assessing market dominance abstract we propose a new measure to assess market dominance contrary to concentration measures such as the herfindahl hirschman index that characterizes the concentration of an industry our dominance measure suggests an approach that classifies when an individual firm has a dominant position in our measure the criterion for dominance is relaxed as the intensity of existing competition increases or as entry barriers are lowered we apply the dominance measure to a number of well known competition cases

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

dynamic pricing of perishable assets under competition we study dynamic price competition in an oligopolistic market with a mix of substitutable and complementary perishable assets each firm has a fixed initial stock of items and competes in setting prices to sell them over a finite sales horizon customers sequentially arrive at the market make a purchase choice and then leave immediately with some likelihood of no purchase the purchase likelihood depends on the time of purchase product attributes and current prices the demand structure includes time variant linear and multinomial logit demand models as special cases assuming deterministic customer arrival rates we show that any equilibrium strategy has a simple structure involving a finite set of shadow prices measuring capacity externalities that firms exert on each other equilibrium prices can be solved from a one shot price competition game under the current time demand structure taking into account capacity externalities through the time invariant shadow prices the former reflects the transient demand side at every moment and the latter captures the aggregate supply constraints over the sales horizon this simple structure sheds light on dynamic revenue management problems under competition which helps capture the essence of the problems under demand uncertainty we show that the equilibrium solutions from the deterministic game provide precommitted and contingent heuristic policies that are asymptotic equilibria for its stochastic counterpart when demand and supply are sufficiently large this paper was accepted by yossi aviv operations management

assessing horizontal mergers under uncertain efficiency gains the analysis of horizontal mergers hinges on a tradeoff between unilateral effects and efficiency gains we examine the role of uncertainty in this tradeoff in theory the attitude towards uncertainty depends on the curvature of the social objective function on the one hand adjustment effects both on the consumers and firms sides tend to make consumers surplus and firms profits convex on the other hand pass through effects may act in the opposite direction we show that convexity prevails in a number of situations including the most general linear demand model implications for empirical merger analysis are exposed

are ghettos good or bad spatial separation of racial and ethnic groups may theoretically have positive or negative effects on the economic performance of those groups we examine the effects of segregation on outcomes for blacks in schooling employment and single parenthood we find that blacks in more segregated areas have significantly worse outcomes than blacks in less segregated areas we control for the endogeneity of location choice using instruments based on political factors topographical features and residence before adulthood a one standard deviation decrease in segregation would eliminate one third of the black white differences in most of our outcomes

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

market structure and media diversity i introduction information on news and current affairs can raise political awareness and promote a range of ideas under the assumption that unregulated media markets supply too little variety many societies have charged regulators with ensuring there are sufficient opportunities for different new and independent viewpoints diversity and that media respond to the interests of their local communities localism 1 the federal communications commission fcc has traditionally limited the amount of common and cross ownership of newspapers radio and television tv stations recently the fcc relaxed ownership rules and refocused their attention on market forces for example consumer preferences and new media such as satellite the internet and smartphone in order to achieve their diversity and localism goals given the increase in choices through new media supporters of greater ownership concentration argue that traditional media should be free to consolidate and use the efficiencies to provide more diverse and local news programming opponents question whether such efficiencies are achievable and argue that large consolidated media corporations are not flexible enough to serve the interests of local and minority communities in this paper we estimate consumer preferences for their local news and current affairs news service described by the offerings from newspapers radio tv the internet and smartphone news service characteristics are diversity of opinion in the reporting of information coverage of multiculturalism issues amount of information on community news and events and amount of space or time devoted to advertising we use our demand estimates to calculate the impact on consumer welfare from a change in media market structure that reduces the number of independent tv stations in the market by one specifically we employ the willingness to pay wtp construct to measure the expected consumer welfare effects between the news service supplied to the consumer before the change in market structure and the service supplied after the change we focus on broadcast tv stations because they are the main news for most households and because the fcc has direct oversight of their ownership we estimate our demand model with data obtained from a nationwide survey of households during march 2011 results show that the representative consumer is willing to pay from 18 to 26 per month for an increase in diversity of opinion and slightly more for community news from a low to a medium level but only an additional 6 to 7 to move to a high level of diversity of opinion or community news the representative consumer also values an improvement in information that reflects the interests of women and minorities from low to medium 7 the representative consumer is willing to pay about 5 to avoid a change from a low to a medium level of advertising but the much higher amount of 20 to avoid a change from a medium to a high level using fcc 2011 data on media market structure we present evidence that indicates the amount of diversity localism and advertising in the news services supplied to consumers is lower in markets with one fewer independent tv station as a result the average small market i e five or fewer tv stations consumer loses 83 per month whereas the average large market i e 20 or more tv stations consumer loses 37 per month these losses are equivalent to 45 million annually for all small market households in the united states and 13 million for large market households if the change in market structure occurs in all markets aggregate losses nationwide would be about 681 million other studies have measured the relationship between information on news and current affairs and market structure flowever these studies measure supply from just one of the media sources that comprise the consumer s news service for example milyo 2007 gentzkow 2007 and gentzkow and shapiro 2010 for newspapers and siegelman and waldfogel 2001 and crawford 2007 for radio and tv

