nep-com New Economics Papers
on Industrial Competition
Issue of 2015‒12‒28
twenty papers chosen by
Russell Pittman
United States Department of Justice

  1. Imitation and price competition in a differentiated market By Khan A.; Peeters R.J.A.P.
  2. The robustness of industrial commodity oligopoly pricing strategies By David M. Newbery and Thomas Greve
  3. Beyond the Uniform Distribution: Equilibrium Prices and Qualities in a Vertically Differentiated Duopoly By Caterina Colombo; Corrado Benassi; Alessandra Chirco
  4. Lack of Preemption Under Irreversible Investment By Thomas Fagart
  5. Patent Rights and Innovation by Small and Large Firms By Alberto Galasso; Mark Schankerman
  6. Cost-reduction innovation under mixed economy By Nie, Pu-Yan; Yang, Yong-Cong
  7. The passing-on of price overcharges in European competition damages actions: A matter of causation and an issue of policy By Lombardi, Claudio
  8. The poverty effects of market concentration By Rodriguez Castelan,Carlos
  9. Nonlinear Pricing in Village Economies By Orazio Attanasio; Elena Pastorino
  10. The Impact of Online Sales on Consumers and Firms: Evidence from Household Appliances By Nestor Duch-Brown; Lukasz Grzybowski; Frank Verboven
  11. Let the Music Play? Free Streaming, Product Discovery, and Digital Music Consumption By Luis Aguiar
  12. Prescription Drug Advertising and Drug Utilization: The Role of Medicare Part D By Abby Alpert; Darius Lakdawalla; Neeraj Sood
  13. The Price Ain’t Right? Hospital Prices and Health Spending on the Privately Insured By Zack Cooper; Stuart V. Craig; Martin Gaynor; John Van Reenen
  14. Information Frictions and Adverse Selection: Policy Interventions in Health Insurance Markets By Benjamin R. Handel; Jonathan T. Kolstad; Johannes Spinnewijn
  15. Airport cities and multiproduct pricing By Tiziana D'Alfonso; Valentina Bracaglia; Yulai Wan
  16. Air transport and high-speed rail competition: environmental implications and mitigation strategies By Tiziana D'Alfonso; Changmin Jiang; Valentina Bracaglia
  17. Complementary Alliances with Endogenous Fleets and Load Factors By Achim I. Czerny; Vincent A.C. van den Berg; Erik T. Verhoef
  18. Menthol Cigarette Advertising and Cigarette Demand By Donald Kenkel; Alan Mathios; Hua Wang
  19. Geographic Fragmentation in the EU Market for e-Books: The case of Amazon By Georgios Alaveras; Estrella Gomez Herrera; Bertin Martens
  20. Double Limit Pricing By Gerard van der Meijden; Karolina Ryszka; Cees Withagen

  1. By: Khan A.; Peeters R.J.A.P. (GSBE)
    Abstract: We study the market outcome that evolves in the long-run when price-setting firms, that compete in a differentiated market, are driven by an imitation dynamic. We find that the prices that can evolve in the long-run depend on the level of market differentiation and on the degree of oversight firms have on market decisions and outcomes. The unique symmetric pure Nash equilibrium price is always supported in the long-run, and it is the unique long-run market outcome for high and low levels of differentiation, when there is no oversight or even with limited oversight on market decisions and outcomes. For intermediate levels of differentiation, in addition to the Nash equilibrium price, there is a set of prices that may emerge in the long-run while these other prices are below Nash equilibrium price when there is almost no oversight on market performances, they are above Nash equilibrium price when the oversight on market performances is more acute.
