Die Ökonomik nichtlinearer Tarife am Beispiel Bahnstrom

Nonlinear tariffs such as quantity discounts are common in infrastructure industries. One reason is that nonlinear tariffs enhance efficiency compared to linear pricing schemes. An example is the nonlinear tariff for the all-inclusive 16,7-Hz Traction Power Supply. Linear tariffs would lead to inefficiently high total costs and to inefficiently low utilization of the infrastructure. In fact, both a perfectly informed price regulation and competition would imply nonlinear tariffs. Finally, all market participants, suppliers and consumers, can in principle benefit from nonlinear tariffs.     

Interfirm Bundled Discounts as a Collusive Device

This paper investigates whether and how firms competing in price with homogeneous goods (i.e., Bertrand competitors) can achieve supernormal profits using interfirm bundled discounts. By committing to offering price discounts conditional on the purchase of a specific brand of other differentiated good, the homogeneous good suppliers can separate consumers into distinct groups. Such brand‐specific discounts help the firms relax competition and attain a collusive outcome. Consumers become worse off due to higher effective prices. Our result shows that in oligopolies it is feasible to leverage other's market power without excluding rivals.     

Oligopoly under incomplete information: On the welfare effects of price discrimination

We study competition by firms that simultaneously post (potentially nonlinear) tariffs to consumers who are privately informed about their tastes. Market power stems from informational frictions, in that consumers are heterogeneously informed about firms’ offers. In the absence of regulation, all firms offer quantity discounts. As a result, relative to Bertrand pricing, imperfect competition benefits disproportionately more consumers whose willingness to pay is high, rather than low. Regulation imposing linear pricing hurts the former but benefits the latter consumers. While consumer surplus increases, firms’ profits decrease, enough to drive down utilitarian welfare. By contrast, improvements in market transparency increase utilitarian welfare, and achieve similar gains on consumer surplus as imposing linear pricing, although with limited distributive impact. On normative grounds, our analysis suggests that banning price discrimination is warranted only if its distributive benefits have a weight on the societal objective.     

The agency and wholesale models in electronic content markets

I analyze a model of dynamic competition between retail platforms in the presence of consumer lock-in. Two different revenue models are considered, one in which platforms set final retail prices and one in which the suppliers set final retail prices. Platforms have long-term (or strategic) pricing incentives but suppliers do not, which implies that the inter-temporal price path faced by consumers depends on the revenue model in place. When suppliers set prices instead of platforms, prices may be higher in early periods but lower in later periods, suggesting that appropriate antitrust enforcement ought to consider more than initial price changes when an industry shifts to the agency model. Indeed, consumers may (but need not) prefer the agency model even when prices increase in initial periods. A potential downside of the agency model is that it may align the incentives of suppliers and platforms and thereby encourage platforms to lower the competitiveness of the supplier market, harming consumers; no such incentives exist under the wholesale model. I relate my results to events in the market for electronic books.     

An antitrust analysis of bundled loyalty discounts

Consider a monopolist in one market that faces competition in a second market. Bundled loyalty discounts, in which customers receive a price break on the monopoly good in exchange for making all purchases from the monopolist, have ambiguous welfare effects. Such discounts should not always be treated as a form of predatory pricing. In some settings, they act as tie-in sales. Existing tests for whether such discounts violate competition laws do not track changes in consumer surplus or total surplus. We apply a new test to an illustrative example based on SmithKline that assumes the “tied” market has homogeneous goods. If the tied market is characterized by Hotelling competition, bundling by the monopolist causes the rival firm to reduce its price. In numerical examples, we find that this can deter entry or induce exit.     

IS MULTIMEDIA CONVERGENCE TO BE WELCOMED?*

This paper considers the consumer implications of the process of convergence across multimedia and telecoms markets. Convergence starts when one firm begins to sell products in hitherto separate horizontal markets competing against rivals active in just one or another of the markets. Convergence creates a strategic link between the markets which alters the price levels, creates the possibility of bundle prices, and creates winners and losers in the population. Partial convergence (e.g., a merged provider of telephony and internet services vs. independent sellers of telephony or internet broadband) lowers prices in the less competitive sector, raises them in the more competitive sector and raises the total prices paid by consumers active in both sectors as compared to the counter‐factual of no convergence. Full convergence (e.g., multiple firms offering TV and internet bundles) leads to deep discounts for bundle purchases but no reductions in stand alone prices paid by consumers in only one of the converging sectors. The bundle on bundle competition is so fierce that profits for all converging firms are reduced compared to the counter‐factual of partial convergence.     

