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on Industrial Competition |
| By: | João Leão (MIT - Department of Economics, ISCTE - Department of Economics and UNIDE-ERC) |
| Abstract: | This paper examines the use of exclusive dealing agreements to prevent the entry of rival firms. An exclusive dealing agreement is a contract between a buyer and a seller where the buyer commits to buy a good exclusively from the seller. One main concern of the literature is to explain how an incumbent seller is able to persuade the buyers to sign an exclusive dealing agreement that deters the entry of a more efficient rival seller. We propose a new explanation when the buyers are downstream firms and both the seller and the buyers face the threat of entry. In this case, the entry of more efficient upstream seller, by decreasing the market power of the upstream firms, can make entry in the downstream market more attractive. This can lead to further entry in the downstream market and to an increase in the competition faced by the downstream firms. Since part of the bigger surplus created by the entry of a more efficient seller is now captured by the downstream entrant firms, entry in the upstream market does not necessarily benefit the incumbent downstream firms. |
| Date: | 2008–06 |
| URL: | http://d.repec.org/n?u=RePEc:isc:wpaper:ercwp2408&r=com |
| By: | Einy, Ezra; Haimanko, Ori; Moreno, Diego; Shitovitz, Benyamin |
| Abstract: | We show that when firms have incomplete information about the market demand and their costs, a (Bayesian) Cournot equilibrium in pure strategies may not exist, or be unique. In fact, we are able to construct surprisingly simple and robust examples of duopolies with these features. However, we also find some sufficient conditions for existence, and for uniqueness, of Cournot equilibrium in a certain class of industries. More general results arise when negative prices are possible. |
| Keywords: | Oligopoly, Incomplete Information, Bayesian, Cournot, Equilibrium, Existence, Uniqueness |
| JEL: | C72 D43 L13 |
| Date: | 2008–10 |
| URL: | http://d.repec.org/n?u=RePEc:hit:econdp:2008-11&r=com |
| By: | João Leão (MIT - Department of Economics, ISCTE - Department of Economics and UNIDE-ERC); Vasco Santos (FE-UNL and INOVA) |
| Abstract: | New horizontally-differentiated goods involving product-specific network effects are quite prevalent. Consumers’ preferences for each of these new goods often are initially unknown. Later, as sales data begin to accumulate, agents learn market-wide preferences which thus become common knowledge. We call network goods’ markets showing these two features “new network markets.” For such markets, we pinpoint the factors determining whether the market-wide preferred firm reinforces its lead as time elapses, both when market-wide preferences are time invariant and when they may change. The latter case allows for the study of markets subject to consumer fads (unanticipated and fleeting consumers’ preference for one product). We show that in new network markets subject to such fads, the firm that benefits from a fad in a mature phase of the industry may be better off than one that benefits from an equal-strength fad at an earlier stage despite the presence of network effects. Moreover, we show that new network markets are more prone to increased sales dominance of the leading firm than are regular network markets. Finally, we characterize the social-welfare maximizing allocation of consumers to networks and use it to evaluate from a social-welfare viewpoint the market outcomes of both types of new network goods as well as regular network goods. |
| Keywords: | Network Effects, Learning, Horizontal Differentiation, Vertical Differentiation |
| JEL: | L14 |
| Date: | 2008–05 |
| URL: | http://d.repec.org/n?u=RePEc:isc:wpaper:ercwp2308&r=com |
| By: | Tsuchihashi, Toshihiro |
| Abstract: | We consider whether market research can always increase a seller's sales under bilateral asymmetric information. If a monopoly seller provides a high quality object, market research cannot increase sales even when the cost is sufficiently low. A low quality seller, on the other hand, can likely benefit from market research. However, this research has shown that market research alone does not improve sales and that advertising complements market research. Thus the high quality seller can increase sales by using both methods. The availability of advertising and market research to both types of seller results in disappearance of information asymmetry and efficient trade. |
| Date: | 2008–05 |
| URL: | http://d.repec.org/n?u=RePEc:hit:econdp:2008-05&r=com |
| By: | Rodrigo Harrison (Instituto de Economía. Pontificia Universidad Católica de Chile.); Gonzalo Hernández; Roberto Muñoz. |
| Abstract: | This paper studies the welfare implications of equilibrium behavior in a market characterized by competition between two interconnected telecommunication ?rms, subject to constraints: the customers belong to a social network. It also shows that social networks matter because equilibrium prices and welfare critically depend on how people are socially related. Next, the model is used to study e¤ectiveness of alternative regulatory schemes. The standard regulated environement, in which the authority de?nes interconnection ac cess charges as being equal to marginal costs and ?nal prices are left to the market, is considered as a benchmark . Then, we focus on the performance of two di¤erent regulatory interventions. First, access prices are set below marginal costs to foster competition. Second, switching costs are reduced to intensify competition. The results show that the second strategy is more efective to obtain equilibrium prices closer to Ramsey?s level. |
| Keywords: | Access charges, social networks, random regular graphs. |
| JEL: | C70 D43 D60 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:ioe:doctra:350&r=com |