Abstract We analyze the decision of a firm to produce an input internally or to delegate the production to a better-informed supplier. The supplier can produce inputs of different qualities. As quality is not verifiable, a selfish supplier always produces the quality that minimizes his costs. A supplier that is motivated by reciprocity may instead produce the quality that maximizes the revenues of the buyer. Accordingly, reciprocity could increase the use of the market. To trigger reciprocal behavior the buyer must propose a contract that the seller perceives to be kind. We find that for reciprocal behavior to show up, it is enough that the supplier is moderately reciprocal. Lastly, we provide some intuitions about how our results change if the supplier is liquidity-constrained and must be granted non-negative profits in all circumstances.
{"title":"Delegation in Vertical Relationships: The Role of Reciprocity","authors":"M. Castellani","doi":"10.1515/bejte-2020-0197","DOIUrl":"https://doi.org/10.1515/bejte-2020-0197","url":null,"abstract":"Abstract We analyze the decision of a firm to produce an input internally or to delegate the production to a better-informed supplier. The supplier can produce inputs of different qualities. As quality is not verifiable, a selfish supplier always produces the quality that minimizes his costs. A supplier that is motivated by reciprocity may instead produce the quality that maximizes the revenues of the buyer. Accordingly, reciprocity could increase the use of the market. To trigger reciprocal behavior the buyer must propose a contract that the seller perceives to be kind. We find that for reciprocal behavior to show up, it is enough that the supplier is moderately reciprocal. Lastly, we provide some intuitions about how our results change if the supplier is liquidity-constrained and must be granted non-negative profits in all circumstances.","PeriodicalId":44773,"journal":{"name":"B E Journal of Theoretical Economics","volume":"23 1","pages":"443 - 468"},"PeriodicalIF":0.4,"publicationDate":"2022-06-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"47774647","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract The step by step model of innovation is a benchmark model in research investigating the relationship between competition and innovation. The model assumes an industry can be in one of two states; leveled or unleveled. In an unleveled state the lagging firm is the only innovator. In a leveled state firms compete in a patent race. In this patent race successful innovation probabilities are mutually exclusive. This formulation provides mathematical tractability, but it has no other justification. I relax this assumption and use numerical simulation to demonstrate that allowing for non mutually exclusive success in innovation has important consequences for the inverted U relationship. The inverted U relationship is no longer a prediction of the model. In addition, the model predicts that patent measures will under count innovation from the leveled state, allowing for an inverted U relationship between competition and patenting under a narrow set of parameter restrictions. This theoretical exercise has important implications for understanding the current state of the empirical record on this topic.
{"title":"Step by Step Innovation without Mutually Exclusive Patenting: Implications for the Inverted U","authors":"Norman H. Sedgley","doi":"10.1515/bejte-2021-0112","DOIUrl":"https://doi.org/10.1515/bejte-2021-0112","url":null,"abstract":"Abstract The step by step model of innovation is a benchmark model in research investigating the relationship between competition and innovation. The model assumes an industry can be in one of two states; leveled or unleveled. In an unleveled state the lagging firm is the only innovator. In a leveled state firms compete in a patent race. In this patent race successful innovation probabilities are mutually exclusive. This formulation provides mathematical tractability, but it has no other justification. I relax this assumption and use numerical simulation to demonstrate that allowing for non mutually exclusive success in innovation has important consequences for the inverted U relationship. The inverted U relationship is no longer a prediction of the model. In addition, the model predicts that patent measures will under count innovation from the leveled state, allowing for an inverted U relationship between competition and patenting under a narrow set of parameter restrictions. This theoretical exercise has important implications for understanding the current state of the empirical record on this topic.","PeriodicalId":44773,"journal":{"name":"B E Journal of Theoretical Economics","volume":"23 1","pages":"469 - 485"},"PeriodicalIF":0.4,"publicationDate":"2022-06-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"49416142","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract Progress of hardware technologies and diffusion of computer knowledge enable consumers to crack software if they decide to use software illegally. This paper constructs a software market in which consumers are horizontally differentiated in accordance with social norms of copyright protection to examine the monopolistic producer’s software protection behaviors with considering partial compatibility between genuine and cracked software as well as utility loss from using cracked software. Our research presents the following results. First, when network externalities are weak, the monopolist would set a degree of protection which induces existence of software cracking to enhance consumers’ willingness to pay for genuine software by improving network benefits. Conversely, if network externalities are sufficiently strong, then software producer would set a degree of protection which stop software cracking completely. This implies that stopping software cracking is not possible without network effects. Second, if utility loss from using cracked software is severe (mild), then strengthening (weakening) network externalities or lowering (raising) compatibility may reduce the number of consumers using cracked software and increase software producer’s profits consequently. Finally, we show that the monopolistic producer tends to over-protect software when genuine and cracked software are highly compatible or network externalities are relatively weak which results in inadequate consumers using cracked software for social optimum.
