nep-ind New Economics Papers
on Industrial Organization
Issue of 2007‒09‒30
five papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Price Stackelberg game with quantity precommitment By Pedro Jara-Moroni
  2. Patents and Antitrust: Application to Adjacent Markets By Nicholas Economides
  3. Persistence of Monopoly, Innovation, and R&D Spillovers: Static versus Dynamic Analysis By Eugen Kovac; Viatcheslav Vinogradov; Kresimir Zigic
  4. Informative Advertising and Consumer Search in a Differentiated-Products Duopoly By Levent Celik
  5. Are Public Banks pro-Competitive? Evidence from Concentrated Local Markets in Brazil By Christiano A. Coelho; João Manoel Pinho de Mello; Leonardo Rezende

  1. By: Pedro Jara-Moroni
    Abstract: In a homogeneous product duopoly with concave demand and convex costs we study a two stage game in which, first, firms engage simultaneously in capacity (production) and, after production levels are made public, there is price Stackelberg competition in the second stage. We justify the special demand rationing on tied prices. Randomizing price leadership in the second stage game, we can find a pure strategy subgame perfect Nash equilibrium (SPNE) of the whole game, in which firms produce strictly more than in the Cournot outcome, which is as well a SPNE.
    Date: 2007
  2. By: Nicholas Economides
    Date: 2007
  3. By: Eugen Kovac; Viatcheslav Vinogradov; Kresimir Zigic
    Abstract: We build a dynamic duopoly model that accounts for the empirical observation of monopoly persistence in the long run. More specifically, we analyze the conditions under which it is optimal for the market leader in an initially duopoly setup to undertake pre-emptive R&D investment ("strategic preda- tion") that eventually leads to the exit of the follower firm. The follower is assumed to benefit from the innovative activities of the leader through R&D spillovers. The novel feature of our approach is that we introduce an explicit dynamic model and contrast it with its static counterpart. Contrary to the predictions of the static model, strategic predation that leads to the persis- tence of monopoly is in general the optimal strategy to pursue in a dynamic framework when spillovers are not large.
    Keywords: Dynamic duopoly, R&D spillovers, persistence of monopoly, strate- gic predation, accommodation.
    JEL: L12 L13 L41
    Date: 2007–01
  4. By: Levent Celik
    Abstract: This paper analyzes informative advertising in a duopoly market with differentiated products when consumer search is costless. If consumers are fully rational, exposure to a single advertisement is sufficient for them to obtain complete market information. In this case, firms undersupply advertising compared to the social optimum because of free-riding. If consumers are not fully rational, they may ignore the existence of another firm when the only advertisement they receive quotes the monopoly price. In this case, both firms advertise the monopoly price, and the market may produce too much or too little advertising compared to the social optimum.
    Keywords: Search, Duopoly, Informative Advertising, Product Differentiation.
    JEL: L13 M37
    Date: 2007–07
  5. By: Christiano A. Coelho (Central Bank of Brasil); João Manoel Pinho de Mello (Department of Economics, PUC-Rio); Leonardo Rezende (Department of Economics, PUC-Rio)
    Abstract: We measure the competitive effect of public ownership of banks in concentrated local banking markets in Brazil by extending Bresnahan and Reiss’s [1991] framework to measure the effects of entry in concentrated markets. We use variation in market size, the number of competitors and their identity to infer how conduct is affected by the entry of a private vis-à-vis a public bank. We find that, while local markets whose structure is private bank duopoly are 100% larger than private monopolies, duopolies with one public and one private bank and private monopolies are no different with respect to market size. These results suggest that, while the presence of private banks toughens competition, public banks do not affect conduct.
    Keywords: banking industry; public versus private ownership; effect of entry.
    JEL: L10 L13 L33
    Date: 2007–08

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