Economic Principles And Problems A Pluralist Introduction 1st Edition Geoffrey Schneider - Solutions

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Discuss the conditions under which pre-market standardization is more likely to emerge as an equilibrium than a standards war.
Describe what is meant by excess inertia and explain why this situation is more likely to happen in markets with indirect rather than direct network effects and where each user only has incomplete rather than full information about the other users’ preferences.
Explain why the competition between incompatible network goods is likely to lead, in the long run, to market dominance by a single good.
Explain why there is a tendency towards underprovision of a network good by a monopolist, and even by perfectly competitive firms.
Explain why there often exist multiple consumer equilibria for a given price of the network industry.
Define direct and indirect network effects, and illustrate with examples.
What are the effects of end-user piracy of digital products on the producers’choices and on social welfare? Discuss.
What is the meaning of the ‘tragedy of the anticommons’? How does this problem apply to innovations and how can it be mitigated?
Does a firm have incentives to license its innovation to rival firms? Discuss.
Why isn’t it optimal in terms of public policy to have patents that last forever?Discuss.
What is behind the so-called ‘patent paradox’? How can it be explained?
Explain how IP law strikes a balance between dynamic and static efficiency considerations or, in other words, between incentives and use.
Is it a sensible policy to allow firms to coordinate their R&D decisions? Discuss
Discuss the effects of strategic behaviour on firms’ investments in R&D.
Explain why firms might invest too much in R&D (from a social point of view)when they are racing to obtain a patent on an innovation.
Why does a monopolist threatened by entry have more incentives to innovate than a potential entrant? Explain the meaning of the ‘efficiency effect’.
Why does a monopolist have less incentives to innovate than a perfectly competitive firm? Explain the meaning of the ‘replacement effect’.
What are possible coordinated effects of vertical mergers?
Should competition authorities prohibit vertical mergers that lead to higher input prices?
Provide two reasons why the Chicago school argument on exclusive dealing(namely that, whenever exclusive dealing is observed, it must be welfare improving) is wrong.
For which reasons can it be profitable for manufacturers to grant exclusive territories to their retailers?
What are possible efficiency-defences of the use of resale-price maintenance?
Suppose that an industry consists of two upstream monopolists who exclusively sell at a linear price to one downstream duopolist each. What would be the effect of vertical integration (so that each upstream monopolist owns its retail outlet) on the final good price?
Is there a free-riding problem when several incumbents try to deter entry?Discuss.
Why is incomplete information crucial for limit pricing to serve as an entry deterrent? Explain.
Explain under which conditions an incumbent firm is able to use brand proliferation to deter entry.
Why, and in what circumstances, would an incumbent firm facing potential entry find it profitable to expand its production capacity above the level that a monopolist ignoring entry would choose?
Explain why entry deterrence and entry accommodation call for the same strategy when product decisions are strategic substitutes, and for opposing strategies when product decisions are strategic complements. Illustrate with some examples.
What is meant by the ‘coordinated effects’ of a merger. Discuss.
Explain the fundamental differences between mergers in Cournot and in Bertrand industries.
Taking successive mergers and entry into account, discuss whether and, if yes, how merger analysis has to be reconsidered.
What is the main advantage of assessing the welfare impact of a merger by looking at its ‘external effect’? Explain in words the condition under which this external effect is positive.
Explain why mergers that do not involve efficiency gains are rarely profitable in Cournot industries.
Explain why competition authorities encourage colluding firms and their employees to report incriminating evidence through leniency and whistleblowing programmes.
Explain why tacit collusion is harder to sustain when demand fluctuates and when the rivals’ actions cannot be observed.
Explain how a collusive outcome may emerge noncooperatively as the equilibrium of a repeated game. Discuss how the horizon of the game, the number of firms, the frequency of interaction and multimarket contact affect the sustainability of collusion.
Contrast the conditions for cartels to be stable when they form in a simultaneous versus sequential way.
Consider a market in which product quality does not affect marginal costs. Do repeat purchases facilitate or hinder advertising signals?
If a firm can choose price and advertising to convince consumers of high quality, do there exist circumstances under which the firm prefers not to use one of those two instruments? Discuss.
What is the role of advertising spending in experience good markets? Are spending caps welfare increasing?
If a firm faces asymmetric information and it has to invest in R&D to increase the probability of high quality, does this information lead to more or less investment?Discuss the effects that play a role.
Can bundling increase competition? Explain.
How can bundling reduce competition?
What is the intuition that bundling (pure or mixed) can increase profits compared to separate selling?
What is the meaning of pure and mixed bundling? Give a real-world example for each practice.
What happens if a firm can set individualized prices depending on previous purchases?
Why would a monopolist deviate from uniform pricing and set non-constant prices? And what selling policies may it choose?
Does a durable good monopolist have an incentive to set its prices flexibly in each period? Discuss.
If a durable good monopolist cannot commit to future prices, does the number of consumers matter? Explain.
