technological migration the case of thai digital terrestrial television this study analyzes the business strategies of entrepreneurs during a technological transition the particular technological transition is the switch from analogue to digital tv in thailand the estimated net present values of the broadcasting operators net profit over a 15 yearlicense period indicate that a long transition period reduces the benefit from upgradingto a better technology the incumbents would like to join the technological migration fromday one the faster the transition process the higher the new platform is worth in presentvalue the government should terminate the old platform as soon as possible and stimulatea rapid transition keywords technological migration digital television net present value jel classification m21 m38 o33

price discrimination and investment incentives abstract we examine a model of a monopolist selling to two segments of consumers with different preferences for quality we show that if the firm is unable to price discriminate between the segments then there is less investment in quality we find that both consumer segments and society overall may suffer if the firm is unable to price discriminate we extend the model to duopoly competition and find that our results still hold

the transition to digital television digital tv this paper studies the role of economic policy for the transition from analogue to digital television with particular attention to the switch off of the analogue terrestrial signal the analogue signal cannot be credibly switched off until almost all viewers have migrated to digital due to the policy objective of universal access to television but before switch off only part of the population can be reached with the digital signal in addition those who are reached need to spend more to upgrade their reception equipment than after switch off because the capacity to increase the power of the digital signal will be made available only then after reviewing the competitive structure and the role of government intervention in television markets we present the early experience of a number of industrialized countries in the transition to digital television we then formulate a micro econometric model of digital television adoption by individual viewers the model is calibrated to uk data and simulated to predict the impact of government policies on the take up of digital television policy makers can affect the speed of take up of digital television by 1 controlling the quality of the signals and the content of public service broadcasters 2 intervening in the market for digital equipment with subsidies and 3 publicizing the conditions and date of switch off of the analogue signal we find that if the analogue terrestrial signal is switched off only when certain aggregate adoption targets are reached strategic delays may arise and expectations may affect the success of the switch off policy jerome adda and marco ottaviani

the welfare effects of third degree price discrimination with nonlinear demand functions the welfare effects of third degree price discrimination are analyzed when demand in one market is an additively shifted version of demand in the other market and both markets are served with uniform pricing social welfare is lower with discrimination if the slope of demand is log concave or the convexity of demand is nondecreasing in the price the demand functions commonly used in models of imperfect competition satisfy at least one of these sufficient conditions

price discrimination and retail configuration the hypothesis that price discrimination based on willingness to pay for quality can occur in multifirm markets is confirmed using microdata on gasoline retailing a test that discriminates between price structures associated with discrimination and with cost driven competitive differentials is developed and implemented with controls for variation in outlet and market characteristics a second test based on profitability variation rejects a competitive peak load pricing explanation for the observed price dispersion the data suggest that price discrimination at the retail level adds at least 9 a gallon to the average price of full service gasoline

market provision of broadcasting a welfare analysis this paper presents a theory of the market provision of broadcasting and uses it to address the nature of market failure in the industry advertising levels may be too low or too high depending on the nuisance cost to viewers the substitutability of programs and the expected benefits to advertisers from contacting viewers market provision may allocate too few or too many resources to programming and these resources may be used to produce programs of the wrong type monopoly ownership may produce higher social surplus than competitive ownership and the ability to price programming may reduce social surplus

third degree price discrimination quality choice and welfare abstract employing an endogenous quality choice model we reconsider the effect on welfare of monopolistic third degree price discrimination we prove that price discrimination always enhances welfare mainly because the quality improvement owing to price discrimination increases consumer surplus moreover we show that third degree price discrimination benefits all parties including consumers in the higher priced market if the preference differences between markets are sufficiently large

monopoly price discrimination and demand curvature this paper presents a general analysis of the eects of monopolistic third degree price discrimination on welfare and output when all markets are served su cient conditions involving straightforward comparisons of the curvatures of the direct and inverse demand functions in the dierent mar kets are presented for discrimination to have negative or positive eects on

