We introduce the concepts of cooperative substitutes and complements, and use them to explain when all firms in a research joint venture will choose equal levels of R&D. We show that the second-order conditions for a symmetric optimum take a particularly simple form, ruling out both excessive cooperative substitutability and excessive cooperative complementarity, and nesting conditions already ...

This paper develops a model of successive oligopolies with endogenous market entry, allowing for varying degrees of product differentiation and entry costs in both markets. Our analysis shows that the downstream conditions dominate the overall profitability of the two-tier structure while the upstream conditions mainly affect the distribution of profits. We compare the welfare effects of upstre...

This paper reports an experiment conducted to examine the effects of changing the form of strategic interactions (Bertrand or Cournot), and changing underlying information conditions on the usefulness of the ‘ALM,’ a merger simulation device used by the U.S. Department of Justice. The experiment consists of twenty 60-period quadropolies. After period 40 a merger is induced. Behaviorally, Courno...

We study Hotelling’s classic duopoly location model in continuous time with flow payoffs accumulated over time and the price dimension made explicit. In an experimental setting, subjects chose price and location in treatments varying only by the speed of adjustment. We find that the principle of minimum differentiation generally holds, with little distance between subjects’ location decisions. ...

This paper challenges the conventional wisdom that exclusive owners of an advanced technology are always better off when producing as a monopolist than when competing against another firm. Competition against a less efficient firm weakens the power that a host country can exert on the incumbent in the form of its tariff policy. We show that this gives a motive for a monopolist to license its te...

On an otherwise symmetric oligopoly market with stochastic demands for heterogeneous products firms can either hire an employee or partner or buy the required labor input on the labor market. Whereas the wage of hired labor does not depend on the realization of stochastic demand, the price of bought labor input reacts positively to product demand. We first solve the market by deriving the equil...

Switching costs may facilitate monopoly pricing in a market with price competition between two suppliers of a homogenous good, provided the switching cost is above some critical level. It is also well known that asymmetric size of customer bases makes monopoly pricing more difficult. Adding consumer heterogeneity to the model we demonstrate that also composition of each firm’s customer base aff...

We model a symmetric duopoly where ...rms choose whether to be quantity setters or price setters by deciding the optimal capacity; undertake R&D activity to determine the degree of di¤erentiation; and ...nally compete in the market. Two games are proposed, where investment decisions follow di¤erent sequences. We assess price and quantity decisions, ...nding a set of equilibria where the choice ...

A budget-constrained buyer wants to purchase items from a shortlisted set. Items are differentiated by quality and sellers have private reserve prices for their items. Sellers quote prices strategically, inducing a knapsack game. The buyer’s problem is to select a subset of maximal quality. We propose a buying mechanism which can be viewed as a game theoretic extension of Dantzig’s greedy heuri...

In media markets, the value of advertisement exposure depends on circulation, and media consumers’ valuation is affected by advertising. This paper analyzes media market competition in a duopoly framework. There exist symmetric and asymmetric equilibria in terms of firm size. There is less scope for asymmetry when products are more differentiated or of higher intrinsic quality. Some media exhib...