Essays in industrial organization

This dissertation contains three chapters on topics in industrial organization. Chapter 2 examines the accuracy of the Hypothetical Monopolist Test, a test for market definition which is often used in the legal analysis of mergers. Chapter 3 analyzes the use of market share discounts by firms and the effect of these discounts on profits and consumer welfare. Chapter 4 investigates pricing practices where a service is offered for a fixed fee plus a multipart usage fee. In Chapter 2, the accuracy of the Hypothetical Monopolist Test (HMT) is examined. In applying the test, two separate models are considered. In each model, the true extent of the product market is known. First, the HMT is applied in a linear differentiated demand model with n firms each producing one symmetrically differentiated product. The test consistently underestimates the number of products in the relevant market in this setting. The second model utilizes a quasi-linear utility specification, and I derive conditions under which the number of products in the market is overestimated. Chapter 3 analyzes the practice of a manufacturer offering a discount or rebate to a retailer if the sales of that manufacturer’s product achieve certain benchmarks. Using a vertical model with linear differentiated demand, I find that the welfare effects of market share discount plans can often be positive. The optimal market share discount plan is closely approximates the outcome of vertical integration between the manufacturer and the retailer. This constructive vertical integration can eliminate double marginalization and encourage competing manufacturers to decrease their own wholesale prices. As such, when one manufacturer offers a market share discount plan, the prices of all products may fall. In Chapter 4, I examine pricing plans that include buckets of free units, as are common in the wireless telephone industry. A simple demand structure is established which allows for direct comparisons of the profits and consumer welfare under different pricing plans. The free bucket pricing plans are shown to generate the same profits for the monopolist and the same consumer surplus as two-part tariffs, even when multiple plans are offered to consumers.Ph. D.Includes bibliographical referencesIncludes vitaby Andrew P. Vassall