neutrality and the private provision of public goods with incomplete information abstract in this paper we introduce incomplete information about income into a standard model of private provision of public goods generally one obtains neutrality results similar in nature to those obtained in the complete information model however with incomplete information several additional difficulties exist in attaining neutrality for neutrality to hold i positive contributions have to be made by all individual types ii any redistribution of income must not convey information to the individuals and iii any redistribution must not depreciate the private information individuals have

raising retailers profits on vertical practices and the exclusion of rivals resale price maintenance rpm slotting fees loyalty rebates and other related vertical practices can allow an incumbent manufacturer to transfer profits to retailers if these retailers were to accommodate entry upstream competition could lead to lower industry profits and the breakdown of these profit transfers thus in equilibrium retailers can internalize the effect of accommodating entry on the incumbent s profits consequently if entry requires downstream accommodation entry can be deterred we discuss policy implications of this aspect of vertical contracting practices jel l14 l22 l25 l42 l81 this paper considers the upstream exclusionary effect of vertical practices that create rents for downstream retailers without carrying a contractual obligation for exclusivity 1 examples of interest include allowing the manufacturer to set the price at which a retailer sells to consumers resale price maintenance or rpm periodic lump sum payments to retailers through slotting fees or loyalty rebates and mar ket division schemes such as the allocation of clients to specific retailers or the use of exclusive territories we explore equilibria that can arise when an upstream incumbent uses a vertical practice of the sort outlined above to share industry profits with retailers we show that if entry by another upstream manufacturer leads to competition that reduces industry profits sufficiently and entry requires accommodation by retailers then equilibria exist in which retailers do not accommodate the entrant this results in exclusion in essence the vertical practice creates a quasi rent that retailers in equilibrium have an incentive to protect

asymmetric regulation of identical polluters in oligopoly models studies of optimal second best environmental regulation of identical polluting agents have invariably ignored potentially welfare improving asymmetric regulation by imposing equal regulatory treatment of identical firms at the outset yet cost asymmetry between oligopoly firms may well give rise to private as well as social gains a trade off is demonstrated for the regulator between private costs savings and additional social costs when asymmetric treatment is allowed asymmetry is indeed optimal for a range of plausible parameter values further it is demonstrated that for a broad class of abatement cost functions there is scope for increasing welfare while keeping both total output and total emission constant some motivating policy issues are discussed in light of the results including international harmonization and global carbon dioxide reduction

the quantitative importance of news shocks in estimated dsge models we estimate a dynamic stochastic general equilibrium dsge model with several frictions and both unanticipated and news shocks using quarterly u s data from 1954 to 2004 and bayesian methods we find that unanticipated shocks dominate news shocks in accounting for the unconditional variance of output consumption and investment growth interest rate and the relative price of investment the unanticipated shock to the marginal efficiency of investment is the dominant shock accounting for over 45 of the variance in output growth news shocks account for less than 15 of the variance in output growth within the set of news shocks nontechnology sources of news dominate technology news with wage markup news shocks accounting for about 60 of the variance share of both hours and inflation we find that in the estimated dsge model i the presence of endogenous countercyclical price and wage markups due to nominal frictions substantially diminishes the importance of news shocks relative to a model without these frictions and ii while there is little change in the estimated contributions of technology news when we restrict wealth effects on labor supply the contributions of nontechnology news shocks are relatively more sensitive

price discrimination and retail configuration the hypothesis that price discrimination based on willingness to pay for quality can occur in multifirm markets is confirmed using microdata on gasoline retailing a test that discriminates between price structures associated with discrimination and with cost driven competitive differentials is developed and implemented with controls for variation in outlet and market characteristics a second test based on profitability variation rejects a competitive peak load pricing explanation for the observed price dispersion the data suggest that price discrimination at the retail level adds at least 9 a gallon to the average price of full service gasoline

the welfare effects of third degree price discrimination in the author examines third degree price discrimination by an upstream monopolist in an intermediate good market discrimination is motivated by the fact that downstream firms differ in their abilities to integrate backward into supply of the input the author shows that under reasonable specifications of equilibrium price discrimination leads to all buyers facing higher input prices in other cases discrimination raises some prices and lowers others the author derives conditions under which discrimination lowers welfare by reducing total output and shows that in some markets discrimination will raise welfare by preventing socially inefficient backward integration copyright 1987 by american economic association

unequal treatment of identical agents in cournot equilibrium oligopoly models where prior actions by firms affect subsequent marginal costs have been useful in illuminating policy debates in areas such as antitrust regulation environmental protection and international competition we discuss properties of such models when a cournot equilibrium occurs at the second stage aggregate production costs strictly decline with no change in gross revenue or gross consumer surplus if the prior actions strictly increase the variance of marginal costs without changing the marginal cost sum therefore unless the cost of inducing second stage asymmetry more than offsets this reduction in production costs the private and social optima are asymmetric

endogenous number of firms horizontal concentration and heterogeneity of firms a note we re examine implications of heterogeneity of firms under a cournot setting on free entry equilibria concerning the number of firms heterogeneity reduces the number of firms in equilibrium the larger the cost asymmetries the smaller the free entry equilibrium number of firms in an industry

emissions trading with profit neutral permit allocations this paper examines the impact of an emissions trading scheme ets on equilibrium emissions output price market concentration and profits in a generalized cournot model we develop formulae for the number of emissions permits that have to be freely allocated to firms to neutralize the profit impact of the ets we show that its profit impact is usually limited in a cournot oligopoly with constant marginal costs total industry profits are preserved so long as freely allocated permits cover a fraction of initial emissions that does not exceed the industry s herfindahl index

