boundedly rational nash equilibrium a probabilistic choice approach we propose an equilibrium for n person finite games based on bounded rationality using the legit model of discrete choice theory at equilibrium each player uses appropriate choice probabilities given those used by the others rationality is parameterized on a continuum from complete rationality to uniform random choice results on the existence of equilibrium and on convergence to nash as rationality becomes perfect are similar to results due to mckelvey and palfrey we identify conditions such that for a given rationality parameter range the path of choices over time when the players use fictitious play converges to equilibrium c 1997 academic press

a search cost model of obfuscation this article develops models in which obfuscation is individually rational for oligopolistic firms firms sell a homogeneous good to rational consumers who incur search costs to learn prices search costs are endogenized by allowing obfuscation firms have an unobservable action that increases the time needed to learn their price one model involves search costs convex in shopping time we show that slight convexity can dramatically alter the equilibrium price distribution a second model examines an informational linkage between current and future search costs consumers are uncertain about a component of search costs here a signal jamming mechanism can lead to equilibrium obfuscation

rent seeking with bounded rationality an analysis of the all pay auction the winner take all nature of all pay auctions makes the outcome sensitive to decision errors which we introduce with a logit formulation the equilibrium bid distribution is a fixed point the belief distributions that determine expected payoffs equal the choice distributions determined by expected payoffs we prove existence uniqueness and symmetry properties in contrast to the nash equilibrium the comparative statics of the logit equilibrium are intuitive rent dissipation increases with the number of players and the bid cost overdissipation of rents is impossible under full rationality but is observed in laboratory experiments our model predicts this property

price competition when three are few and four are many abstract i examine price competition in a market for a homogeneous good when consumers observe prices subject to a random shock perception error when firms have symmetric costs there exists a unique equilibrium in pure strategies which is symmetric when there are up to three sellers in the market the sellers extract the entire consumer surplus however with at least four firms assuming that the marginal cost is sufficiently low relative to consumers valuation both consumers and producers may enjoy a positive surplus the marginal cost pricing is never observed in an equilibrium with finitely many firms potential policy implications are discussed

cournot oligopoly and the theory of supermodular games abstract we reconsider the cournot oligopoly problem in light of the theory of supermodular games invoking the recent ordinal version of this theory proposed by milgrom and shannon we generalize novshek s existence result derive the associated uniqueness result give an extension of a classical existence result under symmetry and provide conditions making a cournot oligopoly into a log supermodular game with the natural order on the action sets we also provide extensive and precise insight as to why decreasing best responses are widely regarded as being typical for the cournot model with production costs several illustrative examples are provided journal of economic literatureclassification numbers c72 l10 l13

how do competitive pressures affect incentives to innovate when there is a market for inventions competition and intellectual property ip protections are complements in stimulating innovation when ip is appropriable a market for inventions forms and competitive pressures increase incentives to innovate competition among producers the demand side of the market for inventions and competition among inventors the supply side of the market for inventions create incentives to innovate when ip is not fully appropriable markets for inventions are limited and competitive pressures can decrease incentives to innovate firms vertically integrate r d and production and share technology to appropriate the returns to ip this implies that antitrust policy and ip protections are complements

price competition under limited comparability this paper studies market competition when firms can influence consumers ability to compare market alternatives through their choice of price formats we introduce random graphs as a tool for modelling limited comparability of formats our main results concern the interaction between firms equilibrium price and format decisions and its implications for industry profits and consumer switching rates we show that narrow regulatory interventions that aim to facilitate comparisons may have adverse consequences for consumer welfare finally we argue that our limited comparability approach provides a new perspective into the phenomenon of product differentiation

challenges and prospects of valuation cruise ship pollution case negative externalities and natural resource valuations play an important role in the debate and analysis of sustainable development however as yet they have not been included extensively in tourism research or planning as a result limited progress has been made to improve environmental management and address resource management challenges this paper seeks to stimulate the discussion over the advantages disadvantages failures and successes of selected economic and development discourses valuation methodologies are discussed and placed within a pollution valuation impact model to identify opportunities to assess the impact of pollution and the value of natural capital in the tourism context cruise tourism is used to demonstrate the model due to its rapid growth and the potential for intense pollution outputs it is considered in the context of a developing and transition state one which sees tourism as a panacea to the problem of accessing international currency by employing cross disciplinary research and applying valuation logic the paper aims to contribute to the decision making process in tourism