{"title":"Software Cracking and Degrees of Software Protection","authors":"C. Chou","doi":"10.1515/bejte-2021-0029","DOIUrl":"https://doi.org/10.1515/bejte-2021-0029","url":null,"abstract":"Abstract Progress of hardware technologies and diffusion of computer knowledge enable consumers to crack software if they decide to use software illegally. This paper constructs a software market in which consumers are horizontally differentiated in accordance with social norms of copyright protection to examine the monopolistic producer’s software protection behaviors with considering partial compatibility between genuine and cracked software as well as utility loss from using cracked software. Our research presents the following results. First, when network externalities are weak, the monopolist would set a degree of protection which induces existence of software cracking to enhance consumers’ willingness to pay for genuine software by improving network benefits. Conversely, if network externalities are sufficiently strong, then software producer would set a degree of protection which stop software cracking completely. This implies that stopping software cracking is not possible without network effects. Second, if utility loss from using cracked software is severe (mild), then strengthening (weakening) network externalities or lowering (raising) compatibility may reduce the number of consumers using cracked software and increase software producer’s profits consequently. Finally, we show that the monopolistic producer tends to over-protect software when genuine and cracked software are highly compatible or network externalities are relatively weak which results in inadequate consumers using cracked software for social optimum.","PeriodicalId":44773,"journal":{"name":"B E Journal of Theoretical Economics","volume":"23 1","pages":"577 - 600"},"PeriodicalIF":0.4,"publicationDate":"2022-06-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"43033593","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract We introduce a behavioral contract theory idea, “shading” (Hart and Moore (2008). “Contracts as Reference Points.” Quarterly Journal of Economics 123 (1): 1–48)) as a component of ex-post haggling (addressed by Coase (1937. “The Nature of the Firm.” Economica 4 (16): 386–405) and Williamson (1975. Markets and Hierarchies: Analysis and Antitrust Implications. New York: Free Press)) into the collusion model à la Tirole (1986. “Hierarchies and Bureaucracies: On the Role of Collusion in Organizations.” Journal of Law, Economics, and Organization 2: 181–214, 1992. “Collusion and the Theory of Organizations.” In Advances in Economic Theory: The Sixth World Congress, edited by J. J. Laffont. Cambridge: Cambridge University Press), thereby constructing a new model of hierarchical organization. By integrating the two ideas, i.e. collusion and shading, we enrich the existing collusion model, thereby obtaining a new result for Collusion-proof versus Equilibrium Collusion. The basic idea is that the increase in shading pressure strengthens the incentive for collusion, thereby making it difficult to implement collusion-proof incentive schemes, which leads to the Equilibrium Collusion. In addition, we also provide a micro-foundation for ex-post haggling costs, where we view rent-seeking associated with collusive behavior and ex-post haggling generated from aggrievement and shading as the two sources of the costs. This model is used to examine the optimal organizational design problem as an optimal response to the trade-off between gross total surplus and ex-post haggling costs, and to take a step further the idea of efficient organization design (Milgrom (1988. “Employment Contracts, Influence Activities and Efficient Organization Design.” Journal of Political Economy 96: 42–60)). We believe that our model could help provide a deep understanding of resource allocation and decision processes in hierarchical organizations.
