nep-mic New Economics Papers
on Microeconomics
Issue of 2008‒06‒27
six papers chosen by
Joao Carlos Correia Leitao
University of the Beira Interior

  1. Regulating a Monopolist with unknown costs and unknown quality capacity By Blackorby, Charles; Szalay, Dezsö
  2. The Design of Permit Schemes and Environmental Innovation By Grischa Perino
  3. Market Power in Power Markets: Evidence from Forward Prices of Electricity By Bent Jesper Christensen; Thomas Elgaard Jensen; Rune Mølgaard
  4. Measuring Quality Change due to Technological Externality in Multi-Feature Service Bundles By Gupta, Abhay
  5. Competition, Takeovers and Gender Discrimination By Heyman, Fredrik; Svaleryd, Helena; Vlachos, Jonas
  6. Cooperative Games in Strategic Form By Sergiu Hart; Andreu Mas-Colell

  1. By: Blackorby, Charles (Department of Economics, University of Warwick); Szalay, Dezsö (Department of Economics, University of Warwick)
    Abstract: We study the regulation of a firm with unknown demand and cost information. In contrast to previous studies, we assume demand is influenced by a quality choice, and the firm has private information about its quality capacity in addition to its cost. Under natural conditions, asymmetric information about the quality capacity is irrelevant. The optimal pricing is weakly above marginal costs for all types and no type is excluded.
    Keywords: Asymmetric Information ; Multi-dimensional Screening ; Regulation
    JEL: D82 L21
    Date: 2008
  2. By: Grischa Perino (University of Heidelberg, Department of Economics)
    Abstract: Most real world emission permit schemes are in effect hybrid instruments that feature both quantity and price controls. While the effects of price bounds are well understood for issues such as uncertain abatement costs it has not been investigated how such bounds affect time-consistency of environmental regulation and research incentives. The present paper analyzes these issues for two types of innovation. While price bounds increase static efficiency they reduce incentives to innovate. Commitment on details of a scheme’s design might be necessary to avoid the latter.
    Keywords: Environmental Regulation, Hybrid Instruments, Innovation, Time-inconsistency
    JEL: Q55 H23 O33 L51
    Date: 2008–06
  3. By: Bent Jesper Christensen; Thomas Elgaard Jensen; Rune Mølgaard (School of Economics and Management, University of Aarhus, Denmark)
    Abstract: We examine the forward market for electricity for indications of misuse of market power, using a unique data set on OTC price indications posted by Elsam A/S, the dominant producer in Western Denmark, which is one of the price areas under the Nordic power exchange Nord Pool. The Danish Competition Council (the regulatory government agency) has ruled that Elsam has used its dominant position to obtain excessive spot prices over a period from July 2003 through December 2006. We show that significant forward premia exist, and that they are related both to spot market volatility and misuse of market power in the spot market, indicating that misuse of market power in the forward market accompanied that which took place in the spot market, according to this ruling. This is consistent with the hypothesis that Elsam used the forward market to disguise its spot market manipulation. The findings are consistent across forward premium regressions and structural forward pricing models.
    Keywords: Electricity, forward prices, market power
    JEL: G13 L12
    Date: 2007–10–26
  4. By: Gupta, Abhay
    Abstract: Technological innovation, externalities and network effects keep shifting the preference parameters in cellular telecommunication service sector. The paper suggests a framework to model these changes.It notes two channels that affect the service prices (in possibly opposite ways). In each corresponding period, consumer with lower reservation prices are shopping for the services. But these reservation prices are going up due to complementarity/ network effects. Under some reasonable assumptions on industry and cost structure, market data can be used to identify these changes. A price index is suggested that decomposes service bundle price changes into the change in price for same-quality of service and change in quality of the service bundle. Some interesting properties of these indexes are also discussed.
    JEL: L16 D62 O32 D49
    Date: 2007–11
  5. By: Heyman, Fredrik; Svaleryd, Helena; Vlachos, Jonas
    Abstract: Theories of taste-based discrimination predict that competitive pressures will drive discriminatory behaviour out of the market. Using detailed matched employer-employee data, we analyze how firm takeovers and product market competition are related to the gender composition of the firm’s workforce and the gender wage gap. Using a difference-in-difference framework and dealing with several endogeneity concerns, we find that the share of female employees increases as a result of an ownership change, in particular when product market competition is weak. Further, increased competition reduces the gender wage gap, especially among highly educated employees. While the estimated wage effect is quite small, the results support the main theoretical predictions.
    Keywords: Competition; Discrimination; Takeovers; Wages
    JEL: J2 J31 J7
    Date: 2008–06
  6. By: Sergiu Hart; Andreu Mas-Colell
    Abstract: In this paper we view bargaining and cooperation as an interaction superimposed on a strategic form game. A multistage bargaining procedure for N players, the “proposer commitment” procedure, is presented. It is inspired by Nash’s two-player variable-threat model; a key feature is the commitment to “threats.” We establish links to classical cooperative game theory solutions, such as the Shapley value in the transferable utility case. However, we show that even in standard pure exchange economies the traditional coalitional function may not be adequate when utilities are not transferable.
    Keywords: Bargaining, Commitment, Nash variable threat
    JEL: C7 D5 D7
    Date: 2008–05

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