J. Pinho | Universidade Católica Portuguesa (original) (raw)
Papers by J. Pinho
Journal of Dynamics and Games, 2016
We propose a profit-sharing rule that maximizes sustainability of cartel agreements. This rule is... more We propose a profit-sharing rule that maximizes sustainability of cartel agreements. This rule is such that the critical discount factor is the same for all the firms. If a cartel applies this rule, then asymmetries among firms may not hinder collusion (contrarily to the typical finding in the literature). In the simplest case of a Cournot duopoly in which firms differ in their stocks of capital, we find that the cartel is the least sustainable when one of the firms is approximately two times bigger than the other.
The B.E. Journal of Economic Analysis & Policy, 2015
We study the sustainability of collusion with optimal penal codes in markets where demand growth ... more We study the sustainability of collusion with optimal penal codes in markets where demand growth triggers the entry of a new firm. In contrast to grim trigger strategies, optimal penal codes make collusion easier to sustain before entry than after. This conclusion is robust to changes in the number of entrants and to the consideration of price-setting instead of quantity-setting. A comparison is given between different reactions of the incumbents to entry in terms of sustainability of collusion, incumbents’ profits, entrant’s profits, consumer surplus and social welfare. One of our findings is that the incumbent firms may prefer competition to collusion.
Portuguese Economic Journal, 2011
We study the effect of quadratic differentiation costs in the Hotelling model of endogenous produ... more We study the effect of quadratic differentiation costs in the Hotelling model of endogenous product differentiation. The equilibrium location choices are found to depend on the magnitude of the differentiation costs (relatively to the transportation costs supported by consumers). When the differentiation costs are low, there is maximum differentiation. When they are intermediate, there is partial differentiation, with a degree of differentiation that decreases with the differentiation costs. When they are above a certain threshold, there is no equilibrium. In any case, the socially optimal degree of differentiation is always lower than the equilibrium level. We also study the case of collusion between firms. If firms can combine locations but not prices, they locate asymmetrically when differentiation costs are high and choose maximum differentiation when they are low. When collusion extends to price setting, there is partial differentiation.
Journal of Mathematical Economics, 2014
The B.E. Journal of Economic Analysis & Policy, 2015
Journal of Mathematical Economics, 2014
Portuguese Economic Journal, 2011
We study the effect of quadratic differentiation costs in the Hotelling model of endogenous produ... more We study the effect of quadratic differentiation costs in the Hotelling model of endogenous product differentiation. The equilibrium location choices are found to depend on the magnitude of the differentiation costs (relatively to the transportation costs supported by consumers). When the differentiation costs are low, there is maximum differentiation. When they are intermediate, there is partial differentiation, with a degree of differentiation that decreases with the differentiation costs. When they are above a certain threshold, there is no equilibrium. In any case, the socially optimal degree of differentiation is always lower than the equilibrium level. We also study the case of collusion between firms. If firms can combine locations but not prices, they locate asymmetrically when differentiation costs are high and choose maximum differentiation when they are low. When collusion extends to price setting, there is partial differentiation.
Journal of Mathematical Economics, 2014
Energy, 2014
There is no consensus on the method to set transmission tariffs for natural gas. The entry-exit s... more There is no consensus on the method to set transmission tariffs for natural gas. The entry-exit system is widely used in European markets because it is cost reflective, it allows the network users to separately book capacity for entry and exit points, beyond its pro-competitiveness characteristics. Some authors, however, defend the adoption of the postage stamp (where a single tariff is charged regardless of the origin of the gas), due to its simplicity. Our goal is to compare these two mechanisms of transmission tariff with respect to the impacts on welfare. We find that the welfare effects crucially depend on the size of the internal market and the fixed costs supported by the incumbent firm. If the domestic market is sufficiently large and there are imports from abroad, consumer surplus is higher under the postage stamp system. JEL Classification: L51, L95.
Bulletin of Economic Research, 2012
We introduce asymmetric information about consumers' transportation costs (i.e., the degree of pr... more We introduce asymmetric information about consumers' transportation costs (i.e., the degree of product differentiation) in the model of Hotelling (1929). When the transportation costs are high, both firms have lower profits than in the case of perfect information. Contrarily, both firms may prefer the asymmetric information case if the transportation costs are low (the informed firm always prefers the informational advantage, while the uninformed firm may or may not prefer to remain uninformed). Information sharing is ex-ante advantageous for the firms, but ex-post damaging in the case of low transportation costs. If the information is not verifiable, the informed firm always tends to announce that the transportation cost is high. To induce truthful revelation: (i) the uninformed firm must pay for the informed firm to confess that the transportation costs are low; and (ii) the informed firm must make a payment (to the uninformed firm or to a third party) for the uninformed firm to believe that the transportation costs are high.
We characterize collusion sustainability in markets where demand growth may trigger the entry of ... more We characterize collusion sustainability in markets where demand growth may trigger the entry of a new firm whose efficiency may be different from the efficiency of the incumbents. We find that the profit-sharing rule that firms adopt to divide the cartel profit after entry is a key determinant of the incentives for collusion (before and after entry). In particular, if the incumbents and the entrant are very asymmetric, collusion without sidepayments cannot be sustained. However, if firms divide joint profits through bargaining and are sufficiently patient, collusion is sustainable even if firms are very asymmetric. acknowledges the support from Fundação para a Ciência e Tecnologia (BPD/79535/2011).
