Stability of Equilibrium Prices in a Dynamic Duopoly Bertrand Game with Asymmetric Information and Cluster Spillovers

Bounded rationality, asymmetric information and spillover effects are widespread in the economic market, and had been studied extensively in oligopoly games, but few references discussed incomplete information in a duopoly market with rationality expectations. Considering the positive externalities brought by the spillover effect between enterprises in a cluster, a duopoly Bertrand game with bounded rationality and asymmetric information is proposed in this paper. In our model, a firm with private information, high or low marginal cost, is introduced. Interestingly, our theoretical analysis reveals that: (1) In a dynamic duopoly Bertrand game with perfect rationality and asymmetric information, the equilibrium price is positively correlated with product substitution rate and the probability of a high marginal cost, while it is negatively correlated with the cluster spillover. (2) In a dynamic duopoly Bertrand game with asymmetric information and adaptive expectation adopted by both firms, the Nash equilibrium prices are always asymptotically stable. (3) In a dynamic duopoly Bertrand game with heterogenous expectation and asymmetric information, where two firms use adaptive expectation and boundedly rational expectation respectively, the Nash equilibrium prices are locally stable under certain conditions. Furthermore, results indicate that, high product substitution rate or large probability of high marginal cost for firm 2 with private information may make the market price unstable, bifurcating or even falling into chaos, while high technology spillover is conducive to stabilize the market by contrast. It is also shown that the chaos can be controlled by a hybrid control strategy with the state variables feedback and parameter variation. Our research has an important theoretical and practical significance to the price competition in oligopoly markets.

Rifkin’s misreadings of the zero-marginal cost of production of information technology

In this paper, I address contemporary attacks on rationalism thanks to Rifkin’s concepts of “extreme productivity” and “zero marginal cost of production” as examples of an ideological twist on genuine economic expressions. The main issue dealt with epistemological issues in the context of the contemporary communication age. It consists to clarify the relation between economic ideas and their relation to reality. To proceed accordingly, I implement a hermeneutic method applied to Rifkin’s discourse. That method is grounded in the scholarly tradition of “the ordinary language philosophy”. Its results proceed to show 2 distinct language games at work: 1- the neoclassical definition of marginal cost and its own logic is distinct from Rifkin’s use of it. 2- Rifkin uses the expression “marginal cost” under the auspices of an ideological discourse on the demise of capitalism. 3- The confusion is based on a systematically deceptive use of scholarly referencing. I conclude by drawing some lessons for the role of a multidisciplinary defense of economic rationality in contemporary discourse.

Divided attention impairs detection of simple visual features

Covert spatial attention allows us to prioritize processing at relevant locations. There is substantial evidence that perception is poorer when attention is distributed across multiple locations than when attention is focused on a single location. However, recent work suggests that may not always be the case: divided attention does not appear to impair detection of simple visual features that are represented in primary visual cortex. Here, we re-examined this possibility. In two experiments, observers detected a simple target (a vertical Gabor), and we manipulated whether attention was focused at one location (focal-cue condition) or distributed across two locations (distributed-cue condition). In Experiment 1, targets could appear independently at each location. Thus, observers needed to judge target presence for each location separately in the distributed-cue condition. Under these conditions, we found a robust cost of dividing attention. In this experiment, the cost of dividing attention could reflect either a limit in perceptual processing or a limit in decision making. Therefore, in Experiment 2, we simplified the task to more directly test whether dividing attention impairs perceptual processing of the target. Specifically, only one target could appear on each trial, such that observers made the exact same decision in both conditions (“was a target present?”). Here, we found a marginal cost of dividing attention on performance, that was weaker than the cost in Experiment 1. Together, our results suggest that divided attention does impair detection of simple visual features, but that this cost is primarily due to limits in post-perceptual decision making.

Methods of Calculating the Marginal Cost of Incarceration: A Scoping Review

Criminal justice reforms and corrections cost forecasts require appropriate estimates of the marginal costs of incarceration to adequately assess cost savings and projections. Average costs are simple to calculate while marginal cost calculations require much more detailed data and advanced methods. We undertook a scoping review to identify, report, and summarize the existing academic and gray literature covering the different estimation methods of calculating the marginal costs of incarceration, following the Arksey and O’Malley framework. Eighteen publications met criteria for inclusion in this review, with only one from the peer-reviewed literature. The three main approaches in the literature and their use are reviewed and illustrated. We conclude that there is a lack of, and need for, peer-reviewed literature on methods for calculating the marginal cost of incarceration, and marginal cost estimates of incarceration, to assist program evaluation, policy, and cost forecasting in the field of corrections.

