This paper analyzes the Ak model with anticipated future consumption. In the model with internal anticipation individual’s utility depends on current consumption and a forward-looking reference level which is formed from individual’s own future consumption. The global dynamics of the economy is characterized by means of a qualitative phase diagram analysis. In the model with external anticipation the consumption reference level is formed from economy-wide average future consumption, which is taken as given by individuals and causes the competitive equilibrium to be inefficient. Characterizing the global dynamics of the economy is required to characterize an optimal fiscal policy that corrects the inefficiency brought about by this external effect.
本文分析了具有未来消费预期的 Ak 模型。在具有内部预期的模型中，个人的效用取决于当前的消费和一个前瞻性的参考水平，该参考水平由个人自身的未来消费形成。通过定性相图分析，可以看出经济的整体动态。在有外部预期的模型中，消费参考水平是由整个经济的未来平均消费形成的，而个人认为未来平均消费是给定的，这就导致了竞争性均衡的低效率。要确定最佳财政政策的特征，以纠正这种外部效应带来的低效率，就必须确定经济的全球动态特征。
{"title":"Global Dynamics and Optimal Policy in the Ak Model with Anticipated Future Consumption","authors":"Manuel A. Gomez","doi":"10.1515/bejte-2023-0080","DOIUrl":"https://doi.org/10.1515/bejte-2023-0080","url":null,"abstract":"\u0000 This paper analyzes the Ak model with anticipated future consumption. In the model with internal anticipation individual’s utility depends on current consumption and a forward-looking reference level which is formed from individual’s own future consumption. The global dynamics of the economy is characterized by means of a qualitative phase diagram analysis. In the model with external anticipation the consumption reference level is formed from economy-wide average future consumption, which is taken as given by individuals and causes the competitive equilibrium to be inefficient. Characterizing the global dynamics of the economy is required to characterize an optimal fiscal policy that corrects the inefficiency brought about by this external effect.","PeriodicalId":501460,"journal":{"name":"The B.E. Journal of Theoretical Economics","volume":"7 2","pages":""},"PeriodicalIF":0.0,"publicationDate":"2024-03-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"140248289","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This article examines firms’ choices on partial (in)attention prior to quantity competition. Being partially (in)attentive, a firm accounts for a part of its market impact. We find that regardless of the number of firms, there is always a unique subgame perfect Nash equilibrium where all firms choose to be partially attentive. The optimal attention level decreases in the number of firms, increases in product differentiation, and converges to zero, i.e. firms tend to be fully inattentive, as either the number of firms goes to infinity or product differentiation goes to zero.
{"title":"Strategic Partial Inattention in Oligopoly","authors":"Lijun Pan","doi":"10.1515/bejte-2023-0028","DOIUrl":"https://doi.org/10.1515/bejte-2023-0028","url":null,"abstract":"\u0000 This article examines firms’ choices on partial (in)attention prior to quantity competition. Being partially (in)attentive, a firm accounts for a part of its market impact. We find that regardless of the number of firms, there is always a unique subgame perfect Nash equilibrium where all firms choose to be partially attentive. The optimal attention level decreases in the number of firms, increases in product differentiation, and converges to zero, i.e. firms tend to be fully inattentive, as either the number of firms goes to infinity or product differentiation goes to zero.","PeriodicalId":501460,"journal":{"name":"The B.E. Journal of Theoretical Economics","volume":"65 7","pages":""},"PeriodicalIF":0.0,"publicationDate":"2024-03-07","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"140077981","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract Using an appropriate game-theoretic approach, this article develops a non-cooperative two-stage game in a Cournot duopolistic network industry in which firms strategically choose whether to produce compatible goods in the first decision-making stage. Quality differentiation affects the sub-game perfect Nash equilibrium (SPNE): (i) the network effect acts differently between low- and high-quality firms, depending on their compatibility choice; (ii) if the network externality is positive (resp. negative), to produce compatible (resp. incompatible) goods is the unique SPNE; however, this equilibrium configuration leads the high-quality firm to be worse off; (iii) there is room for a side payment from the high- to the low-quality firm to deviate toward incompatibility (resp. compatibility) under positive (resp. negative) network externality. This payment represents a Pareto improvement on the firm side but not from a societal perspective, as consumers would be worse off. The article also pinpoints the social welfare outcomes corresponding to the SPNE.
