On the problem of network monopoly

We consider the problem of pricing in a network industry focussing in particular on the issue of cross-network pricing (e.g. cross-network cell phone charges). Economic theory tells us in relation to cross-network pricing that collusion or network monopoly may yield welfare as well as profit benefits although any welfare benefits from cross-network collusion may be more than offset by a reduction in competition elsewhere. To address this, we introduce a new regulatory concept: the independent profit-maximising agent. The agent sets prices on cross-network goods taking either (i) a complete, or (ii) an arbitrarily small, share of the associated profit. We examine welfare and profits with and without agent type (i) and (ii) with collusion (network monopoly) between the non-agent firms and without collusion (independent network duopoly). We show that splitting up the network monopoly (creating independent network duopoly) may be inferior for both society and firm(s) compared with a network monopoly ??regulated?? by an agent and that society always prefers any of the four agent regimes over network monopoly and network duopoly. Indeed, employing the agent may reduce welfare losses by a large proportion while having relatively little effect on profit.     

Asking Price and Price Discounts: The Strategy of Selling an Asset Under Price Uncertainty

We consider fixed and asking price strategies in the context of selling an asset with Bernoullian updating of the seller’s subjective probability of sale at a given price. The determination of optimal fixed, asking and endogenous reservation prices is discussed under risk-neutrality and expected utility maximisation. With risk-neutrality, the optimal asking price exceeds the optimal fixed price when the expected gain is a strictly concave function. The seller’s choice between the fixed and the asking price strategies depends on several factors: the expected cost of haggling, price competition and the seller’s attitude towards risk.