We analyse incentive problems in collective production environments where contributors are compensated according to their observed and ranked efforts. This provides incentives to the contributors to choose first best efforts.

This paper analyzes the efficiency of team production when agents exhibit other regarding preferences. It is shown that full efficiency can be sustained as an equilibrium through a budget-balancing mechanism that punishes some randomly chosen agents if output falls short of efficient level but...

We formalize a conception of authority, which is commonly defined as the right of controlling a person’s actions embedded in human assets in sociology. Due to the inalienable property of human assets, the contractible formal authority is hard to verify and enforce, while real authority...

This paper studies different rules in dissolving a common value partnership where one partner holds proprietary information. In winner's bid auction (WBA) and loser's bid auction (LBA), there exists a unique mixed strategy equilibrium. ``Payoff equivalence'' is established in the sense that...

This paper investigates "discount pricing", the common marketing practice whereby a price is listed as a discount from an earlier, or regular, price. We discuss two reasons why a discounted price---as opposed to a merely low price---can make a rational consumer more willing to purchase the item....

The effects of entry on consumer and total welfare are studied in a model of consumer search. Potential entrants differ in quality, with high-quality sellers being more likely to meet consumer needs. Contrary to the standard view in economics that more entry benefits consumers, we find that...

Retrospective studies of horizontal mergers have focused on their price effects, leaving the important question of how mergers affect product quality largely unanswered. This paper empirically investigates this issue for two recent airline mergers: Delta/Northwest and Continental/United....

Under continual innovation, greater patent strength expands innovating firms’ profit against imitation, but also shifts profit from current to past innovators. We show how the impact of patents on innovation, as determined by these two opposing effects, varies with industry characteristics....

We extend the analysis of monopoly third-degree price discrimination to the empirically important case where marginal costs also differ between markets. Differential pricing then reallocates output to the lower-cost markets, hence welfare can increase even if total output does not, unlike under...

Credit rating agencies play a crucial role in financial markets. There are two competing views regarding their behavior: some argue that they engage in rating inflation, while others suggest that they deflate ratings. This article offers a rationale that reconciles the two opposite arguments. We...