information transmission cournot and bertrand equilibria we examine how incentives for two duopolists to honestly share information change depending upon the nature of competition cournot or bertrand and the nature of the information structure while in earlier papers uncertainty is about an unknown common demand intercept in the present paper uncertainty is about unknown private costs the different information structure reverses the incentives to share information while with unknown common demand sharing is a dominant strategy with bertrand competition and concealing is a dominant strategy with cournot competition with unknown private costs sharing is a dominant strategy with cournot competition and concealing is a dominant strategy with bertrand competition

the limits of market oriented regulatory techniques the case of automotive fuel economy the search for more efficient market oriented regulatory techniques has produced significant recent advances in several areas among these would appear to be the corporate average fuel economy cafe approach to reducing gasoline consumption by the domestic automobile fleet the 1975 energy policy and conservation act required manufacturers to sell fleets with a sales weighted average of 18 miles per gallon in the 1978 model year 19 mpg in 1979 20 mpg in 1980 and 27 5 mpg in 1985 1 the standards for the four intervening years were subsequently set by the national highway traffic safety administration at 22 24 26 and 27 miles per gallon the advantages of the averaging approach over uniform vehicle standards or a gas guzzler tax are two fold first cafe permits each firm to increase its overall fuel efficiency in the cheapest manner since the costs of mileage improvements for different vehicles may be rather different 2 and second it permits the continuation of a diverse product mix to the consumer since a uniform standard would probably result in the demise of certain models these arguments for averaging are now so widely accepted that the principle is being proposed inter alia for automotive emissions standards as well that is instead of maximum allowable emissions for each and every model manufacturers could produce models with various levels of pollutants

optimizing multinomial logit profit functions the multinomial logit model is a standard approach for determining the probability of purchase in product line problems when the purchase probabilities are multiplied by product contribution margins the resulting profit function is generally nonconcave because of this standard nonlinear search procedures may terminate at a local optimum which is far from the global optimum we present a simple procedure designed to alleviate this problem the key idea of this procedure is to find a path of prices from the global optimum of a related but concave logit profit function to the global optimum of the true but nonconcave logit profit function

feebates rebates and gas guzzler taxes a study of incentives for increased fuel economy abstract us fuel economy standards have not been changed significantly in 20 years feebates are a market based alternative in which vehicles with fuel consumption rates above a pivot point are charged fees while vehicles below receive rebates by choice of pivot points feebate systems can be made revenue neutral feebates have been analyzed before this study re examines feebates using recent data assesses how the undervaluing of fuel economy by consumers might affect their efficacy tests sensitivity to the cost of fuel economy technology and price elasticities of vehicle demand and adds assessments of gas guzzler taxes or rebates alone a feebate rate of 500 per 0 01 gallon per mile gpm produces a 16 percent increase in fuel economy while a 1000 per 0 01 gpm results in a 29 percent increase even if consumers count only the first 3 years of fuel savings unit sales decline by about 0 5 percent but sales revenues increase because the added value of fuel economy technologies outweighs the decrease in sales in all cases the vast majority of fuel economy increase is due to adoption of fuel economy technologies rather than shifts in sales

cournot oligopoly with information sharing this paper studies the incentives for information sharing among firms in a cournot oligopoly facing a linear uncertain demand and an affine conditional expectation information structure no information sharing is found to be the unique equilibrium in two cases in which the signals with equal precision are assumed indivisible and infinitely divisible however the nonpooling equilibrium converges to the situation where the pooling strategies are adopted as the amount of information increases hence the efficiency is achieved in the competitive equilibrium as the number of the firm become large

new vehicle feebates new vehicle feebate programs encourage improved fleet wide vehicle fuel efficiency yet analyses of these policies have been limited to ad hoc proposals in this paper we exploit an extensive multi year dataset which includes more than 16 million observations to evaluate the welfare implications of a long standing vehicle feebate program in the canadian province of ontario we 1 show that second best optimal feebates can be written as a function of new vehicle pigouvian taxes 2 find that ontario s feebate program was welfare enhancing relative to a no feebate scenario but that a second best optimal benchmark would have yielded additional welfare while reducing fleet wide emissions and 3 find that ontarian consumers responded asymmetrically to fees versus rebates

monopolistic competition in the spirit of chamberlin a general model this paper develops a model of large group chamberlinian monopolistic competition in which 1 there are many firms producing differentiated commodities 2 each firm is negligible in that it can ignore its impact on and hence reactions from other firms 3 free entry leads to zero profit of operating firms but 4 each firm faces a downward sloping demand curve the existence of a monopolistically competitive equilibrium is established in a companion paper more particular questions such as whether the market provides too many or too few products are addressed for a special case of the model

information and volatility in an economy of interacting agents with both idiosyncratic and aggregate shocks we examine how the structure of private information in uences aggregate volatility the maximal aggregate volatility is attained in a noise free information structure in which the agents confound idiosyncratic and aggregate shocks and display excess response to the aggregate shocks as in lucas 14 for any given variance of aggregate shocks the upper bound on aggregate volatility is linearly increasing in the variance of the idiosyncratic shocks our results hold in a setting of symmetric agents with linear best responses and normal uncertainty we establish our results by providing a characterization of the set of all joint distributions over actions and states that can arise in equilibrium under any information structure this tractable characterization extending results in bergemann and morris 8 can be used to address a wide variety of questions linking information with the statistical moments of the economy

a new approach to understanding labour supply of disabled people abstractthe main interest of this article is to propose an individual utility maximization model to explain the low participation of disabled people we account for heterogeneity of preferences and

aggregation of information in large cournot markets consider a homogeneous product market where firms have private information about an uncertain demand parameter and compete in quantities we examine the convergence properties of bayesian cournot equilibria as the economy is replicated and conclude that large cournot or almost competitive markets do not aggregate information efficiently except possibly when the production technology exhibits constant returns to scale even in a competitive market there is a welfare loss with respect to the first best outcome due to incomplete information in general nevertheless a competitive market is efficient taking as given the decentralized private information structure of the economy endogenous and costly information acquisition is examined and seen to imply that the market outcome always falls short of the first best level with decreasing returns to scale the results are also shown to be robust to the addition of extra rounds of competition which allows firms to use the information revealed by past prices explicit closed form solutions yielding comparative static results are obtained for models characterized by quadratic payoffs and affine information structures

