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To provide consumers with a channel to interact directly with service retailers, some service platforms have allowed consumers to incentivize service retailers for better service via tipping. There are pros and cons of allowing and not allowing tipping in terms of service levels and costs, which can affect consumer utility and platform profitability. By developing a game-theoretic model, we analyze the tipping strategy choices of platforms under competition. We find that when the service ability of service retailers is high, platforms with service retailer pricing should allow tipping, whereas for at least one platform with platform pricing, they should allow it only when the commission rate is also high. Interestingly, if consumers are concerned about service levels in addition to service prices during tipping, for platforms with platform pricing, only one platform should allow tipping when the service ability is medium. However, when the service ability is low or when the sensitiveness of the service level to tips exceeds the threshold, neither platform should allow tipping, regardless of pricing models. Finally, an all-win outcome for service platforms, service retailers, and consumers may be achieved only when platforms adopt different pricing models. [ABSTRACT FROM AUTHOR]

Production disruptions in supply chain systems affect all supply chain members and lead to problems such as the ripple effect. As observed from practice that the production disruption, which is caused by labor strike, natural disaster or equipment breakdown, occurs frequently and the manufacturer has to consider this seriously so as to control the risk. In this paper, we study the problem by examining the impacts on the consumer, supply chain agents and society brought by production disruptions. We explore the different parameters influences on the optimal decisions of retail price and the profit of supply chain agents as well as the profit variance. We also further extend the model by making wholesale price or penalty fee fixed, and find that the profit will not be affectted by both of wholesale price and penalty fee. However, the wholesale price (penalty fee) will affect the profit variance of the supply chain agents. The findings imply that for risk neutral supply chain agents, wholesale price (penalty fee) is not the core factor for them, but it is crucial for the risk averse or risk seeking supply chain agents. We think this paper fills the gap by examining the profit risk in a supply chain facing production disruptions and also the impacts on consumer surplus and society. [ABSTRACT FROM AUTHOR]

This paper considers a supply chain that consists of a manufacturer and a retailer, who concern their respective profits as well as consumer welfare. Each firm's objective is modelled as a weighted sum of its profit and consumer surplus, with the weight on consumer surplus representing the concern level of the firm. We first examine a push supply chain where the manufacturer determines the wholesale price and the retailer determines the order quantity. We derive the optimal decisions and investigate the impact of the firms' consumer surplus consideration on the interactive decisions of the supply chain members and the overall performance of the supply chain. We show that a higher level of retailer's consumer concern does not necessarily lead to higher consumer surplus because her concern on consumers may be exploited by the manufacturer to improve his objective; and the manufacturer's concern on consumers may not benefit the retailer in terms of her profit, especially when the manufacturer's concern level is relatively low. Nevertheless, compared to the for‐profit supply chain, concern on consumer surplus could be beneficial to both firms' profits as well as consumer surplus, inducing a "win‐win‐win" situation under certain conditions. Furthermore, as a social planner, the government seeks to optimize social welfare by adopting subsidy policies, and we examine two types of intervention policies, that is, subsidizing firms and subsidizing consumers. We show that when subsidizing firms, government's quantity‐based subsidy is always more cost‐effective than sales‐based subsidy. As the firms' concern levels become higher or the demand uncertainty becomes lower, subsidizing consumers can achieve higher social welfare than subsidizing firms. Moreover, we examine the impact of the government's budget constraint and concern level on consumer surplus, and extend the analysis to a pull supply chain to show the robustness of the major findings. [ABSTRACT FROM AUTHOR]

Over the past 50 years, wellbeing, tourism and recreation have driven significant changes to coastal areas, yet our understanding of the drivers remains focused on traditional activities like swimming, fishing and scuba diving. Over 50 million people worldwide practice recreational surfing, and the presence of high-quality waves is an increasing appeal for surf-rich locations. Focusing on Noosa World Surfing Reserve in Queensland, Australia, this study has two goals: understand the market and nonmarket values associated with recreational surfing; and highlight opportunities for surf break management to be better incorporated into coastal management activities. Based on our survey responses (n = 140), we found average surf-related expenditures are $1,897 per person per year, including direct expenditure in the reserve and surfing equipment. An application of the travel cost method reveals consumer surplus of A$48 per surfing trip to the Noosa World Surfing Reserve. We conclude that policies aimed at preserving surf breaks and improve users' experience offer an important contribution to coastal management and planning, particularly when managed and natural coasts are under increasing pressures, such as from urban developments and coastal erosion. [ABSTRACT FROM AUTHOR]

Price promotion is an effective way to capture market share, as consumer sensitivity to price is universal. Yet, consumer satisfaction with services‐such as logistics‐plays a critical role. Deep price discounts can indeed spike demand, but they can also congest systems, thus prolonging delivery times and diminishing consumer satisfaction. Despite observed significant effects of logistics capacity on consumer and firm payoffs in logistics systems in recent years, economic and operational analysis of these effects remains under explored. This study theoretically examines the influence of logistics capacity on competition between two firms using a refined Hotelling model that incorporates system congestion via a BPR‐type congestion function. Our primary findings include: First, the possibility of multiple equilibria emerges with intermediate product values, fueled by either unilateral price reductions to seize greater market share or price increases to enhance marginal benefits. Moreover, a firm with superior logistics capacity may not always set higher prices at equilibrium. Second, we show that equilibrium pricing exhibits a non‐monotonic relationship with logistics capacity and market size. Lastly, we scrutinize firms' long‐term strategic reactions to changes in logistics capacity and the implications of marginal capacity costs, symmetric or otherwise. Our findings provide the following insights. We caution that the equilibrium pricing strategy is ambiguous when the product value is not extreme because both firms are more likely to engage in random price wars. Intriguingly, while augmenting logistics capacity might elevate service satisfaction, it could paradoxically reduce firm revenue or consumer surplus. Our analysis also indicates that higher marginal capacity costs could, counter intuitively, benefit firms or consumers. [ABSTRACT FROM AUTHOR]

