We examine the average equilibrium price when quantity setting oligopolies price discriminate. It is known that for the price discrimination extension of Cournot competition the average price is independent of the extent of price discrimination whenever the demand is linear. We show that this...

A new theory of loss-leader pricing is provided in which firms advertise low (below cost) prices for certain goods to signal that their other unadvertised (substitute) goods are not priced too high. The theory is applied to the pricing of upgrades. The results contrast with most existing...

We use micro level retail price data from convenience stores to study the link between 0-ending price points and price rigidity during a period of a runaway inflation, when the annual inflation rate was in the range of 60%–430%. Surprisingly, we find that more round prices are less likely to...

We develop a model of product differentiation in which firms strategically compete in product quality and advertising intensity. Products exhibit a combination of vertical and horizontal differentiation. A consumer’s utility has a stochastic relationship with quality, but they are more likely...

This paper provides two characterizations of the retailer’s markup relative to the manufacturer’s markup in vertical relationships with homogeneous manufacturers and homogeneous retailers. We first show that retailer’s relative markup is equal to the ratio of the retail pass-through to the...

We study the relationship between bank competition and stability for 145 countries over the period 1997–2010. We use three measures of bank competition, namely the Boone indicator, the Lerner and the adjusted Lerner indices, and two econometric methods. Our results show that bank competition...

This paper examines the effects of obtaining a strategic advantage of becoming the leader in the market on insiders’ incentives to merge and consumer welfare. We show that being the market leader is privately profitable for the merging insiders. We also show that the leading merger would...

We develop a model of monopolistic competition that accounts for consumers’ heterogeneity in both incomes and preferences. This model makes it possible to study the implications of income redistribution on the toughness of competition. We show how the market outcome depends on the joint...

Consider the classical double marginalization problem of single-product successive monopolies. We show that the ratio of the cost pass-through at the final sale relative to that at the wholesale level is characterized by the curvature of inverse demand in the final market. We also apply...

Two counter-intuitive results regarding the number of firms emerge from the existing monopolistic competition literature. First, the number of firms is positively related to the extent of the monopoly power. Second, when the goods market is perfectly competitive, the number of firms is reduced...