nep-mic New Economics Papers
on Microeconomics
Issue of 2006‒03‒25
eleven papers chosen by
Joao Carlos Correia Leitao
Universidade da Beira Interior

  1. Quality improvement and network externalities By Jean J., GABSWEWICZ
  2. Monotonicity and Nash Implementation in Matching Markets with Contracts By Haake Claus-Jochen; Klaus Bettina
  3. Incentives to innovate in oligopolies By Paul, BELLEFLAMME; Cecilia, VERGARI
  4. Bundling in Exchange Markets with Indivisible Goods By Dimitrov Dinko; Haake Claus-Jochen; Klaus Bettina
  5. A Note on Expanding Networks and Monopoly Pricing By Jean J., GABSZEWICZ; Filomena, GARCIA
  6. Banks and Innovation: Microeconometric Evidence on Italian Firms By Luigi Benfratello; Fabio Schiantarelli; Alessandro Sembenelli
  7. Tecnhnology estimation for quality pricing in supply-chain relationships By Angelo Zago
  8. On Intertemporal Dependent Preferences with regard Environmental Goods and Services By José Manuel Madeira Belbute
  9. A General Structure Theorem for the Nash Equilibrium Correspondence By Predtetchinski Arkadi
  10. Newspapers’ market shares and the theory of the circulation spiral By Jean, GABSZEWICZ; P.G., GARELLA; N., SONNAC
  11. Health plan pricing behaviour and managed competition. By Rudy Douven; Erik Schut

