids fell after the change in ece policy with the most significant decline observed again in projects with greater common cost uncertainty

beyond chopsticks symmetric equilibria in majority auction games majority auction games are simultaneous sealed bid auctions of identical objects among identical bidders who each want to win a specified fraction more than a half of the objects each bidder receives no benefit from winning less than the specified fraction and no additional benefit from winning more than it symmetric equilibria having simple intuitive forms are shown to exist in first price second price and all pay versions of such games when the number of bidders is sufficiently large this contrasts with earlier results for the two bidder pure chopstick majority auction games where the only known equilibria are more complicated

fat tax subsidy or both the role of information and children s pester power in food choice abstract using a discrete choice experiment with real economic incentives this paper studies how food fiscal policies and external influences such as pestering and information can affect parental choice of food for their child using pairs of a parent and child the experimental design varies the food prices of healthier and unhealthier alternatives of food products for children as part of specific food fiscal policies we then examine the interplay of children s pester power as well as information about the fiscal policies the results from our lab experiment suggest that a implementing a fat tax and a subsidy simultaneously can shift parental behavior to healthier food products to a greater degree than a fat tax or a subsidy alone b providing information regarding the food fiscal policies can further increase the impact of the intervention and c child pestering is one of the causes of the moderate effectiveness of the policies as it strongly affects parents in making unhealthier choices

three object two bidder simultaneous auctions chopsticks and tetrahedra symmetric equilibria are constructed for a class of symmetric auction games the games all have two identical bidders bidding in three simultaneous first price sealed bid auctions for identical objects information is complete and the bidders marginal valuations increase for the second object and then decrease for the third in all cases the support of the mixture that generates the equilibrium is two dimensional and it surrounds a three dimensional set of best responses this appears to be a previously unknown structure

discount chains and brand policy retail chains are observed in many industries the question addressed here is whether retail chains can exploit buyer power by excluding some brands in a theoretical model with two differentiated producers and a single retailer we show that a retailer will require exclusivity exclude a brand if the brands are sufficiently symmetric in demand potential exclusivity will increase welfare if the excluded brand is a close substitute for the brand carried by the retailer our theoretical results are also set in relation to some findings from the norwegian grocery industry jel classification l12 l42

achieving optimal fines for political bribery a suggested political reform allowing appropriately high fines for political bribery would eliminate 1 the large and allocatively arbitrary bribes paid to our most senior retiring politicians 2 the more moderate but ubiquitous and still allocatively arbitrary bribes paid to less senior but strategically successful politicians and 3 the permanent loss through censure or expulsion of some highly proficient but strategically less successful legislative representatives moreover with fines appropriately set the incentives theoretically describing the entire political system would be elevated from allocative arbitrariness to approximately pareto optimal levels

equilibrium incentives for exclusive dealing in a differentiated products oligopoly we consider the incentives for oligopolistic manufacturers to adopt exclusive dealing manufacturers producing differentiated brands can choose to distribute through exclusive retail dealerships or nonexclusive dealerships with nonexclusive dealing manufacturers face an interbrand externality because brand enhancing investments made by one manufacturer may benefit the brands of other manufacturers although exclusive dealing eliminates this externality oligopolistic manufacturers may not choose exclusive dealing exclusive dealing enhances the incentive to invest but the promotional investments are a form of competition between manufacturers thus manufacturers might earn higher profits with nonexclusive dealing making lower promotional investments we find cases in which nonexclusive dealing is a dominant strategy we also find cases in which some but not all manufacturers adopt exclusive dealing moreover even if adoption of exclusive dealing by all manufacturers is the equilibrium it can arise from a prisoner s dilemma in that each manufacturer would prefer nonexclusive dealing

leading for the long term abstract how do leaders build credibility and what happens if they can t or don t existing economic models of leadership consider static settings only and thus are not well suited for addressing such issues moreover an important phenomenon of leadership is its persistence to allow for credibility and other behaviors that make sense only in repeated games such as the followers paying the leader tribute this paper considers a repeated game version of hermalin b e 1998 toward an economic theory of leadership leading by example american economic review 88 1188 1206 leadership model

the economic theory of vertical restraints the types of contracts arising in a typical vertical manufacturer retailer relationship are more sophisticated than a simple uniform price in addition to setting per unit prices manufacturers and retailers also revert to non linear pricing and non price instruments these instruments or contracts are referred to as vertical restraints and can take the form of franchise fees resale price maintenance exclusive dealing exclusive territories and slotting allowances the use and the effects of one type of instrument versus another depend crucially on specific market assumptions upstream and downstream and on the division of bargaining power between manufacturers and retailers this paper surveys the industrial organization literature on retail pricing and shows that vertical restraint instruments have important effects on producer and consumer prices market structure efficiency and welfare

buyer power and intrabrand coordination we analyze the competitive effects of vertical contracts in a contracting situation where rival retailers offer contracts to a manufacturer in contrast to bernheim and whinston 1998 who study the situation in which competing manufacturers offer contracts to a common retailer we find that two part tariffs even if contingent on exclusivity or not do not suffice to implement the monopolyoutcome richer arrangements including e g conditional fixed fees and upfront payments are thus required to internalize all contracting externalities the welfare implications are ambiguous on the one hand richer contracts ensure that no efficient retailer is excluded on the other hand they allow firms to maintain monopoly prices despite intrabrand competition simulations suggest that the latter effect may be more significant

a blotto game with incomplete information we consider a blotto game with incomplete information a pure strategy symmetric monotonic bayesian equilibrium is found and its properties are discussed

the bidder exclusion effect we introduce a new simple to compute test of independence of valuations and the number of bidders for ascending button auctions with symmetric conditionally independent private values the test involves estimating the expected revenue drop from excluding a bidder at random which can be computed as a scaled sample average of a difference of order statistics this object also provides a bound on counterfactual revenue changes from optimal reserve pricing or bidder mergers we illustrate the approach using data from timber auctions where we find some evidence that bidder valuations and the number of participants are not independent

simultaneous auctions with synergies and common values abstract in this paper we study a simultaneous auction model with synergies common values and overlapping interests we construct strategies in which bidders of different types randomize over different bid intervals and provide necessary and sufficient conditions for such strategies to form symmetric equilibria questions about seller s revenue and efficiency are addressed journal of economic literature classification number d44