enforcing time inconsistent regulation i introduction passage of legislation is merely the beginning of the regulatory task the successful translation of policy from legislative debate into regulation is not guaranteed implementation may be especially problematic for regulations that are time inconsistent regulations have the potential for time inconsistency if the government cannot credibly commit itself to enforcement of the original legislation at every relevant point in time consider a law that sets a regulatory standard to be enforced several years in the future the regulation s implementation may take the following course for any given enforcement period first firms are expected to engage in long term investment to move towards meeting the standard second after that investment has been completed an enforcement agency reviews and has the opportunity to modify the standards shortly before the date at which they are to be enforced finally after the agency s review firms make short term investment to meet the standard this process may be repeated for subsequent enforcement periods this sequence of events presents inherent problems for the enforceability of a regulation during the long term investment stage regulated firms know that the relevant administrative agency may be unable to credibly bind itself to future actions given this firms may believe that the agency s enforcement posture depends on their own actions firms may therefore be able to act strategically to induce the regulatory agency to lower the relevant standard before its enforcement date facing such incentives firms may not undertake the desired long term investments upon review the enforcement agency could find that requiring firms to make short term investments to meet the standard may involve substantial social costs facing such costs the agency may grant regulatory relief and relax the standard in these circumstances society s welfare may be greater if firms engaged in the necessary long term investment to meet the standard prior to the enforcement date in order to force firms to make the necessary long term investment however the enforcement agency may need to threaten to punish firms by enforcing the original standard even if firms long term investments are below optimal levels the need to threaten this punishment places the agency in a difficult position if firms do not undertake the desired long term investments it may be in the agency s and society s interests to relax the initial standard to avoid the potentially higher costs associated with short term investments firms will understand this and thus make no ex ante investment towards meeting the standard the regulation is therefore time inconsistent and unenforceable in the case of automobile fuel economy regulations for example congress in 1975 set standards for model years 1978 and afterwards but provided the executive branch in the form of the national highway traffic safety administration nhtsa with discretion to modify the standard for model years after 1984 automobile manufacturers then undertook long term product investment that may have been initiated in order to meet the standards for model years 1985 1986 and 1989 however firms were able to gain regulatory relief from nhtsa at the start of the relevant model years if relief had not been granted there would have been insufficient time for further product innovation and firms would have had to meet the standard by eliminating less fuel efficient vehicles from their fleets a strategy that would have been costly not only to themselves but to their employees and customers as well see kleit 1990 and greene 1991 on the other hand in the 1970s the congress passed laws to be enforced by the environmental protection agency that required automobile companies to invest millions of dollars in pollution control devices while automobile firms achieved some delay in the implementation of the law the devices ultimately were installed

information revelation in auctions with common and private values we explore the incentives to reveal verifiable private information when there are both common and private components to agents valuations and when private information is held in both dimensions when agents observe only one signal they have no incentive to reveal the signal because such a revelation would negate their information advantage however when agents observe multiple signals they may be incentivized to reveal certain signals that could lower their opponents bids and thereby result in a higher profit from other signals this paper shows that there exists an equilibrium with revelation of common value signals in standard auctions which is an efficient equilibrium that maximizes the social welfare and could provide the seller with a higher profit than a situation with no information revelation

impacts of fuel economy improvements on the distribution of income in the u s abstract we estimate the impacts of passenger car and light truck fuel economy improvements in the u s since 1975 on the real monetary incomes of u s households by income quintile over the period 1980 2014 we limit our analysis to the direct monetary impacts fuel savings minus increased vehicle costs and do not attempt a full welfare analysis we include all vehicle purchases new and used household fuel expenditures come from the u s consumer expenditures surveys ces costs of increased new passenger car and light truck fuel economy were obtained from four national research council nrc studies plus a literature review of earlier estimates the nrc cost functions provide a unique time series of technology supply functions constructed by balanced expert panels and comprised of specific technologies proven to increase fuel economy effects of fuel economy improvements on used vehicle prices are based on an analysis of the ces data retrospective analysis indicates that all income quintiles received net savings and that the effect on the distribution of income was progressive a prospective analysis of future fuel economy improvements produced similar results sensitivity analysis indicates that these findings are relatively robust

information use and acquisition in price setting oligopolies asymmetric price setting multi product suppliers have access to multiple sources of information about demand conditions where the publicity of each source corresponds to the cross industry correlation of signals received from it a signal s influence on suppliers prices is increasing in its publicity as well as in its precision the emphasis on relatively public information is stronger for smaller suppliers who control narrower product portfolios when information is endogenously acquired suppliers listen to only a subset of information sources this subset is smaller when products are less differentiated and when the industry is less concentrated smaller suppliers focus attention on fewer information sources the inefficiencies arising from information acquisition and use are identified the associated externalities depend upon the extent of product differentiation the concentration of the industry and the degree of decreasing returns to scale

insisting on a non negative price oligopoly uncertainty welfare and multiple equilibria i study cournot competition under incomplete but symmetric information about the intercept of the linear demand function while assuming that market price must be non negative for all demand realizations although the non negativity assumption is very natural it has only rarely been made in the earlier literature yet it has important economic consequences 1 expected demand effectively becomes convex which means that multiple symmetric pure strategy equilibria can exist and 2 expected total surplus can be larger when the firms do not know demand than when they do the arguments of the paper are relevant also for price competition and for uncertainty about e g cost or the number of firms and these issues are discussed

labour supply in italy an empirical analysis of joint household decisions with taxes and quantity constraints this study applies an econometric framework which allows for complex non convex budget sets highly non linear labour supply curves and imperfect markets with institutional constraints a married couple s version of the model is estimated on italian microdata the empirical results show that male labour supply is rather inelastic while labour supply among females especially participation is considerably more elastic the elasticities depend strongly on household income the largest elasticities are found for females living in poor households the results of the tax simulations suggest that there are only modest labour supply responses from replacing the 1987 system by proportional taxes copyright 1999 john wiley sons ltd

