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1.
Consumers need not evaluate all available product information before making a purchase. This may arise because shopping environments prevent a full evaluation (e.g., online). We develop a model of simultaneous search in which consumers have limited ability in product evaluation in order to study the impact of search cost on prices, consumer surplus, and social welfare. If consumers are endowed with the ability to choose how much information to acquire from a searched product, they may choose limited product evaluation. We find that consumers may evaluate more firms, enjoy lower prices, and higher surplus despite this limited ability. This implies that prices can decrease and consumer surplus can increase in search costs. We then extend our setting to the case of multiproduct firms and find similar effects due to changes in within‐firm search costs.  相似文献   

2.
Spatial Cournot competition and economic welfare: a note   总被引:1,自引:0,他引:1  
We investigated welfare implications in location-quantity models in a symmetric linear city. We found that when firms are not agglomerated in equilibrium, increasing the distance between firms raises (reduces) producer surplus and social welfare (consumer surplus). Moreover, central agglomeration is always optimal for consumers among symmetric locations, but not necessarily for producers. Central agglomeration can be inefficient even if it is the unique equilibrium outcome. In short, the firms are more likely to agglomerate or locate closer than what welfare maximizers would dictate, whereas they locate farther apart than what consumer surplus maximizers would recommend.  相似文献   

3.
This paper analyzes optimal media planning strategies in a pricing‐advertising competition model where firms can use mass and specialized advertising. We find that although targeted advertising avoids the wasting of ads, firms might find it optimal to mix specialized advertising with the mass media. We also show that the characteristics of the specialized media available crucially affect the outcome of price competition between firms, which can range from a full fragmentation of the market into local monopolies to lower average prices (compared to the case where firms had only mass advertising available). Regarding welfare, we prove that although the use of specialized advertising can lower consumer surplus and drive a fragment of consumers out of the market, this advertising technology is welfare‐improving, and can be Pareto superior.  相似文献   

4.
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.  相似文献   

5.
Downstream Competition, Bargaining, and Welfare   总被引:1,自引:0,他引:1  
I analyze the effects of downstream competition when there is bargaining between downstream firms and upstream agents (firms or unions). When bargaining is over a uniform input price, a decrease in the intensity of competition (or a merger) between downstream firms may raise consumer surplus and overall welfare. When bargaining is over a two-part tariff, a decrease in the intensity of competition reduces downstream profits and upstream utility and raises consumer surplus and overall welfare. Standard welfare results of oligopoly theory can be reversed: less competition can be unprofitable for firms and/or beneficial for consumers and society as a whole.  相似文献   

6.
《Economic Systems》2008,32(4):326-334
Utilizing a model that allows for the welfare of the commercial NPO’s stakeholders directly in terms of their consumer surplus, and indirectly in terms of NPO profits, we explore the impact of changes in the NPO’s “social concern” for consumers on market efficiency. Three separate Cournot mixed market scenarios are analyzed: competition between the NPO and a private for-profit firm, competition between the NPO and a public firm, and a market scenario that includes all three firms. We find that the technical efficiency of the NPO vis-à-vis the profit maximizer is crucial in determining whether social welfare rises or falls as the NPO places more weight on their stakeholders’ surplus. In particular, if the NPO is less technically efficient than the profit maximizer or public firm, somewhat paradoxically social welfare may fall as the NPO shows a greater social concern for consumers. In other words, a movement away from pure profit maximizing behavior by a NPO may well be detrimental in these mixed commercial markets. We also show the additional sources of revenue available to a NPO may decrease the overall welfare in these mixed market situations.  相似文献   

7.
We analyze how different degrees of privacy protection affect industry profits, consumer welfare, and total welfare in a model with switching costs. Firms earn higher profits under weak privacy protection compared with strong or no privacy protection. The relationship between the degree of privacy protection and equilibrium profits is not monotonic. Consumer surplus and total welfare increase with the degree of privacy protection unless firms recognize consumer‐specific switching costs. In that case, pricing conditional on switching costs has favorable implications for consumer surplus and total welfare.  相似文献   

