An encompassing model of a business loan contract with the bank is constructed to establish the roles and relative importance of asymmetry of information, market power, borrower (entrepreneurial) effort and quality in explaining contract features. Special cases of the model include symmetric versus asymmetric information regimes, competition versus monopoly power, adverse selection versus moral...

There is an ongoing debate about the credit card industry regarding how effective competition has been at reducing prices. Some experts argue that intense competition is clearly evident and leads to low prices that contain no excess profit. However, other experts find evidence both in price data and in market concentration that competition has failed. A model is presented here showing that if t...

In this paper the one-seller/two-buyer problem with buyer externalities is investigated under the assumption that the two buyers have legal opportunities to cooperate. It is shown that the Competitive equilibrium and the Core are robust with respect to negligible externalities and that the range of market prices in the Core belongs to range of Competitive equilibrium prices. However, these conc...

Previous literature indicates that, when quality is a choice variable, firms have an incentive to produce high quality to maintain their reputations with consumers. The strategic interaction among firms and competition for market share is not considered. This paper finds that, when firms compete for market share, perfect equilibria in which firms produce high-quality goods need not exist. Compe...

The dynamic price competition in a horizontally differentiated duopoly when consumers value previous market shares is analyzed. The conditions for the existence of stable Markov-Perfect Equilibrium(MPE) in linear strategies are established. When they exist, the optimal pricing policies suggest that a firm with a higher previous market share charges a higher price, all else equal. It is possible...

How should complementarities a¤ect antitrust merger policy? I introduce a two-stage strategic model in which complementary input sellers o¤er supply schedules to producers and then engage in bilateral bargaining with producers. The main result is that there is a unique weakly dominant strategy equilibrium and the equilibrium attains the joint pro…t maximizing outcome. Output equals that of a bu...

For a durable consumption good which turns into waste after consumption, the socially optimal durability increases with an increase in the marginal environmental damage. In a laissez-faire equilibrium under perfect competition, producers fail to provide an efficient product design, i.e. durability is inefficiently small, whereas the amount of solid waste is inefficiently large. The market failu...

This paper presents a modeling framework for analyzing competition between multiple firms that each possess a mixture of hydroelectric and thermal generation resources. Based upon the concept of a Cournot oligopoly with a competitive fringe, the model characterizes the Cournot equilibrium conditions of a multiperiod hydrothermal scheduling problem. Using data from the western United States elec...

The challenge of the current study is to introduce entrepreneurship into Microeconomics theory for greater extendability and realism yet capture its unique aspects in a manageable analytical model. The model starts with a perfectly competitive market and then adds a subset of agents with unique skills, capabilities, startup savings, and risk preferences, called entrepreneurs. These profit-seeki...