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Full-Text Articles in Economics
Demonstrations And Price Competition In New Product Release, Raphael Boleslavsky, Christopher Cotton, Haresh Gurnani
Demonstrations And Price Competition In New Product Release, Raphael Boleslavsky, Christopher Cotton, Haresh Gurnani
Raphael Boleslavsky
We develop a game theoretic model of price competition in which an innovating firm can offer product demonstrations. Placing minimal restriction on the firm's ability to design demonstrations, we show that the equilibrium demonstration resolves some but not all customer valuation uncertainty and allows the innovating firm to attract customers while maintaining a high price. Consumer surplus may be lower with endogenous demonstrations than without demonstrations. Regulation requiring firms to provide fully-informative demonstrations (e.g., generous return policies or inspection periods) can further reduce consumer surplus. The ability to design demonstrations also creates incentives for innovating firms to limit the market …
Selloffs, Bailouts, And Feedback: Can Asset Markets Inform Policy?, Raphael Boleslavsky, David L. Kelly, Curtis R. Taylor
Selloffs, Bailouts, And Feedback: Can Asset Markets Inform Policy?, Raphael Boleslavsky, David L. Kelly, Curtis R. Taylor
Raphael Boleslavsky
We present a model in which a policymaker observes trade in a financial asset before deciding whether to intervene in the economy, for example by offering a bailout or monetary stimulus. Because an intervention erodes the value of private information, informed investors are reluctant to take short positions and selloffs are, therefore, less likely and less informative. The policymaker faces a tradeoff between eliciting information from the asset market and using the information so obtained. In general she can elicit more information if she commits to intervene only infrequently. She thus may benefit from imperfections in the intervention process or …