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

exchange rates and cash flows in differentiated product industries a simulation approach how do exchange rate changes impact firms cash flows we extend a simulation method developed in industrial organization to answer this question we use prices quantities and product characteristics for differentiated products coupled with a discrete choice framework and an assumption of price competition to estimate marginal costs for all producers using a monte carlo approach we generate counterfactual prices and profits for different levels of exchange rates we illustrate the method using the market for bottled water our results stress that even in a relatively simple market such as this one different brands face very different exchange rate risks consider a firm that produces a good in france using mainly local inputs and sells it abroad in locations that have a floating exchange rate vis a vis the euro profits and in turn the value of the firm are potentially exposed to exchange rate changes if the euro appreciates profits when measured in euros are likely to decrease how large is the decrease in profits similarly what is the impact of such an exchange rate change on the profits of an import competing firm these are the questions that a large literature on exchange rate exposure attempts to answer

quantifying the effects from horizontal mergers in european competition policy this paper starts from a recent case to study how merger analysis in europe may be potentially improved starting from the geographic market definition in the merger decision we formulate and estimate an oligopoly model with differentiated products based on the estimates we compare several alternative market power tests a hypothetical market power test an actual market power test and a comparative market power test our comparison of these alternative tests illustrates that the recently introduced empirical techniques need not be in conflict with traditional policy practices in europe but should be seen as a natural extension of commonly accepted principles furthermore we emphasize the importance of our dynamic comparative market power test in the european context according to this test the relevant point of comparison when assessing a merger is not the status quo but rather a relevant alternative merger scenario that is likely to happen in the event the merger is rejected in a european context the choice is often to accept a sequence of regionally based mergers or rather a sequence of pan european mergers finally we also emphasize the importance of constructing confidence intervals when computing the predicted merger effects especially if one is interested in testing the hypothesis that a merger has no effects

peer effects on a fertility decision an application for medellin colombia abstract the paper provides historical perspectives on spatial economic inequalities in brazil making use of a database on brazilian municipalities from 1872 to 2000 a suit of maps and graphs describe the geographic factors shaping the historical development of the brazilian economy highlighting the role of transport costs and its consequences for the spatial dynamics of income per capita and labor productivity the remaining of the paper estimates econometric models of growth convergence for municipal income per capita and labor productivity from 1920 onwards analyses are refined firstly by disaggregating the models for urban and rural activities secondly by assuming spatial correlation among variables of the model and thirdly by enlarging the model to take account of the long run determinants of spatial growth convergence empirical results endorse the historical preeminence of geographic factors in particular accessibility and transport conditions as opposed to institutional conditions the conclusion summarizes the results and proposes research extensions

information disclosure in auctions an experiment we report experimental results on the importance of information disclosure policy in first price sealed bid auctions interaction takes place in 10 periods according to a random matching protocol and we control the level of information feedback bidders receive after each period when bidders are informed about the losing bids in previous periods prices are higher than the theoretical prediction however when this information is not revealed the bidding becomes more competitive and the bids come close to the theoretical prediction we suggest that a signaling phenomenon may be important for explaining these results 2002 elsevier science b v all rights reserved

