This note presents a detailed formal derivation of the equilibrium conditions of a variation of the deep habit model developed by Ravn, Schmitt-Grohé, and Uribe (2003). In the present note, the single-period utility function depends on the quasi ratio of current consumption to the stock of habit of each variety, whereas in the original deep habit model it depends on the quasi difference of thes...

A buyer wishes to purchase a good from a seller who chooses a sequence of prices over time. Each period the buyer can also exercise an outside option, abandoning their search or moving on to another seller. We show there is a unique equilibrium in which the seller charges a constant price in every period equal to the monopoly price, contravening the Coase conjecture. We then embed the singlesel...

To distribute software, commercial firms have the opportunity to use some dual licensing strategy i.e. to provide their software under two different licensing terms (proprietary and open source). In this paper, we investigate the relevance and impacts of such distribution strategy in the presence of an already existing open source software. In this competitive setting, we determine in which con...

In liability lawsuits (e.g., patent infringement), a plaintiff demands compensation from defendant, and the parties often negotiate settlement to avoid costly trial. Liability insurance creates bargaining leverage for defendant in this negotiation. We study characteristics of monopoly equilibrium contracts settings where effect is substantial source value insurance. Our results show that under ...

American industries have grown more concentrated over the last 40 years. In absence of productivity innovation, this should lead to price hikes and output reductions, decreasing consumer welfare. With US census data from 1972 2012, I use disentangle revenue output. Industry-level estimates show that concentration increases are positively correlated real growth, uncorrelated with changes overall...

It is difficult to eliminate all market power in electricity markets and it is therefore frequently suggested that some market power should be tolerated: extra revenues contribute to fixed cost recovery, facilitate investment, and increase security of supply. This suggestion implicitly assumes all generation technologies benefit equally from market power. We assess a mixture of conventional and...

We extend the ‘no-haggling’ result of Riley and Zeckhauser (1983) to the class of linear multiproduct monopoly problems when the buyer’s valuations are smoothly distributed. In particular we show that there is no loss for the seller in optimizing over mechanisms such that all allocations belong to the boundary of the feasible set. The set of potentially optimal mechanisms can be further restric...

In this paper we analyze the welfare effects of third-degree price discrimination when competitive pressure varies across markets. In particular, we study the economic aspects of the Robinson-Patman Act associated with the “meeting competition defense.” Using equilibrium models, the main result we find is that this defense might be used successfully in cases of primary line injury precisely whe...

Professional sports teams receive large public subsidies for new facility construction. Empirical research suggests that these subsidies cannot be justified by tangible or intangible economic benefits. We develop a model of bargaining between local governments and teams over subsidies that includes league expansion decisions. The model features loss aversion by fans that captures lost utility w...

This paper offers a new theory of destructive competition. We compare minimum resale price maintenance (RPM) to retail market clearing in a model with a monopolistic manufacturer selling to competitive retailers. In both the RPM and Flexible-Pricing Games, retailers must order inventories before the realization of demand uncertainty. We find that manufacturer profits and equilibrium inventories...