the unilateral incentives for technology transfers predation and deterrence by proxy abstract joint production between rival firms often entails knowledge transfers without direct compensation leaving the question as to why more efficient firms would give their rivals such an advantage we find that such transfers are credible mechanisms to make the market more competitive so as to deter entry or force exit we determine that with free entry such transfers are profitable and further it may be optimal to predate or deter every firm possible so that a market with many firms can become a duopoly while consumers are harmed by such action production efficiency normally increases sufficiently so that welfare increases

cost heterogeneity industry concentration and strategic trade policies abstract we show that if domestic firms do not have identical unit costs then the interplay between the herfindahl index of concentration and the elasticity of the slope of the demand curve is of major importance in the determination of optimal trade policies in some cases the direction of optimal policy is reversed

market power price discrimination and allocative efficiency in intermediate goods markets we consider a monopolistic supplier s optimal choice of two part tariff contracts when downstream firms are asymmetric we find that the optimal discriminatory contracts amplify differences in downstream firms competitiveness firms that are larger either because they are more efficient or because they sell a superior product obtain a lower wholesale price than their rivals this increases allocative efficiency by favoring the more productive firms in contrast we show that a ban on price discrimination reduces allocative efficiency and can lead to higher wholesale prices for all firms as a result consumer surplus industry profits and welfare are lower

media influences on social outcomes the impact of mtv s 16 and pregnant on teen childbearing this paper explores the impact of the introduction of the widely viewed mtv reality show 16 and pregnant on teen childbearing our main analysis relates geographic variation in changes in teen childbearing rates to viewership of the show we implement an instrumental variables iv strategy using local area mtv ratings data from a pre period to predict local area 16 and pregnant ratings the results imply that this show led to a 4 3 percent reduction in teen births an examination of google trends and twitter data suggest that the show led to increased interest in contraceptive use and abortion jel d12 j13 j16 l82 z13 it is a longstanding and open question how exposure to media images affects viewers behavior policy advocates and cultural observers worry in particular about the impact of exposure to sexual and violent content on adolescent behaviors in some circles the idea that teenagers respond to media content is a foregone conclusion but determining whether media images themselves cause teens to behave in certain ways is a difficult empirical task 1 this paper examines the impact of the mtv show 16 and pregnant on teen childbearing this show purports to show the difficult reality of becoming a teen mother as we document below 16 and pregnant has drawn large audiences among relevant subpopulations could exposure to these media images of pregnant teens and very young new moms have had an impact on how teens behave leading to changes in the likelihood of becoming teen mothers themselves

entrepreneurship and uncertainty innovation and competition among the many schumpeter stressed innovation and knight uncertainty as preconditions for entrepreneurship and productivity growth schumpeter emphasized entry in his early work but came to consider incumbent innovation the dominant mode in his later work modern growth theory emphasizes dissemination of knowledge to explain progress in the steady state the paper analyzes the effects of entry market structures and uncertainty on the incidence and diffusion of innovation the insertion of knightian uncertainty in schumpeter s model can explain why innovators are numerous and arrive unexpectedly uncertainty spurs diffusion and improves the utilization of human capital combining the ideas of schumpeter and knight also elucidates several stylized facts of entrepreneurship such as small entry size low chances of survival and high growth rates

buying ecological services nature s harmonies fragmented reserves and the agricultural extensification debate growing demand for cropland products has placed intense pressure on the ability of land resources to support nature straining public budgets to purchase environmental goods fixing overall agricultural output two policy options are whether to promote more extensive and nature friendly farming practices or to produce intensively on some land and leave the rest wild microeconomic models of the topic have not accommodated widely recognized complementary spatial externalities in providing ecological services this article does so identifying also a third policy possibility this is that environmental services can follow a smoothly varying spatial path characterized by harmonic functions

optimal production of transplant care services most organ transplants are from dead donors national transplant organizations exhibit considerable differences in terms of their donor population rates spain s organization is by far the most efficient in this respect we argue that much of the productivity advantage of spain s transplant organization proceeds from an efficient organization of the production chain from organ procurement to transplantation transplants from dead donors are analogous to a common resource for the transplant community their circulation through the national transplant organization creates public good externalities between the care units in charge of organ retrieval and those in charge of transplantation a socially efficient production of transplant care services obtains through an optimal control by the national transplant agency of both the circulation and the production of transplants in particular transplant shortage makes the rotten kid theorem fail in this context the analysis also produces a natural measure of public good externalities evaluated from the standpoint of care units

optimal asymmetric strategies in research joint ventures abstract this paper identifies an overlooked implication of models of research joint ventures initiated by d aspremont and jacquemin 1988 even though the aggregate r d cost of identical firms in a research joint venture would be lowest if they invested equally to reduce subsequent production costs nonetheless members may often enlarge their overall joint profit by making unequal investments such a strategy raises costs in the investment stage but may create more than offsetting benefits in the production stage since industry profits are larger there when the firms are of unequal size when the consideration leading to asymmetry prevails we find that in contrast to previous work a research joint venture can raise welfare even when there are no spillovers

cost manipulation games in oligopoly with costs of manipulating we analyze a class of two stage games where rival firms incur real resource costs in manipulating their marginal costs so as to influence the outcome of the game they want to play in stage two marginal costs may be manipulated by various means such as redistribution of productive assets choice of location or creation of an internal input market a general formulation of the game is provided and several applications are analyzed we show that the optimal allocation of resources within an oligopoly can be asymmetric even for ex ante symmetric firms this is an additional explanation of heterogeneity in oligopoly

