nep-ind New Economics Papers
on Industrial Organization
Issue of 2009‒09‒19
four papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Mixed Duopoly with Price Competition By Roy Chowdhury, Prabal
  2. Monopoly Distortions in Durability and Multi-Dimensional Quality By Roland Strausz
  3. The Kinked Demand Model and the Stability of Cooperation By Sergio Currarini; Marco Marini
  4. Non-Price Determinants of Automotive Demand: Restyling Matters Most By Oleg Korenok; George E. Hoffer; Edward L. Millner

  1. By: Roy Chowdhury, Prabal
    Abstract: This paper examines coalition-proof Nash equilibria (CPNE) of a mixed duopoly with price competition where the public firm meets all the demand coming to it. If the private firm is free to supply less than demand, then the unique CPNE involves the competitive price. If however the private firm also has to supply all its demand, then the set of CPNE prices turns out to be an interval, with prices ranging from the socially optimal one, to the price under complete privatization.
    Keywords: Mixed duopoly; coalition-proof Nash equilibrium; price competition.
    JEL: L2 L3 L1
    Date: 2009–08
  2. By: Roland Strausz (Humboldt-Universitaet zu Berlin)
    Abstract: I show that Swan’s (1970) independence result requires a mul- tiplicative interaction between durability and all other quality at- tributes. Because there is no compelling argument for a multiplica- tivity in quality, monopolists tend to distort durability, even with constant marginal costs. Distortions in durability and other quality aspects are aligned exactly when the marginal cost of quality do not increase too much with durability.
    Keywords: Durability, quality, monopoly
    JEL: L15
    Date: 2009–09
  3. By: Sergio Currarini (Department of Economics,Faculty of Economics, Università degli Studi di Venezia "Ca' Foscari"); Marco Marini (Dipartimento di Economia e Metodi Quantitativi, Università di Urbino (Italy))
    Abstract: This paper revisits a particular behaviour for rms competing in imperfect competitive markets, underlying the well known model of kinked demand curve. We show that under some symmetry and regularity conditions, this asymmetric behaviour of rms sustains monopoly pricing, and possesses therefore some "rationality" interpretation. We also show that such a behaviour can be generalized and interpreted as a norm of behaviour that sustains efficient outcomes in a more general class of symmetric games.
    Keywords: Kinked Demand, Symmetric Games, Norms of Behaviour.
    JEL: C70 D21 D43 L13
    Date: 2009
  4. By: Oleg Korenok (Department of Economics, VCU School of Business); George E. Hoffer (Department of Economics, VCU School of Business); Edward L. Millner (Department of Economics, VCU School of Business)
    Abstract: This paper analyzes market share changes in automobile and light truck submarkets. We find that new product, as measured by restyling, represents the most consistent, dominant determinant of demand. On average a ten percent reduction in relative price would yield only one-tenth the market share impact of a restyling. Alternatively, one would have to double one’s relative advertising expenditures to match the impact of a restyling. Several demand determinants not previously modeled, including rebranding and warranty curtailments, were detrimental to domestic manufacturer market shares. Safety appliance adoptions and changes in vehicle reliability had minimal impact on demand.
    Keywords: automobile pricing, warranty, safety appliances, rebranding, reliability
    JEL: L62 L11 L15 M31 M37
    Date: 2009–09

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