Resumen de Market share discounts, separation, and equilibrium structure in successive oligopolies
Sloev Igor
This thesis comprises three essays on Industrial Organization. The first chapter contributes to the literature on efficiency of a market share discounts use. The second chapter is a joint research papers with Emmanuel Petrakis and Chrysovalantou Milliou, where we study an equilibrium structure in multiproduct successive oligopolies. The third chapter investigates firms' incentives for vertical separation and integration. Each chapter can be considered independently of the rest. The first chapter investigates the pro- and anticompetitive effects of market share discounts (MSD's). While MSD's can be used for exploiting a dominant position and lead to a welfare reduction, MSD's can also serve as an efficient device for the creation of an investment incentive. Particularly, if the final demand for an upstream manufacturer's good depends on retailer's promotional effort, the manufacturer can effectively use MSD's to induce the optimal level of the retailer's effort. Moreover, it is possible that MSD's have a positive impact both on the consumers' surplus and total industry profits. Thus, the main result of the chapter is that MSD's should not be treated anticompetitive apriori, but rather they should be judged on a case-by-case basis. In the second chapter, we develop a successive oligopoly model in which multi-product upstream manufacturers sell their products to consumers through downstream retailers. The product variety offered by each manufacturer and the entry in the upstream market are both endogenous. We show that the equilibrium configuration of the upstream market depends crucially on the economies of scope in the process of new product creation. When the economies of scope are weak the number of manufacturers increases and each manufacturer produces a single product. Manufacturers produce multiple products only if the economies of scope are sufficiently strong. Furthermore, we examine how a number of other market characteristics, such as the market size, the product titutability and the number of retailers affect product variety, entry, firms' profits and welfare. The third chapter explores firms' incentives for strategic vertical separation in duopoly settings. Each firm chooses either to be a retailer of its own good (vertical integration) or to sell its good through an independent exclusive retailer (vertical separation). In the latter case, a two-part tariff contract is applied. Retailers compete in quantities, goods are perfect substitutes and firms' cost functions are quadratic. It is shown that the equilibrium crucially depends on the degree of the (dis)economies of scale and the asymmetry in firms' costs. Two asymmetric equilibria arise, in which one firm separates while the other integrates, when both firms' cost functions exhibit su¢ ciently high diseconomies of scale, or extreme asymmetry of their costs. When the cost asymmetry is moderate, a unique equilibrium exists in which the firm with the lower degree of diseconomies of scale separates, while its rival integrates. When instead the diseconomies of scale are low for both firms, in the unique equilibrium both firms separate. Robustness analysis demonstrates that the results hold also under mild assumptions of a demand and cost functions
