Fat Products

The economics literature generally considers products as points in some characteristics space. Starting with Hotelling, this served as a convenient assumption, yet with more products being flexible or self-customizable to some degree it makes sense to think that products have positive measure. I develop a model where ?rms can o¤er interval long 'fat' products in the spatial model of differentiation. Contrary to the standard results pro?ts of the firms can decrease with increased differentiation - there is a standard effect of lowering the incentive to cut prices, but there is also an incentive to provide more content sometimes resulting in lower profits. Consumer welfare increases unambiguously with respect to the standard model of Salop. I also find that it is profitable for firms to commit as an industry not to make fat products. If one firm is a leader and another is a follower, the leader accommodates the follower by settling for less pro?ts if differentiation is small.self-customizable products, flexible products, product differentiation

Interconnecting Differentiated Networks

I examine interconnection decisions of differentiated firms. I find that previous results that firms never interconnect enough do not hold. In a Hotelling model consumers may suffer from interconnection, and firms may interconnect when it is not socially optimal. The firms interconnect too much when the network effects are steeper - this makes firms compete much less aggressively after interconnection, raising prices for consumers and profits for firms. Price and profit rise results holds under quality and installed base asymmetries, or only some firms in the industry interconnecting. More dimensions of differentiation make interconnection less attractive

Royalty stacking in the U.S. freight railroads: Cournot vs. Coase

Monopolists selling complementary products charge a higher price in a static equilibrium than a single multiproduct monopolist would, reducing both the industry profits and consumer surplus. However, firms could instead reach a Pareto improvement by lowering prices to the single monopolist level. We analyze administrative nationally-representative pricing data of railroad coal shipping in the U.S. We compare a coal producer that needs to ship from A to C,with the route passing through B, in two cases: (1) the same railroad owning AB and BC and (2) different railroads owning AB and BC. We find no price difference between the two cases, suggesting that the complementary monopolist pricing inefficiency is absent in this market. For our main analysis, we use a specification used by previous literature; however, we confirm our findings using propensity score blocking and machine learning algorithms. Finally, we confirm the results by using a difference-in-differences analysis to gauge the impact of a merger that made two routes wholly-owned (switched from case 2 to case 1). Our results have implications for royalty stacking and patent thickets, vertical mergers, tragedy of anti-commons, and mergers of firms selling complements

Pricing of Complements in the U.S. freight railroads: Cournot versus Coase

Monopolists selling complementary products charge a higher price in a static equilibrium than a single multiproduct monopolist would, reducing both the industry profits and consumer surplus. However, firms could instead reach a Pareto improvement by lowering prices to the single monopolist level. We analyze administrative nationally-representative pricing data of railroad coal shipping in the U.S. We compare a coal producer that needs to ship from A to C, with the route passing through B, in two cases: (1) the same railroad owning AB and BC and (2) different railroads owning AB and BC. We do not find that price in case (2) is higher than price in case (1), suggesting that the complementary monopolist pricing inefficiency is absent in this market. For our main analysis, we use a specification consistent with the previous literature; however, our findings are robust to propensity score blocking and machine learning algorithms. Finally, we perform a difference-in-differences analysis to gauge the impact of a merger that made two routes wholly-owned (switched from case 2 to case 1), and these results are also consistent with our main findings. Our results have implications for vertical mergers, tragedy of the anticommons, mergers of firms selling complements, and royalty stacking and patent thickets

Pricing of Complements in the U.S. freight railroads: Cournot versus Coase

Monopolists selling complementary products charge a higher price in a static equilibrium than a single multiproduct monopolist would, reducing both the industry profits and consumer surplus. However, firms could instead reach a Pareto improvement by lowering prices to the single monopolist level. We analyze administrative nationally-representative pricing data of railroad coal shipping in the U.S. We compare a coal producer that needs to ship from A to C, with the route passing through B, in two cases: (1) the same railroad owning AB and BC and (2) different railroads owning AB and BC. We do not find that price in case (2) is higher than price in case (1), suggesting that the complementary monopolist pricing inefficiency is absent in this market. For our main analysis, we use a specification consistent with the previous literature; however, our findings are robust to propensity score blocking and machine learning algorithms. Finally, we perform a difference-in-differences analysis to gauge the impact of a merger that made two routes wholly-owned (switched from case 2 to case 1), and these results are also consistent with our main findings. Our results have implications for vertical mergers, tragedy of the anticommons, mergers of firms selling complements, and royalty stacking and patent thickets

Lie algebroid morphisms, Poisson Sigma Models, and off-shell closed gauge symmetries

Chern-Simons gauge theories in 3 dimensions and the Poisson Sigma Model (PSM) in 2 dimensions are examples of the same theory, if their field equations are interpreted as morphisms of Lie algebroids and their symmetries (on-shell) as homotopies of such morphisms. We point out that the (off-shell) gauge symmetries of the PSM in the literature are not globally well-defined for non-parallelizable Poisson manifolds and propose a covariant definition of them as left action of some finite-dimensional Lie algebroid. Our approach allows to avoid complications arising in the infinite dimensional super-geometry of the BV- and AKSZ-formalism. This preprint is a starting point in a series of papers meant to introduce Yang-Mills type gauge theories of Lie algebroids, which include and generalize the standard YM theory, the PSM, and gerbes.Comment: 24 page

Buyer Resistance for Cartel versus Merger *

Abstract Procurement practices are affected by uncertainty regarding suppliers' costs, the nature of competition among suppliers, and uncertainty regarding possible collusion among suppliers. Buyers dissatisfied with bids of incumbent suppliers can cancel their procurements and resolicit bids after qualifying additional suppliers. Recent cartel cases show that cartels devote considerable attention to avoiding such resistance from buyers. We show that in a procurement setting with the potential for buyer resistance, the payoff to firms from forming a cartel exceeds that from merging, and does so by a magnitude that can offset efficiency gains from a merger. Thus, firms considering a merger may have an incentive to collude instead. We discuss implications for antitrust and merger policy