price dispersion in the small and in the large evidence from an internet price comparison site this paper examines four million daily price observations for more than 1 000 consumer electronics products on the price comparison site http shopper com we find little support for the notion that prices on the internet are converging to the law of one price in addition observed levels of price dispersion vary systematically with the number of firms listing prices the difference between the two lowest prices the gap averages 23 per cent when two firms list prices and falls to 3 5 per cent in markets where 17 firms list prices these empirical results are an implication of a general clearinghouse model of equilibrium price dispersion

from rational actor to efficient complexity manager exorcising the ghost of homo economicus with a unified synthesis of cognition research it is now commonplace to note that economics canonical model of humans as rational self interested utility maximizers homo economicus is both descriptively misleading and often insufficiently predictive however certain outdated assumptions tied to homo economicus persist often influencing discourse and research design even in sustainability oriented fields we argue this ghost of homo economicus endures because the diversity of findings that confound the canonical model has surfaced across multiple behavioral and cognitive sciences each with its own terminology and focus area as such a unified accessible synthesis of this new information has yet to emerge in this paper we review recent insights from across the behavioral and cognitive sciences and propose an efficient complexity manager ecm model homo efficens as the best synthesizing option the crux of this model is that our species works within biological limits to efficiently filter massive environmental complexity this is achieved largely through analogical or case based reasoning we explain this synthesized model using a series of accessible metaphors finally we speculate on how this model may enrich future sustainable development research insofar as it points to fruitful units of analysis can stimulate methodological innovation and provide a more explicit theoretical foundation for the field

price and variety in the spokes model the spokes model of nonlocalized spatial competition provides a new analytical tool for dierentiated oligopoly and a representation of spatial monopolistic competition an increase in the number of rms leads to lower equilibrium prices when consumers have relatively high product valuations but surprisingly to higher equilibrium prices for in termediate consumer valuations new entry alters consumer and social welfare through price market expansion and matching eects with free entry the market may pro vide too many or too few varieties from a social welfare perspective and the equilibrium price remains above marginal cost even when the number of rms is arbitrarily large

licensing policy and technology adoption in standard setting organizations the standard setting organizations decisions on licensing policy and standard s technological specification and the ensuing implications for social welfare are analyzed the author finds the conditions under which a licensing rule that grants monopoly power to the licensors whose technology is adopted in the standard can be employed by the members of the consortium ex post licensing moreover it is shown that the adoption of ex post licensing might lead to the inefficient exclusion of an efficient stand alone licensor finally the author discusses the conditions under which a policy of ex ante licensing can be less efficient than ex post licensing jel k21 l15 l24 l42

considering the energy water and food nexus towards an integrated modelling approach the areas of energy water and food policy have numerous interwoven concerns ranging from ensuring access to services to environmental impacts to price volatility these issues manifest in very di

the non existence of pairwise proof equilibrium abstract private bilateral contracting between a supplier and competing customers admits multiple equilibria we show that requiring equilibrium to be pairwise proof immune to bilateral deviations by the supplier and any customer can imply non existence of equilibrium in normal environments

the logit equilibrium a perspective on intuitive behavioural anomalies costs associated with deviations from the nash equilibrium these payoff asymmetry effects are incorporated in an approach that introduces noisy behavior via a logit probabilistic choice function in the resulting logit equilibrium behavior is characterized by a probability distribution that satisfies a rational expectations consistency condition the beliefs that determine players expected payoffs match the decision distributions that arise from applying the logit rule to those expected payoffs we prove existence of a unique symmetric logit equilibrium and derive comparative statics results the paper provides a unified perspective on many recent laboratory studies of games in which nash equilibrium predictions are inconsistent with both intuition and experimental evidence

economic indicators of resource scarcity a critical essay abstract the theoretical arguments of the conceptual and empirical literature on economic indicators of long run resource scarcity are logically flawed if resource allocators were informed of the nature of resource scarcity their behavior and the economic indicators it generates would reflect the scarcity but if they were so informed we could simply ask them if resources were scarce if they are not informed their behavior and economic indicators are as likely to indicate their ignorance as the reality unfortunately there is no way of knowing whether they are informed or not unless we already know whether resources are scarce

choosing the competition and patent licensing this article examines licensing as a means of choosing the competitors which a patentee monopolist will face in the period after the patent expires the queue of entrants consists of two firms which differ in their relative strengths as competitors for example by size or level of marginal cost by structuring the industry to be composed of weak competitors the incumbent is able to prolong its dominant position in the industry after the patent expires examples are presented in which the evidence suggests that choosing the competition was an important motivation of the licensor s behavior