8.
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.  相似文献   

9.
We revisit the choice of product differentiation in the Hotelling model, by assuming that competing firms are vertically separated, and that retailers choose products' characteristics. The “principle of differentiation” does not hold because retailers with private information about their marginal costs produce less differentiated products in order to increase their information rents. Hence, information asymmetry within vertical hierarchies may increase social welfare by inducing them to sell products that appeal to a larger number of consumers. We show that the socially optimal level of transparency between manufacturers and retailers depends on the weight assigned to consumers' surplus and trades off two effects: higher transparency reduces price distortion but induces retailers to produce excessively similar products.  相似文献   

10.
We examine the influence of firms’ ability to employ individualized pricing on the welfare consequences of horizontal mergers. In a two‐to‐one merger, the merger reduces consumer surplus more when firms can price discriminate based on individual preferences compared to when they cannot. However, the opposite holds true in a three‐to‐two merger, in which the reduction in consumer surplus is substantially lower with individualized pricing than with uniform pricing. Further, the merger requires an even smaller marginal cost reduction to justify when an upstream data provider can make exclusive offers for its data to downstream firms. We also show that exclusive contracts for consumer data pose significant antitrust concerns independent of merger considerations. Implications for vertical integration and data mergers are drawn.  相似文献   

11.
Abstract

The argument of proprietary costs is commonly used by firms to object against proposed disclosure regulations. The goal of this paper is to improve our understanding of the welfare consequences of disclosure in duopoly markets and to identify market settings where proprietary costs are a viable argument for firms to remain silent. We, therefore, solve the optimal disclosure strategies and distinguish two different potentially costly effects of disclosing private information: the strategic information effect and the market information effect. We identify the market settings for which a regulator prefers to impose disclosure regulation so as to maximise consumer surplus or total surplus. Regulation may be necessary because (i) the increase in welfare outweighs proprietary costs to the firms, or (ii) firms are trapped in a prisoners' dilemma. The first primarily applies to Bertrand competition with demand uncertainty and, to a lesser extent, to Cournot competition. The second applies primarily to Cournot competition and Bertrand competition with cost uncertainty.  相似文献   

12.
We study a model of competitive foremarkets and partly monopolized aftermarkets. We show that high aftermarket power prompts firms to engage in inefficiently aggressive below‐cost pricing in the foremarket. This inefficiency is driven by the presence of consumers with valuations below marginal cost. While for intermediate aftermarket power their presence leads to a competition‐softening effect, for high aftermarket power firms attract increasing numbers of unprofitable consumers by aggressively pricing below cost. For high aftermarket power, firms' equilibrium profits can therefore be decreasing in aftermarket power but are always higher than for low aftermarket power. If firms engage in price discrimination by bundling the foremarket and aftermarket goods or by reducing their aftermarket power, they avoid selling to unprofitable consumers but also reduce the competition‐softening effect. This decreases firms' equilibrium profits but increases consumer and social welfare.  相似文献   

13.
We develop an upstream–downstream model to analyze downstream firms' incentives to bundle. In our framework, the upstream firms are content providers (such as television stations) and the downstream firms are system operators (such as cable/satellite operators). We show that an a la carte regulation (i.e., a regulation that forces downstream firms to unbundle) leads to higher consumer surplus, if the unregulated equilibrium exhibits pure bundling (PB). Hence, our model predicts that in the television industry, which is mainly characterized by PB, an a la carte regulation will be beneficial for the consumers. If, on the other hand, the unregulated equilibrium is characterized by mixed bundling, then an a la carte regulation will increase consumer welfare provided that demand for multiple purchases is strong.  相似文献   

14.
This paper studies the interaction between horizontal mergers and price discrimination by endogenizing the merger formation process in the context of a repeated purchase model with two periods and three firms wherein firms may engage in behavior‐based price discrimination (BBPD). From a merger policy perspective, this paper's main contribution is twofold. First, it shows that when firms are allowed to price discriminate, the (unique) equilibrium merger gives rise to significant increases in profits for the merging firms (the ones with information to price discriminate), but has no ex‐post effect on the outsider firm's profitability, thereby eliminating the so‐called (static) “free‐riding problem.” Second, this equilibrium merger is shown to increase industry profits at the expense of consumers' surplus, leaving total welfare unaffected. This then suggests that competition authorities should scrutinize with greater zeal mergers in industries where firms are expected to engage in BBPD.  相似文献   