exchange of cost information in oligopoly when do oligopolists gain by sharing their private information about their costs with one another what are the social welfare effects of such information exchange i study these questions by comparing the oligopolists expected profits under a cost sharing agreement with their expected profits in the bayesian equilibrium that would arise without cost sharing i also analyse the firms decisions to form a trade association to share their cost data under conditions of linear demand and cournot behaviour industrywide information exchange is the unique point in the core of the trade association membership game the exchange of cost data increases expected profits and welfare but reduces expected consumer surplus cost sharing increases efficiency by raising the market shares of lower cost firms and reducing the variability of aggregate output consumer surplus is diminished however because the variance of output is reduced and consumer surplus is a convex function of output

industry equilibrium with outside financing and moral hazard implications for market integration abstract in this paper we study industry equilibrium under the assumptions that 1 firms need outside financing and 2 they have a moral hazard problem in taking potentially excessive risks we characterize an industry equilibrium with credit rationing where firms choose not to take risks and compare this to the industry equilibrium in the absence of credit rationing in both cases we show that competition increases and prices decline as markets integrate however in markets with credit rationing there is typically more exit a smaller decline in prices and most strikingly the market value of the industry increases rather than decreases

information sharing through sales report this paper studies information sharing through sales reports in cournot and bertrand duopolies with common demand uncertainty without sales reports firms choose quantities or prices strategically to manipulate the rivals perception about the market sales reports eliminate firms incentives to do so and keep them only maximizing the current profits if firms make independent sales report decisions no sales report is the unique subgame perfect equilibrium however in a cournot bertrand industry firms are better off with sales reports when goods are substitutes complements further sales reports decrease increase consumer surplus and social welfare in a cournot bertrand industry the results sharply contrast those from the previous information sharing models where firms exchange signals about the future demand copyright 1994 by blackwell publishing ltd

tradable fuel economy credits competition and oligopoly corporate average fuel economy cafe regulations specify minimum standards for fuel efficiency that vehicle manufacturers must meet independently we design a system of tradeable fuel economy credits that allows trading across vehicle classes and manufacturers with and without considering market power in the credit market we perform numerical simulations to measure the potential cost savings from moving from the current cafe system to one with stricter standards but that allows vehicle manufacturers various levels of increased flexibility we find that the ability for each manufacturer to average credits between its cars and trucks provides a large percentage of the potential savings as expected the greatest savings come from the greatest flexibility in the credit system market power lowers the potential cost savings to the industry as a whole but only modestly loss in efficiency from market power does not eliminate the gains from credit trading

trade association disclosure rules incentives to share information and welfare in this article i propose a monopolistic competition framework to analyze the effects of different disclosure rules used by trade associations on the incentives to share information and on the welfare of consumers firms and society this framework is appropriate whenever a single firm cannot influence aggregate market magnitudes and serves as a benchmark for the analysis of information pooling agreements abstracting from strategic considerations i report two main results first a policy of nonexclusionary disclosure destroys the incentives to share information while exclusionary disclosure preserves them second information sharing increases expected total surplus with cournot competition but decreases it with bertrand competition in the context of a quadratic normal model with demand uncertainty

the value to a firm of its rival learning abstract in price competition a firm f reduces its rival s r learning about r s cost in quantity price competition f wants r not to learn about f s cost i show that in quantity competition f wants r not to learn about r s cost

a representative consumer theory of the logit model the log it model is usually derived from a discrete choice approach with stoc hastic utilities it is shown here that the logit demand system may also be derived from the maximization of a deterministic entropy type utility the latter may be interpreted as the preference function of a representative consumer with variety seeking behavior this altern ative view suggests a generalization of the standard logit which allo ws total demand to be determined endogenously copyright 1988 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

limit pricing when incumbents have conflicting interests abstract this paper considers entry into a market with two incumbents where one prefers entry and one dislikes it unlike the entrant incumbents know market demand in separating equilibria incumbents play full information nash equilibrium strategies when beliefs are unprejudiced separating equilibria only exist if entry is relatively unimportant for an incumbent in growing markets this condition will tend to be violated so that only pooling equilibria may exist

applied welfare economics with discrete choice models economists have been paying increasing attention to the study of situations in which consumers face a discrete rather than a continuous set of choices such models are potentially very important in evaluating the impact of government programs upon consumer welfare but very little has been said in general regarding the tools of applied welfare economics indiscrete choice situations this paper shows how the conventional methods of applied welfare economics can be modified to handle such cases it focuses on the computation of the excess burden of taxation and the evaluation of quality change the results are applied to stochastic utility models including the popular cases of probit and logit analysis throughout the emphasis is on providing rigorous guidelines for carrying out applied work this abstract was borrowed from another version of this item

strategic information revelation we analyze the problem in which agents have non public information and are to play an asymmetric information game the agents may reveal some or all of their information to other agents prior to playing this game revelation is via exogenously specified certifiable statements the equilibria resulting from various revelation strategies are used to determine equilibrium revelation of information sufficient conditions are provided for complete revelation of all private information a number of examples are provided illustrating when revelation will or will not occur in commonly analyzed games many economic problems are characterized by the presence of both strategic behaviour on the part of individuals and by asymmetric information models encompassing both of these characteristics have been used successfully to examine questions in many fields usually using the concept of bayesian nash equilibrium as the solution concept typically the agents information is given exogenously and is fixed throughout the analysis modelling the information structure as static is appropriate for some problems but not for all in particular situations that are inherently dynamic most economic encounters allow for some interchange between the agents before the outcome is settled irrevocably in such circumstances it is possible that at least one or more of the agents possessing non public information may be able to reveal part or all of his information to one or all of the other agents in the economy during the course of their contact to the extent that such a communication is believed by the other agents the priors of the other agents will change and we will have what is in essence a new asymmetric information game new in

productivity information in vertical sharing agreements abstract that firms share information with their rivals is both well known and studied however firms also often share information with their suppliers the firm s incentive to share productivity information with both its supplier and its rival is examined it is found that by sharing productivity information a firm raises its own expected input price which raises the rival s expected input price in contrast sharing cost or demand information does not have this effect through this price effect information sharing can increase expected producer surplus in price competition while in previous work the sharing of cost information always reduced producer surplus

