scholarly journals Shared Manufacturing in A Differentiated Duopoly with Capacity Constraints

2022 ◽  
Author(s):  
Junlong Chen ◽  
Chaoqun Sun ◽  
Jiali Liu
Keyword(s):  
Social Welfare ◽  
Market Share ◽  
Product Differentiation ◽  
Consumer Surplus ◽  
Cournot Competition ◽  
Capacity Constraints ◽  
Excess Capacity ◽  
Stackelberg Competition ◽  
Duopoly Model ◽  
Negative Role

Abstract This study sets up a differentiated duopoly model considering capacity constraints and shared manufacturing, investigates the equilibrium results, examines the effects of product differentiation and capacity constraints in three scenarios, and compares the equilibrium outcomes in three cases under Cournot and Stackelberg competition. We find that capacity constraints affect the relationships among product differentiation, equilibrium results, and the market share of enterprises. Shared manufacturing impacts the degree of excess capacity, profits, consumer surplus, and social welfare; however, it may sometimes play a negative role in alleviating excess capacity. Moreover, Cournot competition is a better choice for enterprises with capacity constraints compared to Stackelberg competition.

Competitive Effects of Purchase-Based Targeted Advertising

2012 ◽  
Vol 10 (4) ◽  
pp. 71-84
Author(s):  
Jianqiang Zhang ◽  
Weijun Zhong ◽  
Shue Mei
Keyword(s):  
Social Welfare ◽  
Product Differentiation ◽  
Price Competition ◽  
Consumer Surplus ◽  
Consumer Information ◽  
Competitive Effects ◽  
Targeted Advertising ◽  
Consumer Valuation ◽  
Competitive Environments ◽  
Second Period

This paper develops a two-period sales model to investigate the competitive effects of purchase-based targeted advertising. In the model, two competing firms gain consumer information during the first period sales, which allows them to target advertising based on consumer purchase history. Advertising is assumed to be persuasive in terms of consumer valuation enhancing and product differentiation increasing. The authors find that the firm’s ability to target can damage industry profits, consumer surplus, and even social welfare. The conditions under which targeted advertising is positive or negative are derived, showing that price competition is softened in the second period but intensified in the first. It is suggested that firms under competitive environments cautiously sponsor targeted advertising with appropriate contents.

scholarly journals R&D Activities in Oligopoly and Social Welfare

2015 ◽  
Vol 46 (1) ◽  
pp. 134-146 ◽  
Author(s):  
Jacek Prokop ◽  
Bartłomiej Wiśnicki
Keyword(s):  
Social Welfare ◽  
Consumer Surplus ◽  
Product Market ◽  
Cournot Competition ◽  
Production Costs ◽  
Cost Functions ◽  
Firm Competition ◽  
Research Level ◽  
The Impact ◽  
Total Welfare

Abstract This paper analyzes the impact of R&D activities in an oligopoly on consumer surplus and social welfare. We use a two-stage model to analyze the behavior of duopolists at the research level, and in the final-product market, under the assumption of linear and quadratic cost functions. Three options for firm competition are considered: 1) Cournot competition at both stages; 2) cooperation at the R&D stage and Cournot competition in the final-product market; and 3) cooperation at both stages. Numerical simulations for various levels of R&D spillovers are conducted to analyze the welfare effects of firm decisions. We conclude that for high levels of technological spillovers, total welfare is highest when firms engage in cooperation at the R&D stage, and compete in the final product market, independent of the shape of cost functions. However, the functional form of production costs has a qualitative impact on welfare when firms fully compete.

Price Versus Quantity Competition in a Vertically Related Market with Retailer’s Effort

2020 ◽  
Vol 0 (0) ◽  
Author(s):  
Qian Liu ◽  
Leonard F. S. Wang
Keyword(s):  
Social Welfare ◽  
Consumer Surplus ◽  
Cournot Competition ◽  
Bertrand Competition ◽  
Quantity Competition ◽  
Decentralized Bargaining ◽  
Cournot And Bertrand Competition

AbstractAllowing downstream retailers to engage in demand-enhancing investment, this paper demonstrates that the classical conclusions regarding the comparison of Cournot and Bertrand competition in a vertically related market with decentralized bargaining are completely reversed. It shows that Bertrand competition is more efficient than Cournot competition, in the sense that both consumer surplus and social welfare are always higher in the former.

