Bundling without Price Discrimination

This paper examines the optimal bundling strategies of a multiproduct monopoly in markets in which a seller cannot monitor and thereby restrict the purchases of buyers to a single bundle, while buyers have resale opportunities. In such markets, the standard mechanism through which bundling increases seller profits, based on price discrimination, is not feasible. The profit-maximizing bundling strategy is characterized, given the restrictions on pricing policies resulting from resale and a lack of monitoring. The welfare implications of optimal bundling are analyzed.Bundling ; Pricing ; Revenue Maximization ; Product Design JEL Codes: D42 ; L12

Affective Empathy in Non-Cooperative Games

In this paper, we examine strategic settings in which players have interdependent preferences. Players\u27 utility functions depend not only on the strategy profile being played, but also on the realized utilities of other players. Thus, players\u27 realized utilities are interdependent, capturing the psychological phenomena of affective empathy and emotional contagion. We offer a solution concept for these empathetic games and show that the set of equilibria is non-empty and, generically, finite. Motivated by psychological evidence, we then analyze sympathetic and antipathetic games. In the former, players\u27 utilities increase in others\u27 realized utilities, capturing unconditional friendship; in the latter, the opposite holds, resembling hostility

Co-Worker Altruism and Unemployment

It is well-known that social relationships and altruism among workers foster cooperation in the workplace and, therefore, may have beneficial effects for firms. Yet it is unclear how and to what extent co-worker altruism impacts labor market outcomes. In this paper, we find that, although co-worker altruism may be seamless in good times, it may impact the functioning of labor markets during bad times. Specifically, co-worker altruism may potentially lead to wage rigidity and involuntary unemployment in economic downturns. These results seem to be consistent with recent empirical findings

Bundling without price discrimination

This paper examines the optimal bundling strategies of a multiproduct monopoly in markets in which a seller cannot monitor and thereby restrict the purchases of buyers to a single bundle, while buyers have resale opportunities. In such markets, the standard mechanism through which bundling increases seller profits, based on price discrimination, is not feasible. The profit-maximizing bundling strategy is characterized, given the restrictions on pricing policies resulting from resale and a lack of monitoring. The welfare implications of optimal bundling are analyzed

No-arbitrage, state prices and trade in thin financial markets

We examine how non-competitiveness in financial markets affects the choice of asset portfolios and the determination of equilibrium prices. In our model, potential arbitrage is conducted by a few highly specialized institutional investors who recognize and estimate the impact of their trades on financial prices. We apply a model of economic equilibrium, based on Weretka (http://www.ssc.wisc.edu/~mweretka/Research, 2007a), in which price effects are determined endogenously as part of the equilibrium concept. For the case in which markets allow for perfect insurance, we argue that the principle of no-arbitrage asset pricing is consistent with non-competitive behavior of the arbitragers and extend the fundamental theorem of asset pricing to the non-competitive setting