upward pricing pressure in two sided markets measuring upward pricing pressure upp has recently been proposed by farrell and shapiro 2010 as an alternative screening device for horizontal mergers we extend the concept of upp to two sided markets examples of such markets are the newspaper market where the demand for advertising is related to the number of readers and the market for online search where advertising demand depends on the number of users the formulae we derive depend on four sets of diversion ratios that can either be estimated using market level demand data or elicited in surveys in an application we show that it is important to take the two sidedness of the market into account when evaluating upp

cointegration and the us term structure abstract using the maximum likelihood analysis of cointegration developed by johansen 1988 1991 we test the cointegration implications of the expectations hypothesis of the term structure on a sample of us pure discount yields by using this approach we are able to analyze systems of more than two interest rates simultaneously as opposed to most previous studies which examine interest rates only in pairs one of the main results is that for the period 1952 1987 the cointegration implications generally seem to hold

sufficient decisions in multi sided and multiproduct markets we show that in many models where firms make multiple decisions analysis can be made more tractable by re formulating the model into one in which each firm makes a single choice which we call a sufficient decision the transformation allows application of standard techniques in these settings including pass through for tax incidence and upward pricing pressure for merger analysis the transformation works because the assumption of profit maximization links the firms decisions together examples include models of monopoly and oligopoly in two sided markets where a natural sufficient decision may be the number of transactions that the firm facilitates and multiproduct markets

price coherence and excessive intermediation suppose an intermediary provides a benefit to buyers when they purchase from sellers using the intermediary s technology we develop a model to show that the intermediary would want to restrict sellers from charging buyers more for transactions it intermediates with this restriction an intermediary can profitably raise demand for its services by eliminating any extra price buyers face for purchasing through the intermediary we show that this leads to inflated retail prices excessive adoption of the intermediaries services over investment in benefits to buyers and a reduction in consumer surplus and sometimes welfare competition among intermediaries intensifies these problems by increasing the magnitude of their effects and broadening the circumstances in which they arise we discuss applications to payment card systems travel reservation systems rebate services and various other intermediaries jel codes d40 l11 l14 l42

research on the motion picture industry state of the art and new directions off the beaten track away from theatrical release the motion picture industry has been subject of extensive academic research over the last decades however most scholars focused on the u s theatrical motion picture market the number of research activities regarding even more profitable release windows such as home video or television has been substantially lower although international distribution is essential for a motion picture project to break even there has been little significant re search on most other markets this paper aims at summarizing the current state of research on the motion picture industry particularly from marketing and management perspective revealing research gaps and proposing recommendations for future research endeavors therefore a three pillar scheme is developed to systemize previous findings research on intraorganizational decision making contractual relationships between national stakeholders and international market competition are differentiated since these insights are mainly derived from u s theatrical exhibition they can hardly be applied to other markets and exhibition windows thus potential research areas are identified to expand knowledge of posttheatrical and international markets

mobile termination network externalities and consumer expectations we re examine the literature on mobile termination in the presence of network externalities externalities arise when firms discriminate between on and o net calls or when subscription demand is elastic this literature predicts that profit decreases and consumer surplus increases when termination charges increase this is puzzling since in reality regulators are pushing termination rates down while being opposed to do so by network operators this puzzle is resolved when consumers expectations are assumed passive but required to be fulfilled in equilibrium as defined by katz and shapiro aer 1985 instead of being responsive to non equilibrium prices as assumed until now

trading volume and asset liquidity since the depth and liquidity of a market depend on the entry decisions of all potential participants each trader assesses them according to conjectures about entry by others if trade is equally costly across markets this externality leads to the concentration of trade on one market if not it can produce multiple conjectural equilibria some where trade concentrates on one market and others where large traders resort to a separate market or to search for a trading partner while fragmentation is welfare reducing in the two market case no such ranking is possible if it involves off exchange search

first party content and coordination in two sided markets the strategic use of first party content by two sided platforms is driven by two key factors the nature of buyer and seller expectations favorable versus unfavorable and the nature of the relationship between first party content and third party content complements or substitutes platforms facing unfavorable expectations face an additional constraint their prices and first party content investment need to be such that low zero participation equilibria are eliminated this additional constraint typically leads them to invest more less in first party content relative to platforms facing favorable expectations when first and third party content are substitutes complements these results hold with both simultaneous and sequential entry of the two sides with two competing platforms incumbent facing favorable expectations and entrant facing unfavorable expectations and multi homing on one side of the market the incumbent always invests weakly more in first party content relative to the case in which it is a monopolist this paper was accepted by bruno cassiman business strategy

