An Economic Approach to Article 82

This report argues in favour of an economics-based approach to Article 82, in a way similar to the reform of Article 81 and merger control. In particular, we support an effects-based rather than a form-based approach to competition policy. Such an approach focuses on the presence of anti-competitive effects that harm consumers, and is based on the examination of each specific case, based on sound economics and grounded on facts

An Economic Approach to Article 82 - Report by the European Advisory Group on Competition Policy

This report argues in favour of an economics-based approach to Article 82, in a way similar to the reform of Article 81 and merger control. In particular, we support an effects-based rather than a form-based approach to competition policy. Such an approach focuses on the presence of anti-competitive effects that harm consumers, and is based on the examination of each specific case, based on sound economics and grounded on facts.Competition Policy; Abuse of Market Power; Article 82

An Economic Approach to Article 82

This report argues in favour of an economics-based approach to Article 82, in a way similar to the reform of Article 81 and merger control. In particular, we support an effects-based rather than a form-based approach to competition policy. Such an approach focuses on the presence of anti-competitive effects that harm consumers, and is based on the examination of each specific case, based on sound economics and grounded on facts.competition policy; abuse of market power

Pricing of Products and Complementary Services: A Study of the Online Game Industry

We model a monopolist who offers a product and a complementary service, where only the latter exhibits positive network externalities. We focus on the online game industry as a representative case in which the product (the game), unlike the service (access to the interactive online play mode), has zero marginal cost, and consider two-potential pricing strategies: 1) the bundle pricing, in which the vendor charges a single price for the product and the service; and 2) the separate pricing, in which the vendor sets the prices of the product and the service separately. We find that, in contrast to the common result in the bundling literature, bundling may increase consumer surplus, while the monopolist chooses not to offer the bundle. We offer theoretical evidence that this is due to the presence of network externalities

Pricing economics of video games:a panel data study on the effects of versioning on revenue

Abstract. The video game industry has seen major changes in the 21st century. The industry has experienced exponential growth as digital markets have enabled the usage of new business and pricing models which differ from the traditional retail trade of boxed goods. Meanwhile, the technological development and demand for more complex games has caused the production costs of video games to rise. This thesis analyses the video game industry and the price determination of its products, video games. Under the scope are both the traditional pricing economics of video games, as well as the recently emerged new pricing and business models, which according to the economic pricing theory fall under versioning type price discrimination. The research methods of this thesis include a literature review on the pricing economics of the video game industry, as well as an empirical panel data study on revenue gathering within the firms of the industry. The focus of the econometric research is to build a simple model to capture the main factors of revenue making among 7 big publishers of the industry between the years 2000 and 2020. Included factors are the quantitative data on published products, their qualities, and the pricing models used. The results of the study add to the existing literature by providing quantitative results on the usage of different versioning type pricing models. The findings show that using microtransactions and expansive type downloadable content accounts for a significant share of the industry growth, while using the free- to-play model combined with these types of versioning tools also generates significantly more revenue compared to the traditional retail model. The amounts of mobile and multiplatform games released also had explanatory power over the revenues, while console games, qualities of games, and the usage of the subscription model did not play a significant part in explaining revenue gathering within the firms of the study

Co-ordination and Lock-in: Competition with Switching Costs and Network Effects

Switching costs and network effects bind customers to vendors if products are incompatible, locking customers or even markets in to early choices. Lock-in hinders customers from changing suppliers in response to (predictable or unpredictable) changes in effciency, and gives vendors lucrative ex post market power-over the same buyer in the case of switching costs (or brand loyalty), or over others with network effects. Firms compete ex ante for this ex post power, using penetration pricing, introductory offers, and price wars. Such "competition for the market" or "life-cycle competition" can adequately replace ordinary compatible competition, and can even be fiercer than compatible competition by weakening differentiation. More often, however, incompatible competition not only involves direct effciency losses but also softens competition and magnifies incumbency advantages. With network effects, established firms have little incentive to offer better deals when buyers’ and complementors’ expectations hinge on non-effciency factors (especially history such as past market shares), and although competition between incompatible networks is initially unstable and sensitive to competitive offers and random events, it later "tips" to monopoly, after which entry is hard, often even too hard given incompatibility. And while switching costs can encourage small-scale entry, they discourage sellers from raiding one another’s existing customers, and s also discourage more aggressive entry. Because of these competitive effects, even ineffcient incompatible competition is often more profitable than compatible competition, especially for dominant rms with installed-base or expectational advantages. Thus firms probably seek incompatibility too often. We therefore favor thoughtfully pro-compatibility public policy.

Dynamic Price Competition with Price Adjustment Costs and Product Differentiation

We study a discrete time dynamic game of price competition with spatially differentiated products and price adjustment costs. We characterise the Markov perfect and the open-loop equilibrium of our game. We find that in the steady state Markov perfect equilibrium, given the presence of adjustment costs, equilibrium prices are always higher than prices at the repeated static Nash solution, even though, adjustment costs are not paid in steady state. This is due to intertemporal strategic complementarity in the strategies of the firms and from the fact that the cost of adjusting prices adds credibility to high price equilibrium strategies. On the other hand, the stationary open-loop equilibrium coincides always with the static solution. Furthermore, in contrast to continuous time games, we show that the stationary Markov perfect equilibrium converges to the static Nash equilibrium when adjustment costs tend to zero. Moreover, we obtain the same convergence result when adjustment costs tend to infinity.Price adjustment costs, Difference game, Markov perfect equilibrium, Open-loop equilibrium

Price Discrimination

This is a survey of the literature on price discrimination and related practices for the Handbook of Industrial Organization.Center for Research on Economic and Social Theory, Department of Economics, University of Michiganhttp://deepblue.lib.umich.edu/bitstream/2027.42/101032/1/ECON469.pd