    Keywords: Noncooperative Games; Stochastic and Dynamic Games; Evolutionary Games; Repeated Games; Firm Behavior: Theory; Market Structure and Pricing: Oligopoly and Other Forms of Market Imperfection; Production, Pricing, and Market Structure; Size Distribution of Firms; Oligopoly and Other Imperfect Markets;
    JEL: C72 C73 D21 D43 L11 L13
    Date: 2015
  2. By: David M. Newbery and Thomas Greve
    Abstract: Industrial commodity markets are typically oligopolies in which firms set prices but need to make sunk and durable investment decisions, requiring them to make predictions of future prices. Mark-up pricing models are attractive both for setting prices and predicting future prices for investment analysis. Simple algorithms can find Nash equilibria, but these equilibria are not necessarily robust. This paper examines fixed and proportional mark-up models and demonstrates that they are robust to single firm Nash Cournot deviations but not against more sophisticated deviations in the deterministic case. Cournot equilibria are not robust under demand uncertainty, where proportional mark-up models emerge as the most robust when marginal costs are increasing.
    Keywords: market modelling, mark-up equilibria, robustness, oligopoly
    JEL: C63 C73 D43 L10 L13 L94
    Date: 2015–12–18
  3. By: Caterina Colombo; Corrado Benassi; Alessandra Chirco
    Abstract: The paper proves the existence of a subgame perfect Nash equilibrium in a vertically differentiated duopoly with uncovered market, for a large set of symmetric and asymmetric distributions of consumers, including, among others, all logconcave distributions. The proof relies on the ’income share elasticity’ representation of the consumers’ density function, which ensures the analytical tractability of the firms’ optimality conditions at a high level of generality. Some illustrative examples of the solution are offered, in order to assess the impact of distributive shocks on the equilibrium market configuration.
    Keywords: Vertical differentiation; duopoly; non-uniform distribution; subgame perfect equilibrium; income share elasticity
    JEL: L13 L11 D43 C72
    Date: 2015–12–18
  4. By: Thomas Fagart (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics, CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)
    Abstract: This article considers the classic model of irreversible investment under imperfect competition and stochastic demand and characterizes the markov perfect equilibrium. To do so, I introduce a new way to define strategies permitting the players to create endogenous jumps in the state variable. The markov equilibrium is then similar to the open-loop equilibrium, meaning that the irreversibility of investment does not create a preemption effect in this model. This is due to the form of investment's cost, which creates an incentive to invest as soon as possible, reducing the strategic interaction to the one of a static problem.
    Abstract: Cet article considère le modèle classique d'investissement irréversible en environnement Brownien lorsque la concurrence est imparfaite et caractérise l'équilibre Markovien. Pour ce faire, j'introduis une nouvelle façon de définir des stratégies permettant aux joueurs de faire sauter la variable d'état. L'équilibre Markovien est alors similaire à l'équilibre en Open-loop, ce qui signifie que, dans ce modèle, l'irréversibilité de l'investissement ne crée pas un effet de préemption dans ce modèle. Cela est dû à la forme du coût de l'investissement qui crée une incitation à investir dès que possible, en réduisant l'interaction stratégique entre les entreprises à celui d'un problème statique.
    Keywords: Capacity investment,Cournot competition,Markov-perfect equilibrium,Real option games,Differential games,Investissement en capacité,Concurrence à la Cournot,Equilibre markovien,Option réelle,Jeux différentielle
    Date: 2015–09
  5. By: Alberto Galasso; Mark Schankerman
    Abstract: This paper studies the causal impact of patents on subsequent innovation by the patent holder. The analysis is based on court invalidation of patents by the U.S. Court of Appeals for the Federal Circuit, and exploits the random allocation of judges to control for the endogeneity of the judicial decision. Patent invalidation leads to a 50 percent decrease in patenting by the patent holder, on average, but the impact depends critically on characteristics of the patentee and the competitive environment. The effect is entirely driven by small innovative firms in technology fields where they face many large incumbents. Invalidation of patents held by large firms does not change the intensity of their innovation but shifts the technological direction of their subsequent patenting.
    JEL: K41 L24 O31 O32 O34
    Date: 2015–12
  6. By: Nie, Pu-Yan; Yang, Yong-Cong
    Abstract: Industries with mixed oligopoly are exceedingly popular all over the world, especially in developing countries, such as China. This paper highlights the innovation strategies of mixed duopoly with a (semi-) public firm and another private firm, and the effects of mixed oligopoly on innovation are captured. Firstly, the (semi-) public firm innovates more and produces more than the private firm. Secondly, the degree of the public ownership stimulates the output and innovation. Finally, the price difference and the price dispersion all increase with the degree of the public ownership under independent goods.
