The 1996 Telecommunications Act requires incumbent providers to lease network inputs to rivals at cost-based prices in order to jump-start competition. Sappington (Sappington, D. (2005). American Economic Review, 95(5), 1631–1638) uses the Hotelling model to show that input prices are irrelevant for an entrant’s decision to make or buy an input required for downstream production. We show that t...

Required reading: Chapter 6: Milgrom, Paul, and John Roberts, 1992, Economics, Organization and Management (PrenticeHall: London). Supplementary reading: *Sappington, David E. M., 1991, Incentives in principal-agent relationships, Journal of Economic Perspectives 5(2), 45-66. Chapter 4: Laffont, Jean-Jacques, and David Martimort, 2002, The Theory of Incentives: The Principal-Agent Model (Prince...

We study the mechanism design problem when the principal can condition the agent’s transfers on the realization of ex post signals that are correlated with the agents’ types. Crémer and McLean (Econometrica, 53(1985) 345-361; 56(1988) 1247-1258), McAfee and Reny (Econometrica, 6(1992) 395-421), Riordan and Sappington (JET, 45(1988) 189-199) studied situations where either the signals are rich e...

The author briefly critiques Federal Communications Commission policies and legislative actions as reported by Sappington and Stockdale (2003) and then provides some insights from a marketing science perspective. The author questions whether competition created through regulation produces the same benefits as natural competition and argues that when natural competition fails to produce desired ...

Peer-to-peer file sharing communities present a paradox for standard public goods theory, which predicts that free-riding should preclude the success of the community. We present a model in which users choose their level of sharing, downloading, and listening in the presence of sharing costs and endogenous downloading costs. In our model, sharing emerges endogenously, largely as a byproduct of ...

This paper proposes a unified theoretical framework to discuss the costs and benefits of privatization using the recent advances of Incentive Theory. I begin by presenting a simple model in which the State (the principal) delegates a task (e.g., the production of a public good) to the private sector (the agent). I give and discuss conditions for the “Irrelevance Theorem” due to Sappington and S...

1998 ii ACKNOWLEDGEMENTS I owe much to my teachers. Sunne Brandemeyer piqued my interest in economics when I took Principles of Microeconomics as a sophomore. Phil Porter inspired my interest in public policy and public choice. Jon Hamilton and Steve Slutsky taught me the fundamentals of microeconomic theory and were always available as members of my committee. I was lucky to have Wayne Francis...

Martin B. Wax,1,2 Gülgün Tezel,3,4 Junjie Yang,1 Guanghua Peng,5 Rajkumar V. Patil,1 Neeraj Agarwal,6 Rebecca M. Sappington,7 and David J. Calkins7 1Ophthalmology Discovery Research, Alcon Corporation, Fort Worth, Texas 76134, 2Department of Ophthalmology, University of Texas Southwestern Medical School, Dallas, Texas 75390-9057, Departments of 3Ophthalmology and Visual Sciences and 4Anatomical...

Self-directed and problem oriented learning are significant components of effective adult education (Knowles, 1990), yet for various reasons are difficult to foster in higher education institutions. Given the role of fear/ safety issues in the adult learning process (Sappington, 1984), it is argued that the threatening nature of assessment, and indeed the forms of assessment, such as examinatio...