本文介绍了行为契约理论中的“阴影”概念(Hart and Moore, 2008)。“作为参考点的合同。”经济学季刊123(1):1 - 48))作为事后讨价还价的组成部分(由科斯(1937)提出。《公司的性质》经济学4(16):386-405)和Williamson(1975)。市场与层级:分析与反垄断启示。纽约:自由出版社))进入共谋模型(la Tirole, 1986)。等级制度与官僚制度:论组织中串通的作用法律经济与组织学报(2):181-214,1992。“勾结与组织理论”。《经济理论进展:第六届世界学术大会》，j·j·拉方特主编。剑桥:剑桥大学出版社)，从而构建了一种新的层级组织模式。通过整合合谋和阴影这两个思想，我们丰富了已有的合谋模型，从而得到了抗合谋与均衡合谋的新结果。其基本思路是，遮阳压力的增加增强了共谋的激励，使得防共谋激励方案难以实施，从而导致均衡共谋。此外，我们还提供了事后讨价还价成本的微观基础，我们将与串通行为相关的寻租和由协议和阴影产生的事后讨价还价作为成本的两个来源。这个模型被用来研究最优组织设计问题，作为对总剩余和事后讨价还价成本之间权衡的最优反应，并进一步推进了有效组织设计的思想(Milgrom(1988))。雇佣合同、影响活动与高效组织设计政治经济学杂志(96):42-60)。我们相信我们的模型可以帮助提供对分层组织中的资源分配和决策过程的深刻理解。
{"title":"Collusion, Shading, and Optimal Organization Design","authors":"Yutaka Suzuki","doi":"10.1515/bejte-2020-0130","DOIUrl":"https://doi.org/10.1515/bejte-2020-0130","url":null,"abstract":"Abstract We introduce a behavioral contract theory idea, “shading” (Hart and Moore (2008). “Contracts as Reference Points.” Quarterly Journal of Economics 123 (1): 1–48)) as a component of ex-post haggling (addressed by Coase (1937. “The Nature of the Firm.” Economica 4 (16): 386–405) and Williamson (1975. Markets and Hierarchies: Analysis and Antitrust Implications. New York: Free Press)) into the collusion model à la Tirole (1986. “Hierarchies and Bureaucracies: On the Role of Collusion in Organizations.” Journal of Law, Economics, and Organization 2: 181–214, 1992. “Collusion and the Theory of Organizations.” In Advances in Economic Theory: The Sixth World Congress, edited by J. J. Laffont. Cambridge: Cambridge University Press), thereby constructing a new model of hierarchical organization. By integrating the two ideas, i.e. collusion and shading, we enrich the existing collusion model, thereby obtaining a new result for Collusion-proof versus Equilibrium Collusion. The basic idea is that the increase in shading pressure strengthens the incentive for collusion, thereby making it difficult to implement collusion-proof incentive schemes, which leads to the Equilibrium Collusion. In addition, we also provide a micro-foundation for ex-post haggling costs, where we view rent-seeking associated with collusive behavior and ex-post haggling generated from aggrievement and shading as the two sources of the costs. This model is used to examine the optimal organizational design problem as an optimal response to the trade-off between gross total surplus and ex-post haggling costs, and to take a step further the idea of efficient organization design (Milgrom (1988. “Employment Contracts, Influence Activities and Efficient Organization Design.” Journal of Political Economy 96: 42–60)). We believe that our model could help provide a deep understanding of resource allocation and decision processes in hierarchical organizations.","PeriodicalId":44773,"journal":{"name":"B E Journal of Theoretical Economics","volume":"23 1","pages":"537 - 575"},"PeriodicalIF":0.4,"publicationDate":"2022-06-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"42388946","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract This paper suggests a simple rule which identifies the coordination between optimal unemployment benefits paid and the tax system in the case of risk neutral workers but with moral hazard and hidden information on the worker’s type. Our model posits that, given a universal, linear income tax scheme, the optimal unemployment benefits paid does not depend on workers’ types. Standard government policy pays a positive replacement rate to unemployed workers. Optimal redistribution, taking moral hazard and adverse selection into account, instead suggests that the benefit paid should be the same for all and only depends on the underlying tax structure.
{"title":"Redistributive Unemployment Benefit and Taxation","authors":"Homa Esfahanian, Ali Moghaddasi Kelishomi","doi":"10.1515/bejte-2021-0049","DOIUrl":"https://doi.org/10.1515/bejte-2021-0049","url":null,"abstract":"Abstract This paper suggests a simple rule which identifies the coordination between optimal unemployment benefits paid and the tax system in the case of risk neutral workers but with moral hazard and hidden information on the worker’s type. Our model posits that, given a universal, linear income tax scheme, the optimal unemployment benefits paid does not depend on workers’ types. Standard government policy pays a positive replacement rate to unemployed workers. Optimal redistribution, taking moral hazard and adverse selection into account, instead suggests that the benefit paid should be the same for all and only depends on the underlying tax structure.","PeriodicalId":44773,"journal":{"name":"B E Journal of Theoretical Economics","volume":"23 1","pages":"327 - 343"},"PeriodicalIF":0.4,"publicationDate":"2022-06-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"42681244","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract I study a model of strategic communication between a privately informed sender who can persuade a receiver using Blackwell experiments. Hedlund (2017). “Bayesian Persuasion by a Privately Informed Sender.” Journal of Economic Theory 167 (January): 229–68, shows that private information in such a setting results in extremely informative equilibria. I make three points: first, the informativeness of equilibria relies crucially on two features – the mere availability of a fully revealing experiment, and a compact action space for the receiver. I show by examples that absent these features, equilibria may be uninformative. Secondly, I characterize equilibria in a simple model with constraints for the sender (only two experiments available, none are fully revealing) and the receiver (discrete action space). I argue that noisy experiments and discrete actions are the norm rather than the exception (and therefore, private information need not result in information revelation). Thirdly, I define a novel refinement that selects the most informative equilibria in most cases.