universalism and the value of political power although legislatures typically use majority rule to allocate a budget in distributive legislation unanimous consent over the broad allocation of benefits is pervasive i develop a game theoretic model where members strategically interact in a universal coalition to determine allocations with noncooperative bargaining as a threat point for the breakdown of cooperation to quantify the effects of political power on the agreed upon allocation i structurally estimate the model using the bridge bill capital budget in 1992 i find that 16 73 of the budget would be allocated differently if allocations were determined only based on actual needs

political preferences for the pork barrel a generalization this paper provides a rational explanation for the observation of oversized coalitions often approaching unanimous size in the realm of distributive policies distributive policies are those which concentrate benefits in specific geographic areas states congressional districts while spreading costs through general taxation the explanation offered here that legislators may rationally prefer universalism to hard ball coalition politics generalizes earlier work of weingast and fiorina in particular it extends their results to pork barrel politics i e projects that are economically inefficient and demonstrates how packages of economically inefficient projects can nevertheless be politically popular the main theoretical feature that induces preferences for universalism is uncertainty over the composition of winning coalitions and consequently the desire for the political insurance that universalism provides

price discrimination and social welfare studies the effect of price discrimination on social welfare using methods from duality theory features of the reservation model presented quasi linear utility and consumers surplus upper and lower bounds on welfare change bounds on welfare change with optimal price discrimination from ebsco

quality differences third degree price discrimination and welfare we propose a model with two markets to analyze the welfare implications of price discrimination with quality differences in each market a local firm that operates in that market only competes against a global firm that operates in both markets local firms produce higher quality goods than the global firm if the quality levels of the local firms products are the same price discrimination is never welfare decreasing if they differ discrimination is welfare increasing if quantity increases because of a positive allocation effect of price discrimination there are parameter values such that welfare increases while total output decreases with price discrimination jel d43 d60

how the electoral college influences campaigns and policy the probability of being florida this paper analyzes how us presidential candidates should allocate resources across states to maximize the probability of winning the election by developing and estimating a probabilistic voting model of political competition under the electoral college system actual campaigns act in close agreement with the model there is a 0 9 correlation between equilibrium and actual presidential campaign visits across states both in 2000 and 2004 the paper shows how presidential candidate attention is affected by the states number of electoral votes forecasted state election outcomes and forecast uncertainty it also analyzes the effects of a direct national popular vote for president

price discrimination in oligopoly evidence from regional newspapers recent theoretical work has shown that the incentive to target rival firms customers with low prices can increase price discrimination and that the strength of the incentive depends on a firm s market position using data on swedish newspaper subscriptions we find strong support for these predictions newspapers with a local competitor sell a larger part of their circulation at a discount than monopoly newspapers moreover in competitive markets the use of discounts is inversely related to the newspaper s market share we find no evidence that price discrimination based on observable and exogenous characteristics is influenced by the market structure

the welfare effects of third degree price discrimination in intermediate good markets the case of bargaining this article examines the welfare effects of third degree price discrimination by a monopolist selling to downstream firms with bargaining power one of the downstream firms the chain store can integrate backward at lower cost than rivals bargaining powers also depend on disagreement profits bargaining weights and concession costs if the chain s integration threat is not credible price discrimination reduces the input price charged symmetric downstream firms and often reduces the average input price charged asymmetric downstream firms

