Licensing of a drastic innovation with product differentiation

We analyze the licensing of a drastic innovation when products are differentiated due to consumer and/or product heterogeneity. We show that an industry insider prefers to divest its production arm and license the new technology as an industry outsider, in which case it can replicate multiproduct monopoly profits. We derive the optimal contracts and the optimal number of licenses by assuming a logit demand system. Optimal number of licenses, quite strikingly, increases when the technology has a higher relative value than a commercialized alternative. This result stands in sharp contrast with the literature on the licensing of a homogenous good

Welfare improving product bans

We formulate a model of vertical differentiation to evaluate the welfare effects of removing a low quality product from the market. The mechanism through which a welfare improvement might arise is simple: Once the low quality low cost alternative is banned, entry into the high quality segment becomes more likely. This in turn may lead to a significant reduction in the price of the high quality product. We find that such a ban might improve aggregate welfare when consumers value the higher quality more, the marginal cost of producing high quality is lower, the price of low quality is higher, and the price sensitivity for high quality is not too high

Economics of collective refusals to supply

This paper examines situations where vertically integrated firms refuse to supply an input to an independent competitor in the downstream market. The treatment of such cases by competition or regulatory authorities is based on the assumption that such outcomes can only arise if there is collusion in the upstream markets. We argue that this is not always the case. In particular, we argue that proper antitrust or regulatory assessment of such cases requires analysis of the nature of competition, the shape and elasticity of the demand curve, the observability of upstream contracts, and even the number of potential downstream competitors

Türkiye ortaöğretim sektöründe katma değer oluşumu: üniversiteye giriş yarışı

Bu çalışmada Türkiye’de üniversiteye giriş yarışı “katma değer” yaklaşımıyla incelemektedir. 2005 yılı ÖSYM verileri ile ÖSS’ye başvuran tüm öğrencileri içeren bir veritabanı oluşturulmuş, lise son sınıf öğrencilere ait LGS puanları eklenmiş, bir örneklem gruba anket uygulanmıştır. Raporda önce veritabanı ve tanımlar sunulmuş, cinsiyet, coğrafi bölge, mezuniyet durumu, lise türe arasında çeşitli kesitlere bakılmış, sonra katma değerin belirleyicileri regresyon denemeleri ile sınanmıştır. Sonuç bulgular ÖSS’de başarının büyük ölçüde LGS’de başarı, okunan lise, dershaneye ayrılan zaman ve lisede gösterilen çaba tarafından açıklandığı ve belirlendiğidir. Gelir ve anne baba eğitimi dolaylı, bölge, cinsiyet ve diğer bazı değişkenler zayıf açıklayanlar olarak çıkmaktadır. ABSTRACT This study offers a value-added approach analysis of the competition for admission to universities in Turkey administered by the Center for Student Selection and Placement (CSSP). We initially constructed a database involving all the 1.800.000 plus applicants in 2005 has been constructed from the CSSP data. To this database then we added for all lycee graduating students first their individual Lycee Entrance Examination (LEE) scores and secondly for a subsample among them the outcomes of a survey we designed and conducted in 2005. In this report, we first present this database along with various descriptive accounts across gender, region, school type and graduation status. We then present the modeling exercise undertaken to identify the primary factors that explain success in the competition. We find these to be the student’s lycee, LEE score, external training for the Exam in the so-called drilling sector, and effort in lycee. Income, education level of parents, gender, region and some other variables we have tested all turn out to have indirect or weak significance

Welfare Improving Product Bans

Abstract We formulate a model of vertical differentiation to evaluate the welfare effects of removing a low quality product from the market. The mechanism through which a welfare improvement might arise is simple: Once the low quality low cost alternative is banned, entry into the high quality segment becomes more likely. This in turn may lead to a significant reduction in the price of the high quality product. We find that such a ban might improve aggregate welfare when consumers value the higher quality more, the marginal cost of producing high quality is lower, the price of low quality is higher, and the price sensitivity for high quality is not too high. JEL classification: L1, L11, L50, D4

Upstream Competition with Complex and Unobservable Contracts

This paper examines situations where two vertically integrated firms consider supplying an input to an independent downstream competitor via privately observed contracts. We identify equilibria where competition in the upstream market emerges—the downstream competitor gets supplied—as well as when the downstream firm does not receive the input and is excluded from the market. The likelihood of the outcome in which the downstream firm does not get supplied depends not only on demand parameters, but also on contractual flexibility and observability. We show that when contracts are unobservable, downstream entry will occur less often. Furthermore, our results suggest that permitting contracts that enable the contracting parties to coordinate their behavior in the downstream market may improve welfare by increasing the likelihood that the downstream firm is supplied

Diffusion of a new product under network effects: the US DVD market

We formulate a model that captures the inter-dependence between hardware demand and software supply - indirect network effect - in the DVD industry. The identification of the network effect comes from the difference in software availability across two different formats: VHS and DVD. We find that a 1% increase in the number of DVD titles raises the demand for DVD players by 0.87%. Simultaneously, a 1% increase in video player ownership leads to a 0.14% increase in the variety of video titles. Our simulations show that hardware manufacturers might be able to internalize the network externality to increase total industry revenues.