Copyright (c) 2011 All rights reserved. http://works.bepress.com/byford Recent documents in Martin Byford en-us Tue, 08 Feb 2011 01:32:49 PST 3600 http://works.bepress.com/byford/5 http://works.bepress.com/byford/5 Sun, 06 Feb 2011 15:58:30 PST In a number of simple settings there do not exist Nash equilibria, to the Bertrand price setting game, in pure strategies. Two prominent examples where pure strategy solutions do not exist are price competition with convex costs and spatial competition with finite buyers. This thesis develops an alternative model of price formation. The model examines as a non- transferable utility coalitional game the set of outcomes that are feasible in the Bertrand price setting game.In spatial models with finite buyers the core of this NTU coalitional game is equivalent to the set of outcomes that can be produced by undercut-proof prices. While in a market for a homogeneous good, where sellers face convex costs, the market clearing price is always in the core. Moreover, where at least two sellers compete on the supply side, as buyers become numerous the core collapses to only admit market clearing outcomes.In some settings the price setting game developed in this thesis produces results that contradict the predictions of Bertrand. Where this occurs the core outcomes tend to be more efficient than the corresponding Bertrand-Nash equilibrium. For example, double-marginalisation is never a core out- come in vertically related markets. The existence of solutions in pure strategies allows previously intractable problems in spatial markets to be tackled with relative ease. Two such problems are addressed in this thesis: The first investigates the consequence of replacing the continuum of buyers, with a large but finite set of buyers, in common spatial models. It is shown that the maximum stable mark-ups on both the Hotelling line and circle are halved where the continuum is replaced by an arbitrarily large number of discrete buyers. The difference arises because competition at the margin is more intense where sellers are competing for an atom.The second is to develop a theory of price competition in a market for a homogeneous good, where the option to trade is defined by a buyer-seller network. The necessary and sufficient conditions for a network to behave competitively are characterised, and it is shown that local price distortions can propagate across the network; resulting in supra-competitive pricing. Martin C. Byford Industrial Organisation http://works.bepress.com/byford/4 http://works.bepress.com/byford/4 Mon, 27 Jul 2009 17:09:06 PDT Pure strategy Bertrand Nash equilibria do not typically exist for a number of simple market structures; two prominent examples are price competition with convex costs and spatial competition with finite buyers. This paper develops an alternative model of price formation. The model examines as a non-transferable utility (NTU) coalitional game the set of outcomes that are feasible in the Bertrand price setting game.In spatial models with finite buyers the core of this NTU coalitional game is equivalent to the set of outcomes that can be produced by undercut-proof prices.In a market for a homogeneous good, where sellers face convex costs, the market clearing price is always in the core. Moreover, where at least two sellers compete on the supply side, as buyers become numerous the core collapses to only admit market clearing outcomes.In some settings the price setting game developed in this paper produces results that contradict the predictions of Bertrand. Where this occurs the core outcomes tend to be more efficient than the corresponding Bertrand-Nash equilibrium. For example, double-marginalisation is never a core outcome in vertically related markets. Martin C. Byford Industrial Organisation http://works.bepress.com/byford/3 http://works.bepress.com/byford/3 Mon, 27 Jul 2009 16:48:44 PDT A model of illicit, addictive drug use is proposed when users have foresight. Impacts of drug use penalties, penalties on drug use-related crime, support for drug user rehabilitation as well as the effects of health-related, harm-minimisation policies are analysed. In the short run, government policies impact only on the drug use intensities of existing addicted and casual users. Longer term policy-induced user-cost changes impact on new user and addict numbers through their effect on recruitment into addiction and quit dynamics. Effects of policies on user numbers, usage intensities and impacts on long-run social costs are analysed over this long-term horizon. The model provides a setting for analysing the long-run effects of illicit drug management policies on the social costs of illicit drug use and allows assessment of drug use abstinence and harm minimisation policy tradeoffs. Harry Clarke Public Policy http://works.bepress.com/byford/2 http://works.bepress.com/byford/2 Mon, 27 Jul 2009 16:12:35 PDT This paper is the first to provide a general context whereby potential entry can permanently reduce the intensity of competition in a market. All previous results found that potential entry would lead to lower prices and greater competition. Examining markets where entry occurs by the acquisition of access rights from existing incumbents, we demonstrate that, when competitive choices are strategic complements, a more efficient entrant may be unable to acquire those rights from a less efficient incumbent due to the accommodating behavior of efficient incumbents. Similarly, such accommodating behavior may deter efficient investment by an incumbent or mergers that would generate social welfare improvements. These results have implications as to how economists view potential entry and its benefits. Joshua S. Gans Industrial Organisation http://works.bepress.com/byford/1 http://works.bepress.com/byford/1 Mon, 27 Jul 2009 16:12:34 PDT This paper is the first to provide a general context whereby potential entry can lead incumbent firms to permanently reduce the intensity of competition in a market. All previous results found that potential entry would lead to lower prices and greater competition. Examining markets where entry occurs by the acquisition of access rights from an existing incumbent, we demonstrate that, where competitive choices are strategic complements, a more efficient entrant may be unable to acquire those rights from a less efficient incumbent due to the accommodating behavior of the efficient incumbent. Similarly, such accommodating behavior may deter efficient investment by an incumbent. These results have implications as to how economists view potential entry and its benefits. Martin Byford Industrial Organisation