| This dissertation addresses two topics on market imperfections. First, chapter 2 presents a theoretical model that focuses on problems associated with informational asymmetry. The model presents a dynamic signaling game between a monopolist manufacturer and a monopolist retailer, where demand is uncertain and only the retailer is privately informed. This study shows that informational asymmetry may provide an explanation of the observation that the retailer may not adjust his/her retail price to new demand conditions. It is shown that both pooling and separating equilibrium exist and pooling equilibrium survives the Cho-Kreps intuitive criterion. Second, chapter 3 provides an empirical analysis of problems associated with market power and firm efficiency. The analysis investigates whether or not the introduction of competition by trade exposure in 1988 has increased the efficiency of the Korean cigarette industry. An input distance function and corresponding duality to the cost function are employed to specify the estimable system of equations. In order to conduct hypothesis tests about competition and efficiency, a bootstrapping technique is used. It was found that both allocative and technical efficiency increased after 1988 market opening. Moreover, for the entire observation period, raw materials and capital were overutilized compared to labor and raw materials, respectively. |
