Product line design
We characterize the product line choice and pricing of a monopolist from the upper envelope of net marginal revenue curves to the individual product demand functions. The equilibrium product line constitutes those varieties yielding the highest upper envelope. In a generalized vertical differentiation framework, the equilibrium line is exactly the same as the first-best socially optimal line. These upper envelope and first-best optimal line findings extend to symmetric Cournot oligopoly.
The paper analyzes oligopolistic competition in a market for a differentiated product. A comparative analysis of competition models by Cournot (output competition) and Bertrand (price competition) under prerequisites put forward by the authors shows that under Bertrand competition the price level will be lower. Whereas interrelation between firms output and profit is ambiguous (if goods produced are substitutes), and depend, other things being equal, on the attractiveness of the good offered by the firm. The results obtained are illustrated using Russia’s automotive market review. In particular, an attempt is made to classify some decisions made by car producers as the one or the other competition strategy analyzed in the theoretical part of the paper.
Many industries are made of a few big firms, which are able to manipulate the market outcome, and of a host of small businesses, each of which has a negligible impact on the market. We provide a general equilibrium framework that encapsulates both market structures. Due to the higher toughness of competition, the entry of big firms leads them to sell more through a market expansion effect generated by the shrinking of the monopolistically competitive fringe. Furthermore, social welfare increases with the number of big firms because the pro-competitive effect associated with entry dominates the resulting decrease in product diversity.
Brands and brand management have become a central feature of the modern economy and a staple of business theory and business practice. Contrary to the law's conception of trademarks, brands are used to indicate far more than source and/or quality. This volume begins the process of broadening the legal understanding of brands by explaining what brands are and how they function, how trademark and antitrust/competition law have misunderstood brands, and the implications of continuing to ignore the role brands play in business competition. This is the first book to engage with the topic from an interdisciplinary perspective, hence it will be a must-have for all those interested in the phenomenon of brands and how their function is recognized by the legal system. The book integrates both a competition and an intellectual property law dimension and explores the regulatory environment and case law in both Europe and the United States.
The paper is focused on nonlinear pricing, price discrimination and their implementation in actual markets. The introductory section uses simple examples to describe the basic notions and types of price discrimination. Section 2 reviews the main theories behind nonlinear pricing and summarizes the existing results with a focus on consumer choice for those consumers who are keen on quality. It allows the authors in Section 3 to move further to analyze the issues of “prestige” and conspicuous consumption, especially in the case when the sellers exercise their market power over buyers through brands and reputation. Section 4 shows how theoretical results are actually implemented in the automobile market. In particular, the paper shows that cars originating from countries with an established reputation as automobile manufacturers (UK, Germany, Sweden) get the highest mark-up in the market compared to the basic case. Moreover, the analysis of practical methods used in the Russian car market confirms that car dealers manage to sell automobiles as close to consumer reserve prices as possible, employing all types of price discrimination.
The paper explores how EU competition law has integrated so far the concept of brands in different areas of enforcement. Although EU competition law has engaged in multiple instances with branding and product differentiation, brands do not yet constitute an operational concept in EU competition law. This is due to an important uncertainty as to the normative choices that need to be made with regard to the relation between brands and the formation of consumer preferences. The concerns raised by retailer power and the development of private labels also indicate that the existing economic theory on product differentiation may not also provide a complete picture on the effects of brands on the competitive process and ultimately on consumers. Competition law will also need to tackle the issues raised by the development of ‘social branding’ and the dialogic interaction between brand owners and consumers in the constitution of their brand identity.