Monopoly quality degradation and regulation in cable television

Using an empirical framework based on the Mussa-Rosen model of monopoly quality choice, we calculate the degree of quality degradation in cable television markets and the impact of regulation on those choices. We find lower bounds of quality degradation ranging from 11 to 45 percent of offered service qualities. Furthermore, cable operators in markets with local regulatory oversight offer significantly higher quality, less degradation, and greater quality per dollar, despite higher prices

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

The Role of the Mangement Sciences in Research on Personalization

We present a review of research studies that deal with personalization. We synthesize current knowledge about these areas, and identify issues that we envision will be of interest to researchers working in the management sciences. We take an interdisciplinary approach that spans the areas of economics, marketing, information technology, and operations. We present an overarching framework for personalization that allows us to identify key players in the personalization process, as well as, the key stages of personalization. The framework enables us to examine the strategic role of personalization in the interactions between a firm and other key players in the firm's value system. We review extant literature in the strategic behavior of firms, and discuss opportunities for analytical and empirical research in this regard. Next, we examine how a firm can learn a customer's preferences, which is one of the key components of the personalization process. We use a utility-based approach to formalize such preference functions, and to understand how these preference functions could be learnt based on a customer's interactions with a firm. We identify well-established techniques in management sciences that can be gainfully employed in future research on personalization.CRM, Persoanlization, Marketing, e-commerce,

The Political Economy of Cable - "Open Access."

Advocates of "open access" claim that Internet Service Providers (ISPs) should be able to use a cable TV system's bandwidth on the same terms offered to ISPs owned by the cable system. On that view, "open access" mitigates a monopoly bottleneck and encourages the growth of broadband. This paper shows that cable operators do enjoy market power, and do seek to leverage a dominant position in video into the broadband access market by allocating too little bandwidth for Internet access. Yet, rather than protect cable operators from cannibalizing their cable TV revenue, this strategy defends against imposition of common carrier regulation, which would allow system capacity to be appropriated by regulators and rival broadband networks. Ironically, the push for "open access" limits Internet access by encouraging this under-allocation of broadband spectrum, and by introducing coordination problems slowing technology deployment. These effects are empirically evident in the competitive superiority of cable's "closed" platform vis-a-vis "open" DSL networks, and in financial market reactions to key regulatory events and mergers in broadband.

Potential Competitive Effects of Vertical Mergers: A How-To Guide for Practitioners

The purpose of this short article is to aid practitioners in analyzing the competitive effects of vertical and complementary product mergers. It is also intended to assist the agencies if and when they undertake revision of the 1984 U.S. Vertical Merger Guidelines. Those Guidelines are out of date and do not reflect current enforcement or economic thinking about the potential competitive effects of vertical mergers. Nor do they provide the tools needed to carry out a modern competitive effects analysis. This article is intended to partially fill the gap by summarizing the various potential competitive harms and benefits that can occur in vertical mergers and the types of economic and factual analysis of competitive effects that can be applied to those mergers during the HSR review process. The analysis in the article also identifies several legal and policy issues that the agencies would consider when they undertake the process of revising the Vertical Merger Guidelines. The Appendix contains a listing and summary of the vertical merger cases challenged by the DOJ and FTC since 1994

A dynamic pricing model for unifying programmatic guarantee and real-time bidding in display advertising

There are two major ways of selling impressions in display advertising. They are either sold in spot through auction mechanisms or in advance via guaranteed contracts. The former has achieved a significant automation via real-time bidding (RTB); however, the latter is still mainly done over the counter through direct sales. This paper proposes a mathematical model that allocates and prices the future impressions between real-time auctions and guaranteed contracts. Under conventional economic assumptions, our model shows that the two ways can be seamless combined programmatically and the publisher's revenue can be maximized via price discrimination and optimal allocation. We consider advertisers are risk-averse, and they would be willing to purchase guaranteed impressions if the total costs are less than their private values. We also consider that an advertiser's purchase behavior can be affected by both the guaranteed price and the time interval between the purchase time and the impression delivery date. Our solution suggests an optimal percentage of future impressions to sell in advance and provides an explicit formula to calculate at what prices to sell. We find that the optimal guaranteed prices are dynamic and are non-decreasing over time. We evaluate our method with RTB datasets and find that the model adopts different strategies in allocation and pricing according to the level of competition. From the experiments we find that, in a less competitive market, lower prices of the guaranteed contracts will encourage the purchase in advance and the revenue gain is mainly contributed by the increased competition in future RTB. In a highly competitive market, advertisers are more willing to purchase the guaranteed contracts and thus higher prices are expected. The revenue gain is largely contributed by the guaranteed selling.Comment: Chen, Bowei and Yuan, Shuai and Wang, Jun (2014) A dynamic pricing model for unifying programmatic guarantee and real-time bidding in display advertising. In: The Eighth International Workshop on Data Mining for Online Advertising, 24 - 27 August 2014, New York Cit

EVOLVING RESEARCH ON PRICE COMPETITION IN THE GROCERY RETAILING INDUSTRY: AN APPRAISAL

With the end of the Supermarket Revolution in the 1970s, new forms of horizontal, vertical, and geographic competition have appeared to challenge the supremacy of the supermarket format. New retail formats like warehouse stores, supercenters, and fast-food outlets appear to affect local retail supermarket prices. Slotting allowances, coupons, and electronic data gathering have intensified retailer-manufacturing rivalry. Foreign direct investment offers the promise of new European-style management styles in U.S. grocery retailing.Agribusiness, Demand and Price Analysis,

