Signaling Quality in an Oligopoly When Some Consumers Are Informed

This paper considers a signaling game between two competing firms and consumers. The firms have common private information concerning their qualities, and some of the consumers are informed about the firms' qualities. Firms use prices and uninformative advertising as signals of quality. The model reveals that in the separating equilibrium, prices are first climbing and then declining with the proportion of informed consumers, while the expenditure on uninformative advertising is declining. Firms' profits are highest when the proportion of informed consumers is at an intermediate level. Pooling equilibria exist if the proportion of informed consumers is below a certain threshold.     

Targeted advertising,platform competition,and privacy

Targeted advertising can benefit consumers through lower prices for access to web sites. Yet, if consumers dislike that web sites collect their personal information, their welfare may go down. We study competition for consumers between web sites that can show targeted advertisements. We find that more targeting increases competition and reduces the web sites' profits, but yet in equilibrium web sites choose maximum targeting as they cannot credibly commit to low targeting. A privacy protection policy can be beneficial for both consumers and web sites. If consumers are heterogeneous in their concerns for privacy, a policy that allows choice between two levels of privacy will be better. Optimal privacy protection takes into account that the more intense competition on the high‐targeting market segment also benefits consumers on the less competitive segment. Consumer surplus is maximized by allowing them a choice between a high‐targeting regime and a low‐targeting regime which affords more privacy.     

Signaling,selection and transition: empirical evidence on stepping-stones and vicious cycles in temporary agency work

Despite the growing importance of temporary work agencies, the benefits they bring to temporary agency employees (TAEs) are still disputed, and empirical findings are, by and large, mixed. Using a unique dataset comprising almost 12,000 TAEs on their first and second temporary work assignments, this work aims at disentangling the consequences of temporary agency work on the level of the individual TAE in Germany. We find that temporary agency work assignments act as learning devices for employers about the underlying ability of TAEs. High ability employees can show their qualities and fit with the organization with the time spent on temporary work assignments, albeit at decreasing rates. In addition, we find that if a TAE is assigned to a subsequent project after the first one, it is less likely that the employee transitions into permanent employment. Hence, we conclude that a division exists among TAEs: where the high ability employee may find it a stepping-stone to a desired permanent position, and others get trapped in it and have a hard time transitioning into permanent employment.     

Vertical differentiation,product innovation,and dynamic competition

This paper presents an infinite horizon dynamic model in which two firms compete in a market vertically differentiated by the qualities of their products and consumers have heterogeneous preferences for quality. Given the product qualities offered, the firms engage in price competition that segments the market. In each period each firm can spend on product innovation that if successful increases the quality of its product. Three types of Markov perfect equilibria are identified. A running–coasting equilibrium exhibits increasing quality dominance with one firm undertaking innovation and the other coasting to free ride on the innovation by the first firm. The firm that coasts can have the larger dynamic payoff, so quality dominance does not imply payoff dominance. A second is a leap‐frog equilibrium in which the trailing firm undertakes innovation to leap into the lead. The trailing firm never innovates solely to narrow the gap with the leader, so catch up strategies are never used. In the third both firms undertake innovation, but if both have innovation successes, product differentiation remains the same and profits are reduced by the cost of innovation. The rivalry between Intel and AMD in microprocessors for personal computers provides a motivating example.     

Firm entry,product repositioning and welfare

We show that the entry of a second firm in a horizontally differentiated market (ala Hotelling) may harm consumers as prices increase and consumer’s surplus possibly decrease. We first derive the price and the consumer’s surplus of a monopoly which is located at the center of the market. When a second firm enters the market the first firm repositions and the two firms locate at their equilibrium points. Although competition adds to variety and increases consumer’s surplus, the post entry increase in price may outweight the gains from extra variety and make consumers worse off.     

House prices, wealth effects, and the Singapore macroeconomy

This paper examines the effect housing wealth has upon aggregate consumption in Singapore. While past research has focused only on changes in private housing wealth, the residential market in Singapore is dominated by the public housing sector. The massive public housing segment can generate potentially different wealth effects from standard private housing markets given the former’s unique institutional features. In particular, public housing owners who sell their units at market rates can repurchase a public flat at subsidized prices whereas private homeowners typically cannot. We estimate the link between consumption expenditure and both private and public housing wealth using a VARX approach for the Q1:1990–Q4:2002 period. We find that changes in private house prices have no significant effect on aggregate consumption. In contrast, public housing wealth effects are larger and more persistent.     