The Kerandangan Nature Tourism Park (KNTP), as a conservation area, provides various ecosystem services that do not have direct market value or are intangible. These ecosystem services include benefits in climate regulation, soil protection, water purification, and habitat for biodiversity. Besides that, the KNTP has many tourist attractions, such as the biophysical potential presented in the form of waterfalls, rivers, camping ground and various flora and fauna. KNTP management has planned the development of sustainable natural tourism. The development of natural tourism that ignores the area's function as a conservation area has the potential to cause environmental degradation. Therefore, it is necessary to assess natural resources and intangible environmental services using the Willingness to Pay (WTP) and consumer surplus. The aim of this research is to measure the economic value of natural tourism environmental services in KNTP based on visitors' willingness to pay (WTP) and consumer surplus value. The approach used in this research is the travel cost approach. This approach uses travel costs to estimate the value of WTP and consumer surplus. The research results show that the average WTP value is IDR 13,300 and the consumer surplus value is IDR 171,232 per visit. The WTP value obtained is much smaller than the consumer surplus value. This shows that ticket prices for natural tourism at TWA Kerandangan can still be increased. Willingness of visitors to pay compensation costs, prevent damage to the tourist environment, support conservation and the quality of ecosystem environmental services.

The diversion of manufacturers' branded products outside the authorized channel leads to the emergence of gray markets (GMs), which is legal under the doctrine of first sale. Product diversion to GMs can negatively affect manufacturers' brand reputation. In this study, we analyze a manufacturer's strategic channel choice decision and its implications for social welfare in the presence of GMs and strategic consumers. We present scenarios in which the presence of GMs can either have a positive or negative impact on the manufacturer and the supply chain. Our findings indicate that the manufacturer and the supply chain become worse off due to product diversion to GMs under lower channel differentiation and high penalty cost for the loss of brand reputation due to product diversion. This effect is more severe for a decentralized supply chain, where product diversion does not directly affect the retailer's profitability due to the erosion of brand reputation. In such scenarios, we suggest that manufacturers should follow a brand-protection strategy to curb product diversion to GMs. However, manufacturers selling product categories with low brand equity can follow a market-expansion strategy. In such cases, the presence of GMs provides an alternative channel to expand sales by capturing untapped consumer segments without incurring additional market search or advertising costs. This strategy also facilitates indirect price discrimination among consumers. We find that social welfare is higher when channel differentiation is low under a decentralized supply chain. [ABSTRACT FROM AUTHOR]

AbstractThis research aims at [1] identifying the factors that influence visits to Bunso Eco-Park; [2] estimating the recreational demand function for the park; and [3] estimating visitors’ net benefit (consumer surplus) for embarking on an eco-park recreational trip to Bunso using a sample size of 440. Estimates indicate that the annual person value of the site is Gh¢ 191.06 ($ 22.29) translating into an annual economic value of Gh¢ 9,170,880 (US$ 1,070,114.35). There is an inverse relationship between the rate of visits and the travel cost. The positive intercept of the demand function indicates a normal demand curve for the Bunso Eco-Park. The variables of visitors’ family size, marital status, and years visitors have known the eco-park were not significant. Educational level, age, gender, and knowledge of alternative sites were found to be factors influencing the visitation to the Bunso Eco-Park. Further valuation of the non-recreational value of Bunso Eco-Park would be useful to policymakers to place suitable management plans in sustaining and improving the quality of eco-park service.

We examine the effects of reduced transport costs on a firm's horizontal product innovation activity and consumer welfare. It is well established that trade liberalization, including reducing transport costs, could enable innovative practices and make consumers better off. Trade theory, in particular, commonly asserts that zero transport costs maximize consumer surplus. In contrast, we demonstrate that (i) reduced transport costs can enhance a firm's incentives for investment; however, (ii) positive transport costs (trade barrier) can maximize consumer surplus. [ABSTRACT FROM AUTHOR]

Because of a growing population and shrinking arable land, the world is facing a global food crisis. One important solution could be to subsidize farmers to sustain their production so that they can produce more food for consumers and earn more money for themselves. An efficient subsidy program should also aim to reduce income inequality among farmers, as measured by the Gini coefficient of farmers' income. In this paper, we examine and compare the effects of input and output farm subsidy programs. The input subsidy reduces the farmers' input purchasing costs, whereas the output subsidy reduces the farmers' output processing costs. By considering a continuum of infinitesimal price-taking farmers who are heterogeneous in their average yield rates, our equilibrium analysis of a game-theoretical model yields three results. First, both subsidy schemes reduce the aggregate income inequality measured by the Gini coefficient. However, they create the following "opposite" effects: the input subsidy decreases the income gap among farmers (under mild conditions), whereas the output subsidy increases it. Second, farmers with low yield rates prefer the input subsidy, whereas farmers with high yield rates prefer the output subsidy. Third, the output subsidy scheme is more effective in improving the total farmer income than the input subsidy scheme, whereas the input subsidy scheme is more effective in reducing income disparities and improving consumer surplus than the output subsidy scheme. Our results provide new insights for policymakers who are crafting subsidy schemes. This paper was accepted by Jayashankar Swaminathan, operations management. Funding: This work was supported by the National Natural Science Foundation of China [Grants 71971184, 71972025, and 72032001], the Departmental General Research Fund of the Hong Kong Polytechnic University [Grant P0008761], and the Research Grants Council of Hong Kong [Grants 15504615 and 15500820]. Supplemental Material: The online appendix and data are available at https://doi.org/10.1287/mnsc.2023.4850. [ABSTRACT FROM AUTHOR]

