consistent voting rules for competitive local public goods economies abstract we establish the existence of a voting market equilibrium for a large class of local public goods economies where faced with prices of the private goods and with the public goods produced by the local governments each firm maximizes its profits and each individual maximizes his utility subject to his budget constraint in addition each local government taking the prices of private goods as given i has a balanced budget and ii chooses its production of public goods in such a way that no group that contains more than q q 1 of its residents where q denotes the number of public goods produced will unanimously prefer another affordable vector of public goods

competition between multiple asymmetric networks theory and applications this paper presents a tractable model of network competition with many firms elastic subscriber demand off net price discrimination call externalities and cost and market share asymmetries we characterize stability in expectations and equilibrium under firm and market level network effects the model is applied to simulate the effects of termination rates market maturity and retail pricing strategies we show that predictions based on duopoly models can be misleading in particular concerning the effects of termination rates

competition and the number of firms in a market are duopolies more competitive than atomistic markets this paper uses a variant of the standard search model to examine market equilibrium and the consequences for market equilibrium of an increase in the number of firms if marginal search costs increase with the number of searches then the demand curve facing any firm will be kinked with the elasticity of demand with respect to price decreases being less than with respect to price increases prices may not change in response to changes in marginal costs as the number of firms increases the maximum price that is consistent with equilibrium increases to the monopoly price but the minimum price decreases on the other hand if marginal search costs decrease with the number of searches equilibrium if it exists is characterized by a

a model of forum shopping owners of intellectual property or mere sponsors of an idea e g authors security issuers sponsors of standards resort to more or less independent certifiers to persuade potential users buyers or adopters of the worth of their property or idea we analyze the sponsor s choices ofcertifier and design social preferences regarding these choices and the impacts thereon of multiple categories of users of a downstream presence of the sponsor and of certifier market power finally we study strategic forum shopping by sponsors of competing ideas

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

standard essential patents a major policy issue in standard setting is that patents that are ex ante not that important by being included into a standard may become standard essential patents in an attempt to curb the monopoly power that they create most standard setting organizations require the owners of patents covered by the standard to make a loose commitment to grant licenses on reasonable terms such commitments unsurprisingly are conducive to litigation this paper builds a framework for the analysis of these patents identifies several types of inefficiencies attached to the lack of price commitments and shows how structured price commitments restore competition and why such commitments may not arise spontaneously in the marketplace

intellectual property rights strategic technology agreements and market structure the case of gsm this paper investigates the role of intellectual property rights iprs in shaping the gsm industry this industry is an example of a high tech industry in which standards play a large role in the process of designing the gsm standard a lot of attention has been given to iprs mainly to avoid a situation in which a single ipr holder could hamper or even totally block the development of the standard nevertheless the ultimate gsm standard contains a large amount of so called essential iprs i e iprs without which the implementation of gsm products is impossible the paper starts with a general discussion of the development of gsm and the role of firm strategy and iprs in this process next we present a database on the essential iprs in the gsm standard this database has been compiled on the basis of international patent statistics and the data that manufacturers have supplied to etsi the european standardization body re sponsible for defining the gsm standard we use this database to assess the dynamic ipr position of firms in the original gsm standard and its subsequent development in a next part of our analysis we relate the firm s ipr p osition to the trends in strategic technology agreements in the mobile telecommunications field we ask the question whether firms that are powerful in terms of iprs are also the firms that are central in the technology agreements network or vice versa we also investigate whether developments over time in the technology agreements data follow from the dynamic movements in the ipr position of a firm and which other factors play a role in this

monopolistic competition in the spirit of chamberlin a general model this paper develops a model of large group chamberlinian monopolistic competition in which 1 there are many firms producing differentiated commodities 2 each firm is negligible in that it can ignore its impact on and hence reactions from other firms 3 free entry leads to zero profit of operating firms but 4 each firm faces a downward sloping demand curve the existence of a monopolistically competitive equilibrium is established in a companion paper more particular questions such as whether the market provides too many or too few products are addressed for a special case of the model

product variety informative advertising and price competition abstract in many product categories consumer tastes are diverse and firms use finely targeted advertising to inform consumers about their products this article proposes a model of informative advertising that allows for diverse consumer tastes and multiple competing firms using this framework the authors analyze how diversity in consumers tastes informative advertising and improvements in advertising technology may influence prices first informative advertising can lead to lower prices if consumer valuations are high however if consumer valuations are low informative advertising can lead to higher prices second when consumer valuations are high price increases with greater diversity in tastes though this result reverses if consumer valuations are low third improvements in advertising technology lead to higher levels of advertising when consumer valuation is high but the opposite effect can occur when consumer valuation is low the authors relate these theoretical findings to previous e

pricing prototypical products when we think of colas coca cola first comes to mind products such as cola cola tide laundry detergent and chapstick lip balm are the prototypical products in their respective categories for more than three decades research in consumer psychology has accumulated evidence on how prototypicality influences memory shapes the composition of consideration set and affects purchase decision yet there is no research on how it changes the competitive behavior of firms in a horizontally differentiated market for example some prototypical products are priced lower than other products in their category whereas in certain other categories the prototypical product is priced higher we propose a novel model of spatial competition where the prototypicality of a product influences the probability of the product being included in consumers consideration sets without affecting its valuation using the model we examine theoretically the impact of prototypicality on the pricing decisions of competing firms our analysis shows that when consumer valuations are low the prototypical product is priced lower than a nonprototypical product and earns more profits however when consumer valuations are high the rank order of the prices of the prototypical product and a nonprototypical product is reversed but not the order of profits we subject these predictions to an empirical test the experimental results lend support for the qualitative predictions of the model

