On the possibility of licensing in a market with logit demand functions

We analyze the incentives for technology transfer between two firms in a market characterized by a logit demand framework. The available licensing policies of the incumbent innovator are the up front fee, royalty and two-part tariff policies. We show that when the market is covered there is no equilibrium where technology transfer occurs.

When an inefficient firm makes higher profit than its efficient rival

This paper considers a Cournot duopoly game with endogenous organization structures. There are two firms A and B who compete in the retail market, where A is more efficient than B. Prior to competition in the retail stage, firms simultaneously choose their organization structures which can be either 'centralized' (one central unit chooses quantity to maximize firm's profit) or 'decentralized' (the retail unit chooses quantity to maximize firm's revenue while the production unit supplies the required quantity). Identifying the (unique) Nash Equilibrium for every retail-stage subgame, we show that the reduced form game of organization choices is a potential game. The main result is that with endogenous organization structures, situations could arise where the less efficient firm B obtains a higher profit than its more efficient rival A.Centralized structure; decentralized structure; potential games

Strategic delegation in a sequential model with multiple stages

We analyze strategic delegation in a Stackelberg model with an arbitrary number, n, of firms. We show that the n-1 last movers delegate their production decisions to managers whereas the first mover does not. Equilibrium incentive rates are increasing in the order with which managers select quantities. Letting u_i^* denote the equilibrium payoff of the firm whose manager moves in the i-th place, we show that u_n^*>u_{n-1}^*>...>u_2^*>u_1^*. We also compare the delegation outcome of our game with that of a Cournot oligopoly and show that the late (early) moving firms choose higher (lower) incentive rates than the Cournot firms.Comment: To appear in International Game Theory Review (IGTR), Vol. 13, No. 3 (2011) 1-1

On the gamma-core of asymmetric aggregative games

This paper analyzes the core of cooperative games generated by asymmetric aggregative normal-form games, i.e., games where the payoff of each player depends on his strategy and the sum of the strategies of all players. We assume that each coalition calculates its worth presuming that the outside players stand alone and select individually optimal strategies (Chander & Tulkens 1997). We show that under some mild monotonicity assumptions on payoffs, the resulting cooperative game is balanced, i.e. it has a non-empty gamma-core. Our paper thus offers an existence result for a core notion that is considered quite often in the theory and applications of cooperative games with externalities

A strategic tax mechanism

We introduce a novel commodity tax mechanism in oligopolies that improves upon the standard tax policies. The government (i) announces an excise tax rate $\tau$ and (ii) auctions-off a number of tax exemptions. Namely, it invites the firms in a market to acquire the right to be exempted from the excise tax. The highest bidders are exempted paying the government their bids; and all other firms remain subject to $\tau$. Depending on the characteristics of the market, the mechanism we suggest has a number of desirable features. First, it allows the government to collect more revenues than the standard commodity tax policies (this is due to the competition among the firms to acquire the exemptions). Second, for markets where firms have informational advantage over the government, the mechanism allows for information revelation (via the firms' bids in the auction). Third, it impedes collusive activities in the market (as the mechanism creates an artificial asymmetry among the firms, which hinders collusion). Lastly, the mechanism is voluntary, namely the firms participate in the auction only if they wish and hence they are free to choose how to be taxed

A strategic tax mechanism

We introduce a novel commodity tax mechanism in oligopolies that improves upon the standard tax policies. The government (i) announces an excise tax rate $\tau$ and (ii) auctions-off a number of tax exemptions. Namely, it invites the firms in a market to acquire the right to be exempted from the excise tax. The highest bidders are exempted paying the government their bids; and all other firms remain subject to $\tau$. Depending on the characteristics of the market, the mechanism we suggest has a number of desirable features. First, it allows the government to collect more revenues than the standard commodity tax policies (this is due to the competition among the firms to acquire the exemptions). Second, for markets where firms have informational advantage over the government, the mechanism allows for information revelation (via the firms' bids in the auction). Third, it impedes collusive activities in the market (as the mechanism creates an artificial asymmetry among the firms, which hinders collusion). Lastly, the mechanism is voluntary, namely the firms participate in the auction only if they wish and hence they are free to choose how to be taxed

Bargaining over managerial contracts: a note

The theory of strategic managerial delegation has recently been extended by incorporating bargaining over managerial contracts (van Witteloostuijn et.al 2007, etc). Assuming that bargaining involves only the incentive rates of managers, this line of research has shown that market outcomes (profits and social welfare) depend crucially on the intra-firm allocation of bargaining powers. In the current paper we revisit the bargaining framework assuming that negotiations involve all contractual terms (incentive rates and transfers). We show that contrary to the earlier results, the market equilibrium is independent of bargaining powers, the latter determining only the transfers. Hence the outcome of our model is identical to the outcome of the delegation model with no bargaining

Cooperative games with externalities and probabilistic coalitional beliefs

We revisit cooperative games with externalities, i.e. cooperative games where the payoff of a coalition depends on the partition of the entire set of players. We define the worth of a coalition assuming that its members have probabilistic beliefs over the coalitional behavior of the outsiders, i.e., they assign various probability distributions on the set of partitions that the outsiders can form. We apply this framework to symmetric aggregative games and derive conditions on coalitional beliefs that guarantee the non-emptiness of the core of the induced cooperative games