Improving logistics levels requires mobilizing more resources, resulting in more carbon emissions. We consider a manufacturer selling its products through an e-commerce platform that sells them to customers (reselling) or directly accessing customers via the platform by paying a proportional fee (agency selling). Under reselling, the manufacturer first sets a wholesale price and then the platform sets a retail price and a logistics level. Under agency selling, if using third-party logistics, the manufacturer sets the retail price and logistics level. When using the platform logistics, the manufacturer sets the retail price and the platform sets the logistics level; moreover, the manufacturer bears part of the logistics cost. This study examines the manufacturer's sales model and logistics selection and its impact on the platform's profit and consumer surplus. We find that if the logistics-improving efficiency is sufficiently high (low), the manufacturer should employ reselling (agency selling and third-party logistics) when the manufacturer bears a sufficient small or large part of the logistics cost. However, regardless of the size of the logistics-improving efficiency, the manufacturer should adopt agency selling and platform logistics when the logistics cost borne by the manufacturer is intermediate. If consumers become more sensitive to carbon emission levels, the manufacturer is less (more) likely to adopt the reselling model and platform logistics (agency selling model and platform logistics). Choosing reselling or agency selling and platform logistics, or agency selling and third-party logistics could benefit both the platform and consumers, generating a "win-win-win" outcome. [ABSTRACT FROM AUTHOR]

In this article, a utility function framework is developed, serving to determine the demand for an upcoming demand responsive transportation system. A linear’public-good game’ (PGG) model is modified in a way that maximizing the consumer surplus is assumed to determine individual decision-making. This modification allows for considering the endowment effect in the function, which is expected to enable for a more precise distinction among customer segments. The purpose of this approach is to create a possibility for including descriptive behavioral economic findings in a normative modeling concept. It shall serve as a theoretical basis for coming empirical investigations.

Using both the travel cost and contingent valuation methods, a case study of Lakes Prespa was utilized to assess the demand functions for carp and non-carp angling separately. An on-site survey questionnaire was used to collect the data, which was completed in 2019. The results showed that when travel costs and bid amounts are higher or when anglers are traveling in larger groups, they travel less frequently. On the other hand, the number of trips is positively correlated with income, angling experience, the use of a motorized boat, the number of trips taken to other sites, and retirement. The mean daily consumer surplus values for carp and non-carp anglers were calculated to be €7.24 and €4.33, respectively, using the trip cost method, and €7.83 and €4.61 using the contingent valuation method. Regardless of the method of valuation utilized, carp anglers' consumer surplus was more than 1.7 times that of non-carp anglers, demonstrating that ordering in fish species values is robust to valuation methods. Furthermore, the convergent validity of the two techniques was identified. The results will help fisheries managers make more successful and resource-efficient fishing decisions, as well as policymakers justify funding initiatives targeted at managing and protecting this resource.

This study examines the quantitative conditions under which an energy metering pricing model is proposed to increase both gas merchant profits and gas customer consumer surplus compared to a volumetric pricing model. The quantitative condition is found to be related to factors such as the standard unit calorific value of natural gas prescribed by the National Development and Reform Commission (NDRC) and other relevant government departments under the energy metering pricing model. This paper establishes a mathematical model based on optimization theory to explore the operational decisions of city gas suppliers in the volumetric and energy metering and pricing modes, respectively, under the condition of relatively stable natural gas sales price. The results of the study show that DAC and other authorities can regulate the standard unit calorific value of natural gas under the energy metering and pricing model by regulating the standard unit calorific value of natural gas. This affects the incentives of gas dealers to produce and operate, guides the preference of gas users for natural gas energy metering and pricing, and results in the derivation of formulas for a reasonable range of standard unit calorific values for natural gas. The findings of this paper provide theoretical support to promote the reform of natural gas energy measurement and pricing, and contribute to the development of the natural gas industry. [ABSTRACT FROM AUTHOR]

Common wisdom suggests that cross-holdings can lead to significant output contraction, and thus hurt consumers. On the contrary, we demonstrate that cross-holdings may increase industry output and benefit consumers in an asymmetric Cournot oligopoly with the presence of a welfare-maximizing tax/subsidy policy. The government will strategically use the tax/subsidy policy to regulate the market outcomes in anticipation of the adverse effect of cross-holdings, which could raise industry output and benefit consumers in certain situations depending on the cost distributions and cross-holding structures. [ABSTRACT FROM AUTHOR]

We examine undesirable competition in an asymmetric Cournot oligopoly under foreign competition and indirect taxation. We find that entry of inefficient domestic firms benefits consumers, while that of efficient foreign firms may hurt consumers when the number of foreign firms is relatively small. This result is different from that obtained in Dinda and Mukherjee (2014) which ignore foreign competition. We thus identify another important factor, the nationality of entrant firms, that affects the effect of entry on consumers under the welfare-maximizing tax policy. Our main finding is robust to the introduction of increasing marginal costs across firms. However, we find that (i) when foreign firms act as leaders, entry of (either domestic or foreign) firms always benefits consumers, which indicates that the moves of domestic and foreign firms (simultaneously or sequentially) are critical to the welfare implications under foreign competition. This result is in contrast to the finding by Wang et al. (2019b); and (ii) when efficient firms are partially foreign owned, entry of both domestic and foreign firms may hurt consumers under certain conditions. Hence, factors such as the mode of competition and the degree of foreign ownership are important for the competition authorities to develop relevant policies in an open economy. [ABSTRACT FROM AUTHOR]

Cooperation among rival firms raises serious skepticism among economists, policymakers, and legal experts, since it generally hurts consumers. We show that this may not be the case in an open economy with strategic foreign direct investment (FDI). Under Cournot competition, increased cooperation among firms reduces the domestic welfare, but it may benefit the consumers by attracting FDI. Under Bertrand competition with differentiated goods, increased cooperation may increase consumer surplus, and it may increase or decrease the domestic welfare by attracting FDI. [ABSTRACT FROM AUTHOR]

