Competition, Innovation, and Antitrust: A Theory of Market Leaders and Its Policy Implications

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Springer Science & Business Media, Sep 5, 2007 - Science - 284 pages
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In 1934 Springer published a book by Heinrich von Stackelberg, “Market and Equilibrium”, which contained pathbreaking studies on oligopolistic markets. In particular, it analyzed the behavior of a ?rm acting as a leader with a ?rst mover advantage in the choice of its production level over another ?rm acting as a follower. That analysis became the foundation of the economic theory of market leaders and is the starting point of my book. In the following pages I develop a generalization of Stackelberg’s idea, with a focus on the und- standing of the behavior of market leaders under di ?erent entry conditions, particularly when entry in the market is endogenous. Rather than limiting the analysis to the e ?ects of the market structure on the behavior of the market leaders, I also study the e ?ects of the behavior of market leaders on the market structure. In other words, this book can be seen as an attempt to describe - dogenous market structures where the strategies, the expectations on the strategies of the others, and also the entry decisions are the fruit of rational behavior. In the last few decades, economic theory has put a lot of emphasis on the rational behavior in the choice of actions and strategies and on the rational expectations on these choices. Most ?elds of economic theory have embraced both these elements adopting the rational expectations approach in models with perfect competition ?rst and imperfect competition later.
 

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Contents

1 Competition Leadership and Entry
1
11 A Simple Model of Competition in Quantities
4
111 Monopoly and Antitrust Issues
5
112 Nash Equilibrium
8
113 Marshall Equilibrium
9
114 Stackelberg Equilibrium
10
115 Stackelberg Equilibrium with Endogenous Entry
12
12 Increasing Marginal Costs and Product Differentiation
15
411 Endogenous Entry
138
412 Welfare Analysis
141
42 Dynamic Competition for the Market
142
421 Nash Equilibrium
143
422 Marshall Equilibrium
144
424 Stackelberg Equilibrium with Endogenous Entry
146
425 Nondrastic Innovations
148
426 Strategic Commitments
150

121 Ushaped Cost Functions
16
122 Product Differentiation
18
13 A Simple Model of Competition in Prices
20
14 A Simple Model of Competition for the Market
25
141 The Arrows Paradox
27
142 Innovation by Leaders
31
15 Conclusions
34
16 Appendix
36
2 Strategic Commitments and Endogenous Entry
41
21 Market Structure
44
22 Nash Equilibrium
48
23 Marshall Equilibrium
49
24 Competition in Quantities in Prices and for the Market
50
242 Competition in Prices
54
243 Competition for the Market
58
25 Strategic Investments
59
251 The FudenbergTirole Taxonomy of Business Strategies
61
252 Strategic Commitments with Endogenous Entry
63
26 Cost Reductions and Signaling
66
27 Advertising and Demand Enhancing Investments
70
28 Debt and the Optimal Financial Structure
72
29 Network Externalities and TwoSided Markets
76
210 Bundling
79
211 Vertical Restraints
82
212 Price Discrimination
84
213 Antitrust and Horizontal Mergers
87
214 Conclusions
89
3 Stackelberg Competition and Endogenous Entry
90
31 Stackelberg Equilibrium
94
32 Stackelberg Equilibrium with Endogenous Entry
97
33 Competition in Quantities in Prices and for the Market
100
332 Competition in Prices
106
333 Competition for the Market
108
34 Asymmetries Multiple Leaders and Multiple Strategies
109
342 Multiple Leaders
110
343 Endogenous Leadership
113
344 Multiple Strategies
114
345 General Profit Functions
116
35 Antitrust and Collusion
118
36 StateAids and Strategic Export Promotion
120
37 Privatizations
123
38 Conclusions
124
39 Appendix
125
4 Dynamic Competition and Endogenous Entry
131
41 A Simple Patent Race with Contractual Costs of RD
135
43 Sequential Innovations
151
431 Endogenous Value of Innovations
152
432 Endogenous Technological Progress
155
44 Competition in the Market and Competition for the Market
159
45 Conclusions
162
46 Appendix
165
5 Antitrust and Abuse of Dominance
170
51 The Traditional Approaches to Abuse of Dominance
174
512 The PostChicago Approach
176
52 The Theory of Market Leaders and Endogenous Entry
178
521 Competition in the Market and Policy Implications
179
522 Competition for the Market and Policy Implications
186
53 A Digression on IPRs Protection
189
531 Patents in Dynamic Sectors and Innovations
190
532 OpenSource Innovations
191
533 Conclusions on IPRs Protection
194
54 Reforming Antitrust
195
541 Efficiency Defense
196
542 Predatory Pricing
197
543 Bundling
201
544 Intellectual Property Rights
203
55 Conclusions
204
6 Microsoft Economics
207
61 The Software Market
208
611 Network Effects
210
612 Multisided Platforms
212
613 Microsoft
215
62 The Antitrust Cases
218
622 The EU Case
221
63 Is Microsoft a Monopolist?
223
631 Why Is the Price of Windows so Low?
225
632 Does Microsoft Stifle Innovation?
228
64 Bundling
230
641 Strategic Bundling
232
642 Technological Bundling
234
65 Intellectual Property Rights
235
651 Patents Trade Secrets and Interoperability
236
652 Licenses and Standards
238
66 Conclusions
240
7 Epilogue
243
72 Implications for Business Administration
252
74 Conclusions
255
8 References
256
Index
275
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