Essays on base-supplemental goods market /
Many every-day goods do not provide utility unless some other products are purchased in advance and used in conjunction. The canonical examples are hardware - software, and operating system - other application software. In two complementary goods with timing structure, we define the first one to be...
| Main Author: | |
|---|---|
| Format: | Thesis Book |
| Language: | English |
| Published: |
[Place of publication not identified] :
[publisher not identified] ;
1999.
|
| Subjects: | |
| Online Access: | http://proxy.library.tamu.edu/login?url=http://proquest.umi.com/pqdweb?did=730340171&sid=1&Fmt=2&clientId=2945&RQT=309&VName=PQD |
| Summary: | Many every-day goods do not provide utility unless some other products are purchased in advance and used in conjunction. The canonical examples are hardware - software, and operating system - other application software. In two complementary goods with timing structure, we define the first one to be a abase good' and the second one to be a 'supplemental good'. Markets such as these are analyzed in the four essays. The first essay studies the possibility of vertical merger and foreclosure and its welfare effect. We find that there is more incentive for partial foreclosure when the degree of substitutability is high and the market share of a foreclosing product is small. We also find that the welfare reducing foreclosure may arise even without the credible commitment of foreclosure decision. The second essay considers the case where the base good market is monopolized and analyzes monopolist's incentives for bundling the supplemental good with the base good. We show that without the exit of rival firm a bundling strategy is profitable because it increases the profit from the monopolized base good market. We also show that bundling lowers social welfare as well as rival firms' profit if the two competing supplemental goods are close substitutes. Otherwise, bundling may generate welfare enhancements. The third essay analyzes the equilibrium differentiation of two competing supplemental goods, one of which is provided by a base good monopolist. We show that the so called 'minimum differentiation principle' by Hotelling ( 1929) is invalid in the base-supplemental goods market. There exists an optimal differentiation of two competing supplemental goods in this market category. The fourth essay estimates the effect of bundling in the web browser market. By event study methodology, we measure the actual extra gain (or loss) of firms from adopting a bundling strategy. The actual gain of bundling for Microsoft is estimated as $8.2 billion (3.2% gain of stock price) and the loss for Netscape is estimated as $71.4 million (2.62% loss of stock price). |
|---|---|
| Item Description: | Vita. "Major Subject: Economics". |
| Physical Description: | viii, 86 leaves : illustrations ; 28 cm. Issued also on microfiche from University Microfilm Inc. |
| Bibliography: | Includes bibliographical references (leaves 83-85). |