The presence of a vertical externality, and therefore an incentive to integrate or to impose vertical restraints, is investigated in 11 posted-offer experiments. Upstream markets are characterized by a single seller. When the downstream market consists of three firms, there is no evidence of a vertical externality, and behavior is consistent with the vertically integrated outcome. With a single...

Do Walrasian markets function orderly in the presence of adverse selection? In particular, Is their outcome efficient when exclusive contracts are enforceable? This paper addresses these questions in the context of a Rothschild and Stiglitz insurance economy. We identify an externality associated with the presence of adverse selection as a special form of consumption externality. Consequently, ...

This study proposes an emission-intensity-based emission tax as a policy solution for negative environmental externality in oligopoly markets. Emissions are taxed when firms' intensities exceed their target level. We show that even under imperfect competition, this pricing leads to the first-best outcome. The optimal rate is equal Pigovian tax. principle can also apply tradable permits traded b...

This experimental study examines whether the content of information and the timing of its dissemination affects firms’ market power. We construct laboratory markets that capture the key features of a price-setting, differentiated goods, duopoly model analyzed by Anderson and Renault (2000). Consumers must typically incur a search cost in order to obtain any information, but a fraction of the co...

There is a growing view that systemic risk arises due to loss of intermediation for the overall economy – a negative externality – when the financial sector becomes under-capitalized as a whole. In turn, the systemic risk contribution of an individual financial firm can be defined as its share of this negative externality. Motivated by this intuition, a number of authors have proposed a “Pigovi...

We analyze the spatio-temporal dynamics of capital and pollution in an economic growth model with purposive environmental protection activities. The production process of a unique homogeneous good generates pollution, thus the increases in output associated with economic growth tend to rise the stock of pollution. Pollution is a negative production externality which thus feeds back on the econo...

Loyal users are vital to the future of B2B platform with rapid development and intensive competitions. This study examines how network externality, in terms of direct network externality and indirect network externality, enhances B2B platform users' perceived value, and how such perception of value, in turn, influences their satisfaction and loyalty. First, we develop a conceptual model to desc...

We develop a dynamic general-equilibrium model of rational addiction to study the decisions concerning nonaddictive and addictive goods consumption, savings, labor supply, and production. The model consists of two-period lived overlapping generations and two separate theaters of economic activity: a composite good and an addictive good sector. We determine the relative price of the addictive go...