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

knowing what others know coordination motives in information acquisition we explore how optimal information choices change the predictions of strategic models when a large number of agents play a game with strategic complementarity information choices exhibit complementarity as well if an agent wants to do what others do they want to know what others know this makes heterogeneous beliefs di cult to sustain and may generate multiple equilibria in models with substitutability agents prefer to difierentiate their information choices we use these theoretical results to examine the role of information choice in recent price setting models and to propose modeling techniques that ensure equilibrium uniqueness

strategic information management under leakage in a supply chain the importance of material flow management for a profit maximizing firm has been well articulated in the supply chain literature we demonstrate in our analytical model that a firm must also actively manage information flows within the supply chain which translates to controlling what it knows as well as what its competitors and suppliers know in our model of horizontal competition between an informed and an uninformed firm with a common upstream supplier material and information flows intersect through leakage of demand order information to unintended recipients as a result the informed firm s drive to control information flows within the supply chain can trigger operational losses through material flow distortion these losses can be so severe that the firm may prefer not to acquire information even when it is costless to do so our results underscore the importance of strategic information management actively managing the supply chain s information flows and making trade offs with material flows where appropriate to maximize profits

communication in cournot oligopoly abstract this paper studies communication in a static cournot duopoly model under the assumption that the firms have unverifiable private information about their costs we investigate the conditions under which the firms cannot transmit any information through cheap talk and show that when these conditions are violated it may be possible to construct informative cheap talk equilibria if the firms can communicate through a third party communication can be informative even when informative cheap talk is impossible we exhibit a simple mediated mechanism that ensures informative communication and interim pareto dominates the uninformative equilibrium for the firms

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

the value of transparency in multidivisional firms we study internal incentives transparency and firm performance in multidivisional organizations two independent divisions of the same firm design internal incentives and decide whether to publicly disclose their performances in each division a risk neutral principal deals with a risk averse exclusive agent under moral hazard each agent exerts an unverifiable effort that creates a spillover on the effort cost of the other agent we first study the determinants of the optimal principal agent contract with and without performance transparency then we show how effort spillovers affect the equilibrium communication behavior of each division both principals commit to disclose the performance of their agents in equilibrium when efforts are complements while no communication is the only equilibrium outcome when efforts are substitutes

does competition among public schools benefit students and taxpayers tiebout choice among districts is the most powerful market force in american public education naive estimates of its effects are biased by endogenous district formation i derive instruments from the natural boundaries in a metropolitan area my results suggest that metropolitan areas with greater tiebout choice have more productive public schools and less private schooling little of the effect of tiebout choice works through its effect on household sorting this finding may be explained by another finding students are equally segregated by school in metropolitan areas with greater and lesser degrees of tiebout choice among districts

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

mergers with differentiated products the case of the ready to eat cereal industry traditional merger analysis is difficult to implement when evaluating mergers in industries with differentiated products i discuss an alternative which consists of demand estimation and the use of a model of postmerger conduct to simulate the competitive effects of a merger i estimate a brand level demand system for ready to eat cereal using supermarket scanner data and use the estimates to 1 recover marginal costs 2 simulate postmerger price equilibria and 3 compute welfare effects under a variety of assumptions the methodology is applied to five mergers two of which occurred and for which i compare predicted to actual outcomes

recent advances in oligopoly theory from a game theory perspective abstract this paper surveys the contribution that recent developments in game theory have made to the understanding of oligopoly theory it is argued that conventional models suffer from the problem that there are a number of solution concepts offered with little guidance as to which should be selected and this is related to the static nature of the models employed one important development in game theory has been the analysis of repeated games and when applied to oligopoly theory this suggests that outcomes may be more cooperative than conventional theory suggests related to this is the requirement that firms employ credible threats to punish cheating from cooperative outcomes and the paper examines the extent to which imperfect information may restrict the scope of firms to employ such punishments one way in which firms may seek to make threats credible is through strategic investments for example in production capacity and the paper explores how competition over price or output is integrated with competition over instruments for strategic investment

