Francis Bloch

Two-Sided Search, Marriages and Matchmakers

This paper analyzes the provision of matching services in a model of two-sided search. Agents belong to two populations and are uniformly distributed on [0,1]. Their utility is equal to the index of their mate. In a search equilibrium, as in Mac Namara and Collins (1990), agents form subintervals and are only matched to agents inside their class. Agents of higher quality form larger clusters. Marriage brokers offer to match agents according to a centralized matching procedure. If the matchmaker charges a uniform participation fee to all agents, then she selects to match a subset of agents of higher quality according to the stable identity matching rule. If, on the other hand, the matchmaker can charge different commissions to different agents, she will either choose to match all agents, if the matching cost is low enough, or not to operate.

Market Sharing Agreements and Collusive Networks

We analyze reciprocal market sharing agreements by which firms commit not to enter each others territory in oligopolistic markets and procurement auctions. The set of market sharing agreements defines a collusive network. We characterize stable collusive networks when firms and markets are symmetric. Stable networks are formed of complete alliances, of different sizes, larger than a minimal threshold. Typically, stable networks display fewer agreements than the optimal network for the industry and more agreements than the socially optimal network. When firms or markets are asymmetric, stable networks may involve incomplete alliances and be underconnected with respect to the social optimum.

Persuasive advertising in Hotelling's model of product differentiation

Abstract This paper analyzes the effect of persuasive advertising in a model where consumers differ in their tastes for two competing products. Advertising is viewed as a means by which a firm can shift the distribution of consumer tastes towards one of the products. When both products are sold by the same firm, advertising leads to an increase in the price of the advertised product and a decrease in the price of the other product. The monopolists profit is higher when the distribution is concentrated around one of the products, so that advertising is profitable only if the original distribution of consumer tastes is not too biased towards one of the products. When the two products are sold by different firms, advertising may induce a decrease in the price of the advertised product, showing that a firm does not necessarily have an incentive to engage in advertising.

Coalitions and Networks in Industrial Organization

This paper provides a selective survey of recent approaches to coalition and network formation in industrial organization, and offers a unified framework in which the different approaches can be compared. We focus on two extreme forms of cooperation--collusive agreements and cost-reducing alliances. We show that bilateral negotiations yield higher levels of cooperation than multilateral agreements, that the formation of a cartel depends on the sequentiality of the procedure of coalition formation, and that the size of alliances depends on the membership rule. Copyright 2002 by Blackwell Publishers Ltd and The Victoria University of Manchester

Trade Fragmentation and Coordination in Strategic Market Games

Abstract This paper analyzes the incentives to trade and the validity of the law of one price in three strategic market games with multiple trading posts. In bilateral oligopolies, where traders have corner endowments in one commodity, all agents participate in all the markets. The law of one price holds in bilateral oligopolies and in the buy-or-sell market game, where equilibrium strategies are locally unique. When traders can simultaneously buy and sell on every market, the law of one price fails and the set of equilibrium prices generically has the same dimension as the number of active markets. Journal of Economic Literature Classification Numbers: D43, D51.

Price and quantity experimentation: A synthesis

This paper compares experimentation about product differentiation in a linear setting under four market structures: quantity-setting and price-setting monopoly, Cournot and Bertrand duopoly. Quantity-setting firms always experiment by raising their quantities and the monopolist experiments relatively more than the duopolists. A price-setting monopolist does not experiment. The value of information to Bertrand duopolists may be positive or negative depending on the degree of product differentiation. When information is valuable, price-setting duopolists experiment by lowering prices. A numerical example indicates that the intensity of experimentation is higher in a Cournot duopoly than in a Bertrand duopoly

Strategic complements and substitutes in bilateral oligopolies

This paper characterizes the equilibrium of a bilateral oligopoly where traders have CES utility functions. We show that the offers of traders on the two sides of the market are strategic substitutes if and only if the goods are complements.

Corporate tax competition, tariffs and multinational firms

This note examines the effect of export taxes and tariffs on fiscal competition between countries seeking to attract taxable income from multinational firms. The introduction of a tariff enables the importing country to collect corporate taxes, but fiscal revenues remain too low in equilibrium