What are the effects of competition on quantity-based menu pricing?
How does competition affect the use of menu pricing? Discuss.
When does menu pricing dominate uniform pricing in monopoly? Discuss the countervailing effects.
Suppose a firm can target two groups of consumers by a menu of prices with different qualities but that it can also offer different prices to different consumer groups. What should it do?
What is an empirical regularity concerning international price discrimination?
How does the ability to geographically price discriminate affect location decisions of firms?
Does an increase in competition lead to more or less (third-degree) price discrimination? Discuss.
In which industries do we observe group pricing? Provide two examples.
How do markets work in which firms poach customers?
Does an increase in switching costs lead to more relaxed or more intense competition? Discuss.
How can one (i) measure price dispersion, and (ii) empirically estimate switching costs?
Many markets exhibit price dispersion. In light of the theoretical analysis presented in this chapter, how can one explain such a phenomenon? Relate your discussion to the analysis in Chapter 3 in which firms have private information about costs.
Provide two examples of industries in which search costs are likely to be important, and two examples of industries exhibiting switching costs.
What is the effect of search cost on equilibrium prices? In particular, what happens if all consumers have positive search costs?
Discuss possible effects of persuasive advertising under imperfect competition.
Consider informative advertising about a product’s existence. Does an increase in the advertising cost function necessarily lead to lower profits? Discuss.
Discuss the difference between persuasive advertising and advertising as a complement.
Which industries advertise a lot? Give two examples and discuss the likely reasons for high advertising expenditures.
Why are we interested in empirically estimating models of product differentiation? (After all, to understand the intensity of competition in the short run, we only need to know the Lerner index.)
Does the number of firms in an industry with constant marginal costs necessarily converge to infinity as the entry cost turns to zero? Explain.
When is vertical product differentiation present in an industry? Discuss demand and cost characteristics.
What makes firms locate close to each other in the product space? And what makes them differentiate themselves from their competitors?
In which industries is product differentiation important? Provide two examples.
Which market environments lead to simultaneous entry and exit in an industry?
What is the difference between endogenous and exogenous sunk costs? What are the implications for market structure?
When firms only face fixed setup costs when entering an industry, how is the equilibrium number of firms in the industry determined? Is regulation possibly desirable (to encourage or discourage entry)? Discuss.
Why is there generally a first-mover advantage under sequential quantity competition (with one leader and one follower) and a second-mover advantage under sequential price competition? Explain by referring to the concepts of strategic complements and strategic substitutes.
What characteristics of a specific industry will you look for to determine whether this industry is better represented by price competition or by quantity competition? Discuss.
Define the concepts of strategic complements and strategic substitutes. Illustrate with examples.
Using a unified model of horizontal product differentiation, one comes to the conclusion that price competition is fiercer than quantity competition. Explain the intuition behind this result.
When firms choose first their capacity of production and next, the price of their product, this two-stage competition sometimes looks like (one-stage) Cournot competition. Under which conditions?
How does the number of firms in the industry affect the equilibrium of quantity competition?
How does product differentiation relax price competition? Illustrate with examples.
Give the definitions of the Lerner and Herfindahl indices. What are these measures used for?
Describe the hypothetical monopoly test (or SSNIP test) that is used to define a market.
Explain, in your own words, the monopoly-pricing formula.
Under which assumptions is the consumer surplus a reasonable measure of the consumer welfare in a particular market?
Discuss the factors that determine the vertical boundaries of a firm, that is, the factors behind the ‘make-or-buy decision’ of the firm.
Explain why there is a trade-off between incentive and insurance considerations in a principal–agent relationship between owner and manager with hidden effort.
Assess the arguments for and against regulating the flows of international capital.
Compare and contrast the different types of exchange rate regimes.
Critically evaluate the arguments for and against trade deficits.
Describe the components of the balance of payments and explain how trade deficits and surpluses relate to financial account surpluses and deficits.
Use a supply and demand graph of the foreign exchange market to analyze how particular events will affect exchange rates, exports, and imports.
Discuss the various perspectives on growth and sustainability and determine what you think would be the best approach to resolve the seeming contradictions between growth and environmental preservation.
Evaluate the costs and benefits of economic integration via trade agreements versus a managed trade approach.
Describe U.S. trade patterns and analyze political economy theories that attempt to explain these trade patterns.
Explain the arguments for and against protectionism.
List and analyze the assumptions behind the comparative advantage model.
Use production possibilities curves to determine comparative advantage and to construct consumption possibilities curves.
Explain the theory of comparative advantage in words and using a graph.

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Economic Principles And Problems A Pluralist Introduction 1st Edition Geoffrey Schneider - Solutions

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