In a duopoly model of vertical differentiation, we study market equilibrium and the resulting social welfare following an increase in the consumer's willingness to pay (WTP) for products sold by socially responsible manufacturers. Different types of such changes emerge depending on their effects on consumer heterogeneity. We show that, in most cases, increases in the consumers' social consciousness yield higher profits to socially responsible firms and may lead to higher levels of social welfare, provided that the market structure is left unchanged. However, when an increase in the consumer's social consciousness changes the market structure, welfare may fall, while one of the duopolists' profits rise. The resulting tension between private and social interests calls for a cautious attitude towards information campaigns aimed at increasing the consumer's social consciousness.
a b s t r a c t Hotelling's (1929) principle of minimum differentiation and the alternative prediction that firms will maximally differentiate from their rivals in order to relax price competition have not been explicitly tested so far. We report results from experimental spatial duopolies designed to address this issue. The levels of product differentiation observed are systematically lower than predicted in equilibrium under risk neutrality and compatible with risk aversion. The observed prices are consistent with collusion attempts. Our main findings are robust to variations in three experimental conditions: automated vs. human market sharing rule for ties, individual vs. collective decision making, and even vs. odd number of locations.
In this paper are identified several factors which affect a potential user's willingness to use recycled water for agricultural irrigation. This study is based on the results of a survey carried out among farmers in the island of Crete, Greece. It was found that a higher level of income and education are positively correlated with a respondent's willingness to use recycled water. Income and education are also positively correlated with a potential user's sensitivity to information on the advantages of using non-conventional water resources. Overall, extra information on the advantages of recycled water has a statistically significant impact on reported degrees of willingness to use recycled water.
In this paper we compare two mutually uncorrelated risk-attitude elicitation tasks. In particular, we test for correlation of the elicited degrees of monetary risk aversion at a within-subject level. We show that sufficiently similar incentivized mechanisms elicit correlated decisions in terms of monetary risk aversion only if other risk-related attitudes are accounted for. Furthermore, we ask subjects to self-report their general willingness to take risks. We find evidence of some external validity of the two tasks as predictors of self-reported risk attitudes in general human domains.
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