nep-ind New Economics Papers
on Industrial Organization
Issue of 2010‒02‒20
five papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Dynamic price competition with network effects By Cabral, Luis
  2. Bertrand competition with non-rigid capacity constraints By Prabal Roy Chowdhury
  3. Dual Licensing in Open Source Software Markets By Fabio Maria Manenti; Stefano Comino
  4. Entry Barriers in Retail Trade By Fabiano Schivardi; E. Viviano
  5. Competitiveness of Firms in Indian Automobile Industry By G Burange; Shruti Yamini

  1. By: Cabral, Luis (IESE Business School)
    Abstract: I consider a dynamic model of competition between two proprietary networks. Consumers die and are replaced with a constant hazard rate; and firms compete for new consumers to join their network by offering network entry prices. I derive a series of results pertaining to: a) existence and uniqueness of symmetric equilibria, b) monotonicity of the pricing function (e.g., larger networks set higher prices), c) network size dynamics (increasing dominance vs. reversion to the mean), and d) firm value (how it varies with network effects). Finally, I apply my general framework to the study of termination charges in wireless telecommunications. I consider various forms of regulation and examine their impact on firm profits and market share dynamics.
    Keywords: Networks; dynamic competition; oligopoly competition; wireless telecommunications;
    Date: 2009–12–10
  2. By: Prabal Roy Chowdhury (Indian Statistical Institute, New Delhi; Indian Statistical Institute, New Delhi)
    Abstract: We examine a model of Bertrand competition with non-rigid capacity constraints, so that by incurring an additional per unit cost of capacity expansion, firms can produce beyond capacity. We find that there is an interval of prices such that a price can be sustained as a pure strategy Nash equilibrium if and only if it lies in this interval. We then examine the properties of this set as [a] the number of firms becomes large and [b] the capacity cost increases.
    Keywords: Bertrand competition, capacity constraint
    JEL: D4 L1
    Date: 2009–01
  3. By: Fabio Maria Manenti (University of Padua); Stefano Comino (Università di Udine)
    Abstract: In this paper we present a theoretical model to study the characteristics and the commerciaI sustainability of dual licensing, an open source (OS) business strategy that has gained popularity among software vendors. With dual licensing, a firm releases the same software product under both a traditional proprietary license and an open souree one. We show that the decision to employ a dual licensing strategy occurs whenever the feedbacks of the open souree community are valuable enough compared to the quality of the software that the firm is able to develop in-house. Our analysis points to the centraI role of an appropriate managing of OS licenses in order to balance the pros and cons of "going open source" and to make this versioning strategy viable for software vendors; our analysis also suggests a possible explanation for the observed proliferation of open source licenses.
    Keywords: open source software, open source business models, embedded software, dual licensing, versioning, license proliferation
    JEL: L11 L17 L86 D45
    Date: 2010–01
  4. By: Fabiano Schivardi; E. Viviano
    Abstract: <p>The 1998 reform of the Italian retail trade sector delegated the regulation of entry of large stores to the regional governments. We use the local variation in regulation to determine the effects of entry barriers on sectoral performance. We address the endogeneity of entry barriers through local fixed effects and using political variables as instruments. We also control for differences in trends and for area-wide shocks. We find that entry barriers are associated with substantially larger profit margins and lower productivity of incumbent firms. Liberalizing entry has a positive effect on investment in ICT, increases employment and compresses labor costs in large shops. In areas with more stringent entry regulation, lower productivity coupled with larger margins results in higher consumer prices.</p>
    Keywords: entry barriers; productivity growth; retail trade
    JEL: L81 L5 L11
    Date: 2009
  5. By: G Burange; Shruti Yamini
    Abstract: The competitiveness among the firms in Indian automobile industry has been assessed by understanding the factors that determine its competitive advantage. The efforts have been made to construct a competitiveness index for a sample of fourteen firms for the year 2005-06, which represents around 85 per cent of each segment of the industry namely passenger vehicles, commercial vehicles, three-wheelers and two-wheelers.
    Keywords: Indian, automobile, industry, competitive advantage, competitiveness index, passenger vehicles, commercial, liberalization, Financial, Non Financial
    Date: 2010

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