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on Industrial Competition |
| By: | Armstrong, Mark |
| Abstract: | I survey the use of nonlinear pricing as a method of price discrimination, both with monopoly and oligopoly supply. Topics covered include an analysis of when it is profitable to offer quantity discounts and bundle discounts, connections between second- and third-degree price discrimination, the use of market demand functions to calculate nonlinear tariffs, the impact of consumers with bounded rationality, bundling arrangements between separate sellers, and the choice of prices for upgrades and add-on products. |
| Keywords: | Nonlinear pricing; price discrimination; bundling; multidimensional screening; oligopoly |
| JEL: | D21 D42 L13 L15 M31 |
| Date: | 2015–07 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:65779&r=com |
| By: | Yonezawa, Koichi; Richards, Timothy J. |
| Abstract: | In the consumer packaged goods (CPGs) industry, consumers base their purchase decisions in part on package size because different package sizes offer different levels of convenience. The heterogeneous preference for package size allows manufacturers to use package size as a competitive tool in order to raise margins in the face of higher production costs. By competing in package sizes, manufacturers may be able to soften the degree of price competition in the downstream market, and raise margins accordingly. In order to test this hypothesis, we develop a structural model of consumer demand, and manufacturers' joint decisions regarding package size and price applied to store-level scanner data for the ready-to-eat breakfast cereal category. While others have argued that manufacturers reduce package sizes as a means of raising unit-prices in a hidden way, we show that package size and price are strategic complements – downsizing causes competitors to lower their prices, which leads to further downsizing, and more price competition until a particularly undesirable equilibrium (from the manufacturers perspective) is reached. Our results suggest that package downsizing is not necessarily the best way to extract surplus from consumers as the existing literature would lead us to believe. |
| Keywords: | Differentiated products, discrete choice, package size, pricing, product design, Agribusiness, Demand and Price Analysis, Industrial Organization, Marketing, C35, L13, L66, M31, |
| Date: | 2015–05–26 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea15:205287&r=com |
| By: | Andersen, Per; Vetter, Henrik |
| Abstract: | Roy (Safety First and the Holding of Assets, 1952) argues that decisions under uncertainty motivate firms to avoid bankruptcy. In this paper the authors ask about the behaviour of a monopolist who pre-commits to price when she has only probabilistic knowledge about demand. They argue that pricing in order to maximise the likelihood of survival explains anomalies such as inelastic pricing, why the firm takes on more risk as gains become less likely, and asymmetric responses to demand and cost changes. When demand is a linear demand, the monopolist's response to an increase in the marginal cost is similar to the response when mark-up pricing is used. That is, there is a one-to-one relationship between an increase of the marginal cost and an increase in price. |
| Keywords: | monopoly,uncertainty,safety-first principle |
| JEL: | D42 L12 L21 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:ifwedp:201553&r=com |
| By: | Larue, Bruno; Jeddy, Mohamed; Pouliot, Sébastien |
| Abstract: | Dans un contexte d’enchères séquentielles multi-unitaires, en information complète, on montre que le revenu du vendeur peut augmenter ou diminuer lorsque le nombre d’enchérisseurs augmente, et ce même si un des nouveaux enchérisseurs gagne un des objets. Nous avons recours à des données de l’enchère électronique du porc pour analyser empiriquement l’incidence d’enchérisseurs additionnel sur le prix moyen. Notre méthode d’estimation tient compte de l’endogénéité des invitations lancées à des abattoirs à l’extérieur du Québec. Nous avons identifié un effet négatif que nous expliquons par le fait que l’ajout d’enchérisseurs augmente la concurrence sur les derniers lots mis en vente, mais pas nécessairement sur les premiers......We first show in the context of sequential multi-unit auctions under complete information that a seller’s revenue may increase or decrease as the number of buyers increases, even when the additional bidders win an object. We use data from the Quebec daily hog auction to empirically analyze the effect of invitations extended to bidders from Ontario. Our estimation accounts for the endogenous timing of these rare invitations, but we nevertheless uncover a negative “invitation” effect. We attribute this anti-competitive effect to the fact that the addition of bidders increases competition in late rounds, but not necessarily in early ones. |
| Keywords: | Auctions, livestock, competition, price, Institutional and Behavioral Economics, Livestock Production/Industries, Marketing, D44, C23, |
| Date: | 2013–09 |
| URL: | http://d.repec.org/n?u=RePEc:ags:spaawp:156465&r=com |
| By: | Barrenechea, Martin |
