We study the issue of integrating real and financial decisions in a monopoly firm with risk-averse decision-makers. To that end, we combine the decisions of the firm and of the shareholders in a very simple but robust model, with uncertainty in the real market and CARA preferences. We show the...

We study the informational role of prices. To that end, we consider the framework of a dominant firm with a competitive fringe. When the competitive fringe is large enough, there exists a unique fully revealing equilibrium, in which the price conveys full information about the quality of the...

We study the informational role of prices in a stochastic environment. We provide a closed-form solution of the monopoly problem when the price imperfectly signals quality to the uninformed buyers. We then study the effect of noise on output, market price, information flows, and expected...

We present a diagrammatic and step-by-step analysis of price signaling quality. Because quality is a continuum on the real positive line, out-of-equilibrium beliefs need not be specified, i.e., every positive price is a positive outcome in equilibrium. We first study the behavior of the monopoly...

We address the issue of risk aversion in a competitive equilibrium when some buyers engage in learning and information is conveyed through the price system. Specifically, since the learning process yields uncertainty, we study the effect of risk aversion on the equilibrium outcomes of the model,...

World wide the electricity industry is undergoing a substantial process of restructuring, with an emphasis on the introduction of competition in the generation sector. Competition is ostensibly going to lead to better incentives, both in the use of existing resources and in future investment...

In this paper, we provide another reason that may explain the adoption of the hub-and-spoke network structure in the airline industry. We show that when an airline has to decide on its capacity before the demand conditions are perfectly known, a hub-and-spoke network structure by pooling...

We consider a monopoly supplying a homogeneous good to two separate markets with different demands. In one of the markets, some buyers do not know the quality of the good, but learn about it from observing prices. Under noisy demand, third-degree price discrimination is shown to alter the...

This paper analyses the dynamic problem faced by a monopolist …rm that produces a durable good (in the primary market) and also participates in the market for complementary goods and services (the aftermarket). Considering the possibility of network effects in both markets, we investigate the...

We study third-degree price discrimination in the presence of uninformed buyers who extract noisy information from observing prices. In a noisy learning environment, price discrimination can be detrimental to the firm and beneficial to the consumers. On the one hand, discriminatory pricing...