nep-ind New Economics Papers
on Industrial Organization
Issue of 2010‒03‒06
four papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Pricing to market when quality matters By Roberto Basile; Sergio de Nardis; Alessandro Girardi
  2. A Simple Theory of Predation By Chiara Fumagalli; Massimo Motta
  3. 99 cent: Price Points in E-Commerce By Franz Hackl; Michael E. Kummer; Rudolf Winter-Ebmer
  4. Do soccer players play the mixed-strategy Nash equilibrium? By Azar, Ofer H.; Bar-Eli, Michael

  1. By: Roberto Basile (ISAE - Institute for Studies and Economic Analyses); Sergio de Nardis (ISAE - Institute for Studies and Economic Analyses); Alessandro Girardi (ISAE - Institute for Studies and Economic Analyses)
    Abstract: We build a model of price differentiation with firm heterogeneity, which allows for imperfect competition and market segmentation in the presence of flexible exchange rates as well as horizontal and vertical differentiation and different tastes of consumers in destination markets. We empirically assess the main predictions of our theoretical framework by using firm-level data surveyed by ISAE. We document that export-domestic price margins are significantly affected by price and quality competitiveness even controlling for foreign demand conditions, size, export intensity, destination markets and unobservables. Finally, we provide evidence of a strong heterogeneity across firms in their reaction to price and quality competitiveness.
    Keywords: Pricing to market, qualitative choice models, firm heterogeneity.
    JEL: D21 F10 C23 C25
    Date: 2009–12
    URL: http://d.repec.org/n?u=RePEc:isa:wpaper:123&r=ind
  2. By: Chiara Fumagalli (Università Bocconi, CSEF and CEPR); Massimo Motta (Università di Bologna and CEPR)
    Abstract: We propose a simple theory of predatory pricing, based on scale economies and sequential buyers (or markets). The entrant (or prey) needs to reach a critical scale to be successful. The incumbent (or predator) is ready to make losses on earlier buyers so as to deprive the prey of the scale it needs, thus making monopoly profits on later buyers. Several extensions are considered, including markets where scale economies exist because of demand externalities or two-sided market effects, and where markets are characterised by common costs. Conditions under which predation may take place in actual cases are also discussed.
    Keywords: Anticompetitive Behaviour, Exclusion, Below-Cost Pricing, Antitrust
    JEL: K21 L12 L40
    Date: 2010–02
    URL: http://d.repec.org/n?u=RePEc:fem:femwpa:2010.15&r=ind
  3. By: Franz Hackl; Michael E. Kummer; Rudolf Winter-Ebmer
    Abstract: Basu (2006) argues that the prevalence of 99 cent prices in shops can be explained with rational consumers who disregard the rightmost digits of the price. This bounded rational behaviour leads to a Bertrand equi- librium with positive markups. We use data from an Austrian price com- parison site and find results highly compatible with Basu's theory. We can show that price points - in particular prices ending in 9 - are preva- lent and have significant impact on consumer demand. Moreover, these price points are sticky; neither the price-setter itself wants to change them neither the rivals do underbid these prices, if they represent the cheapest price on the market.
    Keywords: e-commerce, price comparison, price policy
    JEL: M31 L81 L25
    Date: 2010–02
    URL: http://d.repec.org/n?u=RePEc:jku:econwp:2010_02&r=ind
  4. By: Azar, Ofer H.; Bar-Eli, Michael
    Abstract: Mixed-strategy Nash equilibrium (MSNE) is a commonly-used solution concept in game-theoretic models in various fields in economics, management, and other disciplines, but the experimental results whether the MSNE predicts well actual play in games is mixed. Consequently, evidence for naturally-occurring games in which the MSNE predicts the outcome well is of great importance, as it can justify the vast use of MSNE in models. The game between the kicker and goalkeeper in soccer penalty kicks is a real-world game that can be used to examine the application of the MSNE concept or its accuracy because payoffs are a common knowledge, the players have huge incentives to play correctly, the game is simple enough to analyze, its Nash equilibrium is in mixed strategies, and players' actions can be observed. We collected and analyzed data on the direction of kicks and jumps in penalty kicks in various top leagues and tournaments. Our analysis suggests that the MSNE predictions are the closest to the actual sample data, even though some other prediction methods use information on the marginal distribution of kicks or jumps whereas the MSNE does not.
    Keywords: Soccer; Football; MSNE; Mixed-strategies; Mixed-strategy Nash equilibrium; Sports; Penalty kicks
    JEL: L83 C70 D00 C93 C72
    Date: 2009
    URL: http://d.repec.org/n?u=RePEc:pra:mprapa:20964&r=ind

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