Exchange Rates and Product Variety

We study the role of exchange rate variability in the firm's choice of whether to o¤er one or two varieties. We show that variability induces the firm to vertically segment markets (offer two varieties). This happens because variability in the exchange rate a¤ects income dispersion and hence the firm's incentives to extract consumer surplus. To better extract surplus, the firm offers two price-quality menus, a high quality variant geared for top-end surplus extraction and a low quality variant to address market coverage concerns.exchange rate variability, income dispersion, surplus extraction, product variety

Equilibrium Pricing When Only Some Goods Are Advertised

We study how price advertising of a subset of products aspects equilibrium pricing and advertising under low and high product differentiation. We find that, when firms sell products with the same reservation price, loss-leader pricing obtains only when differentiation is low. However, when reservation prices differ, equilibrium may entail loss-leader pricing when differentiation is high. This enables us to shed some light on the seemingly paradoxical empirical findings in the marketing literature that loss-leader pricing fails to increase store traffic, loss-leader sales and hence to increase profits.Informative advertising; loss leader pricing; multiproduct firms

Informative Advertising: Competition or Cooperation?

I compare the outcome when firms semicollude on advertising to the outcome in the Grossman and Shapiro (1984) model of informative advertising. I show that advertising is lower but prices and profits are higher under semicollusion on advertising. I also show that semicollusion on advertising is detrimental to welfare. Although firms earn higher profits when colluding on advertising, fewer consumers are informed, and as a result, welfare is lower. Compared to semicollusion on price, semicollusion on advertising is not always less profitable. Hence I lend theoretical support to empirical studies that find evidence of collusion on advertising rather than price.Informative advertising, semicollusion, competition, product differentiation

Endogenous market transparency and product differentiation

This paper endogenizes both market transparency and product differentiation in a model of informative advertising á la Grossman and Shapiro (1984). We find, contrary to Schultz (2004), that an increase in market transparency raises firm profits but has no effect on product differentiation. We also find that a move from exogenous to endogenous market transparency is detrimental to welfare. Compared to the Grossman and Shapiro model, with endogenous product differentiation, firms advertise more, differentiate their products more, charge higher prices and earn higher profits when the advertising cost is "not too low". This is because endogenizing product differentiation relaxes price competition when the advertising cost is not too low.Endogenous market transparency, advertising intensity, exogenous market transparency, product differentiation

Loss leader or low margin leader? Advertising and the degree of product differentiation

This paper attempts to isolate the conditions that give rise to loss leader pricing. I show that for sufficiently low distance between firms, the advertised good is priced below cost irrespective of whether firms advertise the same or different products. Instead, if products are sufficiently differentiated, loss leader pricing may result only if firms advertise the low reservation value product, otherwise the advertised good is a low margin leader. Thus, whether the advertised good is a loss leader or a low margin leader is primarily a function of the extent of differentiation between competing firms.Informative advertising, loss leader, low margin leader, product di¤erentiation

Price Elasticities and Pricing Power in Emerging Markets: The Case of Petrochemicals Derived Plastics in South Africa

This paper examines whether there necessarily exists a conflict between allocative and productive efficiency in small open economy markets. That productive efficiency favours market concentration is not in dispute, and the sole question we face is whether allocative efficiency suffers under high market concentration. We proceed theoretically and econometrically. We find that the conflict between productive and allocative efficiency is not necessarily as stringent as the international competition policy literature suggests should be the case. In particular, we note that the strategic interaction between the large domestic producer and its competitors makes feasible a range of alternative price elasticities of demand, and empirically that all price elasticities of demand are less than or equal to unity. Nevertheless the impact of market structure is such as to render feasible a wide range of possible levels of pricing power.Price elasticities, market power, emerging markets, South Africa

South African Manufacturing Industry Structure and its Implications for Competition Policy

This paper surveys the literature on the manufacturing sector in South Africa, focusing on concentration and markup levels, with a view to inform policy. The literature has employed a number of different measures of industrial concentration, namely, the Gini and Rosenbluth indices, the Occupancy Count, the C5% index and, to a lesser extent, Concentration Ratios and the Herfindahl-Hirschman index. Generally, manufacturing industry concentration is found to be high and increasing up to 1996. However, all the measures show decreasing concentration post-1996. In respect of markups, the evidence suggests that markups in South Africa are significantly higher than they are in comparable industries world-wide and they appear to be non-declining. However, there are dissenting voices on this point. We then juxtapose the concentration and price-cost margins findings to industry performance (at the macro level). In particular, we review the literature that examines the relations between concentration and price-cost margins on the one hand and output growth, productivity growth, employment, employment growth, investment and export and import competitiveness on the other. We then draw implications for competition policy in South Africa, pointing out areas that need further research as well as international best practices.manufacturing industry, industry concentration, South Africa, competition policy

Witness: The Modern Writer as Witness

Editor\u27s Note [Excerpt] Magic can mean many different things, especially for writers. Magic can be an illusion, a sleight of hand designed to trick onlookers into believing the impossible. Or magic can be a supernatural force in a world of harsh reality, a set of beliefs that sits just outside the realms of organized religion and advanced technology. Wizards and demons, Las Vegas entertainers and houngans --they all practice a kind of sorcery. For poets and prose writers, though, magic affords an opportunity for us to stretch the limitations of the physical world in search of new themes, settings, and characters. Magic is a door we eagerly walk through to reach new lands. We at Witness have thoroughly enjoyed the process of selecting the themed works we have collected here, mainly because the idea of enchantment is inspiring. There is the possibility of positive charms; there is a chance for dark witchery. And sometimes the spell cast by a character is nebulous, difficult to categorize. It’s arguable that we cherish these incantations the most, since they leave us in a state of wonderment bordering on disorientation. Yes, magic can also leave us bewildered and thankful for the bewilderment.https://digitalscholarship.unlv.edu/witness/1001/thumbnail.jp

Witness

Witness, co-written by award-winning Tanzanian-Australian filmmaker Martin Mhando and WA actor and writer David Moody, explores the law of probability as it plays out in bitter human conflicts, retelling stories of torture and atrocities from Chile to Cambodia in a constantly morphing, fractured form. As the play progresses, the men perform a collage of vignettes in which the roles of white, black, male, female, jailer, prisoner, aggressor and victim are endlessly exchanged. At one point Moody dons a curly black wig to play a comical Colonel Gaddafi; elsewhere both men perform a disturbing Auschwitz cabaret scene as “Hymie and Abe,” complete with Marx Brothers nose-and-glasse

Witness: The Modern Writer as Witness

Editor\u27s Note [Excerpt] The United States, as a society, is on the brink of profound and positive change. Demographically and culturally, things are improving, and the reason is obvious to people who study history: Conflict pushes us to be better, to strive for principled goals. Consider the inspired eco-advocacy of Greta Thunberg. Or the swearing in of most diverse class of lawmakers in history into the 116th Congress. Or billionaire Robert F. Smith’s pledge to pay off every Morehouse College (in Atlanta, Georgia) student’s debt. Indeed, there are many good people helping and great moments happening in spite of a bleak 24-hour news cycle designed to ruin happiness and to limit our understanding of our human potential. We at Witness see this yearning for transformation in the works we selected. The doorway must be crossed, and the voices and characters we featured in our Winter 2019 issue stand at the vestibule, ready for the light to warm them, primed to fight for that necessary illumination.https://digitalscholarship.unlv.edu/witness/1000/thumbnail.jp