    Keywords: innovation,industrial organization,mixed duopoly,game theory
    JEL: C61 C72 D43 L13
    Date: 2015
  7. By: Lombardi, Claudio
    Abstract: This paper analyses the functioning of the passing-on of price overcharges in damages actions for breaches of EU competition law and aims to give a critical appraisal of the present regulatory framework in Europe. In particular, this paper maintains that the European Directive 2014/104, in order to facilitate the claims of damages caused by the infringement of European competition rules and to provide full compensation for those damages, has adopted a complex set of rules placing the burden of proof on the party that has, assumedly, the best access to evidence on the relevant issue. Moreover, it is noted that these rules give a strict definition of the overcharge harm and of its diffusion through the market chain. In this connection, it is argued that the objectives of the Directive are partly compromised by the fact that this restrictive approach fails to take into consideration a number of other subjects who may potentially be damaged by the passing-on of the overcharge harm. Secondly, this paper maintains that the set of rules laid down by the Directive 2014/104 creates a system of presumptions, which, contrary to its intended purpose, is likely to discourage damages actions. Finally, this paper argues that actions by indirect purchasers based on the passing-on of the overcharge will still need to heavily rely on domestic civil law rules in particular on local principles of causation and evidence.
    Keywords: European competition law,damages actions,private enforcement,passing-on,indirect purchaser,passing-on defence,Directive 2014/104,causation,civil liability
    Date: 2015
  8. By: Rodriguez Castelan,Carlos
    Abstract: This paper contributes to the limited literature on the welfare impacts of market concentration by developing a simple model that shows how exogenous variations in market power affect poverty. Increased market power leads to economy-wide welfare losses, because it raises the prices of goods and services for all agents in an economy and thus reduces the relative incomes of households, particularly among the poor. Declines in poverty in this context are only possible in the case wherein the poor have access to a share of oligopolistic rents. Although this scenario seems highly unlikely, this result has important implications for public policy, particularly for economies with less-than-perfect markets and social objectives of poverty eradication. This result suggest the possibility of taxing extranormal rents extracted by firms with market power and redistributing them through targeted lump-sum social transfers, thereby contributing to poverty reduction by mitigating welfare losses from the negative price effect.
    Keywords: Economic Theory&Research,Debt Markets,Markets and Market Access,Access to Markets,Climate Change Economics
    Date: 2015–12–15
  9. By: Orazio Attanasio; Elena Pastorino
    Abstract: We propose a model of price discrimination to account for the nonlinearity of unit prices of basic food items in developing countries. We allow consumers to differ in their marginal willingness and absolute ability to pay for a good, incorporate consumers’ subsistence constraints, and model consumers’ outside options from purchasing a good, such as self-production or access to other markets, which depend on consumers’ preferences and income. We obtain a simple characterization of equilibrium non-linear pricing and show that nonlinear pricing leads to higher levels of consumption and lower marginal prices than those implied by the standard nonlinear pricing model. The model is nonparametrically and semiparametrically identified under common assumptions. We derive nonparametric and semiparametric estimators of the model’s primitives, which can easily be implemented using individual-level data commonly available for beneficiaries of conditional cash transfer programs in developing countries. The model well accounts for our data on rural Mexican villages. Importantly, the standard nonlinear pricing model, a special case of our model, is almost always rejected. We find that sellers have large degrees of market power and exert it by price discriminating across consumers through distortionary quantity discounts. Contrary to the prediction of the standard model, consumption distortions are less pronounced for individuals purchasing small quantities, despite the steep decline of observed unit prices with quantity. Overall, most consumers tend to benefit from nonlinear pricing relative to linear pricing. A novel result is that when sellers have market power, policies such as cash transfers that affect households’ ability to pay can effectively strengthen sellers’ incentive to price discriminate and thereby give rise to asymmetric price changes for low and high quantities, which exacerbate the consumption distortions associated with nonlinear pricing. We find evidence of these patterns in response to transfers in our data. These results confirm the importance of our proposed extension of the standard nonlinear pricing model in evaluating the distributional effects of nonlinear pricing.
