nep-ind New Economics Papers
on Industrial Organization
Issue of 2010‒07‒24
five papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Product Line Pricing in a Vertically Differentiated Oligopoly By George Deltas; Thanasis Stengos; Eleftherios Zacharias
  2. Consumers Cooperatives in Mixed Oligopolies. By Marco Marini; Alberto Zevi
  3. Upstream Competition between Vertically Integrated Firms By Marc Bourreau; Johan Hombert; Jérôme Pouyet; Nicolas Schutz
  4. Price Discrimination in Practice: The Market for Drugs in Egypt and the U.S. By Rania Zaher Naguib
  5. Auctions, Entry Deterrence and Divisibility of the Object for Sale By Julio Peña Torres; Gabriel Fernándes Aguirre,

  1. By: George Deltas (Department of Economics, University of Illinois, U.-C.); Thanasis Stengos (Department of Economics,University of Guelph); Eleftherios Zacharias (Department of Economics, Athens University of Business and Economics)
    Abstract: This paper empirically examines the joint pricing decision of products in a firm's product line. When products are distinguished by a vertical characteristic, those products with higher values of that characteristic will command higher prices. We investigate whether, holding the value of the characteristic constant, there is a price premium for products on the industry and/or the firm frontier, i.e., for the products with the highest value of the characteristic in the market or in a firm's product line. The existence of price premia for lower ranked products is also investigated. Finally, the paper investigates whether firms set prices to avoid cannibalizing the other products in their portfolio, whether competition with rival firms is stronger for products that are closer to the frontier compared to other products, and whether a product's price declines with the time it is offered by a firm. Using personal computer price data, we show that prices decline with the distance from the industry and firm frontiers. We find evidence that consumer tastes for brands is stronger for the consumers of frontier products (and thus competition between firms weaker in the top end of the market). Finally, there is evidence that a product's price is higher if a firm offers products with the immediately faster and immediately slower computer chip (holding the total number of a firm's offerings constant), possibly as an attempt way to reduce cannibalization.
    Keywords: Pricing, Multiproduct rms, Personal Computers, Product Entry and Exit
    JEL: L11 D43 L63
    Date: 2010
  2. By: Marco Marini (Department of Economics, University of Urbino "Carlo Bo".); Alberto Zevi (University of Rome "La Sapieza".)
    Abstract: Consumer co-operatives constitute a highly successful example of democratic forms of enterprises operating in developed countries. They are usually organized as medium or large-scale firms competing with profit-seeking firms in retail industries. In this paper we model such a situation as a mixed oligopoly in which consumer co-operatives maximize consumer-members' utilities and distribute them a patronage rebate on their goods purchase. We show that when consumers possess quasilinear preferences over a bundle of symmetrically di¤erentiated goods and firms operate with a linear technology, the presence of consumer co-operatives positively affects all industries output and social welfare. The effect of Co-ops on welfare is shown to be more significant when goods are either complements or highly di¤erentiated and when competition is à la Cournot rather than à la Bertrand.
    Keywords: Consumer Co-operatives, Profit-maximizing Firms, Mixed Oligopoly.
    JEL: L21 L22 L31
    Date: 2010
  3. By: Marc Bourreau (Institut Télécom - Télécom ParisTech - Télécom ParisTech, CREST - Centre de Recherche en Économie et Statistique - INSEE - École Nationale de la Statistique et de l'Administration Économique); Johan Hombert (HEC Paris - GROUPE HEC); Jérôme Pouyet (CREST - Centre de Recherche en Économie et Statistique - INSEE - École Nationale de la Statistique et de l'Administration Économique, Department of Economics, Ecole Polytechnique - CNRS : UMR7176 - Polytechnique - X, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris); Nicolas Schutz (CREST - Centre de Recherche en Économie et Statistique - INSEE - École Nationale de la Statistique et de l'Administration Économique, Department of Economics, Ecole Polytechnique - CNRS : UMR7176 - Polytechnique - X, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris)
    Abstract: We propose a model of two-tier competition between vertically integrated firms and unintegrated downstream firms. We show that, even when integrated firms compete in prices to offer a homogeneous input, the Bertrand result may not obtain, and the input may be priced above marginal cost in equilibrium, which is detrimental to consumers' surplus and social welfare. We obtain that these partial foreclosure equilibria are more likely to exist when downstream competition is fierce. We then use our model to assess the impact of several regulatory tools in the telecommunications industry.
    Keywords: Vertical foreclosure, vertically-related markets, telecommunications.
    Date: 2009–12–09
  4. By: Rania Zaher Naguib (Faculty of Management Technology, The German University in Cairo)
    Abstract: This paper attempts to analyze the medical and economical reasons that cause a difference in the price elasticity of patients' demand to drugs between Egypt and the United States of America. The study was based on two medicines produced by Pfizer (Lipitor and Viagra), with both of them available in Egypt as well as the United States. The result of this study reflected that Egyptians are more sensitive to the changes in price relative to Americans for both Lipitor and Viagra because of different economical and medical factors.
    Keywords: Price Discrimination, Pharmaceutical Industry
    JEL: I11 D42
    Date: 2010–07
  5. By: Julio Peña Torres (ILADES-Georgetown University, Universidad Alberto Hurtado); Gabriel Fernándes Aguirre, (Economista miembro de la División Económica, Fiscalía Nacional Económica de Chile)
    Abstract: This paper analyzes entry deterrence strategies at sequential multi-unit English-type repeated auctions, based on entry deterrence observed at a series of yearly auctions of fishing rights occurring since the early 1990s in the Chilean sea bass fishery. It analyzes parametric configurations under which incumbent firms could have followed non-cooperative deterrence strategies or else may have colluded for that purpose. A two-stage competition model is developed. In the first stage there occurs sequential auctioning of multiple fishing rights; in the second stage, production rights are used to compete in a homogeneous-good Cournot market. The analysis focuses on the relationship between the number of incumbents, sources of competitive advantage for them, and the number and size of the rights for sale. The core of the analysis lies in answering how the divisibility of the object(s) for sale affects the possibilities of incumbents to deter new rivals’ entry.
    JEL: D2 D4 Q2
    Date: 2010–04

This nep-ind issue is ©2010 by Kwang Soo Cheong. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.