Strategic delegation under quality competition

This paper examines strategic manipulations of incentive contracts in a model where firms compete in quality as well as in price. Compensation schemes for managers are based on a linear combination of profits and sales. For a given level of quality, a firm desires to reduce the manager's compensation when product sales increase; this serves as the firm's commitment to raise prices. Nevertheless, in general, a manager has a stronger incentive to produce goods of higher quality if he is compensated according to sales. Therefore, a compensation scheme that penalizes a manager when sales increase may result in products that are inferior to those of its rival. We show that, depending on the nature of quality, a positive weight on sales may be desirable when firms compete in quality and price. Welfare implications are also explored.     

Strategic delegation in asymmetric tax competition

This study examines asymmetric tax competition under representative democracy systems. The findings show that the degree of asymmetry between countries affects the result of elections in each country, where the citizens select a policy‐maker to set a tax rate for the country. In particular, under certain conditions, a decisive voter in the election can select a citizen whose share of the country's capital is higher than the decisive voter's own share.     

Strategic behavior and competition: An overview

The eleven papers of the Journal of Economic Theory symposium issue, “Strategic Behavior and Competition,” are introduced. This symposium can be thought of as an outgrowth of the earlier symposium, “Noncooperative Approaches to the Theory of Perfect Competition,” which appeared in J. Econ. Theory 22 (1980).     

Strategic competition and optimal parallel import policy

Abstract In a two‐country Hotelling type duopoly model of price competition, we show that parallel import (PI) policy can act as an instrument of strategic trade policy. The home firm’s profit is higher when it cannot price discriminate internationally if and only if the foreign market is sufficiently bigger than the domestic one. The key mechanism in the model is that the home firm’s incentive to keep its domestic price close to the optimal monopoly price affects its behavior during price competition abroad. We also analyze the welfare implications of PI policies and show that our key insights extend to quantity competition.     

战略管理、制度依赖与行业竞争力——中国烟草行业实证分析

本文所指行业竞争力是指由行业整体盈利状况和核心企业竞争优势支撑起来的生存与发展能力。自1982年中国烟草总公司成立和1983年《烟草专卖条例》颁布实施以来,烟草行业主要依靠法律引人和行政命令,通过计划指标、许可证管制和各级烟草专卖机构,自上而下地建立了“统一领导、垂直管理、专卖专营”的国家烟草专卖制度。     

Strategic nonlinear income tax competition with perfect labor mobility

Tax competition between two governments who choose nonlinear income tax schedules to maximize the average utility of their residents when skills are unobservable and labor is perfectly mobile is examined. We show that there are no equilibria in which there is a skill type that pays positive taxes to one country and whose utility is larger than the average utility in the other country or in which the lowest skilled are subsidized. We also show that it is possible for the most highly skilled to receive a net transfer funded by taxes on lower skilled individuals in equilibrium. These findings confirm the race-to-the-bottom thesis in this setting.     

Strategic commitment and Cournot competition with labor-managed and profit-maximizing firms

This paper examines the behavior of a labor-managed income-per-member-maximizing firm and a profit-maximizing firm in a quantity-setting model with a strategic commitment. First, each firm independently decides whether or not to make a commitment to capacity. This capacity may subsequently be increased, but cannot be decreased. Hence, each firm’s investment choice changes its capital cost from a variable one into a fixed one. Second, each firm independently chooses its actual output. The paper examines the equilibrium of the quantity-setting mixed model and shows whether or not capacity investment is effective for the labor-managed firm and the profit-maximizing firm.     

Strategic R&D policy under multiproduct duopoly and quality-price competition

This paper analyses strategic R&D policy in a third-country trade model where multiproduct firms with different production technologies compete in a vertically differentiated market. I show that the optimal R&D policies for both countries are subsidies when the product market is under price competition.     

Strategic corporate social responsibility,imperfect competition,and market concentration

We examine the strategic use of corporate social responsibility (CSR) in imperfectly competitive markets. Before firms decide upon supply, they choose a level of CSR which determines the weight they put on consumer surplus in their objective function. First, we consider Cournot competition and show that the endogenous level of CSR is positive for any given number of firms. However, positive CSR levels imply smaller equilibrium profits. Second, we find that an incumbent monopolist can use CSR as an entry deterrent. Both results indicate that CSR may increase market concentration. Finally, we show that CSR levels decrease as the degree of product heterogeneity increases in Cournot competition and are zero in Bertrand Competition.     

Strategic commitment with R&D: The case of Bertrand competition

When there is multiplicatively separable demand and firms compete in the price dimension, there is no room for strategic use of R&D by firms. Under a different demand situation, strategic use of R&D by firms competing in the price dimension reduces R&D spending, reduces output, increases price, and increases profits of each firm.     

