Does entry improve welfare? A general equilibrium approach to competition policy

We consider a simple general equilibrium model with imperfect competition. Firms are price takers in the input market and compete à la Cournot in some or all of the product markets and their technologies display constant returns to scale. We show that an increase in the number of firms in a given sector does not always improve welfare. We also provide a characterization in terms of mark-up rates of the sectors for which entry is welfare enhancing. Our results challenge the common idea that mergers with no cost synergy are not desirable for consumers.     

Facebook Pages Content,Does it Really Matter? Consumers’ Responses to Luxury Hotel Posts with Emotional and Informational Content

This paper examines clients’ responses to luxury hotel posts with either an informational or an emotional appeal. The luxury hotel industry is selected for its hedonic characteristics and its use of Facebook as a branding tool. An experiment with repeated measurement was conducted involving 45 young adults, clients of luxury hotels, and users of Facebook. An informational appeal is more effective in improving the attitude toward the hotel signature (“Sheraton”, in the context of this study) and in improving the perception of quality than an emotional appeal. Yet, the content of the posts has no influence on the intention to stay at the hotel and the intention to follow the hotel on Facebook. Managerial implications are drawn on the choice of content of Facebook pages.     

Victoria's Dirty Secrets

Abstract

“Donna Karan Bunny Butcher,” “Bloody Burberry”: Not-for-profit (NFP) campaigns regularly take brands hostage. These shock tactics are meant to bring publicity to targeted companies' practices that are deemed socially and environmentally irresponsible. The aim is to coerce such firms into complying with NFPs' demands, for fear of consumers' backlash. Surprisingly, there is scant evidence showing the impact of these messages on consumer behavior. This paper examines consumer response to messages targeting brands in the context of the luxury fashion industry. Two experiments, involving repeated measurement and between-subjects message manipulation (framing and target), were conducted. Results show that eco-involvement and product involvement are moderators of consumer response.