the effects of third degree price discrimination in oligopoly retail firms and restaurants commonly offer senior citizen discounts i suspect this practice is not motivated by altruism rather the behavior can be better explained as profit maximizing price discrimination these firms are setting a low price in a market which probably has high elasticity of demand but why should the demand of senior citizens be more elastic than average one possibility is that elderly people have below average income and they would not eat out if restaurant prices were high perhaps a more plausible explanation is that retired people simply have more time on their hands to spend commuting across town to take advantage of discounts the purpose of these discounts may then be to lure senior citizens away from other restaurants rather than to get them out of the house the analysis of third degree price discrimination has a long history a c pigou 1920 joan robinson 1933 and two articles on the subject have recently appeared in this review richard schmalensee 1981 hal varian 1985 the industry structure in these analyses is monopoly but an explicit model of some form of competition is obviously needed to study discriminatory discounts meant to attract customers from rival firms and even discounts meant to get people out of the house may have an oligopoly analysis which is qualitatively different from their monopoly anlysis in this paper i present a simple duopoly model of a differentiated products industry i show that a firm s price elasticity of demand in a market can be expressed as the sum of two parts the industry demand elasticity and the cross price elasticity the first measures the tendency of consumers in a market to stay home when the price goes up the second the tendency to switch suppliers in the monopoly case in which the crossprice elasticity is zero and the collusive case in which the cross price elasticity is irrelevant discrimination between markets is due to differences in industry demand elasticity in the noncooperative oligopoly case equilibrium price differentials can be accounted for both by differences in cross price elasticity as well as differences in industry demand elasticity total industry output when the firms can discriminate between two markets is compared to what it would be if discrimination were impossible which regime has larger output depends on the sum of the adjustedconcavity condition and the elasticity ratio condition the first predominates when the rival products are poor substitutes and the firms have approximate monopoly power while the second predominates at the other extreme where the products are close substitutes and the firms have almost no market power the adjusted concavity condition compares the relative curvature of demands in the two markets and was originally discovered by robinson 1933 in her analysis of monopoly price discrimination the elasticity ratio condition compares the relative difference in industry demand elasticity between the two markets with the relative difference in cross price elasticity according to the elasticity ratio condition a discriminatory discount due to high industry elasticity of demand would be more likely to increase total output than one due to high cross price elasticity the effect of discrimination on profit is also discussed the distinction made here department of economics university of wisconsin madison madison wi 53706 this paper is a revision of part of my doctoral dissertation i am grateful to steve matthews ken judd and john panzar for guidance in this research i also thank seminar participants at wisconsin the justice department and the 1986 econometric society meetings in new orleans and the discussant martin perry the excellent comments of the referees improved the exposition of the paper

competition and product quality in the supermarket industry this article analyzes the effect of competition on a supermarket firm s incentive to provide product quality in the supermarket industry product availability is an important measure of quality using u s consumer price index microdata to track inventory shortfalls i find that stores facing more intense competition have fewer shortfalls competition from walmart the most significant shock to industry market structure in half a century decreased shortfalls among large chains by about a third the risk that customers will switch stores appears to provide competitors with a strong incentive to invest in product quality

estimating the value of proposal power this paper investigates the role of proposal power in the allocation of transportation projects across u s congressional districts in 1991 and 1998 the evidence supports the key qualitative prediction of legislative bargaining models members with proposal power those sitting on the transportation authorization committee secure more project spending for their districts than do other representatives support for the quantitative restrictions on the value of proposal power is more mixed i then empirically address several alternative models of legislative behavior including partisan models informational roles for committees models with appropriations committees and theories of committees as preference outliers

does wal mart sell inferior goods i feel we are well positioned for an economic downturn our low prices and low cost business model should give us an advantage over other retailers if things get more difficult for consumers wal mart s ceo lee scott kavilanz 2007 i introduction in this paper i test for the aggregate income elasticity of revenues at wal mart and target using panel data for 1997 2006 i find that wal mart s revenues fall during good times whereas target s rise during good times inferring income elasticities of demand from these estimated income elasticities of revenue consumers view purchases at wal mart as inferior goods whereas purchases at target are normal goods a well established cross sectional fact is that wal mart s shoppers have relatively low incomes compared to say target s shoppers 1 in a 2005 survey by the pew research center for the people and the press 53 of respondents reporting annual earnings below 20 000 said they shopped at wal mart regularly compared with 33 of respondents earning more than 50 000 pew research center for the people and the press 2005 the average annual household income among wal mart shoppers is 40 000 45 000 roughly equal to the u s median household income compared with 60 000 for target shoppers mui 2005 confirming this pattern figure 1 plots the frequency of shopping at wal mart and target often sometimes or never based on survey evidence for households with incomes below 40 000 and above 70 000 2 shopping frequencies at wal mart are higher for all income groups because the chain s penetration is higher but the likelihood of shopping at wal mart often falls with income whereas the likelihood of shopping at target often rises with income this cross sectional evidence does not establish that a given household increases its shopping at target and decreases its shopping at wal mart as its income rises if wal mart stores are located in lower income areas for example shopping at wal mart may be a normal activity and still consistent with the cross sectional evidence despite this distinction the claim has been made that wal mart sells inferior goods in the technical sense of the term goods for which demand increases when income falls the goal of this paper is to evaluate the inferiority of wal mart s goods using appropriate data and methods i use aggregate data on personal disposable income as a measure of consumer income and publicly available data on sales per store at both wal mart and target by construction the aggregate elasticity i estimate is a weighted average of individual households elasticities of expenditure and can be interpreted as the average household s income elasticity of expenditure on wal mart s and target s wares this elasticity of expenditure is an upper bound on the elasticity of demand at wal mart if wal mart s prices are not any more elastic with respect to income than other stores prices evidence presented in the appendix in this paper suggests that wal mart s prices are if anything less elastic with respect to income than prices at other stores which implies that the income elasticity of expenditure for wal mart s goods is even more negative than my estimates suggest figure 1 omitted holding relative prices constant two effects of income on store revenues work in opposite directions on the one hand a negative income shock may send some shoppers who normally shop at more upscale retailers to discounters thus increasing revenue at the discount retailers on the other hand people who already shop at discounters curtail their spending as well the aggregate effect depends both on the proportion of households of the two types and on the income elasticity of demand for each group if the income shocks are not uniform across types the relative size of the income shock matters too ideally this question would be addressed using household panel data in which household s time invariant characteristics as well as shoppers choice sets are controlled for and changes in income are matched with changes in purchasing patterns

