We show how a monopoly airline uses two ticket types, refundable and non-refundable, to screen consumers with different willingness to pay. Our theoretical model suggests that the difference between these two fares consists of refundability value and price discrimination, and the fare difference diminishes as risk-averse passengers learn about their individual demand uncertainty. Using an original dataset, we find that, after controlling for unobserved seat-and flight-specific characteristics, the empirical evidence from the U.S. airline industry supports our theory.
The authors analyze the optimal network structure of two types of terrorist organizations. In the centralized network, the leadership selects the level of individual effort and the level of group connectivity so as to maximize the expected net welfare of the organization’s membership. Leaders in loosely connected networks will also seek to balance the trade-off between security and communications. However, with decentralized decision making, the individual nodes may not make optimal decisions from the group’s perspective. As a consequence, the decentralized decision-making process is suboptimal from the overall perspective of the network. In particular, the leadership in a centralized network is able to coordinate the activities of all network members and to take advantage of important network externalities.
In this paper, we prove existence and uniqueness of equilibrium in a rentseeking contest given a class of heterogeneous risk-loving players. We explore the role third-order risk attitude plays in equilibrium and find that imprudence is sufficient for risk lovers to increase rent-seeking investment above the risk-neutral outcome. Moreover, we show that rent can be fully dissipated in a standard Tullock contest played by a large number of risk-lovers.
scite is a Brooklyn-based organization that helps researchers better discover and understand research articles through Smart Citations–citations that display the context of the citation and describe whether the article provides supporting or contrasting evidence. scite is used by students and researchers from around the world and is funded in part by the National Science Foundation and the National Institute on Drug Abuse of the National Institutes of Health.