nep-ind New Economics Papers
on Industrial Organization
Issue of 2013‒12‒20
seven papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Competitive Market Segmentation By Silvio Sticher
  2. Firm competition in a probabilistic framework of consumer choice By Hao Liao; Rui Xiao; Duanbing Chen; Matus Medo; Yi-Cheng Zhang
  3. Exclusivity Clauses: Enhancing Competition, Raising Prices By Marc Blatter; Silvio Sticher
  4. Quantity or quality? Knowledge alliances and their effects on patenting By Hottenrott, Hanna; Lopes-Bento, Cindy
  5. Airline Pricing Behaviour under Limited Intermodal Competition By Bergantino, Angela Stefania; Capozza, Claudia
  6. Flex Cars and Competition in Ethanol and Gasoline Retail Markets By Juliano Assuncao; Joao Paulo Pessoa; Leonardo Rezende
  7. Open Source Software Subsidies and Network Compatibility in a Mixed Duopoly By Thierry Pénard; Mourad Zeroukhi

  1. By: Silvio Sticher
    Abstract: In a two-firm model where each firm sells a high-quality and a low-quality version of a product, customers differ with respect to their brand preferences and their attitudes towards quality. We show that the standard result of quality-independent markups crucially depends on the assumption that the customers' valuation of quality is identical across firms. Once we relax this assumption, competition across qualities leads to second-degree price discrimination. We find that markups on low-quality products are higher if consuming a low-quality product involves a firm-specific disutility. Likewise, markups on high-quality products are higher if consuming a high-quality product creates a firm-specific surplus.
    Keywords: price differentiation; vertical competition
    JEL: D43 L13 L15
    Date: 2013–12
    URL: http://d.repec.org/n?u=RePEc:ube:dpvwib:dp1313&r=ind
  2. By: Hao Liao; Rui Xiao; Duanbing Chen; Matus Medo; Yi-Cheng Zhang
    Abstract: We develop a probabilistic consumer choice framework based on information asymmetry between consumers and firms. This framework makes it possible to study market competition of several firms by both quality and price of their products. We find Nash market equilibria and other optimal strategies in various situations ranging from competition of two identical firms to firms of different sizes and firms which improve their efficiency.
    Date: 2013–12
    URL: http://d.repec.org/n?u=RePEc:arx:papers:1312.3826&r=ind
  3. By: Marc Blatter; Silvio Sticher
    Abstract: In a setting where retailers and suppliers compete for each other by offering binding contracts, exclusivity clauses serve as a competitive device. As a result of these clauses, firms addressed by contracts only accept the most favorable deal. Thus the contract-issuing parties have to squeeze their final customers and transfer the surplus within the vertical supply chain. We elaborate to what extent the resulting allocation depends on the sequence of play and discuss the implications of a ban on exclusivity clauses.
    Keywords: exclusive dealing; exclusive provision
    JEL: D86 L13 L42
    Date: 2013–11
    URL: http://d.repec.org/n?u=RePEc:ube:dpvwib:dp1312&r=ind
  4. By: Hottenrott, Hanna; Lopes-Bento, Cindy
    Abstract: This study shows for a large sample of R&D-active manufacturing firms over the period 2000-2009 that knowledge alliances have a positive effect on patenting in terms of both quantity and quality. However, when distinguishing between alliances that aim at joint creation of new knowledge and alliances that aim at the exchange of knowledge, results suggest that creation alliances lead to more valuable patents as they receive significantly more forward citations per patent. Knowledge exchange alliances, on the other hand, are associated with patent quantity, but not quality. --
    Keywords: Knowledge Alliances,Patents,Innovation,R&D,Count Data Models
    JEL: O31 O32 O33 O34
    Date: 2013
    URL: http://d.repec.org/n?u=RePEc:zbw:dicedp:122&r=ind
  5. By: Bergantino, Angela Stefania; Capozza, Claudia
    Abstract: This paper empirically analyses airline pricing for short-haul flights in contexts with no credible threat of inter-modal competition. To this end, we explore the southern Italian market since it is less accessible by other transport modes and thus fares are the direct outcome of air-related competition. We show, in fact, that market power matters, depending on the level of intra-modal competition, and that airlines apply differentiated mark-ups. Besides, consistent with the implementation of inter-temporal price discrimination (IPD), we find a non-monotonic inter-temporal profile of fares with a turning point included in the interval of the 43th to 45th days before departure. Finally, we provide evidence that in more competitive markets, airlines are more likely to engage in IPD.
    Keywords: airfares, market structure, intertemporal price discrimination
    JEL: L11 L13 L9 L93
    Date: 2013–11–27
    URL: http://d.repec.org/n?u=RePEc:pra:mprapa:48892&r=ind
  6. By: Juliano Assuncao; Joao Paulo Pessoa; Leonardo Rezende
    Abstract: In Brazil, gasoline and ethanol coexist as automotive fuels and are becoming closer substitutes as flex cars become more widely adopted. We employ this source of variation in a large panel of weekly prices at the station level to show that fuel prices have fallen in response to this change. This finding is evidence of market power in fuel retail and indicates that innovations that increase consumer choice benefit even those who choose not to adopt them. We also propose a model of price competition in this market and use it to estimate demand from price response functions.
    Keywords: Flex-fuel vehicles, Gasoline, Ethanol, Price competition, Spatial Competition, Discrete equilibrium price dispersion
    JEL: L11 L13 L62 L71
    Date: 2013–12
    URL: http://d.repec.org/n?u=RePEc:cep:cepdps:dp1251&r=ind
  7. By: Thierry Pénard (University of Rennes 1, CREM CNRS UMR 6211 and IDEC); Mourad Zeroukhi (Foundation of the University of Rennes 1, CREM CNRS UMR 6211 and IDEC)
    Abstract: For many applications, open source software (OSS) can o¤er a high-quality alternative to proprietary software (e.g. Linux, Apache, Android,...). But even if OSS is usually free of charge, its installation and use require some skills. Should the government intervene to promote the di¤usion of OSS and provide some learning or …nancial support to potential adopters? This paper examines whether public subsidies towards open source software is socially desirable and how the extent of compatibility between open source software and proprietary software can infuence the amount of subsidies. We consider a mixed duopoly model in which a proprietary software (PS) company competes with an open source software (OSS) community. Users are heterogeneous in their ability to use OSS, and their utility depends on the number of users who have adopted the same software or a compatible software (existence of network externalities). Four situations are distinguished: full compatibility between OSS and PS, full incompatibility, and one-way compatibility (either only OSS or PS is compatible). We show that if the government only takes care of consumer surplus, public subsidies are welfare-enhancing. But the optimal level of subsidies is larger with full compatibility and PS compatibility than full incompatibility and OSS compatibility. These results suggest that government policy towards OSS must be conditional to the degree of compatibility between PS and OSS.
    Keywords: Open source software, Public subsidy, Network compatibility
    JEL: L11 L15 L17 L38
    Date: 2013–11
    URL: http://d.repec.org/n?u=RePEc:tut:cremwp:201339&r=ind

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