a comparison of optimal tariffs and welfare under no lobbying domestic lobbying and domestic foreign lobbying whether and what type of the lobbying induced trade policies can improve the domestic welfare we show that as compared to the case of no lobbying and the case of domestic lobbying the domestic foreign lobbying may achieve the lowest tariff and may also realise the highest welfare for the domestic country our finding provides a theoretical explanation to the prevalent lobbying competition between asian firms and us firms in usa recently we argue that the domestic foreign lobbying may contribute to a freer trade in the domestic country and lobbying competition may be one of the strongest forces pushing for trade liberalisation

estimating market power in a two sided market the case of newspapers the newspaper industry is a two sided market the readers market and the advertising market are closely linked by inter market network externalities we estimate market power in the italian newspaper industry by building a structural model which encompasses a demand estimation

information sharing and tacit collusion in laboratory duopoly markets i introduction economists have long believed that enhanced information about demand conditions or rival actions can play an important role in facilitating collusion for example because it simplifies detection of chiselers stigler 1964 an extensive theoretical literature examines the incentives for non cooperative firms to share information through a trade association about some uncertain parameter see sakai 1990 1991 for a survey firms in these models may cooperate by sharing information in the trade association even though most authors assume that the firms choose non cooperative strategies in the product market under these conditions vives 1984 shows that with demand uncertainty substitute goods and quantity competition each firm s dominant strategy is to conceal information from its rivals therefore under these conditions non cooperative firms will not find it in their interests to form an information sharing arrangement such as a trade association because non cooperative firms should not wish to share information clarke 1983 392 concludes that information pooling mechanisms like trade associations can be considered prima facie evidence that firms are illegally cooperating to restrict output however kirby 1988 shows that non cooperative firms will want to share information if cost functions are sufficiently quadratic moreover hviid 1989 demonstrates that non cooperative firms will prefer to share information if they are sufficiently risk averse these models typically assume that firms interact once and identify the static subgame perfect nash equilibrium ne of the two stage information sharing game this is sensible when the goal is to focus on a narrow set of non cooperative equilibria because the set of non cooperative equilibria becomes very large in these models in the more complex repeated game however repeated interaction between competing firms seems more relevant for empirical applications especially for providing policy insight for trade associations that permit long term interactions among firms unfortunately empirical work in this area based on field data is challenging because the information different decision makers possess and the corresponding residual uncertainty they face are typically difficult to identify this paper uses a different empirical approach we use a series of laboratory duopoly markets to examine the impact of demand uncertainty on sellers output choices specifically we examine the importance of information sharing in facilitating tacit collusion under conditions of demand uncertainty 1 our experiment employs repeated interaction between fixed pairs of subjects trading the ability to directly test the static models for a more realistic policy relevant study of outcomes in the repeated game 2 our results indicate the extent to which results from static theory carry over to the repeated environment and can help guide future theory for dynamic oligopoly models of information sharing the experiment includes four distinct treatment conditions in the primary treatment sellers face uncertain demand but can eliminate uncertainty through voluntary mutual information sharing three control treatments identify the reasons for voluntary information sharing and determine if it leads to more collusive outcomes the first two control treatments eliminate sellers information sharing opportunities in the first control treatment sellers always remain uncertain about demand when choosing output while in the second control treatment sellers always have perfect demand information we refer to these control treatments respectively as forced no sharing and forced sharing throughout the paper the third control treatment sharply reduces collusion incentives by truncating demand while still allowing voluntary information transmission we refer to this control treatment as the truncated demand treatment the results briefly stated are as follows

mergers brand competition and the price of a pint abstract mergers in the uk brewing industry have reduced the number of national brewers from six to four the number of brands in contrast has remained relatively constant we analyze the effects of mergers on brand competition and pricing brand level demand equations are estimated from a panel of draft beers to model brand substitution possibilities we estimate the matrix of cross price elasticities semiparametrically our structural model is used to assess the strength of brand competition along various dimensions and to evaluate the mergers in particular we compute equilibria of pricing games with different numbers of players

