Dongjoon Lee

• PhD.
• Professor (Full) at Osaka Sangyo University

We consider a vertically related market, in which each downstream firm produces a differentiated product by assembling a key input produced by a common supplier and another input produced by a dedicated upstream firm. On the one hand, vertical integration has the advantage of inducing the common supplier to set a lower input price, but the disadvan...

In network industry under Cournot and Bertrand competition, we examine a model when owners of firms hire biased managers who have incorrect market demand. Contrast to previous studies, we show that (i) regardless of the strength of network externalities when consumers form the responsive and passive expectations, owners realize strategic advantage...

By allowing the supplier to contract simultaneously or sequentially with asymmetric retailers under Bertrand competition, we analyze the welfare implications of banning price discrimination in input markets. In contrast to Cournot competition, we find that: (i) under sequential contracting, the monopolistic supplier prefers to contract with an inef...

This study investigates the strategic commitment of downstream firms' private R&D investments. While an observable investment, as a pre‐production commitment, influences an upstream firm's input price, it affects a rival downstream firm's output. We show that both downstream firms commit to underinvestment (overinvestment) to reduce an input price...

We compare collusion stability under Bertrand and Cournot duopoly with differentiated network products. Contrast to previous studies, we show that (i) the range of collusion incentive is narrower under Cournot competition than under Bertrand competition, unless network externalities are sufficiently strong; (ii) collusion in prices (quantities) is...

We investigate the choice of endogenous timing in the presence of network externalities under Bertrand competition. Contrary to the results of sequentiality in equilibrium, we demonstrate that when managers are being delegated both the market and timing decision, there exists a unique simultaneous move in equilibrium regardless of network externali...

We revisit firms’ strategic delegation in a Cournot game. We consider a market comprising two consumer groups, with either a high or low willingness to pay. In this market, we first consider firms’ identical marginal costs and show that either/both firms’ owners may strategically abandon the delegation option to avoid price collapse. We find three...

This paper examines the endogenous determination of vertical organizationstructure (i.e., vertical integration or separation) when an optimal import tariff is implemented in an import-competing market, where one home firm and one foreign firm engage in price competition under network externalities. The optimal import tariff is higher when the forei...

This study examines the endogenous vertical structure in which each manufacturer sells its product to its exclusive retailer who sells network goods to consumers (i.e. a duopoly in the upstream market) under Bertrand competition and Cournot competition with network externalities. We show that with strong (weak) network externalities under Bertrand...

We examine the endogenous determination of a vertical market in an import‐competing market with import tariff. We show that if firms commit to vertical organization before the government's commitment to trade policy, the home and foreign firms choose vertical separation and vertical integration, respectively, at equilibrium under Bertrand competiti...

This study investigates capacity choice in a vertical structure in which each downstream firm makes its capacity decision, then a monopolistic upstream firm proposes the input price or two‐part tariff contract. Finally, each downstream firm chooses its output (or price). Contrary to the conventional wisdom that both firms hold excess capacity in an...

Fershtman and Judd (1987) show that profit-oriented owners delegate pricing decisions to managers through contracts that incentivize them to behave less aggressively. Hoernig (2012) extends their analysis to environments with network effects and finds that, when network effects are strong enough, the result is reversed and that optimal delegation c...

This paper compares vertical integration and vertical separation with network externalities. Contrary to conventional wisdom, if network effects are stronger than the threshold level of the network externality parameter, manufacturers’ strategic choices of wholesale prices move in opposite directions (i.e., wholesale prices may be strategic substit...

By incorporating port competition into a third-market model consisting of two exporting firms and one importing country, we demonstrate the endogenous choice of port structures (i.e. privatization or public ownership) under either Bertrand or Cournot competition. In contrast to previous studies on port competition, we analyze the port strategy in v...

This study examines a first-mover and a second-mover advantage in a vertical structure in which each upstream firm trades with an exclusive retailer and downstream retailers move sequentially. We provide two main claims. One is that, in Cournot (Bertrand) competition, the leader’s upstream firm sets the input price equal to its marginal cost (equal...