  1. By: Jean J., GABSWEWICZ (UNIVERSITE CATHOLIQUE DE LOUVAIN, Center for Operations Research and Econometrics (CORE))
    Abstract: We analyse the optimal pricing choice of an incumbent firm that sells a good with network externalities and is threatened by the entry of a higher quality variant. In the framework of a vertical differentiation model, we find a necessary and sufficient condition under which quality improvement occurs as a result of this competition.
    Keywords: Vertical product differentiation; network externalities; quality improvement
    JEL: L11 L12 L15
    Date: 2005–01–09
  2. By: Haake Claus-Jochen; Klaus Bettina (METEOR)
    Abstract: We consider general two-sided matching markets, so-called matching with contracts markets as introduced by Hatfield and Milgrom (2005), and analyze (Maskin) monotonic and Nash implementable solutions. We show that for matching with contracts markets the stable correspondence is monotonic and implementable (Theorems 1 and 3). Furthermore, any solution that is Pareto efficient, individually rational, and monotonic is a supersolution of the stable correspondence (Theore m 2). In other words, the stable correspondence is the minimal solution that is Pareto efficient, individually rational, and implementable.
    Keywords: microeconomics ;
    Date: 2006
  3. By: Paul, BELLEFLAMME; Cecilia, VERGARI (UNIVERSITE CATHOLIQUE DE LOUVAIN, Center for Operations Research and Econometrics (CORE))
    Abstract: In the spirit of Arrow (1962), we examine, in an oligopoly model with horizontally differentiated products, how much a firm is willing to pay for a process innovation that it would be the only one to use. We show that different measures of competition (number of firms, degree of product differentiation, Cournot vs Bertrand) affect incentives to innovate in non-monotoic, different, and potentially ways.
    Keywords: innovation; profit incentive; oligopoly; product differentiation
    JEL: L13 O31
    Date: 2006–02–22
  4. By: Dimitrov Dinko; Haake Claus-Jochen; Klaus Bettina (METEOR)
    Abstract: We study efficient and individually rational exchange rules for markets with heterogeneous indivisible goods that exclude the possibility that an agent benefits by bundling goods in her endowment. Even if agents'''' preferences are additive, no such rule exists.
    Keywords: microeconomics ;
    Date: 2006
  5. By: Jean J., GABSZEWICZ (UNIVERSITE CATHOLIQUE DE LOUVAIN, Center for Operations Research and Econometrics (CORE)); Filomena, GARCIA
    Abstract: We obtain explicitly the optimal path of prices for a monopolist operating in a network industry during a finite number of periods. We describe this optimal path as a function of network intensity and horizon length and show that the prices are increasing in time and that, for very low network intensity, or very high horizon length, the monopolist will offer the good at zero price in the initial period.
    Date: 2005–12–15
  6. By: Luigi Benfratello (University of Turin); Fabio Schiantarelli (Boston College and IZA Bonn); Alessandro Sembenelli (University of Turin)
    Abstract: In this paper we investigate the effect of local banking development on firms’ innovative activities, using a rich data set on innovation for a large number of Italian firms over the 1990’s. There is evidence that banking development affects the probability of process innovation, particularly for small firms and for firms in high(er) tech sectors and in sectors more dependent upon external finance. The evidence for product innovation is weaker. There is also some evidence that banking development reduces the cash flow sensitivity of fixed investment spending, particularly for small firms, and that it increases the probability they will engage in R&D.
    Keywords: banks, financial development, innovation, R&D, investment
    JEL: D24 G21 G38 O31 O33
    Date: 2006–03
  7. By: Angelo Zago (Dipartimento di Scienze economiche, Università di Verona)
    Keywords: Quality, Procurement, Contracts, Efficienty, Stochastic Production Frontier
    JEL: C21 L15 L24
    Date: 2005–09
  8. By: José Manuel Madeira Belbute (Department of Economics, University of Évora Author-Name Paulo Brito; Technical University of Lisbon – Instituto Superior de Economia e Gestão)
    Abstract: This note extends the standard theory of intertemporal consumer preferences with regard environmental goods and services. It proposes an intertemporal dependent preferences framework that generates a “persistence effect” consistent with consumer’s environmental friendly behaviours. Given the present civilizational and cultural pattern of preferences, consumers need to endure a learning-by-consuming process to full enjoy (and use) them, in order to commit himself with “green-economic behaviors" The contribution to the existing literature is two fold. First we consider the presence of habit-formation with regard the consumption of environmental goods and services in a two goods framework. Secondly, we establish a consistent preference structure that displays a bounded adjacent complementarity in the consumption of environmental goods and services and present the correspondent properties that need to bee fulfilled by the utility function. These extensions will allow new advances in environmental economics, especially in the complete characterization of the demand for environmental goods and services and for the sustainable growth debate.
    Keywords: Consumer behavior, intertemporal dependent preferences, environmental economics.
    JEL: C61 E20 D11 D81 D91 Q01
    Date: 2006
  9. By: Predtetchinski Arkadi (METEOR)
    Abstract: We consider n--person normal form games where the strategy set of each player is a non--empty compact convex subset of a Euclidean space, and the payoff function of player i is continuous in joint strategies and continuously differentiable and concave in player i''s strategy. No further restrictions (such as multilinearity of the payoff functions or the requirement that the strategy sets be polyhedral) are imposed. We demonstrate that the graph of the Nash equilibrium correspondence on this domain is homeomorphic to the space of games. This result generalizes a well--known structure theorem in Kohlberg and Mertens (On the Strategic Stability of Equilibria, Econometrica, 54, 1003--1037, 1986). It is supplemented by an extension analogous to the unknottedness theorems in Demichelis and Germano (On (Un)knots and Dynamics in Games, Games and Economic Behavior, 41, 46--60, 2002): the graph of the Nash equilibrium correspondence is ambient isotopic to a trivial copy of the space of games.
    Keywords: mathematical economics;
    Date: 2006
  10. By: Jean, GABSZEWICZ (UNIVERSITE CATHOLIQUE DE LOUVAIN, Center for Operations Research and Econometrics (CORE)); P.G., GARELLA; N., SONNAC
    Abstract: We consider a model of daily newspapers’ competition to test the validiity of the so called “theory of the circulation spiral”. According to it, the interaction between the newspapers and the advertising markets drives the newspaper with the smaller readership into a vicious circle, finally leading it to death. In a model with two newspapers, we show that, contrary to this conjecture, the dynamics envisaged by the proposes of the theory, does not always lead to the elimination of one of them.
    Date: 2005–11–14
  11. By: Rudy Douven; Erik Schut
    Abstract: In the Dutch social health insurance scheme, health plans operate in a managed competition framework. Essential features of this framework are risk adjustment, open enrolment and community rating. The objective is to study how health plans determine their community rated premiums. Using a panel data set for all health plans operating in the Dutch social health insurance market over the period 1996-2004, we estimate a premium model to determine which factors explain the price setting behaviour of health plans. Our empirical results indicate that competition did not play a major role in premium setting by health plans. We find that financial stability rather than profit maximisation offers the best explanation for health plan pricing behaviour. The forecast of next year's health-care expenditure by the government and the adjusted forecast by the insurers' association play a major role in health plans' pricing decisions. The introduction of a national health insurance scheme in 2006 urged all citizens to reconsider their health plan choice. The threat of losing customers had a profound impact on health plans' pricing behaviour. In sharp contrast to the period 1996-2005, in 2006 competition seems to play a dominant role in insurers' pricing decisions. Whether this will be a temporary or a lasting phenomenon is hard to predict.
    Keywords: Managed competition; Community rating; Health insurance; Health plan choice
    JEL: I11 I18 L11 D41
    Date: 2006–03

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