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We formalize the idea that a financial conglomerate may utilize commercial banking activities to cross-subsidize investment banking through bundled offers. The investment banking sector entails supra-normal profits due to incentive problems with security underwriting. Universal banks may aim to...
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We present a potentially benign naked exclusion mechanism that can be applied to sequential innovation; a non-patentable original innovation by the incumbent supplier fosters derivative innovation by rivals. In the absence of an appropriate legal framework, the original innovator’s equilibrium...
Persistent link: https://www.econbiz.de/10011657133
We examine tippy network markets that accommodate price discrimination. The analysis shows that when a mild equilibrium refinement, the monotonicity criterion, is adopted, network competition may have a unique subgame-perfect equilibrium regarding the winner’s identity; the prevailing brand...
Persistent link: https://www.econbiz.de/10013266682
The idea that an incumbent supplier may tie two complementary products to fend off potential entrants is popular among practitioners yet is not fully understood in formal economic theory. This article makes sense of the argument by formally deriving a dynamic version of the old leverage...
Persistent link: https://www.econbiz.de/10005732316
We examine a mechanism by which bundling may inefficiently deter entry into the market. The model considers an incumbent monopolist in two complementary components that faces a series of entry attempts by rivals. It is shown that the incumbent can practice bundling to buttress its monopoly...
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