negative intra group externalities in two sided markets two types of agents interact on a pre existing free platform agents value positively the presence of agents of the other type but may value negatively the presence of agents of their own type we ask whether a new platform can find fees and subsidies so as to divert agents from the existing platform and make a profit we show that this might be impossible if intra group negative externalities are sufficiently but not too strong with respect to positive inter group externalities

platform competition in two sided markets many if not most markets with network externalities are two sided to succeed platforms in industries such as software portals and media payment systems and the internet must get both sides of the market on board accordingly platforms devote much attention to their business model that is to how they court each side while making money overall this paper builds a model of platform competition with two sided markets it unveils the determinants of price allocation and end user surplus for different governance structures profit maximizing platforms and not for profit joint undertakings and compares the outcomes with those under an integrated monopolist and a ramsey planner jel l5 l82 l86 l96

external demand constraints for agricultural exports an impediment to structural adjustment policies in sub saharan african countries abstract structural adjustment programmes are being promoted throughout the developing countries the recommended policy package including price as well as non price policies is geared towards export growth and a long term sustainable balance of payments there is considerable scepticism however whether developing countries can indeed benefit from an export oriented growth strategy first rigidities in domestic output supply responses could preclude significant export growth second external demand side constraints could impede export revenue growth if a jointly promoted export led strategy resulted in world market price deterioration analysis reveals that in the case of sub saharan africa neither of the above factors should cause a failure of structural adjustment policies however the outcome of adjustment policies could be improved if commodity and country specific factors were taken into consideration

two sided markets with pecuniary and participation externalities the existing literature on two sided markets addresses participation externalities but so far it has neglected pecuniary externalities between competing platforms in this paper we build a model that incorporates both externalities in our setup differentiated platforms compete in advertising and offer consumers a service free of charge such as a tv program that is financed through advertising we show that advertising can exhibit the properties of a strategic substitute or complement surprisingly there exist cases in which platforms benefit from market entry moreover we show that from a welfare point of view perfect competition is not always desirable

dynamic competition with network externalities why history matters we consider dynamic competition among platforms in a market with network exter nalities a platform that dominated the market in the previous period becomes focal in the current period in that agents play the equilibrium in which they adopt the focal platform whenever such equilibrium exists yet when faced with higher quality competition can a low quality platform remain focal in the finite horizon case the unique equilibrium is efficient for patient platforms with an infinite time horizon however there are multiple equilibria where either the lowor high quality platform dominates if qualities are stochastic the platform with a better average quality wins with a higher probability even when its realized quality is lower and this probability increases as platforms become more patient hence social welfare may decline as platforms become more forward looking

competing by restricting choice the case of search platforms we show that a two sided matching platform can successfully compete by limiting the number of choices it offers to its customers while charging higher prices than platforms with unrestricted choice we develop a stylized model of online dating where agents with different outside options match based on how much they like each other starting from these microfoundations we derive the strength and direction of indirect network effects and show that increasing the number of potential matches has a positive effect due to larger choice but also a negative effect due to competition between agents on the same side agents resolve the trade off between these competing effects differently depending on their outside options for agents with high outside options the choice effect is stronger than the competition effect leading them to prefer an unrestricted choice platform the opposite is the case for agents with low outside options who then have higher willingness to pay for a platform restricting choice as

tying and freebies in two sided markets abstract in two sided markets where platforms are constrained to set non negative prices tying can be deployed by platforms as a tool to introduce implicit subsidies for a monopoly this raises participation and benefits consumers on both sides in a duopoly tying on one side makes a platform more or less competitive on the other side depending on externalities tying may not be ex ante optimal while the competing platform may benefit from it the impact on consumers surplus depends on whether competition is softened or intensified on the profitable side moreover tying increases total welfare if network effects are strong

