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Price reductions take either an integrated form (e.g. a discount shown directly on the price tag) or a non-integrated form (e.g. a discount contained in a coupon sent to consumers and thus separate from the price tag). This research examines how non-integrated versus integrated promotions influence choices among vertically differentiated products. Under an integrated promotion (e.g. $10 off) applicable to multiple products (e.g. original list prices: $50 vs. $30), consumers directly compare these products' post-promotion final prices displayed on their price tags (after a reduction of $10: $40 vs. $20). In contrast, under a non-integrated promotion of the same monetary value, consumers simply compare these products' original list prices ($50 vs. $30) and neglect their post-promotion final prices, which require calculations. The list prices ($50 vs. $30; relative to the final prices: $40 vs. $20) as a basis for price comparison reduce the perceived price difference between these products. Consequently, a non-integrated promotion (compared to an integrated promotion) increases consumers' choice of higher-priced products. A series of experiments (N  = 5,187) demonstrate this effect and support the final price neglect mechanism. Furthermore, although attenuated, this effect still emerges for price reductions of a smaller magnitude or in a percent-off format. [ABSTRACT FROM AUTHOR]

Research Summary: Cost advantage helps a firm at the expense of its rivals, but may hurt some rivals worse than others. Conventional wisdom suggests that an advantaged firm will do more harm to closer competitors, but the opposite may occur if competitors can reposition themselves. Closer competitors have stronger incentives to reposition away from the advantaged firm, thereby potentially encroaching on rivals more distant from the advantaged firm and propagating the harm to them like the cue ball in billiards transfers energy from cue stick to target ball. Our formal model compares an advantaged firm's closer and farther competitors, when repositioning is allowed or prohibited, and demonstrates when its advantage hurts farther competitors worse than closer ones. We provide an illustrative case study from grocery retailing. Managerial Summary: When Walmart brought its advantage in distribution efficiency to the low end of the grocery retailing industry, it displaced the inefficient downscale incumbent Winn‐Dixie in many geographic areas. One might have expected such increased efficiency at the low end of the market to hurt midscale supermarkets like Kroger more than premium grocers like Whole Foods, yet the opposite occurred. Why? In a word, repositioning. Midscale competitors retreated away from Walmart by repositioning upscale via renovations, which thereby transferred the impact to premium rivals who could not escape any further upscale. Our economic model of this "cue‐ball effect" predicts that the impact propagated onto upper‐end competitors is greater in markets with less income inequality, and our empirical results are consistent with this prediction. [ABSTRACT FROM AUTHOR]

We study a simple model in which two vertically differentiated firms compete in prices and mass advertising on an initially uninformed market. Consumers differ in their preference for quality. There is an upper bound on prices since consumers cannot spend more on the good than a fixed amount (say, their income). Depending on this income and on the ratio between the advertising cost and quality differential (relative advertising cost), either there is no equilibrium in pure strategies or there exists one of the following three types: (1) an interior equilibrium, where both firms have positive natural markets and charge prices lower than the consumer's income; (2) a constrained interior equilibrium, where both firms have positive natural markets, and the high-quality firm charges the consumer's income or (3) a corner equilibrium, where the low-quality firm has no natural market selling only to uninformed customers. We show that no corner equilibrium exists in which the high-quality firm would have a null natural market. At an equilibrium (whenever there exists one), the high-quality firm always advertises more, charges a higher price and makes a higher profit than the low-quality one. As the relative advertising cost goes to infinity, prices become equal and the advertising intensities converge to zero as well as the profits. Finally, the advertising intensities are, at least globally, increasing with the quality differential. Finally, in all cases, as the advertising parameter cost increases unboundedly, both prices converge increasingly towards the consumer's income. [ABSTRACT FROM AUTHOR]

We study the effects of three forms of taxation—a tax levied on the platform's revenue, an ad valorem tax on consumers' access fees and tax imposed on per‐transaction fees of sellers, in vertically differentiated two‐sided duopoly platforms with cross‐side network effects. The level of informative advertising which increases the probability of finding sellers by buyers, declines with taxes for each platform. Analytical comparison between tax regimes has been made. Additionally, for an increased degree of cross‐group externality, platforms raise the level of informative advertising irrespective of tax structures. [ABSTRACT FROM AUTHOR]

