CEGE - Working Papers / Preprints
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- Endogenous product design and quality when consumers have heterogeneous limited attentionPublication . Cunha, Mariana; Osório C., António M.; Ribeiro, Ricardo M.In some markets, consumers do not know the attributes of all the products that are available in the market, or the prices at which they are offered. To reduce this uncertainty consumers may, at a cost, gather and process information about the attributes and prices of the different products. The uncertainty that persists at the time of purchase affects the competition in the market, via product attributes and prices. We examine the consequences of information costs on firms' product multi-attribute and pricing decisions when consumers have heterogeneous information costs and limited attention. We find that consumers that can gather and process information at approximately no cost rationally select to be attentive while consumers that must incur a cost rationally select to be inattentive. We find also that firms have an incentive to respond to lower information costs by increasing differentiation, but solely along the least-costly attribute dimension and if the proportion of attentive consumers in the market is small. This implies that, as information costs decrease, equilibrium prices may increase in some markets and decrease in others. Further, it implies also that when the cost of an attribute dimension in a market changes, there can be radical shifts in product attributes.
- Mergers of consumer cooperativesPublication . Khorasani, Sina; Korpeoglu, GizemProblem definition: Consumer cooperatives are consumer-owned and managed enterprises that aim to achieve buyer power and maximize their members' welfare. Recently, several cooperatives in major economies, such as the United Kingdom (UK), Italy, and Switzerland, have merged to increase their buyer power and provide lower prices for their members. We seek to understand how these mergers affect market outcomes and consumer welfare. Methodology/results: We build a game-theoretic model of a two-tier supply chain where multiple consumer cooperatives procure a product from a market on behalf of their member consumers. Multiple suppliers produce for this market and can increase their supply by incurring a scale-up cost. We show that mergers of cooperatives reduce the wholesale price, as intended. This enables consumers to allocate more of their income to purchasing other goods, which improves consumer welfare. However, the lower price also induces suppliers to reduce their production quantities, thereby causing each consumer to receive less of the supplied product, which reduces consumer welfare. We find that this underproduction is even more pronounced in industries with low scale-up costs. Thus, we show that mergers harm all consumers when the pre-merger number of cooperatives or the production scale-up cost is below a certain threshold. Otherwise, mergers benefit all consumers. We expand our results by considering horizontally and vertically differentiated cooperatives and show that our main results are robust. We also show that greater differentiation among cooperatives increases the benefit of mergers. Managerial implications: Mergers of cooperatives make a nuanced impact on consumer welfare due to their effect on wholesale prices and production incentives. Policymakers should maintain healthy competition among cooperatives to maximize consumer welfare, especially in markets with low production scale-up costs.
- Barriers to social innovationPublication . Mendes, Américo M. S. Carvalho; Batista, António; Fernandes, Liliana; Macedo, Palmira; Pinto, Filipe; Rebelo, Luis; Ribeiro, Marta; Sottomayor, Miguel; Tavares, Marisa; Verdelho, VítorA deliverable of the project: “The theoretical, empirical and policy foundations for building social innovation in Europe
- Why are incubators important for social innovation?Publication . Mendes, Américo M. S. Carvalho
- What should quality mean in social economy organisations?Publication . Mendes, Américo M. S. Carvalho
- Intermediaries to support social innovationPublication . Mendes, Américo M. S. Carvalho
- Five roles for participation to improve performance in social economy organisationsPublication . Mendes, Américo M. S. Carvalho
- The amazing geometry of price competition with quality dependent production costsPublication . Pires, Cesaltina Pacheco; Pinho, Joana; Jorge, Sílvia Ferreira; Catalão-Lopes, MargaridaThis paper provides a full characterization of price competition in a vertical differentiation model with quality dependent marginal production costs. For each vector of qualities, we determine the Nash equilibrium and show graphically the different market regions for different values of the lowest quality valuation parameter, which reveals an amazing geometry. Besides the classical cases of high-quality monopoly or duopoly with partial or full coverage, we show that, when the high-quality firm has a too high quality, the equilibrium is a low-quality monopoly. Moreover, for positive lowest quality valuation, there always exist interior and corner full coverage duopoly equilibria. On the contrary, partial coverage duopoly do not exist when the lowest consumers’ valuation of quality is high whereas high-quality monopoly are not possible for low values of lowest quality valuation. Our findings are the backbone of future analysis of quality choices and may be relevant for firms and policy makers.
- The Portuguese forests: country level report delivered to the EFFE Project: evaluating financing of forestry in EuropePublication . Mendes, Américo M. S. Carvalho; Feliciano, Diana; Tavares, Marisa; Dias, Rafael
- Organizações de economia social: o que as distingue e como podem ser sustentáveisPublication . Mendes, Américo M. S. Carvalho