Nonconvex Production Technology and Price Discrimination

A modern firm often employs multiple production technologies based on distinct engineering principles, causing non-convexities in the firm's unit cost as a function of product quality. Extending the model of Mussa and Rosen (1978), this paper investigates how a monopolist's product line design may crucially depend on the non-convexities in the unit cost function. We show that the firm does not offer those qualities where the unit cost exceeds its convex envelope. Consequently, there are "gaps" in its optimal quality choice. When the firm is only permitted to offer a limited number of quality levels (due to possible fixed costs associated with offering each quality), the optimal location of quality levels still lies within those regions of the quality domain where the unit cost function coincides with its convex envelope. We further show that the firm's profit is a supermodular function of its quality levels, and characterize a necessary condition for the optimal quality locationPrice Discrimination, Product Line Design, Nonconvex Production

Kondo correlation and spin-flip scattering in spin-dependent transport through a quantum dot coupled to ferromagnetic leads

We investigate the linear and nonlinear dc transport through an interacting quantum dot connected to two ferromagnetic electrodes around Kondo regime with spin-flip scattering in the dot. Using a slave-boson mean field approach for the Anderson Hamiltonian having finite on-site Coulomb repulsion, we find that a spin-flip scattering always depresses the Kondo correlation at arbitrary polarization strength in both parallel and antiparallel alignment of the lead magnetization and that it effectively reinforces the tunneling related conductance in the antiparallel configuration. For systems deep in the Kondo regime, the zero-bias single Kondo peak in the differential conductance is split into two peaks by the intradot spin-flip scattering; while for systems somewhat further from the Kondo center, the spin-flip process in the dot may turn the zero-bias anomaly into a three-peak structure.Comment: 4 pages, 2 figure

Monotone Profitability Ranking in a Differentiated Oligopoly

In a setting where firms produce goods of distinct qualities at potentially different unit costs, I identify sufficient conditions for producing a higher quality good to be more (less) profitable

Quantum transport through double-dot Aharonov-Bohm interferometry in Coulomb blockade regime

Transport through two quantum dots laterally embedded in Aharonov-Bohm interferometry with infinite intradot and arbitrary interdot Coulomb repulsion is analyzed in the weak coupling and Coulomb blockade regime. By employing the modified quantum rate equations and the slave-boson approach, we establish a general dc current formula at temperatures higher than the Kondo temperature for the case that the spin degenerate levels of two dots are close to each other. We examine two simple examples for identical dots - no doubly occupied states and no empty state. In the former, completely destructive coherent transport and phase locking appear at magnetic flux $\Phi=\Phi_{0}/2$ and $\Phi=0$ respectively; in the latter, partially coherent transport exhibits an oscillation with magnetic flux having a period of $\Phi_0$.Comment: 8 pages, 3 figure

Market Segmentation for Information Goods with Network Externalities

Positive externalities characterize the consumption of a majority of information goods such as software, various Internet services, and online communities. In a simple model of vertical differentiation, we show that network externality is a critical factor for the versioning of such information goods. In particular, a multi-product monopolist offers two versions of distinct qualities. The underlying rationale is that offering the low-end version expands the network size and thus enhances the (network) value of the high-end version, allowing the firm to charge a higher price for the high-end version. In addition, we show that the low-quality version may be offered for free under very general conditions. Competition between firms producing compatible products reduces their incentive to version their products due to the spillover effects in a shared product network.Information Systems Working Papers Serie

Versioning Information Goods with Network Externalities

Positive externalities characterize the consumption of a majority class of information goods and services such as software, e-mail, and online content and services including virtual communities. We show that network externality is critical for the market segmentation and product line decisions of an information goods seller. With externality, a monopoly of multiple existing products offers exactly two distinct qualities. When development costs are taken into account, the low quality is developed only if the gain in revenue due to an enlarged network exceeds the extra development costs. In particular, if developed, the low quality should be offered for free under very general conditions. Network externality itself thus can explain the market provision of free information goods by proprietary sellers from a product line design perspective