Problem definition: For many information goods, longer publication cycles (or batches of information) are more economical, but often result in less timely—and, therefore, less valuable—information. Whereas the digitalization of publication processes has reduced fixed publication costs, making shorter publication cycles more economically viable, competing firms have adapted their publication cycles differently: some of them publish more frequently, whereas others publish less frequently. In the face of growing competition and digitalization, how should information providers change their publication frequency strategies? Methodology/results: In this paper, we build a game-theoretic model to determine how information providers should set their publication cycles and prices in a duopoly. We find that, compared with a monopolistic environment, competition gives rise to differentiation by cycles and expands product variety. Specifically, competing firms should seek to differentiate on their publication frequency when the fixed publication is high and their contents share a high degree of commonality, but not otherwise. Whereas a reduction in the fixed cost of publication tends to yield shorter publication cycles, it could also intensify the competitive dynamics, leading firms to further differentiate their publication cycles, hurting consumer surplus. However, this could be temporary, as firms may ultimately converge in their choices of publication cycles. Managerial implications: The digitalization of publication processes is disrupting many information provision industries (e.g., news, weather, financial). We show that competing firms should anticipate nonmonotone or abrupt changes in their publication strategy as their publication processes get digitalized and may actually be hurt—as well as consumers—in the process of digitalization. Supplemental Material: The e-companion is available at https://doi.org/10.1287/msom.2023.0024. [ABSTRACT FROM AUTHOR]

Desertification is showing a trend of overall reversal and partial expansion in the agro-pastoral ecotone in northern China (APENC). Dune–interdune is the typical micro-topography in APENC and is the expansion area of desertification. Research on anti-desertification strategy at dune–interdune is of great significance to further anti-desertification. This paper studies the vertical differentiation of land use and ecosystem service intensities at dune–interdune in APENC. The fundamental reason of the vertical differentiation of land use and ecosystem service intensities is explored with monitoring data of soil moisture at different locations of dune–interdune. Cultivated land is mainly distributed in areas with an elevation < 241 m. Grain provisioning ecosystem service intensity (GPESI) and maize leaf provisioning ecosystem service intensity (MLPESI) show a downward trend with the increase in elevation at dune–interdune. GPESI has a tipping point at the elevation of 241 m. Forage provisioning ecosystem service intensity and sand fixation regulating ecosystem service intensity are high in areas with low or high elevations while low in the central area. Groundwater depth is the root cause for vertical differentiation of land use and ecosystem service intensities at dune–interdune. According to vertical changes of land use and ecosystem service intensities, and groundwater level, cultivated land with an elevation greater than 241 m should be stopped for cultivation to anti-desertification. The area of dune–interdune within 6 m of groundwater depth can be used as cultivated land. The conclusion has an important reference for other similar regions in the world. [ABSTRACT FROM AUTHOR]

In this paper, we theoretically and empirically analyze the impact of competition on poverty. We consider a general equilibrium framework with vertical preferences and compare poverty in a Monopoly setting versus a Duopoly setting considering explicitly the ownership structure. Poverty is measured by the size of the population living below an absolute poverty line. Theoretical results show that the impact of competition on poverty is contingent to the ownership structure, the poverty line and the relative dispersion of the individuals with respect to their intensity of preference for quality and sensitivity to effort: competition can improve or worsen poverty depending on the model's parameters. Empirical findings for the three existing poverty lines ($1.9, $3.2, and $5.5) are consistent to a large extent with our theoretical results. [ABSTRACT FROM AUTHOR]

ABSTRACTIn the context of a vertically differentiated duopoly model with endogenous quality choice, we analyzes the welfare effect of overlapping ownership when the market is fully covered. The results show that overlapping ownership, while detrimental for consumer surplus, may increase or decrease social welfare and firms’ profits. In particular, when the overlapping ownership structure is such that the lower-quality firm acquires a positive share of the higher-quality firm’s profit, an increase in overlapping ownership reduces the lower-quality firm’s incentive to compete against its rival, leading to a higher level of industry profit and, therefore, a higher level of overall welfare.

Copyright of Journal of Social Sciences & Philosophy is the property of Research Center for Humanities & Social Sciences, Academia Sinica and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

Results of previous studies of the relationship between bank competition and bank risk-taking have differed in findings but most have used the same sort of barriers to perfect competition, such as entry barriers and differences in bank default risk. This study suggests that banks that compete more effectively in the deposit market using nonprice features such as differences in services and advertising gain market power and such market power gives them incentives to take less risk. Banks that compete less effectively take more risk. Empirical evidence supports the predictions of the model. [ABSTRACT FROM AUTHOR]

We develop an optimal licensing model of a product innovation in which the (external) patent holder negotiates sequentially a two-part tariff contract with two potential licensees that have a positive and strategic outside option. We study the role of this strategic outside option in determining technology diffusion and efficiency of the bargaining. Although rich enough contracts allow the solution of the well known opportunism problem, the strategic outside option of the second negotiator implies deviation from industry profit maximization, which reduces the profitability of nonexclusive licensing. As a result, exclusive licensing still prevails under certain conditions. We extend our analysis to assess the profitability for the innovator to integrate vertically with either firm in the market. The internal patent holder always sells the innovation to the rival non-affiliate as a way to co-opt the latter and improve the profits of the former. As a result, vertical integration as compared with vertical separation may imply a positive quality improving effect. The private and social profitability of vertical integration depends on the type of bargaining between the negotiators and on the distribution of their bargaining power. [ABSTRACT FROM AUTHOR]

