This paper investigates an optimal capacity expansion policy for innovative product in a context of one supplier and one retailer. With a fully deductible contract, we employ the Stackelberg game model to examine the negotiation process of capacity expansion in a single period. We first derive the retailer’s optimal reservation strategy and then characterize the optimal capacity expansion polic...

The rent of shelter accounts for approximately a third of the Consumer Price Index (CPI). Using a new housing rent index (RRI) developed by Ambrose, Coulson, and Yoshida (2014), we modify the CPI and compute the Taylor rule for the period from 2000 to 2010. With this timely rent index, Taylor rule becomes more consistent with the Federal funds rate than the conventional calculations. However, t...

Price cap regulation (PCR) has now been employed in the telecommunications industry for more than a quarter century. We review the experience with PCR and offer an explanation for its popularity. PCR’s design flexibility, its ability to limit undesirable strategic behavior, declining industry costs, and developing competition all enhanced the appeal of PCR. We also review some surprises that ha...

We study a model with local public goods in which agents’ crowding e¤ects are formally distinguished from their taste types. It has been shown that the core of such an economy can be decentralized with anonymous admission prices (which are closely related to cost share prices). Unfortunately, such a price system allows for an arbitrary relationship between the public goods level in a given juri...

This paper examines competition in the postal sector when one private incumbent and one entrant play a three-stage game. First, firms choose their coverage. Then, they choose the quality of the mail. Finally, firms choose the price. I modify the traditional model of product differentiation proposed by Mussa and Rosen [Mussa, M., Rosen, S., 1978. Monopoly and product quality. Journal of Economic...

Emerging telecommunications competition includes convergence of industries and the removal of barriers to formerly protected markets. Successful entry and protecting existing lines of business mean selecting those markets that will be most profitable to serve. Success will require much more product and price differentiation and targeting to particular customers. This paper describes methods for...

How does an increase in food prices at the border impact poverty in Uganda given the strong spatial heterogeneity of the country and its limited domestic transportation and communication networks? Recently, a number of studies on the impact of international food prices on poverty in developing countries have been published. However, the role of spatial price transmission in this context remains...

a r t i c l e i n f o Media companies are increasingly offering digital content to consumers. Many of these companies are tying digital content with their proprietary digital devices. In this study, we develop a consumer demand model for digital device and digital content based on a constant elasticity demand function. In modeling consumer valuation of the digital device, we take consumer surpl...

— In challenging the conventional wisdom at the time, Singer and Prebisch posited a number of explanations for declining terms of trade of developing economies, including both countryand product-specific factors. Over the past decade, we have begun to witness a simultaneous process of price differentiation within commodities (with the prices of some commodities increasing) and within manufactur...