competition economics and antitrust in europe this paper aims to assess the influence that economic analysis has had on competition policy in the european union over the last twenty years economists are increasingly used in antitrust cases the annual turnover of the main economic consultancy firms has increased by a factor of 20 since the early 1990s and currently exceeds 20 million this is about 15 of the aggregate fees earned on antitrust cases a proportion close to that in the us the economic resources mobilized by the eu commission are however an order of magnitude smaller and this imbalance is a source of concern the legal framework and the case decisions have also been influenced by economic analysis in important ways for instance the analysis of agreements between firms has increasingly focused on effects the analysis of the factors that determine effective competition has become more sophisticated the concept of collective dominance has been progressively developed in terms of the theory of collusion in repeated interactions and quantitative methods have become more important however enforcement has sometimes appealed to economic reasoning in flawed or speculative ways the paper discusses procedural reasons why this may have occurred this paper assesses the system of evidence gathering implemented by the commission in the light of the law and economics literature it is concluded that while the reforms recently implemented by the commission do address the main weaknesses of this system they may still not allow for the most effective development of economic theory and evidence in actual cases damien j neven

airline code share alliances and their competitive effects abstract code share alliances have become a prominent feature in the competitive landscape of the airline industry however policy makers are extremely hesitant to approve proposed code share alliances when the potential partners route networks have significant overlap the main concern is that an alliance may facilitate price collusion on partners overlapping routes this article shows how policy makers can use a structural econometric framework to quantify the competitive effects of proposed code share alliances where potential alliance partners compete on overlapping routes in the prealliance industry as an example i apply the econometric model to the delta continental northwest alliance this proposed alliance was initially greeted with skepticism by the u s department of transportation owing to the potential partners unprecedented level of route network overlap for the markets considered in my analyses it appears as though the ultimate approval of the alliance by policy makers was justified

the flexible coefficient multinomial logit fc mnl model of demand for differentiated products we show fc mnl is flexible in the sense of diewert thus its parameters can be chosen to match a well defined class of possible own and cross price elasticities of demand in contrast to models such as probit and random coefficient mnl models fc mnl does not require estimation via simulation it is fully analytic under well defined and testable parameter restrictions fc mnl is shown to be an unexplored member of mcfadden s class of multivariate extreme value discrete choice models therefore fc mnl is fully consistent with an underlying structural model of heterogeneous utility maximizing consumers we provide a monte carlo study to establish its properties and we illustrate its use by estimating the demand for new automobiles in italy

early settlement in european merger control we analyse the determinants of early settlement between merging parties and the european commission over remedies that remove concerns of anticompetitive effects this extends the previously narrow range of econometric literature on early settlement consistent with the theory of early settlement our results confirm the importance of delay costs and of uncertainty measured by the complexity of the economic analysis required for each merger we also find a non monotonic effect of agency resourcing which raises questions about the commission s efficiency in times of high case load econometrically we select a sample of merger decisions in which the european commission intervened due to concerns of anticompetitive effects and our selection model provides estimates of the factors determining intervention by the commission conclusions are drawn for public policy

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

an experimental investigation of the impact of information on competitive decision making managers often employ market response models as decision aids and historical information of competitors market outcomes to aid their competitive decisions in oligopolistic settings however little is known about how access to a decision aid or the availability of competitors market outcomes impact a firm s competitive decisions e g prices or market outcomes resulting from those decisions e g profits or how managers make these decisions across such informational conditions hence the objective of this paper is twofold first we investigate whether access to a decision aid and historical information of competitors outcomes yields more or less competitive decisions and outcomes second we determine which learning constructs such as choice reinforcement and beliefs about projected profits best explain competitive actions across various information conditions we find that relative to the availability of competitive information access to a decision aid has a larger effect on lowering prices and profits we also find that in two firm markets price competition is even more intense than in five firm markets similarly the availability of market share information leads to more aggressive pricing even when profits are held constant finally we outline the implications of our findings in making managerial resource allocations to market research endeavors

