Work in Progress

Abstract. Why do people hold conflicting views on redistributive policies? We develop a simple theory of how beliefs on people's reactions to incentives under different redistributive institutions shape these views. If an agent believes that participants in the economy will react significantly to the lower incentives of more redistributive systems, she will favour less egalitarian policies. Due to her pessimistic beliefs about other agents' altruism, a poor and/or relatively altruistic agent can choose a more capitalist system than a rich and/or more selfish individual. On aggregate, if beliefs are overly pessimistic, there will be too low redistribution compared to what would emerge under complete information about preferences. We provide experimental evidence for our theory.

Abstract. In a vertical oligopoly where a manufacturer contracts with competing retailers who can increase consumer demand through noncontractible effort, we examine how the manufacturer's integration status influences its choice between a Uniform Pricing Policy (UPP) and Individual Resale Price Maintenance (I-RPM), and how this link shapes the profitability and welfare implications of vertical integration. UPP sets a uniform retail price across all retailers, while I-RPM allows for individual pricing for each retailer. With linear pricing, we find that, absent vertical integration, the manufacturer always adopts UPP to avoid the inefficiently high levels of retail effort resulting from intrabrand competition. However, when vertically integrated, the manufacturer continues to adopt UPP under moderate levels of downstream competition to reassure non-integrated retailers that it will not undercut them in the retail market, but it may switch to I-RPM when competition is either very low or very high. Vertical integration unambiguously benefits consumers regardless of a switch to I-RPM.