Cost of providing cell-free DNA screening for Down syndrome in Finland using different strategies

Introduction A financial analysis is carried out to assess costs and benefits of providing cell-free DNA screening in Finland, using different strategies. Materials and methods Three cell-free DNA screening strategies are considered: Primary, all women; Secondary, those with positive Combined test; and Contingent, the 10–30% with the highest Combined test risks. Three costs are estimated: additional cost for 10,000 pregnancies compared with the Combined test; ‘marginal’ cost of avoiding a Down syndrome birth which occurs in a pregnancy that would have been false-negative using the Combined test; and marginal cost of preventing the iatrogenic loss of a non-Down syndrome birth which occurs in a pregnancy that would have been false-positive. Results Primary cell-free DNA will require additional funds of €250,000. The marginal cost per Down syndrome birth avoided is considerably less than the lifetime medical and indirect cost; the marginal cost per unaffected iatrogenic fetal loss prevented is higher than one benefit measure but lower than another. If the ultrasound component of the Combined test is retained, as would be in Finland, the additional funds required rise to €992,000. Secondary cell-free DNA is cost-saving as is a Contingent strategy with 10% selected but whilst when 20–30% costs rise they are much less than for the Primary strategy and are cost-beneficial. Conclusions When considering the place of cell-free DNA screening it is important to make explicit the additional and marginal costs of different screening strategies and the associated benefits. Under most assumptions the balance is favorable for Contingent screening.

THE DEFENSE OF PRICE DISCRIMINATION IN NETWORK AND INFORMATION GOODS MARKETS

It is not uncommon that articles focused on consumer-price interaction in the network and information goods market swiftly condemn price discrimination as an obfuscation, on-purpose price complexity, or market failure. The reason is a general neoclassical rule of an efficient market where prices are set at marginal cost with no price discrimination. However, the matter is more complicated. This review provides authors an overview of why, where, and which type of price discrimination should be viewed by different optics. Goods such as software, cell carrier services, electronic newspapers subscription, electric energy supply, payment accounts, books, copyrighted content streaming, etc, cannot be treated like manufactured goods. The reasons are specific conditions – substantial and/or repeated fixed/sunk cost, economies of scale, and demand heterogeneity. Recognized economist W. J. Baumol described marginal cost set prices under these conditions as an ‘economic suicide’. Reviewed articles showed that firms are forced to adopt price discrimination in order to recover their costs and to serve more consumer segments. Reviewed authors provided facts to support the use of multipart tariffs, dynamic pricing, versioning, bundling, and Ramsey pricing. These conclusions are used for suggestions on how several studies of information and network goods should be modified. Modifications are related mostly to model assumptions and pricing conclusions. I argue that, in the case of information and network goods, there is justified price discrimination. Hence, there is a certain justified level of price complexity that has to be accepted and not taken as automated evidence of inefficiency, market power, and consumer exploitation.

Cobb-Douglas Preferences and Pollution in a Bilateral Oligopoly Market

In this paper, we investigate how pollution changes with preferences, focusing on a finite bilateral oligopoly model where agents have asymmetric Cobb-Douglas preferences. Producers are also consumers and the choice of heterogeneous preferences is related to the psychological foundations and identity aspects of group membership. We compare two strategic equilibria: the Stackelberg-Cournot equilibrium with pollution (SCEP) and the Cournot equilibrium with pollution (CEP). We show that considering the asymmetric preferences helps the public decision-maker to identify precisely the category of agents (consumer–producers or pure-consumers) for which a change in environmental preference parameters will most effectively reduce pollution. Furthermore, we find that firms’ emissions’ elasticity decreases with market power (when the market power increases) if their marginal cost is lower than their competitor. Finally, we show that when producers are also consumers, an action on pure-consumers’ preference parameters reduces more emissions than a similar action on consumer–producers, and this regardless of the timing of interaction.

Market Structure and Equilibrium in a Hydro Dominated Electricity Market

<p>Hydro generation plays an important role in electricity generation, especially in countries like New Zealand where 60 to 65 percent of electricity is generated in the hydro sector. In contrast to other types of electricity generation, for example gas generation, hydro generation has two unique properties: uncertainty regarding future resource availability and the ability to store the nature resource. Although hydro resource is often considered to be ‘free’, the ability to store creates an endogenous hidden marginal cost of water: usage today entails the loss of the ability to be used in future periods. Therefore pricing in a hydro dominated electricity market should be different from the approaches applied in markets that consist of generation methods that use only non-storable resources. This paper introduces a tractable approach to model a hydro dominated electricity market that incorporates inter-temporal decision making. It enables us to compute the equilibrium outcomes and the endogenous hidden marginal cost of water under different market structures.</p>

Market Structure and Equilibrium in a Hydro Dominated Electricity Market

<p>Hydro generation plays an important role in electricity generation, especially in countries like New Zealand where 60 to 65 percent of electricity is generated in the hydro sector. In contrast to other types of electricity generation, for example gas generation, hydro generation has two unique properties: uncertainty regarding future resource availability and the ability to store the nature resource. Although hydro resource is often considered to be ‘free’, the ability to store creates an endogenous hidden marginal cost of water: usage today entails the loss of the ability to be used in future periods. Therefore pricing in a hydro dominated electricity market should be different from the approaches applied in markets that consist of generation methods that use only non-storable resources. This paper introduces a tractable approach to model a hydro dominated electricity market that incorporates inter-temporal decision making. It enables us to compute the equilibrium outcomes and the endogenous hidden marginal cost of water under different market structures.</p>