We analyze the formation of bilateral R&D collaborations in an oligopoly when each firm benefits from the research done by other firms it is connected to. In contrast to myopic stability, farsighted stability leads to R&D networks consisting of two minimally connected components, with the...

Fershtman and Judd (1987) and Sklivas (1987) have shown that strategic delegation under price competition makes firm owners choose incentive contracts that induce managers to be soft in order to reduce competitive intensity. We show in a worked-out example that under sufficiently strong network...

This paper studies the impact of relative performance evaluation (RPE) on the equilibrium locations in a Hotelling model with quadratic transportation cost. It is shown that equilibrium location varies from maximum differentiation to minimum differentiation, depending upon the relative strength...

Random choices of prices and product characteristics can be used by a contestable monopolist to deter entry and fully extract the monopoly rent. We develop this idea in a model of Bertrand price competition. In equilibrium, one firm enters the market and makes choices that are unpredictable to...

The upper tail of the size distribution of websites follows a power law with slope close to one (Zipf’s law). This finding is robust to measuring website size by unique visitors and page views, and holds for the United States, Germany, and the world. Web traffic in China has less support for a...

We revisit the effects of switching costs on dynamic competition. We consider stationary Markovian strategies, with market shares being the state variable, and characterize a relatively simple Markov Perfect pricing equilibrium at which there is switching by some consumers at all times. For the...

This paper investigates the size of penalties required to deter cartel formation. Allowing the penalty to be increasing in duration within the infinitely repeated game framework, penalties do not need to be as severe as previous research would suggest.

This paper studies whether bank competition affects growth of non-banking industries. We find that non-cooperative bank competition and stability promote industrial growth robustly. Bank concentration may also affect growth positively; the latter effect increases for higher levels of competition.

A well established belief both in the game-theoretic IO and in policy debates is that market concentration facilitates collusion. We show that this piece of conventional wisdom relies upon the assumption of profit-seeking behaviour, for it may be reversed when firms pursue other plausible goals....

Laitinen (1980) derives an input allocation model for a multiproduct firm that first maximizes revenue and second maximizes profit. While theoretically elegant, the model has never been formulated empirically because of the complexity of the model’s price-deflated terms. This paper derives the...