third degree price discrimination in input markets output and welfare if price discrimination is realized the economy shifts from one equilibrium to another it clearly involves welfare effects the price discriminator clearly gains some consumers may also gain from the price cut but others may lose faced with higher prices etc traditionally the change in social welfare is known to be closely related to the change in total output in the case of third degree price discrimination it is well known that an increase in total output is a necessary condition for welfare improvement richard schmalensee 1981 proves this fact in a model in which the monopolist with constant marginal cost can perfectly separate markets further hal r varian 1985 extends this result to the case of interdependent markets permnitting increasing marginal cost of the monopolist and finally the assumption of nondecreasing marginal cost is eliminated by marius schwartz 1990 roughly speaking this proposition says that if there is a welfare gain from price discrimination there has to be some gain to offset the distortion involved on the other hand the vast majority of legal and other policy disputes over the price discrimination concern input markets not final good markets thus it seems important to investigate the situation in which a discriminating monopolist is not a final good supplier but an input supplier and the buyers of the input are downstream producers of a final good as is assumed in this paper if the downstream firms have different technologies their input demand functions will be different and thus the monopolist has an incentive to price discriminate in this scenario michael l katz 1987 and patrick degraba 1990 study the effect of inputmarket price discrimination and show that price discrimination always lowers welfare because it involves the distortion that a lower cost downstream firm is assigned a higher price unfortunately in their simple settings on the technology of downstream industry price discrimination can never change total output of the input or of the final good 1 thus we must say that welfare effect of input market price discrimination remains open to question if it has some effect on total output in particular we are curious as to whether we can obtain some close relationship between the changes in welfare and total output as we have obtained in the final good market settings with this motivation we will construct a model which involves change in total output of the final good in the next section the model and assumptions are provided in section ii after we extend the result of katz 1987 and degraba 1990 we find a relationship between the changes in welfare and total output strikingly it states that an increase in the total output of the final good is a sufficient condition for welfare deterioration this result contrasts with that obtained by schmalensee 1981 varian 1985 and schwartz 1990 from usual models of price discrimination in a final good market section iii concludes the analysis

welfare and output in third degree price discrimination a note abstract one main result on the welfare effects of third degree price discrimination by a monopolist is that an increase in total output is a necessary condition for welfare improvement this note provides two examples showing that this proposition does not generalize to an oligopoly with heterogenous firms in these examples price discrimination makes competition more favorable to the low cost firm this induces a cost saving that overcomes the welfare loss associated with price discrimination