This study introduces a theoretical framework for the Turkish natural gas market based on the principles of game theory and industrial organization. It investigates the effects of the legal and ownership unbundling on consumer surplus, social welfare, and competition. The model considers a mixed oligopoly with a transmission system operator (TSO), a state-owned incumbent, and a private firm. The state-owned incumbent is assumed to maximize consumer surplus and its own profit, while the private firm is assumed to be profit-maximizing. Additionally, the state-owned incumbent is assumed to be less efficient than the private firm. The game consists of three stages. In the first two stages, the state-owned incumbent and the private firm sequentially choose contract sizes in the upstream market. In the last stage, a contract size-restricted Cournot game is played. The findings of the study suggest that legal unbundling appears to offer greater advantages for consumer surplus and social welfare compared to ownership unbundling, particularly when considering key factors such as third-party access, non-tariff discrimination, and import liberalization. The results indicate that adopting the role of a Stackelberg follower by the state-owned incumbent in the upstream market is advantageous in terms of consumer surplus, social welfare, and competition under both unbundling approaches. [ABSTRACT FROM AUTHOR]

The bundling of goods/services is a technique many firms use to influence product demand, generate higher revenues, and enhance consumer surplus. In the telecommunications industry, offering incentive bundles of different mobile phone services is an effective technique to reach such goals in a competitive market. This paper presents a bundle pricing approach for mobile services, which determines the optimal content of service bundles in terms of the type and number of services offered to different customer segments. The proposed model aims to maximize the total firm's revenue and total consumer surplus, as the main mobile service operator's objectives. The model recognizes differential pricing as a useful tool in revenue management. First, an efficient segmentation of customers in terms of their taste and willingness to pay for different mobile services is conducted using the k-means clustering technique. Next, to handle customer buying behavior, the customer reservation price is considered based on the customers' arrival rates and their statistical distribution. Finally, the bundles' content and prices are optimized considering the type and number of services offered to different segments. Our computational experiments using sample data show the effectiveness of the proposed model toward the improvement of revenue as well as consumer surplus.

This study examines the quantitative conditions under which an energy metering pricing model is proposed to increase both gas merchant profits and gas customer consumer surplus compared to a volumetric pricing model. The quantitative condition is found to be related to factors such as the standard unit calorific value of natural gas prescribed by the National Development and Reform Commission (NDRC) and other relevant government departments under the energy metering pricing model. This paper establishes a mathematical model based on optimization theory to explore the operational decisions of city gas suppliers in the volumetric and energy metering and pricing modes, respectively, under the condition of relatively stable natural gas sales price. The results of the study show that DAC and other authorities can regulate the standard unit calorific value of natural gas under the energy metering and pricing model by regulating the standard unit calorific value of natural gas. This affects the incentives of gas dealers to produce and operate, guides the preference of gas users for natural gas energy metering and pricing, and results in the derivation of formulas for a reasonable range of standard unit calorific values for natural gas. The findings of this paper provide theoretical support to promote the reform of natural gas energy measurement and pricing, and contribute to the development of the natural gas industry.

We estimate the social surplus of gambling in France by adding three components: consumer surplus, producer surplus and taxation revenue. To estimate consumer surplus, we use the rational benchmark approach, which attributes a loss of welfare (i.e. a negative surplus) to problem gamblers depending on their level of excess spending compared with recreational gamblers. Using data for the year 2019 and considering only legal gambling, we find that the consumer surplus is negative for the gambling activity as a whole. When we add the producer surplus and the taxation revenue to the consumer surplus, we find that the social surplus is more likely to be negative, ranging from − 45 billion euros in the pessimistic scenario to + 6 billion euros in the optimistic scenario. There are, however, important differences between gambling types. The social surplus is negative in all scenarios for poker and sports betting. Conversely, it is positive in all scenarios for draw lotteries and scratch cards. [ABSTRACT FROM AUTHOR]

The static analysis shows that a merger among complementary input suppliers or complementary patent holders benefits the consumers and the society by reducing the input prices. We show that the effects of a merger of complements are not so straightforward in a dynamic set up with endogenous product differentiation in the final goods market. The merger of complements reduces the total input prices and increases product differentiation. However, whether it increases or decreases consumer surplus and welfare depends on the market expansion following product differentiation, the number of merged input suppliers and the intensity of competition. Hence, in a dynamic setup with endogenous product differentiation, the antitrust authorities may need to be more careful about mergers of complements. Our analysis has also relevance for vertical mergers. • We show mergers of complements may make the consumers and the society worse off. • Endogenous product differentiation in the final goods market constitutes our results. • Our results hold under Bertrand and Cournot competition in the final goods market. • Market expansion, competition, and number of merged input suppliers are important. • Important for vertical merger and different from the results under static analysis. [ABSTRACT FROM AUTHOR]

This paper addresses two central questions in markets with adverse selection: How does information impact the welfare of market participants (sellers and buyers)? Also, what is the optimal information disclosure policy and how is it affected by the planner's relative welfare weight on sellers' surplus versus consumers' surplus? We find that as a result of improved information, prices become more strongly associated with the true quality of sellers and, thus, more dispersed. This will result in higher total surplus. Furthermore, we find that better information has opposing welfare effects on consumers and producers that could lead to limited disclosure depending on the social objective and market characteristics. [ABSTRACT FROM AUTHOR]

This paper considers a dual-channel supply chain consisting of a monopoly manufacturer, an independent retailer and a continuum of heterogeneous consumers who are classified into two segments according to their channel preferences. Due to various activities undertaken in different channels leading to retail costs, we highlight the effect of retail costs (i.e. fixed, linear and quadratic costs) on the optimal channel structures for the manufacturer, consumers and society. Our results show that the retail cost greatly influences the optimal channel structures for different parties. First, the manufacturer's channel selection varies considerably across retail costs. Specifically, when there are variable costs (linear and quadratic costs): on the one hand, the manufacturer might give up the grocery encroachment strategy; on the other hand, some profitable strategies which are missed in the case with fixed cost are likely to be implemented. Second, both consumer surplus and social welfare are maximised in the manufacturer-owned online channel unless the linear costs are sufficiently high or the cost gap between different channels is large. Collectively, the optimal channel structure for the manufacturer is not always optimal for consumer surplus or social welfare. [ABSTRACT FROM AUTHOR]

ABSTRACTIn the context of a vertically differentiated duopoly model with endogenous quality choice, we analyzes the welfare effect of overlapping ownership when the market is fully covered. The results show that overlapping ownership, while detrimental for consumer surplus, may increase or decrease social welfare and firms’ profits. In particular, when the overlapping ownership structure is such that the lower-quality firm acquires a positive share of the higher-quality firm’s profit, an increase in overlapping ownership reduces the lower-quality firm’s incentive to compete against its rival, leading to a higher level of industry profit and, therefore, a higher level of overall welfare.

