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...

We analyze the impact of a uniform price cap at electricity spot markets on firms investmentdecisions and on welfare. Since investment decisions for those markets are taken in the longrun, fluctuating demand at the spot market eventually gives rise to high price spikes in case ofbinding...

In this paper we address the following question: is it more profitable, for an entrant in a differentiatedmarket, to acquire an existing firm than to compete? We illustrate the answer by considering competition inthe banking sector.....

This paper faces two questions concerning Joint Ventures (JV) agreements. First, we studyhow the partners contribution affect the creation and the profit sharing of a JV when partners'effort is not observable. Then, we see whether such agreements are easier to enforce when thedecision on JV...

The purpose of this paper is to investigate the effect of privatization in a mixed duopoly, wherea private firm competes in quantities with a welfare-maximizing public firm. We consider twoinefficiencies of the public sector: a possible cost inefficiency, and an allocative inefficiencydue to the...

We analyse firms' incentives to provide two-way compatibility between two network goodswith different intrinsic qualities. We study how the relative importance of verticaldifferentiation with respect to the network effect influences the price competition as well as thecompatibility choice. The...

In this paper, we provide an explanation of why privatization may attract foreign investorsinterested in entering a regional market. Privatization turns the formerly-public firm into a lessaggressive competitor since profit- maximizing output is lower than the welfare-maximizingone. The drawback...

An important discussion in recent years is the introduction of product patentsand the abolition of process patents. In a model with endogenous number of innovatingfirms, we show that whether product patent increases R&D is ambiguous, and depends onthe type of market demand and the cost of R&D....

We show the effects of Bertrand and Cournot competition on R&D investmentand social welfare in a duopoly with R&D competition where success in R&D isprobabilistic. We show that R&D investments are higher under Bertrand (Cournot)competition when R&D productivities are sufficiently low (high), and...

This paper considers welfare effects of entry when the incumbent firmbehaves like a Stackelberg leader in the product market. In contrast to previous work(Klemperer, 1988, Journal of Industrial Economics), we show that entry may alwaysincrease welfare. Using general demand function, we show the...