Maxim Engers

Signalling with Many Signals

This paper examines a market with asymmetric information where there are many signals available and where both the costs of signaling and the product value may depend on many privately known characteristics. Under a weak condition on the relationship between the marginal cost of increasing the signals and the product value, a separating set exists whereby the value of every sellers product is inferred from the sellers optimal choice of signals. The separating set constructed is Pareto dominant and corresponds to recently proposed equilibrium notions in signaling and screening models. Copyright 1987 by The Econometric Society.

Stackelberg versus Cournot oligopoly equilibrium

Abstract We compare an m-firm Cournot model with a hierarchical Stackelberg model where m Firms choose outputs sequentially. The Stackelberg equilibrium price is lower, so output and total surplus are higher; total profits are lower. While the first mover in a Stackelberg duopoly earns more than a Cournot duopolist, this is not necessarily true for m > 2. We find a surprisingly simple relation which determines whether Cournot profit exceeds the Stackelberg leaders. Finally we consider a game (with firms choosing whether to reveal their outputs) which includes Stackelberg and Cournot as possible outcomes: the equilibrium is Stackelberg.

First Author Conditions

This paper provides a theoretical explanation for the persistent use of alphabetical name-orderings on academic papers in economics. In a context where market participants are interested in evaluating the relative individual contribution of authors, it is an equilibrium for papers to use alphabetical ordering. Moreover, it is never an equilibrium for authors always to be listed in order of relative contribution. In fact, we show via an example that the alphabetical name-ordering norm may be the unique equilibrium, although, multiple equilibria are also possible. Finally, we characterize the welfare properties of the noncooperative equilibrium and show it to produce research of lower quality than is optimal and than would be achieved if co-authors were forced to use name-ordering to signal relative contribution.

Market Equilibrium with Hidden Knowledge and Self-selection

The problem of the existence of a competitive equilibrium in models with hidden knowledge and self-knowledge has been discussed previously by M. Rothschild and J. E. Stiglitz_(1976), C. A. Wilson_(1977), and J. G. Riley_(1979). Recent analyses of such models by I. Cho and D. Kreps_(1986) and Riley argue for a particular outcome - the Pareto-dominant separating, zero-profit one. The authors prove the existence of such an outcome under very general conditions and, generalizing the reactive equilibrium concept introduced by Riley, they prove this outcome is the unique reactive equilibrium. Copyright 1987 by The Econometric Society.

Spatial Competition with Price-Taking Firms

The authors consider a price-taking equilibrium in the spatial setting. A (unique) pricing equilibrium is shown to exist for any set of firm locations. This equilibrium is then used to examine locational incentives in the two-stage process in which firms first choose locations anticipating the subsequent price-taking outcome. The result is spatial agglomeration if demand is inelastic and there are only two firms. Agglomeration does not occur if demand is too elastic or if there are more than two firms. Copyright 1994 by The London School of Economics and Political Science.

Preemptive entry in differentiated product markets

Summary. Models of spatial competition are typically static, and exhibit multiple free-entry equilibria. Incumbent firms can earn rents in equilibrium because any potential entrant expects a significantly lower market share (since it must fit into a niche between incumbent firms) along with fiercer price competition. Previous research has usually concentrated on the zero-profit equilibrium, at which there is normally excessive entry, and so an entry tax would improve the allocation of resources. At the other extreme, the equilibrium with the greatest rent per firm normally entails insufficient entry, so an entry subsidy should be prescribed. A model of sequential firm entry (with an exogenous order of moves) resolves the multiplicity problem but raises a new difficulty: firms that enter earlier can expect higher spatial rents, and so firms prefer to be earlier in the entry order. This tension disappears when firms can compete for entry positions. We therefore suppose that firms can commit capital early to the market in order to lay claim to a particular location. This temporal competition dissipates spatial rents in equilibrium and justifies the sequential move structure. However, the policy implications are quite different once time is introduced. An atemporal analysis of the sequential entry process would prescribe an entry subsidy, but once proper account is taken of the entry dynamics, a tax may be preferable.

R&D policy with layers of economic integration

Domestic R&D policy is examined in the context of four successive layers of international integration: (a) trade in intermediate and final goods, (b) trade in technologies, (c) international R&D spillovers and (d) internationally-coordinated R&D policy. Positive domestic R&D spillovers are assumed throughout. A subsidy improves welfare when there is no trade in technologies or when technologies are traded but R&D policy is internationally coordinated. However, at intermediate degrees of international integration an R&D tax or subsidy might improve welfare. Trade in technologies introduces terms-of-trade effects that increase welfare for net technology importers but reduce it for net exporters.

Why Referees Don't Get Paid (Enough)

This paper examines why referees for academic journals and grant applications are often not paid for their work. We postulate that referees are motivated by a non-monetary concern for journal quality and also by monetary considerations. Increasing pay is, therefore, a means of encouraging marginal referees to opt to review articles rather than rely on others to do the task at a later stage. However, journal quality is influenced by the speed of reviewing. Thus, to the extent that it raises journal quality, higher pay reduces the incentives for referees to choose to review articles. Thus, in order to be effective, referee pay must compensate for this latter effect. We show that this proves too costly for journals, and so zero pay is often the unique equilibrium outcome. This equilibrium is inefficient, and a subsidy to referee payments can restore efficiency.