scholarly journals Social Welfare and Cost Recovery in Two-Sided Markets

2006 ◽  
Vol 5 (1) ◽  
Author(s):  
Wilko Bolt ◽  
Alexander F. Tieman
Keyword(s):  
Social Welfare ◽  
Cost Recovery ◽  
Social Optimum ◽  
Social Planner ◽  
The Social ◽  
Positive Externality ◽  
Antitrust Regulation ◽  
Recovery Problem ◽  
Total Price ◽  
Two Sided Markets

Using a simple model of two-sided markets, we show that, in the social optimum, platform pricing leads to an inherent cost recovery problem. This result is driven by the positive externality of participation that users on either side of the market exert on the opposite side. The contribution of this positive externality to social welfare leads the social planner to increase users' participation by setting prices at both sides of the market such that the total price is below marginal cost. Our result holds for both interior pricing and skewed pricing in two-sided markets. These findings may have interesting consequences for antitrust regulation.

scholarly journals Demand Subsidy versus Production Regulation: Development of New Energy Vehicles in a Competitive Environment

Mathematics ◽  
2021 ◽  
Vol 9 (11) ◽  
pp. 1280
Author(s):  
Zixuan Wang ◽  
Xiuzhang Li
Keyword(s):  
Social Welfare ◽  
Stackelberg Game ◽  
Positive Impact ◽  
Consumer Preference ◽  
Social Planner ◽  
Environmental Preferences ◽  
The Social ◽  
New Energy ◽  
Vehicle Market ◽  
New Energy Vehicles

In the competitive market environment, the growth of new energy vehicles (NEVs) faces many obstacles. Demand subsidy or production regulation-related policies are widely used to promote the development of NEVs. A comparative analysis of the effects of the two types of policies on the competitive vehicle market requires further study. To fill this gap, we investigate which type of policy is more preferable from the perspective of the social planner. In this paper, we construct a Stackelberg game with a welfare-maximizing social planner and two profit-maximizing manufacturers producing NEVs and fuel vehicles (FVs), respectively. Interestingly, although both types of policies can increase the quantity of NEVs, demand subsidy also promotes the growth of total vehicles at the same time; in contrast, production regulation reduces the total vehicles. Moreover, compared with the benchmark that no policy intervention, demand subsidy generally improves social welfare, while production regulation improves social welfare only with high consumer preference for NEVs. Nevertheless, production regulation always has a positive impact on the environment, whereas demand subsidy may have a positive impact only when the NEV is very environment friendly. The numerical results show that consumer environmental preferences and the regulation of environmental impact determine which type of policy dominates the other.

scholarly journals Product innovation, process innovation and advertising-based goodwill: A dynamic analysis in a monopoly

2021 ◽  
Vol 0 (0) ◽  
pp. 0
Author(s):  
Genlong Guo ◽  
Shoude Li
Keyword(s):  
Product Quality ◽  
Product Innovation ◽  
Dynamic Control ◽  
Innovation Process ◽  
Process Innovation ◽  
Social Optimum ◽  
Social Planner ◽  
State Variables ◽  
Product Price ◽  
The Social

<p style='text-indent:20px;'>In this paper, we develop a dynamic control model to investigate a monopolist's investment strategies in product innovation, process innovation and advertising-based goodwill. The significant features of our study are: (ⅰ) considering the effect of product quality on goodwill; (ⅱ) considering the instantaneous cost of producing a quality using machinery and/or skilled labour; (ⅲ) the customers' demand function depends on product quality, product price and goodwill in a separable multiplicative way between the state variables and control variables. Our results suggest that (ⅰ) the system admits unique saddle-point steady-state equilibrium under the monopolist optimum and the social optimum; (ⅱ) and the monopolist will have an underinvestment problem as compared with the social planner; and (ⅲ) although the product price is still determined by the monopolist under the social planner optimum, the product price is higher under the monopolist optimum than that under the social planner optimum.</p>

