Carlo Scarpa

Minimum quality standards with more than two firms1

Abstract This paper studies the effects of introducing a minimum quality standard (MQS) in a vertically differentiated market. It is shown that previous results indicating beneficial effects of a MQS heavily depend on the duopolistic set-up they had been developed in. An example with three firms is then provided, showing that not all reaction functions in quality levels are increasing. We also show that the introduction of the standard decreases the profit levels of all firms, the maximum quality level and the average quality consumed. As a consequence, despite the increase in consumer surplus, any effective MQS would reduce welfare.

Credible spatial preemption through reputation extension

Abstract Judd (1985, Rand Journal of Economics 16, 153–166) shows that the results of previous models of brand proliferation and spatial preemption are substantially weakened if the incumbent does not have high exit costs. This paper illustrates how an incumbent firm can make spatial preemption credible by extending reputation. This is the case with product extensions, which are new products but are linked to the successful reputation of another product already on the market. It is proved that a product extension can make spatial entry preemption credible, because its withdrawal (in response to a competitors new brand) can have a negative reputational effect on the incumbents original product.

Inducing efficiency in the use of foreign aid: The case for incentive mechanisms

In this article we point out that one of the main problems in foreign aid allocation is the efficient use of these funds: as resources available for foreign aid are intrinsically scarce, their efficient use would be in the interest of donors, and especially recipient countries. The aim of this paper is to show how it is possible to design incentive schemes which, by relating the allocation of aid to the way it is used, may induce the recipient country to use these resources appropriately. We discuss potential benefits and problems of different contractual forms, showing how comparing the performances of different countries may help to design optimal incentive mechanisms. Finally, we illustrate a proposal of performance conditioning of the grant element, which may help in tackling the efficiency problem.

A note on small versus large organizations

Abstract The competitive advantages of the ‘size’ of an organization is still a highly controversial topic within economics research. In this short paper, we try and analyze the role of organization size within an industry such as financial services. We show in a simple theoretical model that both small and large organizations have particular advantages in competition.

Gas: quanta concorrenza passerà attraverso i tubi?

In this article we examine some crucial aspects of the Government Decree on the liberalization of the Gas industry in Italy. In particular, we criticize the decision not to vertically separate the transmission activity, run by SNAM, from the other segments where competition will be introduced. Moreover we discuss the problems in developing actual competition due to the existence of a wide portfolio of take-or-pay contracts, and the distortions that might arise following the introduction of antitrust ceilings to market shares. Finally, we point out how the division of roles among the Energy Authority, the Antitrust Authority and the Ministry for Industry might generate some ambiguities and confusion.

The Italian Electricity Sector Between Privatization and the Fear of Competition

Italy’s state electricity company ENEL came into being in December 1962 when more than 1,200 electricity companies were nationalised and merged in a single entity, to which the law reserved the monopoly (with only a few exceptions) of the production, distribution and sale of electricity in Italy. ENEL had the status of an economic public body and characteristics (direct operativeness, monosectoriality, clear identification of objectives) which left very limited room for any real entrepreneurial autonomy from the Ministerial Committee charged with laying down the appropriate directives1. In fact, underscoring the strategic role of electricity in Italy’s development, Parliament entrusted ENEL with the role of an economic-policy tool, particularly at a macro-economic level.

A note on product tampering

Abstract Although product tampering has become an increasingly prevalent issue in recent years, as far as we know there have been no theoretical attempts to analyse its possible public policy implications. This paper tries to present some preliminary theoretical approaches to aspects of produ ct tampering.

A note on pioneering brands, market dominance and technology

Abstract Schmalensee (1982) was the first to show in a formal model how a pioneering brand can retain a large market share because in a world of quality uncertainty, consumers may be unwilling to try new brands. Conrad (1983) has analyzed this idea further, in a more realistic competitive environment setting, and in a price leadership model of post entry behavior. The purpose of this note is to examine the effect of such pioneering brand advantages, or market dominance, when there is a technological change that affects product quality.