{"title":"Constrained Persuasion with Private Information","authors":"Andrew Kosenko","doi":"10.1515/bejte-2021-0017","DOIUrl":"https://doi.org/10.1515/bejte-2021-0017","url":null,"abstract":"Abstract I study a model of strategic communication between a privately informed sender who can persuade a receiver using Blackwell experiments. Hedlund (2017). “Bayesian Persuasion by a Privately Informed Sender.” Journal of Economic Theory 167 (January): 229–68, shows that private information in such a setting results in extremely informative equilibria. I make three points: first, the informativeness of equilibria relies crucially on two features – the mere availability of a fully revealing experiment, and a compact action space for the receiver. I show by examples that absent these features, equilibria may be uninformative. Secondly, I characterize equilibria in a simple model with constraints for the sender (only two experiments available, none are fully revealing) and the receiver (discrete action space). I argue that noisy experiments and discrete actions are the norm rather than the exception (and therefore, private information need not result in information revelation). Thirdly, I define a novel refinement that selects the most informative equilibria in most cases.","PeriodicalId":44773,"journal":{"name":"B E Journal of Theoretical Economics","volume":"23 1","pages":"345 - 370"},"PeriodicalIF":0.4,"publicationDate":"2022-06-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"67197674","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract This paper studies optimal incentive contracting under moral hazard when workers exhibit relative income concerns and compare their earnings with the economy’s average wage. We show that when firms have access to a rich performance measure, the optimal contract takes a binary form if effort is sufficiently low and a ternary form otherwise. We then use these results to investigate how contractual structure varies throughout the economy when firm-worker pairs are heterogeneous with respect to either their productivity, or the information system used to align incentives. We argue that our findings suggest that the incidence of pay-for-performance should be highest for jobs which significantly contribute to overall firm profitability and for which a worker’s performance is difficult to measure. These predictions appear largely consistent with recent empirical evidence.
{"title":"Relative Income Concerns, Dismissal, and the Use of Pay-for-Performance","authors":"D. Demougin, Harvey Upton","doi":"10.1515/bejte-2021-0107","DOIUrl":"https://doi.org/10.1515/bejte-2021-0107","url":null,"abstract":"Abstract This paper studies optimal incentive contracting under moral hazard when workers exhibit relative income concerns and compare their earnings with the economy’s average wage. We show that when firms have access to a rich performance measure, the optimal contract takes a binary form if effort is sufficiently low and a ternary form otherwise. We then use these results to investigate how contractual structure varies throughout the economy when firm-worker pairs are heterogeneous with respect to either their productivity, or the information system used to align incentives. We argue that our findings suggest that the incidence of pay-for-performance should be highest for jobs which significantly contribute to overall firm profitability and for which a worker’s performance is difficult to measure. These predictions appear largely consistent with recent empirical evidence.","PeriodicalId":44773,"journal":{"name":"B E Journal of Theoretical Economics","volume":"23 1","pages":"405 - 441"},"PeriodicalIF":0.4,"publicationDate":"2022-06-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"41613929","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract We present a model that explains the process of strategy learning by the players in repeated normal-form games. The proposed model is based on a directed weighted graph, which we define and call as the game’s dynamic graph. This graph is used as a framework by a learning algorithm that predicts which actions will be chosen by the players during the game and how the players are acting based on their gained experiences and behavioral characteristics. We evaluate the model’s performance by applying it to some human-subject datasets and measure the rate of correctly predicted actions. The results show that our model obtains a better average hit-rate compared to that of respective models. We also measure the model’s descriptive power (its ability to describe human behavior in the self-play mode) to show that our model, in contrast to the other behavioral models, is able to describe the alternation strategy in the Battle of the sexes game and the cooperating strategy in the Prisoners’ dilemma game.
