Switching Costs in Retroactive Rebates - What's time got to do with it?

This paper analyzes the role of the reference period in assessing switching costs in retroactive rebates. A retroactive rebate allows a firm to use the inelastic portion of demand as leverage to decrease price in the elastic portion of demand, thereby artificially increasing switching costs of buyers. I identify two factors that determine the extent to which retroactive rebates, as a form of infra-personal price-discrimination, can result in potential market foreclosure. These two factors are the rebate percentage and the threshold at which this percentage is retroactively applied. In contrast to the existing literature, the length of the reference period within which a rebate scheme applies is demonstrated to be at best an indirect approximation of the potential foreclosure effects of a rebate

The Role of Rivalry. Public Goods versus Common-Pool Resources

Despite a large theoretical and empirical literature on public goods and common-pool resources, a systematic comparison of these two types of social dilemmas is lacking. In fact, there is considerable confusion about these two types of dilemma situations. As a result, they are often treated alike. In this paper we argue that the degree of rivalry is the fundamental difference between the two games. We show that rivalry implies that both games cannot be represented by the same game theoretic structure. Fur-thermore, we experimentally study behavior in a quadratic public good and a quadratic common-pool resource game with identical Pareto optimum but divergent interior Nash equilibria. The results show that partici-pants clearly perceive the differences in rivalry. Aggregate behavior in both games starts relatively close to Pareto efficiency and converges to the respective Nash equilibrium