Robust exclusion and market division through loyalty discounts

We show that loyalty discounts create an externality among buyers because each buyer who signs a loyalty discount contract softens competition and raises prices for all buyers. This externality can enable an incumbent to use loyalty discounts to effectively divide the market with its rival and raise prices. If loyalty discounts also include a buyer commitment to buy from the incumbent, then loyalty discounts can also deter entry under conditions in which ordinary exclusive dealing cannot. With or without buyer commitment, loyalty discounts will increase profits while reducing consumer welfare and total welfare as long as enough buyers exist and the entrant does not have too large a cost advantage. These propositions are true even if the entrant is more efficient and the loyalty discounts are above cost and cover less than half the market. We also prove that these propositions hold without assuming economies of scale, downstream competition, buyer switching costs, financial constraints, limits on rival expandability, or any intra-product bundle of contestable and incontestable demand.     

Dynamic oligopoly pricing: Evidence from the airline industry

We explore how pricing dynamics in the European airline industry vary with the competitive environment and with customer heterogeneity. We document three main findings. First, the rate at which prices increase towards the scheduled departure date is significantly reduced in more competitive markets. Second, the sensitivity of the intertemporal slope to competition increases in the heterogeneity of the customer base. Third, ex-ante predictable advance purchase discounts account for 83 percent of within-flight dispersion in prices and for 17 percent of cross-market variation in pricing dynamics.     

COUNTERVAILING POWER IN WHOLESALE PHARMACEUTICALS*

Using data on wholesale prices for antibiotics sold to U.S. drugstores, we test the growing theoretical literature on ‘countervailing power’ (a term for the ability of large buyers to extract discounts from suppliers). Large drugstores receive a modest discount for antibiotics produced by competing suppliers but no discount for antibiotics produced by monopolists. These findings support theories suggesting that supplier competition is a prerequisite for countervailing power. As further evidence for the importance of supplier competition, we find that hospitals receive substantial discounts relative to drugstores, attributed to hospitals' greater ability to induce supplier competition through restrictive formularies.     

Strategic factor markets,scale free resources,and economic performance: The impact of product market rivalry

This paper analyzes how scale free resources, which can be acquired by multiple firms simultaneously and deployed against one another in product market competition, will be priced in strategic factor markets, and what the consequences are for the acquiring firms' performance. Based on a game‐theoretic model, it shows how the impact of strategic factor markets on economic profits is influenced by product market rivalry, preexisting competitive (dis)advantages, and the interaction of acquired resources with those preexisting asymmetries. New insights include the result that resource suppliers will aim at (and largely succeed in) setting resource prices so that the acquiring firms earn negative strategic factor market profits—sacrificing some of their preexisting market power rents—by acquiring resources that they know to be overpriced. Copyright © 2014 John Wiley & Sons, Ltd.     

One‐Stop Shopping Behavior,Buyer Power and Upstream Merger Incentives

We analyze how consumer preferences for one‐stop shopping affect the (Nash) bargaining relationships between a retailer and its suppliers. One‐stop shopping preferences create ‘demand complementarities’ among otherwise independent products which lead to two opposing effects on upstream merger incentives: first a standard double mark‐up problem and second a bargaining effect. The former creates merger incentives while the later induces suppliers to bargain separately. When buyer power becomes large enough, then suppliers stay separated which raises final good prices. We also show that our result can be obtained when wholesale prices are determined in a non‐cooperative game and under two‐part tariffs.     

Spatial competition and price discrimination with capacity constraints

We characterize mixed-strategy equilibria when capacity-constrained suppliers can charge location-based prices to different customers. We establish an equilibrium with prices that weakly increase in the costs of supplying a customer. Despite prices above costs and excess capacities, each supplier exclusively serves its home market in equilibrium. Competition yields volatile market shares and an inefficient allocation of customers to firms. Even ex-post cross-supplies may restore efficiency only partly. We show that consumers may benefit from price discrimination whereas the firms make the same profits as with uniform pricing. We use our findings to discuss recent competition policy cases and provide hints for a more refined coordinated-effects analysis.     

Symbiotic production: The case of telecommunication pricing

In this paper we analyze a generalization of vertical monopolies in which monopoly suppliers trade essential inputs with one another. The most obvious applications of the model, which we call symbiotic production, are to postal and telecommunications services. We show how producers can use per-unit tariffs to achieve cooperative outcomes without colluding directly over consumer prices. We then show the firms have an incentive to collude in the setting of tariffs but that suchcollusion will lower consumer prices. This assumes that the suppliers are otherwise unfettered. In contrast, if the constituent monopolies are regulated, we show that collusion enables the firms to completely undo the restraints of regulation. The model has important policy implications for the international telecommunications market.     

