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We consider a non-durable good monopoly that collects data on its customers in order to profile them and subsequently practice price discrimination on returning customers. The monopolist's price discrimination scheme is leaky, in the sense that an endogenous fraction of consumers choose to incur a privacy cost to become "active", i.e., to be able to conceal their identity when they return in the following periods. We characterize the Markov Perfect Equilibrium of the game. We find that, regardless of the accuracy of firm's data on their customers, managers adjust their pricing and market expansion strategies to the presence of active customers in the following way: (i) reduce the pace at which introductory price falls over time, and (ii) strategically guarantee that market expansion is incomplete. The equilibrium number of passive customers in the market is found to be increasing in the level of the privacy cost. Investigating the impact of customers' identity management on profits, we find that the monopolist's aggregate profit is a U-shaped function of the privacy cost whatever the degree of the monopolist's information accuracy. Still, the profit effects of consumers' identity management choices are shown to depend on the monopolist's profiling capabilities. Two customer profiling structures are compared. In the case of full information acquisition (FIA), the firm can practice personalized pricing on returning passive customers, while in the case of purchase history information (PHI), it has only enough information for group pricing. We show that in the FIA case, the monopoly equilibrium profit is globally an increasing function of the privacy cost while in the PHI case, it is almost always a globally decreasing function of it (especially for low discount factors).

Immigration policies in western democracies have often been contrary to the policies predicted by the mainstream theory of international economics. In particular, political parties that, according to economic theory, should adopt policies beneficial for lower-income voter-constituencies, have not protected workers from labor-market competition or from a fiscal burden of financing welfare-dependent immigrants. We explain the contradiction by accounting for immigrants as future voters. We identify a political principal-agent problem based on ego-rents from political office. Our theory predicts voter defection from worker-supported political-establishment parties to new-entrant anti-immigration political candidates and parties. We give a hearing to alternative interpretations of the evidence.

A monopolist producing vertically differentiated durable goods can offer in each period a sequence of price-quality menus to segment the market. We show that, contrary to the Coase conjecture for the homogeneous durable good monopoly, thanks to the ability to produce differentiated durable goods, in all Markov-Perfect Equilibria, the profit of a monopolist that cannot commit to future price-quality menus is bounded below by a strictly positive value independent of the discount factor.

Using a Markov-perfect equilibrium model, we show that the use of customer data to practice intertemporal price discrimination will improve monopoly profit if and only if information precision is higher than a certain threshold level. This U-shaped relationship lends support to a popular view that knowledge is good only if it is sufficiently refined. When information accuracy can only be achieved through costly investment, we find that investing in profiling is profitable only if this allows to reach a high enough level of information precision. Consumers expected surplus being a hump-shaped function of information accuracy, we show that consumers have an incentive to lobby for privacy protection legislation which raises the cost of monopoly’s investment in information accuracy. However, this cost should not dissuade firms to collect some information on customers’ tastes, as the absence of consumers’ profiling is actually detrimental to consumers.

A durable good monopolist faces a continuum of heterogeneous customers who make purchase decisions by comparing present and expected price-quality offers. The monopolist designs a sequence of price-quality menus to segment the market. We consider the Markov Perfect Equilibrium (MPE) of a game where the monopolist is unable to commit to future price-quality menus. We obtain the novel results that (a) under certain conditions, the monopolist covers the whole market in the first period (even when a static Mussa-Rosen monopolist would not cover the whole market), because this is a strategic means to convince customers that lower prices would not be offered in future periods, and that (b) this can happen only under the stage-wise Stackelberg leadership assumption (whereby consumers base their expectations on the value of the state variable at the end of the period). Conditions under which MPE necessarily involve sequentially trading are also derived.

We consider an economy in which some taxpayers behave in a Kantian way in their donation behavior while others are Nash players. A Kantian taxpayer holds the norm that any suggested deviation from a proposed equilibrium profile would be adopted by him only if when all members of their community adopted the same deviation, they would all achieve a higher level of welfare. In contrast, a Nash player follows the individual rationality criterion: He would deviate if, assuming all others do not deviate, he would improve his own payoff. We show that if all taxpayers are Nash players, then there is an efficiency-inducing tax credit scheme for charitable contributions. In contrast, if all taxpayers are Kantian, the optimal tax credit for charity is zero. If both types of taxpayers co-exist, and the government does not know who is of what type, then it is not possible for the government to induce the first-best outcome, but it must rely on a second-best tax-credit scheme.

We develop a simple North-South model of quality ladders to show that the virtual mobility of labor across time zones, facilitated by the advance in communication technology, can raise the endogenous growth rate of the world economy. The unique balanced growth rate is increasing in the endowments of skilled labor in both countries and decreasing in the rate of impatience. Moreover, we find that partial R&D offshoring to the South has initially a negative effect on the level of skilled wages in the North, but this is compensated for by its positive effect on the growth rate in both North and South., Nakanishi acknowledges the financial support of the Japan Society for the Promotion of Science: Grant-in-Aid for Scientific Research (A), No.16H02016.

This paper develops a two-country model of intraindustry trade with trade costs, which can be reduced by public investment in an international infrastructure capital, the stock of which accumulates over time. Depending on the trade costs and international distribution of manufac-turing firms, equilibrium patterns of trade are determined, and national welfare in each country is affected by these trade patterns. Taking the relationship between trade costs and national welfare into consideration, the governments carry out a dynamic game of public investment. We show that the dynamic equilibrium of the policy game may exhibit history dependency; if the initial stock of international infrastructure is smaller (larger) than a certain level, the infrastructure stock decreases (increases) over time, and the world economy will end up in autarky (two-way free trade) in the long-run. We also show that international cooperation is beneficial in the sense that it may enable the world economy to escape from a “low development trap.”

We examine the profitability of cross-ownership in an oligopolistic industry where firms compete as Cournot rivals. We consider a symmetric cross-ownership structure in which a subset of k firms engage in cross-shareholding and each firm has an equal silent financial interest in the other firms, while the remaining (n – k) firms stay independent. We show that a symmetric cross-ownership is never profitable for any levels of non-controlling minority shareholdings if the participation ratio (k/n) is less than or equal to (n+1)/(2n), while there exists a large range of cross-ownership for which it can be profitable beyond that participation ratio. This result may be called a cross-ownership paradox, analogous to the merger paradox. With the presence of stock constraints, however, we find some of the results from the cross-ownership paradox do not carry over to the case of non-renewable resource industries. The profitability of a symmetric cross-ownership can be positive even when the participation ratio (k/n) is less than or equal to (n+1)/(2n) and is always positive when the participation ratio (k/n) is greater than (n+1)/(2n), provided that the initial resource stock owned by each firm is small enough. We also highlight that cross-ownership can be preferable to a horizontal merger under Cournot competition. Not only is it more profitable to do so, more importantly, it constitutes a shrewd strategy to avoid possible legal challenges.