{"title":"A Dynamic Graph Model of Strategy Learning for Predicting Human Behavior in Repeated Games","authors":"Afrooz Vazifedan, M. Izadi","doi":"10.1515/bejte-2021-0015","DOIUrl":"https://doi.org/10.1515/bejte-2021-0015","url":null,"abstract":"Abstract We present a model that explains the process of strategy learning by the players in repeated normal-form games. The proposed model is based on a directed weighted graph, which we define and call as the game’s dynamic graph. This graph is used as a framework by a learning algorithm that predicts which actions will be chosen by the players during the game and how the players are acting based on their gained experiences and behavioral characteristics. We evaluate the model’s performance by applying it to some human-subject datasets and measure the rate of correctly predicted actions. The results show that our model obtains a better average hit-rate compared to that of respective models. We also measure the model’s descriptive power (its ability to describe human behavior in the self-play mode) to show that our model, in contrast to the other behavioral models, is able to describe the alternation strategy in the Battle of the sexes game and the cooperating strategy in the Prisoners’ dilemma game.","PeriodicalId":44773,"journal":{"name":"B E Journal of Theoretical Economics","volume":"23 1","pages":"371 - 403"},"PeriodicalIF":0.4,"publicationDate":"2022-06-06","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"48282445","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract Companies are increasingly using data to predict behavior and improve the relation with their customers. In this context, data exchange raises important concerns regarding competition, concentration and welfare. This paper presents a novel linear demand approach that captures data and information effects in competitive markets, which are conveniently summarized in a precision parameter. Subsequently, the proposed approach is applied to study the firm’s incentives to exchange data and their impact in fundamental market variables, welfare and market concentration measures. We found that the incentives for data exchange between competitor firms emerge when the individual information gains are strong enough to compensate for the competitor’s information gains, and the associated strategic correlation effect between varieties. The results also suggest that market concentration tends to increase after data exchange, but both consumers and producers benefit from it. The reason is that better data allows firms to positioning closer to consumers’ needs.
{"title":"Data and Competitive Markets: Some Notes on Competition, Concentration and Welfare","authors":"António Osório","doi":"10.1515/bejte-2021-0087","DOIUrl":"https://doi.org/10.1515/bejte-2021-0087","url":null,"abstract":"Abstract Companies are increasingly using data to predict behavior and improve the relation with their customers. In this context, data exchange raises important concerns regarding competition, concentration and welfare. This paper presents a novel linear demand approach that captures data and information effects in competitive markets, which are conveniently summarized in a precision parameter. Subsequently, the proposed approach is applied to study the firm’s incentives to exchange data and their impact in fundamental market variables, welfare and market concentration measures. We found that the incentives for data exchange between competitor firms emerge when the individual information gains are strong enough to compensate for the competitor’s information gains, and the associated strategic correlation effect between varieties. The results also suggest that market concentration tends to increase after data exchange, but both consumers and producers benefit from it. The reason is that better data allows firms to positioning closer to consumers’ needs.","PeriodicalId":44773,"journal":{"name":"B E Journal of Theoretical Economics","volume":"23 1","pages":"487 - 517"},"PeriodicalIF":0.4,"publicationDate":"2022-06-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"45546211","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract We study social efficiency of entry in the presence of downstream cost asymmetry and upstream price discrimination. We show that entry is excessive when the entrants are highly inefficient, and it is insufficient when either the entrants are efficient or their inefficiency is low. The results are in sharp contrast to the existing literature considering upstream uniform pricing (Cao, H., and L. F. S. Wang. 2020. “Social Efficiency of Entry in a Vertically Related Industry Revisited.” Economics Letters 129. Art. no. 109200), as discriminatory pricing alters the relative strengths of the business-stealing, business-creation and production-(in)efficiency effects.
{"title":"Social Efficiency of Entry in a Vertical Structure with Third Degree Price Discrimination","authors":"J. Chen, A. Mukherjee, Chenhang Zeng","doi":"10.1515/bejte-2021-0069","DOIUrl":"https://doi.org/10.1515/bejte-2021-0069","url":null,"abstract":"Abstract We study social efficiency of entry in the presence of downstream cost asymmetry and upstream price discrimination. We show that entry is excessive when the entrants are highly inefficient, and it is insufficient when either the entrants are efficient or their inefficiency is low. The results are in sharp contrast to the existing literature considering upstream uniform pricing (Cao, H., and L. F. S. Wang. 2020. “Social Efficiency of Entry in a Vertically Related Industry Revisited.” Economics Letters 129. Art. no. 109200), as discriminatory pricing alters the relative strengths of the business-stealing, business-creation and production-(in)efficiency effects.","PeriodicalId":44773,"journal":{"name":"B E Journal of Theoretical Economics","volume":"23 1","pages":"223 - 243"},"PeriodicalIF":0.4,"publicationDate":"2022-03-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"48412896","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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