price dispersion in the lab and on the internet theory and evidence price dispersion is ubiquitous in settings that closely approximate textbook bertrand competition we show that only a little bounded rationality among sellers is needed to rationalize such dispersion a variety of statistical tests based on datasets from two independent laboratory experiments and structural estimates of the parameters of our models suggest that bounded rationality based theories of price dispersion organize the data remarkably well evidence is also presented to suggest that the models are consistent with data from a leading internet price comparison site

international technology transfer under potential threat of entry a cournot nash framework abstract this paper analyses the possibility of technology transfer from a technologically advanced foreign firm to a domestic firm of a less developed country when the product market is characterized by cournot nash competition the foreign firm is not allowed to enter the home market by a prohibitive tariff but the backward firm may not face any such resistance in the foreign markets this means that technology transfer under this situation involves potential threat of competition from the latecomer it is shown that by designing a suitable payment policy the host country government can induce the foreign firm to transfer the best technology however there are possible equilibria where worse than the best technologies are transferred

free entry and social inefficiency our goal is to provide a simple yet general exposition of the conditions under which the number of entrants in a free entry equilibrium is excessive insufficient or optimal our analysis compares the number of firms that enter a market when there is free entry with the number that would be desired by a social planner who is unable to control the behavior of firms once they are in the market that is we consider the second best problem of choosing the welfare maximizing number of firms while we take as given their noncompetitive behavior after entry we demonstrate that the crucial conditions for establishing the presence of an entry bias can be stated quite simply in terms of the outcome of the postentry game played by entrants in contrast to previous work we do not need to model this postentry game explicitly

technology licensing contracts with network effects we study the optimal technology licensing contracts with network effects and investigate the welfare implications when the product innovator is an insider that acts as a stackelberg leader we show that i the market is fully covered when relatively small network intensity matches quality differentiations that are sufficiently large ii with regard to profit maximization the optimal licensing strategy varies from one of royalty licensing to two part tariff licensing as network effects increase not including fixed fee licensing iii consumer surplus is optimal under non licensing conditions in comparison to other licensing strategies due to the covered market iv depending on network effects the preferred strategies to achieve social welfare maximization change from no licensing or fixed fee licensing to two part tariff licensing and royalty licensing is not preferred in this instance v conflict does not always or necessarily occur between the goals of enterprise profit maximization and social welfare optimization two part tariff licensing is preferred both by the licensor and by society when the network effect is large

price competition with consumer confusion this paper proposes a model in which identical sellers of a homogenous product compete in both prices and price frames i e ways to present price information we model price framing by assuming that firms frame choices affect the comparability of their price offers consumers may fail to compare prices due to frame differentiation and due to frame complexity in the symmetric equilibrium the firms randomize over both price frames and prices and make positive profits this result is consistent with the observed coexistence of price and price frame dispersion in the market we also show that i the nature of equilibrium depends on which source of consumer confusion dominates and ii an increase in the number of firms can increase industry profits and harm consumers

testing the efficiency of extraction from a stock resource the theoretical conditions for efficient extraction from a known stock resource by a competitive mining firm are reviewed these conditions are tested using proprietary data from a mining firm output price data and coefficient estimates from a translog cost system are used to compute the in situ value of the resource and the stock effect changes in the in situ value over time are then statistically compared with the expected price path the results reject the hypothesis that the data are consistent with the theoretical model and the maintained hypotheses variations of the basic model that incorporate a time varying discount rate an alternative expected price series and a constraint on the rate of output are also tested and rejected 46 references 10 tables

piracy imitation and optimal copyright policy this article presents a model of optimal copyright policy which incorporates several realistic features which have hitherto been largely ignored first although copyright is understood as a means of encouraging the creation of new works the optimal number of such works is generally not considered second copyright infringement encompasses two different activities subsumed under the same legal umbrella one might either pirate i e illegally copy a work or one might create a new work which is a close imitation of an existing one the mutual recognition of these two features leads to some surprising conclusions relevant to current debate over copyright reform in particular while strong piracy protection encourages overproduction of intellectual property enhanced protection against imitation can mitigate the associated inefficiencies benefitting society