Strategic incentives under vertical integration: the case of wireline-affiliated wireless carriers and intermodal competition in the US

In its review of the Cingular/AT&T Wireless merger, the FCC noted the potentially conflicting incentives of wireline-affiliated (vertically integrated) versus independent (non-integrated) wireless carriers to act as intermodal competitors in the wireline exchange access market. Specifically, because Cingular and Verizon Wireless are owned by wireline carriers, they may have an incentive to compete “less aggressively” within their parents’ wireline territories while AT&T Wireless, an independent wireless carrier, would not. This paper examines these and other hypotheses by examining pre-merger data on the wireless plans offered by the three carriers. The empirical analysis suggests that AT&T Wireless did not design its plans based upon a regional strategy, whereas Cingular offered substantially smaller-minute wireless plans within its parents’ wireline territories. However, the results also suggest that Verizon Wireless did not design its plans in a markedly different fashion within and outside of its parent’s wireline region. It is posited that these findings might reflect the differing ownership and control structures of Cingular and Verizon Wireless.      

On the accessibility of core-extensions

Sengupta and Sengupta (1996) study the accessibility of the core of a TU game and show that the core, if non-empty, can be reached from any non-core allocation via a finite sequence of successive blocks. This paper complements the result by showing that when the core is empty, a number of non-empty core-extensions, including the least core and the weak least core (Maschler et al., 1979), the positive core (Orshan and Sudhölter, 2001) and the extended core (Bejan and Gómez, 2009), are accessible in a strong sense, namely each allocation in each of the foregoing core-extensions can be reached from any allocation through a finite sequence of successive blocks.     

Entrepreneurial innovations,competition and competition policy

We construct a model where an entrepreneur can innovate for entry or for sale. It is shown that increased product market competition tends to increase the relative profitability of innovation for sale. Increased competition not only reduces the profits of entrants and the acquirer of the inventions in a similar fashion, but also reduces the profit of non-acquirers. Therefore, incumbents' valuations of innovations are less negatively affected by increased competition, and the incentive for innovation for sale can increase with increased competition. Moreover, a stricter, but not too strict, merger policy is shown to increase the incentive for innovations for sale by ensuring the bidding competition for the innovation.     

Undesirable competition

We show that the entry of private profit-maximising firms makes the consumers worse off compared to having a nationalised monopoly. Such entry increases the nationalised firm’s profit, industry profit, and social welfare, at the expense of the consumers. Our result is important for competition policy.     

战略计划与战略思维简析

战略计划在战略管理中占有重要地位,但这一思想后来受到了许多管理学家的批评,有关战略计划与战略思维的关系,是理论界长期争辩的一个问题。本文对战略计划的批判性观点,以及战略计划与战略思维的关系的主要观点进行了梳理。在此基础上,从理论上分析了战略管理者应具有辩证思维,战略计划与战略思维是辩证统一的关系,并提出了在实践中保持二者辩证统一的机制。     

Site accessibility and prioritization of nature reserves

Nature reserves not only protect habitat-stressed species but also provide recreation and welfare services to people. Therefore, site accessibility matters in reserve design. This study incorporates public accessibility, determined by urban populations and distances between urban areas and reserve sites, as an additional factor in conservation reserve design besides species representation and economic characteristics of individual sites. An optimization approach is introduced to determine a reserve network with maximum accessibility while satisfying specified representation targets under financial constraints. The paper also presents an empirical application of this approach to endangered/threatened birds in Illinois, USA, and analyzes the tradeoffs between ecological, economic, and social objectives of biological conservation. The results show that: i) the conventional minimal representation approach would result in a small reserve network, but this network would have poor accessibility; ii) public accessibility can be improved significantly by selecting alternative sites with the same amount of conservation budget; iii) further improvement in accessibility can be achieved by enlarging the network, but in this particular case the gains would be insignificant after the first few additional sites; and iv) a regionally integrated conservation plan, as opposed to decentralized conservation efforts, is beneficial for both species protection and social welfare.     

Dynamic price competition

We consider the model of price competition for a single buyer among many sellers in a dynamic environment. The surplus from each trade is allowed to depend on the path of previous purchases, and as a result, the model captures phenomena such as learning by doing and habit formation in consumption.We characterize Markovian equilibria for finite and infinite horizon versions of the model and show that the stationary infinite horizon version of the model possesses an efficient equilibrium where all the sellers receive an equilibrium payoff equal to their marginal contribution to the social welfare.     

Winner-take-all price competition

Summary. We analyze an oligopoly model of homogeneous product price competition that allows for discontinuities in demand and/or costs. Conditions under which only zero profit equilibrium outcomes obtain in such settings are provided. We then illustrate through a series of examples that the conditions provided are “tight” in the sense that their relaxation leads to positive profit outcomes. Received: April 7, 2000; revised version: September 14, 2000