Journal of Dynamics and Games, 2016
We propose a profit-sharing rule that maximizes sustainability of cartel agreements. This rule is... more We propose a profit-sharing rule that maximizes sustainability of cartel agreements. This rule is such that the critical discount factor is the same for all the firms. If a cartel applies this rule, then asymmetries among firms may not hinder collusion (contrarily to the typical finding in the literature). In the simplest case of a Cournot duopoly in which firms differ in their stocks of capital, we find that the cartel is the least sustainable when one of the firms is approximately two times bigger than the other.
The B.E. Journal of Economic Analysis & Policy, 2015
We study the sustainability of collusion with optimal penal codes in markets where demand growth ... more We study the sustainability of collusion with optimal penal codes in markets where demand growth triggers the entry of a new firm. In contrast to grim trigger strategies, optimal penal codes make collusion easier to sustain before entry than after. This conclusion is robust to changes in the number of entrants and to the consideration of price-setting instead of quantity-setting. A comparison is given between different reactions of the incumbents to entry in terms of sustainability of collusion, incumbents’ profits, entrant’s profits, consumer surplus and social welfare. One of our findings is that the incumbent firms may prefer competition to collusion.
Portuguese Economic Journal, 2011
We study the effect of quadratic differentiation costs in the Hotelling model of endogenous produ... more We study the effect of quadratic differentiation costs in the Hotelling model of endogenous product differentiation. The equilibrium location choices are found to depend on the magnitude of the differentiation costs (relatively to the transportation costs supported by consumers). When the differentiation costs are low, there is maximum differentiation. When they are intermediate, there is partial differentiation, with a degree of differentiation that decreases with the differentiation costs. When they are above a certain threshold, there is no equilibrium. In any case, the socially optimal degree of differentiation is always lower than the equilibrium level. We also study the case of collusion between firms. If firms can combine locations but not prices, they locate asymmetrically when differentiation costs are high and choose maximum differentiation when they are low. When collusion extends to price setting, there is partial differentiation.
Journal of Mathematical Economics, 2014
The B.E. Journal of Economic Analysis & Policy, 2015
Journal of Mathematical Economics, 2014
Portuguese Economic Journal, 2011
We study the effect of quadratic differentiation costs in the Hotelling model of endogenous produ... more We study the effect of quadratic differentiation costs in the Hotelling model of endogenous product differentiation. The equilibrium location choices are found to depend on the magnitude of the differentiation costs (relatively to the transportation costs supported by consumers). When the differentiation costs are low, there is maximum differentiation. When they are intermediate, there is partial differentiation, with a degree of differentiation that decreases with the differentiation costs. When they are above a certain threshold, there is no equilibrium. In any case, the socially optimal degree of differentiation is always lower than the equilibrium level. We also study the case of collusion between firms. If firms can combine locations but not prices, they locate asymmetrically when differentiation costs are high and choose maximum differentiation when they are low. When collusion extends to price setting, there is partial differentiation.
Journal of Mathematical Economics, 2014
Energy, 2014
There is no consensus on the method to set transmission tariffs for natural gas. The entry-exit s... more There is no consensus on the method to set transmission tariffs for natural gas. The entry-exit system is widely used in European markets because it is cost reflective, it allows the network users to separately book capacity for entry and exit points, beyond its pro-competitiveness characteristics. Some authors, however, defend the adoption of the postage stamp (where a single tariff is charged regardless of the origin of the gas), due to its simplicity. Our goal is to compare these two mechanisms of transmission tariff with respect to the impacts on welfare. We find that the welfare effects crucially depend on the size of the internal market and the fixed costs supported by the incumbent firm. If the domestic market is sufficiently large and there are imports from abroad, consumer surplus is higher under the postage stamp system. JEL Classification: L51, L95.
Bulletin of Economic Research, 2012
We introduce asymmetric information about consumers' transportation costs (i.e., the degree of pr... more We introduce asymmetric information about consumers' transportation costs (i.e., the degree of product differentiation) in the model of Hotelling (1929). When the transportation costs are high, both firms have lower profits than in the case of perfect information. Contrarily, both firms may prefer the asymmetric information case if the transportation costs are low (the informed firm always prefers the informational advantage, while the uninformed firm may or may not prefer to remain uninformed). Information sharing is ex-ante advantageous for the firms, but ex-post damaging in the case of low transportation costs. If the information is not verifiable, the informed firm always tends to announce that the transportation cost is high. To induce truthful revelation: (i) the uninformed firm must pay for the informed firm to confess that the transportation costs are low; and (ii) the informed firm must make a payment (to the uninformed firm or to a third party) for the uninformed firm to believe that the transportation costs are high.
We characterize collusion sustainability in markets where demand growth may trigger the entry of ... more We characterize collusion sustainability in markets where demand growth may trigger the entry of a new firm whose efficiency may be different from the efficiency of the incumbents. We find that the profit-sharing rule that firms adopt to divide the cartel profit after entry is a key determinant of the incentives for collusion (before and after entry). In particular, if the incumbents and the entrant are very asymmetric, collusion without sidepayments cannot be sustained. However, if firms divide joint profits through bargaining and are sufficiently patient, collusion is sustainable even if firms are very asymmetric. acknowledges the support from Fundação para a Ciência e Tecnologia (BPD/79535/2011).