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

risk taking preferences of farmers in northern thailand measurements and implications abstract risk taking preferences were elicited from small semi commercial farmers in northern thailand using an experimental procedure that included real monetary payoffs of meaningful magnitudes a total of five sets of lotteries with increasing payoffs were offered the farmers were found to be risk averters and their preferences conformed to the hypothesis of increasing nondecreasing partial relative risk aversion using regression analysis farmers expected variation of rice yields and farm size were found to be directly related to a decrease in risk aversion while the extent of multiple cropping availability of non land household assets and tested mathematical ability were found to be indirectly related to a decrease in risk aversion the variables expected variation of rice prices farmer s age and tested abstract ability scores were not related to risk taking preferences

do consumers search for the highest price oligopoly equilibrium and monopoly optimum in differentiated products markets we develop a model of search among substitutes for the best combination of commodity variant and price in which the structure of search costs is manipulable by the suppliers of these variants e g by joining an existing market or opening a new one we analyze the subgame perfect equilibria arising in a multistage game involving specialized firms choice of entry variant and price and we compare them to a multiproduct monopolist s optimal choice we show that equilibrium prices increase in the number of substitutes sold in one market and that in the situation considered here monopoly increases welfare

multi market competition r d and welfare in oligopoly we investigate a multi market cournot model with strategic process research and development r d investments wherein a multi market firm meets new competitors that enter one of the markets we show that entry can enhance the total r d expenditures of the multi market firm moreover the incumbent s profit nonmonotonically changes as the number of entrants increases depending on the fixed entry costs and r d technologies both insufficient and excess entry can appear our results imply that diversification of their products can be a useful strategy for firms

churn versus diversion in antitrust an illustrative model an important question in horizontal merger analysis is what share of a firm s lost output from a unilateral price increase will divert to its merger partner this diversion ratio is often estimated using data on customer switching from a firm to its rivals churn we use a tractable oligopoly model to investigate the potential biases of such estimates depending on what caused the churn shifts in quality or marginal cost of the firm or of a rival or demand side shifts due to changed circumstances or learning about product attributes with demand side shifts churn can be greater between more distant competitors

better product at same cost lower sales and lower welfare we consider a high quality dominant firm facing a low quality competitive fringe we show that the dominant firm s quantity is weakly increasing in its quality if and only if its marginal cost weakly exceeds that of the fringe otherwise it is strictly decreasing in quality this result is driven by the fact that a quality increase causes the marginal revenue curve to rotate clockwise rather than shift outwards and at a height equal to the fringe firms marginal cost this fact combined with the dominant firm s mr mc condition determines the result for closely related reasons the effect of a quality increase on consumer welfare also depends on the relationship between the costs it is possible that all consumers are weakly better off that some are better off and some worse off or that all are weakly worse off we also consider several extensions and variations of the model

most favored customer pricing product variety and welfare abstract most favored customer mfc clauses are usually seen as anticompetitive co ordination devices that firms adopt for the purpose of higher prices here i examine the welfare impact of mfc clauses under endogenous product variety product variety is relevant because prospective higher prices from mfc clauses can be anticipated by multi product firms in their provision of product lines under such circumstances i find that these clauses can be socially harmful but this is not always the case they tend to be socially neutral for relatively large fixed costs of product line assortment harmful for intermediate costs and beneficial for relatively small costs

hub and spoke free trade areas theory and evidence from israel we study how the sequential formation of free trade areas affects trade flows between member countries in a three country three good model of comparative advantage if two countries have an fta and both sign a similar agreement with the third trade between the two decreases however if only one of them signs an additional fta a hub and spoke pattern arises and trade between the initial members increases israel s experience lends strong support to our model trade between israel and the eu subject to an fta since 1975 increased by an additional 29 after the introduction of the us israel fta in 1985 on etudie comment la formation sequentielle de zones de libre echange affecte les flux commerciaux entre les pays membres dans un modele d avantage comparatif avec trois pays et trois biens si deux pays ont un accord de libre echange et qu ils signent tous deux un accord similaire avec un tiers pays le commerce entre les deux pays originaux decroit cependant si seulement un des deux pays originaux signe un accord avec le troisieme un reseau en etoile emerge et le commerce entre les deux payx d origine s accroit l experience d israel donne un fort support au modele le commerce entre israel et l union europeenne sujet a un accord de libre echange depuis 1975 s est accru de 29 apres l introduction de l accord de libre echange entre israel et les etats unis en 1985

