spatial competition monopolistic competition and optimum product diversity abstract this is a republication of a passage from william vickrey s 1964 book microstatics which presents important results in spatial competition and monopolistic competition

reevaluation and renegotiation of climate change coalitions a sequential closed loop game approach abstract major international environmental problems can be characterized as stock externality phenomena long term international environmental coalitions are subject to unexpected shocks certain shocks might have strong impacts on regional environmental policies and their commitments to the coalition the open loop solutions in optimal control problems and differential games cannot capture regions reactions to those shocks in this paper we develop a feasible modeling approach that uses the closed loop strategies to study the issues of reevaluation and renegotiation of climate change coalitions for the purpose we design an algorithm that decomposes a closed loop strategy into a sequence of open loop equilibria and implement the algorithm in the rice model am econ rev 86 1996 741 an integrated assessment model of climate change and economies we analyze policy and methodological implications of the closed loop strategies through simulations of the rice model

reverse channel design the case of competing retailers the economical and environmental benefits of product remanufacturing have been widely recognized in the literature and in practice in this paper we focus on the interaction between a manufacturers reverse channel choice to collect postconsumer goods and the strategic product pricing decisions in the forward channel when retailing is competitive to this end we model a direct product collection system in which the manufacturer collects used products directly from the consumers e g print and copy cartridges and an indirect product collection system in which the retailers act as product return points e g single use cameras cellular phones we first examine how the allocation of product collection to retailers impacts their strategic behavior in the product market and we discuss the economic trade offs the manufacturer faces while choosing an optimal reverse channel structure when a direct collection system is used channel profits are driven by the impact of scale of returns on collection effort whereas in the indirect reverse channel supply chain profits are driven by the competitive interaction between the retailers subsequently we show that the buy back payments transfered to the retailers for postconsumer goods provide a wholesale pricing flexibility that can be used to price discriminate between retailers of different profitability

credible spatial preemption it is often argued that incumbent firms may deter entry by preemptive investment in new goods we show that these conclusions are reversed when multiproduct incumbentfirms may exit in response to entry once entrants are in an industry an incumbent will often want to withdraw some goods to prevent competition with the entrant from reducing profits on other goods such a reaction makes entry more attractive to a potential entrant the equilibrium industry structure is less likely to be monopolistic as the goods are better substitutes as exit costs are low and as the competition between producers of the same good is more intense

trade in and save a two period closed loop supply chain game with price and technology dependent returns abstract consumers evaluate the convenience of changing their products according to the price paid as well as the technology quality level when the consumers wish to capitalize the products residual value they should return them as early as possible accordingly we develop a model of closed loop supply chain clsc where consumers seek to gain as much as possible from their returns and the return rate is a function of both price and quality we model a two period stackelberg game to capture the dynamic aspects of a clsc where the manufacturer is the channel leader we investigate who namely manufacturer or retailer should collect the products in the market thus we identify the best clsc structure to adopt when the return rate is both price and quality dependent our results demonstrate that it is always worthwhile for companies to collect products and adopt an active return approach for returns we investigate the effect of retail competition in both forward and backward channels and show the impact of eliminating the double marginalization on market outcomes

feedback nash equilibria for non linear differential games in pollution control abstract dynamic problems of pollution and resource management with stock externalities often require a differential games framework of analysis in addition they are represented realistically by non linear transition equations however feedback nash equilibrium fbne solutions which are the desired ones in this case are difficult to obtain in problems with non linear quadratic structure we develop a method to obtain numerically non linear fbne for a class of such problems with a specific example for shallow lake pollution control we compare fbne solutions by considering the entire equilibrium trajectories with optimal management and open loop solutions and we show that the value of the best fbne is in general worse than the open loop and optimal management solutions

a stochastic programming approach to power portfolio optimization we consider a power portfolio optimization model that is intended as a decision aid for scheduling and hedging dash in the wholesale power market our multiscale model integrates the unit commitment model with financial decision making by including the forwards and spot market activity within the scheduling decision model the methodology is based on a multiscale stochastic programming model that selects portfolio positions that perform well on a variety of scenarios generated through statistical modeling and optimization when compared with several commonly used fixed mix policies our experiments demonstrate that the dash model provides significant advantages

