Levent Kutlu

Price Discrimination in Stackelberg Competition

We examine the effects of price discrimination in the Stackelberg competition model for the linear demand case. We show that the leader does not use any price discrimination at all. Rather, the follower does all price discrimination. The leader directs all of its first mover preemptive advantage to attract the highest value consumers who pay a uniformly high price. We observe that profits and total welfare are larger and consumer surplus is smaller than those of the standard Stackelberg competition model.

Handling Endogeneity in Stochastic Frontier Analysis

We present a general maximum likelihood based framework to handle the endogeneity problem in the stochastic frontier models. We implement Monte Carlo experiments to analyze the performance of our estimator. Our findings show that our estimator outperforms standard estimators that ignore endogeneity.

Competition and price dispersion in the airline markets

We use two ticket-level data sets on one-way domestic flights for the US airlines to examine the potentially nonlinear relationship between price dispersion and three forms of competition: inter-firm, inter-flight and frequency competitions. The linear relationship is rejected at any conventional significance levels. In particular, there is an S-shaped relationship between market concentration and price dispersion. This can be a reason for the mixed results in the literature. Roughly speaking, the inter-flight and frequency competitions have opposite effects on price dispersion. Finally, in general, the size of aircraft has a positive effect on price. However, for very large aircraft, the relationship becomes negative.

Price Discrimination in Quantity Setting Oligopoly

We analyze a two‐stage quantity setting oligopolistic price discrimination game. In the first stage, firms choose capacities and in the second stage they simultaneously choose the share that they assign to each segment. At the equilibrium, the firms focus more on the high‐valuation customers. When the capacities in the first stage are endogenous, the deadweight loss does not vanish with the level of price discrimination, as it does in one‐stage games and monopoly. Moreover, the quantity‐weighted average price increases with the level of price discrimination as opposed to the established results in the literature for one‐stage games.

Endogeneity in panel stochastic frontier models: an application to the Japanese cotton spinning industry

ABSTRACT We present a panel stochastic frontier model that handles the endogeneity problem. This model can treat the endogeneity of both frontier and inefficiency variables. We apply our method to examine the technical efficiency of Japanese cotton spinning industry. Our results indicate that market concentration is endogenous, and when its endogeneity is properly handled, it has a larger negative impact on the technical efficiency of cotton spinning plants. We find that the exogenous model substantially overestimates efficiency in concentrated markets.

A Time-Varying True Individual Effects Model with Endogenous Regressors

We propose a fairly general individual effects stochastic frontier model, which allows both heterogeneity and inefficiency to change over time. Moreover, our model handles the endogeneity problems if either at least one of the regressors or one-sided error term is correlated with the two-sided error term. Our Monte Carlo experiments show that our estimator performs well. We employed our methodology to the US banking data and found a negative relationship between return on revenue and cost efficiency. Estimators ignoring time-varying heterogeneity or endogeneity did not perform well and gave very different estimates compared to our estimator.

Voting games of resolute social choice correspondences

A resolute social choice correspondence is a social choice rule which maps preference profiles into sets of mutually compatible outcomes. We consider a fairly large class of resolute social choice correspondences and characterize the strong Nash equilibrium outcomes of their voting games in terms of a generalization of the Condorcet principle. Our findings generalize those of Sertel and Sanver (Soc Choice Welf 22:331–347, 2004) who address the same question in a more restricted framework.

Intersection of Nash implementable social choice correspondences

We show that there exist two Nash implementable social choice correspondences defined on an environment with strict preferences for which the intersection is not Nash implementable.

Strategic Product Line Choice under Asymmetric Demand Structure

Abstract We examine strategic product line choices of manufacturers in a stylised duopoly model where products have asymmetric and interdependent market conditions. We characterise the optimal product line decisions and show that manufacturers always prefer to have head-to-head competition (and never segment markets) when product line setup cost is small relative to profitability of the products. When setup costs are high, symmetric manufacturers may prefer to have asymmetric product lines or market segmentation. We show that high setup costs lead to the market segmentation outcome only if there is no significant market size difference and the level of product substitutability is moderate.

US Bank Efficiency and the FED Activity

We examine the relationship between cost efficiency of US banks and FED activity level. It turns out that FED actions have a positive effect on cost efficiencies of the US banks. In particular, as the number of FED actions increases, the cost efficiencies of the US banks increases. This illustrates the importance of FEDs role in reaching a more cost efficient banking system