| Abstract: | In this work we extend the model developed in (Aoki and Hu, 2003) in order to cover cost reduction innovations, instead of product innovations originally developed on that article. The results show that smaller innovations are more licensable. Regarding the time factors, infringers like faster innovation and patentees prefer bigger innovations and longer imitation periods. Under some suitable situations, litigation time could support innovation and discourage infringement. However the patent life has ambiguous effects and may promote infringement. |
| Keywords: | Patents, innovation Policy, Applied Game Theory |
| JEL: | L0 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:65842&r=com |
| By: | Roberto Fontana; Diana Moriniello; Andrea Vezzulli |
| Abstract: | We study how technological leadership affects persistence in product innovation. Relying upon a database of 1818 products marketed between 1990 and 1999 by 265 firms active in three markets of the Local Area Network (LAN) industry we first construct a measure of technological leadership and then relate this measure to persistence in innovation. We find that leaders are systematically more persistent innovators than laggards. We also find that leaders in one market can also systematically innovate in a related and adjacent market. Finally, we find a positive correlation between prior patenting activity and persistence in product innovation. |
| Date: | 2015–07 |
| URL: | http://d.repec.org/n?u=RePEc:ise:isegwp:wp102015&r=com |
| By: | Richards, Timothy J.; Hamilton, Stephen F.; Empen, Janine |
| Abstract: | Online shopping is common in many categories of retail goods. The recent trend towards online retailing has created an unprecedented empirical opportunity to examine consumer search behavior using click stream data. In this paper we examine consumer search intensity across a wide range of grocery products that differ in the depth of product assortment. We develop a model of attribute search in which consumers search within a chosen retailer for products that match their tastes, and that equilibrium prices reflect retailers' expectations of how intensively consumers intend to shop. The model predicts an inverse relationship between product variety and attribute search in which greater product variety reduces search intensity and leads to higher retail prices. We test these hypotheses using consumer data on online search and purchase behavior from the comScore Web Behavior Panel. Our results indicate that consumer's search less and pay higher retail prices in categories with deeper product assortments, a finding that suggests deeper product assortments can produce anti-competitive effects in retail food markets mediated through equilibrium responses in consumer search. |
| Keywords: | consumer search, variety, retail prices, attribute search, market power, Consumer/Household Economics, Demand and Price Analysis, Industrial Organization, Marketing, D12, D83, L13, L81, |
| Date: | 2015–05 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea15:202968&r=com |
| By: | Sesmero, Juan P.; Balagtas, Joseph V. |
| Abstract: | We adopt a game theoretic framework to model key features of agricultural procurement markets in order to explore the interaction between capacity constraints and spatial competition and the implications for input pricing by processing plants. A key finding is that the Lofgren’s (1986) equivalence between uniform delivery and FOB pricing for profit-maximizing firms extends to a capacity-constrained monopsonist. Our results also show that the relative dominance of alternative pricing strategies and the efficacy of capacity constraints as a collusion mechanism is not impervious to market structure asymmetries. When plants can procure inputs from areas with different market structures, capacity constraints greatly influence the optimal pricing strategy, the total surplus, and the fraction of such surplus appropriated by processing firms. In particular, when operating under binding constraints, firms “escape” competition by procuring more inputs from less competitive areas, while still benefiting from the “collusion-like” benefits of fixed output. Therefore binding constraints and asymmetric market structures reinforce each other to increase the fraction of total surplus appropriated by processing firms. |
| Keywords: | spatial competition, capacity constraint, competition asymmetry, free-on-board, uniform delivered, Agribusiness, Industrial Organization, |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea15:205790&r=com |
| By: | Poe, Abby; Coatney, Kalyn; Coble, Keith; Freeman, Matt |
| Abstract: | We analyze the impact of various subsidy policies using a two-stage dynamic game between a buyer (intended beneficiary) and two Bertrand suppliers of technical complementary inputs. Though we identify market power is one of the root causes of subsidy incidence, we also find that input product substitutability plays a much larger role. Furthermore, we identify that subsidy incidence occurs across multiple input markets. However, the multiplier effect of the subsidy enhances sector welfare, though disproportionally in favor of the input suppliers. |