chicken and egg competition among intermediation service providers we analyze a model of imperfect price competition between intermediation service providers we insist on features that are relevant for informational intermediation via the internet the presence of indirect network externalities the possibility of using the nonexclusive services of several intermediaries and the widespread practice of price discrimination based on users identity and on usage efficient market structures emerge in equilibrium as well as some specific form of inefficient structures intermediaries have incentives to propose non exclusive services as this moderates competition and allows them to exert market power we analyze in detail the pricing and business strategies followed by intermediation services providers copyright 2003 by the rand corporation

when do markets tip a cognitive hierarchy approach the market structure of platform competition is critically important to managers and policy makers network effects in these markets predict concentrated industry structures whereas competitive effects and differentiation suggest the opposite standard theory offers little guidance full rationality models have multiple equilibria with wildly varying market concentration we relax full rationality in favor of a boundedly rational cognitive hierarchy model even small departures from full rationality allow sharp predictions there is a unique equilibrium in every case when participants single home and platforms are vertically differentiated a single dominant platform emerges multihoming can give rise to a strong weak market structure one platform is accessed by all and the other is used as a backup by some agents horizontal differentiation in contrast leads to fragmentation differentiation rather than competitive effects mainly determines market structure

switching costs in two sided markets in many markets there are switching costs and network effects yet the literature gen erally deals with these two concepts separately this paper bridges the gap by analyzing their interaction effects or indirect bargain in a dynamic two sided market i show that in a symmetric equilibrium the classic result that the first period price is u shape in switching costs does not emerge but instead switching costs always intensify first period price competition moreover an increase in switching costs on one side decreases the first period price on the other side thus policies that ignore these effects may underestimate the welfare enhancing effects of switching costs

platform competition and seller investment incentives many products and services are not sold on open platforms but on competing for profit platforms which charge buyers and sellers for access what is the effect of for profit intermediation on seller investment incentives since for profit intermediaries reduce the available rents in the market one might naively suspect that sellers have weaker investment incentives with competing for profit platforms however we show that for profit intermediation may lead to overinvestment when free access would lead to underinvestment because investment decisions affect the strength of indirect network effects and thus access prices we characterize the effect of for profit intermediation on investment incentives depending on the nature of the investment and on which side of the market singlehomes

lessons learned in structural adjustment lending in the developing world and implications for eastern europe discussion conditional program assistance which has come to be designated as structural adjustment sa was and still is the order of the day in many countries in africa and elsewhere tweeten mosley and toye also from both methodological and pragmatic viewpoints the experience of several countries which perhaps each in its own way found themselves in the obligation of improving their efficiency through the removal of disincentives and economic distor

the effect of policy reforms on agricultural incentives in sub saharan africa in 1981 the world bank s report on subsaharan africa cited trade and exchange rate biases against exports poor macroeconomic and public sector management and a price bias against agriculture as contributing to the region s poor performance and slow growth world bank 1981 1986b since then average per capita income in the region has continued to fall overall agricultural production has grown more slowly than population declining food production per capita has led to rising food imports and for many of the primary agricultural exports africa s share of world trade has fallen steadily from 1970 to 1983 many african governments now agree on the central role of agriculture and the need to strengthen incentives in the sector united nations this paper assesses how reforms in macroeconomic and sector policies have affected agricultural incentives government policies can be broadly classified into three groups macroeconomic policies that affect incentives in all sectors generally agricultural sector policies that affect farm profitability directly by changing commodity and input prices and general and sector specific policies that may affect farm profitability indirectly by changing factor prices and influencing productivity e g public expenditures on research extension and infrastructure this paper analyzes the impact on agricultural incentives of the first two groups of policies the analysis of producer prices presented below is based on data for about twothirds of the countries in sub saharan africa which account for more than three fourths of agricultural gross domestic product gdp country coverage varies by indicator depending in part on whether comprehensive data are available simple averages are used to summarize policy performance across countries in contrast to weighted averages commonly used to assess aggregate economic effects the analysis of producer prices covers one to four principal export crops per country 2

mixed bundling in two sided markets in the presence of installed base effects we analyze mixed bundling in two sided markets where installed base effects are present and find that the pricing structure deviates from traditional bundling as well as the standard two sided markets literature we determine prices on both sides fall with bundling mixed bundling acts as a price discrimination tool segmenting the market more efficiently consequently as a by product of this price discrimination the two sides are better coordinated and social welfare is enhanced we show unambiguously that platform participations increase on both sides of the market after theoretically evaluating the impact mixed bundling has on prices and welfare we take the model predictions to data from the portable video game console market we find empirical support for all theoretical predictions this paper was accepted by j miguel villas boas marketing

