{"title":"Product Varieties in a Quality-Differentiated Goods Monopoly","authors":"Changying Li, Jianhu Zhang","doi":"10.1628/jite-2018-0014","DOIUrl":"https://doi.org/10.1628/jite-2018-0014","url":null,"abstract":"","PeriodicalId":46932,"journal":{"name":"Journal of Institutional and Theoretical Economics-Zeitschrift Fur Die Gesamte Staatswissenschaft","volume":"1 1","pages":""},"PeriodicalIF":0.4,"publicationDate":"2019-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"67506239","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}
This paper analyzes the welfare implications of requiring either unanimity or simple majority in negotiations to distribute a budget among agents who previously can invest to generate positive consumption externalities to others. The present paper studies this setting with simple-majority bargaining, complementing Cardona and Rubi-Barcelo (2014), that consider the unanimity case. It is shown that reducing the majority requirement reduces the profitability of investments and, as a consequence, alleviates over-investment, which is predominant under unanimous bargaining. Nevertheless, simple majority reduces the aggregate surplus attained at the bargaining stage. Therefore, the relative performance of the bargaining rules is uncertain. We show how it evolves with respect to the size of consumption externalities.
{"title":"Investments, Positive Externalities, and Majority Bargaining","authors":"Daniel Cardona, Antoni Rubí-Barceló","doi":"10.1628/jite-2019-0034","DOIUrl":"https://doi.org/10.1628/jite-2019-0034","url":null,"abstract":"This paper analyzes the welfare implications of requiring either unanimity or simple majority in negotiations to distribute a budget among agents who previously can invest to generate positive consumption externalities to others. The present paper studies this setting with simple-majority bargaining, complementing Cardona and Rubi-Barcelo (2014), that consider the unanimity case. It is shown that reducing the majority requirement reduces the profitability of investments and, as a consequence, alleviates over-investment, which is predominant under unanimous bargaining. Nevertheless, simple majority reduces the aggregate surplus attained at the bargaining stage. Therefore, the relative performance of the bargaining rules is uncertain. We show how it evolves with respect to the size of consumption externalities.","PeriodicalId":46932,"journal":{"name":"Journal of Institutional and Theoretical Economics-Zeitschrift Fur Die Gesamte Staatswissenschaft","volume":"1 1","pages":""},"PeriodicalIF":0.4,"publicationDate":"2019-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"67506454","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}
We study how inter-firm social comparison can alter the choice of two competing manufacturers between vertical integration and vertical separation if retailers are status-concerned. Status is determined by the difference in retailers’ market shares. The novelty of our approach is that in line with empirical evidence, the intensity of social comparison (i) depends on the distance between retail outlets, and (ii) can be influenced by the manufacturers by adjusting their outlets’ locations. In contrast to the commonly studied case of a distance-independent intensity of status concern, social comparison with a distance-dependent intensity of status concern might predict different vertical boundaries.
{"title":"Vertical Boundaries and Endogenous Intensity of Social Comparison","authors":"M. Kopel, Anna Ressi","doi":"10.2139/SSRN.2930091","DOIUrl":"https://doi.org/10.2139/SSRN.2930091","url":null,"abstract":"We study how inter-firm social comparison can alter the choice of two competing manufacturers between vertical integration and vertical separation if retailers are status-concerned. Status is determined by the difference in retailers’ market shares. The novelty of our approach is that in line with empirical evidence, the intensity of social comparison (i) depends on the distance between retail outlets, and (ii) can be influenced by the manufacturers by adjusting their outlets’ locations. In contrast to the commonly studied case of a distance-independent intensity of status concern, social comparison with a distance-dependent intensity of status concern might predict different vertical boundaries.","PeriodicalId":46932,"journal":{"name":"Journal of Institutional and Theoretical Economics-Zeitschrift Fur Die Gesamte Staatswissenschaft","volume":"34 1","pages":"207-227"},"PeriodicalIF":0.4,"publicationDate":"2019-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"81305122","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}
We consider a government that can promote innovation by providing subsidies to different firms. We find that providing a subsidy to only the high-quality firms returns the highest net total surplus and net consumer surplus, even though it resultsin the highest product prices and serves the fewest customers in the market. High-quality product customers are more adversely affected than low-quality ones. In terms of product variety, we show that innovators always withdraw their former products from the market. Finally, the high-quality firm has a higher incentive to hinder the low-quality firm from receiving a subsidy than vice versa.
