Edmond Baranes

Why are technological spillovers spatially bounded ? A market orientated approach

According to empirical evidence, technological spillovers are spatially bounded. This is one of the main reasons why firms are induced to locate in close prox-imity despite tough competition. This paper is an attempt to endogenize such spillovers. For that purpose, we try to explain why spatial proximity gives more incentives to competing firms to share knowledge. We show that spatial proxim-ity is the best way for firms to prevent free-riding in case of knowledge sharing. Indeed, Þercer competition impedes free riding provided that such a behavior dampens firms efficiency and have a dramatic effect on profits. Moreover, our results have important implications for regional policy. We point out that a slight decrease in transport costs triggers spatial polarization which implies knowledge sharing and thereby enhances innovation. A more dramatic decrease in transport costs attains both the objectives of increasing innovation and regional equity.

The interplay between network investment and content quality: Implications to net neutrality on the Internet

This paper studies the interplay between network investment and content quality on the Internet, and investigates the implications to the net neutrality regime. We assume a model in which a network operator provides access to consumers and content providers. The network operator offers two access technologies: an old technology (copper) and a new technology (fiber). Content providers sell both a basic content and a premium content depending on the network technology to which consumers subscribe. We consider two market segments: one in which the network operator only offers the old technology (copper), and the other in which both technologies are offered. The network operator can invest in the new technology to increase its market coverage. We show that a marginal network investment can be beneficial for content providers and increase the consumer surplus, and examine the impacts of the discriminatory regime. We also state that content quality produces contrasted effects in the investment from the network operator depending on how high the consumer valuation for premium content is compared to basic content and the substitutability between both technologies. Finally, high content quality can give incentives to the network operator to invest more in the new technology, and then create a greater positive effect of the discriminatory regime.

Bundling and collusion in communications markets

This paper deals with competition in communications markets between an incumbent and an entrant. We analyze the effect of bundling strategy by a firm who enters an incumbent market. This market dimension has profound implications on the sustainability of collusion in an infinitely repeated game framework. We show that the bundling strategy of the entrant might hinder collusion. Futhermore, we consider a setting in which the entrant uses a one-way access that the incumbent possesses. In such situation, we show that when the entrant bundles its products, a low access charge for call termination on the incumbent network might increase the feasibility of collusion. This result has an important policy implication.

Competition and mergers in networks with call externalities

This paper considers a model of two interconnected networks with different qualities. There are call externalities in the sense that consumers value calls they send and receive. Networks compete in two part tariffs. We show that call externalities create private incentives for each competitor to charge low access prices. This result moderates the risk of tacit collusion when competitors can freely negotiate their access charges. We also analyze the case of a merger between the two networks and give conditions under which the merger can be welfare improving.

Competition between health maintenance organizations and nonintegrated health insurance companies in health insurance markets

This article examines a model of competition between two types of health insurer: Health Maintenance Organizations (HMOs) and nonintegrated insurers. HMOs vertically integrate health care providers and pay them at a competitive price, while nonintegrated health insurers work as indemnity plans and pay the health care providers freely chosen by policyholders at a wholesale price. Such difference is referred to as an input price effect which, at first glance, favors HMOs. Moreover, we assume that policyholders place a positive value on the provider diversity supplied by their health insurance plan and that this value increases with the probability of disease. Due to the restricted choice of health care providers in HMOs a risk segmentation occurs: policyholders who choose nonintegrated health insurers are characterized by higher risk, which also tends to favor HMOs. Our equilibrium analysis reveals that the equilibrium allocation only depends on the number of HMOs in the case of exclusivity contracts between HMOs and providers. Surprisingly, our model shows that the interplay between risk segmentation and input price effects may generate ambiguous results. More precisely, we reveal that vertical integration in health insurance markets may decrease health insurers’ premiums.

Natural Gas Storage and Market Power

Within the context of an evolving global market for natural gas and restructuring efforts in the European market, gas storage is an important element. Providing additional flexibility, promoting competition, and enhancing supply security are crucial factors for natural gas sector liberalization. Storage in Europe has come to the center of the energy policy debate mainly due to very cold temperatures in winter 2005/06 and gas price increases during that time period. This book covers four main topics: development of commercial storage; access regulation; capacity allocation and market power; storage and security of gas supply. Each Chapter puts forth an innovative analytical model discussed or applied to realistically explain specific issues in one of the four biggest European gas consuming countries (France, Germany, Italy and the UK).

Competition in Networks with Call Externalities

This paper considers a model of two interconnected networks with different qualities. There are call externalities in the sense that consumers value calls they send and receive. Networks compete in two part tariffs. We show that call externalities create private incentives for each competitor to charge low access prices. This result moderates the risk of tacit collusion when competitors can freely negotiate their access charges.

Access prices, unbundling and product variety in European Internet markets

ABSTRACT A fundamental policy in European broadband regulation is unbundled access to the local loop of the incumbent telephone company. We present comparative static results that show as the access price decreases, the retail price decreases, the variety of plans offered by Internet service providers increases and the quantity of each variety increases when a threshold condition is met. Using data from 18 European countries from 2006 to 2012, we find empirical support for these results when Internet product variety is measured by variation in download speeds.

Merger control on two- sided markets: is there need for an efficiency defense?

We study horizontal mergers on two-sided markets between horizontally differentiated platforms. We provide a theoretical analysis of the mergers price effect based on the amount of cost savings it generates, the behavior of outsider platforms, and the size of cross-group network effects. We point out differences as compared with the standard, one-sided merger analysis, and also discuss the merger control policy implications.