17,659 research outputs found
Oligopolistic Competition in Price and Quality
We consider an oligopolistic market where firms compete in price and quality and where consumers are heterogeneous in knowledge: some consumers know both the prices and quality of the products offered, some know only the prices and some know neither. We show that two types of signalling equilibria are possible. Both are characterised by dispersion and Pareto-inefficiency of the price/quality offers. But, better price/quality combinations are signalled with lower prices in one type and with higher prices in the other type
Pricing and Trust
We experimentally examine the effects of flexible and fixed prices in markets for experience goods in which demand is driven by trust. With flexible prices, we observe low prices and high quality in competitive (oligopolistic) markets, and high prices coupled with low quality in non-competitive (monopolistic) markets. We then introduce a regulated intermediate price above the oligopoly price and below the monopoly price. The effect in monopolies is more or less in line with standard intuition. As price falls volume increases and so does quality, such that overall efficiency is raised by 50%. However, quite in contrast to standard intuition, we also observe an efficiency rise in response to regulation in oligopolies. Both, transaction volume and traded quality are, in fact, maximal in regulated oligopolies.markets; price competition; price regulation; reputation; trust; moral hazard; experience goods
Quality choice, vertical product differentiation, and labor-managed oligopoly
Although quality choice of profit-maximizing oligopolistic firms has been widely analyzed, it is rare to find such an analysis of labor-managed oligopolistic firms. This paper considers the relationship between vertical product differentiation and labor-managed firms in either partial or full market coverage by using a two-stage game model. At the second stage they are involved in either Bertrand or Cournot competition. Then some results, which are different from those derived from the conventional firms, are obtained. For example, 1) when
labor-managed firms are involved in price competition in an output market, there exists an interior solution only in an extremely limited case; 2) fixed costs affect not only price and output levels but also the level of
quality under both price and quantity competition; and 3) it is impossible to analyze under full market coverage, irrespective of whether labor-managed firms are involved in price or quantity competition in an output market
The Oligopolistic Gatekeeper: The U.S. Accounting Profession
The accounting and financial scandals the last few years not only produced the Sarbanes-Oxley Act, but have prompted a good deal of debate what forces led to so many dramatic reporting failures. This article is the only work to examine how the competitive structure of the accounting industry contributed to its movement from being a profession to a business that performed auditing. In the article we find not only documentation that the accounting profession is an oligopoly but a sound explanation of how its poor structure contributes significantly to negative social welfare. Throughout the article provides rich support of data to support explanations of the forces that have impacted the accounting profession as well as financial reporting. Most importantly, the article connects how the accounting profession\u27s poor competitive structure likely contributed to the financial and accounting scandals of 2001 and 2002 by making it possible for the mangers of their audit clients to trade off better audits for consulting services. The article also provides insight into weaknesses that continue even after reforms such as those introduced by Sarbanes-Oxley. Several steps to strengthen the accounting industry so that it can return to being a zealous gatekeeper are also proposed in the article
Pricing and trust
We experimentally examine the effects of flexible and fixed prices in markets for experience
goods in which demand is driven by trust. With flexible prices, we observe low prices and
high quality in competitive (oligopolistic) markets, and high prices coupled with low quality
in non-competitive (monopolistic) markets. We then introduce a regulated intermediate price
above the oligopoly price and below the monopoly price. In monopolies volume increases and
so does quality, such that overall efficiency is raised by 50%. Somewhat surprisingly, the
same pattern emerges in oligopolies. In fact, across all market forms transaction volume and
traded quality are maximal in regulated oligopolies
Geographical Indications: The Economics of Claw-Back
Graduate Institute of International and Development Studies Working Paper No: 11/2010International Relations/Trade,
How Far Does Economic Theory Explain Competitive Nonlinear Pricing in Practice?
Liberalisation of the British electricity market, in which previously monopolised regional markets were exposed to large-scale entry, is used to test the propositions of several recent theoretical papers on oligopolistic nonlinear pricing. Consistent with those theories, each oligopolist offered a single two-part electricity tariff, and a lump sum discount to consumers who purchased both electricity and gas. However, inconsistent with those theories, firms’ two-part tariffs are heterogeneous in ways that cannot be attributed to cost. We establish a series of stylised facts about the nature of these asymmetries between firms and use them to confront established theory
Geographical Indications: The Economics of Claw-Back
Geographical Indications (GIs) for products (Basmati rice, Champagne sparkling wine, Antigua coffee, etc.) were regulated at the international level in 1995 (WTO TRIPS Agreement, Part II, Section 3). This paper proposes a model on the welfare effects of the socalled “claw-back” of GIs; i.e. the protection in a country (Home) of a GI of another country (Foreign), when the said GI had previously acquired generic status at Home (cf.: protection of Feta in the EU or of Champagne in Chile). The setting includes two countries (Home and Foreign); three varieties (Foreign GI-original goods, Home GI-variety goods and generics) and a continuum of heterogeneous consumers. Two regimes are analyzed: protection / no protection; in two scenarios for Foreign firms: perfect / oligopolistic competition. Only the equilibrium at Home is analyzed. Although a loss in global welfare is always expected when fewer varieties are available in a market, results suggest that industrialized Home countries, with sophisticated consumers and higher relative costs tend to lose less from protecting Foreign GIs than developing Home countries, where the opposite is true. With oligopolistic competition, GI firms become from differentiated from their closest competitor after protection (now generics), further stressing the competitive distortion; consumers with a low willingness to pay for origin and a high degree of valuation for the GI-variety are the biggest losers. Regarding firms, however, contrary to the conventional wisdom, oligopolistic competition by Foreign firms leads to less stringent conditions for Home GI-varieties to compete, and does not affect generics. In effect, if after protection Home GI-varieties can successfully differentiate themselves from Foreign GI-original goods without the (unlawful) use of the GI label (either through the development of their own GI or through proper branding) and stay competitive, the scenario of oligopolistic competition from Foreign firms is more favorable to their development than the scenario of perfect competition.
Economising, Strategising and the Vertical Boundaries of the Firm
Acknowledgments: We are grateful to Celine Azemar, Ron Davies, Rodolphe Desbordes, Hartmut Egger, Holger Görg, Michael Moore, Ali Naghavi, Peter Neary, Pascalis RaimondosMøller, Ian Wooton and two anonymous referees for useful comments and suggestions. The usual disclaimer applies.Peer reviewedPublisher PD
Asymmetries of Information in Electronic Systems
We study the efficiency of the equilibrium price in a centralized, order-driven market where asymmetrically informed traders are active for several periods and can observe each other current and past orders, as in electronic systems of trading. We show that the more precise the information the higher the incentive to reveal it in the first trading rounds. On the contrary, strategic competition forces the less informed trader to wait the end of the trading period to reveal his information. This implies that when differences in information quality are very important, the liquidity of the market decreases as we approach the date of public revelation. We are able to show that more transparent markets as the ones organized via electronic systems are not performing better than markets organized on floor trade in terms of revelation of information, due to the oligopolistic behavior of insidersasymmetric information, liquidity, insider trading, strategic revelation
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