Takanori Adachi

Endogenous Product Boundary

This study analyzes the determinants of product boundary choice as discriminatory pricing. Specifically, we consider a model where a monopolist sells a base product with an add-on valuable only if it is consumed along with the base product. An important feature of this model is that this additional value is contingent on the valuation of the base product. We show that separation, in which case only the base product is sold, yields a higher profit than integration, where only a bundled package is sold, if and only if the range of the add-on value exceeds a threshold value and that separation is more likely to become optimal as the degree of positive contingency increases. As for welfare, consumer surplus in case of separation is always lower than that when the seller is constrained to sell the bundled package.

Output and Welfare Implications of Oligopolistic Third-Degree Price Discrimination

Using estimable concepts, this paper provides sufficient conditions for third-degree price discrimination to increase or decrease aggregate output, social welfare, and consumer surplus in differentiated oligopoly when all discriminatory markets are open even in the absence of price discrimination. Specifically, we allow cost differences to exist across separate markets, and demonstrate that under general demand functions, our sufficient conditions entail a cross-market comparison of multiplications of two or three of the following key endogenous variables: pass-through value, conduct index, and markup value. Notably, the welfare results based on these “sufficient statistics” can readily be extended to accommodate heterogeneous firms, which suggest that our analysis can be used as a building block for empirical analysis of third-degree price discrimination and welfare effects.

Multi-Dimensional Pass-Through, Incidence, and the Welfare Burden of Taxation in Oligopoly

This paper studies welfare consequences of unit and ad valorem taxes in oligopoly with general demand, non-constant marginal costs, and a generalized type of competition. We present formulas providing connections between marginal cost of public funds, tax incidence, unit tax pass-through, ad valorem tax pass-through, and other economic quantities of interest. First, in the case of symmetric firms, we show that there exists a simple, empirically relevant set of sufficient statistics for the marginal cost of public funds, namely the pass-through and the industry demand elasticity. Specializing to the case of price or quantity competition, we show how marginal cost of public funds and pass-through are expressed using elasticities and curvatures of demand and inverse demand. These results also apply to symmetric oligopoly with multi-product firms. Second, we present a generalization with the tax revenue function specified as a general function parameterized by a vector of tax parameters. We analyze multi-dimensional pass-through, generalizing the results of Weyl and Fabinger (2013), and show that it is crucial for evaluating welfare changes in response to changes in taxation. Finally, we generalize our results to the case of heterogeneous firms, as well as to the case of changes in both production costs and taxes.This paper provides a comprehensive analysis of welfare measures when oligopolistic firms face multiple policy interventions and external changes under general forms of market demands, production costs, and imperfect competition. We present our results in terms of two welfare measures, namely, marginal cost of public funds and incidence, in relation to multi-dimensional pass-through. Our arguments are best understood with two-dimensional taxation where homogeneous firms face unit and ad valorem taxes. The first part of the paper studies this leading case. We show, e.g., that there exists a simple and empirically relevant set of sufficient statistics for the marginal cost of public funds, namely unit tax and ad valorem pass-through and industry demand elasticity. We then specialize our general setting to the case of price or quantity competition and show how the marginal cost of public funds and the pass-through are expressed using elasticities and curvatures of regular and inverse demands. Based on the results of the leading case, the second part of the paper presents a generalization with the tax revenue function specified as a general function parameterized by a vector of multi-dimensional tax parameters. We then argue that our results are carried over to the case of heterogeneous firms and other extensions.

Trading and Ordering Patterns of Market Participants in High Frequency Trading Environment - Empirical Study in the Japanese Stock Market

In this study, we investigate ordering patterns of dii¬€erent types of market participants in Tokyo Stock Exchange (TSE) by examining order records of the listed stocks. Firstly, we categorize the virtual servers in the trading system of TSE, each of which is linked to a single trading participant, by the ratio of cancellation and execution in the order placement as well as the number of executions at the opening of the afternoon session. Then, we analyze ordering patterns of the servers in the categories in short intervals for the top 10 highest trading volume stocks. By classifying the intervals into four cases by returns, we observe how dii¬€erent types of market participants submit or execute orders in the market situations. Moreover, we investigate the shares of the executed volumes for the dii¬€erent types of servers in the swings and roundabouts of the Nikkei 225 index, which were observed in September in 2015. The main findings of this study are as follows: Server type A, which supposedly includes non-market making proprietary traders with high-speed algorithmic strategies, executes and places orders along with the direction of the market. The shares of the execution and order volumes along with the market direction increase when the stock price moves sharply. Server type B, which presumably includes servers employing a market making strategy with high cancellation and low execution ratio, shifts its market making price ranges in the rapid price movements. We observe that passive servers in Server type B have a large share and buy at low levels in the price falls. Also, Server type B, as well as Server type A, makes profit in the price falling days and particularly, the aggressive servers in the server type make most of the profit. Server type C, which is assumed to include servers receiving orders from small investors, constantly has a large share of execution and order volume.

Severe versus Lenient Internal Promotion: An Analysis of the Optimal Promotion Mechanism in Organizations

This paper analyses the interaction between work incentives and talent selection in the framework of internal promotion, and investigates the kinds of promotion structures that are adopted in organizations. We compare the benefits of promoting a deserving agent with the costs of providing work incentives to him. It is shown that whether the principal intends to punish even the talented worker (severe promotion) or to reward even the untalented worker (lenient promotion) depends upon whether the benefits of promoting the former worker or the costs of promoting the latter worker are relatively large.