naked exclusion efficient breach and downstream competition previous papers by eric b rasmusen j mark ramseyer and john s wiley jr 1991 and ilya r segal and michael d whinston 2000 argue that exclusive contracts can inefficiently deter entry in the presence of scale economies and multiple buyers we first show that these results no longer hold when buyers are final consumers who can breach these contracts and pay expectation damages we then show however that exclusive contracts can inefficiently deter entry if buyers are downstream competitors even in the absence of scale economies and even if breach is possible

the contractionary effect of bad economic news is bad economic news a self fulfilling prophecy this paper examines the local employment effects of exposure to pessimistic economic news by combining detailed data on newspaper subscriptions with a tabulation of negative newspaper stories the flow of such news across the united states during the 2008 recession is reconstructed at county and quarterly levels the resulting data set is used to estimate the causal impact of such news on unemployment hiring and separation rates exposure to pessimistic news is found to suppress hiring and total employment during the early stages of the recession by up to 40 compared to prerecession levels such news can account for some 7 of the total reduction in employment between 2007 and 2010 content analysis of the articles in question rules out the possibility that this relationship is driven by reverse causation that is newspapers merely reporting poor economic performance further analysis of google search data suggests that the effect is mediated by changes in public attitude caused by exposure to negative news these findings imply that labor market outcomes can differ due to arbitrary differences in the dispersal of economic information bearings on economic theory including the notions of sunspots and animal spirits are discussed

a curvature condition ensuring uniqueness of cournot equilibrium with applications to comparative statics abstract we study a curvature condition on demands that with a cost assumption ensures the uniqueness of cournot equilibrium for two firms the condition is that industry marginal revenue rises no faster than price falls the condition is weaker with more firms and holds for any smooth demand curve provided there are enough firms

the political and economic origins of consumer confidence economic conditions the story usually goes influence consumer confidence which in turn influences both political evaluations and votes but we have little sense of the origins of consumer confidence itself it is generally assumed that monthly reports of the nation s level of consumer confidence respond to objective economic conditions we argue that politics is important for understanding consumer sentiment beyond what we know from economic conditions specifically we demonstrate a direct effect of political evaluations of the president s management of the economy the party of the president extraordinary political events and monetary policy as well as an indirect effect of media coverage of the economy on consumer sentiment after controlling for economic conditions when news coverage is positive citizens give favorable evaluations leading to more positive sentiment our findings suggest that understanding the political economy requires an emphasis on the causal effect of politics as well as economics

exclusive dealing and entry when buyers compete rasmusen et al 1991 and segal and whinston 2000 show that an incumbent monopolist might prevent entry of a more efficient competitor by exploiting externalities among buyers we show that their results hold only when downstream competition among buyers is weak under fierce downstream competition if entry took place a free buyer would become more competitive and increase its output and profits at the expense of buyers that sign an exclusive deal with the incumbent anticipating that orders from a single buyer would trigger entry no buyer will sign the exclusive deal and entry will occur this result is robust across different specifications of the game jel k21 l12 l42

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

an analysis of cooperative research and development i analyze the effects of cooperative research whereby member firms agree to share the costs andfruits of a research project before they undertake it in this model industrywide agreements tend to have socially beneficial effects when the degree ofproduct market competition is low when there are r d spillovers in the absence of cooperation when a high degree of sharing is technologically feasible and when the agreement concerns basic research rather than development activities i show that a royalty free cross licensing agreement among any number offirms lowers the equilibrium level of innovation even though it increases the efficiency of r d through sharing

a theory of oil igopoly cournot equilibrium in exhaustible resource markets with fixed supplies the emergence of an effective and powerful cartel in the international petroleum market has stimulated considerable effort among economists to develop models of pricing and supply behavior for this industry 2 this modeling task poses two basic difficulties first as in the standard oligopoly problem one must characterize the behavior of several sellers in a market aware of each other and of their effect on market price second there is here the added difficulty of treating the explicitly intertemporal nature of suppliers decision wherein a limited stock must be optimally allocated over time this paper studies the implications of the simplest non trivial postulates about these two aspects of the problem it is assumed that suppliers are non cooperative cournot nash players each of whom is imagined to select an optimal supply strategy taking as given the strategies of the others moreover it is hypothesized that the feasible strategies are limited to open loop paths chosen at the initial date to maximize the present value of profits in light of the paths of supply which the others have chosen 3 these basic postulates together with a few technical assumptions concerning the structure of resource demand permit one to demonstrate the existence of at least one non cooperative equilibrium concerning thisequilibrium we show that 1 the average and marginal return on resource stocks is inversely related to the size of a player s initial endowment 2 aggregate production decreases over time until all stocks are exhausted while firms with smaller stocks exhaust their supplies no later than firms with larger stocks do 3 the present value of price net of extraction cost declines over time 4 industry production maximizes a weighted average of intertemporal consumer s surplus and producers profits

competitive price discrimination strategies in a vertical channel using aggregate retail data we explore opportunities for targeted pricing for a retailer that only tracks weekly store level aggregate sales and marketing mix information we show that it is possible using these data to recover essential features of the underlying distribution of consumer willingness to pay knowledge of this distribution may enable the retailer to generate additional profits from targeting by using choice information at the checkout counter in estimating demand we incorporate a supply side model of the distribution channel that captures important features of competitive price setting behavior of firms this latter aspect helps us control for the potential endogeneity generated by unmeasured product characteristics in aggregate data the channel controls for competitive aspects both between manufacturers and between manufacturers and a retailer despite this competition we find that targeted pricing need not generate the prisoner s dilemma in our data this contrasts with the findings of theoretical models due to the flexibility of the empirical model of demand the demand system we estimate captures richer forms of product differentiation both vertical and horizontal as well as a more flexible distribution of consumer heterogeneity

