Daehong Min

We revisit an existing framework of endogenous institution formation for public good provision, incorporating heterogeneous players to address the question, “Who joins an institution that sanctions only its members to provide a public good?” We analyze two models with different sources of heterogeneity. Considering players with heterogeneous wealth levels and valuations of the public good, our first model suggests multiple equilibria at which institution formation is successful. Formation requires each member's valuation to exceed a threshold linked to her contribution ratio. Correlations between valuations and wealth levels influence the equilibrium set's size. Our second model examines sequential decision‐making, uncovering a first‐mover advantage in which non‐members free‐ride on the institution as a second‐order public good.

This study examines the impact of price discrimination on the investment decisions of downstream firms in an intermediate good market. The setting consists of two downstream firms with different marginal costs—one lower than the other—and a monopolistic supplier. The firms decide whether to invest in reducing their marginal costs, with investment costs becoming sunk after the decision. Once these costs are revealed, the supplier offers discriminatory two‐part tariff contracts. Under discriminatory pricing, a unique equilibrium emerges in which the hold‐up problem prevents any investment. However, prohibiting price discrimination mitigates this issue, enabling the more efficient downstream firm to invest in equilibrium. The ban on price discrimination has mixed effects on social welfare. We demonstrate that in some cases, the positive effects of the ban outweigh the negative ones, ultimately enhancing social welfare.