nep-ind New Economics Papers
on Industrial Organization
Issue of 2007‒03‒24
four papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. A Test of Profit Maximization By Asplund, Marcus
  2. On the existence of Bayesian Cournot equilibrium By Ezra Einy; Ori Haimanko; Diego Moreno; Benyamin Shitovitz
  3. Airline Competition and Network Structure By Ricardo Flores-Fillol

  1. By: Asplund, Marcus
    Abstract: This paper aims at testing the maintained assumption that firms' objective is to maximize the expected net present value (ENPV) of profits. The idea is to examine pricing behaviour of a monopolist facing a dynamic demand where current sales influence future demand. Empirically, I estimate an Euler equation implied by maximization of ENPV of profits on data from the Swedish Tobacco Monopoly's sales of moist snuff (an addictive tobacco product) during the period 1917-1959. It is found that the monopolist's prices are well below those that would maximize ENPV of profits.
    Keywords: firm behaviour; profit maximization
    JEL: L12 L21
    Date: 2007–03
  2. By: Ezra Einy; Ori Haimanko; Diego Moreno; Benyamin Shitovitz
    Abstract: We show that even in very simple oligopolies with differential information a (Bayesian) Cournot equilibrium in pure strategies may not exist, or be unique. However, we find sufficient conditions for existence, and for uniqueness, of Cournot equilibrium in a certain class of industries. More general results arise when negative prices are allowed.
    Date: 2007–03
  3. By: Ricardo Flores-Fillol
    Abstract: This paper characterizes the equilibria in airline networks and their welfare implications in an unregulated environment. Competing airlines may adopt either fully-connected (FC) or hub-and-spoke (HS) network structures; and passengers exhibiting low brand loyalty to their preferred carrier choose an outside option to travel so that markets are partially served by airlines. In this context, carriers adopt hubbing strategies when costs are sufficiently low, and asymmetric equilibria where one carrier chooses a FC strategy and the other chooses a HS strategy may arise. Quite interestingly, flight frequency can become excessive under HS network configurations.
    Keywords: fully-connected networks; hub-and-spoke networks; brand loyalty; fully-served markets; partially-served markets
    JEL: L13 L2 L93
    Date: 2007–03–19
  4. By: Mario Denni
    Abstract: This paper addresses the determinants of diffusion of broadband infrastructure by looking at the U.S. Federal States. It tries to identify in particular to what extent intra- and inter -platform competition contribute to accelerating the speed of diffusion. Panel data analysis results indicate that both types of competition significantly affect the rate of diffusion, although with different effect. Intra-platform competition seems to have a positive impact only initially on the rate of diffusion but then dissipates. For the longer term, inter -platform has a much more important role in driving the rate of diffusion. The study takes account of the impact of other variables measuring competition in the telecommunications sector as well.
    Keywords: Broadband; Technological diffusion; Regulation and competition
    JEL: L1 L86 L96 O3

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