the power of money wealth effects in contests abstract the relationship between wealth and power has long been debated nevertheless this relationship has been rarely studied in a strategic game in this paper we study wealth effects in a strategic contest game two opposing effects arise wealth reduces the marginal cost of effort but it also reduces the marginal benefit of winning the contest we consider three types of contests which vary depending on whether rents and efforts are commensurable with wealth our theoretical analysis shows that the effects of wealth are strongly contest dependent it thus does not support general claims that the rich lobby more or that low economic growth and wealth inequality spur conflicts

noncooperative versus cooperative r d with endogenous spillover rates this paper deals with a general version of a two stage model of r d and product market competition we provide a thorough generalization of previous results on the comparative performance of noncooperative and cooperative r d dispensing in particular with ex post firm symmetry and linear demand assumptions we also characterize the structure of profit maximizing r d cartels where firms competing in a product market jointly decide r d expenditure as well as internal spillover levels we establish the firms would essentially always prefer extremal spillovers and within the context of a standard specification derive conditions for the optimality of minimal spillover

when is efficiency separable from distribution in the provision of club goods abstract using the homogeneous of degree zero inverse congestion quality function employed most frequently in the literature we characterise completely the families of utility functions which are then necessary and sufficient for break even utilitarian welfare maximising provision of club goods with self selection to be separable from distribution two types of separation involving alternatively a the price and quality b the price quality facility size and total utilisation are considered when separation is possible utility functions and optimal decisions take simple intuitive forms our results extend the scope of separation results previously obtained only for pure public goods journal of economic literature classification numbers d62 h23 h40

misleading advertising in duopoly this paper builds a model of strategic misleading advertising in duopolistic markets with horizontal product differentiation and advertising externality between firms we investigate the effects of regulating misinformation on market competition behaviour of firms and social welfare we show that the degree of advertising externality and the magnitude of advertising costs are crucial for determining the welfare effects of several regulations including prohibiting misleading advertising educating consumers taxing production and taxing misleading advertising we extend the model by introducing heterogeneous consumers heterogeneous production costs between firms and the degree of advertising informativeness our results have important policy implications for the debate regarding regulation of advertising especially direct to consumer advertising for prescription and over the counter drugs ce texte construit un modele de publicite mensongere strategique dans des marches duopolistiques ou il y a differentiation horizontale des produits et externalites de publicite entre firmes on examine les effets d une reglementation de la desinformation sur la concurrence dans le marche sur le comportement des firmes et sur le bien etre social on montre que le degre d externalites de la publicite et la magnitude des couts de publicite sont des elements cruciaux pour determiner les effets de bien etre de plusieurs reglementations y compris prohiber la publicite mensongere eduquer les consommateurs taxer la production et taxer la publicite mensongere on developpe le modele pour prendre en compte les consommateurs heterogenes des couts de production heterogenes entre firmes et le contenu informationnel de la publicite ces resultats ont des implications importantes pour la politique publique dans les debats concernant la reglementation de la publicite en particulier la publicite directe au consommateur pour les medicaments avec et sans ordonnance

a note on the effect of cost changes on prices in a recent article in this journal sumner 1981 took an ingenious approach to estimating the level of monopoly power in the cigarette industry he noted that differences in marginal costs exist in the industry due to varying levels of state taxes the sales prices established will satisfy the equation p i liq l mr mc where p price and q the elasticity of demand for the product in question if elasticity is a constant observing the change in marginal cost and the change in price enables one to infer the elasticity of demand perceived by the firm elasticity could then be used as a proxy for the firm s market power this technique turns out to be of very limited applicability however because it is extremely sensitive to the functional form assumed for the demand curve consider the general problem of a firm facing constant marginal costs of c in maximizing profits the firm solves

cost pass through and inverse demand curvature in vertical relationships with upstream and downstream competition this paper provides two characterizations of the retailer s markup relative to the manufacturer s markup in vertical relationships with homogeneous manufacturers and homogeneous retailers we first show that retailer s relative markup is equal to the ratio of the retail pass through to the wholesale pass through multiplied by the number of manufacturers relative to the number of retailers we then provide its expression in terms of the inverse demand curvature

exclusive dealing and entry when buyers compete comment in this paper fm s equilibrium analysis is shown to contain some errors fixing these errors changes their conclusions for some of the cases they consider exclusive deals written between an incumbent and competitive downstream buyers will still often arise in equilibrium thereby block ing efficient entry inefficient exclusion arises to protect industry profits from competition the issue centers on how competition works when upstream firms sell to consumers through two com peting downstream buyers in the case upstream firms can offer downstream buyers two part tariffs the analysis of competition in this setting turns out to be surprisingly subtle and the analysis here should be of more general interest to those modeling competition in vertical settings the particular model fm consider is based on the cost specification in segal and whinston 2000 sect iv in which the incumbent faces a potential entrant that has a lower cost of production but faces some fixed cost of entry two identical downstream buyers compete in prices for final consum ers exclusive deals involve the incumbent offering buyers a fixed compensation for agreeing not to purchase from the entrant fm derive their results under two different assumptions on wholesale pricing upstream firms are required to set linear wholesale prices section i and upstream firms are allowed to offer two part tariff contracts section ii since restricting upstream firms to charge linear wholesale prices to buyers seems inconsistent with assuming the incumbent can offer exclu sive contracts with a fixed compensation in the initial stage and since linear wholesale prices can lead to double marginalization problems the focus in this paper is on the less restrictive case consid ered by fm where upstream firms are allowed to offer downstream buyers two part tariffs 1 in this setting correcting fm s analysis shows that entry arises only when scale economies are not too important and the entrant s efficiency advantage is sufficiently large when either