Economics of Change in Market Structure, Conduct, and Performance The Baking Industry 1947-1958

Baking is one of the largest industries in the United States. Its sales, which exceed $4 billion annually, rank it third among the food processing industries, and thirteenth among all manufacturing industries. Bakery products account for nearly$1 out of every $10 spent by American consumers for food. Almost half of the domestic consumption of wheat flour is in the form of bread, rolls, cake, pie, doughnuts, sweet goods, and other perishable bakery products. While this study encompasses the perishable bakery products industry as defined by the U.S. Census Bureau, it focuses primarily on wholesale markets for white bread. Since World War II, important changes have occurred in the bread baking industry. A decline in the per capita demand for bread products coupled with changes in technology and costs has affected the relationships between baking companies, their market behavior, and the resulting level of efficiency and price performance. In an industrial economy, the farming, milling, baking, retailing, and consuming functions are integrally related. Changes in the organization and practices in one may induce changes in others. The baking industry occupies a strategic position in this process, and as a result, consumers, farmers, millers, and retailers, as well as bakers themselves, have a vital interest in the way the baking industry performs. Changes in market structure and firm behavior in the baking industry have been the subject of study and concern by several interested individuals and groups. The U.S. Department of Agriculture has followed with increased concern the widening of the market margin and the declining farmer share of consumer bread prices. The Senate Agricultural Committee has completed a study of average cost and returns of bakery operations.The Federal Trade Commission has followed the pricing practices of many baking companies with frequent cease and desist orders. I\u3e The Justice Department, through periodic prosecutions, has kept baking firms aware of the limitation imposed by the antitrust laws. The Senate Subcommittee on Antitrust and Monopoly has studied the impact of discriminatory pricing by large baking companies on small independent bakers.7 The industry has encouraged economic study of the historic development of baking and changes in market organization and practices.s Most recently, the F.T.C. studied buyer concentration and the integration of retail grocery organizations into baking and other food processing industries

Referral Infomediaries and Retail Competition

An important phenomenon on the Internet has been the emergence of "infomediaries" or Internet referral services such as Autobytel.com and Carpoint.com in the automobile industry, Avviva.com in real estate and Healthcareadvocates.com in medicine. These services offer consumers the opportunity to get price quotes from enrolled brick-and-mortar retailers as also information on invoice prices, reviews and specifications before they commence the shopping process. Internet referral services also direct consumer traffic to particular retailers who join them. The view of industry analysts and practitioners is that these services are a boon to consumers who can use them to get better prices from retailers. What is less clear though is the manner in which these infomediaries affect the market competition between retailers. In this paper, we analyze the impact of referral infomediaries on the functioning of retail markets and the contractual arrangements that they should use in selling their services. We identify the market conditions under which the business model represented by these services would be viable and also provide an understanding of how this institution would evolve with the growth of the Internet. The model that we develop captures the key economic characteristics that define an Internet referral infomediary. On the consumer side, a referral infomediary performs the function of "price discovery": a consumer can use the service to costlessly get an additional retail price quote before purchase. On the firm side, a referral service endows an enrolled retailer with the ability to price discriminate between consumers who come through the service and those who come directly to the store. Specifically the model consists of a referral infomediary and a market with two downstream retailers who compete in price. The retail market is comprised of three consumer segments: a segment loyal to each retailer and a comparison shopping segment that shops on the basis of the lowest price. The referral infomediary reaches some proportion of the total consumer population and this characterizes the reach of the Internet in this market. The impact of the infomediary on the market is best illustrated by the case in which one of the retailers is enrolled in the institution. We show that the referral price will always be lower than the retail store price offered by an enrolled dealer. The incentives of the retailer while setting the on-line referral price are driven not only by the comparison shoppers who search at both stores, but also the consumers who would have searched only at the competing store. Thus the use of a referral service as a price discrimination mechanism leads to lower online prices. Next, the profits of the enrolled dealer first increase and then decrease with the reach of the institution. One might find this surprising because the referral service provides the enrolled retailer the benefit of price discrimination as well as the benefit of additional demand (because the retailer gets the opportunity to quote a price to all online customers, some of whom were not previously accessible). However, the referral service also creates a competitive effect because it helps an enrolled retailer to poach on its competitor's customers who were previously unavailable. The strategic response by the competitor is to price aggressively in order to protect its loyal base and this intensifies price competition leading to lower equilibrium profits. This competitive effect increases with the reach of the infomediary. As a result, the profits of the enrolled retailer first increases and then decreases with the reach of the referral infomediary. We also show that the referral infomediary should prefer an exclusive strategy of allowing only one of the two retailers to enroll. A non-exclusive strategy implies that consumers who use the service will get referral prices from both retailers leading to Bertrand type competition for these consumers. Interestingly, we find that the referral service can unravel (in the sense that neither retailer can get any net profit from joining) when its reach becomes too large. In this case, any retailer that joins can poach upon a large proportion of its competitor's customers leading to intense price competition. Consequently, the joining firm will make less profits than if it had not joined. This provides a rationale for the current attempts by firms such as Autobytel to diversify aggressively into additional service areas. We extend the model to the case where the referral infomediary can identify the different consumer segments and show that consumer identification can prevent the infomediary from unraveling when the reach of the institution increases. Finally, we extend the model to the cases in which retailer loyalty is asymmetric and in which the reach of the Internet can vary across the different segments.Referral Services, Infomediaries, Internet, Price Discrimination, Retail Competition. ,