complementary monopolies and bargaining abstracthow should complementarities affect antitrust merger policy i introduce a two stage strategic model in which complementary input monopolists offer supply schedules to producers and then engage in bilateral bargaining with producers the main result is that there is a unique weakly dominant strategy equilibrium the equilibrium attains the joint profit maximizing outcome and output equals that of a bundling monopoly the result holds with perfect competition in the downstream market with both unit capacity and multiunit capacity the result also holds with oligopoly competition in the downstream market the result contrasts with the cournot effect which states that complementary input monopolists choose total prices that are greater than the bundled monopoly level the analysis shows that consumers surplus and total producers surplus are greater with supply schedules and bargaining than with posted price competition the analysis has implications for antitrust policy toward vertical and conglo

price and variety in the spokes model the spokes model of nonlocalized spatial competition provides a new analytical tool for dierentiated oligopoly and a representation of spatial monopolistic competition an increase in the number of rms leads to lower equilibrium prices when consumers have relatively high product valuations but surprisingly to higher equilibrium prices for in termediate consumer valuations new entry alters consumer and social welfare through price market expansion and matching eects with free entry the market may pro vide too many or too few varieties from a social welfare perspective and the equilibrium price remains above marginal cost even when the number of rms is arbitrarily large

quantity restrictions on advertising commercial media bias and welfare abstract we study the welfare effect of a quantity restriction on advertising in free to air television and other advertising financed media in the presence of commercial media bias broadcasters face a trade off between increasing the number of viewers by sending content that is highly valued by viewers and increasing the price of advertising by choosing advertiser friendly content a cap on advertising drives the per viewer price of ads up thus content improves for viewers therefore the cap can be welfare enhancing even when viewers are not ad averse competition among broadcasters makes it more likely that a cap on advertising improves welfare thus there is a complementarity between regulation and competition on this market we also show that a tax on advertising revenues has quite different effects than a cap on advertising quantity

concentration and self censorship in commercial media within a simple model of non localized hotelling type competition among arbitrary numbers of media outlets we characterize quality and content of media under dierent ownership structures assuming advertising sponsored prot maximizing outlets we show that i topics sensitive to advertisers can be underreported self censored by all outlets in the market ii self censorship increases with the concentration of ownership iii adding outlets while keeping the number of owners xed may even increase self censorship the latter result relies on consumers most preferred outlets being potentially owned by the same media companies we argue that externalities resulting from self censorship could be empirically large

the great industry gamble market structure dynamics as a survival contest industry dynamics are studied as an endogenous tournament with infinite horizon and stochastic entry in each period firms investments determine their probability of surviving into the next period this generates a survival contest which fuels market structure dynamics while the evolution of market structure constantly redefines the contest more concentrated markets endogenously generate less profit rivals that are more difficult to outlive and more entry the unique steady state distribution exhibits ongoing turbulence correlated exit and entry rates and shakeouts the model s predictions fit empirical findings in markets where firms trade off profits for smaller risk of failure e g banking

voting on standardisation this paper analyses equilibria of voting on commodity standards within the framework of a farrell saloner model which takes into consideration the trade off between network effects and losses from a reduction of variety social welfare implications are derived and discussed with respect to manipulations of majority rules the findings indicate that welfare implications of standards are highly sensitive to the decision procedure and that the choice of the decision rule is non trivial as it can at least prevent worst outcomes if not guarantee optimal results

appropriation and efficiency a revision of the first theorem of welfare economics the first theorem of welfare economics rests on the assumption that individuals have neither price making nor market making capacities we offer a revision in which individuals have such capacities the revision emphasizes two keys for market efficiency i the need to align private rewards with social contributions called full appropriation and ii the need for an assumption to counter the possibility of coordination failures in the choice of produced commodities called noncomplementarity we also emphasize that information about prices of unmarketed commodities involves decentralized knowledge available only to product innovators and that pecuniary extemalities are important potential sources of market failure jel d51 d60 d62

equilibrium with product differentiation tive consumer formulations is used to examine the properties of single and multiple price equilibria conditions under which decreases in the intensity of consumer preferences reduce price are given it is shown that with certain types of demand curves entry can eliminate price cost markups even given product differentiation if competition is localized it is demonstrated that entry does not affect the markup finally the effect of spurious product differentiation on price is examined

price increasing competition in a discrete choice model of product differentiation the symmetric duopoly price may be lower than equal to or higher than the single product monopoly price whereas the market share effect encourages a duopolist to charge less than the monopoly price because a duopolist serves fewer consumers the price sensitivity effect motivates a higher price when more consumer choice steepens the firm s demand curve the joint distribution of consumer values for the two conceivable products determines the relative strength of these effects the analysis provides precise conditions for price increasing competition and reveals that it is unexceptional from a theoretical perspective

free entry and social inefficiency our goal is to provide a simple yet general exposition of the conditions under which the number of entrants in a free entry equilibrium is excessive insufficient or optimal our analysis compares the number of firms that enter a market when there is free entry with the number that would be desired by a social planner who is unable to control the behavior of firms once they are in the market that is we consider the second best problem of choosing the welfare maximizing number of firms while we take as given their noncompetitive behavior after entry we demonstrate that the crucial conditions for establishing the presence of an entry bias can be stated quite simply in terms of the outcome of the postentry game played by entrants in contrast to previous work we do not need to model this postentry game explicitly

