Intercommection Incentives of a Large Network Facing Multiple Rivals

This paper extends Cremer, Rey and Tirole’s analysis of whether a firm with the most installed-base customers, in a market exhibiting network externalities, gains by degrading interconnection with rivals that compete with it for new customers. We allow any number of rivals and consider both tipping equilibria and interior equlibria. Degrading interconnection can yield tipping away from the largest network even if its installed-base share exceeds one half. For all parameter values (including those that admit interior equilibria), a share above one half is necessary but not sufficient to ensure degradation is profitable. Greater scope for market expansion—a lower marginal cost or smaller installed-base relative to potential additional demand—makes profitable degradation less likely.Interconnection, Network Externalities, Exclusion

Increasing Fundraising Success by Decreasing Donor Choice

Suggested contributions, membership categories, and discrete, incremental thank-you gifts are devices often used by benevolent associations that provide public goods. Such devices focus donations into discrete levels, thereby effectively limiting the donors' freedom to give. We study the effects on overall donations of the tradeoff between rigid schemes that severely restrict the choices of contribution on the one hand, and flexible membership contracts on the other, taking into account the strategic response of contributors whose values for the public good are private information. We show flexibility dominates when i) the dispersion of donors' taste for the public good increases, ii) the number of potential donors increases, and iii) there is greater funding by an external authority. Using the number of default membership categories that National Public Radio stations offer as proxy for flexibility, we document the existence of empirical correlations consistent with our predictions: stations offer a larger number of suggested contribution levels as i) the incomes of the population served become more diverse, ii) the population of the coverage area increases, and iii) there is greater external support from the Corporation for Public Broadcasting.private provision, categories, restricting donations, heterogeneity, crowding out

The Attack-and-Defense Group Contests: Best-shot versus Weakest-link

This study analyzes a group contest in which one group (defenders) follows a weakest-link whereas the other group (attackers) follows a best-shot impact function. We fully characterize the Nash and coalition-proof equilibria and show that with symmetric valuation the coalition-proof equilibrium is unique up to the permutation of the identity of the active player in the attacker group. With asymmetric valuation it is always an equilibrium for one of the highest valuation players to be active; it may also be the case that the highest valuation players in the attacker group free-ride completely on a group-member with a lower valuation. However, in any equilibrium, only one player in the attacker group is active, whereas all the players in the defender group are active and exert the same effort. We also characterize the Nash and coalition-proof equilibria for the case in which one group follows either a best-shot or a weakest-link but the other group follows an additive impact function

ALL-PAY AUCTION EQUILIBRIA IN CONTESTS

We analyze (non-deterministic) contests with anonymous contest success functions. There is no restriction on the number of contestants or on their valuations for the prize. We provide intuitive and easily verifiable conditions for the existence of an equilibrium with properties similar to the one of the (deterministic) all-pay auction. Since these conditions are fulfilled for a wide array of situations, the predictions of this equilibrium are very robust to the specific details of the contest. An application of this result contributes to fill a gap in the analysis of the popular Tullock rent- seeking game because it characterizes properties of an equilibrium for increasing returns to scale larger than two, for any number of contestants and in contests with or without a common value.(non-) deterministic contest, all-pay auction, contest success functions.

Optimal Intellectual Property Rights Exhaustion and Humanitarian Assistance during a National Health Emergency

We analyze policy options during an international health emergency to provide consumers in least developed countries access to patented life-extending pharmaceuticals. We show that a properly specified tariff against re?xports achieves optimal price dispersion and is shown to depend on the nature of demand, product development costs and humanitarian concerns by western citizens for patients inside a health emergency zone. A tariff dominates regional exhaustion for achieving optimal price dispersion, improves the efficiency properties of a patent for covering product development cost and is a more efficient tool for internalizing a humanitarian externality than a targeted consumption subsidy.Intellectual Property Rights, AIDS, Developing Countries, WTO

E.T. and innovation - science fiction or reality? An assessment of the impact of emissions trading on innovation

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Clean technology adoption and its influence on tradeable emission permit prices.

In this paper we give an example in which the price of tradeable emission permits increases despite firms' adoption of a less polluting technology. This is in contrast with Montero (2002) and Parry (1998), among others. If two Counot players switch to a cleaner technology, the price for permits may increase due to an increase in the net demand for permits and a decrease in net supply of permits after the clean technology is adopted. This is only the case when output demand is elastic.environmental innovation, tradable emission permits, Cournot interaction

Optimal Intellectual Property Rights Protection and Humanitarian Assistance during and International Health Emergency

We analyze policy options during an international health emergency to provide consumers in least developed countries access to patented life-extending pharmaceuticals. We show that a properly specified tariff against reexports achieves optimal price dispersion and is shown to depend on the nature of demand, product development costs and humanitarian concerns by western citizens for patients inside a health emergency zone. A tariff dominates regional exhaustion for achieving optimal price dispersion, improves the efficiency properties of a patent for covering product development cost and is a more efficient tool for internalizing a humanitarian externality than a targeted consumption subsidy.Intellectual Property Rights, AIDS, Developing Countries, WTO

Partial cross ownership and collusion

This article finds that non-controlling minority shareholdings among competitors lower the sustainability of collusion. This is the case under an even greater variety of situations than was indicated by earlier literature. The collusion destabilizing effect of minority shareholdings is mainly caused by their unilateral effects, and it is particularly prevalent in the presence of an effective antitrust authority

IS COMMUNITY INVOLVEMENT BENEFICIAL FOR PUBLIC POLICY EFFICIENCY?

Replaced with revised version of paper 08/02.Political Economy,