search platforms showrooming and price parity clauses we provide a model in which consumers can search for rms directly or through a platform the platform lowers search costs and provides convenience benets but charges rms for the transactions it facilitates in equilibrium we show consumers buy through the platform despite rms setting higher prices on the platform higher prices on the platform give rise to the possibility of showrooming in which consumers search on the platform but then switch and buy directly to take advantage of lower direct prices in settings like this search platforms like amazon s marketplace and booking com have adopted price parity clauses requiring rms oer their best prices on the platform arguing this is needed to prevent showrooming we use our model to evaluate the implications of showrooming and price parity clauses

price coherence and excessive intermediation suppose an intermediary provides a benefit to buyers when they purchase from sellers using the intermediary s technology we develop a model to show that the intermediary would want to restrict sellers from charging buyers more for transactions it intermediates with this restriction an intermediary can profitably raise demand for its services by eliminating any extra price buyers face for purchasing through the intermediary we show that this leads to inflated retail prices excessive adoption of the intermediaries services over investment in benefits to buyers and a reduction in consumer surplus and sometimes welfare competition among intermediaries intensifies these problems by increasing the magnitude of their effects and broadening the circumstances in which they arise we discuss applications to payment card systems travel reservation systems rebate services and various other intermediaries jel codes d40 l11 l14 l42

the role of exclusive territories in producers competition reprinted in cartels stephen salant ed the international library of critical writings in economics edward elgar reference collections

the efficiency of indirect taxes under imperfect competition abstract this paper considers the relative efficiency of ad valorem and unit taxes in imperfectly competitive markets we provide a simple proof that ad valorem taxes are welfare superior to unit taxes in the short run when production costs are identical across firms the proof covers differentiated products and a wide range of market conduct cost asymmetries strengthen the case for ad valorem taxation under cournot competition but unit taxation may be welfare superior under bertrand competition with product differentiation ad valorem taxation is superior with free entry under cournot competition but not necessarily under price competition when consumers value variety

a pareto comparison of ad valorem and unit taxes in noncompetitive environments abstract a literature that began with wicksell 1896 has shown that an ad valorem tax is welfare superior to an equal yield unit tax in both monopoly and oligopoly markets this paper proves a stronger result for any unit tax imposed on a monopoly there exists an ad valorem tax that pareto dominates it that produces larger profit tax revenue and consumer surplus the paper then considers whether this pareto result generalizes to all cournot nash oligopolies the paper shows that pareto dominance holds in such markets whenever the tax level exceeds a critical value that depends on various market parameters

revenue sharing and vertical control in the video rental industry revenue sharing contracts in which retailers pay a royalty on sales to their suppliers are now widely used in the video rental industry we show that revenue sharing is valuable in vertically separated industries in which demand is either stochastic unpredictable or variable e g systematically declining downstream inventory is chosen before demand is realized and downstream firms engage in intrabrand competition unlike two part tariffs revenue sharing achieves the first best outcome by softening retail price competition without distorting retailers inventory decisions our theories are also consistent with trends in prices and availability following retailers adoption of revenue sharing contracts

successive oligopolies with differentiated firms and endogeneous entry we develop a model of successive oligopolies with endogenous entry allowing for varying degrees of product differentiation and entry costs in both markets we show that downstream conditions dominate the overall profitability of the two tier structure while upstream conditions mainly affect the distribution of profits we analyze how two part tariffs and resale price maintenance shape the endogenous market structure and study their welfare effects in contrast to previous literature we find that welfare under linear prices can be larger than under twopart tariffs although the latter avoids double marginalization this is because linear prices induce more downstream market entry

the optimality of ad valorem contracts we provide a new theory of ad valorem contracts i e contracts that vary with the value of the transaction which can explain why such contracts are widely used between vertically related partie

relative income effects on subjective well being in the cross section abstract recent work suggests that a person s subjective well being swb depends to a large degree on relative income focusing on the underlying identification this paper makes four contributions to this literature it describes the aggregation problem with past studies implements an estimation strategy to overcome this problem finds micro level evidence in support of the hypothesis that relative income does matter in individual assessments of swb and uses cross section estimates to replicate the aggregate time series the evidence further indicates that relative income effects may be smaller at low income levels the results are obtained from ordered probit techniques and the general social survey gss

when information dominates comparison abstract we propose a micro econometric evaluation of the relation between life satisfaction and income distribution using a balanced panel survey of the russian population russian longitudinal monitoring survey rlms running from 1994 to 2000 covering 4685 individuals we show that in the context of the very volatile russian environment hirschman s q j econ 87 1973 544 tunnel effect conjecture seems to be confirmed variables reflecting income distribution do not influence satisfaction through social comparisons individuals rather seem to use their informational content in order to form their expectations the reference group s income thereby exerts a positive influence on individual satisfaction which contrasts with other studies on the subject inequality indices do not affect individual welfare

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

the agency model and mfn clauses i provide an analysis of vertical relations in markets with imperfect competition at both layers of the supply chain and where exchange is intermediated either with wholesale prices or revenue sharing contracts revenue sharing is extremely attractive to firms that are able to set the revenue shares but often makes the firms that set retail prices worse off this is so whether revenue sharing lowers or raises industry profits these results are strengthened when a market moves from the wholesale model of sales to the agency model of sales which results in retailers setting revenue shares and suppliers setting retail prices i also show that retail price parity restrictions raise industry prices these results provide a potential explanation for why many online retailers have adopted the agency model and retail price parity clauses

the effects of platform most favored nation clauses on competition and entry abstractin the context of sellers who sell their products through intermediary platforms a platform most favored nation pmfn clause is a contractual restriction requiring that a particular seller will not sell at a lower price through a platform other than the one with which it has the pmfn agreement contractual restrictions observed in markets for e books and travel services among other settings can be viewed as examples of this phenomenon we show that pmfn clauses typically raise platform fees and retail prices and curtail entry or skew positioning decisions by potential entrants pursuing low end business models