paying positive to go negative advertisers competition and media reports this paper analyzes a two sided market for news where two rival advertisers may pay a media outlet to conceal negative information about the quality of their own product paying positive to avoid negative and or to disclose negative information about the quality of their competitor s product paying positive to go negative we show that competition in the product market does not necessarily prevent the emergence of commercial media bias whether or not competing advertisers end up having negative consequences on news accuracy ultimately depends on the extent of correlation in the quality of their products the lower the correlation the higher the expected accuracy of the media outlet s reports these findings provide a rationale to explain the observed differences in the extent of commercial media bias across seemingly similar industries or products within the same media market the results are robust to the presence of multiple media outlets and to asymmetries between the advertisers overall the paper provides theoretical insights for media regulators and for the empirical literature examining the link between advertising and news contents

market competition r d and firm profits in asymmetric oligopoly we investigate a cournot model with strategic r d investments wherein efficient low cost firms compete against less efficient high cost firms we findthat an increase in the number of high cost firms can stimulate r d by the low cost firms while it always reduces r d by the high cost firms more importantly this force can be strong enough to compensate for the loss that arises from more intense market competition the low cost firms profits may indeed increase with the number of high cost firms an implication of this result is far reaching as it gives low cost firms an incentive to help rather than harm high cost competitors we relate this implication to a practice known as open knowledge disclosure especially ford s strategy of disclosing its know how publicly and extensively at the beginning of the 20th century

monopolistic competition and preference diversity approach our model is especially attractive because it starts from economic primitives a specification of the set of possible individual preference patterns it shows how specific properties of the distribution of preferences translate into properties of aggregate demand this allows us to understand the relationship between the distribution of preferences and the degree to which the market introduces biases in product selection this paper presents a general model of the demand for differentiated products which has as special cases two of the most popular approaches used to analyse welfare and competition in monopolistically competitive markets the model of spatial competition on the circle and the model of symmetric aggregate demand the circle model is attractive because both demand and costs have a definite and easy to visualize physical foundation and because it is tractable salop 1979 provides an exemplary modem analysis with this model one can analyze the relationship between the optimal amount of product variety and the amount which a monopolistically competitive market will support in many plausible cases competition produces too much variety such a strong conclusion raises questions of robustness almost simultaneously spence 1976 and dixit and stiglitz 1977 developed an alternative approach to monopolistic competition based upon the chamberlinian assumption of symmetry see also shubik 1959 rather than specifying a distribution of preferences and deriving demand through aggregation as did salop and his predecessors these authors started by specifying a symmetric aggregate benefit function indicating how social welfare depends on the amounts of the various products supplied both spence and dixit stiglitz were able to show that the welfare conclusions from the circle model were not robust depending on the functional form of the benefit function equilibrium may entail either excessive or insufficient product variety 1 the assumption of symmetric demand has proven fruitful in the analysis of many economic problems it is therefore natural to ask what distribution of tastes would give

imperfect competition in selection markets policies to correct market power and selection can be misguided when these forces coexist we build a model of symmetric imperfect competition in selection markets that parameterizes the degree of market power and selection we use graphical price theoretic reasoning to characterize the interaction between these forces using a calibrated model of health insurance we show that the risk adjustment commonly used to offset adverse selection can reduce coverage and social surplus conversely in a calibrated model of subprime auto lending realistic levels of competition can generate an oversupply of credit implying that greater market power is desirable

competition and unanimity revisited some recent developments in the theory of competitive stock markets are discussed and illustrated in this paper using simple examples these developments challenge the central role played by spanning in the literature dealing with unanimity among shareholders harry deangelo s 1981 article gives a clear account of some popular views about the central importance of spanning and is used to focus my presentation in deangelo s article there are three basic claims a if all initial shareholders in a firm have perfectly competitive conjectures and there is spanning net market value maximization will be unanimously favored by initial shareholders as the objective of the firm whether or not there are short sales of the firm s shares perfect competition plus spanning imply unanimity b perfectly competitive conjectures only make sense when there is spanning perfect competition implies spanning c for perfectly competitive conjectures to be correct there must not only be spanning but also constant returns to scale and hence zero profits profits are inconsistent with perfect competition in this paper i show that claim a can be true even without spanning in particular i if all initial shareholders in a firm have correct and perfectly competitive conjectures then net market value maximization will be unanimously favored by them as the objective of the firm at least if there are no short sales of the firm s shares by initial shareholders perfect competition with or without spanning implies unanimity ii claim b above is false that is perfect competition can exist without spanning iii claim c is false whether or not there is spanning that is positive profits and perfect competition are perfectly consistent since the assumption of spanning is tantamount to the assumption of complete markets for example if there is free disposal plus spanning then markets are complete d m kreps 1979 assertion i significantly extends the scope of the unanimity result in particular it extends the result to environments with incomplete markets in which firms market unique securities assertion ii shows such environments exist and iii shows they can be nontrivial that is ones in which shareholders care about the firm s objective beyond whether or not the objective implies nonnegative profits assertions i iii are easily demonstrated once it is realized that the old textbook maxim for perfect competition there must be many buyers and sellers of a commodity for example a particular type of security is simply false while many buyers and sellers may be sufficient for perfect competition it is not necessary indeed iv there may be only one seller of a commoditywithout any good substitutes yet that seller will face a perfectly elastic demand if he is small relative to his market the import of iv is that spanning is basically irrelevant for perfect competition