食品安全危机中的信托责任:异化与重构

社会分工导致食品供应商与食品消费者产生委托代理关系,食品供应商需要对食品消费者承担信托责任,但是由于社会分工的日益细化,该种信托责任日益出现资本意志性、多元复杂性、非生态性等方面的异化.重构食品企业的信托责任需要进行顶层设计,食品供应商要树立食品安全危机意识,在经营理念中彰显社会责任;政府需要建立统一的委托代理机构,作为消费者的代言人,强化食品供应商的信托责任;建立一个公共的食品安全信息平台,降低食品供应商因为信息不对称而损害食品消费者利益的机会主义倾向.     

Bargains Followed by Bargains: When Switching Costs Make Markets More Competitive

In markets where consumers have switching costs and firms cannot price‐discriminate, firms have two conflicting strategies. A firm can either offer a low price to attract new consumers and build future market share or a firm can offer a high price to exploit the partial lock‐in of their existing consumers. This paper develops a theory of competition when overlapping generations of consumers have switching costs and firms produce differentiated products. Competition takes place over an infinite horizon with any number of firms. This paper shows that the relationship between the level of switching costs, firms' discount rate, and the number of firms determines whether firms offer low or high prices. Similar to previous duopoly studies, switching costs are likely to facilitate lower (higher) equilibrium prices when switching costs are small (large) or when a firm's discount rate is large (small). Unlike previous studies, this paper demonstrates that the number of firms also determines whether switching costs are pro‐ or anticompetitive, and with a sufficiently large (small) number of firms switching costs are pro‐ (anti‐) competitive.     

Learning quality through prices and word‐of‐mouth communication

This paper studies the effect of word‐of‐mouth communication on the optimal pricing strategy for new experience goods. I consider a dynamic monopoly model with asymmetric information about product quality, in which consumers learn in equilibrium from both prices and other consumers. The main result is that word‐of‐mouth communication is essential for the existence of separating equilibria, wherein the high‐quality monopolist signals high quality through a low introductory price (lower than the monopoly price), and the low‐quality one charges the monopoly price. The intuition is simple: low prices are costly, and will only be used by firms confident enough that increased experimentation (and therefore communication among consumers) will yield good news about quality and increased future profits. Additional results are the following: for the high‐quality seller, the expected price (quantity) is increasing (decreasing) over time; whereas for the low‐quality one, the opposite is true. Moreover, signaling becomes more difficult when consumers pay less attention to their peers' reports and more attention to past prices. Finally, word‐of‐mouth communication improves consumer welfare.     

Upstream Mergers,Downstream Competition,and R&D Investments

In this paper, we provide an explanation for why upstream firms merge, highlighting the role of R&D investments and their nature, as well as the role of downstream competition. We show that an upstream merger generates two distinct efficiency gains when downstream competition is not too strong and R&D investments are sufficiently generic: The merger increases R&D investments and decreases wholesale prices. We also show that upstream firms merge unless R&D investments are too specific and downstream competition is neither too weak nor too strong. When the merger materializes, the merger‐generated efficiencies pass on to consumers, and thus, consumers can be better off.     

Using survey data to study capitalization of local public services

We use surveys in which respondents evaluate local amenities in Norway to compute proxy variables for the quality of local public services as well as other local amenities relevant to location decisions. Average satisfaction reported by the respondents is computed for each amenity and each municipality, adjusted for sample variation in personal characteristics and included as explanatory variables in a cross-section study of house prices. We find that house prices are increasing in satisfaction with cultural activities, health care, care for the elderly and public transportation.     

Personalized Pricing and Quality Customization

We embed the principal–agent model in a model of spatial differentiation with correlated consumer preferences to investigate the competitive implications of personalized pricing and quality allocation (PPQ), whereby duopoly firms charge different prices and offer different qualities to different consumers, based on their willingness to pay. Our model sheds light on the equilibrium product-line pricing and quality schedules offered by firms, given that none, one, or both firms implement PPQ. The adoption of PPQ has three effects in our model: it enables firms to extract higher rents from loyal customers, intensifies price competition for nonloyal customers, and eliminates cannibalization from customer self-selection. Contrary to prior literature on one-to-one marketing and price discrimination, we show that even symmetric firms can avoid the well-known Prisoner's Dilemma problem when they engage in personalized pricing and quality customization. When both firms have PPQ, consumer surplus is nonmonotonic in valuations such that some low-valuation consumers get higher surplus than high-valuation consumers. The adoption of PPQ can reduce information asymmetry, and therefore sellers offer higher-quality products after the adoption of PPQ. Overall, we find that while the simultaneous adoption of PPQ generally improves total social welfare and firm profits, it decreases total consumer surplus.     

Resale price maintenance in a model of consumer search

A retail search model of Salop and Stiglitz (1977) is adapted to analyze manufacturer incentives for resale price maintenance. For some retailer cost functions and distributions of consumer search costs, imposition of a minimum price for retailers causes a price distribution to collapse to an intermediate price. Manufacturers may benefit from price floors when sales to high-search-cost consumers that have obtained lower prices increase sufficiently so as to offset decreased sales to other consumers facing higher prices. In contrast to previous work, no free-riding problem with respect to dealer services is necessary for manufacturers to prefer banning discounting of their products.     

