Specific taxation, asymmetric costs, and endogenous quality

2020 ◽  
Author(s):  
Philipp J. H. Schröder ◽  
Allan Sørensen
Keyword(s):  
Endogenous Quality ◽  
Asymmetric Costs

Unobserved investment, endogenous quality, and trade

2013 ◽  
Vol 44 (1) ◽  
pp. 33-55 ◽  
Author(s):  
Benjamin E. Hermalin
Keyword(s):  
Endogenous Quality

Endogenous Quality Investments in the U.S. Hospital

2021 ◽  
Author(s):  
Craig Garthwaite ◽  
Christopher Ody ◽  
Amanda Starc
Keyword(s):  
Endogenous Quality ◽  
The U.S

scholarly journals Product Design in Selection Markets *

2016 ◽  
Vol 131 (2) ◽  
pp. 1007-1056 ◽  
Author(s):  
André Veiga ◽  
E. Glen Weyl
Keyword(s):  
Consumer Surplus ◽  
Insurance Markets ◽  
Social Planner ◽  
Endogenous Quality ◽  
Health Insurance Markets ◽  
Product Features ◽  
Marginal Willingness To Pay ◽  
Multidimensional Types ◽  
Simple Ratio ◽  
The Cost

Abstract In selection markets, where the cost of serving consumers is heterogeneous and noncontractible, nonprice product features allow a firm to sort profitable from unprofitable consumers. An example of this “sorting by quality” is the use of down payments to dissuade borrowers who are unlikely to repay. We study a model in which consumers have multidimensional types and a firm offers a single product of endogenous quality, as in Spence (1975) . These two ingredients generate a novel sorting incentive in a firm’s first-order condition for quality, which is a simple ratio. The denominator is marginal consumer surplus, a measure of market power. The numerator is the covariance, among marginal consumers, between marginal willingness to pay for quality and cost to the firm. We provide conditions under which this term is signed and contrast the sorting incentives of a profit-maximizer and a social planner. We then use this characterization to quantify the importance of sorting empirically in subprime auto lending, analytically sign its impact in a model of add-on pricing, and calibrate optimal competition policy in health insurance markets.

scholarly journals Endogenous Price Leadership with Asymmetric Costs: Experimental Evidence

2019 ◽  
Vol 7 (1) ◽  
pp. 59-74
Author(s):  
Miguel A. Fonseca
Keyword(s):  
Experimental Evidence ◽  
High Frequency ◽  
Low Cost ◽  
Differentiated Products ◽  
Strategic Uncertainty ◽  
Price Leadership ◽  
Pricing Decision ◽  
Asymmetric Costs ◽  
Simultaneous Move

This paper presents experimental evidence on the action commitment game with cost-asymmetric firms in a differentiated-products Bertrand duopoly. Unlike its quantity-setting counterpart, the risk-dominant leader–follower equilibrium Pareto dominates the simultaneous-move equilibrium. This equilibrium also minimizes payoff differences between firms. Hence, one would expect the model to accurately capture behavior. The evidence partially supports the theory: low-cost firms price in the first period more often than high-cost firms, and depending on the treatment, between 40 and 57 per cent of all observations conform to equilibrium play. However, the modal timing outcome involved both firms delaying their pricing decision. This timing outcome is characterized by Nash play and some collusion. The high frequency of delaying decisions could be due to a desire to reduce strategic uncertainty.

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