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We study competitive market outcomes in economies where agents have other-regarding preferences (ORPs). We identify a separability condition on monotone preferences that is necessary and sufficient for one's own demand to be independent of the allocations and characteristics of other agents in the economy. Given separability, it is impossible to identify ORPs from market behaviour: agents behave as if they had classical preferences that depend only on own consumption in competitive equilibrium. If preferences, in addition, depend only on the final allocation of consumption in society, the Second Welfare Theorem holds as long as any increase in resources can be distributed in a way that makes all agents better off. The First Welfare Theorem generally does not hold. Allowing agents to care about their own consumption and the distribution of consumption possibilities in the economy, the competitive equilibria are efficient given prices if and only if there is no Pareto-improving redistribution of income.

© The Author 2011. Published by Oxford University Press on behalf of The Review of Economic Studies Limited.

The business world has a healthy appetite for learning from unusual role models. In this article from the 2006 archives, Jamie Anderson, Martin Kupp and Jorg Reckhenrich reveal the entrepreneurial side of an entertainment legend.

© 2011 London Business School

On October 26, 2004, Norman Nicholls - partner of the consulting company "Seattle Management Consultants" in London (UK) - received a phone call from Jesper Lind, board member of Telco-Equipment-Experts. Jesper told Norman: "If you don't change your recommendation on the outsourcing job you are doing for Damotel, our business relationship might suffer in the future."

We examine a multinational firm which has a decreasing marginal cost, and the optimal sales tax policies of the regions where that firm operates. We show that the regions set higher sales taxes than those given by a cooperative equilibrium. Each region fails to fully internalize the effects of its tax level on another region's welfare and the incentives for that region's authority. Exponential cost functions which exhibit economies of scale (for example Cobb-Douglas) and linear demand functions satisfy our assumptions. Our results suggest the need to coordinate sales tax levels between countries and between smaller entities, like states in the United States. Smaller regions benefit more from such coordination. Lowering sales taxes in each region increases welfare for all regions, profits for firms, and consumer welfare.

 

View all ESMT Working Papers in the ESMT Working Paper Series here. ESMT Working Papers are also available via SSRN, RePEc, EconStor, and the German National Library (DNB).

This paper analyses how different types of access regulation to next generation networks affect investments and consumer welfare. The model consists of an investment stage with uncertain returns and subsequent quantity competition. The access price is a function of investment costs and the regulatory regime. A regime with fully distributed costs or a regulatory holiday induces highest investments, followed by risk-sharing and long run incremental costs regulation. Simulations indicate that risk-sharing creates most consumer welfare, followed by regimes with fully distributed costs, regulatory holiday and long run incremental costs, respectively. Risk-sharing benefits consumers as it combines relatively high ex-ante investment incentives with strong ex-post competitive intensity.

The case describes the situation of Dirk von Ameln, permitting director of Nord Stream, in his negotiation efforts to obtain the necessary national permits for the construction of the Nord Stream pipeline. In order to obtain the Danish construction permit, Dirk von Ameln has to reach an agreement with the Danish fishermen, who fear a negative impact on their trade from the construction and operation of the pipeline. The case can be used in its two-party form for introductory negotiation courses. It serves multiple objectives, among them: 1. to understand the steps in preparing negotiations (defining own interests, improving own alternatives, determining the other party's best alternative to a negotiated agreement (BATNA), defining a win set and the objective for the negotiation); 2. to understand the difference between distributive and integrative negotiations, specifically to demonstrate the potential for joint value creation in negotiations with public authorities; 3. to understand the process of negotiation in European cross-border infrastructure projects and its implications on developing company competencies such as management of permitting and communication; and 4. to analyze different approaches to negotiations and their implication on current negotiation strategies and future negotiations and relationships.

What is the best way to design tournaments for status, in which individuals labor primarily for the esteem of their peers? What process, in other words, should organizers of status-based contests impose upon those who covet peer recognition? We propose a formal model of status-based competition that contrasts two competing alternatives. The first, following Merton, is the "Matthew Effect," according to which a tournament's architect directs slack resources to elite actors and thus widens the distribution of rewards by favoring cumulative advantage. The second is the "Mark Effect," under which a tournament's designer instead pushes slack resources to marginal actors and thus tightens the distribution of rewards. Our results suggest that although the Mark Effect is better for the social welfare of most tournaments, the Matthew Effect is preferable in two distinct contexts: in small tournaments where variation in underlying ability translates into acute advantages for the most capable contestants; and in large tournaments whose contestants face constant, rather than rising, marginal costs-a condition we relate to contestants' perception of their work as intrinsically valuable. Our contributions are twofold: We find, counter to the thrust of Merton's work, that cumulative advantage is not invariably optimal for the functioning of status contests; and we identify circumstances in which the production of superstars is likely to make contests for status better off in aggregate. Implications for future research on status and management are discussed.

© 2011 INFORMS

Der steigende Bandbreitenbedarf aufgrund datenintensiver Anwendungen, die Konvergenz verschiedenster digitaler Kommunikationstechnologien sowie die zunehmende kommerzielle Bedeutung des Internet werfen eine der wichtigsten Fragen der kommenden Jahre auf: ob und wie sich das Wirtschaftsmodell des Internet weiterentwickeln muss und welche Rolle der Regulierung in diesem Zusammenhang zukommen sollte. Die Vor- und Nachteile einer Netzneutralitätsregulierung im US-amerikanischen Kontext werden gegenwärtig in den USA - unter Teilnahme führender Wissenschaftler - intensiv debattiert. In Europa gab es zu dem in diesem Zusammenhang eingeleiteten Konsultationsverfahren der Europäischen Kommission in der zweiten Hälfte von 2010 über 300 Stellungnahmen, was das lebhafte Interesse von politischen Entscheidungsträgern und Regulatoren, Wirtschaftsvertretern und der allgemeinen Öffentlichkeit an diesem Thema unter Beweis stellt. Was jedoch fehlt, ist eine eingehende Analyse der Auswirkungen einer Netzneutralitätsregulierung auf potenzielle Internet-Geschäftsmodelle, bei der die verschiedenen Marktbedingungen in Europa, und darunter insbesondere die europäische Zugangsregulierung, berücksichtigt werden.