optimal disclosure policy in oligopoly markets this paper examines the private and social optimality of full disclosure of private information in a two period oligopoly model an incumbent firm is privately informed about the market demand and its production cost after operating as a monopolist in the first period and then competes against an entrant in the second period two main results are derived first it is shown that the incumbent is best off by pre committing to disclose both the demand and cost information by disclosing full information the incumbent nullifies its self defeating intertemporal incentives which arise whenever it has private information about the market demand its cost efficiency or both in addition the equilibrium output variance is the largest under full disclosure which benefits the incumbent ex ante second the paper shows that the incumbent s full disclosure of the demand and cost information may or may not be desirable from a social efficiency standpoint in particular the correlation between the firms production costs is crucial to the rank of disclosure policies in terms of their impact on social efficiency

information sharing and oligopoly in agricultural markets the role of the cooperative bargaining association we study incentives for information sharing among agricultural intermediaries in imperfectly competitive markets for farm output information sharing always increases expected grower and total surplus but may reduce expected intermediary profits even when expected profits increase with information sharing intermediary firms face a prisoner s dilemma where it is privately rational to withhold information given that other firms report truthfully this equilibrium can be avoided if firms information reports are verifiable and if firms commit to an ex ante contract that enforces participation in information sharing we show how agricultural bargaining legislation can implement such a contract with the bargained farm price representing a sufficient statistic of all information held by intermediary firms

comparing flexibility mechanisms for fuel economy standards since 1975 the corporate average fuel economy cafe program has been the main policy tool in the us for coping with the problems of increasing fuel consumption and dependence on imported oil the program mandates average fuel economy requirements for the new vehicle sales of each manufacturer s fleet with separate standards for cars and light trucks the fact that each manufacturer must on its own meet the standards means that the incentives to improve fuel economy are different across manufacturers and vehicle types although the problems associated with fuel consumption do not make such distinctions this paper evaluates different mechanisms to offer automakers the flexibility of joint compliance with nationwide fuel economy goals tradable cafe credits feebates output rebated fees and tradable credits with banking the policies are compared according to the short and long run economic incentives as well as to issues of transparency implementation administrative and transaction costs and uncertainty

majoritarian preference utilitarian welfare and public information in cournot oligopoly abstract can individual preferences for public information among heterogeneous consumers be aggregated into a meaningful social preference that does not suffer from condorcet cycles in a cournot model where homogeneous producers observe a public signal about an uncertain cost of production prior to taking quantity decisions we show that the majoritarian preference of consumers for the precision of public information is fairly well behaved so that a condorcet winner always exists under a monotonicity condition on the demand function we characterize the condorcet winning precision in terms of the demand function and the number of firms under which the condorcet winning precision i hurts consumers surplus and profits or ii remains conflict free these results have interesting implications on collective bayesian persuasion by agencies representing consumers showing that when full transparency maximizes expected consumers surplus collective bayesian persuasion can lead to full opacity and vice versa

information sharing in union firm relationships large firms often negotiate wage rates with labor unions when they do an ex ante agreement to share information should make it more likely that they will reach an agreement and capture the gains from trade however if the firm refuses to share information the union may shade down its wage demand to increase the probability of acceptance this reduction in the wage can increase the joint surplus of the agents and increase social welfare as a result there are some circumstances in which bargaining with incomplete information can be better for the agents and society than bargaining with complete information many firms and their input suppliers form long term relationships in which they periodically negotiate their terms of trade as has long been recognized the presence of private information can cause negotiations to break down on occasion resulting in an inefficient disruption of production for example the united auto workers with superior knowledge of its strike fund and or its member s outside options may call for a strike against general motors if the firm is unwilling to meet its wage demands and the firm s unwillingness to concede may be due to its superior knowledge of demand productivity and or its stock of inventories theoretically such disruptions could be avoided if the agents would simply agree to reveal their private information before the negotiations begin 2 whether or not this will occur is unclear however since some agents may be unwilling to enter into such an agreement if it sufficiently weakened their bargaining position the literatures on noncooperative bargaining and mechanism design have already dealt with many of the issues that arise in this environment in the bargaining literature it is generally assumed that the agents already possess the private information and then the implications of different bargaining processes are examined see ausubel et al 2002 for a survey in the mechanism design literature one of the questions addressed is whether the agents can find a way to commit to ex

output and attribute based carbon regulation under uncertainty abstract output based carbon regulations such as fuel economy standards and the rate based standards in the clean power plan create well known incentives to inefficiently increase output similar distortions are created by attribute based regulations this paper demonstrates that despite these distortions output and attribute based standards can always yield strictly greater expected welfare than flat emission standards given uncertainty in demand for output or attributes assuming locally constant marginal damages for fuel economy standards the welfare maximizing amount of attribute or mileage basing is likely small relative to current policy for the electricity sector however an intensity standard may yield greater expected welfare than a flat standard

too much information sharing welfare effects of sharing acquired cost information in oligopoly by using general information structures and precision criteria based on the dispersion of conditional expectations we study how oligopolists information acquisition decisions may change the effects of information sharing on the consumer surplus sharing information about individual cost parameters gives the following trade off in cournot oligopoly on the one hand it decreases the expected consumer surplus for a given information precision as the literature shows on the other hand information sharing increases the firms incentives to acquire information and the consumer surplus increases in the precision of the firms information interestingly the latter effect may dominate the former effect

customer information sharing among rival firms abstract the recent rapid growth of the internet as a medium of communication and commerce combined with the development of sophisticated software tools are to a large extent responsible for producing a new kind of information databases with detailed records about consumers preferences these databases have become part of a firm s assets and as such they can be sold to third parties this possibility has raised numerous concerns from consumer privacy advocates and regulators who have entered into a heated debate with business groups and industry associations about whether the practice of customer information sharing should be banned regulated or left unchecked this paper investigates the incentives of rival firms to share their customer specific information and evaluates the welfare implications if such exchanges are banned in the context of a perfect price discrimination model

optimal research for cournot oligopolists we extend the classical cournot model to take account of uncertainty in either the cost function or the demand function by undertaking research firms can acquire private asymmetric information to help resolve their uncertainty and make a more informed production decision the model is a two stage game in the first stage research levels are chosen and in the second stage conditional on private research outcomes production decisions are made we find that for a linear continuous information structure there is a unique nash equilibrium to the game in the equilibrium there may be an inefficient amount of aggregate research and there may be incomplete pooling as well the model specializes to the classical case when the cost of research is zero and each firm gains essentially the same information by doing an infinite amount of research or when the cost of research is so high no firm undertakes research