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

technology asymmetries group algebra and multiplant cost minimization for a homogeneous good this article studies firm level production activities when the firm controls a plural number of plants through careful construction of cost function technology asymmetries we inquire into the ordinal structure of the production vector for multiplant cost minimizers when schur convexity of a reference pseudo cost technology is the principal functional assumption then ordinal concepts of technical asymmetries map into rank order on the equilibrium production vector under a more generalized characterization of the technical asymmetries a multiplant firm encounters group theory is used to map a cardinal concept of asymmetries into cardinal bounds on the optimum allocation

pass through vertical contracts and bargains abstract this paper analyzes the determinants of pass through that are specific to vertical relationships between wholesalers and retailers the type of vertical agreement firms contract upon as well as their relative bargaining power are identified as major determinants of pass through rates

consumer confidence and economic fluctuations if consumers become pessimistic about the state of the economy can there be a slowdown in output even if their pessimism is not based on economic fundamentals recent macroeconomic models show the answer is yes if there are strategic complementarities and multiple equilibria we investigate the link between consumer confidence and economic fluctuations using vector autoregressions in all models after controlling for economic fundamentals the hypothesis that consumer sentiment does not cause gnp in the granger sense can be rejected variance decompositions suggest that consumer sentiment accounts for between 13 and 26 percent of the innovation variance of gnp

a general theory of pass through in channels with category management and retail competition i provide a general formulation of the channel pass through problem as a comparative static of the retail price equilibrium and i analyze the impact of category management and retail competition on pass through focusing on brand and retailer differences and the nature of the cost change being passed through whether it is brand specific retailer specific both or neither with category management a retailer s response to a brand specific cost change is not limited to that brand in general a retailer will also change the prices of other brands the cross brand effect can be positive or negative and depending on its sign it either enhances or attenuates pass through i explain the cross brand effect as an interaction between two forces a demand substitution force that pushes for a negative cross brand effect and a strategic complementarity force that pushes for a positive cross brand effect retail competition adds another layer of strategic complementarity causing other retailers to respond even for retailer specific cost changes and increasing pass through of categorywide cost changes but its effect for brand specific cost changes is ambiguous i apply the theory to two commonly used demand functions linear demand and nested logit and show that they have significantly different pass through properties the paper concludes with a discussion of how the theory relates to the empirical literature including the companion piece by besanko et al besanko d j p duba s gupta 2005 own brand and cross brand retail pass through marketing sci 24 1 123 137

network effects and welfare cultures we empirically examine the role of social networks in welfare participation using data on language spoken at home to better infer networks within an area our empirical strategy asks whether being surrounded by others who speak the same language increases welfare use more for those from high welfare using language groups this methodology allows us to include local area and language group fixed effects and to control for the direct effect of being surrounded by one s language group these controls eliminate many of the problems in previous studies the results strongly confirm the importance of networks in welfare participation

partial vertical ownership abstract a backward ownership interest held by a downstream firm yields a partial rebate of the upstream margin input demand increases with backward ownership and the upstream firm optimally responds by raising price with symmetric costs every downstream firm s equilibrium input output choice is invariant across a class of ownership profiles including uniform ownership moreover equity trading results in uniform holdings so partial vertical ownership may have no real effects with asymmetric costs ex ante equity trading amplifies the asymmetries and shifts output toward lower cost firms with homogeneous goods this improves producer and total surplus with differentiated goods it may harm consumers

pass through of commodity price shocks in distribution channels with risk averse agents abstract we apply variance analysis for studying the risk sharing mechanism in distribution channels in which the risk averse buyer and supplier are suffered from commodity price shocks we obtain the closed form optimal pass through rate that minimizes the total channel price cost risk and maximizes the channel throughput for a stackelberg leadership game and a nash bargaining solution using the commodity price data in the steel industry we demonstrate that the pass through rate should be set between 40 and 80 for major metal alloys

impure public goods and transfers in a three agent model abstract this paper extends previous models of non cooperative private funding of pure public goods by allowing for impure public goods the analysis is developed in the context of international public goods under certain conditions the consequences of transfers on utility are paradoxical if the preferences are divergent a country may gain by giving a transfer the receiver may lose and these two phenomena may appear at the same time

two remarks on cournot equilibria abstract we describe two simple results in the theory of cournot equilibria the first has to do with the effect of taxation in a cournot industry and the second describes under what conditions a cournot equilibrium will implicity maximize an objective function these results are probably known but are not well known and they seem useful enough to be worth spelling out

on the effects of the distribution of initial endowments in a nonrenewable resource duopoly abstract this paper studies the effects on equilibrium output and profits of modifying the resource endowments in a nonrenewable resource duopoly when the firms equilibrium terminal dates may differ

oligopoly and welfare a unified presentation with applications to trade and development abstract we develop a unified sequence of models to examine the determinants of price output profitability and concentration for different kinds of oligopolistic market we relate various magnitudes of significance to judges of welfare and to policy makers such as consumer surplus profit or added benefits of employment or trade surplus to observable magnitudes such as the size and concentration of the market it emerges that various appropriately formulated herfindahl indices are useful in several of these relations we attempt to present results in a way that is useful for empirical investigations and pay particular attention to applications in trade and development

symmetric research joint ventures cooperative substitutes and complements we introduce the concepts of cooperative substitutes and complements and use them to explain when all firms in a research joint venture will choose equal levels of r d we show that the second order conditions for a symmetric optimum take a particularly simple form ruling out both excessive cooperative substitutability and excessive cooperative complementarity and nesting conditions already derived in the literature finally we apply our results to the comparison between cooperative and non cooperative r d and show in an important special case that asymmetric outcomes are only optimal for a very limited range of parameter values