We study how erroneous nutrition assumptions affect manufacturers' profits and consumer surplus and how the government could intervene to improve welfare. In our model, two manufacturers produce a conventional product and a fad version misperceived to bring health benefits. We compare the laissez-faire outcome to two outcomes: one without false beliefs and the other with information provision reducing the false belief's prevalence. We find that false beliefs about the health benefits of fad products lower consumer surplus and total welfare under some conditions. Information provision generally increases total welfare, but, in some situations, this occurs at the expense of consumer surplus. [ABSTRACT FROM AUTHOR]

We study a simple model in which two vertically differentiated firms compete in prices and mass advertising on an initially uninformed market. Consumers differ in their preference for quality. There is an upper bound on prices since consumers cannot spend more on the good than a fixed amount (say, their income). Depending on this income and on the ratio between the advertising cost and quality differential (relative advertising cost), either there is no equilibrium in pure strategies or there exists one of the following three types: (1) an interior equilibrium, where both firms have positive natural markets and charge prices lower than the consumer’s income; (2) a constrained interior equilibrium, where both firms have positive natural markets, and the high-quality firm charges the consumer’s income or (3) a corner equilibrium, where the low-quality firm has no natural market selling only to uninformed customers. We show that no corner equilibrium exists in which the high-quality firm would have a null natural market. At an equilibrium (whenever there exists one), the high-quality firm always advertises more, charges a higher price and makes a higher profit than the low-quality one. As the relative advertising cost goes to infinity, prices become equal and the advertising intensities converge to zero as well as the profits. Finally, the advertising intensities are, at least globally, increasing with the quality differential. Finally, in all cases, as the advertising parameter cost increases unboundedly, both prices converge increasingly towards the consumer’s income.

Companies in platform-based business markets have widely embraced freemium business models, in which profit is primarily determined by a minority of paying customers. However, the key challenge of these models is transitioning participants from free users to paying consumers. To encourage paid consumption, companies often rely on product differentiation such as providing consumers who pay for products or services with enhanced features. Product differentiation can be broadly classified into two categories: taste differentiation and quality differentiation. The authors demonstrate that extending the magnitude of taste differentiation is an effective differentiation strategy. Quality differentiation, however, is a double-edged sword and should be used with care. Increasing product differentiation leads to greater perceived value of the service, but undermines fairness perceptions. Companies in platform-based business markets have widely embraced freemium business models where profit primarily depends on a minority of paying customers. However, the key challenge of these models is transitioning participants from free users to paying consumers. To encourage paid consumption, companies often rely on product differentiation such as providing consumers who pay for products or services with enhanced features. However, limited research has addressed how such product differentiation may convert consumers from "free" to "fee." Our research examines the multiplayer online battle arena (MOBA) game as a compelling example of a freemium platform-based business model. We contribute to the freemium literature by introducing three new MOBA-specific differentiations—character competency, character variety, and character-appearance differentiation. We also extend consumption values theory into a dual-path model to unveil the underlying mechanisms through which product differentiation influences in-game purchase. We empirically validate our dual-path model using data from a two-wave longitudinal experiment and three cross-sectional experiments. Our findings support opposing mediating paths for product differentiation in character competency and variety and indicate that these two types of differentiation can indeed undermine perceived game fairness. Conversely, character-appearance differentiation exerts only a positive influence on players' purchasing of in-game items. Consequently, the findings of this study have important potential implications for platform-based companies leveraging freemium business models that seek to increase their share of paying customers. History: Eric Zheng, Senior Editor; Robert Gregory, Associate Editor. Funding: This work was supported by the National Natural Science Foundation of China [Grants 71901172, 72171189, and 72132007], the China Postdoctoral Science Foundation [Grant 2020M673434], and the Social Science Foundation of Shaanxi Province [Grant 2021D002]. Supplemental Material: The online appendix is available at https://doi.org/10.1287/isre.2022.1127. [ABSTRACT FROM AUTHOR]

The current paper considers a retailer selling a vertically differentiated configurable product (e.g., a mobile phone), which is a combination of a required component (e.g., CPU) and an optional component (e.g., headphone). Each component consists of several quality-differentiated variants from which customers can choose. Customers differ in their valuation for quality, and each customer independently chooses the variant that maximizes his utility. First, the scenario where a customer's purchase decision depends on the prices and assortments of both the required and optional components is examined. The results indicate that the assortment and price optimization problem for configurable products can be separated into each component category's assortment and price decisions. Furthermore, the optimal assortment of each component category does not depend on the distribution of customer valuations. It is comprised of the variants that are on the lowest convex envelope curve of the quality-cost graph of that category. An efficient algorithm is proposed to identify the retailer's optimal decisions. Then, we examine the case where a customer evaluates an optional variant only if he decides to purchase a required variant. The results suggest that: (i) there exist some relationships between the optimal decisions in the base choice model and that in the sequential choice model; (ii) overlooking the sequential choice behavior may result in broader assortment, suboptimal prices, and profit loss. [ABSTRACT FROM AUTHOR]

