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on Industrial Organization |
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Issue of 2008‒07‒14
three papers chosen by |
| By: | Carletti, E.; Hartmann, P.; Ongena, S. (Tilburg University, Tilburg Law and Economics Center) |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:kubtil:2008006&r=ind |
| By: | Michiel Bijlsma; Viktória Kocsis; Nelli Valmari |
| Abstract: | In most European broadband Internet markets local loop unbundling is mandated under a cost-based regulated access price. We construct a model for differentiated Cournot competition between service-based and infrastructure-based firms, out of which one infrastructure-based firm (the incumbent) supplies to the service-based firms. We seek for and compare the socially optimal and the incumbent’s profit maximizing access price in two scenarios: (i) service-based firms and incumbent supply homogeneous services (partial differentiation), and (ii) all services are horizontally differentiated (uniform differentiation). We show that in both cases the incumbent never forecloses service-based firms if infrastructure-based competition is present or if services are somewhat differentiated. Under uniform differentiation the welfare optimizing access price is below marginal cost, hence the incumbent subsidizes the production of service-based firms and makes zero profit. In the case of partial differentiation, the same result obtains when both markets are concentrated. However, if markets are not concentrated, the socially optimal access fee exceeds the marginal cost. |
| Keywords: | broadband Internet market; imperfect competition; product differentiation; access regulation |
| JEL: | L13 L51 L86 L96 |
| Date: | 2008–06 |
| URL: | http://d.repec.org/n?u=RePEc:cpb:discus:106&r=ind |
| By: | Maris Goldmanis; Ali Hortacsu; Chad Syverson; Onsel Emre |
| Abstract: | While a fast-growing body of research has looked at how the advent and diffusion of e-commerce has affected prices, much less work has investigated e-commerce's impact on the number and type of producers operating in an industry. This paper theoretically and empirically takes up the question of which businesses most benefit and most suffer as consumers switch to purchasing products online. We specify a general industry model involving consumers with differing search costs buying products from heterogeneous-type producers. We interpret e-commerce as having reduced consumers' search costs. We show how such reductions reallocate market shares from an industry's low-type producers to its high-type businesses. We test the model using U.S. data for three industries in which e-commerce has arguably decreased consumers' search costs considerably: travel agencies, bookstores, and new auto dealers. Each industry exhibits the market share shifts predicted by the model. Interestingly, while the industries experienced similar changes, the specific mechanisms through which e-commerce induced them differed. For bookstores and auto dealers, industry-wide declines in small outlets reflected market-specific impacts, evidenced by the fact that more small-store exit occurred in local markets where consumers' use of e-commerce channels grew fastest. For travel agencies, on the other hand, the shifts reflected aggregate changes driven by airlines cutting agent commissions as consumers started buying tickets online. |
| JEL: | D4 L1 L8 |
| Date: | 2008–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:14166&r=ind |