{"title":"The Differential Impact of Subsidies on Product Improvements","authors":"R. Siebert","doi":"10.1628/JITE-2019-0038","DOIUrl":"https://doi.org/10.1628/JITE-2019-0038","url":null,"abstract":"We consider a government that can promote innovation by providing subsidies to different firms. We find that providing a subsidy to only the high-quality firms returns the highest net total surplus and net consumer surplus, even though it resultsin the highest product prices and serves the fewest customers in the market. High-quality product customers are more adversely affected than low-quality ones. In terms of product variety, we show that innovators always withdraw their former products from the market. Finally, the high-quality firm has a higher incentive to hinder the low-quality firm from receiving a subsidy than vice versa.","PeriodicalId":46932,"journal":{"name":"Journal of Institutional and Theoretical Economics-Zeitschrift Fur Die Gesamte Staatswissenschaft","volume":"1 1","pages":""},"PeriodicalIF":0.4,"publicationDate":"2019-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"67506497","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}
Yanbin Chen, Pu Chen, Yumei Guo, Sanxi Li, Dongmin Yao
This paper presents a simple bargaining model in a contracting situation betweena risk-neutral principal and a risk-averse agent with limited liability. An increasein the agent's bargaining power has two effects. First, the negotiated contracts provide the agent a higher reward, which gives stronger incentive to exert effort. Second, the agent, whose marginal utility decreases with increasing income, exerts less effort, given the same reward, when the equilibrium income increases with the bargaining power. Therefore, we can show there is an inverted-U-shape relationship between agent's effort level and agent's bargaining power.
{"title":"Bargaining to Design Contracts under Moral Hazard","authors":"Yanbin Chen, Pu Chen, Yumei Guo, Sanxi Li, Dongmin Yao","doi":"10.1628/JITE-2019-0039","DOIUrl":"https://doi.org/10.1628/JITE-2019-0039","url":null,"abstract":"This paper presents a simple bargaining model in a contracting situation betweena risk-neutral principal and a risk-averse agent with limited liability. An increasein the agent's bargaining power has two effects. First, the negotiated contracts provide the agent a higher reward, which gives stronger incentive to exert effort. Second, the agent, whose marginal utility decreases with increasing income, exerts less effort, given the same reward, when the equilibrium income increases with the bargaining power. Therefore, we can show there is an inverted-U-shape relationship between agent's effort level and agent's bargaining power.","PeriodicalId":46932,"journal":{"name":"Journal of Institutional and Theoretical Economics-Zeitschrift Fur Die Gesamte Staatswissenschaft","volume":"1 1","pages":""},"PeriodicalIF":0.4,"publicationDate":"2019-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"67506034","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}
Conventional wisdom argues that investment, output and welfare are all increasing in productivity. In this article, I show that this argument is not always correct. In particular, I study a simple model of a credit market with cashless, privately informed entrepreneurs who borrow from wealthy investors. Unlike related studies of credit markets with asymmetric information, I allow entrepreneurs to vary the scale of investment and hence, potentially, signal their type. Signalling crucially depends on the marginal productivity of investment of each type. Surprisingly, I show that aggregate investment and welfare might decrease in productivity. In some cases, an increase in productivity boosts investment but dampens welfare, as part of this increase arises from the attempt of high-type entrepreneurs to signal their type.
{"title":"Signalling, Productivity, and Investment","authors":"Anastasios Dosis","doi":"10.1628/JITE-2019-0028","DOIUrl":"https://doi.org/10.1628/JITE-2019-0028","url":null,"abstract":"Conventional wisdom argues that investment, output and welfare are all increasing in productivity. In this article, I show that this argument is not always correct. In particular, I study a simple model of a credit market with cashless, privately informed entrepreneurs who borrow from wealthy investors. Unlike related studies of credit markets with asymmetric information, I allow entrepreneurs to vary the scale of investment and hence, potentially, signal their type. Signalling crucially depends on the marginal productivity of investment of each type. Surprisingly, I show that aggregate investment and welfare might decrease in productivity. In some cases, an increase in productivity boosts investment but dampens welfare, as part of this increase arises from the attempt of high-type entrepreneurs to signal their type.","PeriodicalId":46932,"journal":{"name":"Journal of Institutional and Theoretical Economics-Zeitschrift Fur Die Gesamte Staatswissenschaft","volume":"1 1","pages":""},"PeriodicalIF":0.4,"publicationDate":"2019-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"67506308","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}
In many countries, the diagnosis-related group system has been expanded to address patient severity. This paper highlights a fundamental drawback of any price refinement policy under adverse selection. Without auditing, no mechanism such that high-severity patients receive more intensive treatment than low-severity patients can ensure that providers are deterred from upcoding. In contrast, we show that splitting can be implemented if the regulator designs an auditing mechanism when the proportion of low-severity patients is sufficiently high. The optimal level of services increases with severity under conditions depending on the net social benefit function and on the cost function. (This abstract was borrowed from another version of this item.)