u s labor market dynamics revisited the picture of u s labor market dynamics is opaque empirical studies have yielded contradictory findings and debates have emerged regarding their implications this paper aims at clarifying the picture which is important for the understanding of the operation of the labor market for the study of business cycles for the explanation of wage behavior and for the formulation of policy the paper determines what facts can be established what are their implications and what remains to be further investigated the main contributions made here are i listing of data facts that can be agreed upon these indicate that there is considerable cyclicality and volatility of both accessions to employment and separations from it hence both are important for the understanding of the business cycle ii presenting the business cycle facts of key series iii pointing to specific gaps in the data picture disparities in the measurement of the sizeable flows between employment and the pool of workers out of the labor force disagreements about the relative volatility of job finding and separation rates across data sets and the fact that the fit of the gross flows data with net employment growth data differs across studies and is not high the definite characterization of labor market dynamics depends upon the closing of these data gaps

news shocks and business cycles abstract this paper proposes and implements a novel structural var approach to the identification of news shocks about future technology the news shock is identified as the shock orthogonal to the innovation in current utilization adjusted tfp that best explains variation in future tfp a favorable news shock leads to an increase in consumption and decreases in output hours and investment on impact more suggestive of standard dsge models than of recent extensions designed to generate news driven business cycles though news shocks account for a significant fraction of output fluctuations at medium frequencies they contribute little to our understanding of recessions

competition with exclusive contracts and market share discounts we analyze firms that compete by means of exclusive contracts and market share discounts conditional on the seller s share of customers total purchases with incomplete information about demand firms have a unilateral incentive to use these contractual arrangements to better extract buyers informational rents however exclusive contracts intensify competition thus reducing prices and profits and in all pareto undominated equilibria increasing welfare market share discounts by contrast produce a double marginalization effect that leads to higher prices and harms buyers we discuss the implications of these results for competition policy jel d43 d83 d86 k21 l14 l42 in this paper we study firms that compete by means of exclusive contracts or mar ket share discounts i e discounts that depend on the seller s share of a customer s total purchases these are common yet seldom studied forms of competition the literature has mainly focused on incumbents use of exclusive contracts or marketshare discounts to deter new entrants whilst paying less attention to competitors deploying similar pricing strategies we show that exclusive contracts intensify competition reducing equilibrium prices whereas market share discounts have a double marginalization effect and hence result in higher prices these findings have a bearing on the current lively policy debate 1 fueled by the fact that antitrust authorities view competition by means of exclusive contracts or marketshare discounts with some suspicion to say the least the authorities main concern appears to be that a dominant firm can use exclusivity or market share discounts to eliminate not only potential competitors but also existing ones a prime instance of this is the case of intel intel whose main competitor amd has been operating for years in the microchip sector offered electronics manufacturers discounts that depended on their buying a minimum share of their total purchases of microchips from intel some customers to qualify for the discount had to opt for an exclusive supply contract that

price discrimination through a distribution channel theory and evidence price discrimination practices are common but they typically are analyzed in a framework in which firms sell directly to end users louis phlips 1981 richard schmalensee 1981 hal varian 1985 gerstner and holthausen 1986 this direct channel framework is valid for service industries such as entertainment and travel where senior citizens buy reduced price tickets to musical concerts and children receive discounts on airfares and movietheater tickets in the packaged goods and durable goods industries however manufacturers sell to retailers who sell to consumers in indirect channels like these price discrimination occurs when manufacturers target pull discounts1 to price conscious consumers in the form of coupons and rebates consumers who do not use these discounts pay higher net prices because manufacturers cannot dictate consumer prices to retailers analysis of price discrimination ought to take into account the pricing behavior of retailers michael katz 1987 gerstner and hess 1991 while some researchers have studied coupons as a means for price discrimination william levedahl 1984 chakravarthi narasimhan 1984 they have done so in a direct channel context and have ignored the role of retailers or other middlemen in the pricing and couponing process in this paper we study price discrimination within a channel of distribution consisting of a single manufacturer and competitive retailers in the model the manufacturer pricediscriminates using a pull discount targeted at consumers with low reservation prices to reduce the net price these consumers pay for the product some consumers with higher reservation prices who self select not to use the discount pay the full retail price for the product the manufacturer chooses the wholesale price for the firm s product and the size of the price discriminating pull discount taking as given the markup percentage used by retailers joint determination of the manufacturer discount and retail markup is also considered the paper s major finding is that a higher retail markup percentage influences the manufacturer to use price discrimination in a less intensive way i e to reduce the size of the equilibrium pull discount as well as the wholesale price the intuition behind this result is as follows the greater the retail markup percentage for a given wholesale price the greater will be the retail price the greater the retail price the larger the pull discount will have to be to keep the low reservation price consumers in the market but the manufacturer bears the entire cost of the discount and a larger discount induces more nontargeted customers to use it these two effects make price discrimination less profitable when markup percentage increases so the manufacturer reduces its pull discount and in gerstner graduate school of management university of california davis ca 95616 and department of economics haifa university haifa 31999 israel hess department of business administration university of illinois champaign il 61820 holthausen department of economics north carolina state university box 7507 raleigh nc 27695 we thank alastair hall jeongwen chiang randy cooke and nick ruotolo for their comments and assistance 1manufacturers who distribute products through retailers use push or pull techniques to increase sales under push manufacturers offer inducements to retailers when consumers shop for the product the retailer has an incentive to promote the brand thus pushing it through to consumers under pull manufacturers offer incentives such as coupons or rebates directly to consumers the manufacturers hope that demand will be pulled through the channel by consumers asking retailers for the promoted brand