information and disclosure in strategic trade policy we relax the standard assumption in the strategic trade policy literature that governments possess complete information about the economy assuming instead that governments must obtain information from firms we examine firms incentive to disclose information to the governments in the brander spencer setting with quantity competition we find firms disclosing both demand and cost information thereby justifying the literature s omniscient government assumption with price competition however firms have no incentives to disclose demand or cost information so governments remain uninformed further with quantity competition and unknown demand governments are caught in an informational prisoner s dilemma

distributional assumptions in the theory of oligopoly information exchange abstract we analyze the profitability of information sharing among cournot oligopolists receiving private information about random demand in this setting previous authors showed information exchange to be unprofitable when firms marginal costs are constant and outputs are perfect substitutes we introduce a measure of the increase in the accuracy of firms demand forecasts when information is shared we provide two examples showing when this measure is large information exchange is profitable even though firms marginal costs are constant and outputs are perfect substitutes moreover we show that in the linear conditional expectations framework which has been standard in the literature this measure reveals these accuracy gains to be severely limited

voluntary disclosure under imperfect competition experimental evidence abstract this study investigates disclosure behavior when a firm has incentives to influence the actions of a product market rival in a cournot quantity game using an experimental economics method we find that when the firm receives private information about industry wide cost unfavorable favorable information is disclosed withheld and the rival adjusts production accordingly in contrast when the firm receives private information about firm specific cost disclosure behavior is not affected by the favorableness of the information and the rival s production decision is insensitive to the firm s disclosure choice

short run pricing strategies to increase corporate average fuel economy short run pricing strategies to increase corporate average fuel economy i introduction in 1974 the average fuel efficiency of new automobiles sold in the united states reached a low of 14 2 miles per gallon mpg close on the heels of the arab opec oil embargo of 1973 74 and the ensuing petroleum price shocks congress passed the 1975 energy policy and conservation act the act required each manufacturer to meet sales weighted corporate average fuel economy cafe standards beginning with 18 mpg in 1978 and gradually increasing each year to 27 5 mpg in 1985 figure 1 the expressed purpose of the cafe standards was to stimulate the development of technology to improve fuel efficiency the possibility of raising the relative prices of the least energy efficient models as a strategy to meet the standards was considered but only as a last resort 1 although there continues to be intense debate as to whether fuel price increases or the cafe regulations drove the fuel economy improvements of the 1970s and 80s several studies agree that improvements in automotive engineering and design rather than pricing strategies played an overwhelmingly dominant role 2 no empirical evidence supports the effectiveness of using pricing strategies to increase the overall level of automotive fuel economy every year since 1985 automobile manufacturers have successfully petitioned the national highway traffic safety administration which determines the level of the cafe standard to reduce the target from 27 5 to 26 mpg in 1986 88 and 26 5 mpg in 1989 in each case at least one manufacturer argued that it would be unable to meet the original target with its planned product offerings and would have to resort to other strategies that would result in unacceptable economic costs this paper explores a method of estimating the costs of achieving fuel economy goals when pricing strategies are used to alter the distribution of sales the method employs the closed form equation for consumers surplus derived from the multinational logit model of discrete choice discussed by mcfadden 1973 and assumes that manufacturers must bear the full cost of meeting the fuel economy target the estimated cost represents an upper bound on the losses firms would incur by setting prices to minimize loss of profit using econometric estimates of the sensitivity of vehicle choice to vehicle price together with market shares and fuel efficiencies for 1986 i estimate the costs of short term improvements in average fuel economy using pricing strategies for general motors ford and chrysler minor adjustments of up to 1 mpg cost 1 2 percent of the price of a 10 000 car for improvements of 2 mpg or more however pricing strategies become a costly way to improve fuel economy the technique also estimates the market shares for each car line that correspond to the pricing solution it thereby identifies which car lines would be most affected the technique produces precise price changes and market shares for each car line readers should not place too much weight on the apparent precision but should consider the estimates as an approximation the usefulness of which lies in measuring the difficulty of meeting fuel economy targets via pricing strategies alone one can compare the size of these estimates to the fines for failing to meet the standards 50 per mpg per car or to typical manufacturer rebates to stimulate sales often 100 to 2 000 per car ii a formulation of the pricing problem faced with the cafe requirements a firm can respond with engineering and design improvements or by raising the prices of less efficient models and lowering the prices of those that exceed the standard technological improvements generally require a lead time of three to five years very large fluctuations in fuel prices have occurred in far shorter perids figure 1 creating the risk that a manufacturer s product offering could be out of step with the market

markets for information of inefficient firewalls and efficient monopolies in this paper we study market environments where information is costly to acquire and is also useful to potential competitors agents may sell or buy reports over the information acquired and choose their trades in the market on the basis of what they learnt reports are unverifiable cheap talk messages hence the quality of the information transmitted depends on the conflicts of interest faced by the senders we find that when information has a prevalent horizontal differentiation component in equilibrium information is acquired when its costs are not too high and in that case it is also sold though reports are typically noisy the market for information is in most cases a monopoly and there is underinvestment in information acquisition we also show that regulatory interventions in the form of firewalls only make the inefficiency worse efficiency can be attained with a monopolist selling differentiated information provided entry is blocked

new vehicle characteristics and the cost of the corporate average fuel economy standard by 2016 the corporate average fuel economy cafe standard will increase by 40 this article focuses on the medium run effects of fuel economy regulation we estimate consumers willingness to pay for vehicle characteristics we employ a novel empirical strategy that accounts for the characteristics endogeneity by using variation of engine models used in vehicle models the results imply that consumers value an increase in power more than an increase in fuel economy simulations of the effects of an increase in the cafe standard suggest that regulatory costs are significantly smaller in the medium run than in the short run

structural models of family labor supply a discrete choice approach a static neoclassical structural model is presented explaining labor supply of both spouses in two adult households in the netherlands family preferences are described with a direct translog utility function with the husbands leisure the wifes leisure and family income as its arguments we assume that the choice set of each family is finite account is taken of the dutch tax and benefits system we allow for hours restrictions and random preferences and account for unobserved wages of nonworkers the models are estimated using smooth simulated maximum likelihood results based upon dutch cross section data from 1987 are illustrated by confidence intervals for elasticities and by several policy simulations excerpt

