nep-ind New Economics Papers
on Industrial Organization
Issue of 2013‒05‒19
five papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Software Upgrades under Monopoly By Jiri Strelicky; Kresimir Zigic
  2. Market Power in Bilateral Oligopoly Markets with Nonexpandable Infrastructures By Yukihiko Funaki; Harold Houba; Evgenia Motchenkova
  3. Hotelling Models with Price-Sensitive Demand and Asymmetric Transport Costs: An Application to Public Transport Scheduling By Adriaan Hendrik van der Weijde; Erik T. Verhoef; Vincent A. C. van den Berg
  4. Defensive Disclosure under Antitrust Enforcement By Ajay Bhaskarabhatla; Enrico Pennings
  5. Mergers in Bidding Markets By Maarten Janssen; Vladimir Karamychev

  1. By: Jiri Strelicky; Kresimir Zigic
    Abstract: We study price discrimination in a monopolistic software market. The monopolist charges different prices for the upgrade version and for the full version. Consumers are heterogeneous in taste for infinitely durable software and there is no resale. We show that price discrimination leads to a higher software quality but raises both absolute price and price per quality. This price discrimination does not increase sales and it decreases the total number of consumers compared to no discrimination. Finally, such discrimination decreases consumers' surplus but increases the developer's profit and social welfare that attains the social optimum in the limit.
    Keywords: monopoly; durable goods; software; upgrades; price discrimination;
    JEL: C61 L12 L15
    Date: 2013–01
    URL: http://d.repec.org/n?u=RePEc:cer:papers:wp478&r=ind
  2. By: Yukihiko Funaki (Waseda University); Harold Houba (VU University Amsterdam); Evgenia Motchenkova (VU University Amsterdam)
    Abstract: We consider price-fee competition in bilateral oligopolies with perfectly-divisible goods, non-expandable infrastructures, concentrated agents on both sides, and constant marginal costs. We define and characterize stable market outcomes. Buyers exclusively trade with the supplier with whom they achieve maximal bilateral joint welfare. Prices equal marginal costs. Threats to switch suppliers set maximal fees. These also arise from a negotiation model that extends price competition. Competition in both prices and fees necessarily emerges. It improves welfare compared to price competition, but consumer surpluses do not increase. The minimal infrastructure achieving maximal aggregate welfare differs from the one that protects buyers most.
    Keywords: Assignment Games, Infrastructure, Negotiations, Non-linear pricing, Market Power, Countervailing power
    JEL: C78 L10 L14 D43 R10
    Date: 2012–12–14
    URL: http://d.repec.org/n?u=RePEc:dgr:uvatin:2012139&r=ind
  3. By: Adriaan Hendrik van der Weijde (VU University Amsterdam); Erik T. Verhoef (VU University Amsterdam); Vincent A. C. van den Berg (VU University Amsterdam)
    Abstract: We formulate a horizontal differentiation model with price-sensitive demand and asymmetric transport costs, in the context of transport scheduling. Two competitors choose fares and departure times in a fixed time interval. Consumers are distributed uniformly along the interval; their location indicates their desired departure time. In a standard Hotelling model, locations are chosen before prices. In our context, the opposite order is also conceivable, but we show that it does not result in a Nash equilibrium; the same is true for a game in both variables are chosen simultaneously. We also discuss Stackelberg game structures and second-best regulation. We conclude that the addition of price-sensitive demand results in equilibria in the traditional Hotelling model with price setting; there, services are scheduled closer together than optimal. We also show that it is possible to include asymmetric schedule delay functions. Our results show that departure times can be strategic instruments. Optimal regulatory strategies depend on the value of schedule delay, and on whether the regulator can commit.
    Keywords: horizontal differentiation, scheduling, transport
    JEL: L11 L51 L91 R40
    Date: 2012–11–08
    URL: http://d.repec.org/n?u=RePEc:dgr:uvatin:2012119&r=ind
  4. By: Ajay Bhaskarabhatla (Erasmus University Rotterdam); Enrico Pennings (Erasmus University Rotterdam)
    Abstract: We formulate a simple model of optimal defensive disclosure by a monopolist facing uncertain antitrust enforcement and test its implications using unique data on defensive disclosures and patents by IBM during 1955-1989. Our results indicate that stronger antitrust enforcement leads to more defensive disclosure, that quality inventions are disclosed defensively, and that defensive disclosure served as an alternative but less successful mechanism to patenting at IBM in appropriating returns from R&D.
    Keywords: Antitrust, Defensive Disclosure, Patent, IBM
    JEL: K21 L40 M10 O32 O34
    Date: 2012–02–09
    URL: http://d.repec.org/n?u=RePEc:dgr:uvatin:2012010&r=ind
  5. By: Maarten Janssen (University of Vienna); Vladimir Karamychev (Erasmus University Rotterdam)
    Abstract: We analyze the effects of mergers in first-price sealed-bid auctions on bidders' equilibrium bidding functions and on revenue. We also study the incentives of bidders to merge given the private information they have. We develop two models, depending on how after-merger valuations are created. In the first, single-aspect model, the valuation of the merged firm is the maximum of the valuations of the two firms engaged in the merger. In the multi-aspect model, a bidder's valuation is the sum of two components and a merged firm chooses the maximum of each component of the two merging firms. In the first model, a merger creates incentives for bidders to shade their bids leading to lower revenue. In the second model, the non-merging firms do not shade their bids and revenue is actually higher. In both models, we show that all bidders have an incentive to merge.
    Keywords: Mergers, first-price sealed-bid auctions
    JEL: D44 D82
    Date: 2013–01–10
    URL: http://d.repec.org/n?u=RePEc:dgr:uvatin:2013012&r=ind

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