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

the relative income hypothesis a comparison of methods studies of the relative income hypothesis find positive and negative effects of relative income to facilitate comparisons we use a large household panel and highlight the sensitivity of the relative income effect to the definition of the reference group and to the estimation strategy employed

opportunism in multilateral vertical contracting nondiscrimination exclusivity and uniformity comment an input supplier selling to competing downstream firms would benefit from publicly committing at the outset to all contracts efficient commitment however would require complete contracts the authors study instead bilateral contracting without commitment regarding others terms each firm then fears that the supplier might opportunistically renegotiate another s contract to increase bilateral profit at the firm s expense the authors show that nondiscrimination clauses generally cannot curb such third party opportunism even with symmetric firms to reassure firms crude forms of commitment may be adopted this could explain the pervasiveness of exclusivity arrangements and the striking uniformity and intertemporal rigidity of franchise contracts copyright 1994 by american economic association

marketplace or reseller intermediaries can choose between functioning as a marketplace in which suppliers sell their products directly to buyers or as a reseller by purchasing products from suppliers and selling them to buyers we model this as a decision between whether control rights over a noncontractible decision variable the choice of some marketing activity are better held by suppliers the marketplace mode or by the intermediary the reseller mode whether the marketplace or the reseller mode is preferred depends on whether independent suppliers or the intermediary have more important information relevant to the optimal tailoring of marketing activities for each specific product we show that this trade off is shifted toward the reseller mode when marketing activities create spillovers across products and when network effects lead to unfavorable expectations about supplier participation if the reseller has a variable cost advantage respectively disadvantage relative to the marketplace then the trade off is shifted toward the marketplace for long tail respectively short tail products we thus provide a theory of which products an intermediary should offer in each mode we also provide some empirical evidence that supports our main results data as supplemental material are available at http dx doi org 10 1287 mnsc 2014 2042 this paper was accepted by bruno cassiman business strategy

conflict between groups of players in coupled socio economic and ecological dynamics conflict among multiple groups is a major source of difficulty in environmental conservation people are often divided into various groups that have different social factors sometimes leading to differences in the degree to which they cooperate in environmental conservation this obstructs the social consensus needed to solve the environmental problems here we study the coupled dynamics of human socio economic choice and lake water pollution and examine the magnitude of the difference in cooperation levels between two groups in the model many players choose between a costly but cooperative option and a selfish option the former results in a reduced phosphorus discharge into the lake each player s choice is affected by an economic cost and social pressure social pressure is a psychological factor that promotes cooperation it becomes stronger when more players in the society are cooperative conformist tendency and when the problem at hand is a greater concern to society in the model two groups sometimes show large differences in their cooperation levels even when both have exactly the same social factors however cooperation levels are more likely to differ between groups that have different social factors enhancement of the cross group conformist tendency is the most effective way to minimize differences in cooperation levels and to mitigate conflict between groups

the dampening of competition effect of exclusive dealing using the dampening of competition approach to understanding vertical relationships this paper shows that in the absence of intrabrand retailer competition firms earn greater profits using exclusive dealing the paper explains the frequent simultaneous appearance of exclusive dealing and exclusive territoriality the results are used to analyze the famous 1949 standard stations case the author concludes that the 1949 court did the right thing for a wrong reason copyright 1990 by blackwell publishing ltd

synchronized deforestation induced by social learning under uncertainty of forest use value abstract deforestation often has been studied in terms of land use models in which natural processes such as ecological succession physical disturbance and human decision making are combined in many land use models landowners are assumed to make decisions that maximize their utilities however since human understanding of ecological and social dynamics is clouded by uncertainty landowners may not know true utility values and may learn these values from their experiences we develop a decision model for forest use under social learning to explore whether social learning is efficient to improve landowners decisions and can lead to effective forest management we assume that a forest is composed of a number of land parcels that are individually managed landowners choose whether or not to cut trees by comparing the expected utilities of forest conservation and deforestation landowners learn utility values not only from their own experiences but also by exchanging and sharing information with others in a society by analyzing the equilibrium and stability of the landscape dynamics we observed four possible outcomes a stationary forested landscape a stationary deforested landscape an unstable landscape fluctuating near an equilibrium and a cyclic forested landscape induced by synchronized deforestation synchronized deforestation which resulted in a resource shortage in a society was likely to occur when landowners employed a stochastic decision and a short term memory about past experiences social welfare under a cyclic forested landscape can be significantly lower than that of a stationary forested landscape this implies that learning and remembering past experiences are crucial to prevent overexploitation of forest resources and degradation of social welfare

the economics of franchise contracts as an organizational arrangement the franchise contract lies between anonymous price mediated exchange and centralized intrafirm employment in contrast to conventional market exchange franchise contracts typically impose on franchisees retail quality standards common hours of business price controls and nonlinear payment schedules for example fixed initial royalty fees plus a percentage of gross retail revenues while franchisors typically provide national advertising and training programs monitor and inspect the franchisees performance with varying intensity across industries and hold the residual power to terminate the franchise agreement observations of actual terminations indicate that franchisors sometimes exclude this power franchisors sometimes face persistent queues of potential franchisees in contrast to simple employment contracts franchise agreements provide for sharing of profits through royalties on revenue or output and considerable freedom for independent decisions by local franchisees 1 why do these franchise contracts exist