a note on credible spatial entry deterrence abstract this note revisits the question of spatial entry deterrence to investigate the credibility of pre emption by crowding in a differentiated market judd rand j econ 16 1985 153 argues that pre emption by crowding is not a credible entry barrier because an incumbent monopolist has an ex post incentive to withdraw products in response to entry we demonstrate that pre emption by crowding may be a credible entry barrier if multiple potential entrants choose the timing of entry endogenously

excessive risk taking and the maturity structure of debt abstract this paper analyses the effect of short term debt on equityholders risk taking decisions we show that if short term debt limits the expropriation of debtholders it also implies a lower leverage which prevents the firm from increasing tax shields we then examine the incentive of equityholders to increase the firm risk when debtholders hold the option to swap a perpetual coupon bond with short term debt we find that this option mitigates equityholders risk shifting incentives compared to standard short term debt this restructuring option deters debtholders expropriation it increases leverage and it reduces the loss in tax shields due to asset substitution

impact of some parameters on investments in oligopolistic electricity markets abstract it is seldom the case that one has the opportunity to compare investments as projected by a long term multi period model to what is eventually realized in practice further although sensitivity analysis is of common use in any optimization setting the impact of some parameters on strategic investments is not yet fully assessed in the context of the deregulated electricity industry starting with a benchmark model of the finnish industry we precisely explore the impact on equilibrium investments of varying such parameters as direct and cross price elasticities length of the planning horizon and the depreciation rate of capacity we run the model with different parameter values and compare the predicted equilibrium with what companies have actually done the model is a stochastic dynamic game involving three players and played over a ten year period our results show the depreciation rate and the planning horizon have a notable effect on investment levels whereas price elasticities seem to play a lesser role although the model s results are rather well aligned to total industry investments it diverges from individual levels this may be due to the cost parameter used and or to the open loop information structure adopted in the computations in any event these results should be of methodological and practical interest to scholars and practitioners involved in strategic investment in the electricity industry

incentive and production decisions for remanufacturing operations we consider a manufacturer producing original products using virgin materials and remanufactured products using returns from the market where the amount of returns depend on the incentive offered by the manufacturer we determine the optimal value of this incentive and the optimal production quantities in a stochastic demand setting with partial substitution we analyze 3 different models in centralized and decentralized settings where the collection process of the returns is managed by a collection agency in the decentralized setting we also analyze contracts to coordinate the decentralized systems and determine the optimal contract parameters finally we present our computational study to observe the effect of different parameters on the system performance

the optimal reverse channel choice under supply chain competition abstract this note extends the model of savaskan et al 2004 to examine the impact of supply chain competition on the optimal reverse channel choice of manufacturers who remanufacture their own products even for two identical supply chains asymmetric equilibria of strategic reverse channel choices may arise in which one prefers retailer managed collection and the other prefers manufacturer managed collection there exists a prisoner s dilemma in which the pareto optimal solution is for both manufacturers to use manufacturer managed collection but retailer managed collection is a dominant strategy

a note on credible spatial preemption in an entry exit game i investigate how an incumbent firm deters entry by crowding the market even when the incumbent can withdraw its stores in response to entry in a two location model judd 1985 shows such spatial entry deterrence is not credible in contrast i demonstrate spatial preemption can be credibly employed in a circular city model if the incumbent can build its stores on sufficiently many locations and transportation costs are linear

weak entrants are welcome abstract this paper investigates the decision problem of an incumbent firm confronted by both a weak and strong entrant in a differentiated market suppose that the incumbent can deter entry of the weak firm but cannot deter entry of the strong firm by itself then the incumbent may allow entry of the weak firm and use it to alter the strong firm s entry decision the present paper formalizes this idea and it sheds new light on the fact that domestic firms are sometimes able to block strong foreign firms after trade liberalization the idea also explains why a dominant firm lets fringe firms be in the market

