Free daily newspapers : too strong incentives to print?

A free daily newspaper distributes news to readers and sells ad-space to advertisers, having private information about its audience. For a given number of distributed copies, depending on the type of audience (favorable or unfavorable), the newspaper may either have a large readership or a small readership. A large readership provides a greater return to advertisers, because ads are visualized by more people. A favorable audience has also the advantage of requiring a lower distribution cost (for a given number of distributed copies), because readers are willing to exert more effort to obtain a copy of the free newspaper and are less likely to reject a copy that is handed to them. We find that when the audience is unfavorable, the number of distributed copies and the price of ad-space coincide with those of the perfect information scenario. In contrast, if the audience is favorable, the newspaper prints extra copies to send a credible signal to the advertisers that the audience is favorable. Overprinting is not necessarily welfare-detrimental since readers benefit from the existence of additional copies.info:eu-repo/semantics/publishedVersio

Takeovers and cooperatives: governance and stability in non-corporate firms

Author's draft dated 11 January 2010. Final version published in Journal of economics available online at http://www.springerlink.com/If consumers wholly or partially control a firm with market power they will charge less than the profit maximizing price. Starting at the usual monopoly price, a small price reduction will have a second order effect on profits but a first order effect on consumer surplus. Despite this desirable static result, it has been argued that cooperatives are vulnerable to take-over by outsiders who will run them as for-profit businesses. This paper studies takeovers of cooperatives. We argue that there will not be excessive takeovers of cooperatives due to the Grossman-Hart problem of free riding during takeovers.Research in part supported by ESRC grant RES-000-22-0650

Vertical product differentiation and advertising.

A duopoly model is developed in which firms’ strategic variables include brand quality, the number of distinct market segments to enter and price. Informative advertising is used to overcome consumer ignorance about brands. In contrast to many existing models in which firms engage in price competition, the subgame perfect equilibria of the game are not characterised by the production of vertically differentiated products. Further, whilst the firms typically produce identical high quality products, in some circumstances the production of homogeneous low quality brands can be an equilibrium strategy

Random encounters and information diffusion about product quality

This paper explores how social interactions among consumers shape markets. In a two-country model, consumers meet and exchange information about the quality of the goods. As information spreads, demand evolves, affecting the prices and quantities manufactured by profit-maximizing firms. We show that market prices with informational frictions reach the duopoly price with full information at the limit. However, this convergence can take different paths depending on the size asymmetry between countries. In particular, when the country producing the low-quality good is relatively large, the single market does not immediately turn into a duopoly and can be temporarily trapped in a situation of price instability where no Nash equilibrium in pure (but only in mixed) strategies exists and prices can fluctuate between their monopoly and duopoly levels. It follows that the classical price-reducing effects of international trade may take longer to appear. In view of an intense globalization process, understanding how social meetings affect market outcomes is critical for understanding the performance of international economic integration

The Quality–Quantity Trade-off

The standard vertical-product-differentiation model assumes that quality and quantity are independent choices. That is, the choice of quality is separated from the decision of the number of units to produce. For certain products this is not appropriate. This note presents an extension to the vertical-product-differentiation model to incorporate the relationship between quality and quantity. Eastern Economic Journal (2008) 34, 95–100. doi:10.1057/palgrave.eej.9050009