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

delineating markets for bundles with consumer level data the case of triple play abstract the question of whether bundles of telecommunication services are relevant product markets is addressed as a first step demand for bundles of services as well as the associated services is modeled as a discrete choice problem with a potentially large number of products a unique invoice based consumer level data set from portuguese telecommunications firms is collected this choice based data set is combined with survey data to characterize the market shares of all potential combinations of services available several discrete choice models are estimated a cross nested logit model is the most parsimonious description of the substitution patterns between the large number of products available the demand model used coupled with the definition of choice alternatives proposed generates flexible substitution patterns which produce reasonable price elasticities of demand the demand for triple play products is elastic with own price elasticities for the larger firms ranging between 3 2 and 1 3 and a market own price elasticity of 1 4 some of the products analyzed are found to be complementary our results indicate that triple play bundles are a relevant product market

assessing the effect of payroll taxes on formal employment the case of the 2012 tax reform in colombia in 2013 colombia implemented a tax reform that reduced payroll taxes by a total of 13 5 percentage points of wages this paper evaluates the effects of this component of the 2012 colombian tax reform on firms formal employment and average wages we construct a panel of firms based on their employees administrative records to account for the endogeneity of the treatment we use an instrumental variables technique that exploits the exogenous variation from the decisions of firms that are similar to each other in several dimensions but belong to different economic sectors based on our preferred specification we estimate a positive and significant increase in formal employment as a result of the implementation of the reform of approximately 213 000 jobs in existing pre reform firms in the long run these effects will increase to more than 600 000 jobs the effect of the reform on the average wages paid by firms was also found to be positive for some sizes of firms but the overall effect in the short run is rather small

an empirical assessment of the welfare effects of reciprocal dumping abstract can two way trade in similar products lead to lower welfare than if such trade was banned theory answers yes to empirically investigate this proposition we examine swedish imports of bottled water assuming one shot bertrand and cournot competition we can use the estimates from a structural model of demand to uncover marginal costs we simulate the effect on consumer and producer surplus of banning imports we do not find convincing evidence that banning imports would increase overall welfare given our choice of market this suggests we should not be overly concerned with the welfare effects of two way trade in consumer goods that are close to homogenous

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

necessary and sufficient conditions in merger control the use of hhi and threshold value this article considers two coarse measures applicable to antitrust policy one of market concentration the herfindahl hirschman index hhi and one of market dominance threshold value calculations of threshold value are compared to hhi values to determine when thresholds might be of specific use in merger cases many scenarios which satisfy the threshold conditions indicating a dominant firm exists are consistent with high hhi numbers such that current us department of justice and european commission guidelines based on hhis for merger concerns will have been met it is suggested as a rule of thumb that hhis be used as necessary conditions and threshold value be considered sufficient conditions for further case review

stratification and public utility services in colombia subsidies to households or distortion of housing prices domiciliary public utility services in colombia have a cross subsidy system which charges subsidized rates to the households who live in houses located in strata associated to low wealth levels and taxed rates to the better off we assesses the hypothesis that the flow of subsidies that potentially come from a particular house are discounted by housing market agents so that most of them are transferred to the prices of the houses that generate the subsidies by estimating a hedonic prices model applying a regression discontinuity approach we find that the increment in house value estimated because of subsidies is similar in magnitude to the present value of the flow of subsidies likely effects are found on the rent amount we conclude that subsidies to the poor population through public spending in domiciliary public utility services in colombia is being achieved if anything in a very limited way most of the financial effort on this subject ends up distorting housing relative prices according to socioeconomic strata with an annual cost of up to 0 7 of gdp in supposed gross subsidies to domiciliary public utility services

operating system prices in the home pc market because the demand for os is a derived demand revealed through the demand for pcs and because its elasticity is relatively small the profit maximizing price of dos win that would result from a static equilibrium is much higher than the observed price we investigate this assertion empirically by fitting a differentiated products model of the home pc market to panel data of all pc brands sold in the g7 countries over the period 1995 1999 the results confirm that the low value of the aggregate elasticity of demand for pcs is the result of differentiation and substitution among pcs

competitive pricing in markets with different overhead costs concealment or leakage of cost information this paper experimentally investigates how leaders and followers in a duopoly set prices for two product markets that have different overhead costs in a fully crossed two by two design we manipulate the participants private cost report quality as either low or high representing the extent to which these reports reveal that product markets have different overhead costs we show that when only the leader is given a high quality cost report private cost information of higher quality is better incorporated into market prices that are observable to participants both the leader and follower improve in profits and their prices better reflect the differences in overhead costs because the follower infers information from the leader s prices information leakage in contrast when only the follower receives a high quality cost report the leader s profits and prices do not improve this occurs because the follower conceals cost information when the leader has a low quality cost report

