Monopoly and Quality Distortion: Effects and Remedies

Besanko, David; Donnenfeld, Shabtai; White, Lawrence J.

doi:10.2307/1884279

Cited by 78 publications

(66 citation statements)

References 10 publications

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“…1 In a static model with the same ingredients, it is shown that the monopolist trades off quality for quantity as the network effect becomes more relevant Orsini, 2001, 2003a). Here, the dynamic formulation of the problem permits to single out some additional features of such a market.…”

Section: Introductionmentioning

confidence: 99%

R&D for Quality Improvement and Network Externalities

Lambertini

Orsini

2007

Netw Spat Econ

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We investigate the bearings of network externalities on product quality improvements requiring costly R&D investments. The model considers the dynamic behaviour of a monopolist alternatively maximising profits or social welfare. On the one hand, we confirm much of the acquired wisdom from the static literature on the same topic, about the arising of quality undersupply at the private optimum. On the other, we identify the initial conditions that must be met for R&D activity to be observed under profit-seeking behaviour.We also show that the presence of network externalities affects the optimal behaviour of the profit-seeking firm but not that of a benevolent planner, who serves all consumers and smooths the R&D costs leading to a steady state quality which is independent of network concerns.JEL Classification: D62, D92, L12

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Section: Introductionmentioning

confidence: 99%

R&D for Quality Improvement and Network Externalities

Lambertini

Orsini

2007

Netw Spat Econ

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“…The firm's problem in this case turns out to be similar to the one in the standard model with a price ceiling (e.g., [3]). However, there is an important difference.…”

Section: Introductionmentioning

confidence: 76%

“…If the scale of U is large relative to that of V, the consumer has strong willpower. 3 The choice that maximizes V represents the most tempting offer in the menu. The role of the maximization can be seen by rearranging (1) into…”

Section: Consumers' Preferencesmentioning

confidence: 99%

“…Proposition 7 shows that if¯ < b, all consumers >¯ choose the same offer from M. It appears, therefore, as if there were a price regulation that sets a price ceiling at t (b). Indeed, the optimal menu M resembles the menu in Besanko et al [3], who study nonlinear pricing when there is a price ceiling. In their problem, however, the price ceiling is exogenous.…”

Section: U(y) + V (Y) > U (X( )) + V (X( )) and (Y) > (X( ))mentioning

confidence: 99%

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Nonlinear pricing with self-control preferences

Esteban

Miyagawa

Shum

2007

Journal of Economic Theory

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A basic assumption of economics is that consumers choose what they want. However, many consumers find it difficult to stop overeating, overspending, smoking, procrastinating, etc, even though they want to. In reality, consumers have temptation and it is psychologically costly to exercise self-control. To clarify the implications of the existence of temptation and self-control costs, this paper studies a firm's optimal selling strategy exploiting the behavioral features of consumers. We characterize optimal nonlinear pricing schemes for a monopoly when self-control is costly for consumers. Since consumers have a preference for commitment, the firm faces a trade-off between offering a small menu that makes the consumers' self-control easier and offering a large menu that achieves better price discrimination. We show that the optimal menu resembles the one in the standard nonlinear pricing problem with a price ceiling, where the upper bound on prices is determined endogenously by a participation constraint. The ceiling motivates the firm to offer a relatively flat and compact price schedule, serving more consumers with low demand. The characterization also shows that the firm may earn less if consumers have temptation.JEL classification: D11; D42; D82; L11; L12; L15

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“…That such caps would reduce quality has found support in the literature evaluating such regulations imposed by the 1992 Cable Act (Besanko, Donnenfeld and White (1987), Besanko, Donnenfeld and White (1988), Crawford (2000), Crawford and Shum (2007), Crawford (2013) …”

Section: Evaluating the Simple Modelmentioning

confidence: 99%

The Economics of Television and Online Video Markets

Crawford

2015

SSRN Journal

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Television is the dominant entertainment medium for hundreds of millions. This chapter surveys the economic forces that determine the production and consumption of this content. It presents recent trends in television and online video markets, both in the US and internationally, and describes the state of theoretical and empirical research on these industries. A number of distinct themes emerge, including the growing importance of the pay-television sector, the role played by content providers (channels), distributors, and negotiations between them in determining market outcomes, and concerns about the effects of market power throughout this vertical structure. It also covers important but unsettled topics including the purpose for and effects of both the old (Public Service Broadcasters) and the new (online video markets). Open theoretical and empirical research questions are highlighted throughout. JEL: L82, L86, L32, M37, C72, D40, L40, L50

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Monopoly and Quality Distortion: Effects and Remedies

Cited by 78 publications

References 10 publications

R&D for Quality Improvement and Network Externalities

R&D for Quality Improvement and Network Externalities

Nonlinear pricing with self-control preferences

The Economics of Television and Online Video Markets

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