This study examines the effect of earnings pressure on firms’ strategic behavior in output competition. We argue that firms facing earnings pressure will attempt to increase current profits to meet analysts’ forecasts by exploiting market power opportunities in their product markets, even at the risk of encouraging future entry and rival expansion. In commodity industries, this behavior will le...

This paper examines the relationship between a differentiated downstream market and a specialized upstream market. We analyze four different ways price competition takes place between the upstream and downstream sectors when the upstream market supplies specialized and complementary inputs to a downstream product differentiated market. The first is the benchmark case of decentralized markets, t...

A wide spectrum of technologies, producing a vast array of product qualities, coexists in modern markets today. Many of these markets are also characterised by what is commonly known as localized competition that refers to a special industrial structure in which different firms compete directly with different groups of rivals. We explore the endogenous choice of product quality in localized com...

A multiple-market framework is developed to measure the size and distribution of research benefits. The model considers an upstream raw product market and a downstream finished product market and allows for imperfect competition in the intermediary food-processing sector. A central conceptual result is derived: an increase in raw product output is a sufficient condition for costreducing innovat...

We study how competition affects innovation (and welfare) when firms compete both in the product market and in innovation development. This relationship is complex and may lead to scenarios in which a lessening of competition increases R&D and consumer welfare in the long run, contradicting arguments provided by antitrust agencies in recent merger cases. We provide conditions for when a merger ...

We extend the standard Dixit-Stiglitz model of imperfect competition to allow for multiproduct firms. We fully endogenise market structure by determining both the number of varieties per firm and the number of firms in the industry. A crucial feature of the model is that firms internalise the effects of both intraand inter-firm competition in making their product range and pricing decisions. Th...

We present a model of fixing or patching a software problem after the product has been released in the market. Specifically, we model a software firm’s trade-off in releasing a buggy product early and investments in fixing it later. We first show that patching investments and time to enter the market are strategic complements such that higher investments in patching capability allow the firm to...

European Union countries have implemented widespread reforms to product markets in order to stimulate competition, innovation and economic growth. We provide empirical evidence that the reforms carried out under the EU Single Market Programme (SMP) were associated with increased product market competition, as measured by a reduction in average profitability, and with a subsequent increase in in...

We propose a static approximation of dynamic demand substitution behavior based on a fluid network model and a serviceinventory mapping. This approximation greatly enhances our ability to analyze the interdependent inventory/service, price, and product assortment decisions in noncompetitive and competitive scenarios with demand substitution. We demonstrate that the approximation is well behaved...

We examine how globalization affects firms incentives to train workers. In our model, firms invest in productivity-enhancing worker training before Cournot competition takes place. When two separated product markets become integrated and are thus replaced with a market with greater demand and greater firm number, training by each firm increases provided the two countries are sufficiently small....