Industry equilibrium under random demand

The paper deals with the characterization of long-run industry equilibrium under random demand, for the two polar cases of perfect competition and pure monopoly. Contrary to the basic theorem of welfare economics for the standard (deterministic) case, it is shown that perfect competition does not in general lead to an optimal (efficient) outcome. Perfect competition is optimal if and only if firms display risk-neutrality with respect to profits. Surprisingly enough, when risk preferences are non-neutral, one could by means of price regulation lead monopoly to behave optimally, whereas this is impossible for competition.     

Trade Policies for Exporting Industries under Free Entry

This paper computes optimal export taxes and domestic production subsidies for exporting industries under free entry. We show that domestic welfare is not at maximum, as is typically believed, when the export price is a monopoly price, and the domestic price is a competitive price, because a market structure effect has to be taken into account. Furthermore, we show that the optimal tax/subsidy formulas for an oligopoly coincide with those under perfect competition, if foreign and domestic demand functions are both linear. We also discuss optimal trade policies when only one instrument is available, and we run numerical simulations to determine and compare optimal trade taxes under endogenous and exogenous market structures.     

价格歧视战略与福利效应分析

在完全竞争市场条件下 ,竞争均衡可实现帕累托最优效率。垄断市场一般很难提供价格等于边际成本的产量水平 ,其产量与价格选择对社会来说不是最优的。垄断厂商以内生范畴和外生范畴为基础对消费者进行分类 ,使得价格歧视成为一种可行战略。由于定价策略存在差异 ,不同类型的价格歧视便具有不同的福利效应。     

Endogenous rationing,price dispersion and collusion in capacity constrained supergames

This paper examines the feasibility of collusion in capacity constrained duopoly supergames. In each period firms simultaneously set a price–quantity pair specifying the price for the period and the maximum quantity the firm is willing to sell at this price. Under price–quantity competition firms are able to ration their output below capacity. For a wide range of capacity pairs, the equilibrium path providing the smaller firm with its highest stationary perfect equilibrium payoff requires that it undercut its rival’s price and ration demand. Furthermore, for some capacities and discount factors supporting security level punishments, price shading and rationing arise everywhere on the set of stationary perfect equilibrium paths yielding (constrained) Pareto optimal payoffs. That is, price shading may not only be consistent with optimal collusion, it may be a requirement of optimal collusion.     

Competitive Permit Markets and Vertical Structures: The Relevance of Imperfectly Competitive Eco‐Industries

Permit markets lead polluting firms to purchase abatement goods from an eco‐industry which is often concentrated. This paper studies the consequences of this sort of imperfectly competitive eco‐industry on the equilibrium choices of the competitive polluting firms. It then characterizes the second‐best pollution cap. By comparing this situation to one of perfect competition, we show that Cournot competition on the abatement good market contributes not only to a nonoptimal level of emission reduction but also to a higher permit price, which reduces the production level. These distortions increase with market power, measured by the margin taken by the noncompetitive firms, and suggest a second‐best larger pollution cap.     

Bidding in an Electricity Pay-as-Bid Auction

One of the main elements of the recent reform of electricity trading in the United Kingdom is the change from a uniform price auction in the wholesale market to discriminatory pricing. We analyze this change under two polar market structures (perfectly competitive and monopolistic supply), with demand uncertainty. We find that under perfect competition there is a trade-off between efficiency and consumer surplus between the two auction rules. We also establish that a move from uniform to discriminatory pricing under monopoly conditions has a negative impact on profits and output (weakly), a positive impact on consumer surplus, and ambiguous implications for welfare and average prices.     

SPATIAL PERFECT COMPETITION: A UNIFORM DELIVERED PRICING MODEL

Abstract.  Spatial competition is often probed in terms of spatial oligopoly and/or monopolistic competition in the literature. This paper considers spatial competition as a form of perfect competition, in the sense that the firms are assumed to be price-takers located at the centre of a market area and practising uniform pricing. It shows that under scale economy competitive equilibria can occur, and may actually be observed in the form of international price differentials. Both a very high price and a very low price can yield conditions of competitive equilibrium in spatially or otherwise separate markets.     

Search, common knowledge, and competition

This paper analyzes the effects of buyer search costs and seller private and common knowledge on seller competition. It shows that lack of common knowledge results in the equilibrium price continuously decreasing to the perfectly competitive one as buyer search costs for price decrease from positive for all buyers to zero for all buyers, even if each market agent's uncertainty (in the private knowledge) is small. At the same time, if the uncertainty of each seller about buyer valuations is small, the effects of a small change in the search costs or of information structure on pricing may be large (but continuous).     

