Computing welfare losses from data under imperfect competition with heterogeneous goods

We study the percentage of welfare losses (PWL) yielded by imperfect competition under product differentiation. When demand is linear, if prices, outputs, costs and the number of firms can be observed, PWL is arbitrary in both Cournot and Bertrand equilibria. If in addition, the elasticity of demand (resp. cross elasticity of demand) is known, we can calculate PWL in Cournot (resp. Bertrand) equilibrium. When demand is isoelastic and there are many firms, PWL can be computed from prices, outputs, costs and the number of .rms. In all these cases we find that price-marginal cost margins and demand elasticities may influence PWL in a counterintuitive way. We also provide conditions under which PWL increases or decreases with concentration

Stackelberg Independence

The standard model of sequential capacity choices is the Stackelberg quantity leadership model with linear demand. I show that under the standard assumptions, leaders' actions are informative about market conditions and independent of lead-ers' beliefs about the arrivals of followers. However, this Stackelberg independence property relies on all standard assumptions being satisfied. It fails to hold whenever the demand function is non-linear, marginal cost is not constant, goods are differentiated, firms are non-identical, or there are any externalities. I show that small deviations from the linear demand assumption may make the leaders' choices completely uninformative

Managing a conflict: optimal alternative dispute resolution

We study optimal methods for Alternative Dispute Resolution (ADR), a technique to achieve settlement and avoid costly adversarial hearings. Participation is voluntary. Disputants are privately informed about their marginal cost of evidence provision. If ADR fails to engender settlement, the disputants can use the information obtained during ADR to determine what evidence to provide in an adversarial hearing. Optimal ADR induces an asymmetric information structure but makes the learning report-independent. It is ex ante fair and decreases the disputants' expenditures, even if they fail to settle. We highlight the importance of real-world mediation techniques, such as caucusing, for implementing optimal ADR