Duopoly models with a joint capacity constraint

Nie

2021

Preprint

Background: The Resource Tax Law has been officially implemented on September 1, 2020 in China. This law presents the “Fee-to-Tax” reform of water resources. Methods: This article compares the effects of the “Fee-to-Tax” reform under an asymmetric duopoly with perfect information. Results: First, an analysis when all firms simultaneously respond to the water resource policy is conducted. The mechanisms of the two policies are different: the water resource fee affects output by reducing market size, while the water resource tax reduces output by amplifying the weighted cost difference effects between companies. It is shown that the tax works better than the fee for eliminating backward production capacity. Then, a comparison of the situation when companies respond sequentially is carried out. When a low-cost firm is in the leading position, the collection of fees actually reduces the output difference, whereas the tax improves it. When a high-cost firm acts as a leader, the effects depend on the cost difference. When the cost difference between firms is small, the first-move advantage of high-cost firms dominates the cost advantages of low-cost firms. Therefore, a higher tax rate yields a smaller output difference. Conclusions: When cost differences are relatively larger, the cost advantage of low-cost firms dominates the first-move advantage of high-cost firms. Therefore, the “Fee-to-Tax” reform provides some benefits to maintain the environmental development of some water-mining or related industries.

Section: Literature Reviewmentioning

confidence: 99%

Analysis of the Fee-to-Tax Reform on Water Resources in China

Nie

2021

Preprint

“…In other words, attractive communicators are more helpful in changing beliefs and attractive endorsers create more purchase intentions (Kahle & Homer, 1985). Solomon (1996) showed that Performer Q (quotient) Ratings is a core concept of SAT, which reflects the celebrity's popularity among those who recognise the celebrity.…”

Section: Theory Backgroundmentioning

confidence: 99%

“…Cournot quantity competition is a general model in industrial organisation (See Bian et al, 2018;Sacco & Schmutzler, 2011;Tao, Wang, & Yang, 2018). The model about celebrity endorsement is established here and the two firms are assumed to abide Cournot quantity competition, which means they make quantity decision by considering the action of the rival, simultaneously.…”

Section: The Modelmentioning

confidence: 99%

“…4. Performer Q Rating was first issued in Solomon (1996)' famous book named Consumer Behavior and then Shimp (1997) calculated celebrity's Q rating by questionnaire and Q equals to the percentage of sample who know the celebrity divided the percentage of the total sample rating the celebrity as 'one of the favorites', which measured the attractiveness of the celebrity. 5.…”

Section: Notesmentioning

confidence: 99%

See 1 more Smart Citation

Effects of celebrity endorsement on firms’ competition: from industrial organisation perspective

Wang

Economic Research-Ekonomska Istraživanja

Nie

et al. 2019

Self Cite

Product endorsement is employed by many firms and most studies have proceeded based on management perspectives and ignored the strategic effects (or indirect effects). However, as a non-price competition, product endorsement behaviour's strategic effects are valuable to be considered and convenient to be captured by industrial organisation perspective. So, this paper's purpose is to reveal the strategic effects of product endorsement by industrial organisation perspective. First, the results of this paper show that celebrity endorsement decreases the rival's benefits. Second, under a unique endorser, the lower efficiency (measured by marginal production cost) firm's celebrity endorsement improves price difference and dispersion, which are direct effects of product endorsement. The higher efficiency firm's endorsement promotes the producer surplus, consumer surplus and social welfare, which are called indirect effects. Finally, celebrity endorsement has trigger effects. If one firm launches celebrity endorsement, the rational reaction for its rivals is also to engage in a similar behaviour. This paper expands the celebrity endorsement issue from management to economics perspective.

“…Nie (2014) discusses the impact of capacity constraints on the firm size differences, price differences, price dispersion and consumer surplus under different ownership systems. Tao et al (2018) relax the capacity constraints and further study duopoly…”

mentioning

confidence: 99%

Capacity Choice and Government Regulation in a Vertical Industry

Wang

Liu

2020

This paper sets up an industry competition model consisting of two upstream enterprises and two downstream enterprises. Then we rely on the model to explore how non-regulation and different regulatory policies (maximizing the total profits of the upstream enterprises, the social welfare of the upstream industry or the overall social welfare) affect the following factors: the excess capacity, enterprise profits, consumer surpluses, social welfare in the upstream and downstream enterprises and the overall social welfare. The following conclusions are drawn from our research. First, whether and how the government regulates the capacity choice greatly affect the equilibrium outcomes, as well as the welfare distribution among the upstream enterprises, downstream enterprises, and consumers. The specific effects are dependent on market demand and enterprise cost. Second, the government should formulate its regulatory policies on capacity choice based on the overall social welfare of the entire supply chain. If the government aims to maximize the profits of the upstream enterprises, the social welfare of the downstream industry will be negatively affected. Third, excess capacity does not necessarily suppress social welfare. Under certain conditions, the worst scenario of excess capacity may occur under the pursuit of the maximal overall social welfare. Excess capacity may arise from various causes, rather than market competition or government regulation alone. Excess capacity cannot be attributed solely to government failure. These conclusions have some significance for optimizing capacity regulation policies.