In this note I investigate the outcome of a static price competition between a strong firm (a firm with an established loyal consumer base) and a weak firm (a firm without loyal consumers). The consumers are divided into the strong firm's loyal segment and the switching segment, members of which have heterogeneous tastes for the firms' products. In the presence of loyal consumers, for a large set of the parameters of the demand function, the firms use mixed strategies over a finite number of prices. These strategies can be interpreted as occurrences of sales. The most common case is that of the strong firm's using two prices and the weak firm's using one price. However, when both firms use sales, the weak firm promotes more often than the strong firm.

Our model illustrates how political institutions trade off between the competing goals of representation and governance, where governance is the responsiveness of an institution to a single pivotal voter. We use exogenous variation from the 30-year history of the federal Community Development Block Grant program to identify this trade-off. Cities with more representative governments—those with larger city councils—use more grant funds to supplement city revenues rather than implementing tax cuts, thereby moving policy further away from the governance ideal. In sum, more representative government is not without cost. (JEL D72, H71, R50)

In this paper, I investigate the outcome of a price competition between two firms, each producing two complementary products. Specifically, I study each firm's decision to coordinate price promotions of its products. Consumers are divided into loyals, who purchase both products from their preferred firm, and heterogeneous switchers, who choose between four possible bundles or buy a product in a single category. The switchers are willing to pay some price premium in order to purchase two complementary products that share the same brand name and are produced by the same firm, because they believe that these products are a better match than two complementary products with different brand names. I find that each firm predominantly promotes its complementary products together. This finding is correlationally supported by data in the shampoo and conditioner and in the cake mix and cake frosting categories. This paper was accepted by Pradeep Chintagunta, marketing.

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