duopoly information equilibrium cournot and bertrand abstract in a duopoly model where firms have private information about an uncertain linear demand it is shown that if the goods are substitutes not to share information is a dominant strategy for each firm in bertrand cournot competition if the goods are complements the result is reversed furthermore the following welfare results are obtained 1 i with substitutes in cournot competition the market outcome is never optimal with respect to information sharing but it may be optimal in bertrand competition if the products are good substitutes with complements the market outcome is always optimal 2 ii bertrand competition is more efficient than cournot competition 3 iii the private value of information to the firms is always positive but the social value of information is positive in cournot and negative in bertrand competition

duopoly information exchange the case of unknown slope abstract we model information exchange between duopolists facing a common random demand the slope of the common demand curve facing the firms is assumed unknown and firms observe private signals about this slope we show that for sufficiently large variation in the demand slope firms earn strictly higher profit when they share their information rather than keeping it private even with constant marginal costs and homogeneous goods in this case it is a nash equilibrium for the duopolists to share their information in a quid pro quo information exchange consistent with earlier models information exchange raises welfare

incentives for information production and disclosure in a duopolistic environment this paper examines the nature of the equilibrium solution to the duopoly problem under various incomplete information structures and the incentives to produce and disclose information attention is focused on the duopolists cost functions the results indicate that disclosure of such information is generally beneficial to the duopolists

uncertainty resolution private information aggregation and the cournot competitive limit a cournot model of oligopoly in which otherwise identical firms have private differential information about the common cost of production and a shared but unknown demand curve is examined a bayesian equilibrium of the corresponding game of incomplete information is solved for explicitly and analysed in the symmetric equilibrium different firms produce at different output levels because they have different information because the information individual firms have is random total output and hence market price is also random for any finite number of firms the main result of the paper relates to the asymptotic properties of the equilibrium when the number of firms becomes large under fairly general conditions on the joint distribution of demand and individual firms information about demand the random equilibrium price converges almost surely to a constant in the limit more importantly this price equals the perfectly competitive price in other words in large markets even if no firm knows the true market demand curve and firms are not price takers and do not use price as a signal to improve their information the competitive price will prevail with certainty in the limit aggregate outcomes are as if all firms shared their private information with each other

monopolistic competition aggregation of competitive information and the amount of product differentiation consider an industry with a large number of homogeneous firms each firm s profits are a function of its own strategy and the strategies the other firms select suppose other firms strategies enter into each firm s profit function only through one or more statistics for example average price in the market may parameterize every firm s profit function we prove that as a general rule the industry s firms will in equilibrium follow at most m 1 distinct strategies where m is the number of statistics by which competitors strategies affect each firm s profits

individual marketing with imperfect targetability our research investigates the competitive ramifications of individual marketing and information management in today s information intensive marketing environments the specific managerial issues we address are as follows first what kinds of incentive environments do competing firms face when they can only target individual customers imperfectly second does the improvement in an industry s targetability intensify price competition in the industry such that all competing firms become worse off third should a firm share its customer knowledge so as to improve its rival s targetability fourth how should an information vendor sell its information that can improve a firm s targetability finally do competing firms have the same incentives to invest in their own targetability to answer those questions we develop a simple model a la narasimhan 1988 in which each of the two competing firms have their own loyal customers and compete for common switchers we assume that each firm can classify its own loyal customers and switchers correctly only with a less than perfect probability this means that each firm s perceived customer segmentation differs from the actual customer segmentation based on their perceived reality these two competing firms engage in price competition as an extension we also allow the competing firms to make their investment decisions to acquire targetability we show that when individual marketing is feasible but imperfect improvements in targetability by either or both competing firms can lead to win win competition for both even if both players behave noncooperatively and the market does not expand win win competition results from the fact that as a firm becomes better at distinguishing its price insensitive loyal customers from the switchers it is motivated to charge a higher price to the former however due to imperfect targetability each firm mistakenly perceives some price sensitive switchers as price insensitive loyal customers and charges them all a higher price these misperceptions thus allow its competitors to acquire those mistargeted customers without lowering their prices and hence reduce the rival firm s incentive to cut prices this effect softens price competition in the market and qualitatively changes the incentive environment for competing firms engaged in individual marketing a prisoner s dilemma occurs only when targetability in a market reaches a sufficiently high level this win win perspective on individual marketing has many managerial implications first we show that superior knowledge of individual customers can be a competitive advantage however this does not mean that a firm should always protect its customer information from its competitors to the contrary we find that competing firms can all benefit from exchanging individual customer information with each other at the nascent stage of individual marketing when firms targetability is low indeed under certain circumstances a firm may even find it profitable to give away this information unilaterally however as individual marketing matures as firms targetability becomes sufficiently high further improvements in targetability will intensify price competition and lead to prisoner s dilemma therefore it is not only prudent politics but also a business imperative for an industry to seize the initiative on the issue of protecting customer privacy so as to ensure win win competition in the industry second we show that the firm with a larger number of loyal customers tends to invest more in targetability when the cost of acquiring targetability is high however the firm with a smaller loyal base can through information investment acquire a higher level of targetability than the firm with a larger loyal base as long as the cost of acquiring targetability is not too high as the cost further decreases competing firms will all have more incentives to increase their investments in targetability until they achieve the highest feasible level third an information vendor should make its information available nonexclusively exclusively when its information is associated with a low high level of targetability when the vendor does sell its information exclusively it should target a firm with a small loyal following if it can impart a high level of targetability to that firm finally our analysis shows that an information intensive environment does not doom small firms in fact individual marketing may provide a good opportunity for a small firm to leapfrog a large firm the key to leapfrogging is a high level of targetability or customer knowledge

labour market discrimination on the basis of health an application to uk data an analysis of wage discrimination is carried out on the basis of health on uk data with a number of important modifications first selection is controlled for into both health and labour market status second the direct effect of health upon productivity is accounted for and third discrimination is examined with regard to participation as well as wages the question of selection into health status is found to be of little empirical importance but taking account of selection into labour market status and the direct impact of health upon productivity leads to a fall in measured discrimination the paper finds similar results with regard to participation it is also examined whether these effects differ across age and gender