the existence of equilibrium in discontinuous economic games i theory the article presents information about the existence of equilibrium in discontinuous economic games in this paper and its sequel presents study the existence of nash equilibrium in games where agents payoff functions are discontinuous the enquiry is motivated by a number of recent studies that have uncovered serious existence problems in seemingly innocuous economic games in the sequel to this paper authors have explained the utility function in the economic games referred to earlier are neither continuous nor quasi concave however they demonstrate that the payoff functions in mildly modified versions of these constructs exhibit two weaker forms of continuity which together with the requirement of quasi concavity suffice for the existence of an equilibrium from this one may conclude that at least in the modified versions of these models discontinuities in the payoff functions are not the real source of the problem rather it is the failure of the payoff functions to the quasi concave which is responsible for the non existence of equilibrium these observations bear on the existence of nash equilibrium in pure strategies

shared savings contracts for indirect materials in supply chains channel profits and environmental impacts there are many materials for which the quantity needed by a firm is at best indirectly related to the quantity of final product produced by that firm such as solvents in manufacturing processes or office supplies for any such indirect materials an inescapable incentive conflict exists the buyer wishes to minimize consumption of these indirect materials while the supplier s profits depend on increasing volume both buyer and supplier can exert effort to reduce consumption hence making the overall supply chain more efficient however no supplier will voluntarily participate unless contract terms are fundamentally revised this can be done through a variety of shared savings contracts where both parties profit from a consumption reduction this paper analyzes several such contracts currently in use for chemicals purchasing we show that such contracts can always increase supply chain profits but need not lead to reduced consumption we analyze equilibrium effort levels consumption and total profits and show how these change with the contract parameters we find that the goals of maximizing joint profits and minimizing consumption are generally not aligned also surprisingly a decrease in a cost parameter can lead to a decrease in profits it may be necessary but is always possible to renegotiate the shared savings contract to reap the benefits of a cost decrease

a note on feedback sequential equilibria in a lanchester model with empirical application we study in this paper dynamic equilibrium advertising strategies in a duopoly with asymmetric information structure and sequential play the advertising model of lanchester is used in a game where the relevant solution concept is feedback stackelberg equilibrium which is subgame perfect an algorithm is devised for the computation of this equilibrium and numerical results are reported and discussed using a data set from the cola market we obtain the resulting advertising strategies and provide a comparison with closed loop and open loop nash equilibria

competitive advantage through take back of used products abstract motivated by a recent antitrust ruling against hill rom one of the two dominant american suppliers of hospital beds we develop a stylized model to investigate the consequences of used product take back on firms industry and customers our findings suggest that by taking back and reselling refurbished products a manufacturer can increase both profit margins and sales to the detriment of a non interfering competitor in our model customers are always better off under product take back but it depends on the degree of competition whether firms use the benefits of take back primarily to increase their margins or to pass them on to the customers by lowering their prices the first firm to offer take back in some cases can deter its competitors from following this profitable strategy especially if it has an existing advantage in terms of lower production cost or higher market share contrary to the claim of hill rom s competitor we find a legitimate business justification for hill rom s reduction of new product prices

optimal return and rebate mechanism in a closed loop supply chain game abstract within a closed loop supply chain clsc framework we study several consumer return behaviors for the used products which are based on the product prices and rebates consumers evaluate the rebate they receive as well as the price of the new product before deciding whether to dump a return therefore the number of used products returned is examined under two types of rebates a fixed rebate and a variable rebate we search for the optimal rebate mechanism and find that the clsc profits are higher under an variable rebate policy this finding justifies the industry practices that employ a rebate mechanism based on both the value and the price of used item we offer two types of solution concepts to the clsc games open loop stackelberg solution and markov perfect stackelberg solution which are commonly employed in the dynamic games literature while we mainly employ markovian equilibrium we also allow firms to utilize open loop strategies so as to assess the impact of precommitment on the market outcomes therefore we offer a comprehensive analysis of all possible market equilibrium solutions under different strategic considerations and the commitment deliberations we show that under the fixed rebate regime open loop solution coincides with markov perfect solution furthermore we show how consumer return behavior impacts the dynamic nature of the game we find that the time frame is irrelevant if firms offer a fixed rebate in contrast the game will be fully dynamic when firms offer a variable rebate

can price competition dominate market segmentation this note analyses duopoly competition in a two stage location price game while allowing each firm to establish a couple of outlets both the circle and the line model of spatial competition are considered our main result is clear cut in equilibrium neither firm will take up the opportunity of opening two stores this is a warning that market segmentation i e competition from multiple outlets might not be attractive at all because it entails more intense price competition