Is Perfect Price Discrimination Really Efficient? An Analysis of Free Entry Equilibria

We analyze models of product differentiation with perfect price discrimination and free entry. Although perfect price discrimination ensures efficient output decisions given product characteristics, coordination failures may prevent efficiency in the choice of product characteristics. More fundamentally, even if we have efficient product choices for a fixed number of firms, one always has excessive entry in free entry equilibrium. Our results apply to a large class of models of product differentiation including location models as well as representative consumer models of the demand for variety. These results also apply to models of common agency or lobbying with free entry and imply that one has excessive entry into the ranks of lobbyists.price discrimination, efficiency, free entry, product differentiation

Minimum Wages in a Symmetric Model of Monopsonistic Competition

We reconsider the employment effect of a minimum wage on employment in a symmetric model of monopsonistic competition, where each employer competes equally with every other employer. The employment effect depends on the degree of distortion in the labor market. If fixed costs are high (low), the labor market is relatively non-competitive (competitive) and minimum wages increase (decrease) employment. This contrasts with the results of a Salop style model where a minimum wage unambiguously raises employment. We also find that the welfare effect of a small minimum wage is unambiguously positive.

Oligopsony and the Distribution of Wages

A number of theories (search and efficiency wages) have been developed, in part, to explain why identically able workers are often paid different wages. However, when there is a minimum wage, they do not explain the resulting ``spike" in the wage distribution. Our model's predictions are consistent with this evidence. We assume that workers are equally able but have heterogeneous preferences for non-wage characteristics, while employers have heterogeneous productivity characteristics. This results in a model of labor market oligopsony where ``inside'' and ``outside'' forces interact, producing wage dispersion as well as a spike at the minimum wage.wage differentials, wage dispersion, monopsony, oligopsony, labor theory, minimum wage

Is Perfect Price Discrimination Really Efficient? An Analysis of Free Entry

We analyze models of product differentiation with perfect price discrimination and free entry. With a fixed number of firms, and in the absence of coordination failures, perfect price discrimination provides incentives for firms to choose product characteristics in a socially optimal way. However, with free entry, the number of firms is always excessive. Our results apply to a large class of models of product differentiation. They also apply to models of common agency or lobbying with free entry and imply that one has excessive entry into the ranks of the principals.

On the non-integrability of the Popowicz peakon system

We consider a coupled system of Hamiltonian partial differential equations introduced by Popowicz, which has the appearance of a two-field coupling between the Camassa-Holm and Degasperis-Procesi equations. The latter equations are both known to be integrable, and admit peaked soliton (peakon) solutions with discontinuous derivatives at the peaks. A combination of a reciprocal transformation with Painlev\'e analysis provides strong evidence that the Popowicz system is non-integrable. Nevertheless, we are able to construct exact travelling wave solutions in terms of an elliptic integral, together with a degenerate travelling wave corresponding to a single peakon. We also describe the dynamics of N-peakon solutions, which is given in terms of an Hamiltonian system on a phase space of dimension 3N.Comment: 8 pages, AIMS class file. Proceedings of AIMS conference on Dynamical Systems, Differential Equations and Applications, Arlington, Texas, 200

Minimum Wages, Employment and Monopsonistic Competition

We set out a model of monopsonistic competition, where each employer competes equally with every other employer. The employment effects of minimum wages depend on the degree of distortion in the labor market. If fixed costs per firm are high then the labor market is relatively non-competitive and minimum wages increase employment. Conversely, low fixed costs make for a more competitive labor market where minimum wages reduce employment. This contrasts with the results of a Salop style model with localized employer competition where a minimum wage unambiguously raises employment. We also find that the welfare effect of a small minimum wage is unambiguously positive