Private and social incentives to discriminate in oligopoly

In an oligopoly model with switching costs firms have no incentive to discriminate by price (third degree), if the environment is symmetric. This is partly due to the fact that prices decrease unambiguously with price discrimination. In an asymmetric environment a firm enjoying some advantage may well have an incentive to discriminate. In all cases price discrimination increases social surplus. The antitrust treatment of price discrimination thus has to be questioned. --

Resale Price Maintenance and the Service Argument (in the Book Trade)

The paper introduces a specification of the demand side which allows RPM to have different effects on prices and on service, which may increase or decrease due to RPM. A feature of the model which deviates from those found in the literature is due to the introduction of a class of consumers who do not search but decide on a purchase spontaneously. More interestingly social welfare is reduced by RPM (at least locally) exactly under those circumstances where RPM induces higher service (and price). Hence, welfare decreases exactly in the case which was frequently presented for the justification of RPM to promote service. --resale price maintenance,service,welfare

Review of the Literature on the Impact of Mergers on Innovation

--

A comment on Yin, Xiangkang and Yew-kwang Ng: Quantity precommitment and Bertrand competition yield Cournot outcomes:a case with product differentiation

--

Does the Service Argument Justify Resale Price Maintenance?

Proponents of RPM argue that RPM helps to sustain a high level of service at the point of sale and that such a high level is efficient. This paper provides a simple model which leads to the following conclusions: 1) RPM may increase or decrease the level of service. 2) Whether the service level is more efficient under RPM does not depend on the fact that service increases due to RPM. It may be lower under RPM and more efficient. 3) Whether the service level is more efficient depends on the characteristics of the heterogeneous consumers. A feature of the model which deviates from those found in the literature is the introduction of a class of consumers who do not search but decide on a purchase spontaneously. --resale price maintenance,quality,efficiency

Third-degree price discrimination in an oligopolistic market

In this paper a discrete choice model is suggested which generates unambiguously lower prices, if oligopolists discriminate by price. In a setting of two groups of consumers and two firms this is due to a different ranking of the elasticity of demand of the two groups by the two firms. Here, this ranking results from switching costs. It is argued that firms can prevent price discrimination which lowers their profits, if firms are symmetric. However, with asymmetric firms price discrimination cannot always be prevented by simple threats to pay back in kind. In this case there is an incentive to use price discrimination and it enhances welfare. --

Resale Maintenance and the Service Argument: Efficiency Effects

Proponents of RPM argue that RPM helps to sustain a high level of service at the point of sale and that such a high level is efficient. This paper provides a simple model which leads to the following conclusions: 1) RPM may increase or decrease the level of service. 2) Whether the service level is more efficient under RPM does not depend on the fact that service increases due to RPM. It may be lower under RPM and more efficient. 3) Whether the service level is more efficient depends on the characteristics of the heterogeneous consumers. A feature of the model which deviates from those found in the literature is the introduction of a class of consumers who do not search but decide on a purchase spontaneously. --resale price maintenance,service,efficiency

Thoughts on the nature of vetoes when bargaining on public projects

--

Profitable cannibalization

Using a model with switching costs it is shown that firms may have an incentive to set up a new firm supplying to the same market under quite general conditions. The new firm attracts some market share of the founding firm. The start up firm is thus an act of cannibalization. Moreover, entry of the new firm may increase average prices. This is due to the fact that the new firm has more difficulties to overcome switching costs than incumbent firms. Competition may therefore be less intense. --oligopoly,switching costs,price-increasing entry