Buyer power and exclusion in vertically related markets

Suppliers and consumer organizations have become increasingly concerned by the build-up of buyer power of retailers in many markets. A major concern is that strong retailers will abuse their power to exclude products and rival retailers from the market to be able to increase prices to consumers. As a consequence, remedies to limit buyer power are discussed and implemented in many countries. In this paper we compare the incentives for exclusion, and the effect on consumers prices, under both buyer and seller power. We study a model with a dominant upstream manufacturer and a competitive fringe of producers offering their products to two differentiated downstream retailers. We compare the equilibrium outcome of this model when i) the dominant supplier holds all the bargaining power, and (ii) the retailers have all the bargaining power. We show that full or partial exclusion of either the competitive product or downstream retailers occurs when inter and intrabrand competition are strong. This is true both under seller and buyer power. However, in contrast to the received literature, we find that buyer power weakly enhances welfare compared to seller power because buyer power will lead to both more product variety (less exclusion) and lower retail prices.     

Tariff-mediated network effects versus strategic discounting: Evidence from German mobile telecommunications

Mobile telecommunication operators routinely charge subscribers lower prices for calls on their own network than for calls to other networks (on-net discounts). Studies on tariff-mediated network effects suggest this is due to large operators using on-net discounts to damage smaller rivals. Alternatively, research on strategic discounting suggests that small operators use on-net discounts to advertise with low on-net prices. We test the relative strength of these effects using data on tariff setting in German mobile telecommunications between 2001 and 2009. We find that large operators are more likely to offer tariffs with on-net discounts but there is no consistently significant difference in the magnitude of discounts. Our results suggest that tariff-mediated network effects are the main cause of on-net discounts.     

Brand-specific tastes for quality

This paper develops a model of nonlinear pricing with competition. The novel element is that each consumer's willingness to pay for quality is private information and is allowed to differ across brands. The consumer's preferences are represented by a multidimensional type containing the marginal value of quality for different products. Buyers with high willingness to pay for quality also display strong preferences for particular brands, and require higher discounts in order to switch away from their favorite product. Therefore, competition is fiercer for buyers with lower tastes for quality, and hence more elastic demands. This is in sharp contrast to earlier models in which competition is fiercer for higher-taste, more valuable buyers. In equilibrium, firms either compete intensively for the entire market (providing strictly positive rents to all consumers) or shut down the least profitable segment of the market. Quality levels are distorted downwards for all buyers, except for those with the highest type. The number of competing firms and the degree of correlation across brand preferences enhance the efficiency of the allocation.     

Oligopoly intermediation,relative rivalry and market conduct

We consider two firms that compete against each other jointly in upstream and downstream markets under two pricing games: Purchasing to stock (PTS), in which firms select input prices prior to setting consumer prices; and purchasing to order (PTO), in which firms sell forward contracts to consumers prior to selecting input prices. The antitrust implications of the model depend on the relative degree of oligopoly rivalry in the upstream and downstream markets. Firms strategically precommit to setting prices in the less rivalrous market, which serves to soften competition in the more rivalrous market, resulting in anticompetitive effects. Bertrand prices emerge in equilibrium when the markets are equally rivalrous, while Cournot outcomes arise with upstream monopsony or downstream monopoly markets. The slope of firm reaction functions depends on relative rivalry, a feature we use to derive testable hypotheses for antitrust analysis of a wide variety of industry practices.     

Competitive customer poaching with asymmetric firms

Conditioning the pricing policies on purchase history is proven to generate a cutthroat price competition enhancing consumer surplus. This result typically relies on a framework where competitors are assumed to be symmetric. This paper demonstrates that under significant asymmetries of competing firms, the strong firm trades off current market share for future market share and the weak firm does the opposite. This inter-temporal market sharing agreement generates unidirectional poaching and entails new and distinctive welfare implications. In particular, if consumers are sufficiently myopic, price discrimination softens price competition in relation to uniform pricing, overturning the conclusion of previous studies.     

Strategic segmentation of a market

When competing firms target information towards specific consumers through direct marketing activities, complete segmentation of markets can result. We analyze a two-stage duopoly where, prior to price competition, each firm targets information to specific consumers and only consumers informed by a firm can buy from it. This has the effect of endogenously determining market segments in a model of ‘sales'. In equilibrium, pure local monopoly emerges; firms target and sell to mutually exclusive market segments. When the cost of marketing approaches zero, market shares reflect relative production efficiency (equal shares when firms are symmetric); this may not be the case when marketing cost is high.