fee versus royalty licensing in a cournot duopoly model abstract this paper finds that royalty licensing can be superior to fixed fee licensing for the patent holding firm when the cost reducing innovation is non drastic the reason for this result is that the patent holding firm enjoys a cost advantage over the licensee under royalty licensing while the two firms compete on equal footing under fixed fee licensing

shrouded attributes consumer myopia and information suppression in competitive markets bayesian consumers infer that hidden add on prices e g the cost of ink for a printer are likely to be high prices if consumers are bayesian firms will not shroud information in equilibrium however shrouding may occur in an economy with some myopic or unaware consumers such shrouding creates an inefficiency which firms may have an incentive to eliminate by educating their competitors customers however if add ons have close substitutes a curse of debiasing arises and firms will not be able to profitably debias consumers by unshrouding add ons in equilibrium two kinds of exploitation coexist optimizing firms exploit myopic consumers through marketing schemes that shroud high priced add ons in turn sophisticated consumers exploit these marketing schemes it is not possible to profitably drive away the business of sophisticates it is also not possible to profitably lure either myopes or sophisticates to nonexploitative firms we show that informational shrouding flourishes even in highly competitive markets even in markets with costless advertising and even when the shrouding generates allocational inefficiencies

double marginalization and cost pass through weyl fabinger and cowan meet spengler and bresnahan reiss consider the classical double marginalization problem of single product successive monopolies we show that the ratio of the cost pass through at the final sale relative to that at the wholesale level is characterized by the curvature of inverse demand in the final market we also apply cowan s 2012 method which utilizes the idea of pass through in an analysis of third degree price discrimination to compare consumer surplus under vertical integration and separation

living to spend another day exploring resilience as a new fourth goal of ecological economics abstract the three main goals of ecological economic theory seek to predict and prevent system breakdowns however chaos theory and human uncertainty ignorance guarantee that shocks breakdowns and catastrophes like covid 19 will increasingly occur due to converging environmental resource crises the challenge then is designing a resilient safe fail economy that can endure adapt to and successfully recover from breakdowns and avoid collapse to date little attention has been paid in ecological economics to the implications of resilience for broader economic decisions affecting the design of global civilization this paper provides a general introduction to resilience and an argument for why it should become a much larger focus of ecological economic research going forward five arguments are advanced for why resilience should not be subsumed under an existing goal including that efforts to build resilience have the potential to both complement and contradict the other three goals especially efficiency the resilience alliance s adaptive cycle highlighting the cost to resilience of increasing scale and complexity meshes readily with ecological economist s own critiques of growth encouraging increased collaboration between these transdisciplines the need to further study these tensions provides justification for adding resilient design as a distinct fourth policy goal to core ecological economic theory

abuse of dominance and licensing of intellectual property patent thickets layers of licenses a firm needs to be able to offer products that embody technologies owned by multiple firms and licensing policies have drawn increasing scrutiny from policy makers patent thickets involve complementary products which gives rise to double marginalization the so called royalty stacking problem and has the potential to retard diffusion of new technologies and reduce consumer welfare this paper examines the impact of licensing policies of one or more upstream owners essential intellectual property ip on the downstream firms that require access to that ip the terms under which downstream firms can access this ip affects entry decisions product diversity prices and welfare we consider both the case in which a single party controls the essential ip and the case in which different parties control complementary pieces of essential ip we compare the outcome of several alternative standard licensing arrangements such as flat rate access fees royalty percentages per unit fees patent pools and cross licensing arrangements with or without vertical integration we first consider the case where there is a single upstream owner of essential ip increasing the number of licenses enhances product variety which creates added value but it also intensifies downstream competition which dissipates profits we derive conditions under which the upstream ip monopoly will then want to provide an excessive or insufficient number of licenses relative to the number that maximizes consumer surplus or social welfare when there are multiple owners of essential ip royalty stacking can reduce the number of the downstream licensees but also the downstream equilibrium prices the consumers face the paper derives conditions determining whether this reduction in downstream price and variety is beneficial to consumers or society finally the paper explores the impact of alternative licensing policies with fixed license fees or royalties expressed as a percentage of the price an upstream ip owner cannot control the intensity of downstream competition in contrast volume based license fees i e per unit access fees do permit an upstream owner to control downstream competition and to replicate the outcome of complete integration the paper also shows that vertical integration can have little impact on downstream competition and licensing terms when ip owners charge fixed or volume based access fees

