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Microeconomics Seminar by Özlem Bedre-Defolie, ESMT Berlin

Dates:
  • Tue 23 Feb 2021 14.00 - 15.15
  Add to Calendar 2021-02-23 14:00 2021-02-23 15:15 Europe/Paris Microeconomics Seminar by Özlem Bedre-Defolie, ESMT Berlin

"Competition for exclusivity of a superior input"

We analyze the implications of allowing exclusive dealing between a superior input seller and two competing firms that are asymmetric in their locked-in consumer base and compete for new consumers. The superior input reduces the cost of achieving a given quality. The firms first compete for the superior input by offering a menu of exclusive dealing and non-exclusive dealing tariffs. They then choose their quality, where the cost of quality depends on the amount of own input and whether the superior input is available. In a unique equilibrium the big firm has the superior input exclusively if the small firm’s quality would be lower without the superior input. Otherwise, there exists also a nonexclusive equilibrium where both platforms have the superior input. ED might increase the total welfare despite lowering the small firm's quality. This happens if firms are close substitutes and very asymmetric in their loyal bases. If the firms are allowed to price discriminate between their loyal and new consumers, the big firm chooses a higher quality level. The small firm's quality is lower with price discrimination if the asymmetry between the firms' loyal bases is large. Price discrimination enlarges the region where exclusive dealing is the unique equilibrium.

 

Co-author: Gary Biglaiser, University of North Carolina

Online - Zoom DD/MM/YYYY
  Online - Zoom

"Competition for exclusivity of a superior input"

We analyze the implications of allowing exclusive dealing between a superior input seller and two competing firms that are asymmetric in their locked-in consumer base and compete for new consumers. The superior input reduces the cost of achieving a given quality. The firms first compete for the superior input by offering a menu of exclusive dealing and non-exclusive dealing tariffs. They then choose their quality, where the cost of quality depends on the amount of own input and whether the superior input is available. In a unique equilibrium the big firm has the superior input exclusively if the small firm’s quality would be lower without the superior input. Otherwise, there exists also a nonexclusive equilibrium where both platforms have the superior input. ED might increase the total welfare despite lowering the small firm's quality. This happens if firms are close substitutes and very asymmetric in their loyal bases. If the firms are allowed to price discriminate between their loyal and new consumers, the big firm chooses a higher quality level. The small firm's quality is lower with price discrimination if the asymmetry between the firms' loyal bases is large. Price discrimination enlarges the region where exclusive dealing is the unique equilibrium.

 

Co-author: Gary Biglaiser, University of North Carolina


Location:
Online - Zoom

Affiliation:
Department of Economics

Type:
Seminar

Organiser:
Prof. Giacomo Calzolari (EUI)
Zeinab Aboutalebi (EUI)
Prof. Andrea Mattozzi (EUI - Department of Economics)

Speaker:
Özlem Bedre-Defolie (ESMT Berlin)
 

Page last updated on 18 August 2017