    JEL: D42 D43 D82 I38 O12 O13 O22
    Date: 2015–11
  10. By: Nestor Duch-Brown (European Commission - JRC - IPTS); Lukasz Grzybowski (Telecom Paris Tech); Frank Verboven (Katholieke Universiteit Leuven)
    Abstract: In this paper, we estimate a differentiated products demand model to ask three questions regarding the introduction of e-commerce. First, we ask whether the online distribution channel has increased total sales, or only diverted sales from traditional channels. We find that there is some market expansion effect but also a considerable sales diversion. Second, we ask who benefited most from online sales: consumers or firms. We find that consumers benefited more, which is entirely due to the appearance of an additional distribution channel and not due to increased competition. Third, we ask how the online channel has affected European market integration. We find that international price differences for identical products are larger in the traditional channel than online. However, there is still substantial market segmentation in the online channel between the EU countries. The introduction of e-commerce therefore did not influence price levels and price dispersion in the traditional channel.
    Keywords: e-commerce, online sales, substitution, consumer welfare, nested logit
    JEL: L13 L68 L86
    Date: 2015
  11. By: Luis Aguiar (European Commission - JRC - IPTS)
    Abstract: Interactive music streaming services have grown tremendously in recent years, raising questions about their eects on digital music sales and piracy. While often overlooked in practice, theoretical considerations suggest that these eects may differ according to the streaming services' functionality. Premium subscriptions, for instance, oer consumers unlimited and unconstrained access to music, providing little incentives to acquire digital music through alternative channels of consumption. On the other hand, free and advertisement-supported services provide consumers with very limited mobility in their usage. If music streaming allows for the discovery of new products, and if consumers value mobility, then free streaming services may well stimulate the use of channels that oer the possibility of mobile consumption. We rely on individual-level clickstream data on a representative sample of 5,000 French Internet users to study the question of how free music streaming aects music purchasing and piracy behavior. We exploit the introduction of a listening cap by the French streaming platform Deezer in June 2011 to identify this causal eect in a dierence-in-dierences setting. Our results show that free streaming services stimulate alternative channels of music consumption that oer mobility. We nd that users of Deezer's free streaming services visited licensed downloading websites up to 2.9% less than they would have had the restriction not been introduced. Similarly, they decrease their visits to unlicensed downloading websites by as much as 2%. Our ndings are indicative of online music streaming serving as an information channel for the discovery of new products, and our analysis serves as a rst step toward understanding the heterogeneity of eects that streaming platforms may have on the rapidly changing recorded music industry.
    Keywords: Music Streaming, Music Industry, Copyright
    JEL: K42 L82 O34 O38
    Date: 2015
  12. By: Abby Alpert; Darius Lakdawalla; Neeraj Sood
    Abstract: Pharmaceutical firms currently spend over $4 billion on direct-to-consumer advertising (DTCA) of prescription drugs, a nearly 30-fold increase since 1993 that has led to much debate about its value to patients. We examine how DTCA influences drug utilization along the extensive and intensive margins by exploiting a large and plausibly exogenous shock to DTCA driven by the introduction of Medicare Part D in 2006. Using data on advertising for local media markets from Nielsen, we show that Part D led to large relative increases in DTCA in geographic areas with a high concentration of Medicare beneficiaries compared to areas with a low concentration. We examine the effects of this sudden differential increase in advertising on non-elderly individuals to isolate the effects of advertising on drug utilization from the direct effects of Part D. Using data from pharmacy claims, we find substantial differential increases in drug utilization that mirror the increases in DTCA after Part D. These effects are driven both by increased take-up of treatment and improved drug adherence. Our results imply significant spillovers from Medicare Part D onto the under-65 population and an important role for non-price factors in influencing prescription drug utilization.