scanning the commons evidence on the benefits to startups participating in open standards development this paper contributes large sample evidence to an emerging discussion on open innovation and firm strategy we ask why a startup should participate in an open standards community we propose four ways that participation might increase a startup s chances of a liquidity event gaining endorsement of the startup s technology standard openly developing the startup s technology within the community but not necessarily gaining endorsement simply attending physical meetings of the community and having startup members elected to leadership positions examination of venture funded startups in the networking data communications industry sectors reveals that those startups that participate in an open standards community the internet engineering task force ietf have a greater likelihood of an initial public offering or acquisition the strongest effects are due to attendance and conditional on high levels of attendance holding leadership positions within the ietf surprisingly standards endorsement is insignificant when controlling for simple physical attendance these results are robust to instrumental variable methods and alternative coding of variables in two stage models we also find that prominent venture capitalists might help their portfolio companies by steering them to effective technology strategies in this case active participation in the ietf and not simply by lending status

when showrooming increases retailer profit abstractshowrooming the phenomenon of consumers visiting a brick and mortar b m store to learn about products but then buying online to obtain lower prices is attracting increased attention both in business practice and in academic literature it is considered a major threat to the b m retailers and determining how to fight it seems to be the only consideration however the manufacturer s need for retail informational services has always been one of the essential reasons for retailers to exist and is a means for retailers to achieve profitability the popular arguments about the threat of showrooming ignore the strategic role of the manufacturer in the distribution channel this article analytically shows that when the manufacturer s decisions are considered i e when the manufacturer retailer contract is endogenous consumers ability to engage in showrooming may lead to increased rather than decreased profitability for b m retailer s thus retail efforts to restrict showrooming behavior m

the existence of low end firms may help high end firms two models of competition between high end and low end products benefiting the high end firms are presented one is a quantity competition model and the other is a price competition model with product differentiation the key factor is the existence of two heterogeneous consumer groups those who demand only high end name brand products and those who care little whether products are high or low end we show that under certain conditions the profits of firms in the high end market are larger when there are firms producing low end products than when there are not the existence of price sensitive consumers who care little about product quality intensifies competition among the high end firms the existence of low end firms functions as a credible threat which induces the high end firms not to overproduce because price sensitive consumers buy products from the low end firms the result provides a new theoretical mechanism concerning the profitability and pricing of national brand firms after the entry of private labels it has an implication for pricing and marketing strategies established firms should not decrease their prices after the entry of nonestablished firms

access to bottleneck inputs under oligopoly a prisoners dilemma we analyze the incentives of vertically integrated oligopolists to concede access to their bottleneck inputs to an entrant in the downstream market first two vertically integrated incumbents make access price offers to an entrant that chooses which one to accept if any second firms compete on salop s circle the firms may be asymmetrically located on the circle to reflect differences in consumer shares for some levels of asymmetry the incumbents face a prisoners dilemma with respect to conceding access to their bottleneck inputs entry by a downstream firm may lead to lower retail prices however entry may also lead to higher retail prices for the access provider and for the entrant we also consider the cases where there are several incumbents and where the entrant makes the access price offers

prices profits and preference dependence we develop a new approach to discrete choice demand for differentiated products using copulas to separate the marginal distribution of consumer values for product varieties from their dependence relationship and apply it to the issue of how preference dependence affects market outcomes in symmetric multiproduct industries we show that greater dependence lowers prices and profits under certain conditions suggesting that preference dependence is a distinct indicator of product differentiation we also find new sufficient conditions for the symmetric multiproduct monopoly and the symmetric single product oligopoly prices to be above or below the single product monopoly price

empirical evidence on the relationship between mobile termination rates and firms profits the theoretical literature on mobile termination rates mtrs is inconclusive on how the level of mtrs affects overall consumer charges and firms profits we show that when firms offer bundles with fixed included usage a tariff structure that has become more common in recent years an identical change in all mtrs does not affect firms retail prices or profits we use a panel dataset from saturated european markets to estimate the effect of mtrs on mobile operators profits as predicted by the theoretical model we cannot reject the fact that firms profits are unaffected by an identical change in all mtrs

abuse of dominance and licensing of intellectual property patent thickets layers of licenses a firm needs to be able to offer products that embody technologies owned by multiple firms and licensing policies have drawn increasing scrutiny from policy makers patent thickets involve complementary products which gives rise to double marginalization the so called royalty stacking problem and has the potential to retard diffusion of new technologies and reduce consumer welfare this paper examines the impact of licensing policies of one or more upstream owners essential intellectual property ip on the downstream firms that require access to that ip the terms under which downstream firms can access this ip affects entry decisions product diversity prices and welfare we consider both the case in which a single party controls the essential ip and the case in which different parties control complementary pieces of essential ip we compare the outcome of several alternative standard licensing arrangements such as flat rate access fees royalty percentages per unit fees patent pools and cross licensing arrangements with or without vertical integration we first consider the case where there is a single upstream owner of essential ip increasing the number of licenses enhances product variety which creates added value but it also intensifies downstream competition which dissipates profits we derive conditions under which the upstream ip monopoly will then want to provide an excessive or insufficient number of licenses relative to the number that maximizes consumer surplus or social welfare when there are multiple owners of essential ip royalty stacking can reduce the number of the downstream licensees but also the downstream equilibrium prices the consumers face the paper derives conditions determining whether this reduction in downstream price and variety is beneficial to consumers or society finally the paper explores the impact of alternative licensing policies with fixed license fees or royalties expressed as a percentage of the price an upstream ip owner cannot control the intensity of downstream competition in contrast volume based license fees i e per unit access fees do permit an upstream owner to control downstream competition and to replicate the outcome of complete integration the paper also shows that vertical integration can have little impact on downstream competition and licensing terms when ip owners charge fixed or volume based access fees

