nep-ind New Economics Papers
on Industrial Organization
Issue of 2012‒09‒09
five papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Patents and Licenses By Yair Tauman; Debrapiya Sen
  2. Second-Degree Price Discrimination on Two-Sided Markets By Böhme, Enrico
  3. Buying frenzies in durable-goods markets By Ting Liu; Pasquale Schiraldi
  4. Price Stickiness in Customer Markets with Reference Prices By Nicolas Vincent
  5. Strategic delegation in price competition By Güth, Werner; Pull, Kerstin; Stadler, Manfred

  1. By: Yair Tauman (Department of Economics, Stony Brook University); Debrapiya Sen (Department of Economics, Ryerson University, Toronto, ON, Canada.)
    Abstract: This article considers the problem of patent licensing in a Cournot oligopoly under a class of general demand functions. We consider two cases, the case where the innovator is an outsider and the one where it is one of the incumbent rms. The licensing policies considered are upfront fees, royalties and combinations of the two. It is shown that (i) for generic values of magnitudes of the innovation, a royalty policy is better than fee or auction provided the industry size is relatively large, (ii) under combinations of fees and royalties, provided the innovation is relatively signicant (or the industry size is relatively large), (a) there is always an optimal policy where the innovation is licensed to practically all rms of the industry and (b) any optimal combination includes a positive royalty.
    Date: 2012–08
    URL: http://d.repec.org/n?u=RePEc:nys:sunysb:12-05&r=ind
  2. By: Böhme, Enrico
    Abstract: The present paper provides a descriptive analysis of the second-degree price discrimination problem on a monopolistic two-sided market. By imposing a simple two-sided framework with two distinct types of agents on one of its market sides, it will be shown that under incomplete information, the extent of platform access for high-demand agents is strictly reduced below the benchmark level (complete information). In addition, the paper’s findings imply that it is feasible in the optimum to charge higher payments from low-demand agents if the extent of interaction with agents from the opposite market side is assumed to be bundle-specific.
    Keywords: two-sided markets; second-degree price discrimination; monopoly
    JEL: D82 L12 D42 L15
    Date: 2012–08–30
    URL: http://d.repec.org/n?u=RePEc:pra:mprapa:40951&r=ind
  3. By: Ting Liu (Department of Economics, Stony Brook University); Pasquale Schiraldi (Department of Economics,London School of Economic)
    Abstract: We explain why a durable-goods monopolist would like to create a shortage during the launch phase of a new product. We argue that this incentive arises from the presence of a second-hand market and uncertainty about consumers?willingness to pay for the good. Consumers are heterogeneous in their valuations. Some consumers are initially uninformed about their valuations and learn about them over time while others are informed through their lifetimes. Given demand uncertainty, first period sales may result in misallocation and lead to active trading on secondary market after the uncertainty is resolved. We characterize conditions under which the monopolist would like to restrict sales and generate a buying frenzy. We show how the monopolist may benefit from an active second-hand market.
    Date: 2012–08
    URL: http://d.repec.org/n?u=RePEc:nys:sunysb:12-07&r=ind
  4. By: Nicolas Vincent
    Abstract: Price rigidity is often modeled by assuming that firms face a fixed cost of price change. However, in surveys, firms report that the main reason they wish to keep prices stable is for fear of antagonizing customers. Moreover, marketing studies show that most consumers engage in very little product comparison on a typical shopping trip. In this paper, we explore the implications of these observations for price rigidity. In our model, comparing prices and characteristics of alternative brands is time-consuming. While some consumers behave as bargain hunters with zero opportunity cost form shopping, most are loyal to firms as long as posted prices are not raised. A price increase is interpreted as a signal that a better alternative may be available and triggers consumer search. Firms do not face menu costs and are free to change nominal prices, but understand that their pricing decisions will affect their customer base and hence future profits. We show that this micro-founded mechanism is akin to a nominal rigidity and naturally generates price stickiness. It is also compatible with the observation of frequent sales at the retail level and can rationalize the decreasing or flat hazard functions observed empirically.
    Keywords: Price stickiness, customer relations, nominal rigidities, consumer inattention
    JEL: E30 L16
    Date: 2012
    URL: http://d.repec.org/n?u=RePEc:lvl:lacicr:1230&r=ind
  5. By: Güth, Werner; Pull, Kerstin; Stadler, Manfred
    Abstract: We study price competition in heterogeneous markets where price decisions are delegated to agents. Principals implement a revenue sharing scheme to which agents react by commonly charging a sales price. The results of our model exemplify the importance of both intrafirm- and interfirm interactions of principals and agents in competition. We show that price delegation can increase or decrease the firms' surplus depending on the heterogeneity of the market and the number of agents employed by the firms. --
    Keywords: Strategic delegation,Agency theory,Revenue sharing
    JEL: C72 L22 M52
    Date: 2012
    URL: http://d.repec.org/n?u=RePEc:zbw:tuewef:43&r=ind

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