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This article aims at exploring how the monopolist determines the optimal allocation of advertising and pricing when he faces the threat of the potential firm entering the market. When consumers are unable to distinguish the quality of a commodity, they will use the weighted average willingness to pay of the high quality and the low quality goods to be the willingness to pay for the commodity. Because that the average willingness to pay is different among consumers of different types, thus the monopolist¡¦s decisions concerning the allocation of advertising budget and pricing will be influenced. We found that no matter what the average willingness to pay is, as long as the monopolist has the ability to compete against price, the expenditure on advertising will be larger; otherwise, the expenditure on advertising will be smaller.

After experienced two energy crises, the shock of oil price volatility has become more and more critical economically and strategically. In recent years, the phenomena of high demand, high oil production, and high price of oil have resulted in significant impact on economy and people¡¦s welfare in Taiwan. Two major suppliers are Chinese Petroleum Corporation (CPC) and Formosa Petrochemical Corporation (FPC) in Taiwan. Their responsive strategy become more challenging. To discuss this subject deeply, the event study is applied to understand how the differential price strategy influences their operation. Besides, the non-parametric method is also used to analyze the behavior of the competitive price. Empirical results indicate that after taking the measure of remaining price constant, total sales volume of CPC doesn¡¦t increase. In the other hand, total demand of FPC decreases as expected after increasing price. The results also show that CPC¡¦s operation becomes poorer, and FPC¡¦s operation becomes better. The reason behind FPC¡¦s success may be by expanding foreign market timely. However, the statement needs more data to prove it. Finally, two chosen strategic behaviors can¡¦t explain the price setting of unleaded gasoline, but Bertrand¡¦s statement may explain the phenomenon of price-cutting in 98 unleaded gasoline.

In view of the fact that multi-store firms have been normal in a real society, this paper is concerned with the spatial decision of a multi-store firm under price regulation. It is shown that a multi-store firm with monopoly power will select as decision variables the size of a single store and the number of stores at the same time. In the duopolistic market, the new entrant will not compete with all stores of the incumbent on the same location, because of the non-existence of positive profit for both firms in this case. The new entrant will select to locate differently to compete with the incumbent in the short term. It is shown that there exists a Nash equilibrium regardless of whether or not the new entrant sets up its stores in the two ends of the linear market area. However, in the long run, the incumbent will decide not only the size of the stores, but also the locations. Nash equilibrium is shown to exist also in the long run. Finally, some numerical simulations of price regulation on welfare are carried out in the last section. Keywords¡Glocation, multi-store firm, price competition

Thesis advisor: Utku Unver / This dissertation consists of three essays in microeconomic theory: two focusing on insurance theory and one on matching theory. The first chapter is concerned with catastrophe insurance. Motivated by the aftermath of hurricane Katrina, it studies a strategic model of catastrophe insurance in which consumers know that they may not get reimbursed if too many other people file claims at the same time. The model predicts that the demand for catastrophe insurance can ``bend backwards'' to zero, resulting in multiple equilibria and especially in market failure, which is always an equilibrium. This shows that a catastrophe market can fail entirely due to demand-driven reasons, a result new to the literature. The model suggests that pricing is key for the credibility of catastrophe insurers: instead of increasing demand, price cuts may backfire and instead cause a ``race to the bottom.'' However, small amounts of extra liquidity can restore the system to stable equilibrium, highlighting the importance of a functioning reinsurance market for large risks. These results remain robust both for expected utility consumer preferences and for expected utility's most popular alternative, rank-dependent expected utility. The second chapter develops a model of quality differentiation in insurance markets, focusing on two of their specific features: the fact that costs are uncertain, and the fact that firms are averse to risk. Cornerstone models of price competition predict that firms specialize in products of different quality (differentiate their products) as a way of softening price competition. However, real-world insurance markets feature very little differentiation. This chapter offers an explanation to this phenomenon by showing that cost uncertainty fundamentally alters the nature of price competition among risk-averse firms by creating a drive against differentiation. This force becomes particularly pronounced when consumers are picky about quality, and is capable of reversing standard results, leading to minimum differentiation instead. The chapter concludes with a study of how the costs of quality affect differentiation by considering two benchmark cases: when quality is costless and when quality costs are convex (quadratic). The third chapter focuses on the theory of two-sided matching. Its main topic are inefficiencies that arise when agent preferences permit indifferences. It is well-known that two-sided matching under weak preferences can result in matchings that are stable, but not Pareto efficient, which creates bad incentives for inefficiently matched agents to stay together. In this chapter I show that in one-to-one matching with weak preferences, the fraction of inefficiently matched agents decreases with market size if agents are sufficiently diverse; in particular, the proportion of agents who can Pareto improve in a randomly chosen stable matching approaches zero when the number of agents goes to infinity. This result shows that the relative degree of the inefficiency vanishes in sufficiently large markets, but this does not provide a "cure-all'' solution in absolute terms, because inefficient individuals remain even when their fraction is vanishing. Agent diversity is represented by the diversity of each person's preferences, which are assumed randomly drawn, i.i.d. from the set of all possible weak preferences. To demonstrate its main result, the chapter relies on the combinatorial properties of random weak preferences. / Thesis (PhD) — Boston College, 2012. / Submitted to: Boston College. Graduate School of Arts and Sciences. / Discipline: Economics.