15.
We investigate the likely effect on prices, consumer surplus, and profits of intensified competition among peer‐to‐peer lodging platforms. We find that intensified competition in the sharing economy may give rise to some surprising results. For instance, intensified competition may allow platforms to charge higher fees from peer suppliers and lead, therefore, to a decline in consumer surplus. Only if the market of professional hoteliers is highly competitive, intensified competition among platforms leads to the traditional outcome that the entry of more platforms leads to lower fees charged from consumers and to enhanced consumer surplus. We also find that platforms may actually earn higher profits when there is intensified competition among professional hoteliers. In addition, while intensified competition among professional hoteliers leads to a decline in the fees that platforms can charge customers, it may actually result in higher lodging prices. We explain these counterintuitive results by the dual role that the lodging price plays in affecting the welfare of individuals active in the sharing economy. While a higher price has an adverse effect on the welfare of demanders of lodging it benefits peer suppliers of lodging because a higher lodging price raises the compensation they receive when offering lodging capacity to a platform.  相似文献   

16.
A model of duopoly competition in nonlinear pricing when firms are imperfectly informed about consumer locations is analyzed. A continuum of consumers purchase a variable amount of a product from one of two firms located at the endpoints of the market. At the Nash equilibrium in quantity-outlay schedules, consumers buy the same quantities as they would from the same firm if it were a monopolist facing the same informational asymmetries, but they receive greater surplus. Hence, no efficiency gains result from competition. If consumers have the option to reveal their locations and have the firms deliver the goods, all consumers choose to reveal their locations in equilibrium. Thus, the inefficiencies from information asymmetries may not arise because firms can deliver the good to consumers. In contrast, with a monopoly seller, consumers have no incentives to reveal their locations.  相似文献   

17.
We investigate the robustness of the new foreclosure doctrine and its associated welfare implications to the introduction of incomplete information. In particular, we let the upstream firm's marginal cost be private information, unknown to the downstream firms. The previous literature has argued that vertical integration is harmful because it allows an upstream monopolist to limit output to monopoly levels, whereas a disintegrated structure will "over-sell," producing more in equilibrium. By contrast, we find that with incomplete information, high-cost firms will often "under-sell" in equilibrium, that is, supply less than their monopoly output. Low-cost firms continue to over-sell, so all types of firms have a reason to integrate downstream, but this is socially harmful only for low-cost types. For high-cost firms vertical integration can be Pareto-improving, resulting in higher output, profits, and consumer surplus.  相似文献   

18.
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.  相似文献   

19.
We study sequential mergers under incomplete information where the follower is ignorant about the leader's merger synergy. When the follower's own synergy is sufficiently large, incomplete information induces both firms to merge more. These additional mergers benefit both firms and total welfare but hurt consumers. If the follower's synergy is very small, the leader is unable to take any strategic action, and most results are reversed. The analysis suggests that incomplete information strengthens the strategic complementarity between the two mergers and thereby increases the likelihood of a merger wave.  相似文献   

20.
Vertical Integration and Proprietary Information Transfers   总被引:2,自引:0,他引:2  
Suppose that rival downstream producers of a final good contract with the same upstream supplier of an input and, in the process, reveal private information. A vertical merger between the upstream supplier and one of the downstream firms may dissipate the information advantage of the remaining downstream firms. The welfare consequences of such a merger and related information sharing depend on the value of information, the benefits of integration apart from information sharing, and the nature of upstream competition. In this paper, conditions are found under which owners of a vertically integrated firm are better off breaking up into independent firms. This result may explain AT&T's recent spinoff of Lucent Technologies. Further results suggest that a prohibition on information transfers, such as that often proposed by the Federal Trade Commission and Department of Justice as a precursor to approving vertical mergers, may actually reduce expected consumer surplus and expected social welfare.  相似文献   

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