private contracting with externalities divide and conquer abstract this paper considers the efficacy of divide and conquer strategies in principal agent games involving contracting with externalities we find that whereas divide and conquer offers can arise in equilibrium under some conditions when the principal s offers are publicly observable they cannot arise in equilibrium when the principal s offers are privately observable and the agents hold passive out of equilibrium beliefs this insight applies to technology and platform adoption decisions with network effects labor relations settlement negotiations and input licensing among others

estimating market power in a two sided market the case of newspapers the newspaper industry is a two sided market the readers market and the advertising market are closely linked by inter market network externalities we estimate market power in the italian newspaper industry by building a structural model which encompasses a demand estimation

multidimensional platform design successful platforms attract not just many users but also those of the right kind the right kind of user is one who can either be directly monetized or who differentially attracts other valuable users bonacich centrality on the network of user sorting with direct value of monetization captures this feedback loop and thus characterizes the value of user characteristics we use this value to determine optimal steady state platform design and reliable means for platforms to reach such a steady state we apply these results respectively to explain the dynamic growth strategy of social networks and urban development policies of cities

innovation rent extraction and integration in systems markets author s farrell joseph katz michael abstract we consider innovation incentives in markets where final goods comprise two strictly complementary components one of which is monopolized we focus on the case in which the complementary component is competitively supplied and in which innovation is important we explore ways in which the monopoly may have incentives to confiscate efficiency rents in the competitive sector thus weakening or destroying incentives for independent innovation we discuss how these problems are affected if the monopolist integrates into the competitive sector

the strategic analysis of intermediation the importance and the special character of intermediation were recognized as early as in the eighteenth century and have been stressed by many authors afterwards in spite of this long tradition comparatively little work has been done on the details of the economic theory of intermediation instead it was assumed that intermediation can simply be treated like any other economic activity in contrast i will argue that the theory of intermediation requires a specific game theoretic analysis and moreover that many preconceptions that one might have on the basis of standard microeconomic theory are wrong

bundling information goods of decreasing value consumers average value for information goods websites weather forecasts music and news declines with the number consumed this paper provides simple guidelines to optimal bundling marketing strategies in this case if consumers values do not decrease too quickly we show that bundling is approximately optimal if consumers values to subsequent goods decrease quickly we show by example that one should expect bundling to be suboptimal

the role of online platforms for media markets two dimensional spatial competition in a two sided market abstract we analyze the market for online and offline media in a model of two dimensional spatial competition where media outlets sell content and advertising space consumer preferences are distributed along the style and type of news coverage where the distance costs may vary across dimensions for integrated provision of online and offline platforms we show that entering the online market reduces average profits and may even constitute a prisoner s dilemma specialized provision may yield polarization in the style and type dimensions this is in contrast to the maximum minimum differentiation result previously established in the literature on multidimensional horizontal competition we show that maximal differentiation in both dimensions occurs due to the discrete nature of the type dimension and asymmetric advertising markets

financial intermediation and delegated monitoring this paper develops a theory of financial intermediation based on minimizing the cost of monitoring information which is useful for resolving incentive problems between borrowers and lenders it presents a characterization of the costs of providing incentives for delegated monitoring by a financial intermediary diversification within an intermediary serves to reduce these costs even in a risk neutral economy the paper presents some more general analysis of the effect of diversification on resolving incentive problems in the environment assumed in the model debt contracts with costly bankruptcy are shown to be optimal the analysis has implications for the portfolio structure and capital structure of intermediaries

heavily skewed pricing in two sided markets a common feature in two sided markets is the prevalence of heavily skewed pricing strategies in which price markups are much higher on one side of the market than the other we show that maximal skewed pricing is profit maximizing under constant elasticity of demand the most elastic side of the market is used to generate maximum demand by providing it with platform services at the lowest possible price full participation of the high elasticity low price side of the market attracts the other side as this side is less price elastic the platform is able to extract high prices

