This paper studies the protectionist effect of a non‐trade policy — a consumption tax — compared to that of a tariff on the Chinese automobile market. Our empirical findings suggest that both the consumption tax and the tariff can protect domestic automakers’ market shares, but they can only shift a small portion of demand from imported cars to domestic cars. This demand exclusion is caused by the weak substitution between imported cars and domestic cars, and it is the underlying reason for the welfare loss caused by both the tariff and the consumption tax. A change in the consumption tax favorable to domestic manufacturers is equivalent to an additional 28% tariff, beyond the explicit 25% tariff, in terms of its protective effect on domestic manufacturers’ market shares.
This paper presents a structural model of code sharing among major U.S. domestic airlines and estimates a profit‐sharing rule. The profit‐sharing rule between partner firms in code sharing is estimated at 0.92, which suggests that the operating carrier acquires around 92% of profits from a round‐trip, and the marketing carrier retains 8% as a commission fee. Meanwhile, the economies of code sharing reduces marginal cost, and firms are able to price at higher markups. This implies that demand increases and consumers have larger surplus if code sharing creates new products.
A challenger wants a resource initially held by a defender, who can negotiate a settlement by offering to share the resource. If Challenger rejects, conflict ensues. During conflict, each player could be a tough type for whom fighting is costless. Therefore, nonconcession intimidates the opponent into conceding. Unlike in models where negotiations happen in the shadow of exogenously specified conflicts, offers made during negotiations determine how conflict unfolds if negotiations fail. In turn, how conflict is expected to unfold determines the players' negotiating positions. In equilibrium, negotiations always fail with positive probability, even if players face a high cost of conflict. Allowing multiple offers leads to brinkmanship—the only acceptable offer is the one made when conflict is imminent. If negotiations fail, conflict is prolonged and not duration dependent.
This paper empirically tests the bottleneck co-ownership theory presented in Boffa and Panzar (2012) by using data in the US airline industry. We present a structural model of codesharing between major airlines and regional airlines. The empirical evidence in this study supports the bottleneck co-ownership theory. The estimation results show that bottleneck co-ownership as a regulatory alternative gains higher welfare than average pricing in disintegrated vertical relation. Consumers benefit with lower product prices and firms have higher profits.
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