scholarly journals Advertising Collusion in Retail Markets

2010 ◽  
Vol 10 (1) ◽  
Author(s):  
Kyle Bagwell ◽  
Gea M. Lee
Keyword(s):  
Lower Cost ◽  
Consumer Welfare ◽  
Productive Efficiency ◽  
Trade Off ◽  
Retail Markets ◽  
Costs Of Production ◽  
Price Advertising ◽  
Search Rule

Abstract We analyze non-price advertising by retail firms, when the firms are privately informed about their respective costs of production. In a static advertising game, an advertising equilibrium exists in which lower-cost firms select higher advertising levels. In this equilibrium, informed consumers rationally employ an advertising search rule in which they buy from the highest-advertising firm since lower-cost firms also select lower prices. In a repeated advertising game, colluding firms face a trade-off: the use of advertising can promote productive efficiency, but only if sufficient current or future advertising expenses are incurred. At one extreme, if firms pool at zero advertising, they sacrifice productive efficiency but also eliminate current and future advertising expenses. Focusing on symmetric perfect public equilibria for the repeated advertising game, we establish conditions under which optimal collusion entails pooling at zero advertising. More generally, full or partial pooling is observed in optimal collusion. Such collusive agreements reduce consumer welfare, since they restrict informed consumers' ability to locate the lowest available price in the market.

scholarly journals Advertising Competition in Retail Markets

2010 ◽  
Vol 10 (1) ◽  
Author(s):  
Kyle Bagwell ◽  
Gea M Lee
Keyword(s):  
Price Competition ◽  
Consumer Welfare ◽  
Comparative Statics ◽  
Productive Efficiency ◽  
Production Costs ◽  
Retail Markets ◽  
Social Surplus ◽  
Price Advertising ◽  
Search Rule ◽  
Number Of Firms

Abstract We consider non-price advertising by retail firms that are privately informed as to their respective production costs. We construct an advertising equilibrium in which informed consumers use an advertising search rule whereby they buy from the highest-advertising firm. Consumers are rational in using the advertising search rule since the lowest-cost firm advertises the most and also selects the lowest price. Even though the advertising equilibrium facilitates productive efficiency, we establish conditions under which firms enjoy higher expected profit when advertising is banned. Consumer welfare falls in this case, however. Under free entry, social surplus is higher when advertising is allowed. In addition, we consider a benchmark model of price competition; we provide comparative-statics results with respect to the number of informed consumers, the number of firms and the distribution of costs; and we consider the possibility of sequential search.

Interrelationship Among Competition, Diversification and Liquidity Creation: Evidence from Indian Banks

2021 ◽  
Vol 15 (2) ◽  
pp. 183-204
Author(s):  
Pankaj Sinha ◽  
Naina Grover
Keyword(s):  
Inverse Relationship ◽  
Consumer Welfare ◽  
Adverse Impact ◽  
Public And Private ◽  
Jel Codes ◽  
Trade Off ◽  
Private Banks ◽  
Indian Banks ◽  
The Impact

This study analyses the impact of competition on liquidity creation by banks and investigates the dynamics between diversification, liquidity creation and competition for banks operating in India during the period from 2005 to 2018. Using the broad and narrow measures of liquidity creation, an inverse relationship is determined between liquidity creation and competition. The study also indicates a trade-off between pro-competitive policies to improve consumer welfare and the liquidity-destroying effects of competition, and it highlights how diversification affects liquidity creation. Highly diversified banks in India create less liquidity compared with less-diversified banks, both public and private. The liquidity-destroying effects of competition is intensified among highly diversified private banks, which suggest that diversification has not moderated the adverse impact of competition. JEL Codes: G01, G18, G21, G28

scholarly journals The Impact of Consumer Search Behavior on Search Advertising in the Hotel Industry

2015 ◽  
pp. 1-15
Author(s):  
Qiang Lu ◽  
Yupin Yang ◽  
Shahriar Akter
Keyword(s):  
Product Information ◽  
Hotel Industry ◽  
Search Behavior ◽  
Competitive Market ◽  
Product Knowledge ◽  
Trade Off ◽  
Travel Agents ◽  
Search Advertising ◽  
Advertising Content ◽  
Price Advertising

This chapter proposes a conceptual framework to encapsulate our understanding of how consumers' search behavior influences the content in search advertising in the hotel industry. We suggest that firms can better match consumers' preferences and needs by embracing a trade-off between price information and product information in search advertising. The dynamics of this trade-off is driven by consumers' prior product knowledge and the type of advertisers in the competitive market. Our framework suggests that travel agents tend to focus more on price advertising in their search ads, whereas hotels do not change their level of price advertising in a competitive market. More interestingly, competition from travel agents and hotels has different effects on the content of search advertising by travel agents and hotels. Our study provides critical insights in responding to different market conditions, which enhance the understanding of firms' behaviors in designing their search advertising content.

