A new theory of loss-leader pricing is provided in which firms advertise low (below cost) prices for certain goods to signal that their other unadvertised (substitute) goods are not priced too high. The theory is applied to the pricing of upgrades. The results contrast with most existing...

We show that the price-setting subgame in the classic Hotelling’s model (1929) with the linear transport costs has the unique equilibrium solution for all location pairs under the assumption that duopolists secure themselves against being driven out of the market by undercutting. In contrast...

We examine the impact of (and links between) two types of economic integration on the stability of multimarket collusion when firms interact in quantities in segmented markets: (1) multilateral trade liberalization, captured by a reduction of trade costs across all markets; and (2) preferential...

In this paper we show that, in the presence of buyer and seller power, a monopolist can enter into a costly contractual relationship with a low-quality supplier with the sole intention of improving its bargaining position relative to a high-quality supplier, without ever selling the good...

In the dominant firm-competitive fringe model, where firms purchase input from a common supplier via two-part tariff contracts, we demonstrate that countervailing power may be neutral. Unlike Chen (2003), more countervailing power may not lead to lower consumer prices.

We study the welfare effects of parallel trade (PT) considering investment in quality. We thus revisit the case for PT in research-intensive industries. We find that PT may raise quality, depending on how preferences for quality differ across countries. Conditional on quality, consumer surplus...

We study efficiency and distributional implications of bilateral delegation in wage and employment bargaining in monopoly. Delegation causes underproduction, and the bargaining pie severely contracts rendering mutual gains from delegation impossible. With an increase in the union’s bargaining...

In screening with non-concave costs: (i) cycles of active IC constraints can make all packages distorted; (ii) standard screening can be less profitable than price discrimination within a consumer type using first-come-first-served rationing.

I investigate how an incumbent firm deters entry by crowding the market, even when the incumbent can withdraw its stores in response to entry. In a two-location model, Judd (1985) shows such spatial entry deterrence is not credible. In contrast, I demonstrate spatial preemption can be credibly...