Purchase-Based Targeted Advertising

2015 ◽  
pp. 171-188
Author(s):  
Jianqiang Zhang ◽  
Weijun Zhong ◽  
Shue Mei
Keyword(s):  
Social Welfare ◽  
Consumer Surplus ◽  
Information Gathering ◽  
Consumer Information ◽  
Competitive Effect ◽  
Competitive Effects ◽  
Targeted Advertising ◽  
Competitive Environments ◽  
Duopoly Model

Purchase-Based Targeted Advertising (PBTA) refers to the advertising that is targeted to an individual based on his or her purchase histories, which is ubiquitous in the age of e-commerce. This chapter examines the competitive effects of PBTA by establishing a two-period duopoly model: the first period consists of the consumer information gathering process while the second is the period where PBTA is embraced. Based on this model, it is found that PBTA may improve or damage industry profits, consumer surplus, as well as social welfare. The conditions under which the competitive effect is positive or negative are derived, showing that whether PBTA is beneficial or detrimental depends on the content of advertising designed by the competing firms. It is suggested that firms under competitive environments cautiously deploy PBTA with appropriate advertising contents.

DECISION MAKING ON STRATEGIC ENVIRONMENTAL TECHNOLOGY LICENSING: FIXED-FEE VERSUS ROYALTY LICENSING METHODS

2009 ◽  
Vol 08 (03) ◽  
pp. 609-624 ◽  
Author(s):  
MING-CHUNG CHANG ◽  
JIN-LI HU ◽  
GWO-HSHIUNG TZENG
Keyword(s):  
Social Welfare ◽  
Consumer Surplus ◽  
Technology Licensing ◽  
Environmental Damage ◽  
Environmental Technology ◽  
Tax Rate ◽  
Duopoly Model ◽  
High Emission ◽  
Fixed Fee

Because of a deterioration in the quality of the environment, this paper studies the effects of the environment and the economy on environmental technology licensing in a homogeneous Cournot duopoly model in order to reduce environmental pollution and hence improve social welfare. To this end, two licensing methods — namely, a fixed-fee licensing method and a royalty licensing method — are compared. It is found that a high emission tax rate induces the innovator to not license the environmental technology to the licensee under the fixed-fee licensing method. As for social welfare, a large innovation scale of environmental technology does not guarantee that social welfare will be maximized. Finally, a large innovation scale of environmental technology is likely to increase consumer surplus if the marginal environmental damage is significant. Consumers are likely to prefer royalty licensing to fixed-fee licensing. This conclusion differs from Wang's finding in 2002.

scholarly journals Are Cooperative R&D Agreements Good For The Society?

2014 ◽  
Vol 12 (3) ◽  
pp. 313
Author(s):  
Satyajit Ghosh ◽  
Sarah Ghosh
Keyword(s):  
Social Welfare ◽  
Product Differentiation ◽  
Technological Progress ◽  
Patent Protection ◽  
Well Being ◽  
Standard Of Living ◽  
Industrial Policies ◽  
Duopoly Model ◽  
The World ◽  
Stage Game

Technological progress is crucial for economic growth and enhancement of standard of living in any economy. But firms often have insufficient incentive for R&D, because in spite of patent protection, the benefits of R&D are not always limited to the firms that initially conduct the R&D activities. Consequently, governments around the world often undertake industrial policies to promote collaborative R&D efforts between firms in order to increase R&D. This paper examines the implications of cooperative R&D agreements for the societal well being. The R&D and price decisions are analyzed using a Bertrand Duopoly Model in presence of product differentiation in a two-stage game. It is shown that under cooperative R&D agreements R&D and output levels are larger and prices are lower than under non-cooperation. For complementary and independent goods, these results are valid for any degree of R&D spillover and for substitute goods they may hold even for sufficiently small R&D spillover. These results are more general than D'Aspremont and Jacquemin (1988) who have shown that cooperative R&D levels exceed those under non-cooperation only for large R&D spillover. As for the level of social welfare, this paper finds the cooperative as well as the non-cooperative R&D output and price levels to be socially inefficient. However, cooperative R&D agreements tend to dominate non-cooperative R&D ventures in terms of social welfare. This result also holds for any degree of R&D spillover for complementary and independent goods and even for sufficiently small spillover in the case of substitute goods.

