We study supply chain contracting with investment in demand forecasting under downstream competition. Supporting some recent industry observations, we show that under common pricing schemes, such as wholesale price or two-part tariff, downstream firms overinvest in demand forecasting. Analyzing the bounds and determinants of overinvestment, we demonstrate that the wholesale price and two-part t...

This paper is motivated by the US freight railroad industry, which is characterized by a major restructuring over the last 30 years. In particular, the number of active firms decreased from 26 in 1978 to seven in 2006 due to several takeover waves. The empirical focus concerns the estimation of a structural demand model for the US railroad industry. Then, the demand estimates are used to comput...

This paper is motivated by the US freight railroad industry, which is characterized by a major restructuring over the last 30 years. In particular, the number of active firms decreased from 26 in 1978 to seven in 2006 due to several takeover waves. The empirical focus concerns the estimation of a structural demand model for the US railroad industry. Then, the demand estimates are used to comput...

We present a laboratory experiment on the impact of price framing on consumer decision making. Consumer subjects face a search market where two sellers offer a homogeneous good. We examine six different price frames with linear perunit pricing (that is displayed as such) serving as a benchmark. We find that all frames deviating from the benchmark have some negative impact on consumer decision m...

By reviewing the existing organizational and operation arrangements of public transit system in China, this paper firstly explored a pricing competition model between profit maximizing operators and consumer surplus maximizing operators on a single route. Under this mixed duopoly market, effects of two widely used polices (fare subsidy and nationalization) on equilibrium fare changes are invest...

It is often alleged that high auction prices inhibit service deployment. We investigate this claim under the extreme case of financially constrained bidders. If demand is just slightly elastic, auctions maximize consumer surplus if consumer surplus is a convex function of quantity (a common assumption), or if consumer surplus is concave and the proportion of expenditure spent on deployment is g...

Owner-Consumers and Efficiency Joseph Farrell GTE Laboratories If each household owns the same fraction of a firm as its share of consumption, shareholders unanimously want marginal-cost pricing. Otherwise, profits are overemphasised relative to consumer surplus.

This paper determines the effect that offset payments under the Continued Dumping and Subsidy Offset Act (CDSOA also known as the “Byrd Amendment”) have on tariff levels that are lobbied for by U.S. producer groups. We derive the optimum antidumping tariff that would maximize the welfare of producers receiving CDSOA offset payments. We compare and contrast this newly derived “optimal antidumpin...

A cable operator chooses to bundle or provide programs à la carte by striking a balance between maximizing total surplus and minimizing transfer payments to program providers. We show, using general demand and cost functions, that a cable operator’s decision to bundle maximizes total producer surplus if the cable operator’s bargaining power is sufficiently high, and that a cable operator in a w...