cartel enforcement with uncertainty about costs what cartel agreements are possible when firms have private information about production costs in order for a cartel agreement to work it must take into account the incentives for firms to misrepresent their cost information and it must provide sufficient reward so that no firm wishes to defect for private cost uncertainty we characterize the set of cartel agreements with side payments that can be supported as bayesian nash equilibria we show that if defection results in either cournot or bertrand competition the incentive problems in large cartels are severe enough to prevent the cartel from achieving the monopoly outcome in contrast with common cost uncertainty the incentive problems become less severe in large cartels allowing perfect collusion

a theory of hub and spoke collusion abstract we develop a model of hub and spoke collusion between a manufacturer and two retailers demand is stochastic and collusion between retailers is difficult the best collusive equilibrium is inefficient rotemberg and saloner 1986 in the hub and spoke collusive agreement retailers transmit their information about the state of demand to the supplier the supplier uses this information to adjust the wholesale price by organizing the collusion the supplier increases profits of the vertical chain we show that surprisingly this type of collusive agreement can under some conditions improve consumer welfare

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

estimation of cost efficiencies from mergers application to us radio this article estimates fixed cost efficiencies from mergers using a dynamic oligopoly model in which mergers and repositioning of products are endogenous the inference is based on revealed preference approach selecting cost synergies that rationalize observed merger decisions the estimates can be used to assess the total welfare impact of retrospective and counterfactual mergers the framework is applied to estimate cost efficiencies after the 1996 deregulation of u s radio industry within the period of 1996 to 2006 the cost savings resulting from mergers amount to 1 2 billion per year equally split across economies of scale and within format cost synergies

duopolists don t wish to share information abstract this paper shows that in a full bayes cournot equilibrium duopolists would prefer to keep their market information private rather than share it with their opponent this is in contrast to a fulfilled expectations bayes cournot equilibrium where firms are indifferent to sharing

reply on comment to small firms and the merger mania research on performance differences between small and large firms is booming it emerges relatively separated from the mainstream industrial organization literature inspired by levy s comment on an earlier paper we try to bridge the gap between the two areas especially we screen non cooperative game theoretical models for predictions on performance differences most of them forecast higher profits for larger firms but there exist also some models which predict the opposite for very specific circumstances

identification of endogenous social effects the reflection problem this paper examines the reflection problem that arises when a researcher observing the distribution of behaviour in a population tries to infer whether the average behaviour in some group influences the behaviour of the individuals that comprise the group it is found that inference is not possible unless the researcher has prior information specifying the compisition of reference groups if this information is available the prospects for inference depend critically on the population relationship between the variables defining reference groups and those directly affecting outcomes inference is difficult to implossible if these variables are functionally dependent or are statistically independent the prospects are better if the variables defining reference groups and those directly affecting outcomes are moderately related in the population

demand estimation and merger simulations for drugs logits v aids abstract we use adhd drugs sales data from 2000 2003 and compare estimates of elasticities and merger simulations from three different demand models models include logit random coefficients logit and conditional aids demand model with multistage budgeting the magnitude of cross price elasticities is larger in the third model in comparison to the first two and some of the cross price elasticities are estimated to be negative hypothetical merger simulations show larger price effects for the multistage aids model in comparison to the discrete choice models

technological competition uncertainty and oligopoly abstract in an oligopoly context the present technological choice of a firm which expects to receive private revelant information just prior to the uncertain market stage has both a flexibility value and a strategic commitment value in contrast to some common wisdom ideas we provide a natural two stage competition framework in which an increase in uncertainty always raises the commitment value of the technological choice of the firm and may decrease its flexibility value when the increased uncertainty takes the form of more variable beliefs the first result tends to reinforce therefore the findings of the strategic commitment literature under certainty