Objective: To explore the changes in social welfare before and after the implementation of the national volume-based procurement (NVBP). Explore whether the NVBP promotes the healthy development of manufacturers under the premise of benefiting patients. Then put forward relevant suggestions on how to effectively intervene the government in the pharmaceutical market. Methods: Starting with consumer surplus and producer surplus, social welfare was studied from the three perspectives of price, supply, and demand. Results: Consumer surplus was significantly increased, and the drug welfare of patients was significantly improved. The profits of the whole pharmaceutical industry have decreased but will increase in the future. The welfare of individual pharmaceutical enterprises varies. Overall social welfare has been significantly improved. Conclusion: The core purpose of the NVBP is to improve the medication welfare of patients, and through the increase of consumer surplus, it can affect the increase of producer surplus. Under such a linkage mechanism, the diversified linkage system of "price, demand, and supply" will achieve the effect of "1 + 1+1 > 3". [ABSTRACT FROM AUTHOR]

This study examines whether and how an online service marketplace can leverage refund options endorsed by different parties (i.e., the platform or sellers) to address the "lemons" problem that is due to the intangibility, variability, and unreturnable nature of the services sought. We show that both platform refund insurance and a seller-guaranteed refund increase service demand, with platform refund insurance as the more effective option and hence having a more effective signaling mechanism, and that sellers with a better reputation or less popularity might benefit less from refund options. An investigation on further use of the more effective refund option, a "having platform refund insurance or being cast out" policy (i.e., retaining platform refund-insured sellers but expelling uninsured ones), reveals the effectiveness of this policy in filtering out low-quality sellers, shown as an improved quality of sellers on the platform due to new sellers' replacing those who were expelled, yet a cost (i.e., a loss in demand and consumer welfare) for the platform due to the changes in characteristics (e.g., price) of sellers. This cost, however, is lower than the benefit from the improved quality of the sellers, so that the platform's overall performance improves. This study examines whether and how an online service marketplace can leverage refund options endorsed by different parties (i.e., the platform or sellers) to address the "lemons" problem that is caused by the intangibility, variability, and unreturnable nature of the services sought. Through developing a signaling mechanism and a corresponding demand estimation model, we show that both platform refund insurance and a seller-guaranteed refund increase service demand, with platform refund insurance as the more effective option and hence having a more effective signaling mechanism. A reduced-form analysis suggests that sellers with a better reputation or less popularity might benefit less from refund options. An investigation on further use of the more effective refund option, a "having platform refund insurance or being cast out" policy (i.e., retaining platform refund-insured sellers but expelling uninsured ones), using counterfactual simulations and supply-side single interrupted time series designs, reveals the effectiveness of this policy in filtering out low-quality sellers, shown as an improved quality of sellers on the platform due to the change in sellers (i.e., new sellers' replacing those who were expelled) both immediately after the policy and in the (near) equilibrium, yet a cost (i.e., a loss in demand and consumer welfare) for the platform in the (near) equilibrium due to the changes in characteristics (e.g., price) of sellers. This cost, however, is lower than the benefit from the improved quality of the sellers, so that the platform's overall performance improves. The study also quantifies the consumer welfare of the online service marketplace and provides practical insight for consumers, sellers, and online service marketplace operators. History: Juan Feng, Senior Editor; Beibei Li, Associate Editor. Funding: This work was supported by the National Natural Science Foundation of China [Grants 71972047, 71831005, and 91746302]. Supplemental Material: The online supplement is available at https://doi.org/10.1287/isre.2022.1162. [ABSTRACT FROM AUTHOR]

This article challenges the conventional wisdom that decreases in total revenue always cause firms to be worse off. Instead, innovations and entry causing clockwise rotations or parallel supply shifts can increase producer surplus even when total revenue decreases. Textbooks claiming producers are worse off when total revenue declines are misleading because producer surplus increases initially even when revenue declines. Schumpeterian entrepreneurs who create innovations that benefit low-productivity/high-marginal-cost production cause clockwise supply rotations, and entrepreneurs that create innovations that provide similar benefits to both high- and low-productivity producers cause parallel supply shifts. The article's focus on entry and innovation illustrates the importance of Julian Simon's argument that focusing on allocation rather than innovation often leads to wrong conclusions and Alchian's argument that uncertain foresight makes profit maximization meaningless as a guide to specifiable action. Though producer surplus increases then declines, consumer and total surplus always increase. Producer surplus eventually declines when clockwise supply rotations lead supply to be more elastic than demand, where the price-reducing effect of the innovation dominates the costreducing and quantity-enhancing effects. Entry and innovation that generate rightward parallel supply shifts cause producer surplus to increase at an increasing rate when supply is elastic until the inflection point where supply is unit elastic. Beyond the inflection point, parallel rightward supply shifts cause producer surplus to increase at a decreasing rate and, eventually, decline. Last, we conduct a numerical 3D analysis illustrating how entry and innovation that cause supply to rotate and shift affect producer surplus. [ABSTRACT FROM AUTHOR]