bertrand competition under network externalities abstract two firms engage in price competition to attract buyers located on a network the value of the good of either firm to any buyer depends on the number of neighbors on the network who adopt the same good when the size of externalities increases linearly with the number of adoptions we identify the set of pricing strategies that are consistent with an equilibrium in which one of the firms monopolizes the market the set includes marginal cost mc pricing as well as bipartition pricing which offers discounts to some buyers and charges markups to others we show that mc pricing fails to be an equilibrium under non linear externalities in a general network but identify conditions for an equilibrium with bipartition pricing to be robust against perturbations in the externalities from linearity the analysis is applied to platform competition in a two sided market under local and approximately linear externalities

food poverty profile and decomposition applied to ghana abstract a new procedure for deriving a food poverty line and estimating a decomposable poverty measure is applied to the 1974 1975 ghana household budget survey a food poverty profile is constructed which estimates the relative contributions of regional and socioeconomic variables to overall food poverty the incidence of food poverty is found to be more prevalent in 1 rural areas and locations close to the sahel and 2 households with many members and illiterate female or self employed heads comparisons of least cost diets and observed diets incorporating tastes suggest that households exercise food preferences which have relatively high costs

on the evolution of market institutions the platform design paradox we study competition among market designers who create new trading platforms when boundedly rational traders learn to select among them we ask whether walrasian platforms leading to market clearing trading outcomes will dominate the market in the long run if several market designers compete we find that traders learn to select non market clearing platforms with prices systematically above the market clearing level provided at least one such platform is introduced by a market designer this in turn leads market designers to introduce non market clearing platforms hence platform competition induces non competitive market outcomes

to bundle or not to bundle commodity bundling is studied in an environment where the dispersion of valuations unambiguously decreases when two or more goods are sold as a bundle only bundling is more likely to dominate separately selling the goods if marginal costs are low relative to the average valuation or if the distribution of valuations is very peaked around the mean

local network externalities and market segmentation this paper models interaction between groups of agents by means of a graph where each node represents a group of agents and an arc represents bilateral interaction it departs from the standard katz shapiro framework by assuming that network benefits are restricted only amongst groups of linked agents it shows that even if rival firms engage in bertrand competition this form of network externalities permits strong market segmentation in which firms divide up the market and earn positive profits the analysis also shows that some graphs or network structures do not permit such segmentation while for others there are easy to interpret conditions under which market segmentation obtains in equilibrium c 2009 elsevier b v all rights reserved

food in sub saharan africa trends and policy challenges for the 1990s abstract the food situation in africa can be expected to become increasingly serious as the end of the century approaches the gap between domestic supply and food needs in rapidly widening yield increasing technology becomes essential in view of land scarcity in high potential areas and sustainability problems in marginal zones the concern of governments for food self sufficiency however must not divert attention from the primary objective of household food security which is essentially a question of households real income accelerated rural growth and improved rural health and sanitation services accessible to the poor are central elements for household food security improvement

coordination and discrimination in contracting with externalities divide and conquer abstract the paper studies bilateral contracting between n agents and one principal whose trade with each agent generates externalities on other agents it examines the effects of prohibiting the principal from i coordinating agents on her preferred equilibrium and ii making different contracts available to different agents these effects depend on whether an agent is more or less eager to trade when others trade more the prohibitions reduce the aggregate trade in the former case and have little or no effect in the latter case the inefficiencies under different contracting regimes are linked to the sign of the relevant externalities and are shown to be typically reduced by both prohibitions

a synthetic factor approach to the estimation of value at risk of a portfolio of interest rate swaps in this paper we decompose the interest rate swap yield curves of 10 major currencies into their common factors and find that the first two factors interpreted as parallel shift and rotation explain between 97 1 and 98 6 of the variation in the interest rate swap rates across all 10 currencies the main contribution of the paper however is that we then model these two factors as simplified synthetic factors so that they may be used to develop an innovative approach to the computation of value at risk var for a portfolio of interest rate swaps 2000 elsevier science b v all rights reserved

middlemen in bilateral search markets this article examines the role of middlemen in bilateral search markets e g employment agencies real estate brokers it is shown that the middleman narrows the set of buyer firm and seller worker types who search seller types with high valuations and buyer types with low valuations drop out of the search market and instead trade through the middleman the middleman also decreases the equilibrium search intensities of those agents who search it is proven that the middleman improves welfare if search is very costly and inefficient and decreases welfare if search is effectively costless and very efficient