The attitudes of developing countries for intellectual property rights (IPR) regulations and law enforcement are ambiguous. We seek to clarify this issue by structuring a model, simultaneously considering the IPR index and the strength of law enforcement of China in period 1996–2015. Firstly, the government of a developing country always holds the strictest attitude towards law enforcement. Secondary, the growing level of IPR leads to the decrease of the total welfare, but the decline of total welfare slows down. Third, the motivation of maximising total welfare induces the governments of developing countries to strengthen law enforcement. This provides internal motivation for development. The findings of this article show that developing countries have long-term internal motivations to improve their strength of IPR levels and law enforcement. [ABSTRACT FROM AUTHOR]

Copyright of Nankai Business Review is the property of Nankai Business Review Editorial Office and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

Problem definition: Onion is an indispensable ingredient of the Indian diet, and plays a vital role in Indian economy, society, and politics. The ever-lasting volatility in its prices leads to significant social unrest. In this paper, we are interested in helping decision makers to rigorously evaluate a recent policy proposal to make dehydrated onion widely available to remedy the situation. Methodology/results: Using a stylized analytical model, we look for conditions under which it is optimal to introduce a processed substitute and whether it should be managed by nonprofit or for-profit firms. We find that the solution is identified by threshold-based policies and outcomes are far better under the nonprofit management. We also find that a nonprofit processing firm may purposefully choose a strategy where consumers do not purchase its offering for a certain medium range of raw onion deterioration levels. In addition, we find that a for-profit firm would always choose to be the lower-quality substitute in the market unless the raw onion deterioration is high. We also find that when supply capacity is constrained, sales of the processed substitute might decrease with increased supply availability. Managerial implications: This is the first paper that takes perishability and consumer welfare into account in a two-period vertically differentiated market model and compares various scenarios of competition when there is consumer prejudice for the processed substitute. For India's policymakers, we find ample evidence to work toward implementing the processed substitute policy. We go deep and discuss tailored insights for certain regions in India. We find that although improved consumer perception is favorable in general, policymakers should be careful about some unintended consequences such as increased prices and lower availability. Funding: O. D. Palsule-Desai acknowledges financial support provided by Indian Institute of Management Indore. Supplemental Material: The e-companion is available at https://doi.org/10.1287/msom.2022.1145. [ABSTRACT FROM AUTHOR]

In this paper, we study how the presence of coordination, competition and cost structures affect the product variety and pricing decisions in a two-stage supply chain. We consider vertically differentiated industries. Products reach the end customers via assembly companies positioned in the middle-tier between the producers and end customers. The assembly operations incur bill-of-materials (BOM) cost, which includes the cost of raw materials and components as well as the cost of producing, managing and synchronising supply, storage and distribution of these materials and components. We consider three coordination scenarios in the supply chain, and compare an uncoordinated supply chain with a horizontal and a vertical coordination scenario using the Nash equilibria of a multi-leader Stackelberg game between the producers and assembly companies. For exogenously given quality levels, we show that producers and assembly companies should either differentiate their product offering, or offer the high-end product only depending on the BOM cost. In addition, the uncoordinated scenario helps reduce the intensity of competition in the supply chain. For endogenous quality levels, partial product-differentiation equilibrium can emerge. Numerical experiments are performed to illustrate the impacts of BOM cost and quality levels on the equilibrium. [ABSTRACT FROM AUTHOR]

In location-based models of price competition, traditional sufficient conditions for existence and uniqueness of an equilibrium (Caplin and Nalebuff in Econometrica 59(1):25–59) are not robust for the firm that serves the right-tail of the consumers' distribution. Interestingly, as we relax these conditions, we observe only two new alternative cases. Moreover, we identify a novel, easily testable condition for uniqueness that is weaker than log-concavity and that can also apply to Mechanism Design. Thanks to this general framework, we can solve the equilibrium of general vertical differentiation models numerically and show that inequality has a U-shaped effect on profits and prices of a high-quality firm. Moreover, we prove that extreme levels of concentration can dissolve natural monopolies and restore competition, contrary to the Uniform case. [ABSTRACT FROM AUTHOR]

This paper examines the effects of a rival's cost increase in a vertically differentiated market with endogenous product qualities. It provides cost-side and demand-side conditions under which a firm gains and under which it loses from its rival's cost increase. We show how the gain or loss depends on: (i) the absence or presence of outside options for consumers; (ii) the degree of heterogeneity in consumer taste for quality; (iii) whether the cost of producing quality involves fixed costs or variable costs; and (iv) the relative quality-production efficiencies of the competing firms. [ABSTRACT FROM AUTHOR]