a quest for the economics of sustainability and the sustainability of economics abstract this paper briefly reviews key insights from natural resource and environmental economics ecological economics and industrial ecology in an effort to identify the major contributions of these fields to the understanding and promotion of sustainable development each is based on overlapping worldviews methods and tools their synthesis and extension subsumed under the rubric of natural economics is suggested as a new thrust in environmental research offering valuable guides to policy making an early illustration of the application of natural economics in new zealand is presented

fee versus royalty reconsidered for an outsider innovator in a cournot oligopoly royalty licensing could be superior to both fixed fee and auction the result depends on a simple fact that has been overlooked in the existing literature namely the number of licenses can take only integer values

an analysis of intellectual property licensing strategy under duopoly competition component or product based abstract a component supplier holding patents can calculate the intellectual property licensing fees either as a percentage of sales prices of its customer manufacturers products i e product based strategy or as a percentage of the wholesale price of its component i e component based strategy selecting which strategy to license the patent plays a vital role in supply chain players strategic interactions especially when the downstream manufacturers compete this paper investigates which strategy is favored more by players of a supply chain which consists of a component supplier and two duopoly manufacturers the manufacturers are assumed to be heterogeneous in production cost but produce and competitively sell homogenous goods employing a supplier stackelberg game model we demonstrate that the component supplier prefers to implement the product based strategy nevertheless the manufacturers preferences are dependent on how effectively they produce products specifically the product based strategy could be favored by the manufacturer with a sufficiently high cost advantage over the rival furthermore we find that the supply chain players preferences of licensing strategy could be dependent on factors such as the market size the differences of the production costs and unit royalty fees when the products are imperfect substitutes

vertical mergers and market foreclosure ythe model in this paper illustrates three effects of vertical mergers when both stages are oligopolistic and vertically integrated and unintegrated producers coexist first the merging firm increases its final good output second the resulting backward shift in the residual demand curve facing unintegrated final good producers ylowers their demand for the intermediate good third the merged firm withdraws from the intermediate good market the increased concentration pushes the intermediate good price upward which effect dominates depends on market structure under some conditions a vertical merger causes the price of the final good to increase

licensing under general demand and cost functions abstract we consider a cournot duopoly under general demand and cost functions where an incumbent patentee has a cost reducing technology that it can license to its rival by using combinations of royalties and upfront fees two part tariffs we show that for drastic technologies a licensing occurs and both firms stay active if the cost function is superadditive and b licensing does not occur and the patentee monopolizes the market if the cost function is additive or subadditive for non drastic technologies licensing takes place provided the average efficiency gain from the cost reducing technology is higher than the marginal gain computed at the licensee s reservation output optimal licensing policies have both royalties and fees for significantly superior technologies if the cost function is superadditive by contrast for additive and certain subadditive cost functions optimal licensing policies have only royalties and no fees

welfare reducing licensing abstract in this paper we characterize situations where licensing a cost reducing innovation to a rival firm using two part tariff contracts a fixed fee plus a linear per unit of output royalty reduces social welfare we show that it occurs if i the firms compete in prices ii the innovation is large enough but not drastic and iii the goods are close enough substitutes moreover we show that regardless of the type of competition first the optimal contract always includes a positive royalty and second even drastic innovations are licensed whenever the goods are not homogeneous

fees versus royalties and the private value of a patent we compare how much profit an owner of a patented cost reducing invention can realize by licensing it to an oligopolistic industry producing a homogeneous product by means of a fixed fee or a per unit royalty our analysis is conducted in terms of a noncooperative game involving n 1 players the inventor and the n firms in this game the inventor acts as a stackelberg leader and it has a unique subgame perfect equilibrium in pure strategies it is shown that licensing by means of a fixed fee is superior to licensing by means of a royalty for both the inventor and consumers only a drastic innovation is licensed to a single producer

on licensing policies in bertrand competition abstract three licensing policies the auction the fee and the royalty are studied in a bertrand type duopoly with differentiated goods the analysis is conducted in terms of a multistage noncooperative game involving an external patentee and two firms each producing a differentiated good in bertrand price competition a principal finding is that for a patentee the royalty may be superior to the other two policies journal of economic literature classification numbers 026 611 621

how to license intangible property we examine the optimal licensing strategy of a research lab selling to firms who are product market competitors we consider an independent lab as well as a research joint venture we show that 1 demands are interdependent and hence the standard price mechanism is not the profit maximizing licensing strategy 2 the seller s incentives to develop the innovation may be excessive 3 the seller s incentives to disseminate the innovation typically are too low 4 larger ventures are less likely to develop the innovation and more likely to restrict its dissemination in those cases where development occurs and 5 a downstream firm that is not a member of the research venture is worse off as a result of the innovation

