12 research outputs found
Entanglement between Demand and Supply in Markets with Bandwagon Goods
Whenever customers' choices (e.g. to buy or not a given good) depend on
others choices (cases coined 'positive externalities' or 'bandwagon effect' in
the economic literature), the demand may be multiply valued: for a same posted
price, there is either a small number of buyers, or a large one -- in which
case one says that the customers coordinate. This leads to a dilemma for the
seller: should he sell at a high price, targeting a small number of buyers, or
at low price targeting a large number of buyers? In this paper we show that the
interaction between demand and supply is even more complex than expected,
leading to what we call the curse of coordination: the pricing strategy for the
seller which aimed at maximizing his profit corresponds to posting a price
which, not only assumes that the customers will coordinate, but also lies very
near the critical price value at which such high demand no more exists. This is
obtained by the detailed mathematical analysis of a particular model formally
related to the Random Field Ising Model and to a model introduced in social
sciences by T C Schelling in the 70's.Comment: Updated version, accepted for publication, Journal of Statistical
Physics, online Dec 201
The Drivers of Income Inequality in Rich Countries
Rising income inequality has recently come centre-stage as a core societal concern for rich countries. The diagnosis of the forces driving inequality upwards and their relative importance remains hotly contested, notably with respect to the roles of globalization versus technology and of market forces versus institutions and policy choices. This survey provides a critical review and synthesis of recent research. The focus is on income inequality across the entire distribution, rather than only on what has been happening at the very top. We pay particular attention to including what has been learned from the analysis of micro-data, to ensuring that the coverage is not unduly US-centric, and to analyses of the interrelations between the different drivers of inequality. The marked differences in inequality trends across countries and time-periods reflect how global economic forces such as globalisation and technological change have interacted with differing national contexts and institutions. Major analytical challenges stand in the way of a consensus emerging on the relative importance of different drivers in how income inequality has evolved in recent decades
Collusion Theory: Where to Go Next?
This note comments on Feuerstein's (Feuerstein, Switgard, âCollusion in industrial economics: A survey,â forthcoming in Journal of Industry, Competition and Trade, 2005) survey of collusion theory. I start by presenting evidence from a recent real-world collusion case: the lysine industry. Based on this, I point out a few areas where collusion theory can improve: (a) the problem of equilibrium choice (bargaining over each firm's share), which is especially important in asymmetric oligopolies; (b) the problem of equilibrium implementation, including in particular communication in an asymmetric information context; and (c) the relation between price wars and collusion. I conclude with a few notes on policy issues, namely leniency programs and cartel detection strategies. Copyright Springer Science + Business Media, Inc. 2005collusion, cartels, public policy,
Electoral reforms, entry barriers and the structure of political markets: A comparative analysis
Vertical Product Differentiation, Entry-Deterrence Strategies, and Entry Qualities
We analyze the potential entry of a new product into a vertically differentiated market. Here the entry-deterrence strategies of the incumbent firm rely on âlimit qualities.â The model assumes quality-dependent marginal production costs and considers sequential quality choices by an incumbent and an entrant. Entry-quality decisions and the entry-deterrence strategies are related to the fixed cost necessary for entry and to the degree of consumersâ taste for quality. We detail the conditions under which the incumbent increases its quality level to deter entry. Quality-dependent marginal production costs in the model entail the possibility of inferior-quality entry as well. Welfare is not necessarily improved when entry is encouraged rather than deterred. Copyright Springer Science+Business Media, LLC 2006Entry deterrence, Quality choice, Stackelberg duopoly, Vertical product differentiation,