Sunk costs and the dynamics of creative industries

This chapter examines the long-run evolution of modern entertainment industries such as the film and music industries. It investigates ways to conceptualise and quantify the subsequent waves of creative destruction, and investigates specifically how sunk costs affect the evolution of the industry through its interaction with variety, market integration, product differentiation and price discrimination, and how old entertainment formats almost never became extinct. It finds that within this framework, four economic tendencies shaped the entertainment industries evolution: first, endogenous sunk costs often led to a competitive escalation of production expenditures, which we call ‘quality races’, which increased industrial concentration. Second, the fact that marginal revenues largely equalled marginal profits led to extreme vertical integration through ownership or revenue-sharing contracts, as well as to an oversupply of variety and a dual market structure with high-concept blockbuster products and low-budget niche products. Third, entertainment’s public good characteristics led to substantial income inequality among creative inputs and business models optimising exclusion possibilities in the value chain. Finally, the project-based character of entertainment production implied large intra- and inter-industry agglomeration benefits and often led to geographical concentration. Dynamic product differentiation allowed various old formats to survive the waves of creative destruction, albeit in much smaller incarnations

Balancing Margin and Mission: Nonprofit Competition in Charitable versus Fee-Based Programs

Competition in the nonprofit world has intensified in recent years, and nonprofit managers are challenged to devise strategies that will serve both organizational needs and public interest. We propose a framework for thinking about nonprofit competition based on the intersection of two dimensions: the domain of competition, which can be either fee-based or donative activities; and the competitive strategy, which can be either price- or differentiation-based. The experience of the American Red Cross, a prominent nonprofit organization facing competition in both fee-based and donative domains, provides data for the elaboration of the framework, and for tentative conclusions about the implications of nonprofit competition for both margin and mission.This publication is Hauser Center Working Paper No. 11. The Hauser Center Working Paper Series was launched during the summer of 2000. The Series enables the Hauser Center to share with a broad audience important works-in-progress written by Hauser Center scholars and researchers

IMPERFECT COMPETITION AND STRATEGIC TRADE THEORY: WHAT HAVE WE LEARNED

International Relations/Trade,

Nutrition-sensitive value chains from a smallholder perspective: A framework for project design

"The Alliance of Bioversity International and the International Center for Tropical Agriculture (CIAT) gratefully acknowledges permission from IFAD to re-publish that work as an Alliance Working Paper, with updated acknowledgements, author information and information on additional resources.

Infrastructure dominance in short-haul air transport markets

En este trabajo, se analiza cómo una compañía aérea puede beneficiarse del dominio de una red de aeropuertos en un mercado caracterizado por rutas de corto radio y congestión. Se estima un sistema de ecuaciones para el mercado español de transporte aéreo. Los resultados muestran que los beneficios del dominio aeroportuario, tanto en términos de demanda como de coste, son consecuencia de ofrecer una frecuencia de servicio elevada. Una frecuencia elevada permite ofrecer mayores descuentos en las clases de tarifas para viajeros por motivos personales y, a su vez, establecer precios más elevados en las clases de tarifas para viajeros por negocios. Tales beneficios pueden perjudicar la posición competitiva de aquellas aerolíneas con presencia limitada en los aeropuertos. De ahí que una asignación equilibrada del espacio en los aeropuertos sea crucial para garantizar la competencia.Competencia, transporte aéreo, modelos de ecuaciones simultáneas.

Evidence on Imperfect Competition and Strategic Trade Theory

Strategic trade theory shows that government intervention in markets with small numbers of traders can boost the welfare of a country relative to free trade. This survey critically assesses the empirical evidence regarding this possibility. One finding is that while many international food and agricultural markets are characterized by oligopoly, price-cost markups tend to be small, and the potential gains from intervention are modest at best. In turn, existing government interventions such as agricultural export subsidies are generally not optimal in a strategic trade sense. The evidence suggests that oligopoly by itself is not a sufficient rationale for deviating from free trade in international markets.

A Competition Model for A Brazilian Air Shuttle Market

This paper aims at developing a competition model for a relevant subset of the Brazilian airline industry: the air shuttle market on the route Rio de Janeiro Ð S*o Paulo, a pioneer service created in 1959. The competition model presented here contains elements of both vertical product differentiation and representative consumer. I also use the conduct parameter approach to infer about the behaviour of airlines in the market under three situations: a quasideregulation rocess (from 1998 on), two price war events (1998 and 2001), and a shock in costs due to currency devaluation (1999). Results permitted making inference on the impacts of liberalisation on competition and investigating an alleged collusive behaviour of 1999.air shuttle, competition, deregulation, product differentiation

The effect of competition among brokers on the quality and price of differentiated internet services

Price war, as an important factor in undercutting competitors and attracting customers, has spurred considerable work that analyzes such conflict situation. However, in most of these studies, quality of service (QoS), as an important decision-making criterion, has been neglected. Furthermore, with the rise of service-oriented architectures, where players may offer different levels of QoS for different prices, more studies are needed to examine the interaction among players within the service hierarchy. In this paper, we present a new approach to modeling price competition in (virtualized) service-oriented architectures, where there are multiple service levels. In our model, brokers, as the intermediaries between end-users and service providers, offer different QoS by adapting the service that they obtain from lower-level providers so as to match the demands of their clients to the services of providers. To maximize profit, players, i.e. providers and brokers, at each level compete in a Bertrand game while they offer different QoS. To maintain an oligopoly market, we then describe underlying dynamics which lead to a Bertrand game with price constraints at the providers' level. Numerical simulations demonstrate the behavior of brokers and providers and the effect of price competition on their market shares.This work has been partly supported by National Science Foundation awards: CNS-0963974, CNS-1346688, CNS-1536090 and CNS-1647084