We study in this paper the effect of the type of information provided by an ecolabel. For this purpose, in the framework of a model of vertical differentiation, we compare the effects of a partial information label (Type I) and a complete information label (Type III) on firms' profits, industry profit, consumers' surplus, environmental damage and social welfare. A partial information label indicates that the environmental quality of a good exceeds some given threshold. The authority issuing a partial information label chooses its labeling criteria while maximizing the social welfare. A complete information label indicates the exact environmental quality chosen by firms. We prove that while a partial information label always improves the social welfare and deteriorates the green firm profit compared to a complete information label, the comparison between the two types of ecolabel in terms of the brown firm's profit, the industry's profit, the consumers surplus and the environment depends in a non-obvious way on the marginal cost of quality and on the environmental sensitivity to quality. [ABSTRACT FROM AUTHOR]

When confronted with a new product, consumers often find it difficult to predict how it will perform, and such uncertainty reduces consumers' willingness to adopt the product. In this paper, we consider a market whereby consumers decide when and which product to buy, given that they know the product quality of the incumbent but are uncertain about that of the entrant. We investigate how consumer uncertainty about product quality affects firms' behavior-based pricing and customer acquisition and retention dynamics. Using a two-period vertical model, we find that, under high-end encroachment, an increase in consumer uncertainty reduces the entrant's profit and hurts the incumbent's profit when the quality differential between the products is relatively small, whereas, under low-end encroachment, increasing uncertainty not only benefits the incumbent but also can favor the entrant. An important implication for entrants is that the marketing activities, which aim to reduce consumer uncertainty about product functionalities, may fail to improve profitability. We also find that the entrant lowers the price for uninformed customers and raises the price for repeat buyers under high-end encroachment but lowers the price for all customers under low-end encroachment. We further examine the subsidy strategy and show that, when the entrant's product has a significant quality advantage and consumer uncertainty is high but not very high, the optimal strategy for the entrant is to acquire all consumers who do not buy from the incumbent by providing subsidies and to drop the low-valuation customers by means of a high price after their uncertainty is resolved. This paper was accepted by Anandhi Bharadwaj, information systems. [ABSTRACT FROM AUTHOR]

This paper studies a manufacturer’s optimal product variety, pricing and scheduling decisions in a single flexible production facility when customers have private information in their marginal valuations for product qualities. In addition to determining the product variety and price of each product, the manufacturer needs to optimise a detailed schedule of production (batch sizes and production sequences) to fully utilise the flexibility of this facility. To achieve the second-degree discrimination, the manufacturer provides multiple products and follows a priority rule in the production schedule. To obtain economies of scale, the manufacturer may offer a composite product targeting the whole population, or choose a dedicated product to serve a proportion of customers. Comparing these three production choices, we observe that the optimal product variety strategy is threshold controlled by the relative ratio of customer arrival rates, the relative difference between customers’ marginal valuations and the production technology. [ABSTRACT FROM AUTHOR]

As an inevitable result of Russia’s higher education policies of the past two decades, new university leaders in and outside of Moscow and St. Petersburg have emerged, and vertical differentiation has increased. Inequality of educational potential has a strong regional dimension, exerting a considerable delayed impact on regional socioeconomic development. Differences in universities’ resources affected their ability to adapt their instructional, research, and administrative processes to change during the pandemic, thus broadening the education and research quality gap in higher education. Some regions may face an increased outflow of youth talent to leading universities or just any colleges based in Moscow and St. Petersburg, which will certainly weaken the socioeconomic growth prospects of Russia’s regions. The pandemic accelerated the debate over this problem and demonstrated readiness of universities for joint efforts. Groundwork was laid for deploying a policy to create a cooperative network of universities and their stakeholders so as to reduce institutional differentiation and promote exchange of experience and competence among universities. This paper investigates into the main characteristics of vertical differentiation in Russian higher education that had been in place when the pandemic broke out and determined whether universities succeeded or failed in switching to distance learning. Furthermore, lockdown measures and their economic impact on different types of universities are analyzed. Finally, we discuss possible avenues and specific considerations for expanding cross-institutional collaboration and engaging stakeholders inuniversity development.

