Copyright (c) 2008 All rights reserved. http://works.bepress.com/yuk_fai_fong Recent documents in Yuk-Fai Fong en-us Wed, 06 Aug 2008 05:33:08 PDT 3600 http://works.bepress.com/yuk_fai_fong/11 http://works.bepress.com/yuk_fai_fong/11 Mon, 04 Aug 2008 22:15:35 PDT Applying techniques developed by Geanakoplos et al. (1989), this paper analyzes the gift exchange between agents with privately observed nonpaternalistic altruism. I find that gift giving between agents under private information of altruism can be analyzed as a conventional signaling game. After applying standard refinements of signaling games, I show that, over nondegenerate ranges of parameter values, private information introduces systematic and significant biases in agents' behavior. First, agents tend to give larger gifts than under full information. Second, despite that fact that agents have no intrinsic concern for reciprocity or fairness, the more altruistic the recipient is, the more the donor exaggerates the gift size. The second finding gives rise to a new theory of reciprocity according to which private information of unconditional altruism can lead to reciprocal behavior. Yuk-Fai Fong http://works.bepress.com/yuk_fai_fong/10 http://works.bepress.com/yuk_fai_fong/10 Thu, 31 Jul 2008 20:51:53 PDT This paper investigates firms' abilities to tacitly collude when these firms each monopolize a proprietary aftermarket. When firms' aftermarkets are isolated from foremarket competition, they cannot tacitly collude more easily than single product firms do. However, when their aftermarket power is contested by foremarket competition as equipment owners view new equipment as a substitute for their incumbent firm's aftermarket product, the monopoly profit is sustainable among a larger number of firms. More strikingly, as long as existing customers have a shorter market life expectancy than incoming customers, for any discount factor, supranormal profits are sustainable among arbitrarily many firms each selling ex ante identical products. These results suggest the importance of distinguishing between two types of aftermarket power which are often considered to be qualitatively the same. Conditions under which introduction of aftermarket competition hinders firms' ability to tacitly collude are characterized. Yuk-Fai Fong