RAND Journal of Economics articles from March 2007

RAND Journal of Economics archives from March 2007

Vertical integration, exclusive dealing, and ex post cartelization.
March 22, 2007... This article uncovers an unnoticed connection between exclusive contracts and vertical organization. A vertically integrated firm can use exclusive dealing to foreclose an equally efficient upstream competitor and to cartelize the downstream...

Secrecy versus patenting.
March 22, 2007... We develop an equilibrium search model of innovation with the possibility of multiple independent discovery. We distinguish innovations from ideas, and we view patents as probabilistic property rights that are constrained by the innovators'...

Does Sutton apply to supermarkets?
March 22, 2007... I present empirical evidence that endogenous fixed costs play a central role in determining the equilibrium structure of the supermarket industry. Using the framework developed in Sutton (1991), I construct a model of supermarket competition...

Reliability and competitive electricity markets.
March 22, 2007... We derive the optimal prices and investment program for an electric power system when there are price-insensitive retail consumers served by load serving entities that can choose any level of rationing contingent on real-time prices. We then...

Exclusive contracts foster relationship-specific investment.
March 22, 2007... Exclusive contracts prohibit one or both parties from trading with anyone else. Contrary to earlier findings, we show that investments that are specific to the contracting parties may be encouraged by exclusivity. Results depend on the nature...

Buy or wait, that is the option: the buyer's option in sequential laboratory auctions.
March 22, 2007... We report results from an experiment on two-unit sequential auctions with and without a buyer's option (which allows the winner of the first auction to buy the second unit). The four main auction institutions are studied. Observed bidding...

Ordered search.
March 22, 2007... I present an ordered-search model that, in contrast with random-search models, yields an intuitively appealing equilibrium in which there is price dispersion, prices and profits decline in the order of search and consumers with lower search...

Seasonality in the U.S. motion picture industry.
March 22, 2007... The observed seasonality of box-office revenues reflects both seasonality in underlying demand for movies and seasonality in the number and quality of available movies. I separately identify these aspects by estimating weekly demand for movies,...

Do switching costs make markets more or less competitive? The case of 800-number portability.
March 22, 2007... Do switching costs reduce or intensify price competition if firms charge the same price to existing and new consumers? I study 800-number portability to determine how switching costs affect price competition under a single price regime. AT&T...

Corporate strategy and information disclosure.
March 22, 2007... We examine voluntary disclosures of information about corporate strategies. We develop a model in which managers choose whether to reveal their strategic plans only to some partners of the firm or also to the outside world. We show that...

Does divestiture crowd out new investment? The "make or buy" decision in the U.S. electricity generation industry.
March 22, 2007... An empirical model of the "make or buy" decision faced by independent power producers (IPPs) in restructured U.S. wholesale electricity markets is derived to analyze power plant investment decisions by major IPPs from 1996 to 2000. The...

Merger waves: a model of endogenous mergers.
March 22, 2007... We develop a model of endogenous mergers to study their dynamic process. Firms choose whether, when, and with whom to merge. Two necessary conditions are identified for mergers to occur: firm heterogeneity and negative demand shocks. We show...

Collusion and dynamic (under-) investment in quality.
March 22, 2007... In a dynamic game of investment in product quality, I investigate whether collusive underinvestment equilibria can be supported by the threat of escalation in investment outlays. When there are no spillovers, underinvestment equilibria exist...

Consumer preferences and product and process R&D.
March 22, 2007... Firms often conduct both product and process R&D. Consumer preferences typically play a vital role in determining these R&D choices. The economics literature, however, has mostly ignored the interrelationship between the R&D choices of firms...

Outsourcing, information leakage, and consulting firms.
March 22, 2007... I analyze the R&D investment of firms that decide between outsourcing and in-house production when information leakage is present (contractors learn clients' technology and can diffuse it to competitors) in a general equilibrium model....