This paper examines whether Bertrand equilibrium in a differentiated duopoly can be duplicated with Cournot competition or not. We show that the degree of product differentiation plays an important role in the duality between those equilibria. Our main claims are two. One is that there exists a unique duality condition that satisfies the equivalenc...

With strategic trade policies, we consider first- and second-mover advantages in a vertical structure given the two-part tariff contract (composed of the input price and the fixed fee) of an upstream firm, where a home and a foreign final-good firms export to a third-country market. We find that the upstream firms’ and governments’ preference order...

Considering the interplay between network externalities and the degree of product substitutability in a vertical structure, we compare the outcomes of vertical integration and vertical separation. In contrast to previous results, we show that when both products are sufficiently close substitutes, there is a threshold level of the network externalit...

This paper compares Bertrand and Cournot competition in a vertical structure in which the upstream firm sets the input price and makes R&D investments. We show that from the downstream firms’ point of view, Cournot competition has the advantage of a more monopolistic effect, leading to the setting of a higher price, but has the disadvantage of indu...

We revisit the classic discussion on the endogenous choice of a price or a quantity contract in a vertically related duopoly with a monopolistic upstream firm. We show, from the perspective of the upstream firm, choosing the price contract is a dominant strategy regardless of the nature of goods. We also show, from the perspective of the downstream...

We consider the issue of first- and second-mover advantages in a vertically related market. First, we show that the standard conclusions about sequential-move games under Bertrand and Cournot competitions can change in the context of a vertically related market. This is because an upstream monopoly can control first- and second-mover advantages by...

In this paper we analyze vertical restraints by two manufacturers in which each sells through a separate retailer who has private information on the uncertain demand it faces. The degree of product differentiation plays an important role in equilibrium. If the products are differentiated, the dominant strategy is for each manufacturer to itself sti...

This paper proposes a Korea fixed income portfolio by using the analytic hierarchy process (AHP). We find that each criterion plays an important role in the portfolio. Nevertheless, the effect of the AHP-portfolio on the total returns is trivial. Therefore, we determine that the decision maker prefers the government bond to the others. We also dete...

This paper studies the two royalty structures: Sales-based Royalty (SBR) and Margin-based Royalty (MBR). From the standpoint of a franchisor, if it is necessary for a franchisee to engage in a marketing activity, the SBR grants a more high-powered incentive scheme to the franchisee than the MBR does. On the other hand, the latter plays a role in al...

We examine which type of assembler－American-type or Japanese-type－will occupy a dominant position in a duopoly competition. An American-type assembler such as GM produces the parts internally, while a Japanese-type such as Toyota purchases them from its affiliated (keiretsu) supplier. This subject is also related to an institutional choice of bound...

This paper analyzes royalty modes in the franchise arrangements of convenience stores under double-sided moral hazard. In Japan, the majority of franchisors charge margin-based royalties based on net margins rather than sales-based royalties based on sales. We show that the franchisor can attain the first-best outcome by adopting margin-based royal...

This paper examines two manufacturers' competition with their own affiliated supplier in duopoly. Each manufacturer purchases intermediate goods from its own affiliated supplier. A cost reduction investment takes place before the intermediate goods are produced by each supplier. We illustrate the asymmetric equilibrium, in the sense that the interm...

This paper studies vertical restraints in a duopoly market when retailers have private information on demand uncertainty. If both manufacturers are able to charge their retailers franchise fees, they will delegate the decision to determine retail prices to their retailers. If both manufacturers are unable to charge their retailers franchise fees, t...

Kyoto University (京都大学) 0048 新制・課程博士 博士(経済学) 甲第14346号 経博第367号 新制/経/238 UT51-2009-D58 2009-03-23 京都大学大学院経済学研究科現代経済・経営分析専攻 (主査)准教授 菊谷 達弥, 教授 成生 達彦, 准教授 宇高 淳郎 学位規則第4条第1項該当