nep-ind New Economics Papers
on Industrial Organization
Issue of 2011‒03‒12
four papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. A Hotelling Style Model of Spatial Competition for Convenience Goods By B. Curtis Eaton; Jesse Tweedle
  2. Misleading Advertising in Duopoly By Keisuke Hattori; Keisaku Higashida
  3. Patent Pools and Product Development By Thomas Jeitschko; Nanyun Zhang
  4. Seesaw in the Air: Interconnection Regulation and the Structure of Mobile Tariffs By Christos Genakos; Tommaso Valletti

  1. By: B. Curtis Eaton; Jesse Tweedle
    Abstract: Ordinarily people do not make special purpose trips to acquire goods like gasoline or roceries, but instead buy them as the need arises in the course of their daily lives. Such goods are commonly called convenience goods. We modify Hotelling's model of spatial competition so that we can analyze the price equilibrium of duopolists that retail a convenience good. Certain features of the duopolists' demand functions suggest that price competition is more severe in the convenience goods model than in the Hotelling model. The same features complicate the analysis because they mean that a pure strategy price equilibrium does not exists for many locational con-figurations. Although we are not able to find the mixed strategy price equilibrium analytically, we do present some numerical results on equilibrium prices that broadly confirm this suggestion. We also provide a more general product differentiation interpretation of the convenience good model.
    Date: 2011–01–01
    URL: http://d.repec.org/n?u=RePEc:clg:wpaper:2011-04&r=ind
  2. By: Keisuke Hattori (Faculty of Economics, Osaka University of Economics); Keisaku Higashida (School of Economics, Kwansei Gakuin University)
    Abstract: In this paper, we build a model of strategic misleading advertising in duopolistic markets with horizontal product differentiation and advertising externality between firms. We investigate the effects of regulating misinformation on market competition, behavior of firms, and social welfare. We show that the degree of advertising externality and the magnitude of advertising costs are crucial for determining the welfare effects of several regulations, including prohibiting misleading advertising, educating consumers, taxing production, and taxing misleading advertising. We then extend the model by introducing two types of heterogeneities; heterogeneous consumers and heterogeneous production costs between firms.
    Keywords: Misleading Advertising, Regulation; Duopoly, Product Differentiation, Advertising Externality
    JEL: L13 L15 M37
    Date: 2011–03
    URL: http://d.repec.org/n?u=RePEc:kgu:wpaper:69&r=ind
  3. By: Thomas Jeitschko (Antitrust Division, U.S. Department of Justice and Department of Economics, Michigan State University); Nanyun Zhang (Department of Economics, Towson University)
    Abstract: The conventional wisdom is that the formation of patent pools is welfare enhancing when patents are complementary, since the pool avoids a double-marginalization problem associated with independent licensing. The focus of this paper is on (downstream) product development and commercialization on the basis of perfectly complementary patents. We consider development technologies that entail spillovers between rivals, and assume that nal demand products are imperfect substitutes. If pool formation either increases spillovers in development or decreases the degree of product dierentiation, pool formation can actually adversely aect overall welfare by reducing incentives towards product development and product market competition|even with perfectly complementary patents. This significantly modifies and possibly even negates the conventional wisdom for many settings. The paper provides insights into why patent pools are uncommon in science-based industries such as biotech, despite there being strong policy advocacy for them.
    Keywords: Patent Pools, Research and Development, Innovation, BioTechnology, Electronics.
    JEL: L1 L2 L4 L6 D2 D4
    Date: 2011–02
    URL: http://d.repec.org/n?u=RePEc:tow:wpaper:2011-02&r=ind
  4. By: Christos Genakos; Tommaso Valletti
    Abstract: Interconnection rates are a key variable in telecommunications markets. Every call that is placed must be terminated by the network of the receiving party, thus the termination end has the characteristic of an economic bottleneck and is subject to regulation in many countries. This paper examines the impact of regulatory intervention to cut termination rates of calls to mobile phones. We argue that regulatory cuts should have a differential impact according to the type of tariff the mobile customer subscribes to. While all mobile customers may pay higher prices because of a "waterbed" effect, termination rates also affect competition among mobile operators. We show that the waterbed effect is diluted, but not eliminated, for customers with pre-paid cards, where regulation also acts as impediment to "raise-each-other's-cost" collusive strategies that mobile networks can adopt. The waterbed effect is instead strongest for consumers with monthly (post-paid) subscription contracts.
    Keywords: Interconnection, network competition, regulation, mobile phones
    JEL: L13 L51
    Date: 2011–02
    URL: http://d.repec.org/n?u=RePEc:cep:cepdps:dp1045&r=ind

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