This paper examines the interaction between venture risk, product market competition and entrepreneurs’ choice between bank …nancing and venture capital (VC) …nancing. Under bank …nancing, a debt-type contract emerges as optimal, which allows the entrepreneur to retain full control of the venture and thus yields strong e¤ort incentives, as long as she can service the debt repayment; but leads t...

This paper demonstrates how management compensation schemes can serve as an inexpensive and sometimes even free signaling mechanism. In the particular example studied here it is shown how a contract offered to the manager of a monopolistic tirm may induce him to take some actions that will credibly signal the Crm’s marginal cost and will deter entry if the firm is ‘suficiently’ ellicient. This ...

We study competition between two multi-product firms with distinct production technologies in a market where customers have heterogeneous preferences on a single taste attribute. The mass customizer (MC) has a perfectly flexible production technology, thus can offer any variety within a product space, represented by Hotelling’s (1929) linear city. The mass producer (MP) has a more focused produ...

This paper aims at developing a competition model for a relevant subset of the Brazilian airline industry: the air shuttle market on the route Rio de Janeiro – São Paulo, a pioneer service created in 1959. The competition model presented here contains elements of both vertical product differentiation and representative consumer. I also use the conduct parameter approach to infer about the behav...

This paper revisits the competition-innovation relationship using an unbalanced panel of enterprise data stemming from four waves of the Luxembourgish innovation survey for the period 2002-2010. We estimate by full-information maximum likelihood a nonlinear dynamic simultaneous-equations model with pseudo-fixed effects using four measures of perceived competition and three indicators of innovat...

We incorporate product demonstrations into a game theoretic model of firm price competition. Demonstrations may include product samples, trials, return policies, reviews, or any other means by which a firm allows consumers to learn about their value for a new product. In our model, demonstrations help individual consumers learn whether they prefer an innovation over an established product. The ...

This paper studies the implications of consumer reference dependence for market competition. If consumers take some product (e.g., the first product they consider) as the reference point when evaluating others and exhibit loss aversion, then the more “prominent” firm whose product is taken as the reference point by more consumers will randomize over a high and a low price. Relative to the stand...

Product Market Competition and Lobbying Coordination in the U.S. Mobile Telecommunications Industry* by Astrid Jung and Tomaso Duso This paper empirically investigates market behavior and firms’ lobbying in a unified structural setup. In a sequential game, where firms lobby for regulation before they compete in the product market, we derive a testable measure of lobbying coordination. Applying ...

Overview Developing products that not only add value but also increase profitability is the goal of virtually all niche food and agricultural product producers and manufacturers. Large-scale food product manufacturers often accomplish this goal through several strategies, including undertaking market research to identify relatively large segments of the market to serve as potential customers, e...

Asymmetries arise and persist provided that one firm has a strategic advantage over the other. The tangible form of this advantage is that one firm can get the other to stop investing. In Section 4 of the paper, we have shown that this is the case under price competition because a firm’s profits from product market competition peak in its own capacity. Below we show that cost/benefit considerat...