We study how commitment of entrepreneurs to sustainability practices might effectively improve the social and environmental impact of market competition. To this end we devised a market experiment in which profit maximization and socially and environmentally concerned behavior were both potential goals of producers. Our subject pool included two distinct types of students having different prosocial attitudes. The two types adopted significantly different strategies in the treatment group, where producers could contribute to a positive externality, whereas they behaved similarly in the control group, where the only objective was profit maximization. Subjects who were ex-ante more prosocial chose to produce with more focus on the positive externality than their counterparts. However, they failed to actually deliver a larger social impact as a consequence of the market outcome. We conclude that producers often commit to social responsibility, even though well-meaning conducts do not necessarily beget equally good outcomes. [ABSTRACT FROM AUTHOR]

A well-known principle in economics is that firms differentiate their product offerings in order to relax competition. However, in this paper we show that information frictions can invalidate this principle. We build a duopolistic competition model of second-degree price discrimination with information frictions in which (i) an equilibrium always exists with overlapping product qualities, whereas (ii) an equilibrium with nonoverlapping product qualities exists only if both information frictions and the cost of providing high quality are sufficiently small. As a consequence, reasons other than an attempt to soften competition should explain why firms in some cases carry nonoverlapping product lines. This paper was accepted by Matthew Shum, marketing. [ABSTRACT FROM AUTHOR]

Problem definition: We consider an intermediary's problem of dynamically matching demand and supply of heterogeneous types in a periodic-review fashion. Specifically, there are two disjoint sets of demand and supply types, and a reward for each possible matching of a demand type and a supply type. In each period, demand and supply of various types arrive in random quantities. The platform decides on the optimal matching policy to maximize the expected total discounted rewards, given that unmatched demand and supply may incur waiting or holding costs, and will be fully or partially carried over to the next period. Academic/practical relevance: The problem is crucial to many intermediaries who manage matchings centrally in a sharing economy. Methodology: We formulate the problem as a dynamic program. We explore the structural properties of the optimal policy and propose heuristic policies. Results: We provide sufficient conditions on matching rewards such that the optimal matching policy follows a priority hierarchy among possible matching pairs. We show that those conditions are satisfied by vertically and unidirectionally horizontally differentiated types, for which quality and distance determine priority, respectively. Managerial implications: The priority property simplifies the matching decision within a period, and the trade-off reduces to a choice between matching in the current period and that in the future. Then the optimal matching policy has a match-down-to structure when considering a specific pair of demand and supply types in the priority hierarchy. [ABSTRACT FROM AUTHOR]

The paper considers a discrete continuous model where consumers choose quality of the product they buy as well as its usage. The product has two quality dimensions, intrinsic quality and environmental quality, that are in conflict with each other. It analyzes a two-stage game in a vertically differentiated duopoly market, where firms choose intrinsic quality in the first stage, and compete in prices in the second stage. It examines the effects of green network, and environmental regulation in the form of an emission tax on equilibrium qualities, market share, and total emissions. It shows that while both green network effect and environmental regulation, individually, improve the overall environmental quality, the effect is stronger when the tax is imposed in the presence of green network effect. Though an increase in green network effect reduces environmental quality of both firms, the market share of the cleaner firm rises at the expense of the other firm, resulting in an overall improvement of the environment. In the presence of green network effect, an emission tax improves environmental quality of both firms with market shares unaltered, thereby resulting in a reduction in total emissions. The green network effect enhances the effect of an emission tax. We also find that the environmental friendly firm benefits from the green network effect. The optimal tax is increasing in the network effect. [ABSTRACT FROM AUTHOR]

[Objective]The spatial distribution and stoichiometric vertical differentiation rule of soil carbon, nitrogen and phosphorus in different communities of desertification area desertification area are revealed to provide the scientific basis for ecological management and vegetation recovery in Southwest Guizhou karst desertification area.[Method] The vertical distribution and ecosystem stoichiometric characteristics of SOC,TN and TP content in soils with different soil depth of five different communities are discussed.[Result] The variation range of SOC,TN and TP is 11.98-32.91,1.98-4.99 and 0.43-1.69 g/kg respectively. The SOC and TN content decreases with increase of soil depth in general and there is no significance in TP content among different soil layers. The variation range of C∶N,C∶P and N∶P is 4.64-7.87,11.49-33.98 and 1.91-5.28 separately and the vertical direction of their ratios is a high to low pattern with increase of soil depth. The C∶N ratio is lower than national average level and C∶P ratio is higher. The plant growth is easily influenced by N limit when N∶P ratio is less than 14.There are the very significant positive correlations between SOC and TN,SOC and TP,TN and TP.C∶P is very significantly and positively related to C∶N and N∶P.C∶P is significantly and negatively related to TN. There is a reverse effect between SOC and N∶P.[Conclusion]The soil nutrients of the vegetation community recovered by artificial labour are higher than wasteland because the recovered vegetation community has a strong ability of nutrient accumulation. The soil organic carbon is quickly decomposed and efficiently mineralized. The mineralization ability of P element is weak and the effectiveness is low. There are very significant correlations between different nutrients in the research area. The nutrient balance has a strong positive regulatory mechanism in the soil ecosystem. There is a mutual feedback effect between C and N. The proportion of N and P is restricted by C element. [ABSTRACT FROM AUTHOR]