Regret theory and the competitive firm

This paper examines the production decision of the competitive firm under uncertainty when the firm is not only risk averse but also regret averse. Regret-averse preferences are characterized by a modified utility function that includes disutility from having chosen ex-post suboptimal alternatives. The extent of regret depends on the difference between the actual profit and the maximum profit attained by making the optimal production decision had the firm observed the true realization of the random output price. If the firm is not too regret averse, we show that the conventional result that the optimal output level under uncertainty is less than that under certainty holds. Using a simple binary model wherein the random output price can take on either a low value or a high value with positive probability, we show the possibility that the firm may optimally produce more, not less, under uncertainty than under certainty, particularly when the firm is sufficiently regret averse and the low output price is very likely to prevail.     

Retrading in market games

When agents are not price takers, they typically cannot obtain an efficient real location of resources in one round of trade. This paper presents a non-cooperative model of imperfect competition where agents can retrade allocations, consistent with Edgeworth's idea of recontracting. We show (a) there are Pareto optimal allocations, including competitive equilibrium allocations, that can be approximated arbitrarily closely when trade is myopic, i.e., when agents play a static Nash equilibrium at every round of retrading; (b) any converging sequence of allocations generated by myopic retrading can be supported along some retrade-proof subgame perfect equilibrium path when traders anticipate future rounds of trading.     

Endogenous market structures and the optimal financial structure

Abstract We characterize the optimal financial structure as a strategic device to optimize the value of a firm competing in a market where entry is endogenous. Debt financing is always optimal under quantity competition, and, contrary to the Brander‐Lewis‐Showalter results based on duopolies, we show the optimality of moderate debt financing also under price competition with cost uncertainty (but not with demand uncertainty). We derive the formulas for the optimal financial structure, which does not affect the strategies of the other firms but reduces their number.     

A DYNAMIC ENTRY AND PRICE GAME WITH CAPACITY INDIVISIBILITY

Strategic market interaction is here modelled as a two‐stage game in which potential entrants choose capacities and next active firms compete in prices. Due to capital indivisibility, the capacity choice is made from a finite grid and there are economies of scale. In the simplest version of the model with a single production technique, the equilibrium turns out to depend on the ratio between the level of total output at the long‐run competitive equilibrium and the firm's minimum efficient scale: if that ratio is sufficiently large (the market is sufficiently ‘large’), then the competitive price emerges at a subgame‐perfect equilibrium of the capacity and price game; if not, then the firms randomize in prices on the equilibrium path. The role of the market size for the competitive outcome is shown to be even more important if there are several available production techniques.     

产业市场环境特征与企业战略风险

竞争战略理论一直强调产业市场环境对企业竞争绩效不确定性的影响,从产业竞争构成来看,这一环境可分为产业结构、产业演变、产业位势和产业合作关系,四种产业环境特征通过对竞争构成要素的改变进而影响到企业的长期绩效水平。这一产业环境系统构成了企业战略的外部性风险要素。产业结构性风险表现在产业结构的不确定性、竞争构成因素的变化和竞争战略的相对均衡性上。产业在从导入到成长、成熟、衰退的演变过程中,产业结构以其竞争要素产生根本性改变,最终影响到企业竞争的基础和生存的条件,导致投资陷阱和战略的非理性风险。以规模和市场份额为特征的产业住势风险同样表现在对产业市场结构稳定性的影响上,其风险在于能否保持理想市场份额和规模经济性。产业合作在共享利益的同时,存在着价格和数量的背叛以及效率、代价和学习不对称等产业合作风险。     

Ambiguous Social Welfare Effects of Price Regulation Under Imperfect Competition

Conventional wisdom is that a binding price ceiling increases output and so increases social welfare if imposed on an imperfectly competitive market. However, this paper shows that a price ceiling can be harmful to social welfare even though it increases industry output and consumer surplus. This model can be applied to the pharmaceutical industry under price control in many countries, e.g., U.K., Canada, Germany and Japan.     

INTEGER PRICING AND BERTRAND-EDGEWORTH OLIGOPOLY WITH STRICTLY CONVEX COSTS: IS IT WORTH MORE THAN A PENNY?