cournot competition and the social value of information in a differentiated product cournot model each supplier receives informative signals about demand the cross industry correlations of the signals differ more public signals have higher correlation coefficients in equilibrium information is used inefficiently from the industry s perspective information is over used and too much emphasis is placed on relatively public signals from the consumer s perspective information is under used and too much emphasis is placed on relatively private signals welfare is enhanced by increasing the use of information as desired by consumers but re balancing that use away from public signals as desired by the industry if information is costly and endogenously acquired then suppliers acquire too much new information but they use it too little

on the use of heuristics to approximate competitors private information abstract firms often lack knowledge of the nature of the uncertainty they or their opponents face and use heuristics or approximations to determine their strategy we define and analyze one type of heuristic strategy in which firms choose strategies based on the expectation of their opponents private information rather than the full information about the distribution of that private information we find that in equilibrium the degree to which the heuristic strategy differs from the bayesian strategy depends on 1 the convexity of a firm s marginal profits with respect to their opponents private information and 2 whether firm strategies are complementary or substitutable under certain conditions firms equilibrium profits are greater when all firms use heuristics than when all firms use the full information our results provide insight into incentives firms may have to either facilitate or impede access to industry information

information sharing in credit markets we present a model with adverse selection where information sharing between lenders arises endogenously lenders incentives to share information about borrowers are positively related to the mobility and heterogeneity of borrowers to the size of the credit market and to advances in information technology such incentives are instead reduced by the fear of competition from potential entrants in addition information sharing increases the volume of lending when adverse selection is so severe that safe borrowers drop out of the market these predictions are supported by international and historical evidence in the context of the consumer credit market a large body of literature on credit markets has shown that asymmetric information may prevent the efficient allocation of lending leading to credit rationing e g jaffee and russell 1976 stiglitz and weiss 1981 or to a wedge between lending and borrowing rates e g king 1986 in this literature informational asymmetries are taken to be exogenous lenders fail to observe some relevant characteristic or action of potential borrowers and have no way of learning about it in some countries however lenders can improve their knowledge about new customers by exchanging information with other lenders through information brokers generally known as credit bureaus the latter collect file and distribute the information voluntarily supplied by their members and operate on the principle of reciprocity lenders who do not provide data are denied access to the bureau s files in other countries instead these institutions do not exist the literature offers no guide to identify the factors that lead to endogenous communication between lenders this paper is an attempt to fill the gap information sharing is important for a number of reasons it may increase the degree of competitiveness within credit markets vives 1990 improve

efficient use of information and social value of information this paper analyzes equilibrium and welfare for a tractable class of economies games that have externalities strategic complementarity or substitutability and heterogeneous information first we characterize the equilibrium use of information complementarity heightens the sensitivity of equilibrium actions to public information raising aggregate volatility whereas substitutability heightens the sensitivity to private information raising cross sectional dispersion next we define and characterize an efficiency benchmark designed to address whether the equilibrium use of information is optimal from a social perspective the efficient use of information reflects the social value of aligning choices across agents finally we examine the comparative statics of equilibrium welfare with respect to the information structure the social value of information is best understood by classifying economies according to the inefficiency if any in the equilibrium use of information we conclude with a few applications including production externalities beauty contests business cycles and large cournot and bertrand games

monopoly competition and information acquisition abstract an incumbent monopolist is uncertain about its linear demand but can acquire public information at a cost we determine how an entry threat affects the firm s information acquisition if returns to scale are constant and the state contingent demands become more dispersed as output increases then entry reduces information acquisition if however either the incumbent or entrant has increasing returns or if the state contingent demands are nonlinear or fail increasing dispersion then entry can increase information finally entry can hurt consumers although entry always increases output it can decrease information consumers sometimes prefer a better informed monopoly to a duopoly

nurses wanted is the job too harsh or is the wage too low when entering the job market nurses choose among different kind of jobs each of these jobs is characterized by wage sector primary care or hospital and shift daytime work or shift this paper estimates a multi sector job type random utility model of labor supply on data for norwegian registered nurses rns in 2000 the empirical model implies that labor supply is rather inelastic 10 increase in the wage rates for all nurses is estimated to yield 3 3 increase in overall labor supply this modest response shadows for much stronger inter job type responses our approach differs from previous studies in two ways first to our knowledge it is the first time that a model of labor supply for nurses is estimated taking explicitly into account the choices that rn s have regarding work place and type of job second it differs from previous studies with respect to the measurement of the compensations for different types of work so far it has been focused on wage differentials but there are more attributes of a job than the wage based on the estimated random utility model we therefore calculate the expected value of compensation that makes a utility maximizing agent indifferent between types of jobs here between shift work and daytime work it turns out that norwegian nurses working shifts may be willing to work shift relative to daytime work for a lower wage than the current one

disability in italian households income poverty and labour market participation this article studies the economic effects of disabled members on italian households with the aim of identifying a suitable target group for welfare policies survey of households income and wealth data for the year 2000 is used preliminary results show significant differences in levels of income and poverty diffusion to the detriment of households with disabled members we propose an exogenous explanation the replacement ratio between disability benefits and expected labour income shows that disability benefits do not compensate the potential incomes of the disabled person and of the possible carer except in households with severe socioeconomic disadvantages we also propose an endogenous explanation applying a logit model we show that the labour market participation of the possible carer is reduced in households with disabled persons in order to increase the income of the households with disabled members policy recommendations include the provision of care services and structural policies to impro

information sharing and tax competition among governments abstract the residence based principle has been proposed as a second best measure to the full international coordination of capital tax policies this system requires that tax authorities have full information about the foreign investments of their residents however the degree of information transmission among governments can be considered as a strategic variable we show that under some features of the tax system there will not be any information sharing while there are institutional arrangements under which governments may transmit partial information for strategic purposes we also show that full information sharing is not necessarily a pareto optimum

