nep-ind New Economics Papers
on Industrial Organization
Issue of 2010‒06‒04
five papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Demand-Enhancing Investment in Mixed Duopoly By Stefan Bühler; Simon Wey
  2. Patent licensing, bargaining, and product positioning By Toshihiro Matsumura; Noriaki Matsushima
  3. Universal Service Auctions in Liberalized Postal Markets By Joan Calzada; Christian Jaag; Urs Trinkner
  4. An Analysis of Bundle Pricing in Horizontal and Vertical Markets: The Case of the U.S. Cottonseed Market By Shi, Guanming; Stiegert, Kyle; Chavas, Jean-Paul
  5. An Analysis of the Pricing of Traits in the U.S. Corn Seed Market By Shi, Guanming; Chavas, Jean-Paul; Steigert, Kyle

  1. By: Stefan Bühler; Simon Wey
    Abstract: This paper examines demand-enhancing investment and pricing in mixed duopoly. We analyze a model with differentiated products and reduced-form demand, making no assumptions on the relative efficiency of the public firm. First, we derive sufficient conditions for public investment to crowd out private investment. Second, we characterize the conditions under which individual investments (prices, respectively) in the mixed duopoly are higher (lower) than in the standard duopoly. Third, we show that with linear demand the public firm effectively disciplines the private firm, inducing an improvement in its price-quality ratio relative to the standard duopoly.
    Keywords: Mixed oligopoly, price, investment, quality
    JEL: D43 H42 L13
    Date: 2010–05
  2. By: Toshihiro Matsumura; Noriaki Matsushima
    Abstract: Innovators who have developed advanced technologies, along with launching new products by themselves, often license these technologies to their rivals. When a firm launches a new product, product positioning is also an important matter. We consider a standard linear city model with two firms in which the licenser and the licensee negotiate on licensing and engage in Nash bargaining after they determine their product positions. We investigate how the bargaining power of the licenser affects the product positions of the firms. We find that the licenser more likely chooses the central position when its bargaining power is weak whereas the product position of the licenser accelerates price competition between the firms. We also discuss the welfare implication. We find that the inverse U shape relationship between the bargaining power of the licenser and total social surplus, i.e., neither too strong nor too weak bargaining power of the licensor is optimal.
    Date: 2010–05
  3. By: Joan Calzada; Christian Jaag; Urs Trinkner
    Abstract: We analyze whether it makes sense to auction off Universal Service Obligations in postal markets. Based on auction theory, case studies and sector-specific considerations we conclude that auctions will be difficult to implement in the postal sector.
    Keywords: Procurement, Tendering, Reverse Auctions, Universal Service Obligation
    JEL: L51
    Date: 2009–06
  4. By: Shi, Guanming (University of Wisconsin); Stiegert, Kyle (University of Wisconsin); Chavas, Jean-Paul (University of Wisconsin)
    Abstract: In this paper, we investigate substitution/complementarity relationships among products sold with different bundled characteristics and under different vertical arrangements. Our conceptual model demonstrates the interactive price impacts emanating from product differentiation, market concentration and market size. The model is applied to the U.S. cottonseed market using transaction level data from 2002 to 2007. This market has been impacted structurally in numerous ways due to the advances and the rapid adoption of seeds with differing bundles of biotechnology traits and vertical penetration emanating from the biotechnology seed industry. Several interesting findings are reported. The econometric investigation finds evidence of sub-additive pricing in the bundling of patented biotech traits. Vertical organization is found to affect pricing and the exercise of market power. While higher market concentration is associated with higher prices, there is also evidence of cross-product complementarity effects that lead to lower prices. Simulation methods are developed to measure the net price effects. These simulations are applicable for use in pre-merger analysis of industries producing differentiated products and exhibiting similar market complexities.
    JEL: L13 L40 L65
    Date: 2009–12
  5. By: Shi, Guanming (University of Wisconsin); Chavas, Jean-Paul (University of Wisconsin); Steigert, Kyle (University of Wisconsin)
    Abstract: This paper investigates the pricing of patented traits in the U.S. hybrid corn seed market under imperfect competition. In a multiproduct context, we first examine how substitution/complementarity relationships among products can affect pricing. This is used to motivate multi-product generalizations of the Herfindahl-Hirschman index (GHHI) capturing cross-market effects of imperfect competition on bundle pricing. The GHHI model is applied to pricing of conventional and patented biotech seeds in the US from 2000-2007. One major finding is that standard component pricing in biotech traits is soundly rejected in favor of subadditive bundle pricing. The econometric estimates show how changes in market structures (as measured by both own- and cross-Herfindahl indexes) affect U.S. corn seed prices.
    JEL: L13 L40 L65
    Date: 2009–12

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