Raimondello Orsini

Network Externalities and the Overprovision of Quality by a Monopolist

We investigate the behavior of a monopolist supplying a vertically differentiated good with network externalities. Assuming a convex unit cost of quality improvements, we show that the presence of network externalities may yield oversupply of quality compared with the social optimum, when partial market coverage emerges at equilibrium. Overall, the incentive to expand output increases in the extent of network externalities, thereby partially counterbalancing the social damage produced by the quality distortion.

Quality improvement and process innovation in monopoly

We investigate the R&D portfolio of a monopolist investing in cost-reducing and quality enhancing R&D. Incentives along the two directions are inversely related to the size of market demand, and independent of each other. The stability analysis shows the existence of a unique stable steady state equilibrium, which is a saddle point. Finally, we show that the monopolist undersupplies product quality as compared to the social optimum, while its investment in the abatement of marginal cost is socially efficient.

Vertically Differentiated Monopoly with a Positional Good

We analyse positional effects in a monopoly market with vertical differentiation, comparing monopoly and social planning. The provision of quality under monopoly depends upon the relative size of positional effects and the hedonic evaluation of quality. An elitarian equilibrium where quality increases in the level of positional concern emerges under monopoly, only if the market is sufficiently rich. Under social planning, quality increases in the level of positional externality, independently of market affluency. As long as partial market coverage obtains under both regimes, the monopoly deadweight loss decreases as the positional externality becomes more relevant.

Positional effects, product quality and regulation in duopoly

We investigate positional effects in a vertically differentiated duopoly, evaluated against the first best. Positional concerns distort the allocation of consumers across varieties, as well as the average quality. If the external effect is sufficiently relevant, the resulting welfare loss is increasing in the extent of the externality itself. The beneficial effect of regulation through a minimum quality standard is analysed.

Students, Temporary Workers and Co-Op Workers: An Experimental Investigation on Social Preferences

We conduct an artefactual field experiment to compare the individual preferences and propensity to cooperate of three pools of subjects: Undergraduate students, temporary workers and permanent workers. We find that students are more selfish and contribute less than workers. Temporary and permanent contract workers have similar other-regarding preferences and display analogous contribution patterns in an anonymous Public Good Game.

When Foul Play Seems Fair: Dishonesty as a Response to Violations of Just Deserts

We investigate the norm of just deserts and its effect on honesty. Just deserts is an essential norm in a market society, and honesty is an important factor in economic and social exchange. In particular, we analyze what happens when the social distributive rules betray the reasonable expectation that who deserves more will obtain a larger payoff. Using a formal-theoretic framework—equity theory—we explore the nexus between the perception of just deserts and honesty, combining cross-national survey (WVS) evidence and data from two laboratory experiments—conducted in the United States and Italy—to study whether violations of the principle of just deserts contribute to an increased tolerance for or an engagement in dishonest and corrupt acts. We find convergent evidence that violation of the just deserts norm results in a greater propensity toward self-serving dishonesty, and that this effect is distinct from the effect of inequality. Both the survey and experimental results also indicate that sensitivity to violations of the just deserts norm vary cross-nationally. We conclude with a discussion of the implications of our results for theories of distributive justice and multiple equilibria in societal levels of honesty.

Being nice with the experimenter

This article investigates the determinants of reciprocity towards the experimenters in the lab under a flat-wage scheme. We find that personality attributes – such as agreeableness – help predict the behaviour of the subjects. We additionally propose and assess a general measure of reciprocity.

Network Externalities in a Dynamic Monopoly

Abstract We reconsider the role of network externalities in a dynamic spatial monopoly where the firm must invest in order to accumulate capacity, while consumers may have either linear or quadratic preferences. We (i) characterise saddle point equilibria, (ii) prove that the extent of market coverage is increasing in the network effect and (iii) unlike the existing static literature on the same problem, the monopolist may not make introductory price offers. Then, we briefly deal with the socially optimal solution, showing that, in general, a planner would serve more consumers than a profit-seeking monopolist.

Does Death Make Us All Equal? Conformism and Status-Seeking Under Mortality Salience

The thought of one’s own death induces anxiety and threatens self-esteem. According to Terror Management Theory, to reduce this existential threat individuals typically embrace their cultural worldview, and seek for an increase in self-esteem and status by improving their productivity. Within an experimental economy setting, this paper investigates the effect of Mortality Salience (MS) on individual productivity, using for the first time a real-effort task where the economic incentive is to not perform. We investigated whether the improvement in productivity was significantly driven by self-esteem or status seeking, providing either private feedback alone or, additionally, public feedback. Always controlling for participants’ individual susceptibility to the MS induction, our results indicate that subjects generally tend to be more sensitive to in-group conformity under MS compared to a control (Music) induction condition. That is, they initially improve their performance to enhance self-esteem, but then homologate to average performance levels, consistent with the incentive not to perform. However, for a subset of less materialistic participants, with strong susceptibility to MS, performance levels constantly improved along the task.

Non-Monetary Feedback Induces More Cooperation: Students and Workers in a Voluntary Contribution Mechanism

We conduct an artefactual field experiment to study and compare the behavior of workers and students in a linear voluntary contribution mechanism in which subjects can assign immaterial sanctions or rewards to the other group members. We find that both students and workers sanction group members who contribute less than the group average, and reward those who contribute more. In both subject samples, the use of non-monetary sanctions and rewards induces more cooperation. The magnitude of the effect, however, is heterogeneous, as feedback has more impact among students who, contrary to workers, respond positively to sanctions. Students also tend to use sanctions more than workers. We discuss the implications of these findings for social cohesion, cooperative spirit and organizational efficiency in the workplace.