Lake Tana is a well-known tourist spot in northern Ethiopia that lures both domestic and foreign tourists. The lake's value is still underrated, despite the site's immense potential for recreation and tourism. In this study, the recreational value of Lake Tana is estimated, and the consumer characteristics associated with recreational demand are analyzed. The study employs a Zero-Truncated Poisson (ZTP) regression model for data generated by the Individual Travel Cost Method (ITCM) and draws information from 1094 on-site surveys. According to ZTP regression results, variables that are significantly and positively associated with demand for Lake Tana recreation include the monthly income and age of the visitors and their preference for other recreation destinations such as Tis-Abay and Gondar Fasiledes Royal Castle. However, respondents' leisure time, overall cost, and residential distance from the recreational site are all negatively associated with the demand for recreation. It is also evident that Lake Tana is endowed with a wealth of attributes, ranging from natural beauty to ancient religious and cultural heritages, making the lake a highly desirable recreation destination. According to the estimation, Lake Tana has a yearly recreational value of around USD 68.5 million. However, it also demonstrates that if lake settings were to improve in quality, the value of Lake Tana would rise considerably, reaching USD 151 million. The value of sentimental attachment implies that determining Lake Tana's recreational value is a key element in the resource's sustainable utilization and management. To make greater use of Lake Tana's recreational amenities, however, uncontrolled waste disposal, favorable recreation facilities, and the spread of water hyacinth should be addressed immediately. Furthermore, it is imperative to maintain the lake's diverse attributes, as the integration of these attributes is what gives the lake its primary appeal. [ABSTRACT FROM AUTHOR]

In many settings, consumer surplus directly impacts a firm or organization's objective, and the profit‐only objective becomes inadequate. Our paper is the first to consider the dual objective of profit and consumer surplus in multi‐product pricing under the multinomial logit demand, where the prices are continuously set. We define a firm's marginal consumer surplus as its marginal contribution to the expected customer utility transformed into monetary unit. Although the profit is concave in the choice probability space, the marginal consumer surplus is convex, complicating the analysis. We identify the optimal monopoly pricing solution and develop solution approaches for the equilibrium solutions of both price‐competition and quantity‐competition oligopolies. In the monopolistic setting, we solve the optimal solution in a near‐closed‐form expression, and show that the firm's markup and profit decline as its emphasis for marginal consumer surplus increases and eventually drops to zero when the firm turns into a social welfare maximizer. Therefore, social welfare is maximized only when the monopolist is willing to endure zero profit. In competitive settings, if one firm's emphasis on marginal consumer surplus increases, then the improvement in marginal consumer surplus can magnify through competitive forces, reflected in reduced equilibrium prices for all firms. Moreover, we find that, while the overall marginal consumer surplus always increases with any firm's weight on marginal consumer surplus in its objective (referred to as the CS weight), a firm's marginal consumer surplus increases in its own CS weight but decreases in other firms' CS weight. Finally, we prove that, all else equal, a firm with a higher CS weight can earn a higher profit than its profit‐maximizing competitors, which is counterintuitive. In the quantity competition, a firm may even increase its absolute profit level by increasing its CS weight. [ABSTRACT FROM AUTHOR]

This article estimates the life-cycle value of risperidone as representative of second-generation antipsychotics (SGA) relative to haloperidol (first-generation antipsychotics). We estimated the number of patients treated with risperidone in Sweden and the United Kingdom, from 1994 to 2017, using data of usage and volume sales. We collected data from the literature on the effectiveness (quality-adjusted life-years per patient per year), direct costs (health services), and indirect costs (productivity) of risperidone and haloperidol. We proxied the incremental value added by the new class (SGA) using a comparator from the inferior class. Next, we modeled the life-cycle uptake of risperidone to estimate the life-cycle incremental cost (ie, direct, indirect, and medicine costs), incremental quality-adjusted life-years, and net monetary benefit of risperidone. We also assessed the life-cycle distribution of the social surplus between the payer (consumer surplus) and the innovator (producer surplus). For the United Kingdom, consumer surplus represents around 72% of the total surplus before patent expiration and around 95% after patent expiration. For Sweden, the consumer surplus represents around 94% of the total surplus before patent expiration and around 99% after generic competition. These results suggest that the value added by SGAs to the system is higher than the expected value estimated using cost-effectiveness analysis at launch. Pricing and reimbursement decisions could recognize the full life cycle of value of innovative medicines. This not only presents a challenge of estimation but also of assessing the appropriate division of shares of social value. [ABSTRACT FROM AUTHOR]

Conventional cost-effectiveness analysis (CEA) for the value-based pricing of new medicines largely ignores the implications of limited market exclusivity (ie, patent-protection periods plus any exclusivity granted by regulators). This paper explores the implications of this methodological shortcoming, which produces several pricing anomalies with potentially unintended effects on research and development (R&D) incentives. We illustrate these implications by comparing 4 stylized examples of increasing complexity, from short-term cures for acute conditions to long-term cures for rare, health-catastrophic conditions. (1) Conventional-CEA will project a different result than an adjusted CEA that considers generic or biosimilar entry; (2) free and flexible pricing of long-term treatments (eg, statins for hypercholesterolemia) or repeated-dose cures (eg, insulin for type 1 diabetes) for chronic conditions will likely result in predictable price increases at the end of the exclusivity period that may be perceived as unjustified or unsupported; and (3) one-time administration "cures" (eg, gene therapy for spinal muscular atrophy) have the potential to allocate a large share of the social surplus to the manufacturer over the product lifetime, which may or may not be dynamically efficient per se , but may also inadvertently disadvantage the development of valuable long-term treatments or repeated-dose cures for chronic conditions. We highlight the need for additional research on long-term solutions to these issues that would aim to promote dynamically efficient global R&D. More work is needed on the following: (1) relationships between social surplus allocation and the amount and composition of global R&D, as we may be as likely to be encouraging excessive R&D in some areas as to be undersupplying it in others; and (2) relating the size of the surplus reward to R&D cost and, thus, the return on investment. • Conventional cost-effectiveness analyses have generally not taken patent expiry (or, similarly, "loss of exclusivity") into account, and overlook the impact on sharing of social surplus between the manufacturer and society following the loss of exclusivity. • Different medicinal products are rewarded vastly different shares over an assumed product lifetime of 30 years, even when all are assumed and modeled to 12 years of exclusivity. • These practices generate pricing "anomalies" that might inadvertently create an unlevel playing field across different products, especially curative ones, and may be distorting prices, rewards, and incentives for the size and composition of pharmaceutical research and development in unintended ways. [ABSTRACT FROM AUTHOR]

