Non-Separable, Quasiconcave Utilities are Easy -- in a Perfect Price Discrimination Market Model

Recent results, establishing evidence of intractability for such restrictive utility functions as additively separable, piecewise-linear and concave, under both Fisher and Arrow-Debreu market models, have prompted the question of whether we have failed to capture some essential elements of real markets, which seem to do a good job of finding prices that maintain parity between supply and demand. The main point of this paper is to show that even non-separable, quasiconcave utility functions can be handled efficiently in a suitably chosen, though natural, realistic and useful, market model; our model allows for perfect price discrimination. Our model supports unique equilibrium prices and, for the restriction to concave utilities, satisfies both welfare theorems

Pricing of Complementary Goods and Network Effects*

We discuss the case of a monopolist of a base good in the presence of a complementary good provided either by it or by another firm. We assess and calibrate the extent of the influence on the profits from the base good that is created by the existence of the complementary good, i.e., the extent of the network effect. We establish an equivalence between a model of a base and a complementary good and a reduced-form model of the base good in which network effects are assumed in the consumers’ utility functions as a surrogate for the presence of direct or indirect network effects, such as complementary goods produced by other firms. We also assess and calibrate the influence on profits of the intensity of network effects and quality improvements in both goods. We evaluate the incentive that a monopolist of the base good has to improve its quality rather than that of the complementary good under different market structures. Finally, based on our results, we discuss a possible explanation of the fact that Microsoft Office has a significantly higher price than Microsoft Windows although both products have comparable market shares.calibration; monopoly; network effects; complementary goods; software; Microsoft

Information goods and endogenous pricing strategies: the case of academic journals

I model journal pricing behavior in a portfolio demand environment and consider how the ongoing transition from print to digital distribution has lead to endogenous changes in pricing behavior. Specifically, when choosing whether or not to price discriminate, publishers compare the benefits of selling more content to each set of buyers against the associated additional costs. As the distribution costs decline, price discrimination becomes more attractive. However, since this cost decline also s new entry opportunities, incumbent firms may also need to bundle their journals to avoid displacement of individual titles.bundling

Mergers and Partial Ownership

In this paper we compare the profitability of a merger to the profitability of a partial ownership arrangement and find that partial ownership arrangements can be more profitable for the acquiring and acquired firm because they can result in a greater dampening of competition. We also derive comparative statics on the prices of the acquiring firm, the acquired firm, and the outside firms. In a dual context, we show that a cross-majority owner may have incentives to sell a fraction of the shares in one of the firms he controls to a silent investor who is outside the industry. Aggregate ex post operating profit in the two firms controlled by the cross-majority shareholder then increases, such that both the cross-majority shareholder and the silent investor will be better off with than without the partial divestiture.media economics, mergers, corporate control, financial control

Triple Play Time

Abstract: Digital convergence thrusts telephony, television and the internet into the socalled 'triple play' offerings, creating new forms of rivalry between cable operators and telephone companies. Markets participants feel compelled to enter new industries to survive, even though their core competencies are limited to their primary market. The outcome of triple play competition is likely to depend on the speed of the development of new technologies and the adaptation of the regulatory environment. In the short run, telephone companies will enjoy an advantage attributable to switching costs. However, this advantage will erode as younger subscribers switch to telephony on the internet.triple play; bundling; digital convergence; broadband access; television and telephone

Shopbots, Powershopping, Powersales: New Forms of Intermediation in E-Commerce - An Overview -

With the advent and proliferation of the Internet many aspects of business and market activities are changing. New forms of intermediation also called cybermediaries are becoming increasingly important as a coordinator of interaction between buyers and sellers in the electronic market environment. Especially the overwhelming abundance of information offered by the Internet promotes the development of new intermediarie like malls, shopbots, virtual resellers etc. This paper provides a detailed overview of different new forms of cybermediation and illustrates their influence on consumer choice, firm pricing and product differentiation strategies.comparison shopping, cybermediaries, e-commerce, shopbots