a free lunch in the commons we derive conditions under which raising costs through a regulatory constraint or a fully expropriated tax can increase the profits arising from a common pool resource the basic model assumes a fixed number of identical agents with linear costs selling in a single period at an exogenous price a necessary and sufficient condition for a cost increase to be profitable is that aggregate output from the resource be locally convex in aggregate effort we also show that cost increases can be profitable even if price is endogenous agents are heterogeneous entry is costless or agents are playing a markov perfect equilibrium of a dynamic game we also discuss more general welfare implications of the result along with its relation to existing results for a cournot oligopoly

input price discrimination with downstream cournot competitors abstract this paper addresses third degree price discrimination in input markets i decompose the upstream monopolist s profit into two parts one that depends on average input prices and one that depends on their distribution this decomposition is useful in comparing the welfare properties of price discrimination against uniform pricing under reasonable assumptions input price discrimination negatively affects both consumer surplus and total welfare

price discrimination in input markets we analyze the short and long run implications of third degree price discrimination in input markets in contrast to the extant literature which typically assumes that the supplier is an unconstrained monopolist in our model input prices are constrained by the threat of demand side substitution in our model the more efficient buyer receives a discount a ban on price discrimination thus benefits smaller but hurts more efficient larger firms it also stifles incentives to invest and innovate with linear demand a ban on price discrimination benefits consumers in the short run but reduces consumer surplus in the long run which is once again the opposite of what is found without the threat of demand side substitution

monetary policy in the media just like private companies depend crucially on their ability to reach customers policymakers must communicate with private agents to be successful and much of this communication is channeled through the media this is especially true for central banks which need to build credibility among the general public this paper analyses how favorably the print media report about the european central bank s ecb monetary policy decisions favorableness is inter alia influenced by the amount of information communicated by the ecb there are however also indications of a critical monitoring role of the media which reports more negatively when inflation exceeds the inflation target

an empirical investigation of the welfare effects of banning wholesale price discrimination rand 054 rand2007 cls 1994 07 13 v1 2u standard latex document class rand rand 054 dispatch 12 7 2008 ce n a journal msp no no of pages 26 pe sharon rand journal of economics vol 40 no 1 spring 2009 pp 20 45 an empirical investigation of the welfare effects of banning wholesale price discrimination sofia berto villas boas economic theory does not provide sharp predictions on the welfare effects of banning wholesale price discrimination if downstream cost differences exist then discrimination shifts production inefficiently toward high cost retailers so a ban increases welfare if differences in price elasticity of demand across retailers exist discrimination may increase welfare if quantity sold increases so a ban reduces welfare using retail prices and quantities of coffee brands sold by german retailers i estimate a model of demand and supply and separate cost and demand differences simulating a ban on wholesale price discrimination has positive welfare effects in this market and less if downstream cost differences shrink or with less competition introduction wholesale price discrimination means that an upstream firm sets different prices for the same product for various downstream retailers wholesale price discrimination is commonly practiced in many markets examples include markets such as petroleum distribution steel heavy trucking tobacco and pharmaceuticals in several countries milk and other dairy products are sold using government administered or sanctioned discriminatory pricing schemes wholesale price discrimination practices are also used for services such as loans insurance and advertising 1 competition authorities have been concerned with wholesale price discrimination the european union treaty s article 82 c prohibits practices where a dominant firm would place trading partners at a competitive disadvantage the u s robinson patman act forbids discriminat ing in price between different purchasers where the effect may be to lessen competition unless the university of california berkeley sberto are berkeley edu i thank the editor igal hendel and two anonymous referees for many helpful comments and max auffhammer cyndi berck peter berck gal hochman silke januszewski forbes george judge kai uwe k uhn diana lazo mark muendler aviv nevo ariel pakes jeff perloff andrew sweeting miguel villas boas and participants at uc san diego university of michigan the inra idei conference in toulouse and the university of british columbia summer conference in industrial organization for their suggestions i thank daniel klapper for letting me have access to the data support from the giannini foundation and from an aes grant are gratefully appreciated see for gasoline markets texaco v hasbrouck 496 us 543 no 87 2048 1990 and the new york state motor fuel marketing practices act for steel chan hall and rust 2003 for heavy trucking volvo trucks north america inc v reeder simco gmc inc docket no 04 905 for tobacco brooke group ltd v brown and williamson tobacco corp 509 us 209 no 92 466 1993 for wholesale pharmaceuticals see http www datcp state wi us trade business unfair comp drug price jsp for dairy markets see for example gardner 1984 and for services see givens 1983 c 2009 rand copyright

third degree price discrimination and consumer surplus this paper considers the effects of monopoly third degree price discrimination on aggregate consumer surplus discrimination is likely to reduce surplus relative to that obtained with a uniform price but surplus can rise under reasonable conditions if the ratio of the pass through coefficient to the price elasticity at the uniform price is higher in the market with the higher price elasticity then surplus is larger with discrimination for a large set of demand functions the relatively high pass through coefficient implies a large price reduction in this market with logit demand functions surplus is higher with discrimination if pass through is above 0 5