{"title":"Nonresponsiveness, Severity Auditing, and Upcoding Deterrence","authors":"M. Mougeot, Florence Naegelen","doi":"10.1628/JITE-2018-0011","DOIUrl":"https://doi.org/10.1628/JITE-2018-0011","url":null,"abstract":"In many countries, the diagnosis-related group system has been expanded to address patient severity. This paper highlights a fundamental drawback of any price refinement policy under adverse selection. Without auditing, no mechanism such that high-severity patients receive more intensive treatment than low-severity patients can ensure that providers are deterred from upcoding. In contrast, we show that splitting can be implemented if the regulator designs an auditing mechanism when the proportion of low-severity patients is sufficiently high. The optimal level of services increases with severity under conditions depending on the net social benefit function and on the cost function. (This abstract was borrowed from another version of this item.)","PeriodicalId":46932,"journal":{"name":"Journal of Institutional and Theoretical Economics-Zeitschrift Fur Die Gesamte Staatswissenschaft","volume":"10 1","pages":""},"PeriodicalIF":0.4,"publicationDate":"2019-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"67506128","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}
{"title":"36th International Seminar on the New Institutional Economics","authors":"","doi":"10.1628/jite-2019-0031","DOIUrl":"https://doi.org/10.1628/jite-2019-0031","url":null,"abstract":"","PeriodicalId":46932,"journal":{"name":"Journal of Institutional and Theoretical Economics-Zeitschrift Fur Die Gesamte Staatswissenschaft","volume":"1 1","pages":""},"PeriodicalIF":0.4,"publicationDate":"2019-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"67506409","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}
This paper examines the interaction between religion and law as alternative mechanisms for controlling behavior. The model involves a prisoners' dilemma game played by randomly paired members of society. Religious believers cooperate reflexively, but are subject to exploitation by nonbelievers. Law enforcement emerges when the gain to believers from deterrence of nonbelievers exceeds enforcement costs. The results show that some minimal amount of religious belief is a prerequisite for law to emerge, but a high level of belief precludes its emergence. Thus, religion is both a complement and substitute for law. We present empirical evidence to support the argument.
{"title":"Toward an Economic Theory of Religious Belief and the Emergence of Law","authors":"Metin M. Coşgel, Thomas J. Miceli","doi":"10.1628/JITE-2019-0035","DOIUrl":"https://doi.org/10.1628/JITE-2019-0035","url":null,"abstract":"This paper examines the interaction between religion and law as alternative mechanisms for controlling behavior. The model involves a prisoners' dilemma game played by randomly paired members of society. Religious believers cooperate reflexively, but are subject to exploitation by nonbelievers. Law enforcement emerges when the gain to believers from deterrence of nonbelievers exceeds enforcement costs. The results show that some minimal amount of religious belief is a prerequisite for law to emerge, but a high level of belief precludes its emergence. Thus, religion is both a complement and substitute for law. We present empirical evidence to support the argument.","PeriodicalId":46932,"journal":{"name":"Journal of Institutional and Theoretical Economics-Zeitschrift Fur Die Gesamte Staatswissenschaft","volume":"1 1","pages":""},"PeriodicalIF":0.4,"publicationDate":"2019-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"67506465","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}
This study investigates how leadership affects public policies in markets where the number of firms is endogenously determined. We focus on the relationship between the relative efficiency of an incumbent firm and the optimal entry tax (entry barrier). We find that this relationship depends on whether the incumbent can commit to the output before the entries of new firms. The optimal entry tax is decreasing (res. increasing) in the productivity of the incumbent when it takes (res. does not take) leadership. We also find that the optimal entry barrier occurring when the incumbent takes leadership is lower than that when it does not.
{"title":"Entry License Tax: Stackelberg versus Cournot","authors":"Susumu Cato, Toshihiro Matsumura","doi":"10.1628/JITE-2019-0015","DOIUrl":"https://doi.org/10.1628/JITE-2019-0015","url":null,"abstract":"This study investigates how leadership affects public policies in markets where the number of firms is endogenously determined. We focus on the relationship between the relative efficiency of an incumbent firm and the optimal entry tax (entry barrier). We find that this relationship depends on whether the incumbent can commit to the output before the entries of new firms. The optimal entry tax is decreasing (res. increasing) in the productivity of the incumbent when it takes (res. does not take) leadership. We also find that the optimal entry barrier occurring when the incumbent takes leadership is lower than that when it does not.","PeriodicalId":46932,"journal":{"name":"Journal of Institutional and Theoretical Economics-Zeitschrift Fur Die Gesamte Staatswissenschaft","volume":"1 1","pages":""},"PeriodicalIF":0.4,"publicationDate":"2019-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"67506350","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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