Many studies have been conducted to analyze the impact of road capacity restrictions on transportation networks. Numerous studies related to network capacity restrictions have focused on estimating the inconvenience caused by an increase in travel time as a measurement indicator for capacity restrictions occurring over a short period of time. In terms of network capacity restrictions, this study focuses on monetary loss from the perspective of economic welfare analysis. Using an agent-based model, this study analyzes the effect of disrupting all modes over the short and long term as the capacity of roads is reduced because of area-wide road capacity restrictions. Many studies have used the method of estimating inconvenience caused by increased travel time as an effect analysis, but this study uses logsum-based benefit method; benefit estimated results by the two methods are then compared. A large difference between the two benefit calculation methods was found. In detail, although there was a large loss in terms of increased travel time because of capacity reduction, despite the increase in average travel time because of the long-term change of modes, the derived consumer surplus inconvenience was relatively small because of the adjustment in the utility between modes. The effect of mode conversion was reflected in the benefits of consumer surplus from the perspective of a consumer welfare analysis. The case study showed that the scale of the inconvenience of the consumer surplus method was small because of the highly influential transport policy in small study area, where it was easy to switch between walking and cars. The present study targeted drastic policies that are expected to be quite difficult to accept socially, but a somewhat relaxed scenario analysis is also needed. In addition, it is necessary to consider inconvenient loss for changing the departure time and route in the further studies. [ABSTRACT FROM AUTHOR]

In the cost–benefit analysis of transportation investment, although the benefit estimation method due to the effect of travel time saving has been widely used, several limitations with the method have been pointed out in a number of studies. As an alternative, a logsum-based benefit calculation has been widely adopted, with most of the research focused on urban transportation. Therefore, it is rarely applied to interregional transportation. In this study, we applied a logsum-based approach to the calculation of benefits for expressway road projects in Korea's long-term transportation plan. To calculate the logsum, this study used input data from both the mode choice and destination choice models, finding that an analysis of the feasibility of inter-regional road investment was possible. Various studies have calculated the benefits based on one of the two models. The two methods have similar formulas; however, varying results were derived due to differences in the application of formulas for parameter estimation and benefit estimation. In conclusion, the proposed methods are expected to enable a more comprehensive evaluation of the transport system. Looking at more detailed research results, the logsum based on the mode choice model had great benefits in the Seoul metropolitan area where demand was high; however, the logsum of the destination-based model showed a large difference in distribution of benefits evenly by various metropolitan areas. On the other hand, it was found that the traditional reduction of travel time was much less by region than the logsum methods, but the effect was large in the metropolitan area. From the perspective of the theoretical and practical consumer surplus analysis, we suggest open discussions regarding which method to choose when calculating benefits from the mode choice logsum model, the destination logsum model and travel time savings method. [ABSTRACT FROM AUTHOR]

With the enhancement of environmental protection, more and more enterprises begin to develop green products. However, the high cost of green R&D leads to an increase of product price, which reduces the competitiveness of green products. In this paper, we model a supply chain which consists of one manufacturer and one retailer providing a primary product and a substitutable green added product in the market. In order to capture the impact of consumer behavior on the supply chain members' decision-making, we classify the market into two segments and assume that high-end green consumers have higher preferences for green products than ordinary consumers. Different to existing research, we assume ordinary consumers hold a positive but lower green preference compared to the green consumers. When analyzing the impacts of consumers' green preferences, we find that there exist specific boundaries of cost and market potential which define the optimal pricing strategy and product line design. Regarding profits, we find that when the green preferences of high-end and low-end consumers increase in the same proportion, the high-end market may not bring greater supply chain revenue. In particular, the marginal profit increase of the manufacturer is always greater than that of the retailer. [ABSTRACT FROM AUTHOR]

The "right-to-repair" (RTR) movement calls for government legislation that requires manufacturers to provide repair information, tools, and parts so that consumers can independently repair their own products with more ease. The initiative has gained global traction in recent years. Repair advocates argue that such legislation would break manufacturers' monopoly on the repair market and benefit consumers. They further contend that it would reduce the environmental impact by reducing e-waste and new production. Yet the RTR legislation may also trigger a price response in the product market as manufacturers try to mitigate the profit loss. This paper employs an analytical model to study the pricing, welfare, and environmental implications of RTR. We find that, as the RTR legislation continually lowers the independent repair cost, manufacturers may initially cut the new product price and then raise it. This nonmonotone price adjustment may further induce a nonmonotone change in consumer surplus, social welfare, and the environmental impact. Strikingly, the RTR legislation can potentially lead to a lose–lose–lose outcome that compromises manufacturer profit, reduces consumer surplus, and increases the environmental impact despite repair being made easier and more affordable. This paper was accepted by Charles Corbett, operations management. Funding: Chen Jin gratefully acknowledges the Singapore Ministry of Education Academic Research Fund [Tier 1, Grant R-253-000-144-133]. Supplemental Material: The online appendix is available at https://doi.org/10.1287/mnsc.2022.4401. [ABSTRACT FROM AUTHOR]

Motivated by the widespread adoption of corporate social responsibility (CSR), we investigate a socially responsible e-commerce supply chain where the E-platform owns a store brand product and supports online sales of the manufacturer's product under agency selling or reselling. The socially responsible firm has a mixed objective of its profit and consumer surplus. We explore how the firms' CSR concern affects their decisions and economic performance. Our results contradict conventional wisdom which suggests that a firm has to sacrifice profitability to achieve social responsibility and that a firm's CSR concern benefits its supply chain partner. Instead, we show that under agency selling, the E-platform's concern on consumers can improve its own profit while harming the manufacturer's profit. Furthermore, when both firms are socially responsible, their consumer concern can improve their profits simultaneously under reselling, leading to a "doing well by doing good" effect. As horizontal or vertical differentiation between the two products increases, this effect is more likely to be realized. Regarding firms' sales mode preferences, in a traditional for-profit supply chain, agency selling is the only mode preferred by both parties. However, in a socially responsible supply chain, they can achieve preference alignment under either agency selling or reselling. • We study a socially responsible supply chain focused on consumer surplus. • The E-platform owns a store brand and allows agency selling and reselling. • We explore how CSR impacts firms' decisions and economic performance. • Firms can align preferences under either agency selling or reselling. • The E-platform's consumer concern can boost its profit but harm its partner's. [ABSTRACT FROM AUTHOR]

