Newspapers’ market shares and the theory of the circulation spiral

We consider a model of daily newspapers’ competition to test the validiity of the so called “theory of the circulation spiral”. According to it, the interaction between the newspapers and the advertising markets drives the newspaper with the smaller readership into a vicious circle, finally leading it to death. In a model with two newspapers, we show that, contrary to this conjecture, the dynamics envisaged by the proposes of the theory, does not always lead to the elimination of one of them.

Exit, sunk costs, and the selection of firms

This paper aims to identify the cost characteristics of exiting firms whenever firms are playing an infinite horizon supergame with time-invariant cost and demand functions. With more than two firms, the problem of which firms exit is quite similar to a coalition formation one. Solving this coalition formation problem, we obtain that the exiting firms are those with higher average cost functions whenever reentry is costless while, whenever reentry is unprofitable, the exiting firms are those with lower marginal (and possibly) average cost functions. Since reentry costs are typically sunk, our analysis points out that the presence of sunk costs affects not only the size (as it is well known) but also the composition of the industry

Price discrimination and the location choice of a durable goods monopoly

Delivered pricing by a spatial monopoly amounts to third degree price discrimination. Well known results in spatial economics show that the monopolist location choice is efficient under delivered pricing and generally inefficient under mill pricing. By contrast, the present paper shows that if the monopolist sells a durable good the location is inefficient also under delivered pricing . Under mill pricing the same inefficiency occur

Unexploited comparative advantages in a differentiated duopoly

The present paper analyses the question whether firms choose product varieties for which they enjoy a comparative advantage with respect to their rivals. In a limited set-up, that of a vertically differentiated duopoly, it is here found that firms may not choose in such an optimal way, but rather end up in “perverse” equilibria where the firm most efficient in producing a high quality variant of a product produces instead the low quality one, and leaves to the less efficient rival the high quality position

"Innocuous" minimum quality standards

The present note shows that "innocuous" Minimum Quality Standards, namely below the lowest quality level in a market, may have effects on equilibrium outcomes. Such a MQS reduces the incentive to invest in R&D by the quality-leading firm

Debt restructuring with multiple creditors and the role of exchange offers

Exploiting the analogy with the public provision of a public good, this paper studies debt restructuring with an arbitrary number of creditors using mechanism design. Creditors differ in the value they expect to receive in bankruptcy, and this value is private information. As with public goods, too little debt forgiveness is graned in equilibrium relative to the first bes

Disclosing versus withholding technology knowledge in a duopoly

We study firms\u2019 incentives to transfer knowledge about production technology to a rival in a Cournot duopoly. In a setting where two technologies are available, a technology is characterized by its associated cost function and no single technology is strictly superior to the other. A firm has superior information if it knows both techniques and the other only one. Cost efficiency may e \u2018reversed\u2019 after the voluntary disclosure, so that the rival\u2019s costs are improved at the equilibrium level of output. Adding R&D investments to the picture, we find that a firm can decide to invest just for the purpose of acquiring knowledge that will be transferred and not used. Furthermore, for the same point in the parameter space, the acquisition of full knowledge may occur or not as a function of the initial distribution of information

Niche vs. central firms: Pattern of technology choice and cost-price dynamics in a differentiated oligopoly

We investigate whether and how positions in the characteristics space influences technological adoption and how price levels are affected; furthermore we assess the effects of policy interventions. In an industry where a central firm competes with two peripheral/niche ones, two technologies are available: one with low marginal and high fixed costs and one with opposite pattern. The central firm is in direct competition with the all the rivals. We show that this firm has higher incentives to adopt the technology efficient at large production scale; consequently if fixed cost decreases, the diffusion of this technology in the industry starts from the center and then spreads over to the niche firms. Changes in fixed and marginal costs affect long-run prices in non-obvious way. On the normative side, subsidies affect the technology pattern and deliver relevant effects: lump-sum subsidies increase consumer surplus, but can reduce profits. A price-cap that forestalls a technological change improves welfare. Our analysis is well-suited to analyze the digitalization process that has taken place in the last years

Joint venture for a new product and antitrust exemptions

The present paper analyzes different forms of organizing a JV for the introduction of a new product. It is shown that under non contractible effort levels by the parent companies, a non cooperative solution, due to free-riding, is less desirable than one where firms cooperate not only at the R&D but also at the selling stage. Also, allowing firms to set up a production JV may be an alternative way to improve upon the fully non cooperative solution. An Antitrust authority should therefore consider the possible destructive effects on the JV results of prohibitions of inter-firm cooperatio