Jae Nahm

Korea University | KU

Entrepreneurs report unverifiable soft information to investors. The credibility of soft information depends on the entrepreneur's reputation concern. In equilibrium, high-talent entrepreneurs, who are better at developing profitable projects in the future and therefore have stronger reputation concerns, signal their talents by producing honest rep...

Since the mid-1990s, antitrust authorities and courts in the U.S and the EU use several merger simulation models to evaluate unilateral effects of horizontal mergers. Merger simulation models combine game theoretic models with some premerger market data such as demand elasticity to predict the impact of the merger on price, consumers' surplus and t...

Previous studies on "tying" are based on the premise that there are clear boundaries between tied products. However, in the computing industry there are constant battles over boundaries between complementary products. A dominant firm in one layer of a multi-layered system usually attempts to extend into other layers by including some of the latter'...

It is a widely adopted practice for firms to announce new products well in advance of actual market availability, especially in the computer industry. In this article, a firm makes pre-announcements on its product, which are "cheap talk." We develop a reputation model of "vaporware" where the product pre-announcement can partially convey informatio...

We examine asymmetric complementary good pricing under sequential moves when a price leader (firm A) produces a main product, whereas a price follower (firm B) produces an enhancer for the main product. We show that under sequential moves there is an additional pricing regime “pseudo complements" besides the two cases obtained under simultaneous...

This paper analyzes the effects of one-way compatibility on technology adoption in a market that is characterized by a free-entry condition on the software side. We show that hardware-backward compatibility increases a new-generation hardware firm’s profit; the effects of software-backward compatibility on the hardware firm’s profits depend on the...

We develop a model in which a main product (called product A) provides a performance quality z by itself, whereas a complementary product (called product B) is useless by itself but enhances the main product's performance quality to q > z. This asymmetric complementarity gives rise to the following results. First, if z is relatively small, then fir...

Borrowers' reputation concerns makes communication of soft or non-verifiable information credible. We find that some misreporting of short-term information has costs as well as benefits. The costs are due to inefficient management of investments, while the benefits are due to the fact that some short-term misreporting facilitates signaling of a fir...

We examine the effect of the most-favored-nation provision in input prices on downstream firms' R and D incentives. Contrary to the previous literature, we show that the effect depends on the extent of substitutability between downstream firms if they compete in two-part tariffs. When a downstream firm lowers its marginal cost, it entails two confl...

Theoretical and factual studies of ways that the rapidly evolving digital economy has changed the structure of different industries, focusing on the software and music industries. Digital technology has dramatically changed the structure of many industrial sectors. The rise of the Internet and increased broadband access have given rise to new busin...

It is a widely adopted practice for firms to announce new products well in advance of actual market availability. The incentives for pre-announcements are stronger in markets with network effects because they can be used to induce the delay of consumers’ purchases and forestall the build-up of rival products’ installed bases. However, such announce...

In open systems, firms give up their property rights to technologies and permit other companies to use these technologies. We ask how an incumbent's architecture choice affects social welfare by altering R&D competition among firms. More specifically, we ask whether an incumbent, by adopting an open system, can establish its socially inefficient te...

While selling an existing product, a durable-goods monopolist may develop a new, improved product. The firm must consider the interaction between its intertemporal pricing and research and development (R&D) decisions. The interactions show a sharp dichotomy depending on pricing regimes. When it is optimal for the firm to continue to sell the old mo...

We extend the Baye and Morgan (2001) model to study competition between price comparison sites in the information market on the internet. We identify one symmetric sub-game perfect Nash equilibrium in which (1) price comparison sites set the same advertising fees; (2) the same proportion of consumers subscribe to each site; (3) each firm mixes betw...

In open systems firms give up their property rights to technologies and permit other companies to use these technologies. The goal of this paper is to understand an incumbent's architecture choice -open versus closed systems in a model with network effects and durable goods pricing. We study how a system choice changes consumers' expectations of a...

This paper looks at a hardware firm's decision to make its products forward and backward compatible in a model with heterogeneous consumer preferences. First, looking at a competitive hardware market, we show that backward compatibility always increases the valuation of hardware by the marginal consumer (who has the lowest valuation among purchaser...

In open systems firms give up their property rights to technologies and permit other companies to use these technologies. We ask whether an incumbent can establish its socially inefficient technology as a market standard by choosing an open system, thus preempting an entrant from developing a more efficient technology. We study how the incumbent's...