Online cooked meal deliveries (CMD) have become prevalent with the advancement of on-demand delivery services offered by vendors such as Uber Eats and DoorDash. Thus, the development of a CMD demand generation model holds significant importance for CMD vendors, consumers, and policymakers. The model serves as a strategic tool for CMD vendors to address consumer needs. At the same time, it also holds substantial relevance for policymakers seeking to understand CMD demand and formulate effective regulatory measures for CMD operations. This paper presents such a modelling framework. The model is developed under the behavioural principle of random utility maximization (RUM) and explicitly represents various socioeconomic characteristics in the CMD demand generation process. The model is estimated using a Greater Toronto Area, Canada dataset. The empirical model provides insights into the factors influencing week-long CMD usage. The model also offers assessments for households' consumer surplus brought by CMD, which can inform public policies through well-fare analysis. [ABSTRACT FROM AUTHOR]

In most European and Asian countries, the owner of the high-speed train (HST) track is either fully independent from, or integrated with, the operations of train service. In this paper, we build a simple model to analyze a particularly unique ownership structure of HST infrastructure, namely, a mixed structure featuring both integration and separation within a network. We compare this mixed case with the scenario where ownership and operations of HST are integrated and identify a conflict between social welfare (consumer surplus) and HST profit. Specifically, consumer surplus and social welfare are higher in the mixed case (compared with the integrated case), while the profit of the HST industry is lower if any of the following conditions holds: 1) the size of the market, where ownership and operations may be separated, is sufficiently small; 2) the weight that the HST operator puts on social welfare is sufficiently small; 3) the fee paid by the infrastructure owner to HST operator for operational services is sufficiently high. Our results prove to be robust when there exists competition from airlines. Additionally, we observe consistent outcomes when varying the weights on social welfare. Finally, several policy implications are discussed. [ABSTRACT FROM AUTHOR]

Introduction: Recent work examining the impact of climate-change induced extremes on food-energy-water systems (FEWS) estimates the potential changes in physical flows of multiple elements of the systems. Climate adaptation decisions can involve tradeoffs between different system outcomes. Thus, it is important for decision makers to consider the potential changes in monetary value attributed to the observed changes in physical flows from these events, since the value to society of a unit change in an outcome varies widely between thing like food and energy production, water quality, and carbon sequestration.Methods: We develop a valuation tool (FEWSVT) that applies theoretically sound valuation techniques to estimates changes in value for four parameters within the food-energy-water nexus. We demonstrate the utility of the tool through the application of a case study that analyzes the monetary changes in value of a modelled heat wave scenario relative to historic (baseline) conditions in two study regions in the United States.Results: We find that food (corn and soybeans) comprises the majority (89%) of total changes in value, as heatwaves trigger physical changes in corn and soybeans yields. We also find that specifying overly simplified and incorrect valuation methods lead to monetary values that largely differ from FEWSVT results that use accepted valuation methods.Discussion: These results demonstrate the value in considering changes in monetary value instead of just physical flows when making decisions on how to distribute investments and address the many potential impacts of climate change-induced extremes.

This paper studies a green manufacturer's strategic licensing of its green technology to a brown rival under the consideration of the green manufacturer's environmental concerns. Consumers in the market have green awareness. Adopting the green technology not only helps manufacturers to reduce carbon emissions, but also to increase market sizes. The green manufacturer can choose from three technology licensing strategies, i.e., no licensing (N), royalty licensing (R) or fixed-fee licensing (F). The equilibrium licensing strategy can be derived by comparing the respective payoff after adopting the three strategies. It is found that the green manufacturer should choose fixed-fee licensing strategy when the market size expansion effect is strong, and the competition intensity is moderate; otherwise, the green manufacturer should choose royalty licensing strategy. Furthermore, it is found that when the green manufacturer is more concerned about environmental impacts, it will be more willing to choose fixed-fee licensing strategy, rather than royalty licensing strategy. Through numerical tests, some interesting results are also found. For example, the brown manufacturer might be hurt even if the cost reduction effect of technology licensing is relatively stronger. Moreover, it is found that consumer surplus and social welfare nonmonotonically change with the substitution level. In summary, this research tries to provide some guidelines to the industry and the society on better managing green technology diffusions. [ABSTRACT FROM AUTHOR]

This study aims to determine the economic value of tourism objects and whether there is a consumer surplus at the Petrus Kafiar beach based on the Travel Cost Method (TCM). The consumer surplus value is obtained by using the Individual Travel Cost Method (ITCM) approach and willingness to pay to calculate the willingness to pay of tourists visiting Petrus Kafiar Beach. The value of WTP obtained is Rp 23.358,21 per person per visit. Meanwhile, the average WTP (willingness to pay) per year for one visit is only Rp 5.491,23. The results of the integral calculation to find the consumer surplus of visitors to the Petrus beach tourism object, the consumer surplus is ranged from Rp 5.201,5 to Rp 10.403,91 per individual/visit. As for the factors that influence the number of visits to Petrus Kafiar beach, two significant variables were found, namely the level of income and distance at the 95% confidence level. [ABSTRACT FROM AUTHOR]

This paper advances Motta's (2004) study of two-firm Bertrand mergers with arbitrary synergies in symmetric linear models to m -firm mergers with cost-savings in asymmetric linear models. It identifies a set of Bertrand mergers that reduce not only consumer surplus but also rival firms' profits. Such severely anti-competitive mergers are intriguing because they can never happen in both Farrell and Shapiro (1990) and Nocke and Schutz (2018). • It advances Motta's (2004) two-firm mergers to m-firm with non-arbitrary synergy. • It finds a set of mergers that reduce both consumer surplus and outsiders' profits. • It provides simplified and previously unavailable expressions of equilibria. [ABSTRACT FROM AUTHOR]