Endogenous Timing and Quality Standards in a Vertically Differentiated Duopoly

The consequences of the adoption of quality standards on the endogenous timing of moves are investigated in a vertically differentiated duopoly. We obtain two main results. First, we prove that, when the low-quality firm is Stackelberg leader in the quality stage, the related MQS is ineffective. Second, the timing game in the quality space has a unique equilibrium in pure strategies, involving simultaneous moves. The related optimal MQS is time consistent, although suboptimal from the viewpoint of the regulator.Minimum Quality Standard, extended game, endogenous timing

Price regulation and incentives to innovate: Fixed vs. flexible rules

Since the seminal works of Schumpeter (1937) and Arrow (1962), economists have recognised that the innovation process is crucially dependent on the strategic environment in which firms operate and on the institutional arrangements which govern the appropriability of economic returns from innovation In this paper we focus on one particular aspect of the relationship between market structure and innovation, that is the effect of regulation on the incentives to innovate of a regulated monopolistic firm. More precisely, we discuss the influence of price regulation on the economic incentives to undertake costly R&D effort to discover a new technology. After a discussion of positive approaches to regulation and their relevance for the policy debate about the relationship between innovative activity and regulation, the paper develops the analysis of different price regulatory schemes in terms of incentives to undertake R&D effort, comparing a traditional price cap scheme with a downward flexible price-cap scheme. The welfare analysis of these schemes and a discussion of their relative merits shows that a welfare ranking of the alternative forms of regulations is crucially dependent on the properties of the cost reduction distribution function. Finally, it is shown that the incentives effects induced by a flexible price-cap bear some similarities with the incentives to innovate resulting from the so-called 'sliding scales' regulatory schemes

Corporate Governance, Corporate and Employment Law, and the Costs of Expropriation

We set up a model to study how ownership structure, corporate law and employment law interact to set the incentives that infl uence the decision by the large shareholder or manager effectively controlling the fi rm to divert resources from minority shareholders and employees. We suggest that agency problems between the controller and other investors and holdup problems between shareholders and employees are connected if the controller bears private costs of “expropriating” these groups. Corporate law and employment law may therefore somethimes be substitutes; employees may benefi t from better corporate law intended to protect minority shareholder, and vice versa. Our model has implications for the domestic and comparative study of corporate governance structure and addresses, among other things, the question whether large shareholders are better able to “bond” with employees than dispersed ones, or whether the separation of ownership facilitates longterm relationships with labor

Market Coverage and the Existence of Equilibrium in a Vertically Differentiated Duopoly

The existence of a pure-strategy subgame perfect equilibrium in qualities and prices is investigated in a duopoly model of vertical differentiation where quality improvements require a quadratic variable cost. The alternative cases of partial and full market coverage are considered. It is shown that there exists a parameter range where the incentive to decrease differentiation arises for the high-quality firm, preventing firms to reach a pure-strategy duopoly equilibrium

Minimum Quality Standards and Collusion

We model the introduction of a minimum quality standard in a vertically differentiated duopoly. We extend the literature in determining the standard endogenously, showing that the maximisation of social welfare entails an increase in the surplus accruing to consumers served by the low quality firm and a decrease in the surplus of the remaining consumers. Then, we consider the effects of the standard on the stability of price collusion, proving that the standard makes it more difficult for firms to collude if consumers are sufficiently rich

Full vs Partial Market Coverage with Minimum Quality Standards

The consequences of the adoption of quality standards on the extent of market coverage is investigated by modelling a game between regulator and low-quality firm in a vertically differentiated duopoly. The game has a unique equilibrium in the most part of the parameter range. There exists a non-negligible range where the game has no equilibrium in pure strategies. This result questions the feasibility of MQS regulation when firms endogenously determine market coverage

The stability of international environmental coalitions with farsighted countries: Some theoretical observations

We study a three-country model of international environmental agreements where countries may choose either to limit their emissions or to behave noncooperatively. First, we provide a taxonomy of various kinds of strategic situations. Then, by applying some recently developed game-theoretic techniques, we show that if countries are "farsighted" then there is scope for self-enforcing cooperation in several such situations

Capitale sociale e accountability: il ruolo del bilancio di missione nella governance delle organizzazioni non profit

In questo saggio si espongono alcune ragioni giustificative dell'adozione, da parte di organizzazioni non profit (d'ora in poi, ONP), di uno strumento di rendicontazione sociale come il bilancio di missione. La tesi di fondo che intendiamo sviluppare e' sintetizzabile nei termini seguenti: e' quanto mai auspicabile che, per un soggetto mission-oriented quale e' un ente non lucrativo, il bilancio di missione si configuri, prima ancora che come uno strumento di comunicazione in senso stretto, come una efficace leva di governance organizzativa, funzionale al monitoraggio e al rafforzamento nel tempo delle relazioni tra l'ONP e i propri stakeholder di riferimento, sia interni che esterni. Se concepito in questo modo, tale strumento di accountability sociale e' in grado di produrre effetti benefici potenzialmente molto rilevanti per l'organizzazione in termini di tutela e valorizzazione del suo profilo identitario nel tempo, fornendo un contributo specifico alla prevenzione di pericolose e tutt'altro che improbabili derive isomorfiche(paragrafo 1). In particolare, sosteniamo che l'obiettivo di preservare e consolidare la propria identita' organizzativa potra' essere perseguito in maniera tanto piu' efficace quanto piu' l'ONP riuscira' (i) a dotarsi stabilmente di un assetto di governance di tipo multistakeholder (paragrafo 2); chiariremo inoltre che, per evitare che la compresenza di una molteplicita' di interessi degeneri assumendo caratteri conflittuali, e' essenziale che (ii) i diversi stakeholder mantengano un elevato livello di identificazione nella mission istituzionale; cio' presuppone che l'ONP sia in grado di procedere all'accumulazione di uno stock significativo di "capitale sociale che apre" (bridging social capital; paragrafo 3). All'interno di questo quadro concettuale, che assegna alla rendicontazione sociale un ruolo di primaria importanza in chiave gestionale, il bilancio di missione e' chiamato ad assolvere ad una essenziale funzione complementare a quella del vincolo formale alla non distribuzione degli utili, consentendo all'ONP di non disperdere uno dei principali fattori di vantaggio comparato di tale forma organizzativa- la presenza di forti motivazioni intrinseche nei propri stakeholder chiave (paragrafo 4)- e quindi di agire coerentemente con i propri fini istituzionali.Capitale sociale; accountability; bilancio sociale; governance; organizzazioni non profit; governance multistakeholder; bridging social capital; beni relazionali; social accountability;

Minimum Quality Standards in Hedonic Markets with Environmental Externalities

We investigate the introduction of a minimum quality standard (MQS) in a vertically differentiated duopoly with an environmental externality. We establish that the MQS bites only if the hedonic component of consumer preferences is sufficiently strong. Then, we illustrate an underlying tradeoff between the beneficial effects of quality enhancement on prices and the associated undesirable increase in the environmental externality