Jonas Häckner

Collusive pricing in markets for vertically differentiated products

Abstract This paper examines the relationship between product differentiation and the sustainability of collusive pricing in markets for vertically differentiated products. The main finding is that collusion is more easily sustained, the more similar the products are. Exactly the opposite result may be obtained in models of horizontal differentiation. Consequently, when products are differentiated both horizontally and vertically, theory provides no clearcut prediction.

Endogenous product design in an infinitely repeated game

Abstract This paper examines the incentives to differentiate products horizontally in a repeated game when redesigning costs are negligible. The main findings are the following. If firms are patient with respect to future profits (i.e. the discount factor is high) they will choose an intermediate degree of differentiation. The lower the discount factor, the more firms are forced to increase differentiation in order to keep collusion from breaking down. Unless the discount factor is extremely low, prices will be unconstrained monopoly prices.

Optimal symmetric punishments in a Bertrand differentiated products duopoly

Abstract This paper studies how product differentiation affects collusive pricing in a duopoly when products are horizontally differentiated and firms compete in prices. In contrast to earlier work, the punishment mechanism supporting collusion is assumed to be the optimal symmetric punishment proposed by Abreu (1986, Journal of Economic Theory 39, 191–225). Such punishments have previously been characterized only for Cournot oligopolies and for Bertrand oligopolies with capacity constraints. The optimal symmetric punishment turns out to have a simple two-phase structure. After one period of an intense price war, firms return to the collusive outcome. If prices are restricted to be non-negative and the discount factor is large, the price war will be extended to more than one period. The best collusive price is shown to be lower, the more substitutable are products.

Vanity and Congestion: A Study of Reciprocal Externalities

This paper models a private goods oligopoly market characterized by negative and reciprocal externalities. Although firms compete in prices and products are undifferentiated in equilibrium, the price-cost margin turns out to be positive. From a social perspective, the equilibrium price is higher than what is motivated by the negative externality. Hence, welfare can be improved by means of a price ceiling. Finally, industries with high fixed costs would be expected to exhibit a high degree of concentration on the supply side and considerable price-cost margins. Copyright 1996 by The London School of Economics and Political Science.

Rent Control and Prices of Owner-Occupied Housing

We examine the relation between rent control and prices of owner-occupied housing in the presence of different qualities of housing. While a rent ceiling and the price of condominiums are substitutes if housing is undifferentiated, it is shown that this is not necessarily the case when housing differs in quality. A complete dismantling of rent control may in fact increase the price of condominiums. Copyright 2000 by The editors of the Scandinavian Journal of Economics.

Trade costs and the timing of competition policy adoption

This paper first presents stylized evidence showing how the date of the adoption of competition policy is correlated with country size. Smaller countries tend to adopt competition policy later. We then present a theoretical model with countries of different size, trade costs, and firms competing a la Cournot. In the model we show that reduced trade costs following from increasing globalization affect countries differently depending on their size. This has implications for the incentives to introduce competition policy. The predictions of the model are consistent with the empirical regularity presented.

Every Viewer has a Price: On the Differentiation of TV Channels

The authors analyzed the implications of targeted advertising on the equilibrium level of channel profile differentiation (e.g., in terms of political positioning), in free-to-air broadcasting industries. When consumers have no preferences over program content (e.g., entertainment vs. news) standard Hotelling type results apply. Market forces minimize differentiation while the optimal degree is at an intermediate level. As preferences over program content get somewhat stronger, the difference between optimal and market outcomes is initially reduced. However, when preferences over program content get more pronounced, minimal differentiation suddenly becomes optimal while market forces lead to excessive differentiation. Hence, policies aimed at increasing diversity are beneficial only when viewers care little about differences in program content.