We consider a vertically differentiated model with two identical countries each having initially one firm. In a context of open economies, we investigate whether countries would and should cooperate in the creation of an international label. We compare two options: a unique international ecolabel set up by an international authority and two national ecolabels set up non-cooperatively by two national government-sponsored authorities. Firms then choose their environmental qualities and prices. We prove that relative to the case of national ecolabels, the international label lets the global welfare as it is or improves it. However, the improvement is always at the expense of one of the two countries, in which case the international label is not feasible because of the opposition of the aggrieved country. Finally, under some conditions, a subgame-perfect Nash equilibrium fails to exist in the national labels case, while it always exists with an international label. The international program may be relevant in this case to solve the problem of instability of the market that arises with national ecolabels. [ABSTRACT FROM AUTHOR]

The issue of versioning of information goods has resurfaced, in part as a result of the recent popularity of downloadable contents (DLC) among video game manufacturers. The central idea behind the DLC strategy, zero-day DLCs in particular, is that consumers who find the base version of a game to be sufficiently close to their tastes would want more of its capabilities and would pay a premium to upgrade by purchasing a DLC. To better understand the implications of such a product-line strategy, in this work, we combine the literature on versioning with that on consumer learning. In doing so, we uncover an interesting economic phenomenon that, for an experience good, a manufacturer’s desire to vertically differentiate could actually stem from its inability to otherwise elicit unobserved heterogeneity in consumers’ perceived fit. In other words, we generalize versioning to accommodate both vertical and horizontal heterogeneity. [ABSTRACT FROM PUBLISHER]

Multitier store brands are increasing in significance in retail outlets. In this article, the authors theoretically examine the rationale for the existence of multitier store brands, their optimal quality levels, and their implications for consumer welfare and channel profits. They show that despite the manufacturer's efforts to deter the entry of store brands by providing side payments and/or introducing additional national brands, the retailer will offer multitier store brands in equilibrium. Furthermore, the quality levels of store brands and national brands are interlaced, with a store brand taking the top-quality position unless national brands outnumber store brands. Even though the proliferation of store brands reduces product differentiation, it does not decrease consumer welfare or channel profits. However, store brands hurt the manufacturer's profits and make two-part tariffs ineffective in improving channel coordination. Nonetheless, the retailer can enhance channel coordination by procuring the store brand from the national brand manufacturer. The authors extend their model in several directions to capture additional features of retail markets and assess the robustness of their findings. [ABSTRACT FROM AUTHOR]

We examine a choice of options for an outside innovating firm in Stackelberg duopoly under vertical differentiation. The options for an innovating firm are to enter the market with or without licensing its technology for producing a higher‐quality good by a combination of royalty and fixed license fee, and to license its technology without entry. When the innovating firm licenses its technology to the incumbent firm without entry, its optimal royalty rate is zero. When the innovating firm enters the market with a license to the incumbent firm, and the cost function is strictly concave, its optimal royalty rate is one such that the incumbent firm drops out of the market with a negative fixed license fee. If the cost function is strictly convex, there is an internal solution of the positive optimal royalty rate with positive or negative fixed license fee. Without entry cost, if the cost function is strictly concave, the entry without license and entry with license strategies are optimal, and if it is strictly convex, the entry with license strategy is optimal. [ABSTRACT FROM AUTHOR]

With the accessibility of customers' purchase history and the development of data analytics, firms that have a better understanding of customer behaviours might charge different prices to their repeat and new customers. This mechanism is referred to as behaviour-based pricing (BBP). We model the competition of two vertically differentiated supply chains to study the strategic interaction between upstream contract choices (long-term or short-term) and downstream pricing mechanisms (BBP or not). We show that manufacturers always prefer long-term wholesale contracts. The adoption of BBP will decrease the profits of both manufacturers and the reseller that sells a low-quality product. However, the reseller that sells a high-quality product can benefit from BBP under certain conditions. Interestingly, when the resellers have the power to determine the type of wholesale contracts, a hybrid configuration where one supply chain uses a long-term contract and the other uses a short-term contract, could occur in equilibrium. Moreover, we find that the customers have a higher surplus under BBP, whereas the short-term wholesale contract can further increase the surplus. [ABSTRACT FROM AUTHOR]

Online marketplaces are rapidly shifting the trajectory of the e‐commerce landscape. Brand manufacturers are starkly more dependent on online marketplaces, and for most brands, marketplace presence is not optional but mandatory. At this point, brand executives face a pivotal question in addressing their marketplace presence: What product selling (or distribution) approach should be adopted to leverage this channel for their brand? At its core, there are effectively two options offered to brand executives: selling to the online marketplace (as a 1p vendor); and selling on the marketplace platform (as a 3p seller). Whereas the conventional 1p vendor model is quintessentially the entry point to an online marketplace, some brand manufacturers migrate to the 3p seller model. Many others, however, avoid pulling the 3p trigger. In this paper, we address these two options a brand manufacturer has for selling (or allowing sales of) his product on a marketplace. On the grounds that online marketplaces retain brands at distinct price/quality tiers so as to be both comprehensive and robust, we propose a model of competition between two brand manufacturers whose products (in a category) are vertically differentiated on a quality/performance attribute and a convex marginal production cost is incurred for providing the higher quality. Given there is no single selling strategy on a marketplace that is ideal for all brand manufacturers and strategies would work the best under different market and competitive conditions, we investigate the impact of where a brand stands (vis‐á‐vis his competitor) on the two dimensions of a product‐attribute space on the transitions of 1p brands to 3p sellers on the marketplace platform. We also extend the analysis to the setting where an online retailer decides on whether or not to add a marketplace platform to her existing online marketplace and (if so) on the referral fee percentage at which the product category would be listed. [ABSTRACT FROM AUTHOR]

