Luc Leruth

Partial compatibility with network externalities and double purchase

Abstract We analyze an industry where two firms sell a good which generates a positive network externality whose value varies across consumers. The firms make product design decisions which determine the degree of compatibility of their goods before competing in quantities. However, consumers can always reap the benefits of compatibility by joining both networks. We show that such ‘double purchases’ drastically affect the nature of the product market equilibrium as well as the compatibility choices made by the firms. While the equilibrium level of compatibility chosen by the firms depends on the degree of consensus required to increase standardization, it tends to be higher than the social optimum.

Congestion and Game in Capacity: a Duopoly Analysis in the Presence of Network Externalities

We consider the case of a duopoly selling perfect substitutes except for their level of capacity. Firms are playing a two-stage game in which they take capacities as given when they play in prices and anticipate the price outcome when they play in capacities. We analyze the case where consumers are homogeneous and where they are differentiated in their willingness to pay to avoid congestion.

Daily wages and piece rates in agrarian economies

The paper presents an analysis of the coexistence of daily-wage and piece-rate contracts in agrarian economies. We show that, when individual effort is taken into account, daily-wage labourers typically form a convex set in the space of working ability. The most able and the least able labourers work on piece rates, as they can thus choose their own level of effort. We also prove that, on a monopsonistic labour market, the use of both contracts in equilibrium results from the profitability of market segmentation. Imperfect substitutability between workers under different contracts and the downwards rigidity of daily wages can also explain the coexistence of the two types of contracts in more general settings, e.g. perfect competition

POWER INDICES AND THE MEASUREMENT OF CONTROL IN CORPORATE STRUCTURES

This paper proposes a brief review of the use of power indices in the corporate governance literature. Without losing sight of the field of application, it places the emphasis on the game-theoretic aspects of this research and on the issues that arise in this framework. It should be noted that the views presented in this paper are not necessarily those of the IMF.

Equilibrium in Competing Networks with Differentiated Products

We study “positive network externalities” in a horizontally differentiated industry. We show that a symmetric Nash equilibrium in prices exists if and only if the degree of product differentiation is sufficiently large. We also study the impact of larger or lower compatibility on equilibrium prices.