In this paper we analyse the implications of integer pricing for Bertrand Edgeworth oligopoly with strictly convex costs. When price is a continuous variable, there is a generic non-existence of pure-strategy equilibrium. In the case of integer pricing, this is not so. We characterize a set of possible single price equilibria around the competitive price, which if non-empty will constitute the set of single price equilibria if the industry is large enough. Furthermore, we provide an example in which the highest equilibrium price can be arbitrarily far from the competitive price.     

反垄断调查的一个鉴别：一致性定价行为背后的差异与合谋

如何区分成本上涨时企业同时涨价的行为究竟是价格合谋还是寡头竞争的企业正常的价格调整行为？这是反垄断执法机构面临的一个难题。本文通过数理模型证明了无论企业进行伯川德竞争还是古诺竞争，寡头竞争的企业的定价随着成本的变化存在一个连续调整路径，而组成卡特尔的企业的定价则会随着成本的变化出现一个不连续的跳跃。因此反垄断执法机构在观察到企业的一致性定价行为之后，如果能从以往的价格监测纪录中发现这些企业在成本下跌时，价格存在着更大幅度的下调，则可以据此怀疑这些企业存在着价格合谋，应开展更深入的调查来搜集这些企业违反《反垄断法》的全面证据。     

Value theory with personalized trading

This paper extends existing general equilibrium theory to describe the competitive production and allocation of “personalized commodities:” commodities with only one potential buyer or seller. The basic, novel theoretic possibility introduced into value theory with the introduction of personalized trading—the trading of personalized commodities—is that price discrimination over quantity may occur under perfect competition. Theorems on the existence and optimality of competitive equilibria under discriminatory pricing are proved.     

Nonlinear pricing with self-control preferences

A basic assumption of economics is that consumers choose what they want. However, many consumers find it difficult to stop overeating, overspending, smoking, procrastinating, etc, even though they want to. In reality, consumers have temptation and it is psychologically costly to exercise self-control. To clarify the implications of the existence of temptation and self-control costs, this paper studies a firm's optimal selling strategy exploiting the behavioral features of consumers. We characterize optimal nonlinear pricing schemes for a monopoly when self-control is costly for consumers. Since consumers have a preference for commitment, the firm faces a trade-off between offering a small menu that makes the consumers’ self-control easier and offering a large menu that achieves better price discrimination. We show that the optimal menu resembles the one in the standard nonlinear pricing problem with a price ceiling, where the upper bound on prices is determined endogenously by a participation constraint. The ceiling motivates the firm to offer a relatively flat and compact price schedule, serving more consumers with low demand. The characterization also shows that the firm may earn less if consumers have temptation.     

Analysis of threshold cointegration with asymmetric adjustments in the Hong Kong grocery industry

High market concentration in the Hong Kong grocery industry has been prevalent over many years with the domination of a few large supermarket chains. However, no research has been conducted on the price dynamics between the supermarket and non-supermarket sectors to investigate whether the non-supermarket sector can impose competitive discipline on the dominating supermarket chains. We argue that standard cointegration tests cannot allow for transaction costs and distinguish whether the price co-movement is attributable to price competition or collusion. Our study therefore fills this research gap by adopting the threshold cointegration tests in a three-regime threshold vector error-correction model to account for the asymmetric price adjustment dynamics between supermarket and non-supermarket sectors of Hong Kong and evaluate the market power of the supermarket sectors in the presence of transaction costs. Our results favour the presence of cointegration between the supermarket and non-supermarket price indices with asymmetric adjustment dynamics. We interpret the results of statistically significant downward price adjustments in the outer-band regimes as the evidence of mutual price competition. Nevertheless, the supermarket sector has stronger market power than the non-supermarket sector, and therefore can sustain higher price level without inducing substantial competition pressures inside the neutral band.     

基于我国成品油定价机制的石油双寡头行为分析

我国成品油定价实行最高零售限价已三年有余,价格管制在平抑国际油价冲击的同时也产生许多问题,管制效果备受争议,政府的补贴政策也饱受诟病.基于成品油最高零售限价,石油双寡头、寡头与政府之间的博弈行为表明:最高零售限价不能解决高油价问题,对形成成品油市场的竞争格局作用不大,而且政府在与石油寡头的博弈中处于弱势地位,针对国有石油企业的补贴政策将造成财政资金的浪费.我国成品油定价改革方向为市场定价,根本问题是尚未形成垄断竞争的市场格局.成品油定价改革应在培育垄断竞争格局的基础上,改革燃油税为从价计征、完善石油储备体系,为市场化定价改革铺平道路.