nep-ind New Economics Papers
on Industrial Organization
Issue of 2021‒05‒24
two papers chosen by

  1. Challenging the incumbent: entry in markets with captive consumers and taste heterogeneity By Christian Oertel; Armin Schmutzler
  2. Simulating media platform mergers By Ivaldi, Marc; Zhang, Jiekai

  1. By: Christian Oertel; Armin Schmutzler
    Abstract: We analyze entry of a firm with a new and differentiated product into a market with two properties: An existing incumbent has a captive consumer base, and all consumers have heterogeneous tastes. The interaction of the share of captive consumers with the degree of taste heterogeneity leads to non-monotone effects of both parameters on entry. In particular, a higher captive share can support entry when heterogeneity is low but not when it is high, and higher taste heterogeneity (i.e., less product substi- tutability) can impede entry in the presence of captive consumers. Considering these effects together leads to new insights on entry, horizontal product innovation, and price discrimination.
    Keywords: Entry, captive consumers, asymmetric competition, product innovation
    JEL: L13 L40
    Date: 2021–05
  2. By: Ivaldi, Marc; Zhang, Jiekai
    Abstract: The empirical analysis of media platforms economics has often neglected the multi-homing behaviour of advertisers. Assuming away the cross-substitutability and/or complementarity between the advertising slots of dierent platforms could damage the quality and the robustness of counterfactual analysis. To evaluate the consequence of such an abstraction, we compare the simulation results of hypothetical platform mergers when the demand on the advertising side is derived from a Translog cost model which allows for multi-homing, and when it is approximated by using a simple log-linear inverse demand model that ignores the dierentiation among media platforms' advertising slots. Ignoring the existence of substitutes or complements on the advertising side would result in overpredicting the losses of the viewers' surplus and in underpredicting the gains in platforms' revenues.
    Keywords: Two-sided market; platform merger; advertising; TV market; competition policy
    JEL: K21 L10 L40 L82 M37
    Date: 2021–03

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