New Economics Papers
on Industrial Organization
Issue of 2011‒06‒18
seven papers chosen by

  1. Vertical Limit pricing By Aggey Semenov; Julian Wright
  2. Entry deterrrence via renegotiation-proof non-exclusive contracts By Aggey Semenov; Julian Wright
  3. Game complete analysis of Bertrand Duopoly By Carfì, David; Perrone, Emanuele
  4. Open Innovation in a Dynamic Cournot Duopoly By I. Hasnas; L. Lambertini; A. Palestini
  5. Price competition on networked duopolistic markets By Zakaria Babutzidze
  6. Fight Cartels or Control Mergers? On the Optimal Allocation of Enforcement Efforts within Competition Policy By Andreea Cosnita-Langlais; Jean-Philippe Tropeano
  7. Coupon Impacts on Orange Juice Demand Based on Time-Series and Cross-Sectional Data By Brown, Mark G.

  1. By: Aggey Semenov (Department of Economics, University of Ottawa, Ottawa, ON); Julian Wright (Department of Economics, National University of Singapour)
    Abstract: A new theory of limit pricing is provided which works through the vertical contract signed between an incumbent manufacturer and a retailer. We establish conditions under which the incumbent can obtain full monopoly profits, even if the potential entrant is more efficient. A key feature of the optimal vertical contract we describe is quantity discounting, typically involving three-part incremental-units or all-units tariffs, with a marginal wholesale price that is below the incumbent’s marginal cost for sufficiently large quantities.
    Keywords: limit pricing, vertical contracts, multi-part tariffs.
    JEL: L12 L42
    Date: 2011
  2. By: Aggey Semenov (Department of Economics, University of Ottawa, Ottawa, ON); Julian Wright (Department of Economics, National University of Singapour)
    Abstract: We establish the entry-deterring role of vertical contracts in a setting that does not rely on asymmetric information, the exclusivity of the incumbent’s contracts, limits on distribution channels, or restrictions on the ability to renegotiate contracts in case of entry. The optimal contract we describe is a three-part quantity discounting contract that involves the payment of an allowance to the downstream firm and a marginal wholesale price below the incumbent’s marginal cost for sufficiently large quantities
    Keywords: entry, vertical contracts, exclusivity, renegotiation
    JEL: D21 L42
    Date: 2011
  3. By: Carfì, David; Perrone, Emanuele
    Abstract: In this paper we apply the Complete Analysis of Differentiable Games (introduced by D. Carfì in [3], [6], [8] and [9]) and al-ready employed by himself and others in [4], [5], [7]) to the classic Bertrand Duopoly (1883), classic oligopolistic market in which there are two enterprises producing the same commodity and selling it in the same market. In this classic model, in a competitive background, the two enterprises employ as possible strategies the unit prices of their product, contrary to the Cournot duopoly, in which the enterprises decide to use the quantities of the commodity produced as strategies. The main solutions proposed in literature for this kind of duopoly (as in the case of Cournot duopoly) are the Nash equilibrium and the Collusive Optimum, without any subsequent critical exam about these two kinds of solutions. The absence of any critical quantitative analysis is due to the relevant lack of knowledge regarding the set of all possible outcomes of this strategic interaction. On the contrary, by considering the Bertrand Duopoly as a differentiable game (games with differentiable payoff functions) and studying it by the new topological methodologies introduced by D. Carfì, we obtain an exhaustive and complete vision of the entire payoff space of the Bertrand game (this also in asymmetric cases with the help of computers) and this total view allows us to analyze critically the classic solutions and to find other ways of action to select Pareto strategies. In order to illustrate the application of this topological methodology to the considered infinite game, several compromise pricing-decisions are considered, and we show how the complete study gives a real extremely extended comprehension of the classic model.
    Keywords: Duopoly; Normal form Games; Microeconomic Policy; Complete study; Bargaining solutions
    JEL: D0 C71 C7 C81 D01 C72
    Date: 2011
  4. By: I. Hasnas; L. Lambertini; A. Palestini
    Abstract: We analyze an Open Innovation process in a Cournot duopoly using a differential game approach where knowledge spillovers are endogenously determined via the R&D process. The game produces multiple steady states, allowing for an asymmetric solution where a firm may trade off the R&D investment against information absorption from the rival.
    JEL: C73 L13 O31
    Date: 2011–05
  5. By: Zakaria Babutzidze (Observatoire Français des Conjonctures Économiques)
    Date: 2011–04
  6. By: Andreea Cosnita-Langlais; Jean-Philippe Tropeano
    Abstract: This paper deals with the optimal enforcement of the competition law between the merger and anti-cartel policies. We examine the interaction of these two branches of the competition policy given the budget constraint of the competition agency and taking into account the ensuing incentives for firms’ behavior in terms of choice between cartels and mergers. We are thus able to conclude on the optimal competition policy mix. We show for instance that to the extent that a tougher anti-cartel action triggers more mergers taking place, the public agency will optimally invest only in control fighting for a tight budget, and then in both instruments as soon as the budget is no longer tight. However, if the merger’s coordinated effect is taken into account, then when resources are scarce the agency may optimally have to spend first on controlling mergers before incurring the cost of fighting cartels.
    Keywords: competition law enforcement, antitrust, merger control, anti-cartel policy
    JEL: L41 K21 D82
    Date: 2011
  7. By: Brown, Mark G.
    Abstract: A recent study by Dong and Leibtag found coupons were effective in increasing fruit and vegetable demand. The current study supports these finding for the OJ product group. The analysis focused on the informational/advertising or demand shift impact of coupons, as opposed to the price impact which could not be determined since data on prices were a weighted average for coupon users and non-users. The results indicate a 6% increase in OJ gallons sales when coupons are used. The coupon variable used in the analysis, however, measures the extent of coupon usage but not intensity. As such, the results provide a partial view of the impact of coupons and further analysis on data that also includes some measure of intensity is needed to more fully evaluate this marketing tool.
    Keywords: coupon, orange juice, demand, Agribusiness,
    Date: 2010–08–01

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