nep-ind New Economics Papers
on Industrial Organization
Issue of 2015‒07‒25
four papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Antimonopoly regulation method based on perfect price discrimination By Vadim Borokhov
  2. Multi-Product Duopoly With Cross-Product Cost Interdependencies By Gary Biglaiser; Andrei Hagiu
  3. Patent collateral, investor commitment and the market for venture lending By Yael V. Hochberg; Carlos J. Serrano; Rosemarie H. Ziedonis
  4. Full versus partial collusion among brands and private label producers By Hasnas, Irina; Wey, Christian

  1. By: Vadim Borokhov
    Abstract: We propose a method of antimonopoly regulation in a day-ahead power market with locational marginal pricing which forms economic incentives for a producer, operating a portfolio of generating units, to submit an offer indicating its true cost and faithful values of technical parameters, entering generating units constraints. The uncertainty faced by regulator when applying the method affects neither nodal output/consumption volumes nor locational marginal prices but manifests itself in overall uplift or downlift for the market, which may be allocated among the other market players in a way preserving the price signals produced by the market.
    Date: 2015–07
  2. By: Gary Biglaiser (University of North Carolina); Andrei Hagiu (Harvard Business School, Strategy Unit)
    Abstract: Many multi-product firms incur a complexity fixed cost when offering different product lines in different quality tiers relative to the case when offering all products lines in the same quality tier (high or low). Such fixed costs create an interdependency between firms' choices of quality tiers across different product lines, even when demands are independent. We investigate the effects of this interdependency on equilibrium profits in a Stackelberg duopoly game. Both firms' profits are (weakly) higher when the complexity cost is infinite than when it is 0. The Stackelberg leader's profits are always (weakly) higher with a positive complexity fixed cost, but its profits can be non-monotonic in the magnitude of this cost. The Stackelberg follower's profits can be lower when the complexity fixed cost is positive than when it is equal to 0.
    Keywords: multi-product duopoly, vertical differentiation, fixed costs.
    JEL: L1 L2 L8
    Date: 2015–07
    Abstract: This paper investigates the market for lending to technology startups (i.e. venture lending) and examines two mechanisms that facilitate trade within it: the ’saleability’ of patent collateral and financial intermediaries. We find that intensified trading in the secondary market for patent assets increases the annual rate of startup lending, particularly for startups with more re-deployable patent assets. Moreover, we show that the credibility of venture capitalist commitments to refinance and grow fledgling companies is vital for startup debt provision. Following a severe and unexpected capital supply shock for VCs, we find a striking flight to safety among lenders, who continue to finance startups whose investors are better able to credibly commit to refinancing their portfolio companies, but withdraw from otherwise promising projects that may have most needed their funds. The findings are consistent.
    Keywords: fi nancing innovation, patent collateral, venture capital, market for patents.
    JEL: L14 L26 G24 O16 O3
    Date: 2015–07
  4. By: Hasnas, Irina; Wey, Christian
    Abstract: We analyze the incentives to collude when brand manufacturers compete with a private label producer of inferior quality. Full collusion is easier to sustain than partial collusion from the brands.perspective when horizontal differentiation is large and vertical differentiation is small. The private label firm is better off under full collusion than under partial collusion if goods are sufficiently homogenous (horizontal and/or vertical). Partial collusion could be preferred by the private label exactly when full collusion is easier to sustain. Improving the private label's quality makes full collusion more likely, either because it relaxes the brand producers' incentive constraint or because it shifts the preference of the private label firm from partial collusion to full collusion. Fully collusive behavior reveals itself through a nonnegative price effect on the brands' side caused by a quality increase of the private label good.
    Keywords: Oligopoly,Product Differentiation,Private Label,Collusion
    JEL: L11 L13
    Date: 2015

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