| Keywords: | Subsidy Incidence, Differentiated Input Products, Dynamic Bertrand Game, Agricultural and Food Policy, Industrial Organization, Political Economy, H2, Q1, L13, C73, |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:ags:saea14:162507&r=com |
| By: | Suh, Dong Hee; Guan, Zhengfei; Khachatryan, Hayk |
| Keywords: | Demand and Price Analysis, International Relations/Trade, |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea15:205263&r=com |
| By: | Djuric, Ivan; Götz, Linde; Glauben, Thomas |
| Abstract: | In this paper we analyze the impact of the Russian ban on import of pig meat originating in the EU on the domestic pig meat price developments in Russia. We use a regime-switching price transmission model in order to identify possible changes in the long-run equilibrium between the pig meat prices of Russia and its main non-EU trading partners. Our results indicate the reduction of transaction costs in pig meat trade between Russia and its main non-EU trading partners, followed by the increase in transmission of price changes in the long-run. Though, our results indicate completely opposite results concerning domestic price relations between wholesale and end consumer pig meat prices in Russia. Overall, faced with the scarcity of pig meat on the domestic market, Russian consumers bear the biggest burden from the ban in the medium term by being faced with the significant increase in end consumer pig meat prices. |
| Keywords: | import ban, pig meat, price transmission, Russia, Agribusiness, Agricultural and Food Policy, Demand and Price Analysis, Food Security and Poverty, International Relations/Trade, C22, I31, P22, Q11, Q17, Q18, |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea15:205306&r=com |
| By: | Liaukonyte, Jura; Streletskaya, Nadia; Kaiser, Harry M. |
| Abstract: | Consumer preferences for labeled products are often assumed to be exogenous to the presence of labels. However, the label itself (and not the information on the label) can be interpreted as a noisy warning signal. We measure the impact of “Contains” labels and additional information about the labeled ingredients, treating preferences for labeled characteristics as endogenous. We find that for organic food shoppers, the “Contains” label absent additional information serves as a noisy warning signal leading them to overestimate the riskiness of consuming the product. Provision of additional information mitigates the large negative signaling effect of the label |
| Keywords: | Demand Shifts and Rotations, Experimental Economics, Labeling, Signaling effect, Willingness-to-Pay, Agribusiness, Agricultural and Food Policy, Demand and Price Analysis, L13, C21, M31, Q13, Q18, |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea15:205386&r=com |
| By: | Pasirayi, Simba |
| Abstract: | Private brand growth in emerging markets has not kept pace with the growth in private brands elsewhere. For instance in Europe and North America, private brands now constitute an average of 35% of total retail market share, compared to emerging markets, where market shares vary between 1% and 8 %. This study, examines the possibility that variation in private brand performance between developed and emerging economies is due to manufacturers’ market power. In most emerging economies, national brand manufacturers tend to be the sole producers of private brands. This supply arrangement implies that they have inherent market power and can deter retailers from pursing aggressive private brand strategies. |
| Keywords: | Emerging markets, Private Label, South Africa, Manufacturer Market Power, Industrial Organization, Marketing, |
| Date: | 2015–05–20 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea15:205302&r=com |
| By: | Tifaoui, Said; Cramon-Taubadel, Stephan von |
| Keywords: | Demand and Price Analysis, Financial Economics, |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aesc15:204295&r=com |
| By: | Prater, Marvin; Sparger, Adam; O'Neil, Daniel Jr. |
| Abstract: | Since the passage of the Staggers Act in 1980, many railroads have merged. The market share of Class I railroads has increased since then, while the number of Class I railroads has fallen to only seven. Through railroad mergers, rail-to-rail competition has been reduced, railroad market power has increased, and rail costs have fallen by over half in real terms. Over much of this period, most of these reduced costs were passed on to shippers as savings through lower rates. Since 2004, however, average rail rates per ton-mile for all commodities have climbed 36 percent, negating some of the savings over the period. Although some of these real rail rate increases have contributed to record rail profitability and capital investment, most of the rate increases are the result of increased railroad costs; real rail costs, adjusted for productivity, increased 29 percent during the same period. Although deregulation of railroads in 1980 produced more than 550 regional and local railroads throughout America, the 7 Class I railroads originated well over half the grain and oilseed shipments in 2011. |
| Keywords: | railroad, train, market share, deregulation, grain, rates, Agribusiness, |
| Date: | 2014–02 |
| URL: | http://d.repec.org/n?u=RePEc:ags:uamsrr:164478&r=com |