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

the impact of information sharing opportunities on market outcomes an experimental study information regarding uncertain demand conditions or industry costs as well as the opportunity to share this information can have an important impact on firm behavior a series of recent game theoretic models have characterized the incentives for firms to share information regarding uncertain parameters 3 7 8 13 14 16 22 26 20 21 provide a comprehensive survey most of the models assume that behavior in the output market is noncooperative regardless of the firms information sharing decisions this paper reports a series of 15 laboratory sessions that test the noncooperative backward induction approach of these models the results suggest that pricing behavior may be influenced by the information sharing decision under most conditions the noncooperative nash model accurately describes average behavior although in certain conditions information sharing appears to facilitate tacit collusion the paper also estimates a simple behavioral model of learning that describes how experimental subjects learn the optimal information sharing decision as an alternative to the theories backward induction assumption the information sharing models tested here have been interpreted as identifying the incentives for competitive firms to form a trade association that reduces their uncertainty thousands of trade and professional associations are active worldwide and the majority collect information from their members that is aggregated and distributed through association statistical programs the theoretical models demonstrate how three variables influence the information sharing incentives 1 the type of competition bertrand or cournot 2 the nature of the goods substitutes or complements and 3 the source of uncertainty demand or cost the first two variables determine the slope of the firms reaction functions and the uncertainty source along with the information sharing decision determines the degree of correlation among the firms strategies the incentive for noncooperative firms to share information shifts as these three variables change because reduced correlation has a negative or positive effect on profit depending upon the slope of the reaction functions

a stackelberg model of pricing of complementary goods under information asymmetry abstract we consider a duopoly market where two separate firms offer complementary goods in a leader follower type move each firm has private forecast information about the uncertain market demand and decides whether to share it with the other firm we show that information sharing would benefit the leader firm but hurt the follower firm as well as the total system if the follower firm shares information unconditionally we then devise a simple to implement information sharing scheme under which both firms and the total system are better off we also provide several interesting managerial insights and establish the robustness of the model in managing a supply chain through our analytical and simulation results

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

multiple product firms a nested logit approach this paper proves the existence of a symmetric equilibrium with multiproduct firms using a nested logit model of demand the demand model is parameterized by two variables that characterize different dimensions of preference for variety these reflect intragroup heterogeneity and intergroup heterogeneity a group or nest being the set of products produced by a firm there are then two dimensions to market performance the total number of firms and the range of products produced per firm it is shown that the market equilibrium involves an excessive number of firms but each firm provides too few products copyright 1992 by blackwell publishing ltd

compulsory or voluntary pre merger notification theory and some evidence abstract we compare the prevailing system of compulsory pre merger notification with the australian system of voluntary pre merger notification it is shown that for a non trivial set of parameter values a perfect bayesian equilibrium exists in mixed strategies in which the regulator investigates un notified mergers with probability less than one and the parties choose notification with probability less than one thanks to the signaling opportunity that arises when notification is voluntary voluntary notification leads to lower enforcement costs for the regulator and lower notification costs for the merging parties some of the theoretical predictions are supported by exploratory empirical tests using merger data from australia overall our results suggest that voluntary merger notification may achieve objectives similar to those achieved by compulsory systems at lower costs to the merging parties as well as to the regulator

manufacturer s revenue sharing contract and retail competition this paper investigates a revenue sharing contract for coordinating a supply chain comprising one manufacturer and two competing retailers the manufacturer as a stackelberg leader offers a revenue sharing contract to two competing retailers who face stochastic demand before the selling season under the offered contract terms the competing retailers are to determine the quantities to be ordered from the manufacturer prior to the season and the retail price at which to sell the items during the season the process of pricing and ordering is expected to result in an equilibrium as in the bayesian nash game on the basis of anticipated responses and actions of the retailers the manufacturer designs the revenue sharing contract adopting the classic newsvendor problem model framework and using numerical methods the study finds that the provision of revenue sharing in the contract can obtain better performance than a price only contract however the benefits earned under the revenue sharing contract by different supply chain partners differ because of the impact of demand variability and price sensitivity factors the paper also analyses the impact of demand variability on decisions about optimal retail price order quantity and profit sharing between the manufacturer and the retailers lastly it investigates how the competition between retailers factor influences the decision making of supply chain members in response to uncertain demand and profit variability