Self-confidence and survival

We consider the impact of history on the survival of a monopolist selling single units in discrete time periods, whose quality is learned slowly. If the seller learns her own quality at the same rate as customers, a sufficiently bad run of luck could induce her to stop selling. When she knows her quality, a good seller never stops selling. Furthermore, a seller with positive, though imperfect, information sells for the same number of periods whether her information is private or public. We further consider the robustness of the central result when the seller's opportunities for strategic behaviour are limited

Long term debt with hidden borrowing

We consider borrowers with the opportunity to raise funds from a competitive baking sector, that shares information about borrowers, and an alternative hidden lender. We highlight that the presence of the hidden lender restricts the contracts that can be obtained from the banking sector and that in equilibrium some borrowers obtain funds from both the banking sector and the (inefficient) hidden lender simultaneously. We further show that as the inefficiency of the hidden lender increases, total welfare decreases. By extending the model to examine a partially hidden lender, we further highlight the key role of information.Hidden Borrowing, Informal Lenders, Borrower Screening, Long Term Debt

Imperfect Competition and Committment

The degree of competition that a rm faces affects its ability to commit to good behavior. However, the relationship need not be monotonic since competition affects the pro ts when committed to good behavior (such as efficient high quality) and bad behavior as well as the short-term profits from "cheating". We demonstrate that as a result competition (using two different measures of competition which show qualitatively similar effects) might have non-monotonic effects on a rm s ability to commit. In particular, a firm might choose to operate in a more competitive environment

Breadth, Depth, and Competition

In a spatial model of both horizontal and vertical differentiation where an agent can occupy an interval rather than a point on the Hotelling line, one can examine the trade-off between depth (a narrow high quality position) and breadth (a wide low quality range). In particular, the extent of depth or breadth can be non-monotonic in the strength of competition

Long-term Debt and Hidden Borrowing

We consider borrowers with the opportunity to raise funds from a competitive banking sector that shares information, as well as from other hidden lenders. The presence of hidden lenders allows borrowers to conceal poor results from their banks and, thus, restricts the contracts that can be obtained from the banking sector. In equilibrium, borrowers obtain funds from both the banking sector and ine¢ cient hidden lenders simultaneously, so that different types of borrowers cannot be distinguished by banks. This generates cross-subsidies between different borrowers that are observationally equivalent to the banking sector. We show that the cheaper the cost of hidden borrowing, the lower is welfare and the lower is the variety of funding arrangements in the banking sector. In particular, while high costs of hidden borrowing allow each different (viable) type of borrower to access different terms from the banking sector, as the cost of hidden borrowing falls, more and more borrowers face identical terms up to the point where all borrowers who access the banking sector (which may include inefficient ones) face identical terms. We generalize the model to allow for partially-hidden lenders and obtain qualitatively similar results

Interrogation Methods and Terror Networks

We examine how the structure of terror networks varies with legal limits on interrogation and the ability of authorities to extract information from detainees. We assume that terrorist networks are designed to respond optimally to a trade-off caused by information exchange: Diffusing information widely leads to greater internal efficiency, but it leaves the organization more vulnerable to law enforcement. The extent of this vulnerability depends on the law enforcement authority’s resources, strategy and interrogation methods. Recognizing that the structure of a terrorist network responds to the policies of law enforcement authorities allows us to begin to explore the most effective policies from the authorities’ point of view

Costly search and design

Firms compete by choosing both a price and a design from a family of designs that can be represented as demand rotations. Consumers engage in costly sequential search among firms. Each time a consumer pays a search cost he observes a new offering. An offering consists of a price quote and a new good, where goods might vary in the extent to which they are good matches for the consumer. In equilibrium, only two design- styles arise: either the most niche where consumers are likely to either love or loathe the product, or the broadest where consumers are likely to have similar valuations. In equilibrium, different firms may simultaneously offer both design-styles. We perform comparative statics on the equilibrium and show that a fall in search costs can lead to higher industry prices and profits and lower consumer surplus. Our analysis is related to discussions of how the internet has led to the prevalence of niche goods and the "long tail" phenomenon.Product design, search costs, long tail

Vertical Practices Facilitating Exclusion

Resale price maintenance (RPM), slotting fees, loyalty rebates and other related vertical practices can allow an incumbent manufacturer to transfer profits to retailers. If these retailers were to accommodate entry, upstream competition could lead to lower industry profits and the breakdown of these profit transfers. Thus, in equilibrium, retailers can internalize the effect of accommodating entry on the incumbent’s profits. Consequently, if entry requires downstream accommodation, entry can be deterred. We discuss policy implications of this aspect of vertical contracting practices