competing for talents abstract two organizations compete for high quality agents from a fixed population of heterogeneous qualities by designing how to distribute their resources among members according to their quality ranking the peer effect induces both organizations to spend the bulk of their resources on higher ranks in an attempt to attract top talents that benefit the rest of their membership equilibrium is asymmetric with the organization with a lower average quality offering steeper increases in resources per rank high quality agents are present in both organizations while low quality agents receive no resources from either organization and are segregated by quality into the two organizations a stronger peer effect increases the competition for high quality agents resulting in both organizations concentrating their resources on fewer ranks with steeper increases in resources per rank and yields a greater equilibrium difference in average quality between the two organizations

technological platforms and diversification as the invention of fundamental new sciences spawns subsequent research discovery and commercialization core technologies branch into new applications and markets some of them evolve over time into many derived technologies whereas others are essentially dead ends the pattern of evolution and branching is called a technological trajectory an intriguing question is whether some firms can ride the trajectory by developing proprietary experience in a platform technology because the knowledge is proprietary firms that originate in industrial fields based on a platform technology acquire the technological skills to diversify and to mimic the branching of the underlying technological trajectory the ability to compete in hypercompetitive markets depends on the acquisition of know how that is applicable to a wide set of market opportunities such capabilities serve as platforms into quickly evolving markets to respond rapidly to market changes a firm must have already acquired fundamental compet

two sided markets a progress report the paper provides a road map to the burgeoning literature on two sided markets and presents new results it identifies two sided markets with markets in which the structure and not only the level of prices charged by platforms matters the failure of the coase theorem is necessary but not sufficient for two sidedness the paper builds a model integrating usage and membership externalities that unifies two hitherto disparate strands of the literature emphasizing either form of externality and obtains new results on the mix of membership and usage charges when price setting or bargaining determine payments between end users

marketplace or reseller intermediaries can choose between functioning as a marketplace in which suppliers sell their products directly to buyers or as a reseller by purchasing products from suppliers and selling them to buyers we model this as a decision between whether control rights over a noncontractible decision variable the choice of some marketing activity are better held by suppliers the marketplace mode or by the intermediary the reseller mode whether the marketplace or the reseller mode is preferred depends on whether independent suppliers or the intermediary have more important information relevant to the optimal tailoring of marketing activities for each specific product we show that this trade off is shifted toward the reseller mode when marketing activities create spillovers across products and when network effects lead to unfavorable expectations about supplier participation if the reseller has a variable cost advantage respectively disadvantage relative to the marketplace then the trade off is shifted toward the marketplace for long tail respectively short tail products we thus provide a theory of which products an intermediary should offer in each mode we also provide some empirical evidence that supports our main results data as supplemental material are available at http dx doi org 10 1287 mnsc 2014 2042 this paper was accepted by bruno cassiman business strategy

structural adjustment a survey of the issues and options abstract the article raises and attempts to answer questions such as adjustment for what purpose to what shocks of what factors or forces by whom who loses and who benefits from adjustment and adjustment how it also discusses the question of adjustment when the distinction between external and internal shocks is rejected as neither helpful for the allocation of blame nor for the justification of raising finance an analysis of the impact on the poor is sketched out after a brief discussion of the role of the market and government intervention in adjustment policy and the fallacy of aggregating country policies there follows a discussion of the double paradox of conditionality why should a donor impose conditions that are in the best interest of the recipient and why instead of paying for getting good advice is the recipient rewarded with extra money ten possible reasons are given the paper ends with proposals as to how to overcome the conflict between national sovereignty and assuring that donor money is well spent

customer coalitions monopoly price discrimination and generic entry deterrence abstract this paper analyzes the interplay between a profit maximizing monopolist and a set of consumers who are able to form coalitions that bargain with the monopolist and or integrate into production we show that the monopolist will deter the formation of these countervailing coalitions through strategic selection of generic limit price offers to each consumer these limit prices are derived as subgame perfect equilibria in two alternative models of customer monopoly interplay in both models price discrimination emerges in environments wherein it has previously been considered unprofitable welfare analysis of the equilibria demonstrates the procompetitive effects of potential customer coalitions and generally provides an efficiency based motivation for a government ban on price discrimination