London's Congestion Charge

2017 ◽  
pp. 1-10
Author(s):  
David Besanko ◽  
Johannes Horner ◽  
Ed Kalletta
Keyword(s):  
Social Welfare ◽  
Traffic Congestion ◽  
Social Optimum ◽  
Deadweight Loss ◽  
Sufficient Data ◽  
Negative Externalities ◽  
General Terms ◽  
Congestion Charge ◽  
The Social

Describes the events leading up to the imposition of the London congestion charge. Views about the congestion charge, both pro and con, are presented. Also discusses, in general terms, the economics of traffic congestion, pointing out that an unregulated market for driving will not reach the social optimum. Contains sufficient data to estimate the deadweight loss in an unregulated market and the reduction of the deadweight loss due to the imposition of the congestion charge in 2003.To provide a good illustration of how an unregulated market with negative externalities can lead to an overprovision of a good (in this case driving). Also, to show how an externality tax (in this case, London's congestion charge) can lead to an improvement in social welfare.

scholarly journals Social Learning with Costly Search

2016 ◽  
Vol 8 (1) ◽  
pp. 83-109 ◽  
Author(s):  
Manuel Mueller-Frank ◽  
Mallesh M. Pai
Keyword(s):  
Social Learning ◽  
Social Welfare ◽  
Discount Rate ◽  
Learning Model ◽  
Search Costs ◽  
Social Optimum ◽  
Linear Rate ◽  
The Social

We study a sequential social learning model where agents privately acquire information by costly search. Search costs of agents are private, and are independently and identically distributed. We show that asymptotic learning occurs if and only if search costs are not bounded away from zero. We explicitly characterize equilibria for the case of two actions, and show that the probability of late moving agents taking the suboptimal action vanishes at a linear rate. Social welfare converges to the social optimum as the discount rate converges to one if and only if search costs are not bounded away from zero. (JEL D81, D83)

scholarly journals How do Fines and Their Enforcement on Counterfeit Products Affect Social Welfare?

2021 ◽  
Author(s):  
Marta Biancardi ◽  
Andrea Di Liddo ◽  
Giovanni Villani
Keyword(s):  
Social Welfare ◽  
Differential Game ◽  
Social Planner ◽  
Selling Price ◽  
Brand Name ◽  
The Social ◽  
Enforcement Costs ◽  
Feedback Equilibria ◽  
Counterfeit Products

AbstractWe consider a differential game which models the competition between a genuine and a counterfeit producer. The genuine manufacturer acts as a leader, first announcing the price of the product and the investments in advertising. After observing the leader’s decisions, the counterfeiter sets the selling price of the fakes. We assume that the demand of the good is driven by the brand-name goodwill. We calculate the Stackelberg feedback equilibria and the social welfare, defined by the unweighted sum of the genuine and fakes consumers, the profit of the genuine firm, minus the enforcement costs borne by the social planner. The purpose of this paper is twofold. Firstly we study the dependence of social welfare on the amount of the fines established in the IPR law and monitoring efforts. Then, we compare prices, profits and social welfare under Nash and Stackelberg framework.

scholarly journals Social Welfare and Cost Recovery in Two-Sided Markets

2005 ◽  
Vol 05 (194) ◽  
pp. 1 ◽  
Author(s):  
Wilko Bolt ◽  
Alexander F. Tieman ◽  
◽  
Keyword(s):  
Social Welfare ◽  
Cost Recovery ◽  
Two Sided Markets

scholarly journals Selfishness Level of Strategic Games

2014 ◽  
Vol 49 ◽  
pp. 207-240 ◽  
Author(s):  
K. R. Apt ◽  
G. Schaefer
Keyword(s):  
Nash Equilibrium ◽  
Social Welfare ◽  
Price Of Anarchy ◽  
Congestion Games ◽  
Price Of Stability ◽  
Social Optimum ◽  
Potential Game ◽  
Strategic Games ◽  
The Social ◽  
The Impact

