Price and Quantity Competition in a Differentiated Duopoly With Network Compatibility Effects

We consider the efficiency of price and quantity competition in a network products market, where we observe product compatibility with network externalities (hereafter, network compatibility effects). In particular, if network compatibility effects between firms are sufficiently asymmetric, the Cournot equilibrium is more efficient than the Bertrand equilibrium in terms of larger consumer, producer and total surpluses. Then, we consider an endogenous choice of the strategic variables, price and quantity. If the degree of network compatibility effects of the rival firm is larger (smaller) than the degree of product substitutability, then choosing prices (quantities) is a dominant strategy for the firm. Thus, if the network compatibility effects of both firms are larger (smaller), the Bertrand (Cournot) equilibrium arises. Furthermore, if the network compatibility effects between the firms are sufficiently asymmetric, the firm with a larger (smaller) network compatibility effect than a certain level of product substitutability chooses quantities (prices). In this case, the Cournot–Bertrand equilibrium arises, which is less (more) efficient than the Cournot equilibrium in terms of consumer (producer) surplus.     

On the “merger paradox” in price competition with asymmetric product differentiation

By assuming asymmetric product differentiation, we consider the “merger paradox” in price competition (or the incentive to collude in prices). We investigate whether the emergence of the merger paradox depends on the degree of product differentiation between firms. In particular, unlike Deneckere and Davidson (1985), we demonstrate that if the degree of product differentiation between the insider and outsider is sufficiently small, then they are strategic substitutes, and thus, the merger paradox arises in price competition.     

Double marginalization and cost pass-through: Weyl–Fabinger and Cowan meet Spengler and Bresnahan–Reiss

Consider the classical double marginalization problem of single-product successive monopolies. We show that the ratio of the cost pass-through at the final sale relative to that at the wholesale level is characterized by the curvature of inverse demand in the final market. We also apply Cowan’s (2012) method, which utilizes the idea of pass-through in an analysis of third-degree price discrimination, to compare consumer surplus under vertical integration and separation.     

Gender differences in entrepreneurship and intrapreneurship: an empirical analysis

This study examines the gender gap in start-up activities to determine whether it is family status or employment status that is responsible for the observed gender gap. We consider independent entrepreneurship and intrapreneurship as two different start-up modes: While intrapreneurship is conducted within an established organization, independent entrepreneurship is solely an independent activity. This study focuses on this fundamental distinction to identify the parameters of our empirical model. Using nationally representative US data, we find that the effects of being a part-time worker on the likelihood of becoming an independent entrepreneur differ across genders. The obtained results suggest similar findings for intrapreneurship, but in opposite directions. Furthermore, our decomposition results suggest that for both entrepreneurship and intrapreneurship, the gender differences in the employment-related variables are more significant than those in the family-related variables in affecting the observed gender gap negatively (for entrepreneurship) or positively (for intrapreneurship).     

Optimal Timing of Advertising with Demand Spillovers

We construct a model of a horizontally differentiated duopoly with demand spillovers in which advertising influences the willingness-to-pay of consumers for products and thereby affects not only market share, but also the level of market demand. Furthermore, firms decide the timing as well as the level of advertising. We first derive a subgame perfect Nash equilibrium and Stackelberg equilibria in the advertising competition. Then, using the framework of an endogenous timing decision game with an observable delay (i.e., Hamilton and Slutsky, Games Econ Behavior 2: 29–46, 1990), we consider the optimal timing of advertising. We demonstrate that the optimal timing depends on the degree of demand spillovers and the product substitutability. In particular, if there are sufficient asymmetric demand spillovers between firms, there is a unique Stackelberg equilibrium in the advertising competition, in which the firm providing the product with small (large) demand spillovers chooses to invest in advertising early (late), regardless of the mode of competition.     

Third-degree price discrimination,quality choice,and welfare

Employing an endogenous quality choice model, we reconsider the effect on welfare of monopolistic third-degree price discrimination. We prove that price discrimination always enhances welfare, mainly because the quality improvement owing to price discrimination increases consumer surplus. Moreover, we show that third-degree price discrimination benefits all parties, including consumers in the higher priced market if the preference differences between markets are sufficiently large.     

Ministerial Weights and Government Formation: Estimation Using a Bargaining Model

This article proposes a method to estimate relative ministerialweights in parliamentary democracies. Specifically, we presenta bargaining model of government formation and estimate structuralparameters of the model using data for (i) who the formateursare, (ii) what each party's voting weight is, and (iii) whatministerial seats each party obtains. We also measure the effectsof voting weights and formateur advantage on bargaining results.We apply our proposed method to the case of Japan. Our estimationresults show that political players value pork-related posts(such as the Minister of Construction) much more than prestigiousones (such as the Minister of Foreign Affairs). We also findthat there is a significant formateur advantage, whereas votingweights do not have a significant scale effect, which is consistentwith the findings for European democracies.     

Tariffs,Quality Choice,and Cost Functions: a Foreign Monopoly Case*

It has been shown that trade restrictions such as tariffs, import quotas, and voluntary export restrictions, lead to quality upgrading of imports. In this paper, however, we reconsider this proposition by focusing on the nature of cost functions. Based on a standard vertical differentiation model, we analyze the effects of tariffs on quality and quantity of imports. We show that if a fixed cost is an increasing function of quality, tariffs lead to quality downgrading of imports. Moreover, we discuss minimum quality requirements (MQR) for such a trade policy. We show that MQR increases the amount of imports and an importing country's welfare in the presence of the fixed cost function. These issues will be addressed in the context of a foreign monopoly.     

Aspirations and the transfer paradox in an overlapping generations model

This study examines the transfer problem between two countries when either the donor or the recipient has aspirations, based on parents’ standards of living, in a one-sector overlapping generations model. Focusing on whether and how aspirations impact the welfare effect of a transfer, we demonstrate the following results. First, when the donor forms aspirations, as the degree of his/her aspirations to their parents increases, a transfer is more likely to cause donor enrichment. However, this does not affect the recipient’s welfare at all. In contrast, when the recipient forms aspirations, whether the increase in the degree of these aspirations causes immiserization depends on whether the transfer raises the recipient’s consumption. Second, we show that if the donor’s or recipient’s marginal utility increases with their respective aspirations, the transfer is more likely to cause recipient immiserization. However, whether donor enrichment occurs depends on the situation. These results imply that there are two types of effects that aspirations can have on the welfare of both countries: effects caused by the aspirations, and effects that occur through the capital market. Furthermore, we find that these two effects on welfare do not necessarily work in the same direction.     

Compatibility Under Differentiated Duopoly with Network Externalities: A Comment

Chen and Chen (J Ind Compet Trade 11:43?55, 2011) analyze the effects of compatibility under system product Cournot competition with network externalities. They show that a firm’s optimal strategy is to set an incompatible system standard, even though perfect compatibility is socially optimal. In this case, a social dilemma arises. However, their result depends on a specific assumption about the network size. We use the framework of Shy (1995) to modify this assumption, and hence show that the social dilemma identified by Chen and Chen (J Ind Compet Trade 11:43?55, 2011) does not arise.