Chapter 1: Designing Contests with Heterogeneous Agents. This paper studies how to design a contest between agents with heterogeneous abilities under the uncertainty of their performances. We find that the level effort crucially depends on marginal winning probabilities of effort, more rigorously, on the probability density of the expected output gap. In particular, we emphasize that the contest mechanism with heterogeneous agents should be qualitatively different from that with homogeneous ones. The principal often chooses to adopt a worse monitoring technology, to assign less positively correlated tasks, and to announce a winner only if the agent outdoes the rival conspicuously. These schemes are beneficial to the principal only when the agent's abilities are sufficiently different.Chapter 2: Entry Decision with Tying under Quality Uncertainty and Switching Costs. This paper studies primary market monopolist's entry decision into the competitive subsidiary market through tying strategy, in which both primary and subsidiary goods are non-depreciating durables with periodically upgraded. Under the quality uncertainty and switching costs in the subsidiary market, we show that, as switching cost goes up, a primary market monopolist would be more likely to make an early-entry into the subsidiary market to capture future profits from periodic upgrades. From a policy perspective, this result implies that, when antitrust authorities decide whether or not to prohibit primary market monopolist's tying behavior, they have to consider a technical aspect of the good as well that determines the size of switching cost. If switching cost is high, they need to scrutinize tying behavior more strictly at the early stage of market evolution. On the contrary, if the switching cost is low they need to pay more attention as the market progresses more.Chapter 3: Customer Return Policy as a Signal of Quality. This paper presents a signaling model in which the length of return period is used as a signaling device for product quality. Without consumer's interim benefit, we show that there exist multiple separating equilibria, where a seller with a high-quality good offers a longer return period than a specific minimum level while a seller with a low-quality good does not offer return service. All the separating equilibria satisfy the Cho-Kreps intuitive criterion. We find, however, no pooling equilibrium exists since any pooling strategy would be dominated by high-quality seller's deviation to the strategy offering a perfect-information price and a maximum refund period. With interim benefits there could be multiple separating equilibria, but the smallest return period among them satisfies the intuitive criterion. Multiple pooling equilibria could also exist and not all of them would necessarily be eliminated by the intuitive criterion.
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