the welfare effects of third degree price discrimination in a differentiated oligopoly this article examines the welfare effects of third degree price discrimination under oligopolistic competition with horizontal product differentiation we derive a necessary and sufficient condition for price discrimination to improve social welfare the degree of substitution must be sufficiently greater in the strong market where the discriminatory price is higher than the uniform price than in the weak market where it is lower it is verified however that consumer surplus is never improved social welfare improves solely owing to an increase in the firms profits in the case of linear demands jel d43 l11 l13 i introduction this article examines the welfare effects of oligopolistic third degree price discrimination explicitly considering product differentiation as a source of market power and strategic interaction product differentiation is one of the main reasons why firms can enjoy market power it enables them to sell products that are no longer perfect substitutes for example coca cola and pepsico sell similar types of soda although it is arguable that they differ in taste each firm thereby attracts some consumers over another as a form of price discrimination coca cola was once reported to be testing a vending machine that would automatically raise prices in hot weather 1 although the plan triggered nationwide controversy and coca cola had to abandon the project as a result it could have changed the regime of uniform pricing to one of price discrimination in the soda market how would the resulting change affect consumer welfare and firms profits in other words is third degree price discrimination good or bad answering this question is important because it helps us to evaluate price discrimination under oligopoly in this article we focus on horizontal product differentiation to consider substitutability as well as complementarity 2 by assuming a linear quadratic utility function of a representative consumer and focusing on the symmetric equilibrium of a pricing game we characterize the conditions relating to such demand properties as substitutability and complementarity required for price discrimination to improve social welfare more specifically we derive a necessary and sufficient condition for price discrimination to improve social welfare the degree of substitution must be sufficiently greater in the strong market where the discriminatory price is higher than the uniform price than in the weak market where it is lower it is also shown that aggregate output must increase for price discrimination to improve social welfare we verify however that consumer surplus is never improved by price discrimination welfare improvement from price discrimination is solely owing to an increase in firms profits in the example above the degree of substitution would be higher in the strong market i e when the temperature is high because consumers care less about which brand when it is hot weather our analysis below implies that social welfare might improve in this case the degree of substitution can vary across markets even if consumers in each market face exactly the same products because consumers taste depends on various market specific factors such as geographical and natural conditions if the strong market is where consumers demand a product more eagerly caring less about which brand in the above example individuals demand soda more eagerly in hot weather then our results suggest that price discrimination has large potential to improve social welfare 3 why does allowing price discrimination improve social welfare notice that there are two forces that determine equilibrium prices in price setting oligopoly a larger market size raises the price whereas a larger substitutability parameter lowers the price for price discrimination to raise social welfare it is necessary that a high degree of substitutability mitigates an increase in the discriminatory price in the larger market

monopolistic third degree price discrimination under vertical product differentiation this paper shows in a vertical product differentiation model with variable costs of quality that monopolistic third degree price discrimination always reduces welfare regardless of whether the quality is fixed or is endogenous the results provide rich implications for antitrust policy

academic journal pricing and the demand of libraries the prices of for profit academic journals have increased rapidly over the past decade barbara albee and brenda dingley 2001 there remains substantial debate as to the explanation for these increases among those put forward are the increased concentration of the journal industry see e g mccabe 2002 and the relatively recent effort by major publishers to bundle print and electronic journals aaron s edlin and rubinfeld 2004 while both explanations are undoubtedly important what is missing is the significant role of the primary customers of journal publishers the academic libraries as agents of college and university faculties libraries serve the interests of their principals while having only limited information about faculty journal demands facing little or no hard budget constraint faculty are unlikely or unwilling to make difficult allocative choices as a result libraries have been making hard choices for years between journals and books and among journals in a world of increasing budgetary pressure given that electronic transmission of knowledge is becoming increasingly important an understanding of the reasons for the increases in journal prices is a vital element in the ongoing discussion of best mechanisms by which scholarly communications can be disseminated in this paper we formulate a model of library journal demand and suggest how it can be used to analyze the optimal pricing of journals by publishers this represents part of a larger project whose long range goal is to explain the pattern of journal pricing over time and to evaluate two broad policy questions i to what extent have mergers and or bundling practices been responsible for the increase in journal prices ii to what extent are journal prices likely to change in response to changing library acquisition strategies reallocation of budgets between serials and books journal sharing among libraries setting hard budgets etc