    JEL: H51 I10 I18
    Date: 2015–11
  13. By: Zack Cooper; Stuart V. Craig; Martin Gaynor; John Van Reenen
    Abstract: We use insurance claims data for 27.6 percent of individuals with private employer-sponsored insurance in the US between 2007 and 2011 to examine the variation in health spending and in hospitals’ transaction prices. We document the variation in hospital prices within and across geographic areas, examine how hospital prices influence the variation in health spending on the privately insured, and analyze the factors associated with hospital price variation. Four key findings emerge. First, health care spending per privately insured beneficiary varies by a factor of three across the 306 Hospital Referral Regions (HRRs) in the US. Moreover, the correlation between total spending per privately insured beneficiary and total spending per Medicare beneficiary across HRRs is only 0.14. Second, variation in providers’ transaction prices across HRRs is the primary driver of spending variation for the privately insured, whereas variation in the quantity of care provided across HRRs is the primary driver of Medicare spending variation. Consequently, extrapolating lessons on health spending from Medicare to the privately insured must be done with caution. Third, we document large dispersion in overall inpatient hospital prices and in prices for seven relatively homogenous procedures. For example, hospital prices for lower-limb MRIs vary by a factor of twelve across the nation and, on average, two-fold within HRRs. Finally, hospital prices are positively associated with indicators of hospital market power. Even after conditioning on many demand and cost factors, hospital prices in monopoly markets are 15.3 percent higher than those in markets with four or more hospitals.
    JEL: I11 L10 L11
    Date: 2015–12
  14. By: Benjamin R. Handel; Jonathan T. Kolstad; Johannes Spinnewijn
    Abstract: A large literature has analyzed pricing inefficiencies in health insurance markets due to adverse selection, typically assuming informed, active consumers on the demand side of the market. However, recent evidence suggests that many consumers have information frictions that lead to suboptimal health plan choices. As a result, policies such as information provision, plan recommendations, and smart defaults to improve consumer choices are being implemented in many applied contexts. In this paper we develop a general framework to study insurance market equilibrium and evaluate policy interventions in the presence of choice frictions. Friction-reducing policies can increase welfare by facilitating better matches between consumers and plans, but can decrease welfare by increasing the correlation between willingness-to-pay and costs, exacerbating adverse selection. We identify relationships between the underlying distributions of consumer (i) costs (ii) surplus from risk protection and (iii) choice frictions that determine whether friction-reducing policies will be on net welfare increasing or reducing. We extend the analysis to study how policies to improve consumer choices interact with the supply-side policy of risk-adjustment transfers and show that the effectiveness of the latter policy can have important implications for the effectiveness of the former. We implement the model empirically using proprietary data on insurance choices, utilization, and consumer information from a large firm. We leverage structural estimates from prior work with these data and highlight how the model's micro-foundations can be estimated in practice. In our specific setting, we find that friction-reducing policies exacerbate adverse selection, essentially leading to the market fully unraveling, and reduce welfare. Risk-adjustment transfers are complementary, substantially mitigating the negative impact of friction-reducing policies, but having little effect in their absence.
    JEL: D8 D82 G22 I11 I13
    Date: 2015–11
  15. By: Tiziana D'Alfonso (Department of Computer, Control and Management Engineering Antonio Ruberti (DIAG), University of Rome La Sapienza, Rome, Italy); Valentina Bracaglia (Department of Computer, Control and Management Engineering Antonio Ruberti (DIAG), University of Rome La Sapienza, Rome, Italy); Yulai Wan (Department of Logistics and Maritime Studies, Hong Kong Polytechnic University, Hung Hom, Kowloon, Hong Kong)
    Abstract: We study multiproduct pricing of core and side goods in the case of a (monopoly) airport city. The consumption of the side services is not conditional on the consumption of the core service, i.e., travellers as well as non-travellers may demand side goods but derive different benefits. We obtain several results in two different settings. The first one depicts the case in which individuals make decisions about buying core and side goods independently. In this case, non-traveller demand induces the facility to increase the core price with respect to the case in which only travellers may purchase side services. In the second one, individuals make decisions simultaneously, depending on their degree of foresight over the surplus that they anticipate to obtain from the consumption of side goods. In this case, the non-passenger demand might incentivizes the transport facility to charge lower core price, with respect to the case in which only travellers may purchase side services. Manipulating the side products mix in order to enrich the shopping experience of travellers (i.e., to increase the benefit that they derive from the joint consumption of core and side goods) may be welfare-enhancing. Traveller surplus would certainly increase, but such positive effects occur to the detriment of non-travellers, who find themselves to pay a higher price for side products, whatever is the level of consumer foresight.
