Price dynamics and collusion under short-run price commitments

We consider a dynamic homogenous oligopoly in which firms set prices repeatedly. Theory predicts that short-run price commitments have an increasing impact on profits and may lead to less price stability. The experiments that we conduct provide support for the first effect and against the second effect when a random ending rule is applied. Application of a fixed ending rule seems to reverse these findings, but none of the effects is significant.microeconomics ;

Focal prices and price cycles in an alternating price duopoly experiment

In the infinite horizon alternating price setting duopoly of Maskin and Tirole (1988), a focal price equilibrium and an equilibrium consisting of Edgeworth cycles coexist. In this study we investigate which of these two equilibria is more likely to emerge by means of a laboratory experiment. In 20 out of 27 observations the focal price equilibrium emerges, while price cycles are observed in only one observation. Furthermore, we study the duopoly in case of a long but finite horizon. Although the corresponding unique subgame-perfect equilibrium consists of Edgeworth cycles, experimentally we still observe a focal price in the majority of the observations. Nevertheless, price cycles are observed far more often than for the infinite horizon setting.microeconomics ;

Alternating-move Hotelling with Demand Shocks

In this paper an infinite-horizon alternating-move Hotelling model in which consumers are uniformly distributed over the market is considered. In a Markov perfect equilibrium, a seller’s move in any period depends on the price the other seller is committed to. The analytic solution is given and the unique linear Markov perfect equilibrium is computed for different values of the discount factor. The base model is then extended by the introduction of exogenous demand shocks which makes finding an analytical solution using the conventional analysis impossible. For this extended model the margin in which long-run prices fluctuate is determined for different values of the shock probability. It is found that the prices set in the high demand state are always lower than in the low demand state. Thus, our findings would support a notion of counter cyclical pricing with respect to the state of demand.Industrial Organization;

Synergies are a reason to prefer first-price auctions!

In this paper we show that in a private value setting first-price auctions can be preferred to second-price auctions. We consider a sequential auction of two objects with positive synergies and compare both auction formats. Although the second-price auction performs better in terms of efficiency and revenue, the first-price auction performs much better on a so far neglected dimension. Namely, the probability that the winner of the first object goes bankrupt is almost always higher when using the second-price rule. Our findings therefore support the common use of first-price auctions, most notably for procurement.industrial organization ;

Sequential Auctions with Synergies: The Paradox of Positive Synergies.

In multi-unit (procurement) auctions winning multiple contracts can lead to cost advantages due to synergies. As an example one can think of procurement auctions where construction firms have returns to scale for investments in specialized equipments and workers that are required in large-scale projects. In this paper we analyze the effects of the presence of such synergies on bidding behavior and thus auction outcomes in general. We find that the presence of synergies on the bidders’ side induces more competitive bidding and therefore leads to lower expected payoffs for bidders and higher expected revenues for sellers. Thus, instead of benefiting from the presence of synergies, bidders suffer from it. Moreover it is found that serious bankruptcy problems can occur. In particular the negative welfare consequences caused by these bankruptcy problems are of major importance for auction design when synergies are present. Finally, the presence of synergies leads to a decreasing price trend and can therefore explain the declining price anomaly.industrial organization ;

An experimental comparison of sequential first- and second-price auctions with synergies

The presence of synergies in recurrent procurement auctions leads to an exposure problem and asymmetries among bidders. We consider sequential first- and second-price auctions with synergies in a setting with four bidders. In a series of experiments we compare the performance of the two pricing formats for three different sizes of the synergy. We find that for small synergies, the first-price auction performs better in terms of efficiency, revenue, and the probability on losses. However, once the synergy factor becomes very large the performance of the two different pricing formats becomes more similar. We also find that even though the potential total surplus that can be divided between buyers and seller increases in the synergy factor, subjects’ earnings within a pricing rule do not significantly change in the synergy factor. Finally, we observe that the two pricing formats give rise to different price trends within the auction sequence. In general, our results provide support for the common use of first-price instead of second-price auctions for public procurement.industrial organization ;

Sequential auctions with synergies: The paradox of positive synergies

We show that synergies enhance bidding competition to such an extent that they are a curse rather than a blessing for the bidders; they may even induce serious bankruptcy problems.microeconomics ;

Signals of a new phase in N=2 gauge theory with a magnetic field on the three-sphere

We study the effect of a magnetic field on N=2 super-Yang-Mills on S^3 at strong coupling using the gauge/gravity correspondence. As in previous work that dealt with the theory in infinite volume, we find that increasing the magnetic field pushes the system into the confined phase. However, we in addition also find that, within the class of configurations with the same symmetry as those which describe the ground state at vanishing magnetic field, a mass gap appears in the spectrum. This suggests the existence of a new phase with so far unexplored symmetry structure. We provide suggestions for the physical properties of this phase.Comment: 28 page

Exploring colourful holographic superconductors

We explore a class of holographic superconductors built using non-abelian condensates on probe branes in conformal and non-conformal backgrounds. These are shown to exhibit behaviour of the specific heat which resembles that of heavy fermion compounds in the superconducting phase. Instead of showing BCS-like exponential behaviour, the specific heat is polynomial in the temperature. It exhibits a jump at the critical temperature, in agreement with real-world superconductors. We also analyse the behaviour of the energy gap and the AC and DC conductivities, and find that the systems can be either semi-conducting or metallic just above the critical temperature

Temperature versus acceleration: The Unruh effect for holographic models

We analyse the effect of velocity and acceleration on the temperature felt by particles and strings in backgrounds relevant in holographic models. First, we compare accelerated strings and strings at finite temperature. We find that for fixed Unruh temperature felt by the string endpoints, the screening length is smaller for the accelerated Wilson loop than for the static one in a thermal background of the same temperature; hence acceleration provides a ``more efficient'' mechanism for melting of mesons. Secondly, we show that the velocity-dependence of the screening length of the colour force, previously obtained from a moving Wilson loop in a finite temperature background, is not specific for the string, but is a consequence of the generic fact that an observer which moves with constant velocity in a black hole background measures a velocity-dependent temperature. Finally, we analyse accelerated particles and strings in the AdS black hole background, and show that these feel a temperature which increases as a function of time. As a byproduct of our analysis we find a global Minkowski embedding for the planar AdS black hole