On the Markovian efficiency of Bertrand and Cournot equilibria

We characterize and compare closed-loop (feedback) price and quantity strategies within a full-fledged dynamic model of oligopolistic competition in which production requires exploitation of a renewable productive asset. Unlike previous papers on the strategic exploitation of productive assets, we allow for imperfect product substitutability, which enables us to deal with price competition. We show that the traditional result that the Bertrand equilibrium is more efficient than the Cournot equilibrium does not necessarily hold in a Markovian environment, either in the short-run or at the stationary equilibrium, or using the discounted sum of welfare as a criterion for relative efficiency.

The strategy of global branding and brand equity

This book offers a way to predict which brand a buyer will purchase. It looks at brandperformance within a product category and tests it in different countries with verydifferent cultures. Following the Predictive Brand Choice (PBC) model, this book seeks to predict a consumer’s loyalty and choice. Results have shown that PBC can achieve a high level of predictive accuracy, in excess of 70% in mature markets. This accuracy holds even in the face of price competition from a less preferred brand.PBC uses a prospective predicting method which does not have to rely on a brand’spast performance or a customer’s purchase history for prediction. Choice data isgathered in the retail setting – at the point of sale. The Strategy of Global Brandingand Brand Equity presents survey data and quantitative analyses that prove themethod described to be practical, useful and implementable for both researchers and practitioners of commercial brand strategies.

A theory of weekly specials

Multiproduct retailers facing similar costs and serving the same public commonly announce different weekly specials. These promotional prices also seem to evolve randomly over the weeks. Here, weekly specials are viewed as the strategic outcome of an oligopolistic price competition among multiproduct retail stores facing nonconvex costs. Existence of an equilibrium in mixed strategies is proven. ldentical stores serving the same public will never charge the same price vector with probability one (cross-store price dispersion). Mixed strategies can generate random price dispersion over time in the repeated version of the mode!.

R&D investment, international trade, and home market and competitiveness efects

We analyze the effects of R&D investment on international trade. The importance of studying this comes from the fact that one of the most important characteristics of modern industrial organization is that firms try to influence market behavior through strategic variables as R&D. Moreover international competition between firms is, more and more, also centered in R&D competition (besides output and price competition). With this in mind, we develop an oligopolist reciprocal-markets model where firms engage in R&D investment to achieve future reductions in marginal costs. We find ‘home market effects’ at the level of R&D investment, i.e.: firms located in countries that host a higher share of skilled-labor perform higher levels of R&D investment. As consequence, firms in these countries are more competitive than firms in other countries, and as such they can penetrate more easily foreign markets. As result of this ‘competitiveness effect’, countries where these firms are located run trade surplus, while countries where firms perform lower levels of R&D investment incur in trade deficits.

Three Essays in Spatial Economics

This work contributes to the field of spatial economics by embracing three distinct modelling approaches, belonging to different strands of the theoretical literature. In the first chapter I present a theoretical model in which the changes in urban system’s degree of functional specialisation are linked to (i) firms’ organisational choices and firms’ location decisions. The interplay between firms’ internal communication/managing costs (between headquarters and production plants) and the cost of communicating with distant business services providers leads the transition process from an “integrated” urban system where each city hosts every different functions to a “functionally specialised” urban system where each city is either a primary business center (hosting advanced business services providers, a secondary business center or a pure manufacturing city and all this city-types coexist in equilibrium.The second chapter investigates the impact of free trade on welfare in a two-country world modelled as an international Hotelling duopoly with quadratic transport costs and asymmetric countries, where a negative environmental externality is associated with the consumption of the good produced in the smaller country. Countries’ relative sizes as well as the intensity of negative environmental externality affect potential welfare gains of trade liberalisation. The third chapter focuses on the paradox, by which, contrary to theoretical predictions, empirical evidence shows that a decrease in international transport costs causes an increase in foreign direct investments (FDIs). Here we propose an explanation to this apparent puzzle by exploiting an approach which delivers a continuum of Bertrand- Nash equilibria ranging above marginal cost pricing. In our setting, two Bertrand firms, supplying a homogeneous good with a convex cost function, enter the market of a foreign country. We show that allowing for a softer price competition may indeed more than offset the standard effect generated by a decrease in trade costs, thereby restoring FDI incentives.

