nep-ind New Economics Papers
on Industrial Organization
Issue of 2017‒05‒28
four papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Intertemporal Price Discrimination with Multiple Products By Rochet, Jean-Charles; Thanassoulis, John
  2. Price Discrimination and Dispersion under Asymmetric Profiling of Consumers By Paul Belleflamme; Wing Man Wynne Lam; Wouter Vergote
  3. Temporary and permanent technology lock-ins in the quality-differentiated Bertrand competition By Anton Bondarev; Frank C. Krysiak
  4. Open Source and Competition Strategy Under Network Effects By Yu Wang; Yu Chen; Bonwoo Koo

  1. By: Rochet, Jean-Charles; Thanassoulis, John
    Abstract: We study the multiproduct monopoly profit maximisation problem for a seller who can commit to a dynamic pricing strategy. We show that if consumers' valuations are not strongly-ordered then optimality for the seller requires intertemporal price discrimination and it can be implemented by dynamic pricing on the cross-sell to the bundle. If consumers are perfectly negatively correlated, reducing the cross-sell price at a single point in time is optimal. For general valuations we show that if the cross-partial derivative of the profit function is negative then dynamic pricing on the cross-sell is more profitable than fixing prices. So we show that the celebrated Stokey (1979) no-discrimination-across-time result does not extend to multiple good sellers when consumers' valuations are drawn from the tilted uniform, the shifted uniform, the exponential, or the normal distribution. We extend our results to welfare, to complementarities in demand, and to the determination of optimal discount schedules.
    Keywords: Multidimensional Mechanism Design; Second Degree Price Discrimination; Bundling; Time Discounting; Cross-sell.
    JEL: D42 L11
    Date: 2017–05
    URL: http://d.repec.org/n?u=RePEc:cpr:ceprdp:12034&r=ind
  2. By: Paul Belleflamme (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - Ecole Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique); Wing Man Wynne Lam (Department of Economics, University of Liège); Wouter Vergote (CEREC, University Saint-Louis - Bruxelles)
    Abstract: Two duopolists compete in price on the market for a homogeneous product. They can use a 'profiling technology' that allows them to identify the willingness-to-pay of their consumers with some probability. If both firms have profiling technologies of the exact same precision, or if one firm cannot use any profiling technology, then the Bertrand paradox continues to prevail. Yet, if firms have technologies of different precisions, then the price equilibrium exhibits both price discrimination and price dispersion, with positive expected profits. Increasing the precision of both firms’ technologies does not necessarily harm consumers.
    Keywords: price discrimination,price dispersion,Bertrand competition
    Date: 2017–04
    URL: http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-01502452&r=ind
  3. By: Anton Bondarev; Frank C. Krysiak (University of Basel)
    Abstract: We consider a setting where strategic behavior of r&d rms can lead to di erent types of a technology lock-in, permanent or temporary, in an eventually inferior technology. The simple setting with one incumbent and one potential entrant may lead to a wide variety of possible strategic regimes. We study conditions on relative market strength of the incumbent and the entrant which lead to di erent strategic actions and demonstrate, that such a strategic behavior is not always socially suboptimal, since it may lead to faster development of the existing technology due to persistent threat of the potential entrant. We further elaborate on the selection of support tools which may induce the development of new technology in the secondbest world and establish criteria for these tools to be social welfare improving ones.
    Keywords: technology lock-in, technological change, strategic interaction, r&d policy, multiple regimes
    JEL: C61 O31 O38
    Date: 2017
    URL: http://d.repec.org/n?u=RePEc:bsl:wpaper:2017/09&r=ind
  4. By: Yu Wang (School of Economics, Nanjing University); Yu Chen (University of Graz); Bonwoo Koo (University of Waterloo)
    Abstract: This study analyzes a firm's decision to adopt an open source strategy in the development of a primary system product that has an indirect network effect on complementary accessory products, and evaluates its impact on market competition and social welfare. It shows that open source systems can drive proprietary systems out of the market if system development costs are high and the network effect is strong. This study also shows that the presence of open source systems can benefit proprietary firms due to consumers' higher willingness-to-pay for accessory products, and increase total industry profit and social welfare.
    Keywords: Hotelling model, packaged goods, network effect, horizontal product differentiation
    JEL: L14 L15 L17 L86
    Date: 2017–05
    URL: http://d.repec.org/n?u=RePEc:grz:wpaper:2017-03&r=ind

This nep-ind issue is ©2017 by Kwang Soo Cheong. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at http://nep.repec.org. For comments please write to the director of NEP, Marco Novarese at <director@nep.repec.org>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.