{"title":"Product Quality and Product Compatibility in Network Industries","authors":"D. Buccella, L. Fanti, L. Gori","doi":"10.1515/bejte-2023-0014","DOIUrl":"https://doi.org/10.1515/bejte-2023-0014","url":null,"abstract":"Abstract Using an appropriate game-theoretic approach, this article develops a non-cooperative two-stage game in a Cournot duopolistic network industry in which firms strategically choose whether to produce compatible goods in the first decision-making stage. Quality differentiation affects the sub-game perfect Nash equilibrium (SPNE): (i) the network effect acts differently between low- and high-quality firms, depending on their compatibility choice; (ii) if the network externality is positive (resp. negative), to produce compatible (resp. incompatible) goods is the unique SPNE; however, this equilibrium configuration leads the high-quality firm to be worse off; (iii) there is room for a side payment from the high- to the low-quality firm to deviate toward incompatibility (resp. compatibility) under positive (resp. negative) network externality. This payment represents a Pareto improvement on the firm side but not from a societal perspective, as consumers would be worse off. The article also pinpoints the social welfare outcomes corresponding to the SPNE.","PeriodicalId":501460,"journal":{"name":"The B.E. Journal of Theoretical Economics","volume":" 45","pages":""},"PeriodicalIF":0.0,"publicationDate":"2023-12-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"138994822","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract This paper analyzes the impacts of product differentiation in general oligopolistic equilibrium with trade. With constant wages, when product differentiation increases, the extensive margins of home and foreign exports decrease, and the domestic and foreign scopes of variety in each industry increase unambiguously. However, the impact of product differentiation on the labor requirement of each firm is mixed. In general equilibrium, an increment of product differentiation increases the wage rate unambiguously if the total variety of goods is large enough in all industry. However, if all firms are single-product ones, an increment of product differentiation increases the wage rate unambiguously in general equilibrium.
{"title":"Product Differentiation and Trade","authors":"Jiancai Pi, Yanwei Fan","doi":"10.1515/bejte-2023-0016","DOIUrl":"https://doi.org/10.1515/bejte-2023-0016","url":null,"abstract":"Abstract This paper analyzes the impacts of product differentiation in general oligopolistic equilibrium with trade. With constant wages, when product differentiation increases, the extensive margins of home and foreign exports decrease, and the domestic and foreign scopes of variety in each industry increase unambiguously. However, the impact of product differentiation on the labor requirement of each firm is mixed. In general equilibrium, an increment of product differentiation increases the wage rate unambiguously if the total variety of goods is large enough in all industry. However, if all firms are single-product ones, an increment of product differentiation increases the wage rate unambiguously in general equilibrium.","PeriodicalId":501460,"journal":{"name":"The B.E. Journal of Theoretical Economics","volume":"100 11","pages":""},"PeriodicalIF":0.0,"publicationDate":"2023-12-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"138999707","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract This study focuses on firms with cost-efficient technology that use licensing to influence product market behaviour, market prices and outputs and the resulting welfare effects. We show how licensing fees can be constructed that lead to identical collective industry outputs as under collusion while industry output is equal to or higher than that achieved under competition and sustained in equilibrium. Hence, consumers are either indifferent to firms’ collusion or better off when they do collude, whereas firms (producers) are always better off due to the improved cost efficiency of integrating the new production technology. This provides a theoretical foundation that explains why technology licensing is observed in highly concentrated industries characterised by significant diseconomies of scale relative to demand. We contribute to the literature by demonstrating how technology licensing involving collusion can reduce the dissipation effect and improve social welfare in oligopolistic industries. An important policy implication is that collusion involving technology licensing should not always be challenged by antitrust authorities, particularly when it does not transfer welfare from consumers to producers.