Essays in Industrial Organization and Information Technology

Chapter 1 studies how consumers’ switching costs affect the pricing and profits of firms competing in two-sided markets such as Apple and Google in the smartphone market. When two-sided markets are dynamic – rather than merely static – I show that switching costs lower the first-period price if network externalities are strong, which is in contrast to what has been found in one-sided markets. By contrast, switching costs soften price competition in the initial period if network externalities are weak and consumers are more patient than the platforms. Moreover, an increase in switching costs on one side decreases the first-period price on the other side. Chapter 2 examines firms’ incentives to invest in local and flexible resources when demand is uncertain and correlated. I find that market power of the monopolist providing flexible resources distorts investment incentives, while competition mitigates them. The extent of improvement depends critically on demand correlation and the cost of capacity: under social optimum and monopoly, if the flexible resource is cheap, the relationship between investment and correlation is positive, and if it is costly, the relationship becomes negative; under duopoly, the relationship is positive. The analysis also sheds light on some policy discussions in markets such as cloud computing. Chapter 3 develops a theory of sequential investments in cybersecurity. The regulator can use safety standards and liability rules to increase security. I show that the joint use of an optimal standard and a full liability rule leads to underinvestment ex ante and overinvestment ex post. Instead, switching to a partial liability rule can correct the inefficiencies. This suggests that to improve security, the regulator should encourage not only firms, but also consumers to invest in security.

Efficiency in Deregulated Electricity Markets: Offer Cost Minimization vs. Payment Cost Minimization Auction

This study of the wholesale electricity market compares the efficiency performance of the auction mechanism currently in place in U.S. markets with the performance of a proposed mechanism. The analysis highlights the importance of considering strategic behavior when comparing different institutional systems. We find that in concentrated markets, neither auction mechanism can guarantee an efficient allocation. The advantage of the current mechanism increases with increased price competition if market demand is perfectly inelastic. However, if market demand has some responsiveness to price, the superiority of the current auction with respect to efficiency is not that obvious. We present a case where the proposed auction outperforms the current mechanism on efficiency even if all offers reflect true production costs. We also find that a market designer might face a choice problem with a tradeoff between lower electricity cost and production efficiency. Some implications for social welfare are discussed as well.

Can a Newly Proposed Mechanism for Allocating Contracts in U.S. Electricity Wholesale Markets Lead to Lower Prices? A Game Theoretic Analysis

This study of the wholesale electricity market compares the cost-minimizing performance of the auction mechanism currently in place in U.S. markets with the performance of a proposed replacement. The current mechanism chooses an allocation of contracts that minimizes a fictional cost calculated using pay-as-offer pricing. Then suppliers are paid the market clearing price. The proposed mechanism uses the market clearing price in the allocation phase as well as in the payment phase. In concentrated markets, the proposed mechanism outperforms the current mechanism even when strategic behavior by suppliers is taken into account. The advantage of the proposed mechanism increases with increased price competition.

Firm dynamics in the Cambodian garment industry: firm turnover, productivity growth, and wage profile under trade liberalization

The international garment trade was liberalized in 2005 following the termination of the MFA (Multifibre Arrangement) and ever since then, price competition has intensified. Employing a unique firm dataset collected by the authors, this paper examines the changes in the performance of Cambodian garment firms between 2002/03 and 2008/09. During the period concerned, frequent firm turnover led to an improvement of the industry’s productivity, and the study found that the average total-factor productivity (TFP) of new entrants was substantially higher than that of exiting firms. Furthermore, we observed that thanks to productivity growth, an improvement in workers’ welfare, including a rise in the relative wages of the low-skilled, was taking place. These industrial dynamics differ considerably from those indicated by the “race to the bottom” argument as applied to labor-intensive industrialization in low income countries.

Chapter 5 Product Differentiation versus Geographical Differentiation: Evidence from the Pork Processing Industry in China

This chapter attempts to identify whether product differentiation or geographical differentiation is the main source of profit for firms in developing economies by employing a simple idea from the recently developed method of empirical industrial organization. Theoretically, location choice and product choice have been considered as analogues in differentiation, but in the real world, which of these strategies is chosen will result in an immense difference in firm behavior and in the development process of the industry. Development of the technique of empirical industrial organization enabled us to identify market outcomes with endogeneity. A typical case is the market outcome with differentiation, where price or product choice is endogenously determined. Our original survey contains data on market location, differences in product types, and price. The results show that product differentiation rather than geographical differentiation mitigates pressure on price competition, but 70 per cent secures geographical monopoly.

Plan anual de una compañía distribuidora de productos petrolíferos

El alcance de este proyecto consiste en elaborar el plan anual teórico de una compañía distribuidora de productos petrolíferos, que tiene como objetivo mantener los niveles de cuota en el mercado nacional de carburantes de estaciones de servicio, evaluando las rentabilidades conseguidas. El mercado de carburantes de automoción esta reduciéndose de forma importante desde el comienzo de la crisis, por lo que es necesario realizar un análisis profundo de ingresos (ventas y márgenes) y costes (fijos y variables), así como de las inversiones a realizar. Se deduce del estudio que la rentabilidad de la compañía es relativamente alta pero viene dada por un gran número de variables, internas y externas a la propia compañía. En definitiva, el negocio de las estaciones de servicio se basa en un producto con muy bajo margen e impuestos muy altos y es por ello que la competencia a nivel de precios esta muy limitada. Además y dado el nivel de inversiones y costes es necesario un volumen de ventas alto para poder conseguir superar el punto de equilibrio económico. ABSTRACT The scope of this project is to develop the theoretical annual plan of an oil products distribution company, which aims to maintain the levels of market share in the service stations market, assessing the returns achieved. The motor fuels market is decreasing significantly since the beginning of the crisis, making it necessary to conduct a thorough analysis of revenue (sales and margins) and costs (fixed and variable), as well as investments to be made . It follows from the study that the company's profitability is relatively high but is given by a large number of variables, internals and externals to the company. In short, the service stations business is based on a product with very low margin and that is the reason that the price competition level is very limited. Moreover, given the level of investments and costs is necessary to sale a high volume in order to get beyond the break even.