We introduce a new measure of the discrepancy in strategic games between the social welfare in a Nash equilibrium and in a social optimum, that we call selfishness level. It is the smallest fraction of the social welfare that needs to be offered to each player to achieve that a social optimum is realized in a pure Nash equilibrium. The selfishness level is unrelated to the price of stability and the price of anarchy and is invariant under positive linear transformations of the payoff functions. Also, it naturally applies to other solution concepts and other forms of games. We study the selfishness level of several well-known strategic games. This allows us to quantify the implicit tension within a game between players' individual interests and the impact of their decisions on the society as a whole. Our analyses reveal that the selfishness level often provides a deeper understanding of the characteristics of the underlying game that influence the players' willingness to cooperate. In particular, the selfishness level of finite ordinal potential games is finite, while that of weakly acyclic games can be infinite. We derive explicit bounds on the selfishness level of fair cost sharing games and linear congestion games, which depend on specific parameters of the underlying game but are independent of the number of players. Further, we show that the selfishness level of the $n$-players Prisoner's Dilemma is c/(b(n-1)-c), where b and c are the benefit and cost for cooperation, respectively, that of the n-players public goods game is (1-c/n)/(c-1), where c is the public good multiplier, and that of the Traveler's Dilemma game is (b-1)/2, where b is the bonus. Finally, the selfishness level of Cournot competition (an example of an infinite ordinal potential game), Tragedy of the Commons, and Bertrand competition is infinite.

A Model of Welfare-Reducing Settlement

2004 ◽  
Vol 3 (1) ◽  
Author(s):  
Abraham L. Wickelgren
Keyword(s):  
Social Welfare ◽  
Private Information ◽  
Full Range ◽  
Social Planner ◽  
The Social ◽  
Pooling Equilibrium ◽  
Different Levels ◽  
Damage Rule

Abstract While it is typically taken for granted that settlement of lawsuits increases social welfare, this paper shows that settlement can lower welfare. If the defendant has private information about the harm from his action both at the time of the action and the time of settlement bargaining, then defendants who cause different levels of harm can pay the same settlement amount in a partial pooling equilibrium. Settlement acts as a damage cap, preventing the defendant's liability from increasing with the harm over the full range of possible harms, leading to under-deterrence. This result holds even though the social planner can choose the socially optimal damage rule.

Comparisons of customer behavior in Markovian queues with vacation policies and geometric abandonments

2020 ◽  
Vol 54 (3) ◽  
pp. 615-636 ◽  
Author(s):  
Wei Sun ◽  
Shiyong Li ◽  
Naishuo Tian
Keyword(s):  
Social Welfare ◽  
Poisson Process ◽  
Busy Period ◽  
Customer Behavior ◽  
Social Planner ◽  
Multiple Vacations ◽  
Single Vacation ◽  
Markovian Queues ◽  
The Social ◽  
The One

This paper mainly studies customers’ equilibrium balking behavior in Markovian queues with single vacation and geometric abandonments. Whenever the system becomes empty, the server begins a vacation. If it is still empty when the vacation ends, the server stays idle and waits for new arrivals. During a vacation, abandonment opportunities occur according to a Poisson process, and at an abandonment epoch, customers decide sequentially whether they renege and leave the system or not. We consider four information levels: the fully/almost observable cases and the almost/fully unobservable cases, and get the customers’ equilibrium balking strategies, respectively. Then we also get their optimal balking strategies for the almost observable and the almost/fully unobservable cases, and make comparisons of customer strategies and social welfare for the almost observable and the almost/fully unobservable queues with single vacation and multiple vacations. Because of abandonment, we find that the customers’ equilibrium threshold in a vacation may exceed the one in a busy period in the fully observable queues. However, it has little effect on their equilibrium threshold in the almost observable queues, although frequent abandonment opportunity arrival inhibits their optimal threshold. Interestingly, for the almost unobservable queues, customers who arrive in a busy period are not affected by reneging that happened in the previous vacation when they make decisions of joining or balking, whereas the social planner expects that the customers can take it into consideration for social optimization. In the fully unobservable queues, because of no information, possible reneging surely influences customers’ equilibrium and optimal balking behavior. For the almost observable and the almost/fully unobservable queues, the optimal social welfare is greater in the queues with single vacation than that in the queues with multiple vacations.

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