Passive Cross-Holding in a Stackelberg Oligopoly

2021 ◽  
Vol 0 (0) ◽  
Author(s):  
Hongkun Ma ◽  
Chenhang Zeng
Keyword(s):  
Social Welfare ◽  
Product Differentiation ◽  
Consumer Surplus ◽  
Stackelberg Leadership ◽  
Convex Costs

Abstract We show that bilateral cross-holding can be profitable for firms with symmetric technologies in a Stackelberg oligopoly. Furthermore, if firms involved in cross-holding obtain a strategic advantage to be the leaders (i.e. Stackelberg leadership through cross-holding), such cross-holding will improve both consumer surplus and social welfare. We also discuss robustness of our main results with respect to convex costs and product differentiation.

scholarly journals A Welfare Assessment of Revenue Management Systems

2020 ◽  
Vol 19 (1) ◽  
pp. 1-41
Author(s):  
Nicolas Dupuis ◽  
Marc Ivaldi ◽  
Jerome Pouyet
Keyword(s):  
Theoretical Model ◽  
Revenue Management ◽  
Consumer Preferences ◽  
Consumer Surplus ◽  
Capacity Constraints ◽  
Management Systems ◽  
Optimal Pricing ◽  
Pricing Strategies ◽  
Welfare Impact ◽  
Welfare Assessment

AbstractWe study the welfare impact of revenue management, a practice which is widely spread in the transport industry, but whose impact on consumer surplus remains unclear. We develop a theoretical model of revenue management allowing for heterogeneity in product characteristics, capacity constraints, consumer preferences, and probabilities of arrival. We also introduce dynamic competition between revenue managers. We solve this model computationally and recover the optimal pricing strategies. We find that revenue management is generally welfare enhancing as it raises the number of sales.

scholarly journals Externalities and Regulation in Card Payment Systems

2006 ◽  
Vol 5 (1) ◽  
Author(s):  
Jean-Charles Rochet ◽  
Jean Tirole
Keyword(s):  
Social Welfare ◽  
Consumer Surplus ◽  
Welfare Analysis ◽  
Payment Systems ◽  
Interchange Fees ◽  
Regulatory Approach ◽  
Innovative Thinking ◽  
Card Payment ◽  
Economic Thinking

The paper offers a roadmap to the current economic thinking concerning interchange fees. After describing the fundamental externalities inherent in payment systems and analysing merchant resistance to interchange fee increases and the associations' determination of this fee, it derives the externalities' implications for welfare analysis. It then discusses whether consumer surplus or social welfare is the proper benchmark for regulatory purposes. Finally, it offers a critique of the current regulatory approach, and concludes with a call for more novel and innovative thinking about how to reconcile regulators' concerns and the industry legitimate desire to perform its balancing act.

scholarly journals Capacity Choice and Government Regulation in a Vertical Industry

2020 ◽  
Vol 31 (5) ◽  
pp. 513-524
Author(s):  
Junlong Chen ◽  
Yajie Wang ◽  
Jiali Liu
Keyword(s):  
Social Welfare ◽  
Government Regulation ◽  
Market Competition ◽  
Excess Capacity ◽  
Market Demand ◽  
Government Failure ◽  
Regulatory Policies ◽  
The Social ◽  
Capacity Choice ◽  
The Government

This paper sets up an industry competition model consisting of two upstream enterprises and two downstream enterprises. Then we rely on the model to explore how non-regulation and different regulatory policies (maximizing the total profits of the upstream enterprises, the social welfare of the upstream industry or the overall social welfare) affect the following factors: the excess capacity, enterprise profits, consumer surpluses, social welfare in the upstream and downstream enterprises and the overall social welfare. The following conclusions are drawn from our research. First, whether and how the government regulates the capacity choice greatly affect the equilibrium outcomes, as well as the welfare distribution among the upstream enterprises, downstream enterprises, and consumers. The specific effects are dependent on market demand and enterprise cost. Second, the government should formulate its regulatory policies on capacity choice based on the overall social welfare of the entire supply chain. If the government aims to maximize the profits of the upstream enterprises, the social welfare of the downstream industry will be negatively affected. Third, excess capacity does not necessarily suppress social welfare. Under certain conditions, the worst scenario of excess capacity may occur under the pursuit of the maximal overall social welfare. Excess capacity may arise from various causes, rather than market competition or government regulation alone. Excess capacity cannot be attributed solely to government failure. These conclusions have some significance for optimizing capacity regulation policies.

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