    Keywords: monopoly; multiproduct pricing; complementarity effect; demand effect; hierarchical demands; airport city
    Date: 2015
  16. By: Tiziana D'Alfonso (Department of Computer, Control and Management Engineering Antonio Ruberti (DIAG), University of Rome La Sapienza, Rome, Italy); Changmin Jiang (Asper School of Business, University of Manitoba, 181 Freedman Crescent, Winnipeg, Canada); Valentina Bracaglia (Department of Computer, Control and Management Engineering Antonio Ruberti (DIAG), University of Rome La Sapienza, Rome, Italy)
    Abstract: We develop a duopoly model to analyse the environmental impact of high-speed rail (HSR) introduction in a market for travel served by air transport. We take into account simultaneously the effects on the environment of induced demand, schedule frequency and HSR speed and we show that competition between the two modes may be detrimental to the environment depending on the magnitude of the pollution level of HSR relative to air transport. We conduct a simulation study based on the LondonÐParis market and we find that the introduction of HSR increases local air pollution (LAP) but decreases greenhouse gases (GHG) emissions. Moreover, we perform a sensitivity analysis of our results towards the level of HSR and air transport emissions. We find that modal competition is more likely to be detrimental to the environment when such ratio is relatively high. Furthermore, when mixed public/private-owned HSR takes into account the surplus of consumers and the surplus that the other (air) transport operator brings about, we find that modal competition is more likely to be detrimental to the environment than in the case of a fully private HSR. Finally, we provide an interpretive discussion of the results with respect to the different mitigation strategies available to the two transport modes and EU policy measures for the environment Ð which might jointly affect the ratio between HSR and air transport emissions.
    Keywords: High-speed rail ; Airlines ; Competition ; Environment ; Mitigation Policies ; London-Paris market
    Date: 2015
  17. By: Achim I. Czerny (Hong Kong Polytechnic University, Hong Kong, PR China); Vincent A.C. van den Berg (VU University Amsterdam, the Netherlands); Erik T. Verhoef (VU University Amsterdam, the Netherlands)
    Abstract: This paper analyzes the effect of carrier collaboration on fleet capacity, fleet structures in terms of the number and the size of vehicles, and load factors. The model features complementary networks, scheduling, price elastic demands, and demand uncertainty. For the case of a given number of vehicles, the analysis shows that carrier collaboration increases vehicle sizes (thus, fleet capacity) if marginal seat costs are low while fleet capacity remains unchanged if marginal seat costs are high. If both vehicle sizes and vehicle numbers can be varied, then collaboration will always increase vehicle numbers and fleet capacity, while the effects on vehicle sizes and, thus, also load factors, are ambiguous and therewith hard to predict. Numerical simulations indicate that collaboration increases expected load factors also when the number of vehicles is endogenous.
    Keywords: Alliances; fleet capacity; load factors; scheduling; uncertainty
    JEL: L40 L50 M21 R42 R49
    Date: 2015–12–18
  18. By: Donald Kenkel; Alan Mathios; Hua Wang
    Abstract: The FDA is considering using its regulatory authority over the tobacco industry to promote public health by restricting the advertising of menthol cigarettes. In this paper we contribute new empirical evidence on the effects of magazine advertisements for menthol cigarettes on cigarette demand. Unlike previous research on cigarette advertising and demand, we use individual-level data and a measure of advertising exposure based on each consumer’s magazine-reading habits. These data allow us to control for individual heterogeneity that influences both advertising exposure and cigarette demand. We exploit quasi-experimental variation in advertising exposure in the 2000s created by sharply different supply-side variation in menthol and non-menthol advertising. We examine the importance of controlling for heterogeneity by estimating simple models relating advertising exposure to behavior and then adding specifications that take advantage of the richness of our individual-level data. We examine advertising effects on multiple margins of cigarette demand. Our empirical results do not provide any evidence that menthol advertising in magazines affects cigarette demand at various margins: the probability of menthol use; smoking participation; the number of cigarettes smoked per day; the probability of a past-year quit attempt; and anti-smoking attitudes among teens.
