Government bailouts and default risks of a duopoly: strong bank versus weak bank

A duopolistic loan market includes a strong bank without the problem of early closure that opts out of government bailouts and a weak bank with this problem that participates in the bailout programmes of distressed loan purchases and direct equity injections. A direct implication of our framework is that the strong bank’s equity will be priced as a standard call option, while the weak bank’s equity will be priced as a down-and-out call option. We find that an increase in either bailout (i.e. distressed loan purchases and direct equity injections) directly decreases the weak bank’s default risk but indirectly increases the strong bank’s default risk. Accordingly, either bailout contributes to banking stability since the indirect positive effect insufficiently offsets the direct negative effect, giving an overall negative response of default risks to an increase in either bailout. Higher competition by shifting to quasi-competition from collusion increases banking stability under either bailout. Our analysis suggests that competition is aligned with the regulatory objective of improving stability.     

Excess Entry in the Absence of Scale Economies

It is well-known that with free entry, more firms than is socially optimal typically enter provided there are economies of scale. This paper investigates the possibility of excess entry in the absence of scale economies We thank Simon Anderson, Tom Holmes, the late Arijit Mukherji, and Xavier Vives for helpful comments. We also thank the participants at the July 2001 Australasian Meetings of the Econometric Society in Auckland, June 2002 University of Melbourne-National University of Singapore Symposium and seminar participants at the University of Sydney and University of New South Wales for useful suggestions. We are especially thankful to an anonymous referee whose meticulous comments have helped us to improve the paper     

Endogenous price leadership in a duopoly: Equal products, unequal technology

In the present paper we study endogenous price leadership in the context of a homogeneous product Bertrand duopoly model in which the firms have different, strictly convex cost functions. In such a framework it is well known that a simultaneous move price choice game does not have an equilibrium in pure strategies, but it has an equilibrium in mixed strategies. In the Stackelberg games with an exogenous price leader, we show that a pure strategy subgame perfect Nash equilibrium (SPNE) always exists. Although the SPNE might not be unique, the payoffs are the same across all SPNE. Finally, we analyze the issue of endogenous price leadership using the continuous version of the Robson (1990) timing game. The result is unexpected. One would expect the more efficient firm to emerge as the endogenous price leader. This is not always true. In most cases the endogenous leader is the firm with the highest "threshold" price. However, we also provide conditions under which the more efficient firm emerges as the leader. Our paper essentially complements Yano (2001) , which is based on the Hamilton and Slutsky (1990) framework.     

Simultaneous and sequential price competition in heterogeneous duopoly markets: experimental evidence

We investigate simultaneous and sequential price competition in duoply markets with differentiated products and random matching of symmetric firms. We find that second movers gain from the sequential structure in comparison to simultaneous-move markets whereas first movers do not. As predicted by the theory, there is a significant first-mover disadvantage in the sequential game. Finally, we report the results of control treatments varying the matching scheme and the mode of eliciting choices (strategy method vs. standard sequential play).     

First mover advantage by product proliferation in multiproduct duopoly

This study aims to show that the product proliferation strategy in multi‐product duopoly is first‐mover advantage. We consider simultaneous and Stackelberg variety competitions. A firm producing more varieties charges a higher price, produces larger total quantities, and earns higher total revenue. When firms sequentially choose the masses of varieties and then simultaneously decide prices, the leader produces more varieties and enjoys first‐mover advantage. The masses of varieties can be regarded as strategic substitutes in the same way that quantities are. Finally, the market is likely to provide too few varieties relative to the social optimum.     

基于零售商促销努力的混合契约设计

在供应链协作中,供应商与零售商之间的合作尤为重要。零售商的促销水平极大的影响了产品的需求与销量,但促销活动同时也为零售商带来了额外的经营成本,经营成本的增加将导致零售商缺乏足够的积极性加大对促销活动的投入,因此需要供应商分担部分经营成本。利用回购契约与销量返利组合契约,分析了在允许二次进货的情况下供应商和零售商之间的利益关系,并设计了一种混合契约,以激励零售商为获得更多利润而加大促销努力的投入。     

不完全信息下买卖双方供应链博弈模型研究

针对买卖双方供应链中不完全信息问题，建立了卖方Stackelberg模型和买方Stackelberg模型。得出在完全信息模型中买方的最优单位营销支出和销售价格分别是卖方批量的减函数，批发价格的增函数；卖方的最优批量是买方销售价格的减函数，单位营销支出的增函数。在不完全信息下，给定需求函数中参数的联合概率分布，以及卖方成本参数的联合概率分布，买卖双方根据各自预期利润的最大化进行决策，获得各自决策变量的表达式，其形式类似于完全信息下的结果。     

Duopoly competitions with capacity constrained input

This paper focuses on the duopoly substitutability product with an upstream input subjected to capacity constraints. The effects of capacity constraints are captured. Combining competition effect with constraint effect, some interesting conclusions are reached. First, the relationship between capacity constraints and firm size is addressed. We argue that the capacity constraints reduce market size difference and price difference under Cournot. Second, under the Stackelberg case, the existence of solution is proved, and Stackelberg competitions enlarge firm-size difference and price difference if the more efficient firm plays the leading position. When the weaker firm plays the leading position, the conclusions depend on the total capacity. Finally, under the Stackelberg case, when the stronger firm plays the leading position, the firm-size difference and price difference decrease with total input under capacity constraints, which is contrary to the conclusions under Cournot competitions.     

MIXED OWNERSHIP,MANAGERIAL INCENTIVES AND BANK COMPETITION

We consider deposit competition between two banks, where prior to competition one bank is subjected to a nationalization decision and the other bank chooses managerial incentives. The government who maximizes a modified form of social welfare (with greater weight on profit than depositor surplus) chooses only partial nationalization, which still hurts the rival private bank. But by offering deposit‐linked managerial incentives the private bank recovers its lost profit and induces even less nationalization, leaving social welfare unchanged. However, under interest rate competition for differentiated deposits the private bank offers profit‐linked managerial incentives while the other bank may be completely nationalized.     

MARKET‐DEMAND BOOSTING AND PRIVATIZATION IN A MIXED DUOPOLY

This study incorporates demand‐boosting strategies into a mixed duopoly model in order to consider the endogenous determination of market demand. The results indicate equilibrium characteristics that differ from those found under an exogenous demand setting. As consumers become more sensitive to the demand‐boosting strategies of firms, the government must choose a lower level of privatization. This suggests that the responsiveness of consumer demand to the demand‐boosting strategies of firms constitutes a limiting factor for privatization.