Joint Opaque booking systems for online travel agencies

This paper analyzes the properties of the advanced Opaque booking systems used by the online travel agencies in conjunction with their traditional transparent booking system. In section 2 we present an updated literature review. This review underlines the interest and the specicities of Opaque goods in the Tourism Industry. It also characterizes properties of the Name-Your-Own-Price (NYOP) channel introduced by Priceline and oering probabilistic goods to potential travelers. In the section 3 of the paper we present a theoretical model, in which we wonder what kind of Opaque system can be implemented by a given online monopoly. We compare the "Opaque \Hotwire system", a NYOP system without any possibility of rebidding and the joint implementation of these two systems. We nd that the NYOP system and the joint implementation can have challenging properties if consumer's information is complete. Then, in section 4, we analyze the case of incomplete information. We develop an appropriate setting to integrate the lack of complete information of potential passengers on their relative propensity to pay. We analyze three cases corresponding to dierent levels of uncertainty and number of tickets available. We nd that in some relevant cases (average number of tickets, moderate uncertainty), the joint implementation of 2 dierent Opaque booking systems is advantageous for the Online travel Agencies (OTAs) and airlines. This result casts doubt on the current OTAs' strategies.Opaque Selling, Name-Your-Own-Price, Economics of Tourism, Online Travel Agencies, Probabilistic Goods.

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

Bottleneck co-ownership as a regulatory alternative

This paper proposes a regulatory mechanism for vertically related industries in which the upstream “bottleneck” segment faces significant returns to scale while other (downstream) segments may be more competitive. In the proposed mechanism, the ownership of the upstream firm is allocated to downstream firms in proportion to their shares of input purchases. This mechanism, while preserving downstream competition, partially internalizes the benefits of exploiting economies of scale resulting from an increase in downstream output. We show that this mechanism is more efficient than a disintegrated market structure in which the upstream natural monopoly bottleneck sets a price equal to average cost.Regulation, vertically related industries, co-ownership

Spatial Monopoly Pricing in a Stochastic Environment

This paper reexamines the welfare implications of three pricing regimes (mill, uniform and discriminatory) for a monopoly in a stochastic environment. It con-siders a risk-averse monopolist faces two markets with stochastic and linear demands. The monopolist is assumed to commit to an irreversible price in each market before the uncertainty is resolved. Several unconventional results are shown to be triggered by the presence of demand uncertainty. The reason for the reversal of orthodox intuition is the asymmetry in the risk chacteristics of the markets and the willingness of the monopolist to trade increased level of expected prots for reduced risk.spatial pricing, monopoly, demand uncertainty

Internal Rationality, Imperfect Market Knowledge and Asset Prices

We present a decision theoretic framework in which agents are learning about market behavior and that provides microfoundations for models of adaptive learning. Agents are 'internally rational', i.e., maximize discounted expected utility under uncertainty given dynamically consistent subjective beliefs about the future, but agents may not be 'externally rational', i.e., may not know the true stochastic process for payoff relevant variables beyond their control. This includes future market outcomes and fundamentals. We apply this approach to a simple asset pricing model and show that the equilibrium stock price is then determined by investors' expectations of the price and dividend in the next period, rather than by expectations of the discounted sum of dividends. As a result, learning about price behavior affects market outcomes, while learning about the discounted sum of dividends is irrelevant for equilibrium prices. Stock prices equal the discounted sum of dividends only after making very strong assumptions about agents' market knowledge.learning, internal rationality, consumption based asset pricing

Complementary platforms

We introduce an analytical framework close to the canonical model of platform competition investigated by Rochet and Tirole (2006) to study pricing decisions in two-sided markets when two or more platforms are needed simultaneously for the successful completion of a transaction. The model developed is a natural extension of the Cournot-Ellet theory of complementary monopoly featuring clear cut asymmetric single- and multihoming patterns across the market. The results indicate that the so-called anticommons problem generalizes to two-sided markets because individual platforms do not take into account the negative pricing externality they exert on the other platforms. As a result, mergers between such platforms may be welfare enhancing, but involve redistribution of surplus from one side of the market to the other. Moreover, the limit of an atomistic allocation of property rights however is not monopoly pricing, indicating that there also exist differences with the received theory of complementarity.Two-Sided Markets · Complements · The Anticommons Problem