two sided network effects a theory of information product design how can firms profitably give away free products this paper provides a novel answer and articulates trade offs in a space of information product design we introduce a formal model of two sided network externalities based in textbook economics a mix of katz and shapiro network effects price discrimination and product differentiation externality based complements however exploit a different mechanism than either tying or lock in even as they help to explain many recent strategies such as those of firms selling operating systems internet browsers games music and video the model presented here argues for three simple but useful results first even in the absence of competition a firm can rationally invest in a product it intends to give away into perpetuity second we identify distinct markets for content providers and end consumers and show that either can be a candidate for a free good third product coupling across markets can increase consumer welfare even as it increases firm profits the model also generates testable hypotheses on the size and direction of network effects while offering insights to regulators seeking to apply antitrust law to network markets

search diversion and platform competition abstract platforms use search diversion in order to trade off total consumer traffic for higher revenues derived by exposing consumers to unsolicited products e g advertising we show that competition between platforms leads to lower equilibrium levels of search diversion relative to a monopoly platform when the intensity of competition is high on the other hand if there is only mild competition then competing platforms induce more search diversion relative to a platform monopolist when platforms charge consumers fixed access fees all equilibrium levels of search diversion under platform competition are equal to the monopoly level irrespective of the nature of competition furthermore relative to platforms that cannot charge such fees platforms that charge positive negative access fees to consumers have weaker stronger incentives to divert search

is exclusionary pricing anticompetitive in two sided markets this paper studies the competitive effects of exclusionary pricing in two sided markets while formally showing that below cost pricing on one market side can allow an incumbent firm to exclude a potential rival which does not have a customer base yet the proposed model does not necessarily imply that below cost pricing in such markets should be taken as anti competitive conduct instead i find that in sufficiently asymmetric two sided markets exclusion is always beneficial and if anything there is too little of it in the sense that there are cases in which there is inefficient entry further prohibiting below marginal cost pricing may destroy some socially efficient exclusion and worsen the problem of excessive or inefficient entry

optimal auction design in two sided markets a key feature of online markets for advertising e g sponsored links is that clicking rates depend on the searchers expectations that the platform selects relevant advertisers this article studies auction design by a platform that maximizes profits in the long run where clicking rates are mechanism dependent in line with the practice of the major search engines the revenue maximizing mechanism is a scoring auction that combines the willingness to pay and the relevance to searchers of advertisers by trading off rent extraction and clicking volume this mechanism works as a cross subsidization device between searchers and advertisers

agricultural incentives in developing countries measuring the effect of sectoral and economywide policies the impact of sector specific direct and economywide indirect policies on agricultural incentives for 18 developing countries for the period 1975 84 are estimated the direct effect is measured by the proportional difference between the producer price and the border price adjusting for distribution storage transport and other marketing costs the indirect effect has two components 1 the impact of the unsustainable portion of the current account deficit and of industrial protection policies on the real exchange rate and thus on the price of agricultural commodities relative to nonagricultural nontradables and 2 the impact of industrial protection policies on the relative price of agricultural commodities to that of nonagricultural tradable goods the authors found that a in almost all cases the direct effect is equivalent to a tax on exportable goods and to a subsidy for importables b the indirect effect also taxes agriculture and dominates the direct effect and c the direct policies for both importables and exportables stabilize domestic producer prices

a semi parametric analysis of two sided markets an application to the local daily newspapers in the usa summary this paper considers an empirical semiparametric model for two sided markets contrary to existing empirical literature on two sided markets we specify network effects and probability distribution functions of net benefits of the two sides nonparametrically we then estimate the model by nonparametric instrumental variables regression for local daily newspapers from the usa we show that semiparametric specification is supported by the data and the network effects are neither linear nor monotonic with a numerical illustration we demonstrate that the mark up of the newspaper on each side changes drastically with the nonlinearly specified network effects from the case with linear network effects copyright 2015 john wiley sons ltd

platform pricing at sports card conventions platform pricing at sports card conventions we study a new data set of us sports card conventions in order to evaluate the pricing theory of two sided markets conventions are two sided because organizers must set fees to attract both consumers and dealers we have detailed information on consumer price dealer price and since most conventions are local the market structure for conventions we present several findings first consumer pricing decreases with competition at any reasonable distance but pricing to dealers is insensitive to competition and in longer distances even increases with competition second when consumer price is zero and thus constrained dealer price decreases more strongly with competition these results are compatible with existing models of two sided markets but are difficult to explain without such models