scholarly journals Cost-Accuracy Aware Adaptive Labeling for Active Learning

2020 ◽  
Vol 34 (03) ◽  
pp. 2569-2576
Author(s):  
Ruijiang Gao ◽  
Maytal Saar-Tsechansky
Keyword(s):  
Active Learning ◽  
Lower Cost ◽  
State Of The Art ◽  
Learning Algorithms ◽  
Budget Constraint ◽  
Fixed Cost ◽  
Trade Off ◽  
Generalization Performance ◽  
Generalization Bound ◽  
Generalization Accuracy

Conventional active learning algorithms assume a single labeler that produces noiseless label at a given, fixed cost, and aim to achieve the best generalization performance for given classifier under a budget constraint. However, in many real settings, different labelers have different labeling costs and can yield different labeling accuracies. Moreover, a given labeler may exhibit different labeling accuracies for different instances. This setting can be referred to as active learning with diverse labelers with varying costs and accuracies, and it arises in many important real settings. It is therefore beneficial to understand how to effectively trade-off between labeling accuracy for different instances, labeling costs, as well as the informativeness of training instances, so as to achieve the best generalization performance at the lowest labeling cost. In this paper, we propose a new algorithm for selecting instances, labelers (and their corresponding costs and labeling accuracies), that employs generalization bound of learning with label noise to select informative instances and labelers so as to achieve higher generalization accuracy at a lower cost. Our proposed algorithm demonstrates state-of-the-art performance on five UCI and a real crowdsourcing dataset.

Economics of Agglomeration

2019 ◽  
Author(s):  
Jacques-François Thisse
Keyword(s):  
Urban Economics ◽  
Spatial Scales ◽  
Consumer Welfare ◽  
Increasing Returns ◽  
Dispersion Force ◽  
Differentiated Products ◽  
Economic Activities ◽  
Trade Off ◽  
Production Factors ◽  
Space Economy

Despite the drop in transport and commuting costs since the mid-19th century, sizable and lasting differences across locations at very different spatial scales remain the most striking feature of the space-economy. The main challenges of the economics of agglomeration are therefore (a) to explain why people and economic activities are agglomerated in a few places and (b) to understand why some places fare better than others. To meet these challenges, the usual route is to appeal to the fundamental trade-off between (internal and external) increasing returns and various mobility costs. This trade-off has a major implication for the organization of the space-economy: High transport and commuting costs foster the dispersion of economic activities, while strong increasing returns act as a strong agglomeration force. The first issue is to explain the existence of large and persistent regional disparities within nations or continents. At that spatial scale, the mobility of commodities and production factors is critical. By combining new trade theories with the mobility of firms and workers, economic geography shows that a core periphery structure can emerge as a stable market outcome. Second, at the urban scale, cities stem from the interplay between agglomeration and dispersion forces: The former explain why firms and consumers want to be close to each other whereas the latter put an upper limit on city sizes. Housing and commuting costs, which increase with population size, are the most natural candidates for the dispersion force. What generates agglomeration forces is less obvious. The literature on urban economics has highlighted the fact that urban size is the source of various benefits, which increase firm productivity and consumer welfare. Within cities, agglomeration also occurs in the form of shopping districts where firms selling differentiated products congregate. Strategic location considerations and product differentiation play a central role in the emergence of commercial districts because firms compete with a small number of close retailers.

scholarly journals Degrees of Rationality in Agent-Based Retail Markets

2019 ◽  
Vol 56 (4) ◽  
pp. 953-973
Author(s):  
Georgios Methenitis ◽  
Michael Kaisers ◽  
Han La Poutré
Keyword(s):  
Lower Cost ◽  
Software Agents ◽  
Evolutionary Game ◽  
Response Strategy ◽  
Agent Based ◽  
Retail Markets ◽  
Best Response ◽  
Recent Developments ◽  
Logit Function ◽  
Economic Choices

AbstractThe imperfect decision-making of human buyers participating in retail markets varies from fundamental models that assume rational economic choices: even in markets with identical items human buyers are not rational, i.e., buyers do not always choose the cheapest option. Recent developments in artificial intelligence and e-commerce enable market participation by software agents that are (almost) perfectly rational due to their computational capacity. However, the increasing degree of buyers’ rationality might have unfavorable effects on retail markets with regards to the competition between sellers and the resulting prices. In this paper, we study the effects of varying degrees of buyers’ rationality on the competition and the prices buyers face in retail markets with identical items. We use the multinomial logit function to model different degrees of buyers’ rationality. We further model the competition between sellers using k-level reasoning: each seller computes the price to offer (best response strategy) with regards to its belief for the competition. First, we derive an analytical best response strategy (price) of a seller given the competing prices and the degree of buyers’ rationality, and show that there exists an optimal degree of buyers’ rationality that minimizes the price. Last, we use evolutionary game theory to show that perfect rationality leads to unstable competition dynamics increasing the overall cost for buyers. In contrast, bounded rationality leads to smoother dynamics and lower cost for buyers. Our insights raise the need to revisit design objectives for software agents in retail markets in light of their wider systematic impact.