This paper is a combination of spatial duopoly model together with consumption externality model. Under the circumstance of heterogeneous products, I will discuss separately the influence of consumption externalities on the optimal equilibrium strategy of the firm. When consumers are characterized with the snob, the equilibrium price tends to be higher; however, consumers are characterized with the conformity, firms will be fierce price competition. Moreover, given the existence of conspicuous goods, consumers purchase a conspicuous good in order to display their relative high income and thereby achieve greater social status. And for this type of conspicuous consumers, the government will generally levy a luxury tax or even prohibit the consumption of the conspicuous good. And finally, by comparing these two cases with the laissez-faire economy, changes in the social welfare are exactly in an opposite direction.

This study analyses and compares the theories relating to advertising and competition in economics literature with their operation in the market-place, and with the attitudes and pronouncements of public policy towards advertising and competition. A survey of the main literature in economic theory concerned with advertising and competition includes the theory of value, the theory of the firm, and theories and empirical studies on the effects of advertising and imperfect competition on prices, profits, barriers to entry and product differentiation. Since no general agreement exists on these theories and research, the review is interspersed with criticisms which have been made about specific features of them, and also a short outline of alternative theories which are considered to give a more accurate account of the behaviour of firms in the real world. Consumer behaviour in the market is then studied from three viewpoints: a summary of the major academic theories of consumer behaviour; the results of some empirical research into consumer behaviour; and eight case histories of products and services which show how products are developed and introduced on the market. Finally, the economic theories are compared with the results of the empirical research and the case histories. The theory and practice of advertising and competition is then compared with extracts from the reports of public bodies to illustrate the attitude of public policy towards advertising and competition. The conclusions draw attention to the major discrepancies which appear to exist between theory and practice, and the implications that follow for public policy which seems to be predominantly based on the theory of the firm and the need to eliminate imperfections in the market such as product differentiation, advertising and non-price competition.

This thesis analyzes the products of Toyota Motor Czech spol. s.r.o. which is a company operating on the Slovak and Czech car market. The work is based on the theoretical knowledge described in the first part. The first part is then followed by a practical section, in which I first describe the current market situation in the automotive industry in Czech and Slovak Republic. Further I characterize the company Toyota Motor Czech spol. s.r.o. itself, then I describe the most important car models and related market segments. Later in the practical part I analyze the models of Toyota in terms of price and marketability over the competition. The final section summarizes the information obtained and gives some recommendations that the company could use in the future to improve the position of individual models.

The purpose of this dissertation is to examine the extent of competition between generic products and therapeutic substitutes under different regulatory regimes in the European Union (EU) pharmaceutical industry. In particular, this study investigates generic competition among the five largest European pharmaceutical markets; the United Kingdom, Germany, France, Italy and Spain, with comprehensive IMS data for 10 years (1994-2003), in order to estimate the effect of generic entry on drug prices at the product level. This analysis finds that generic entry has a negative effect on prices in countries with free pricing originator market, whereas in EU countries with strict price and reimbursement regulation, generic competition is ineffective and/or counterproductive. Fewer generics and less competitive late entrants are consistent with incentives in regulated environments: low regulated prices for originator products discourage generic entry following patent expiration. These findings suggest that regulation of both manufacturers' prices and retail pharmacy prices undermines price competition in the off-patent sector, and that budgetary savings from generic price competition are not realized in countries with strict regulatory systems.