Background and aims: Most litter decomposition experiments are early term (less than three years) studies. Unfortunately, early and late terms have different decomposition rates due to different chemical compositions and climatic conditions. Therefore, long-term (more than 5 years) experiments are needed to improve our understanding of decomposition dynamics and unique impacts of different litters. Methods: A 90-month field trial was conducted using a litterbag methodology employing 330 litter samples from four tree species along a climatic gradient in Gongga Mountain, on the Qinghai-Tibetan Plateau, China. The remaining litter mass (%) was fitted, and models were evaluated using R2 and Akaike Information Criterion (AIC). Decomposition rates of litters from the same site and climatic gradient were compared based on application of the optimization model. Results: The dual negative exponential function (DNEF) model of each litter had the highest R2 and lowest AIC value of the different models tested. The decomposition rate of all litters at 2250m was higher than that at 3000m. P. purdomii and B.utilis had higher decomposition rates compared to R. faberi and L.cleistocarpus. Conclusions: The DNEF model best described the long-term decomposition pattern of the different litters and temperature was the controlling factor of decomposition along an elevation gradient on Gongga Mountain. Higher decomposition rates of P. purdomii and B.utilis were related to their deciduous traits and lower initial C:N. [ABSTRACT FROM AUTHOR]

• We study competition when firms make different compatibility decisions. • The literature only compares full compatibility with full incompatibility. • We learn each firm's incentive about compatibility rather than collective incentives. • Among symmetric firms, compatibility weakly dominates incompatibility for each firm. • Vertical differentiation generates individual incentives for incompatibility. This paper examines the issue of product compatibility in an oligopoly with three multi-product firms. Whereas most of the existing literature focuses on the extreme cases of full compatibility or full incompatibility, we look at asymmetric settings in which some firms make their products compatible with a standard technology and others do not. Our analysis reveals each firm's individual incentive to adopt the standard, and allows to study a two-stage game in which first each firm chooses its technological regime (compatibility or incompatibility), then price competition occurs given the regime each firm has selected at stage one. When firms are ex ante symmetric, we find that for each firm compatibility weakly dominates incompatibility. In a setting in which a firm's products have higher quality than its rivals' products, individual incentives to make products incompatible emerge, first for the firm with higher quality products, then also for the other firms, as the quality difference increases. This paper sheds lights on markets in which some firms adopt the standard technology but other firms use proprietary systems. [ABSTRACT FROM AUTHOR]

This paper describes how process and product innovations respond to cost and demand changes. In the present model firms simultaneously choose process and product innovations within a model of vertical differentiation and uncovered market. We show that the outcome is unique both in monopoly and in the duopoly. In these outcomes, a demand increase (decrease) enhances (depresses) both process and product innovation, while an increase (decrease) in production costs stimulates (depresses) process innovation but lowers (increases) product one. The insight for these results relies on the scale effect of innovation. Our result can be placed in the ongoing debate on complementarity and substitutability of process and product innovation. [ABSTRACT FROM AUTHOR]

We consider a product variety design problem with respect to both vertical and horizontal differentiation dimensions under a sequential consumer choice process. Consumers have heterogeneous valuations for product quality as well as different preferences for product type. We consider two sequential consumer choice processes: a quality-based choice model where consumers consider product quality first and then product type, and a type-based choice model with the reversed order. Under the quality-based model, the category manager can either adopt vertical differentiation strategy or bi-dimensional differentiation strategy, whereas under the type-based model, the category manager can either adopt horizontal differentiation strategy or bi-dimensional differentiation strategy. We characterise the structure of optimal product category and prices for each product differentiation strategy and develop efficient algorithms for the quality-based consumer choice model. We find that under the quality-based choice model, vertical differentiation strategy is more profitable than bi-dimensional differentiation strategy, whereas under the type-based choice model, horizontal differentiation strategy is preferred over bi-dimensional differentiation strategy. The result is robust considering the impact of heterogeneity in consumer choice process. Thus, further differentiation in quality or type is actually not preferred when consumers follow a sequential consumer choice process. [ABSTRACT FROM AUTHOR]