third degree price discrimination in input markets output and welfare if price discrimination is realized the economy shifts from one equilibrium to another it clearly involves welfare effects the price discriminator clearly gains some consumers may also gain from the price cut but others may lose faced with higher prices etc traditionally the change in social welfare is known to be closely related to the change in total output in the case of third degree price discrimination it is well known that an increase in total output is a necessary condition for welfare improvement richard schmalensee 1981 proves this fact in a model in which the monopolist with constant marginal cost can perfectly separate markets further hal r varian 1985 extends this result to the case of interdependent markets permnitting increasing marginal cost of the monopolist and finally the assumption of nondecreasing marginal cost is eliminated by marius schwartz 1990 roughly speaking this proposition says that if there is a welfare gain from price discrimination there has to be some gain to offset the distortion involved on the other hand the vast majority of legal and other policy disputes over the price discrimination concern input markets not final good markets thus it seems important to investigate the situation in which a discriminating monopolist is not a final good supplier but an input supplier and the buyers of the input are downstream producers of a final good as is assumed in this paper if the downstream firms have different technologies their input demand functions will be different and thus the monopolist has an incentive to price discriminate in this scenario michael l katz 1987 and patrick degraba 1990 study the effect of inputmarket price discrimination and show that price discrimination always lowers welfare because it involves the distortion that a lower cost downstream firm is assigned a higher price unfortunately in their simple settings on the technology of downstream industry price discrimination can never change total output of the input or of the final good 1 thus we must say that welfare effect of input market price discrimination remains open to question if it has some effect on total output in particular we are curious as to whether we can obtain some close relationship between the changes in welfare and total output as we have obtained in the final good market settings with this motivation we will construct a model which involves change in total output of the final good in the next section the model and assumptions are provided in section ii after we extend the result of katz 1987 and degraba 1990 we find a relationship between the changes in welfare and total output strikingly it states that an increase in the total output of the final good is a sufficient condition for welfare deterioration this result contrasts with that obtained by schmalensee 1981 varian 1985 and schwartz 1990 from usual models of price discrimination in a final good market section iii concludes the analysis

tariffs and the most favored nation clause abstract in an n country oligopoly model of intraindustry trade n 3 this paper explores the economics of the most favored nation mfn principle under the non cooperative tariff equilibrium each country imposes higher tariffs on low cost producers relative to high cost ones thereby causing socially harmful trade diversion mfn adoption by each country improves world welfare by eliminating this trade diversion under linear demand mfn adoption by the country with the average production cost is most desirable high cost countries refuse reciprocal mfn adoption with other countries and also lose even if others engage in reciprocal mfn adoption amongst themselves

when are nash equilibria independent of the distribution of agents characteristics author s bergstrom ted varian hal r abstract we present examples of nash equilibria that do not vary with the distribution of a parameter across agents and then offer a general theorem that characterizes this independence

the impact of social structure on economic outcomes s ocial structure especially in the form of social networks affects economic outcomes for three main reasons first social networks affect the flow and the quality of information much information is subtle nuanced and difficult to verify so actors do not believe impersonal sources and instead rely on people they know second social networks are an important source of reward and punishment since these are often magnified in their impact when coming from others personally known third trust by which i mean the confidence that others will do the right thing despite a clear balance of incentives to the contrary emerges if it does in the context of a social network economists have recently devoted considerable attention to the impact of social structure and networks on the economy for example see the economists chapters in rauch and casella 2001 and the illuminating review essay of this volume by zuckerman 2003 as well as dutta and jackson 2003 and calvoarmengol 2004 however i focus here on sociologists contributions sociologists have developed core principles about the interactions of social structure information ability to punish or reward and trust that frequently recur in their analyses of political economic and other institutions i begin by reviewing some of these principles building on these i then discuss how social structures and social networks can affect economic outcomes like hiring price productivity and innovation

input market price discrimination and the choice of technology recent concerns over the effects of the robinson patman act and so called priceprotection policies such as most favoredcustomer clauses mfc s 2 on market performance have given economists new reasons to examine the welfare effects of third degree price discrimination in order to assess these effects correctly it is imperative that one understand how price discrimination influences market behavior joan robinson s 1933 work launched the formal inquiry into the welfare effects of third degree price discrimination building on the intuition presented by arthur pigou 1932 she showed that if a monopolist faces two independent linear demand curves the use of price discrimination will not affect industry output but will reduce welfare richard schmalensee 1981 extends these results to nonlinear demand curves and shows that an increase in total industry output is a necessary condition for price discrimination to be welfare improving hal varian 1985 broadens these results by deriving upper and lower bounds on the welfare change due to the use of price discrimination he shows that these results can be applied to markets in which there are nonzero cross price effects all of this work examines how the ability of a monopolist to price discriminate will affect the market outcome when all other characteristics of the market are treated as exogenous recently two lines of research have extended this inquiry beyond the case of a monopolist in a market with exogenously fixed parameters the first line considers the case of oligopoly the work of charles holt and david scheffman 1985 and thomas cooper 1986 has shown that restrictions on price discrimination imposed by the use of mfc s can facilitate collusion between oligopolists attempting to restrict output this implies that third degree price discrimination can be welfare improving the second line of research shows that price discrimination by a firm can affect nonprice decisions made by other market participants thus affecting the market outcome michael katz 1987 presents a model in which a large firm s ability to vertically integrate backward into the production of an input allows it to obtain a lower per unit price from the supplier of the input than can be obtained by smaller firms without this ability he shows that third degree price discrimination reduces welfare unless it prevents inefficient backward integration degraba 1987 shows that the use or nonuse of price discrimination by a national firm can affect nonprice decisions made by local firms that compete with the national firm in this situation third degree price discrimination is welfare reducing because it induces local firms to produce a product that is overly differentiated from the product of the national firm in all of the work cited above price discrimination is important when sellers set prices in separate markets or charge different prices to different customers in the same market the following analysis which can be considered a contribution to the second line of research suggests that price discrimination can be important even when a seller faces a single market in which all customers are identical the intuition behind this result is that nonprice decisions made by downstream producers such as the choice of technology can be affected by the use or johnson graduate school of management cornell university ithaca ny 14853 i thank robert frank robert smiley richard thaler and the participants of the jgsm applied microeconomics workshop for their helpful comments see william baldwin 1987 pp 438 40 for a good summary of the debate 2see john kwoka and lawrence white 1989 pp 196 7