product diversion to a direct competitor a manufacturer will often limit competition among downstream partners by authorizing only a select group of retailers to carry its product however it is not uncommon for authorized retailers to create an additional competitor by diverting units to an unauthorized seller this paper presents an analytical model that demonstrates how diversion from authorized retailers to an unauthorized direct competitor can occur under circumstances not considered by the prior literature in fact diversion can represent a prisoner s dilemma whereby retailers diminish their own profit by selling to the unauthorized direct seller the authorized retailer s profit loss actually increases as the per unit diversion costs incurred by the authorized retailer decrease the model also shows that the unauthorized direct seller earns greater profit by strategically procuring a unilaterally constraining quantity even though this procurement strategy results in an equivalent increase in the quantity sold by the retailers combined the results identify a new reason for diversion and its consequences for retailers and the unauthorized direct seller

coalition formation in standard setting alliances we present a theory for predicting how business firms form alliances to develop and sponsor technical standards our basic assumptions are that the utility of a firm for joining a particular standard setting alliance increases with the size of the alliance and decreases with the presence of rivals in the alliance especially close rivals the predicted alliance configurations are simply the nash equilibria i e those sets of alliances for which no single firm has an incentive to switch to another alliance we illustrate our theory by estimating the choices of nine computer companies to join one of two alliances sponsoring competing unix operating system standards in 1988

strategic pricing consumer search and the number of firms discover prices there are three distinct price dispersed equilibria characterized by low moderate and high search intensity the effects of an increase in the number of firms on search behaviour expected prices price dispersion and welfare are sensitive i to the equilibrium consumers search intensity and ii to the status quo number of firms for instance when consumers search with low intensity an increase in the number of firms reduces search does not affect expected price leads to greater price dispersion and reduces welfare in contrast when consumers search with high intensity increased competition results in more search and lower prices when the number of competitors in the market is low to begin with but in less search and higher prices when the number of competitors is large duopoly yields identical expected price and price dispersion but higher welfare than an infinite number of firms a question that has received much attention in economic theory is how the number of competitors and market outcomes are related despite the existence of work showing the contrary see e g satterthwaite 1979 rosenthal 1980 the prediction that emerges from a market where firms interact in a cournot fashion has come to dominate economic thought namely that an increase in the number of competitors leads to larger aggregate production lower market price and improved market performance measured in terms of some social welfare criterion ruffin 1971 this paper challenges the generality of this belief by presenting an oligopoly model with consumer search where the equilibrium expected price may be constant increasing or nonmonotonic in the number of firms we present an economy with two types of consumers consumers who search for prices at no cost fully informed and consumers who must pay a fixed search cost for each price quotation they observe less informed 1 all buyers have the same willingness to pay for the good and buy either a single unit or nothing at all on the supply side of the market there are n firms producing a homogeneous good at constant marginal cost we analyse a one shot simultaneous move game firms set prices and consumers decide how many prices to search for at the same moment in time our model is essentially an oligopolistic version of burdett and judd 1983 where some consumers search costlessly in this model consumers search using a fixed sample size search strategy i e they choose the number of prices to observe before receiving any offer nonsequential search is appealing when consumers find it more advantageous to gather price information quickly morgan and manning 1985 this occurs when the search outcome is observed with delay and delay is costly for instance an mba graduate looking for a job 1 the presence in the model of consumers who search costlessly captures the fact that some people have a

standard setting organisations and standard essential patents voting and markets the analysis provides conditions under which standard setting organisations ssos choose efficient technology standards i introduce a two stage game with both voting and market competition in equilibrium standards and market outcomes are efficient even with market power from scarce capacity and standard essential patents seps i show that a drastic innovation with seps generates greater social welfare than a less efficient standard without seps a key finding is that voting power and market power have counterbalancing effects the discussion helps explain empirical observation of differences in sso voting rules intellectual property ip rules membership and alliances

value of an additional firm in monopolistic competition the paper develops a model of monopolistic competition in which the satisfaction levels consumers get from products are independently and identically distributed potential substitution among products then generates demand curves through the mechanism of order statistics the value of extra variety can be calculated directly pareto lognormal and beta distributions are investigated using numerical integration some but not all cases support the argument that the optimal number of firms exceeds the equilibrium number