optimal bid disclosure in patent license auctions under alternative modes of competition abstract the literature on patent license auctions in oligopoly assumed that the auctioneer reveals the winning bid and stressed that this gives firms an incentive to bid high in order to signal an aggressive output strategy in a downstream cournot market game and conversely bid low to signal acquiescent pricing in a bertrand market game the present paper examines the information revealed by publishing the winning or the losing or no bid assuming an oligopoly with differentiated goods we rank disclosure rules and find that it is not optimal for the innovator to disclose the winning bid regardless of the mode of competition

automobile quality choice under pollution control regulation in this paper we develop a modified quality choice model to study the effects of various mobile source air pollution control regulations we have a single producer that supplies a fixed number of car types two but faces a spectrum of consumers differing in their valuation of car quality the car manufacturer chooses the quality levels of the two car types as well as the sales mix between the two types and the size of the market it wishes to supply by endogenizing both the sales mix and the market size while still allowing quality to be a choice variable we are able to more completely analyze the impact of any car pollution control regulation existing studies of this impact either focus on the model line adjustment response shifts in the quality array or on the price adjustment response changes in the sales mix and market size in allowing for both the model line and the price adjustment options we find that the corporate average fuel efficiency cafe standard is unambiguously welfare superior to the low emission vehicle quantity constraint lev and zero emission vehicle zev programs we also show that the effects of the cafe standard are not equivalent to those of a fuel tax as previously found and that for a given car pollution target the former is preferred to the latter

the effect of vehicle fuel economy standards on technology adoption abstract many countries are tightening passenger vehicle fuel economy standards this paper provides the first empirical evidence on the effects of fuel economy standards on technology adoption we investigate changes in the rate and direction of technology adoption that is the extent to which technology is used to increase fuel economy at the expense of other vehicle attributes we find that recent changes in u s and european standards have both increased the rate of technology adoption and affected the direction of technology adoption producers reduced horsepower and torque compared to a counterfactual in which fuel economy standards remained unchanged we estimate opportunity costs from reduced horsepower and torque to be economically significant relative to the gains from fuel savings

a normalized value for information purchases consider agents who are heterogeneous in their preferences and wealth levels these agents may acquire information prior to choosing an investment that has a property of no arbitrage and each piece of information bears a corresponding cost we associate a numeric index to each information purchase information cost pair this index describes the normalized value of the information purchase it is the risk aversion level of the unique cara agent who is indifferent between accepting and rejecting the purchase and it is characterized by a duality principle that states that agents with a stronger preference for information should engage more often in information purchases no agent more risk averse than the index finds it profitable to acquire the information whereas all agents less risk averse than the index do given an empirically measured range of degrees of risk aversion in a competitive economy with no arbitrage investments our model therefore comes close to describing an inverse demand for information by predicting what pieces of information are acquired by agents and which ones are not among several desirable properties the normalized value formula induces a complete ranking of information structures that extends blackwell s classic ordering

policy watch the economics of fuel economy standards one of the most hotly contested of all energy policy issues involves corporate average fuel economy or cafe standards for new cars and light duty trucks tighter standards would reduce gasoline consumption and hence both greenhouse gas emissions as well as this country s vulnerability to oil price shocks but they would also increase the price of new vehicles worsen traffic congestion and depending on how they are phased in possibly even reduce occupant safety these effects are amenable to economic analysis and we review the evidence to date bearing on this interesting and important question

coordination in oligopoly the private and social efficiency of two behavioral coordination mechanisms is examined in this paper in cournot oligopoly firms prefer immediate coordination on the nash equilibrium interpreted as a preplay communication over the best reply dynamics and fictitous play which converge to the equilibrium but with delay interpreted as a decentralized learning process in bertrand oligopoly firms prefer the learning process these results indicate that firms have incentives to create institutions such as trade associations or informal meetings to facilitate coordination of production capacities but not prices moreover quantity agreements may even increase social welfare

relying on the information of interested parties we investigate the conventional wisdom that competition among interested parties attempting to influence a decisionmaker by providing verifiable information elicits all relevant information we find that if the decisionmaker is strategically sophisticated and well informed about the relevant variables and about the preferences of the interested party or parties competition may be unnecessary to achieve this result if the decisionmaker is unsophisticated or not well informed competition is not generally sufficient if the interested parties interests are sufficiently opposed however or if the decisionmaker is seeking to advance the parties welfare then competition can reduce or even eliminate the decisionmaker s need for prior knowledge about the relevant variables and for strategic sophistication in other settings only the combination of competition among information providers and a sophisticated skepticism is sufficient to allow effective decisionmaking

sectoral labour supply choice restrictions and functional form this is the authors submitted article version which is the pre peer reviewed version of the article the article changed title in the peer reviewing process from analyzing labor supply behavior with latent job opportunity sets and institutional choice constraints later published as discussion paper no 399 http brage bibsys no ssb handle urn nbn no bibsys brage 21006

localized competition multimarket operation and collusive behavior this paper studies collusive behavior in a repeated oligopoly model with localized competition also reinterpreted as a model of multimarket operation private information about the rivals past actions naturally arises from these product market structures the resulting communication problems imply that firms should not adopt strategies with too severe punishments infinite grim punishments may be too severe for large discount factors the standard stick and carrot punishments from the perfect public information model are always too severe for all discount factors modified stick and carrot punishments can still be used though for a smaller range of discount factors than the standard stick and carrot punishments

policy watch corporate average fuel economy standards initially the minimum corporate average fuel economy cafe program was promoted as a policy to reduce u s vulnerability to oil shocks in the past two years however concern about global warming has resulted in new political pressures to raise cafe once again to reduce the growth in u s emissions of carbon dioxide a greenhouse gas in this paper i do not attempt to provide a detailed critique of these two objectives i simply take the goals as given and draw upon estimates from the empirical literature to show that cafe is a very costly instrument for achieving them in addition i compare the costs of meeting the same objectives through a fuel or carbon tax

calories obesity and health in oecd countries theoretical models suggest that decisions about diet weight and health status are endogenous within a utility maximization framework in this article we model these behavioural relationships in a fixed effect panel setting using a simultaneous equation system with a view to determining whether economic variables can explain the trends in calorie consumption obesity and health in organization for economic cooperation and development oecd countries and the large differences among the countries the empirical model shows that progress in medical treatment and health expenditure mitigates mortality from diet related diseases despite rising obesity rates while the model accounts for endogeneity and serial correlation results are affected by data limitations