Recent empirical studies suggest that prices in highly concentrated industries tend to be rigid and that pricing is often asymmetric with price rises occurring more frequently than price reductions (Domberger [1987]). Existing explanations of price rigidity and asymmetric pricing assume that...

Firm's incentives to form joint ventures are analyzed in an incomplete-information framework when technological know-how is private information. Firms first decide on cooperation and then compete in a second-price procurement auction. Provided that firms indicate their willingness to cooperate...

This paper makes explicit the role of the entrepreneur in a consumer-producer economy. Entrepreneurial behavior changes the status quo by altering existing comparative advantages. A positive feedback effect with trading institutions ensues. This model shows how the entrepreneur can, when...

Based on a Hotelling-type model, this paper analyzes a differential game where two firms engage in quality-enhancing research and development (R&D). The analysis is formulated in terms of open-loop and feedback solutions. We find that the open-loop stationary levels of R&D and quality are...

We examine the link between innovative activity on the part of firms, the competitive pressure to introduce innovations, and optimal damages awards. While innovative activity brings forth valuable new products for consumers, competitive pressure in the ensuing innovation race induces firms to...

This paper studies welfare consequences of consumer-side market transparency with endogenous entry of firms. Different from most studies, we consider the unique symmetric entry equilibrium, which is in mixed strategies. We identify two effects of market transparency on welfare: a competition...

We examine the effect of uncertainty on horizontal mergers, considering that firms must decide whether to merge before observing the realized cost of the merged firm. The existing literature clarifies that merging firms facing cost uncertainty decide to merge if expected efficiency gains or...

This paper compares two alternative incentive schemes, performance-related pay (PRP) and relative performance evaluation (RPE), in a differentiated duopoly where institutional features constrain firms to pay workers a given salary. It is shown that RPE endogenously arises as the optimal choice...

We analyze the welfare effects of mergers in a strategic trade-policy environment. A merger in one country changes the strategic behavior of all firms in the markets, which in turn modifies the strategic interaction between governments in the policy game. Consequently, the results strongly...

The traditional analysis of exclusionary bundling examines the impact of a monopolist bundling product A with another product B, which is competitively provided. Using experimental posted-offer markets, we investigate the exclusionary and welfare implications of having a fringe competitor in the...