nep-mic New Economics Papers
on Microeconomics
Issue of 2005‒08‒03
three papers chosen by
Joao Carlos Correia Leitao
Universidade da Beira Interior

  1. On Tariff, Quality Choice and Innovation in a Vertically Differentiated Monopoly with Discrete Preferences By Rajat Acharyya; Swapnendu Banerjee
  2. Marriage Matching and the Proposers' Advantage By Onur Celik; Vicki Knoblauch
  3. Robust Monopoly Pricing: The Case of Regret By Dirk Bergemann; Karl Schlag

  1. By: Rajat Acharyya (Jadavpur University); Swapnendu Banerjee (National University of Singapore)
    Abstract: In a vertically differentiated monopolistic framework with discrete preferences we examine how protecting the low-quality segment raises the incentive for quality innovation. We show how the monopolist facing competitive imports, might fail to exert its complete monopoly power even if there is prohibitive tariff on both the high and low quality segment of the market. On the other hand, given non prohibitive tariff on the high quality segment, the potential gain for the monopolist exhausts at a level much below the prohibitive low-quality tariff level. Also a sufficiently low tariff on the high quality product can force the monopolist to produce the first best qualities irrespective of the tariff level on the low quality product
    Keywords: F13, L12, L15
  2. By: Onur Celik (University of Connecticut); Vicki Knoblauch (University of Connecticut)
    Abstract: Despite an extensive literature exploring two-sided matching problems, there remains much to learn about even the simplest marriage matching model. We adopt as our primary tool a simple measure of how well men do and how well women do under a given matching, and use this tool to demonstrate that a group with randomly generated preferences does very well when matched with a group with identical preferences, and that if both groups. preferences are randomly generated, then the proposers' advantage is quite large. We then use theoretical calculations (that is, we examine randomly generated examples) to illustrate, evaluate and extend our findings.
    Keywords: Two-Sided Matching, Mechanism, Proposers' Advantage
    JEL: C78 D63 D70
    Date: 2005–06
  3. By: Dirk Bergemann; Karl Schlag
    Abstract: We consider a robust version of the classic problem of optimal monopoly pricing with incomplete information. The robust version of the problem is distinct in two aspects: (i) the seller minimizes regret rather than maximizes revenue, and (ii) the seller only knows that the true distribution of the valuations is in a neighborhood of a given model distribution. We characterize the robust pricing policy as the solution to a minimax problem for small and large neighborhoods. In contrast to the classic monopoly policy which is a single deterministic price, the robust policy is always a random pricing policy, or equivalently, a multi-item menu policy. The responsiveness of the robust policy to an increase in risk is determined by the curvature of the static profit function.
    Keywords: Monopoly, Optimal Pricing, Regret, Robustness
    JEL: C79 D82
    Date: 2005

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