Random encounters and information diffusion about product quality

This paper explores how social interactions among consumers shape markets. In a two-country model, consumers meet and exchange information about the quality of the goods. As information spreads, demand evolves, affecting the prices and quantities manufactured by profit-maximizing firms. We show that market prices with informational frictions reach the duopoly price with full information at the limit. However, this convergence can take different paths depending on the size asymmetry between countries. In particular, when the country producing the low-quality good is relatively large, the single market does not immediately turn into a duopoly and can be temporarily trapped in a situation of price instability where no Nash equilibrium in pure (but only in mixed) strategies exists and prices can fluctuate between their monopoly and duopoly levels. It follows that the classical price-reducing effects of international trade may take longer to appear. In view of an intense globalization process, understanding how social meetings affect market outcomes is critical for understanding the performance of international economic integration.     

Price dispersion and optimal price categories with limited memory consumers

In this paper, we study consumers with limited memory and examine the effects of their price categorization on the pricing strategies of competing firms. The valuations of consumers are assumed to be heterogeneous. We find that it is possible to observe price dispersion even when each firm charges a single price if the consumers categorize prices non‐optimally. Moreover, we demonstrate that the likelihood of a price dispersion outcome is reduced when consumers with limited memory set up the price categories optimally. These findings suggest that the consumers' limited memory and their sub‐optimal behavior, that is, their inability to choose price categories optimally can be a reason for observed price dispersion.     

Quality Competition, Insurance, and Consumer Choice in Health Care Markets

In this model, insurance offering a choice of hospitals is valued because consumers are uncertain which hospital they will prefer ex post. A competitive insurance market facilitates tacit price collusion between hospitals; high margins induce hospitals to compete for customers through overinvestment in quality. Incentives may exist to lock in market share via managed-care plans with less choice and lower prices. As technology becomes more expensive, the market increasingly offers too little choice. A pure managed care market may emerge, with underinvestment in quality. Relative to a pure insurance regime, however, all consumers are better off under managed care.     

Postsearch uncertainty,product heterogeneity,and price divergence

We develop a consumer search model in which consumers may remain uncertain about product quality even after inspecting the product. We first consider the postsearch uncertainty regarding vertical quality, and characterize the separating equilibrium in which firms with different quality levels charge different prices. If quality information is not sufficiently transparent after the search, then prices between the low- and the high-quality products can either diverge or converge as the search cost decreases, depending on the degrees of horizontal and vertical product differentiation. We further extend the model to include the postsearch uncertainty about the horizontal match value and to endogenize the firm's quality choice.     

On sellers' cooperation in hybrid marketplaces

Hybrid marketplaces, such as Amazon's and Zalando's stores or Apple's and Google's app stores, which distribute their own products and services in competition with those of third-party sellers, play a significant and growing role in the Internet economy. This paper shows that, other things equal, such platforms would maximize their profits if they lowered the fees charged to sellers and the prices charged to consumers in response to cooperation agreements between third-party sellers: horizontal mergers or collusive agreements. It also shows that such cooperation can be pro-competitive when the platform is a vertically integrated gatekeeper, adopts the agency business model, is a close competitor to the third-party sellers it hosts, and observes (or correctly anticipates) the third-party sellers' agreement. The discussion here is of significant policy relevance, since third-party sellers in online marketplaces may find it easier to collude and may respond to the bargaining power of certain gatekeeper platforms by merging their activities.     

Price and quantity competition among heterogeneous suppliers with two-part pricing: applications to clubs, local public goods, networks, and growth controls

Models of club goods, local public goods, and growth controls appear to have theoretical structures distinct from usual oligopoly models. This article shows, however, that they are special cases of a generalized oligopoly model that incorporates the possibility of two-part pricing and externalities between consumers (either congestion or network externalities). Our generalized two-part pricing model not only serves as a synthesis of a wide range of models but also allows us to obtain several new results on equilibrium prices. Another advantage of our model is that it can be interpreted as a reduced form of more complicated models that have spatial structures. This facilitates extension to the case where firms are heterogeneous and the number of firms is arbitrary.     

房地产商与购房者的博弈分析

房价是一个关系社会民生的问题,而作为市场经济中的一部分,房地产商与消费者之间进行的是买卖交易,从而存在双方买卖博弈。从2007年至今的房价下调,是在政府干预下的房地产商与消费者的博弈结果。在继续对峙的时期,房地产商与购房者各自该如何决策,怎样达到双赢及社会福利的最大化,文中采用买卖博弈,找出纳什均衡策略。