{"title":"A Theoretical Analysis of Collusion Involving Technology Licensing Under Diseconomies of Scale","authors":"Ted Lindblom, Aineas Mallios, Stefan Sjögren","doi":"10.1515/bejte-2022-0148","DOIUrl":"https://doi.org/10.1515/bejte-2022-0148","url":null,"abstract":"Abstract This study focuses on firms with cost-efficient technology that use licensing to influence product market behaviour, market prices and outputs and the resulting welfare effects. We show how licensing fees can be constructed that lead to identical collective industry outputs as under collusion while industry output is equal to or higher than that achieved under competition and sustained in equilibrium. Hence, consumers are either indifferent to firms’ collusion or better off when they do collude, whereas firms (producers) are always better off due to the improved cost efficiency of integrating the new production technology. This provides a theoretical foundation that explains why technology licensing is observed in highly concentrated industries characterised by significant diseconomies of scale relative to demand. We contribute to the literature by demonstrating how technology licensing involving collusion can reduce the dissipation effect and improve social welfare in oligopolistic industries. An important policy implication is that collusion involving technology licensing should not always be challenged by antitrust authorities, particularly when it does not transfer welfare from consumers to producers.","PeriodicalId":501460,"journal":{"name":"The B.E. Journal of Theoretical Economics","volume":"45 7","pages":""},"PeriodicalIF":0.0,"publicationDate":"2023-12-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"138633101","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract The television broadcasting industry is of crucial economic and social importance. Traditionally, this industry has been dominated by free-to-air TV (FTV) but due to technological progress, subscription-based pay TV (PTV) has emerged as a competing business model. A key question for the PTV broadcasters is whether to air commercials in addition to charging subscription fees. Based on a theoretical model of asymmetric competition between a PTV and an FTV broadcaster, we examine the effects of placing PTV advertising on broadcaster market strategies, viewer demands, broadcaster profits and consumer surplus. We find that introducing advertising on PTV can induce a higher viewer demand on this channel but a lower viewer demand on the FTV channel. Surprisingly, consumers can benefit through the introduction of advertising in PTV and broadcaster profits can increase if the viewer disutility of advertising is sufficiently large. Our study provides an analytical framework for choosing and implementing an optimal PTV strategy when an FTV competitor preexists in the market. Furthermore, our study derives implications for policymakers and regulatory authorities by showing that additional PTV advertising is not necessarily socially undesirable due to the strategic market reactions.
{"title":"The Effects of Introducing Advertising in Pay TV: A Model of Asymmetric Competition between Pay TV and Free TV","authors":"Helmut Dietl,Markus Lang,Panlang Lin","doi":"10.1515/bejte-2021-0068","DOIUrl":"https://doi.org/10.1515/bejte-2021-0068","url":null,"abstract":"Abstract The television broadcasting industry is of crucial economic and social importance. Traditionally, this industry has been dominated by free-to-air TV (FTV) but due to technological progress, subscription-based pay TV (PTV) has emerged as a competing business model. A key question for the PTV broadcasters is whether to air commercials in addition to charging subscription fees. Based on a theoretical model of asymmetric competition between a PTV and an FTV broadcaster, we examine the effects of placing PTV advertising on broadcaster market strategies, viewer demands, broadcaster profits and consumer surplus. We find that introducing advertising on PTV can induce a higher viewer demand on this channel but a lower viewer demand on the FTV channel. Surprisingly, consumers can benefit through the introduction of advertising in PTV and broadcaster profits can increase if the viewer disutility of advertising is sufficiently large. Our study provides an analytical framework for choosing and implementing an optimal PTV strategy when an FTV competitor preexists in the market. Furthermore, our study derives implications for policymakers and regulatory authorities by showing that additional PTV advertising is not necessarily socially undesirable due to the strategic market reactions.","PeriodicalId":501460,"journal":{"name":"The B.E. Journal of Theoretical Economics","volume":"161 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2022-03-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"138535109","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract We consider a private-value auction with one-sided incomplete information in which two objects are sold in a sequence of two second-price auctions. The buyers have multiunit demand and are asymmetrically informed at the ex ante stage of the game. One buyer perfectly knows his type, and the other buyer is uninformed about her own type. We consider interim information acquisition by the uninformed buyer and derive an asymmetric equilibrium that is shown to produce a declining price sequence across both sales. The supermartingale property of the price sequence stems from the uninformed buyer’s incentives to gather private information, which leads to aggressive bidding in the first-stage auction.
