Steven C. Salop

Bargains and Ripoffs: A Model of Monopolistically Competitive Price Dispersion

Bargains and Ripoffs: A Model of Monopolistically Competitive Price DispersionAuthor(s): Steven Salop and Joseph StiglitzSource: The Review of Economic Studies, Vol. 44, No. 3 (Oct., 1977), pp. 493-510Published by: The Review of Economic Studies Ltd.Stable URL: http://www.jstor.org/stable/2296903Accessed: 15/09/2009 15:43

COMPETITION AND INTEGRATION AMONG COMPLEMENTS, AND NETWORK MARKET STRUCTURE*

This article analyzes the competition and integration among complementary products that can be combined to create composite goods or systems. The model generalizes the Cournot duopoly complements model to the case in which there are multiple brands of compatible components. It analyzes equilibrium prices for a variety of organizational and market structures that differ in their degree of competition and integration. The model applies to a variety of product networks, including automatic teller machines, real estate multiple listing services, and airlines CRS, as well as to nonnetwork markets of compatible components such as computer CPUs and peripherals, hardware and software, and long distance and local telephone services. Copyright 1992 by Blackwell Publishing Ltd.

Equilibrium with Product Differentiation

A model of product differentiation which combines elements of both spatial and representative consumer formulations is used to examine the properties of single- and multiple-price equilibria. Conditions under which decreases in the intensity of consumer preferences reduce price are given. It is shown that, with certain types of demand curves, entry can eliminate price-cost markups even given product differentiation. If competition is localized, it is demonstrated that entry does not affect the markup. Finally, the effect of spurious product differentiation on price is examined.

Practices that (Credibly) Facilitate Oligopoly Co-ordination

It is now well established in both the economic and legal literature that successful price co-ordination (either express or tacit) is not inevitable — even in highly concentrated industries protected by insurmountable barriers to entry. The key to this insight is the recognition that even though oligopolists’ fates are interdependent, individual self-interests are not perfectly consonant. As a result, oligopolists may find it difficult to agree on a mutually acceptable co-operative outcome, achieve that outcome smoothly, and maintain it over time in the face of exogenous shocks and private incentives to deviate. In the current language of industrial organisation, the joint profit-maximising point may not be a Nash equilibrium.

The Efficient Regulation of Consumer Information

CONSUMER protection regulation has come under increasing fire from Congress, the courts, and the business community. Regulations have been criticized as costly, economically irrational, rigid, and paternalistic. 1 One response to these charges has been a movement away from traditional forms of regulation and toward interventions that are more compatible with consumer and seller incentives. In particular, there has been increased interest in techniques which ensure that consumers have sufficient information to protect themselves against unsafe products or unfair seller behavior. Despite the general acceptance of this goal, analysis of how to efficiently provide consumer information has lagged behind. Information has traditionally been viewed as something which consumers either had or had not; and if they did not have it, the only solution was (somehow) to give it to them. Similarly, deception of consumers has been viewed as undesirable simply as a matter of definition, with the proper response to such deception being (obviously) to eliminate it. While these simple prescriptions may be accurate as far as they go, they mask many of the complexities involved in the ways in which information is communicated to consumers and the ways that consumers (and the market) respond. This paper explores some of those complexities in an attempt to see how the legal systems efforts to improve consumer infor-

Consumer Search and Public Policy

Consumers acquire information from a variety of internal and external sources. Sources differ in their abilities to convey different kinds of information. This paper examines the implications of these sources for designing government information programs. It emphasizes the need to examine the effects of information disclosures in the total information environment.

Wage differentials in a dynamic theory of the firm

Abstract The behavior of a profit-maximizing firm in a market characterized by uncertain wage differentials for a homogeneous occupation is studied. The firm must make a number of interdependent decisions at every moment of time. It must choose a wage rate, a level of vacancies and the rate at which it will fill them, and the scale of production. Individual behavior plays an important role in the model. Individuals must decide whether to quit their current job to search for a better position if they are employed and whether to accept any forthcoming offers if they are unemployed. The model is set up as a dynamic optimization problem. The determinants of the firms relative wage rate are its turnover costs, price of output, the aggregate vacancy-unemployment ratio, and other individual and market variables. It is shown that a firm faced with an excess supply of willing applicants will not lower its wage. This introduces an inflationary bias into the market when changes in the unemployment rate are considered.

Question: What is the Real and Proper Antitrust Welfare Standard? Answer: The True Consumer Welfare Standard

This short article, which was submitted to the Antitrust Modernization Commission, explains why the consumer welfare standard is used by courts and is more appropriate for evaluating antitrust issues.

Updating the Merger Guidelines: Comments

These comments (originally submitted to the DOJ and FTC in November 2009) make a number of comments relevant to revising the Merger Guidelines. The comments focus on the use of the GUPPI (gross upward pricing pressure index) in unilateral effects analysis. They also comment on the deterrence and incipiency standard, exclusionary effects of horizontal mergers and market definition when there are multi-product firms or pre-merger coordination, among other issues.

A Model of Ordered Bargaining with Applications

We present a model of ordered bargaining between one buyer and several sellers, with Nash bargaining at each stage. We first show that the model has the property that the buyers payoff equals the expected utility of a weighted sum of independent Bernoulli random variables. We then exploit this property to uncover further properties and implications of the model using standard results from expected utility and probability theory. We derive some potential implications for merger analysis and we outline an application of the model to the allocation of pork barrel spending.