133 research outputs found
Do Slotting Allowances Harm Retail Competition?
No full textSlotting allowances are fees paid by manufacturers to get access to retailers’ shelf space. Both in the USA and Europe, the use of slotting allowances has attracted attention in the general press as well as among policy makers and economists. One school of thought claims that slotting allowances are efficiency enhancing, while another school of thought maintains that slotting allowances are used in an anti-competitive manner. In this paper, we argue that this controversy is partially caused by inadequate assumptions of how the retail market is structured and organized. Using a formal model, we show that there are good reasons to expect anti-competitive effects of slotting allowances. We further point out that competition authorities tend to use an unsatisfactory basis for comparison when analyzing welfare consequences of slotting allowances.slotting allowances, retail competition, anti-trust policy
On the choice of royalty rule to cover fixed costs in input joint ventures
No full textIn a model where two competing downstream firms establish an input joint venture (JV), we analyze how different royalty rules for covering fixed costs affect channel profits. Under running royalties (regardless of whether based on predicted or actual output), the downstream firms’ perceived marginal costs are above the true marginal costs since fixed costs are incorporated. We find that tougher competition between the JV partners may actually increase channel profit under such a scheme. We also show that running royalties based on predicted output are outperformed by royalties based on actual output, but that lump-sum financing of the JV is preferable if the competitive pressure is weak
Turning the page on business formats for digital platforms : does Apple's agency model soften competition?
No full textThe agency model used by Apple and other platform providers such as
Google allows upstream rms (content providers like book publishers and developers
of apps) to choose the retail prices of their products (RPM) subject to a xed
revenue-sharing rule. We show that (i) this leads to higher prices if the competitive
pressure is higher downstream than upstream; (ii) upstream rms earn positive
surplus even when platform providers have all the bargaining power; and (iii) with
asymmetric business formats (where only some platform providers use the agency
model), a retail most-favored-nation clause leads to retail prices that resemble the
outcome under industry-wide RPM
Mergers and Partial Ownership
No full textIn this paper we compare the profitability of a merger to the profitability of a partial ownership arrangement and find that partial ownership arrangements can be more profitable for the acquiring and acquired firm because they can result in a greater dampening of competition. We also derive comparative statics on the prices of the acquiring firm, the acquired firm, and the outside firms. In a dual context, we show that a cross-majority owner may have incentives to sell a fraction of the shares in one of the firms he controls to a silent investor who is outside the industry. Aggregate ex post operating profit in the two firms controlled by the cross-majority shareholder then increases, such that both the cross-majority shareholder and the silent investor will be better off with than without the partial divestiture.media economics, mergers, corporate control, financial control
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Access Pricing, Quality Degradation, and Foreclosure in the Internet
No full textMedia market concentration, advertising levels, and ad prices
No full textStandard media economics models imply that increased platform competition decreases ad levels and that mergers reduce per-viewer ad prices. The empirical evidence, however, is mixed. We attribute the theoretical predictions to the combined assumptions that there is no advertising congestion and that viewers single-home. Allowing for crowding in viewer attention spans for ads may reverse standard results, as does allowing viewers to multi-home
Hotelling Competition with Multi-Purchasing: Time Magazine, Newsweek, or both?
No full textEquilibrium prices behave quite differently if consumers single-purchase (buy either Time Magazine or Newsweek) or if some consumers multi-purchase (buy both). Prices are strategic complements under single-purchase, and increase with magazine quality. In a multi-purchase regime prices are strategically independent because firms then act monopolistically by pricing the incremental benefit to marginal consumers. Furthermore, prices can decrease with magazine quality due to overlapping content. Higher preference heterogeneity increases prices and profits in equilibrium with single-purchase, but decreases them with multi-purchase. We determine when each regime holds, and present a detailed reaction function analysis which applies more generally to duopoly pricing.magazine competition, multi-purchase, incremental pricing, content competition
Media Market Concentration, Advertising Levels, and Ad Prices
No full textStandard media economics models imply that increased platform competition decreases ad levels and that mergers reduce per-viewer ad prices. The empirical evidence, however, is mixed. We attribute the theoretical predictions to the combined assumptions that there is no advertising congestion and that viewers single-home. Allowing for crowding in viewer attention spans for ads may reverse standard results, as does allowing viewers to multi-home.media economics, pricing ads, advertising clutter, information congestion, mergers, entry
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