licensing a new product with non linear contracts this paper looks at a situation where a licensor owns a patent on a technology that allows the production of a new good the licensor seeks to license its innovation to a set of producers that differ according to their marginal cost of producing an existing good we show that the licensor is able to obtain the profit a monopolist would achieve by producing the new good the equilibrium licensing contract specifies both a fixed fee and a royalty scheme based on the production of a licensee le memoire examine la situation ou un detenteur de brevet sur une technologie qui permet de produire un nouveau bien cherche a ceder une autorisation d exploiter cette innovation a un ensemble de producteurs qui ont differents couts marginaux de production d un bien existant on montre que le detenteur de brevet est capable d obtenir le profit qu un monopoleur obtiendrait en produisant le nouveau bien le contrat de licence d equilibre specifie a la fois un paiement forfaitaire et un arrangement de royautes sur la base du volume de production de l exploitant

supermodularity and complementarity in economics an elementary survey the literature on supermodular optimization and games is surveyed from the perspective of potential users in economics this methodology provides a new approach for comparative statics based only on critical assumptions and allows a general analysis of games with strategic complementarities the results are presented in a simplified yet rigourous manner without reference to lattice theory for the special case of one dimensional parameter and actions sets with the emphasis being on wide accessibility detailed applications are presented for well known models of consumer behavior monopoly pass through bertrand and cournot competition strategic r d search and matching wherever appropriate useful tricks for applications and comparative comments are inserted

the shallow or the deep ecological economics movement ecological economics and its policy recommendations have become overwhelmed by economic valuation shadow pricing sustainability measures and squeezing nature into the commodity boxes of goods services and capital in order to make it part of mainstream economic financial and banking discourses there are deeper concerns which touch upon the understanding of humanity in its various social psychological political and ethical facets the relationship with nature proposed by the ecological economics movement has the potential to be far reaching however this is not the picture portrayed by surveying the amassed body of articles from this journal or by many of those claiming affiliation a shallow movement allied to a business as usual politics and economy has become dominant and imposes its preoccupation with mainstream economic concepts and values if instead ecological economists choose a path deep into the world of interdisciplinary endeavour they will need to be prepared to transform themselves and society the implications go far beyond the pragmatic use of magic numbers to convince politicians and the public that ecology still has something relevant to say in the 21st century author s abstract

general licensing schemes for a cost reducing innovation optimal combinations of upfront fees and royalties are considered for a cost reducing innovation in a cournot oligopoly for both outside and incumbent innovators it is shown that for any nondrastic innovation a the license is practically sold to all firms ensuring full diffusion of the innovation b consumers are better off firms are worse off and the social welfare is improved c the optimal licensing policy involves positive royalty for relatively significant innovations d compared to an incumbent firm an outsider invests more in r d and has higher incentive to innovate and e as a function of the magnitude of the innovation the industry size that provides the highest incentive to innovate is u shaped

a model of add on pricing this paper examines competitive price discrimination with horizontal and vertical taste differences consumers with higher valuations for quality are assumed to have stronger brand preferences two models are considered a standard competitive price discrimination model in which consumers observe all prices and an add on pricing game in which add on prices are naturally unobserved and firms may advertise a base good at a low price in hopes of selling add ons at high unadvertised prices in the standard game price discrimination is self reinforcing the model sometimes has both equilibria in which the firms practice price discrimination and equilibria in which they do not the analysis of the add on pricing game focuses on the chicago school argument that profits earned on add ons will be competed away via lower prices for advertised goods a conclusion is that add on practices can raise equilibrium profits by creating an adverse selection problem that makes price cutting unappealing although profitable when jointly adopted using add on pricing is not individually rational in a simple extension with endogenous advertising practices and costless advertising several models that could account for add on pricing are discussed

on the duration of technology licensing abstract we model an innovator s choice of payment scheme and duration as a joint decision in a multi period licensing game with potential future innovations and some irreversibility of technology transfer we find that it may be optimal to license the innovation for less than the full length of the patent and that royalty contracts can be more profitable than fixed fee licensing even in the absence of information asymmetry and risk aversion moreover licensing contracts based on royalty have a longer duration than fixed fee licenses and are more likely to be used in industries where innovations are frequent and intellectual property protection is weak our paper also highlights an important link between the study of technology licensing and the theory of durable goods

