Published papers

I analyze the implications of the Laffont-Tirole type agency problems on oligopolistic market outcomes. In the model, a firm's marginal cost is decreasing in managerial effort and is subject to an additive shock. Both managerial effort and the realization of the shock are a manager's private information. A firm first offers a menu of contract to its manager, and then competes in the product market. As in the model of single principal and single agent, the incentive contracts implement efforts that are distorted downward relative to full information. In this model, with multiple agency relationships, an additional source for upward distortion of effort emerges as a result of the interaction in the product market. The results are robust to whether firms compete in price or quantity.

We analyze price and quality competition in a mixed duopoly in which a profit-maximizing private firm competes against a state-owned public firm. We first show that the welfare-maximizing public firm provides a lower quality product than the private firm when they are equally efficient. In order to maximize social welfare, government manipulates the objective of the public firm that is given by a convex combination of profits and social welfare. It is demonstrated that an optimal incentive of the public firm is welfare maximization under the absence of quality competition, but it is neither welfare maximization nor profit maximization under the presence of quality competition. The result supports a completely mixed objective between welfare and profit maximizations or partial privatization of the public firm.

This paper examines strategic manipulations of incentive contracts in a model where firms compete in quality as well as in price. Compensation schemes for managers are based on a linear combination of profits and sales. For a given level of quality, a firm desires to reduce the manager's compensation when product sales increase; this serves as the firm's commitment to raise prices. Nevertheless, in general, a manager has a stronger incentive to produce goods of higher quality if he is compensated according to sales. Therefore, a compensation scheme that penalizes a manager when sales increase may result in products that are inferior to those of its rival. We show that, depending on the nature of quality, a positive weight on sales may be desirable when firms compete in quality and price. Welfare implications are also explored.

We study the structure of optimal taxation in an economy composed of individuals with the same characteristics except for their productive abilities. We compare the optimal outputs, consumptions and tax rates corresponding to Harsanyi, Nash and Rawls solutions. Some definite results are obtained when there are two types of consumers, and specific studies are made on proportional taxation. We will also give conditions under which the utility level of the more able individual is lower than that of the less able individual and argue that the more able individuals have incentive to pretend to be less able if separate tax rates are applied.

'The author considers a situation where a domestic firm tries to enter the home and foreign markets which are monopolized by a foreign incumbent. The international entry game consists of the home and foreign governments' choices of import tariffs and the entry decision of the domestic firm with technological disadvantage. It is shown that the optimal use of import tariffs may lead to entry promotion or deterrence, depending on the parameters of the demands and costs functions. The author also consider the welfare implications of the Nash tariff equilibrium.'