reference dependent utility product variety and price competition products such as nike running shoes gillette razors and gatorade sports drink serve as the standard against which consumers evaluate other members of the category empirical evidence suggests that consumers care about not only the consumption utility derived from a product but also the gain loss utility in comparison to the reference product of the category this paper examines how reference dependent utility affects price competition in a horizontally differentiated market where consumers tastes are diverse when consumer valuations are low the reference product is priced lower than a nonreference product in contrast when consumer valuations are high the reference product is priced higher than a nonreference product moreover loss aversion on the price dimension always intensifies competition among low valuation goods whereas loss aversion on the taste dimension softens competition among high valuation goods only if consumer sensitivity to the difference in match quality is above a threshold we also find that an increase in the diversity of consumers tastes reduces equilibrium profits if consumer valuation is low but has the opposite effect if consumer valuation is high we further explore how an increase in the popularity of the reference product affects price competition finally we assess the robustness of the findings by extending the model in different directions the online appendix is available at https doi org 10 1287 mnsc 2017 2834 this paper was accepted by juanjuan zhang marketing

standards consortia and innovation the development of formal ict standards is a challenging form of collaborative innovation combining consensus decision making and r d rivalry to supplement this formal standard setting process it has thus become frequent that part of the involved firms creates ad hoc consortia to better align positions on a common technology roadmap this paper aims to assess whether such consortia can effectively mitigate r d coordination failure through enhanced cooperation we first develop a theoretical model showing that depending on the nature of firms incentives to contribute proprietary technology different types of r d coordination failure namely a public good or rent seeking problem may occur in equilibrium using a large panel of standards we then confirm empirically the prediction that consortia have different effects on innovation under a public good or rent seeking regime overall we observe an increase in innovation after a firm joined a consortium however this effect is significantly weakened or even reversed for standards characterized by a strong rent seeking regime

welfare optimal patent royalties when imitation is costly we identify welfare optimal patent royalties in a model of costly imitation entry and imperfect competition when the social planner may impose a compulsory license optimal royalties either blockade imitation facilitating unregulated monopoly or yield an aggregate zero profit efficient duopoly when duopoly is optimal the optimal per unit royalty pins the equilibrium price at the aggregate average cost and the optimal fixed royalty shifts surplus so the patentee and imitator break even efficient duopoly yields higher welfare than monopoly for sufficiently low invention cost and may also yield higher welfare than a prize system interestingly royalty payments may be negative because of this efficient duopoly may not be feasible if the planner must instead direct the courts to use such royalties

competition with targeted product design price variety and welfare abstract we consider the price and welfare effects of competition in targeted product design in the context of the salop circle model changes in product design lead to demand rotations that set the stage for our analysis with an exogenous number of firms we show that the degree of targeted product design tends to increase with the number of firms moreover under reasonable conditions price increasing competition takes place for intermediate levels of the number of firms this effect is associated with the possibility of lower consumer welfare with endogenous firm entry an interesting insight from our analysis is that in some situations an increase in market size or a technological progress that reduces entry costs both might reduce consumers welfare

markets and linguistic diversity abstract producers of cultural goods and media products can make their specific contents available to their audiences and readerships only through a particular language the choice of language is a non trivial decision in markets with bilingual or multilingual consumers in this paper i argue that the very existence of bilingual consumers may seriously bias market outcomes against minority languages in particular i show that the level of linguistic diversity determined by profit maximizing firms tends to be inefficiently low except when and where the cost of producing a second linguistic version becomes sufficiently low thus the model provides an efficiency argument supporting policies that protect the presence of minority languages in these markets

a model of market power in customer markets we develop a model for studying dynamic competition in environments with frictions that lead to partial lock in of customers to products the dynamic aspects associated with customer retention and acquisition introduce pricing incentives that do not exist in more traditional static product markets the proposed model while highly stylized maintains certain symmetry properties that allow us to obtain equilibrium existence and uniqueness we then study the comparative statics of the model and derive a closed form relationship between average equilibrium markups and the herfindahl index we illustrate how the model can be used by analyzing mergers in such a dynamic environment

are loyalty rewarding pricing schemes anti competitive abstract many economists and policy analysts seem to believe that loyalty rewarding pricing schemes like frequent flyer programs tend to reinforce firms market power and hence are detrimental to consumer welfare the existing academic literature has supported this view to some extent in contrast we argue that these programs are business stealing devices that tend to enhance competition in the sense of generating lower average transaction prices and higher consumer surplus in highly competitive environments this result is robust to alternative specifications of the firm commitment power and demand structures however it could be reversed if the number of firms is sufficiently small and if firms are restricted to use program designs with sufficiently weak commitment capacity

existence of voting market equilibria abstract we show the existence of an equilibrium in a model where private goods are allocated by markets and the public good bad is allocated by majority rule voting

monopolistic competition in the spirit of chamberlin special results the idea of large group monopolistic competition was first introduced by chamberlin in i 933 although a large literature has developed on this topic since that time it can be argued that few of the models which have been formulated really capture monopolistic competition in chamberlin s sense in a companion paper to this one hart i 983 a model was presented which it was claimed did satisfy the desiderata of large group monopolistic competition specifically the model had the property that i there were many firms producing differentiated commodities 2 each firm was negligible in the sense that it could ignore its impact on and hence reactions from other firms 3 free entry led to zero profit of operating firms but 4 each firm faced a downward sloping demand curve and hence equilibrium price exceeded marginal cost the model of hart i983 was quite general and only such issues as the existence and limiting properties of equilibrium were considered the purpose of the present paper is to analyse a special case of this model in greater detail and to consider in this context the old question of whether too few or too many brands are produced under monopolistic competition before embarking on the analysis however let me briefly indicate why i believe that there is a need for a new model of monopolistic competition further discussion of this may be found in hart i983 in the last few years a sizeable literature has developed on imperfect competition and product differentiation see for example dixit and stiglitz i977 lancaster i979 salop i979 and spence i976 in much of this literature see for example spence i976 markets of fixed finite size are considered where the entry of firms is limited by the existence of set up costs under these conditions only a finite number of firms can operate and hence firms will not be negligible in the sense of 2 in addition due to the integer problem operating firms will generally make strictly positive profits i e 3 is violated models of

