This paper introduces a continuous-time real options game to study firms' incentives in capacity preemption. Unlike previous literature usually predicting that the endogenous Stackelberg leader is better off by building a larger capacity than its follower, this paper shows that under fairly...

A parsimonious theoretical model of second degree price discrimination suggests that the business cycle will affect the degree to which firms are able to price-discriminate between different consumer types. We analyze price dispersion in the airline industry to assess how price discrimination...

This paper examines the effect of product market threats on firms' stock crash risk. Competitive pressure from the product market aggravates managers' incentive to withhold negative information. When negative information is accumulated to a tipping point, the accumulated information all comes...

We examine the effect of a threat of entry on experimentation about demand by an incumbent monopolist when there is a fixed cost of entry. We also examine the impact of experimentation on the probability of entry into the market. We show that experimentation may itself be used as a tool for...

A parsimonious theoretical model of second degree price discrimination suggests that the business cycle will affect the degree to which firms are able to price-discriminate between different consumer types. We analyze price dispersion in the airline industry to assess how price discrimination...

The conventional functional form of the Constant-Elasticity-of-Substitution (CES) production function is a general production function nesting a number of other forms of production functions. Examples of such functions include Leontief, Cobb–Douglas, and linear production functions....

This article studies the equivalence between labor and consumption taxes in a stochastic context, where the government can undertake an active portfolio management strategy by investing in both risk-free and risky assets. Using a two-period model we show that such taxes let consumers make the...