    JEL: I12
    Date: 2015–12
  19. By: Georgios Alaveras (European Commission – JRC - IPTS); Estrella Gomez Herrera (European Commission – JRC - IPTS); Bertin Martens (European Commission – JRC - IPTS)
    Abstract: This study examines geographical market segmentation in the market for e-books in the EU, based on data from the Amazon Kindle e-books store, the market leader. Residents in all EU countries have access to the Amazon US Kindle store. However, access to Amazon's 6 e-book stores in the EU (UK, Germany, France, Spain, Italy and the Netherlands) is restricted to residents in each of these countries and in 4 neighbouring countries with which they share a language. There is no cross-border store access between these 6 countries. Because e-book catalogues are 93% overlapping between these 6 stores, cross-border access restrictions do not significantly affect cross-border availability in the EU6+4=EU10. Even for the remaining EU18 cross-border availability is very high because they have access to nearly all e-books in the EU6 stores via the Amazon US store. They have no direct access to the EU6 e-book stores however. Lifting digital access walls for Amazon e-book stores in the EU would result in a small increase only in the book titles available to EU consumers. E-book prices vary between Amazon EU stores, and between EU and US e-book stores. Currently, EU10 consumers can find price arbitrage opportunities between their local store and the US store only. Consumers in the remaining EU18 can buy from the US store only. Lifting geographical access restrictions would increase price arbitrage options, especially for EU18 e-book consumers. However, the welfare impact is difficult to predict as it might lead to increased price convergence, with winners and losers. E-book prices excluding VAT appear to be negatively correlated with VAT rates. This reduces consumer price variation despite variations in VAT rates across countries. The discrepancy between universal access to the US e-book store and geographically restricted access to the same e-books in EU stores indicates that access is driven by commercial considerations rather than objective legal barriers related to the EU copyright management regime. Market segmentation piggy-backs on but is not driven by the copyright regime.
    Keywords: Amazon, e-books, geographical market segmentation, EU market, electronic publishing
    JEL: F15
    Date: 2015
  20. By: Gerard van der Meijden (VU University Amsterdam, the Netherlands); Karolina Ryszka (VU University Amsterdam, the Netherlands); Cees Withagen (VU University Amsterdam, the Netherlands)
    Abstract: We study resource extraction by a non-renewable resource supplier who faces demand from two regions, one of which employs a tax on the imported resource and a subsidy on the available backstop technology, and one that has no environmental policy in place. The resource extraction path possibly contains two limit pricing phases, both in the presence and in the absence of speculators on the market. In the case with speculators, the resource price is continuous. Without speculators, the price jumps upward when demand from the region with climate policy drops to zero. A tightening of climate policies results in lower initial resource consumption; no Weak Green Paradox occurs. Yet, a decrease in the backstop production cost or an increase in the backstop subsidy shorten the overall extraction period, potentially resulting in higher total climate costs in the case without speculators. An analysis of the welfare effects reveals that the regulated region faces differential non-green and green incentives to tighten its climate policies in the two price regimes. We find that, even though climate damages might go down, unilateral policy tightening is possibly detrimental to the regulated region's non-green welfare due to a resource supply shift to the unregulated region.
    Keywords: limit pricing; non-renewable resource; monopoly; climate change; carbon tax; renewables subsidy
    JEL: Q31 Q37
    Date: 2015–12–18

This nep-com issue is ©2015 by Russell Pittman. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.