{"title":"Uninformed Bidding in Sequential Auctions","authors":"Emmanuel Lorenzon","doi":"10.1515/bejte-2021-0009","DOIUrl":"https://doi.org/10.1515/bejte-2021-0009","url":null,"abstract":"Abstract We consider a private-value auction with one-sided incomplete information in which two objects are sold in a sequence of two second-price auctions. The buyers have multiunit demand and are asymmetrically informed at the ex ante stage of the game. One buyer perfectly knows his type, and the other buyer is uninformed about her own type. We consider interim information acquisition by the uninformed buyer and derive an asymmetric equilibrium that is shown to produce a declining price sequence across both sales. The supermartingale property of the price sequence stems from the uninformed buyer’s incentives to gather private information, which leads to aggressive bidding in the first-stage auction.","PeriodicalId":501460,"journal":{"name":"The B.E. Journal of Theoretical Economics","volume":"49 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2022-02-28","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"138535115","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract We study Butters’s (1977. “Equilibrium Distributions of Sales and Advertising Prices.” The Review of Economic Studies 44 (3): 465–91) model under concave advertising costs, and determine a class of cost functions such that each seller sends the same finite number of ads in equilibrium. Then we consider the limit economy where the number of buyers and sellers grow indefinitely, and show that the equilibrium of the finite economy does not converge to an equilibrium in the limit economy.
{"title":"Equilibrium Pricing under Concave Advertising Costs","authors":"Klaus Kultti,Teemu Pekkarinen","doi":"10.1515/bejte-2021-0169","DOIUrl":"https://doi.org/10.1515/bejte-2021-0169","url":null,"abstract":"Abstract We study Butters’s (1977. “Equilibrium Distributions of Sales and Advertising Prices.” The Review of Economic Studies 44 (3): 465–91) model under concave advertising costs, and determine a class of cost functions such that each seller sends the same finite number of ads in equilibrium. Then we consider the limit economy where the number of buyers and sellers grow indefinitely, and show that the equilibrium of the finite economy does not converge to an equilibrium in the limit economy.","PeriodicalId":501460,"journal":{"name":"The B.E. Journal of Theoretical Economics","volume":"84 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2022-02-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"138535114","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract This paper examines the environmental effect of political connections at the individual and organizational levels. We integrate political connections at both levels in a four-stage game-theoretic framework to study the political interplay between an entrepreneur, a bureaucrat and a government. We distinguish individual-level political connections from bribery and argue that while the latter is generally more efficient for the firm aiming to reduce environmental tax payments, political connections become more appealing when the bureaucrat places a higher value on indirect non-monetary benefits. We find that individual-level political connections are associated with more emission discharges by the firm, while the effect of organizational-level political connections on emissions depends on a negative interaction effect between political connections at different levels and a positive resource-reallocation effect between abatement activities and production.
{"title":"Politically Connected Firms and the Environment","authors":"Haowei Yu,Lin Zhang","doi":"10.1515/bejte-2020-0167","DOIUrl":"https://doi.org/10.1515/bejte-2020-0167","url":null,"abstract":"Abstract This paper examines the environmental effect of political connections at the individual and organizational levels. We integrate political connections at both levels in a four-stage game-theoretic framework to study the political interplay between an entrepreneur, a bureaucrat and a government. We distinguish individual-level political connections from bribery and argue that while the latter is generally more efficient for the firm aiming to reduce environmental tax payments, political connections become more appealing when the bureaucrat places a higher value on indirect non-monetary benefits. We find that individual-level political connections are associated with more emission discharges by the firm, while the effect of organizational-level political connections on emissions depends on a negative interaction effect between political connections at different levels and a positive resource-reallocation effect between abatement activities and production.","PeriodicalId":501460,"journal":{"name":"The B.E. Journal of Theoretical Economics","volume":"30 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2021-11-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"138543028","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract Tort models assume symmetry in the behavior of injurers and victims when faced by a threat of liability and a risk of harm without compensation, respectively. This assumption has never been empirically validated. Using a novel experimental design, we study the behavior of injurers and victims when facing symmetric accident risks. Experimental results provide qualified support for the symmetric behavior hypothesis.
{"title":"Injurers versus Victims: (A)Symmetric Reactions to Symmetric Risks","authors":"Alice Guerra,Francesco Parisi","doi":"10.1515/bejte-2020-0101","DOIUrl":"https://doi.org/10.1515/bejte-2020-0101","url":null,"abstract":"Abstract Tort models assume symmetry in the behavior of injurers and victims when faced by a threat of liability and a risk of harm without compensation, respectively. This assumption has never been empirically validated. Using a novel experimental design, we study the behavior of injurers and victims when facing symmetric accident risks. Experimental results provide qualified support for the symmetric behavior hypothesis.","PeriodicalId":501460,"journal":{"name":"The B.E. Journal of Theoretical Economics","volume":"25 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2021-09-28","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"138535707","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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