information gatekeepers on the internet and the competitiveness of homogeneous product markets we examine the equilibrium interaction between a market for price information controlled by a gatekeeper and the homogenous product market it serves the gatekeeper charges fees to firms that advertise prices on its internet site and to consumers who access the list of advertised prices gatekeeper profits are maximized in an equilibrium where a the product market exhibits price dispersion b access fees are sufficiently low that all consumers subscribe c advertising fees exceed socially optimal levels thus inducing partial firm participation and d advertised prices are below unadvertised prices introducing the market for information has ambiguous social welfare effects

emerging carbon constraints for corporate risk management abstract while discussions about global sustainability challenges abound the financial risks that they incur albeit important have received less attention we suggest that corporate risk assessments should include sustainability related aspects especially with relation to the natural environment and encompass the flux of critical materials within a company s value chain such a comprehensive risk assessment takes into account input as well as output related factors with this paper we focus on the flux of carbon and define carbon constraints that emerge due to the disposition of fossil fuels in the input dimension and due to direct and indirect climate change effects in the output dimension we review the literature regarding the financial consequences of carbon constraints on the macroeconomic sector and company level we conclude that a financial consequences seem to be asymmetrically distributed between and within sectors b the individual risk exposure of companies depends on the intensity of and dependency on carbon based materials and energy and c financial markets have only started to incorporate these aspects in their valuations this paper ends with recommendations on how to incorporate our results in an integrated carbon risk management framework

equilibrium vertical foreclosure reply in ordover saloner and salop 1990 hereafter oss we showed that a downstream duopolist may have an incentive to backward integrate in order to foreclose its downstream rival from a source of upstream supply as a result of the vertical integration the downstream rival s input price increases giving the integrating firm a competitive advantage in the downstream market moreover in equilibrium the foreclosed downstream rival does not find it profitable to negate these effects by integrating itself oss considers a four stage game involving two upstream firms ul and u2 and two downstream firms dl and d2 in the first stage the downstream firms can bid to acquire ul if there is an acquisition say dl acquires ul to form f1 upstream input prices are set in the second stage in the third stage knowing the input prices it faces d2 can attempt to acquire u2 finally in the fourth stage dl and d2 compete a la bertrand with differentiated products in his comment david reiffen 1992 makes three distinct points first he notes that once dl has acquired ul the equilibrium of the subsequent subgame depends critically on how upstream prices are set in the second stage he argues that our results depend on the ability of fl to commit to a high upstream price this criticism previously has been made by oliver hart and jean tirole 1990 we show below that the results in oss do not depend on the ability of fl to commit instead our main result stems from the fact that vertical integration changes the firm s incentives to engage in price cutting in the input market the notion that vertically integrated firms behave differently from unintegrated ones in supplying inputs to downstream rivals would strike a businessperson if not an economist as common sense 1 we show that there is theoretical merit to that common sense view second reiffen argues that the game considered by oss is similar to a game in which there is no vertical integration but rather where a nonintegrated dl has a first mover advantage in the downstream market in such a game dl benefits from the ability to commit to the price that its stackelberg leadership position gives it reiffen considers this to be additional evidence in support of the claim that oss depends critically on fl s ability to commit not on vertical integration we explain why the mechanism by which dl is able to raise its profits in the sequential one shot game considered by reiffen is conceptually quite different from the mechanism by which dl profits from vertical integration in oss third reiffen argues that our results depend on there being only two upstream firms this is correct in the symmetric bertrand model analyzed however as we discuss below our results do obtain as long as the upstream price is decreasing in the number of firms as occurs in many oligopoly models particularly when costs vary across firms the next section summarizes the conceptual problems pertaining to upstream pricing these problems are resolved in section ii by means of simple and natural price ordover department of economics new york university 269 mercer st 7th floor new york ny 10003 saloner graduate school of business stanford university stanford ca 94305 salop georgetown university law center 600 new jersey avenue nw washington dc 20001 we have benefited greatly from several discussions with faruk gul research support from the national science foundation grant 8813943 iri the sloan foundation and the c v starr center for applied economics at nyu is gratefully acknowledged for example the japan u s strategic impediments initiative is predicated on the proposition that the loosely linked japanese firms that form the various keiretsu do discriminate against nonaffiliated firms