Volume 22, Issue 2

I examine a two-period duopolistic market for a durable good where firms compete in prices. Consumers are heterogeneous and can be described according to the following characteristics (i) high valuation and high search intensity; (ii) high valuation and low search intensity; (iii) low valuation and high search intensity; and (iv) low valuation and low search intensity. The market exhibits a new version of the so-called Coasian dynamics. The firms engage in intertemporal price discrimination and only consumers with high valuation and low search intensity purchase the product early. This result is based on a property which dictates that the consumers with high valuation and low search intensity are the most impatient. I call this the skimming through search property. When the difference between the high and the low valuation is small, there is positive probability that the prices in the first period are lower than the prices in the second period, so each firm may set a decreasing sequence of prices in a stochastic sense. Furthermore, when the percentage of consumers with high valuation increases, all consumers pay lower prices. This inter-consumer externality resembles the positive externality caused by an increase in market transparency.

We assess whether the partisanship of local councils affects the level and composition of local public spending by German municipalities. Our identification strategy exploits changes in the party with the absolute majority in the local council, combining an instrumental variable strategy with a matching approach to address potential selection into treatment. We find evidence for strong partisan effects: Communities with a left-wing council majority spend more on ‘people-oriented’ public goods and less on infrastructure than communities with a right-wing dominated council.

We examine gender differences when eliciting distributional preferences as conducted by the Equality Equivalence Test, which has the ability to classify subjects into preferences types. Preferences are elicited when individuals interact with an individual of the same gender and with an individual of the opposite gender. We find elicited preferences are robust across both in-group (same gender) and out-group (opposite gender) interactions. When analyzing the intensity of benevolence (or malevolence) we find that overall women exhibit more malevolence than men, but there is no gender difference for benevolence. Furthermore, women exhibit a higher level of in-group favoritism than men.

It is believed that if there is no informational asymmetry between firms and the government, firms could be remunerated for innovation using optimal taxation rather than patents. We show that under reasonable conditions (such as the government’s inability to customise the tax rate for each firm), patent protection is preferable to a tax/subsidy scheme if the marginal costs of the imitators are sufficiently higher than that of the innovator. Otherwise, the tax/subsidy scheme is preferable. These results hold under Cournot and Bertrand competition with product differentiation, but not for the case of Bertrand competition with homogeneous products. We rationalise these findings as the results of a trade-off between the distortions induced by monopoly under patents and production inefficiency under the tax/subsidy scheme.

Most equivalence scales that are applied in research on inequality do not depend on income, even though there is strong empirical evidence that equivalence scales are actually income-dependent. This paper explores the consistency of results derived from income-independent and income-dependent scales. We show that applying income-independent scales when income-dependent scales would be appropriate leads to violations of the transfer principle. Surprisingly, there are some exceptions, but these require unrealistic and strong assumptions. Thus, the use of income-dependent equivalence scales almost always leads to different assessments of inequality than the use of income-independent equivalence scales. Two examples illustrate our findings.