The common prior assumption asserts that the beliefs of agents in different states of theworld are their posteriors based on a common prior and possibly some private signal. Commonpriors are pervasive in most economic models of incomplete information, oligopoly models withasymmetrically informed...

This article deals with the impact of intermediaries on insurance market transparancy and performance. In a market exhibiting product diferentiation and coexistence of of perfectly and imperfectly informed consumers, competition among insurers leads to non-existence of a pure-strategy market...

We introduce a generalized theoretical approach to study imitation andsubject it to rigorous experimental testing. In our theoretical analysiswe …nd that the different predictions of previous imitation models aredue to different informational assumptions, not to different behavioralrules. It is...

In this paper, we present a model of endogenous vertical integration and horizontal differentiation. Thereexists two output brands and two versions of the input. The only mean for output differentiation is the inputversion used in output production. Firms may choose to vertically integrate to...

We show in a simple model of entry with sunk cost, that a regulator prefers limiting the output, orcapacity, of the incumbent firm rather than imposing a “Minimum Quality Standard” in order tohelp the entrant to provide high quality. As a by-product, our analysis makes a contribution to...

We provide a theoretical justification for bi-sourcing, which refers to thesituation where a final goods producer buys an input from an outside supplier and alsoproduces it in-house. Bi-sourcing occurs if the marginal cost of producing the input inhouseis higher than the marginal cost of outside...

Common wisdom suggests that entry reduces profits of the incumbentfirms. On the contrary, we show that if the incumbents differ in marginal costs and theentrants behave like Stackelberg followers, entry may benefit the incumbents who arerelatively cost efficient while it always hurts the cost...

We show that, for licensing by an outside innovator in a Cournot oligopoly,royalty licensing can generate higher payoff to the innovator than the fixed-feelicensing and auction if the labor market is unionized...

In this paper we give an example in which the price of tradeable emission permits increasesdespite firms' adoption of a less polluting technology. This is in contrast with Montero (2002) andParry (1998), among others. If two Counot players switch to a cleaner technology, the price forpermits may...

We show the incentive for divisionalization by a monopolist producer. Incontrast to the previous literature, where divisionalization occurs for product marketadvantage, we show that divisionalization occurs if it provides strategic advantage inthe labor market. With unionized labor market, we...