the treasury yield curve as a cointegrated system this paper examines the temporal relationship between interest rates on treasury securities ranging in maturity from three months to 30 years we find strong empirical support that the seven treasury rates selected are cointegrated a conclusion that is insensitive to the normalization chosen in particular the hypothesis of noncointegration is rejeeted decisively regardless of the rate selected as the dependent variable in the cointegrating equation to determine whether this information can be used to improve forecasts of treasury rates the seven rates are forecasted with a corresponding erroreorrection model that is shown to outperform an augmented var model that ignores the cointegration of the rates the results are consistent with the belief that arbitrage limits the extent to which rates on different maturities of a given security diverge in addition the results confirm the appropriateness of imposing a common stochastic process for interest rates in equilibrium models of the term structure

economic reform programmes and agricultural development macro policy sequencing in ghana 1983 1988 abstract 1983 saw the institution of an economic reform programme as a policy response to economic decline in ghana results indicate achievement of some degree of stabilization and growth agricultural performance was mixed a result partly attributed to poor macro policy sequencing this article highlights the importance of orderly macro policy sequencing for the achievement of growth and development it suggests setting structural measures within demand management measures in a mutually enhancing package consideration of social dimensions of reform programmes and measures to ameliorate hardships among vulnerable groups in initial stages of programmes is emphasized as important for the sustainability of economic reforms

explorations into factors explaining money market returns in this article we measure and interpret the common factors that describe money market returns results are presented for both three and four factor models we find that the three factor model explains on average 86 percent of the total variation in most money market returns while the four factor model explains on average 90 percent of this variation using mimicking portfolios we provide an interpretation of the systematic risks represented by these factors in this article we attempt to measure and interpret the common factors that describe money market returns the factor approach we employ assumes that the covariance matrix of a set of random variables in this case excess returns can be decomposed into common or systematic components and idiosyncratic or nonsystematic components this decomposition into systematic and nonsystematic components is based on an assumption of a linear relationship between the returns of each security and a set of common factors this is the assumption of linear return generating models which form an integral part of the structure of many asset pricing theories for example arbitrage pricing theory apt as developed by ross 1976 the interpretation is that the common factors represent sources of systematic or nondiversifiable risk and the idiosyncratic component of returns represents diversifiable risks our focus here is not on testing a particular asset pricing model per se but on developing empirical evidence for the existence of stylized facts regarding money market returns the stylized facts take the form of the existence measurement and interpretation of the common factors that are found in money markets our attempt to measure and interpret these sources of systematic risk may eventually lead to the construction of observable eco

information gatekeepers on the internet and the competitiveness of homogeneous product markets we examine the equilibrium interaction between a market for price information controlled by a gatekeeper and the homogenous product market it serves the gatekeeper charges fees to firms that advertise prices on its internet site and to consumers who access the list of advertised prices gatekeeper profits are maximized in an equilibrium where a the product market exhibits price dispersion b access fees are sufficiently low that all consumers subscribe c advertising fees exceed socially optimal levels thus inducing partial firm participation and d advertised prices are below unadvertised prices introducing the market for information has ambiguous social welfare effects

exclusive nightclubs and lonely hearts columns non monotone participation in optional intermediation in many decentralised markets the traders who benefi tm ost from an exchange do not employ intermediaries even though they could easily afford them at the same time employing intermediaries is not worthwhile for traders who benefit little from trade together these decisions amount to non monotone participation choices in intermediation only traders of middle type employ intermediaries while the rest the high and the low types prefer to search for a trading partner directly we provide a theoretical foundation for this hitherto unexplained phenomenon we build a dynamic matching model where a trader s equilibrium bargaining share is a convex increasing function of her type we also show that this is indeed a necessary condition for the existence of non monotone equilibria

gender based price discrimination in matching markets this paper develops a new model to analyze price discrimination in matching markets where agents have private information about their respective qualities on the basis of signals car clothing club membership etc purchased from profit maximizing firms men and women form beliefs about each other s qualities the matching must then be stable in the following sense there cannot be a man and woman who are unmatched and who both believe they would be better off if they were matched with one another the model enables an analysis of the impact of third degree or gender based price discrimination on welfare when third degree price discrimination is not feasible the cost of eliciting private information is higher but a monopoly intermediary may have stronger incentives to implement an efficient allocation i show that gender based price discrimination is more likely to have a positive impact the more symmetric the matching environment is