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on Industrial Organization |
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Issue of 2009‒11‒14
five papers chosen by |
| By: | Alex Dickson (Department of Economics, University of Strathclyde); Roger Hartley (Department of Economics, University of Manchester) |
| Abstract: | Bilateral oligopoly is a strategic market game with two commodities, allowing strategic behavior on both sides of the market. When the number of buyers is large, such a game approximates a game of quantity competition played by sellers. We present examples which show that this is not typically a Cournot game. Rather, we introduce an alternative game of quantity competition (the market share game) and, appealing to results in the literature on contests, show that this yields the same equilibria as the many-buyer limit of bilateral oligopoly, under standard assumptions on costs and preferences. We also show that the market share and Cournot games have the same equilibria if and only if the price elasticity of the latter is one. These results lead to necessary and su¢ cient conditions for the Cournot game to be a good approximation to bilateral oligopoly with many buyers and to an ordering of total output when they are not satisfied. |
| Keywords: | Quantity competition, Cournot, strategic foundation, commitment |
| JEL: | C72 D21 D43 |
| Date: | 2009–10 |
| URL: | http://d.repec.org/n?u=RePEc:str:wpaper:0922&r=ind |
| By: | Jos Jansen (Max Planck Institute for Research on Collective Goods, Bonn) |
| Abstract: | This paper studies the incentives for production cost disclosure in an asymmetric Cournot duopoly. Whereas the efficient firm (consumers) prefers information sharing (concealment) when the firms choose accommodating strategies in the product market, the firm (consumers) may prefer information concealment (sharing) when it can exclude its competitor from the market. Hence, the rankings of expected profit and consumer surplus can be reversed if exit of the inefficient firm is possible. Although the efficient firm has stronger incentives to share information when it shares strategically, there remain cases in which the firm conceals information in equilibrium to induce exit. |
| Keywords: | cost asymmetry, Cournot duopoly, exit, information disclosure, precommitment |
| JEL: | D82 L13 |
| Date: | 2009–10 |
| URL: | http://d.repec.org/n?u=RePEc:mpg:wpaper:2009_32&r=ind |
| By: | Bardey, David (University of Rosario, Bogota); Cremer, Helmuth (TSE (GREMAQ-CNRS)); Lozachmeur, Jean-Marie (TSE (GREMAQ-CNRS)) |
| Date: | 2009–10 |
| URL: | http://d.repec.org/n?u=RePEc:ide:wpaper:21322&r=ind |
| By: | Helmut Dietl (Institute for Strategy and Business Economics, University of Zurich); Tobias Duschl (Institute for Strategy and Business Economics, University of Zurich); Egon Franck (Institute for Strategy and Business Economics, University of Zurich); Markus Lang (Institute for Strategy and Business Economics, University of Zurich) |
| Abstract: | This paper develops a model of a professional sports league with network externalities by integrating the theory of two-sided markets into a contest model. In professional team sports, leagues function as a platform that enables sponsors to interact with fans. In these league-mediated interactions, positive network effects operate from the fan market to the sponsor market, while negative network effects operate from the sponsor market to the fan market. Clubs react to these network effects by charging higher (lower) prices to sponsors (fans). Our analysis shows that the size of these network effects determines the level of competitive balance within the league. Traditional models, which do not take network externalities into account, under- or overestimate the actual level of competitive balance, which may lead to wrong policy decisions. Moreover, we show that clubs benefit from stronger combined network effects through higher profits. Finally, we derive policy recommendations for improving competitive balance by taking advantage of network externalities. |
| Keywords: | Competitive balance, contest, multisided market, network externalities, team sports league |
| JEL: | L11 L13 L83 M21 |
| Date: | 2009–11 |
| URL: | http://d.repec.org/n?u=RePEc:iso:wpaper:0114&r=ind |
| By: | Casadesus-Masanell, Ramon (Harvard Business Scholl); Ruiz-Aliseda, Francisco (Universitat Pompeu Fabra) |
| Abstract: | Katz and Shapiro (1985) study systems compatibility in settings with one-sided platforms and direct network externalities. We consider systems compatibility in settings with two-sided platforms and indirect network externalities to develop an explanation why markets with two-sided platforms are often characterized by incompatibility with one dominant player who may subsidize access to one side of the market. We find that incompatibility gives rise to asymmetric equilibria with a dominant platform that earns more than under compatibility. We also find that incompatibility generates larger total welfare than compatibility when horizontal differences between platforms are small. |
| Keywords: | network; industries; platforms; markets; |
| Date: | 2009–06–17 |
| URL: | http://d.repec.org/n?u=RePEc:ebg:iesewp:d-0798&r=ind |