A Better Place to Be: Republicanism as an Alternative to the Authoritarianism-Democracy Dichotomy

ABSTRACT Title of Dissertation: A BETTER PLACE TO BE: REPUBLICANISM AS AN ALTENATIVE TO THE AUTHORITARIANISM-DEMOCRACY DICHOTOMY Christopher Ronald Binetti, Doctor of Philosophy, and 2016 Dissertation directed by: Dr. Charled Frederick Alford, Department of Government and Politics In this dissertation, I argue that in modern or ancient regimes, the simple dichotomy between democracies and autocracies/dictatorships is both factually wrong and problematic for policy purposes. It is factually wrong because regimes between the two opposite regime types exist and it is problematic because the either/or dichotomy leads to extreme thinking in terms of nation-building in places like Afghanistan. In planning for Afghanistan, the argument is that either we can quickly nation-build it into a liberal democracy or else we must leave it in the hands of a despotic dictator. This is a false choice created by both a faulty categorization of regime types and most importantly, a failure to understand history. History shows us that the republic is a regime type that defies the authoritarian-democracy dichotomy. A republic by my definition is a non-dominating regime, characterized by a (relative) lack of domination by any one interest group or actor, mostly non-violent competition for power among various interest groups/factions, the ability of factions/interest groups/individual actors to continue to legitimately play the political game even after electoral or issue-area defeat and some measure of effectiveness. Thus, a republic is a system of government that has institutions, laws, norms, attitudes, and beliefs that minimize the violation of the rule of law and monopolization of power by one individual or group as much as possible. These norms, laws, attitudes, and beliefs ae essential to the republican system in that they make those institutions that check and balance power work. My four cases are Assyria, Persia, Venice and Florence. Assyria and Persia are ancient regimes, the first was a republic and then became the frightening opposite of a republic, while the latter was a good republic for a long time, but had effectiveness issues towards the end. Venice is a classical example of a medieval or early modern republic, which was very inspirational to Madison and others in building republican America. Florence is the example of a medieval republic that fell to despotism, as immortalized by Machiavelli’s writings. In all of these examples, I test certain alternative hypotheses as well as my own.

BM: Tributación y concentración en el sistema financiero Colombiano 1989 - 2003

El presente documento analiza los determinantes del margen de intermediación para el sistema financiero colombiano entre 1989 y 2003. Bajo una estimación dinámica de los efectos generados por variables específicas de actividad, impuestos y estructura de mercado, se presenta un seguimiento del margen de intermediación financiero, para un período que presenta elementos de liberalización y crisis.

El efecto de la definición regulatoria de banda ancha sobre la difusión y la competencia del mercado de servicios de Internet fijo en Colombia

A partir de la dinámica evolutiva de la economía de las Tecnologías de la Información y las Comunicaciones y el establecimiento de estándares mínimos de velocidad en distintos contextos regulatorios a nivel mundial, en particular en Colombia, en el presente artículo se presentan diversas aproximaciones empíricas para evaluar los efectos reales que conlleva el establecimiento de definiciones de servicios de banda ancha en el mercado de Internet fijo. Con base en los datos disponibles para Colombia sobre los planes de servicios de Internet fijo ofrecidos durante el periodo 2006-2012, se estima para los segmentos residencial y corporativo el proceso de difusión logístico modificado y el modelo de interacción estratégica para identificar los impactos generados sobre la masificación del servicio a nivel municipal y sobre las decisiones estratégicas que adoptan los operadores, respectivamente. Respecto a los resultados, se encuentra, por una parte, que las dos medidas regulatorias establecidas en Colombia en 2008 y 2010 presentan efectos significativos y positivos sobre el desplazamiento y el crecimiento de los procesos de difusión a nivel municipal. Por otra parte, se observa sustituibilidad estratégica en las decisiones de oferta de velocidad de descarga por parte de los operadores corporativos mientras que, a partir del análisis de distanciamiento de la velocidad ofrecida respecto al estándar mínimo de banda ancha, se demuestra que los proveedores de servicios residenciales tienden a agrupar sus decisiones de velocidad alrededor de los niveles establecidos por regulación.