How Does Firms’ Innovation Disclosure Affect Their Banking Relationships?

2020 ◽  
Author(s):  
Farzad Saidi ◽  
Alminas Žaldokas
Keyword(s):  
Private Information ◽  
Lower Cost ◽  
Public Information ◽  
Public Capital ◽  
Information Provision ◽  
Cost Of Debt ◽  
Trade Off ◽  
Financing Choices ◽  
Banking Relationships ◽  
Patent Applications

Firms face a trade-off between patenting, thereby disclosing innovation, and secrecy. We show that this trade-off interacts with firms’ financing choices. As a shock to innovation disclosure, we study the American Inventor’s Protection Act that made firms’ patent applications public 18 months after filing, rather than when granted. We find that such increased innovation disclosure helps firms switch lenders, resulting in lower cost of debt, and facilitates their access to syndicated-loan and public capital markets. Our evidence lends support to the idea that public-information provision through patents and private information in financial relationships are substitutes, and that innovation disclosure makes credit markets more contestable. This paper was accepted by Gustavo Manso, finance.

scholarly journals Recent Empirical Evidence on Discrimination by Regulated Firms

2002 ◽  
Vol 1 (1) ◽  
Author(s):  
David Reiffen ◽  
Michael R Ward
Keyword(s):  
Empirical Evidence ◽  
Lower Cost ◽  
Cellular Phone ◽  
Economies Of Scope ◽  
Mobile Telephony ◽  
Trade Off ◽  
Cellular Telephony ◽  
Regulated Firms ◽  
Real Phenomenon

Well-established economic principles show that regulated monopolies may have an incentive to act discriminatorily against rivals of their unregulated affiliates. This paper discusses some recent empirical evidence regarding discrimination in telecommunications. Specifically, it surveys anecdotal and systematic evidence that LECs discriminate against unaffiliated providers of mobile telephony. Evidence regarding discrimination by LECs against rival local phone companies is also discussed. At the same time, the evidence suggests that allowing LECs to enter cellular telephony may result in higher-quality or lower-cost cellular phone provision. These findings provide evidence that discrimination is a real phenomenon, and that there is a policy trade-off between preventing discrimination (by mandating separation) and realizing economies of scope.

Benefits, criteria and activities of supplier development: a categorical literature review

2015 ◽  
Vol 27 (4) ◽  
pp. 653-675 ◽  
Author(s):  
Manojkumar Vithalrao Dalvi ◽  
Ravi Kant
Keyword(s):  
Literature Review ◽  
Design Methodology ◽  
Lower Cost ◽  
Supplier Development ◽  
Trade Off ◽  
Content Type ◽  
Supplier Performance ◽  
On Time Delivery ◽  
Level Of Importance ◽  
Constant Improvement

Purpose – Supplier development (SD) is a kind of collaboration among a buyer and a supplier to seek constant improvement in supplier performance and capabilities to provide better quality, on-time delivery of products and services at lower cost. The purpose of this paper is to exhibit and summarize the important aspects of SD benefits, SD criteria and SD activities. Design/methodology/approach – The review of SD aspects is based on 72 papers published from 1991 to till date in academic databases namely Science Direct, Emerald, Springer-Link Journals and IEEE Xplore with “supplier development” and “vendor development” as keywords. Findings – Through the literature review, this paper brings up the analysis of aforementioned aspect of SD in detail and put forth 43 SD benefits, 23 SD criteria and 9 SD activities. This paper also presents the important SD benefits, SD criteria and SD activities based on the occurrence in literature. Research limitations/implications – The literature on practical difficulties for implementation of SD activities, and trade-off between benefits and risk associated with SD activities are seldom available. Originality/value – This paper presents a literature review on three crucial aspects namely SD benefits, SD criteria and SD activities. The SD benefits, SD criteria and SD activities are identified according to their level of importance. The main contribution of this paper is to draw together three above mentioned important aspects of SD.

scholarly journals Stapled Financing, Value Certification, and Lending Efficiency

2017 ◽  
Vol 52 (2) ◽  
pp. 677-703 ◽  
Author(s):  
Hadiye Aslan ◽  
Praveen Kumar
Keyword(s):  
Adverse Selection ◽  
Lower Cost ◽  
Shareholder Wealth ◽  
Investment Banks ◽  
Leveraged Buyouts ◽  
Data Set ◽  
Trade Off ◽  
Positive Effects ◽  
Target Value ◽  
Ex Post

We examine whether financing commitments from a target firm’s financial advisor, in the form of stapled financing, provide certification of target value. Using a data set of leveraged buyouts spanning 2002–2011, and addressing endogeneity issues, we find that stapled financing has significant positive effects on sellers’ shareholder wealth, especially for targets suffering from greater adverse selection. Stapled financing facilitates deal financing by allowing buyers to obtain lower-cost and longer-maturity debt, and it is positively associated with bidding intensity. Investment banks offering stapled financing appear to trade off higher expected advisory fees against loss of lending efficiency ex post.

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