centrality and pricing in spatially differentiated markets the case of gasoline we highlight the importance of centrality for pricing firms characterized by a more central position in a spatial network are more powerful in terms of having a stronger impact on their competitors prices and on equilibrium prices these propositions are derived from a simple theoretical model and investigated empirically for the retail gasoline market of vienna austria we compute a measure of network centrality based on the locations of gasoline stations in the road network results from a spatial autoregressive model show that prices of gasoline stations are more strongly correlated with prices of central competitors

the dynamic provision of product diversity under duopoly abstract this paper builds a dynamic duopoly model to examine the provision of new varieties over time consumers experience temporary satiation and hence higher consumption of the current variety lowers demand for future varieties the equilibrium can be characterized by a combination of monopolistic pricing and nearly zero profits competitive timing in particular if the cost of producing a new variety is not too low then firms tend to avoid head to head competition and set the short run profit maximizing price however firms tend to introduce new varieties as soon as demand has grown sufficiently to cover costs from a second best perspective the equilibrium may exhibit excessive product diversity however if firms coordinate their frequency of new product introductions then consumers are likely to be harmed it is also shown that equilibrium prices are moderated by two factors first consumers option value of waiting reduces their willingness to pay second competition reduces firms incentives to engage in intertemporal price discrimination

dynamic product diversity the goal of this paper is to study the frequency of new product introductions in monopoly markets where demand is subject to transitory saturation we focus on those types of goods for which consumers purchase at most one unit of each variety but repeat purchases in the same product category the model considers in nitely lived forward looking consumers and rms we show that the share of potential surplus that a monopolist is able to appropriate increases with the frequency of introduction of new products and the intensity of transitory saturation if the latter is su ciently strong then the rate of introduction of new products is higher than socially desirable excessive dynamic product diversity jel classi cation numbers l12 l13

a network city model of spatial competition abstract in this paper we analyze a spatial bertrand oligopoly model called network city model firms compete directly and simultaneously with all other firms in the model we allow for heterogeneous product differentiation heterogeneous constant marginal costs of production and heterogeneous consumer densities we show that the equilibrium is unique and easily computable our model is more general than the existing spatial models and more importantly our model provides a spatial microfoundation for the traditional linear demand functions in a differentiated bertrand oligopoly

technical compatibility and the mode of foreign entry with network externalities we examine the preferences of a foreign firm and a local government over two modes of foreign direct investment de novo entry and acquisition of the domestic incumbent two crucial features of the model are network externalities and partial incompatibility between the domestic and the foreign technology the relative welfare impact of the two entry modes depends on the degree of market competition and the strength of the network externality the clash between the foreign firm s choice and the local government s ranking of the two entry modes can motivate limits on the degree of foreign ownership of the local firm ce texte examine les preferences d une firme etrangere et d un gouvernement du pays hote quant a deux modes d investissement direct de l etranger entree de novo de la firme etrangere versus acquisition d une firme domestique en place deux facteurs pris en compte sont la presence d externalites de reseau et d incompatibilite partielle entre la technologie locale et celle introduite par la firme etrangere l impact relatif des modes d entree sur le mieux etre local depend du degre de concurrence sur le marche et de l importance des externalites de reseau le conflit entre les preferences de l entreprise etrangere et les preferences du gouvernement local peuvent etre a la source de politiques qui limitent le degre de proprieteetrangere permis

can prominence matter even in an almost frictionless market consumer search on the internet is rarely random sponsored links appear higher up a webpage and consumers often click them firms also bid aggressively for these prominent positions at the top of the page but why should prominence matter when visiting an additional website is almost costless i present a model in which consumers know their valuations for the products offered in the market but do not know which retailer sells which product i show that a prominent retailer earns significantly more profit than other firms even when the cost of searching websites and comparing products is essentially zero

impact of the information asymmetry between managers and owners under oligopoly we show using a hotelling 1929 model with laffont and tirole 1986 firms that under duopoly the information asymmetry caused by the separation of ownership and control has two effects on owners incentives to induce effort information asymmetry raises the marginal cost of inducing effort which decreases efforts and increases prices since all firms prices increase this leads to a change in the expected demand of each firm and thus in the marginal benefit of inducing effort which may amplify or mitigate the initial impact as a consequence information asymmetry may induce some firms to increase efforts and lower prices more surprisingly it may increase both ex post and ex ante social welfare

true monopolistic competition as a result of imperfect information the paper restates hart s 1985a 1985b definition of large group monopolistic competition distinguishes it from oligopolistic competition and raises the question of whether there are reasonable circumstances that give rise to true monopolistic competition as defined the purpose is to show that consumers imperfect information may create conditions that will turn an otherwise oligopolistic market into a truly monopolistically competitive one