THESIS
2018
vii, 51 pages : illustrations ; 30 cm
Abstract
Chapter 1 investigates how dynamic diminishing marginal utility influences firms' ability to tacitly
collude and shows that it crucially depends on whether diminishing marginal utility is product-specific
or market-wide. When diminishing marginal utility is product-specific, i.e., when a consumer's
consumption of one product this period only lowers her marginal utilities of a subset of products next
period, collusion is easier to sustain since consumers can switch among firms to avoid utility loss on
the equilibrium path, while at least some consumers cannot switch when a firm deviates to capture all
consumers. When diminishing marginal utility is market-wide, i.e., when a consumer's consumption of
one product this period lowers her marginal utilities of all products next period,...[
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Chapter 1 investigates how dynamic diminishing marginal utility influences firms' ability to tacitly
collude and shows that it crucially depends on whether diminishing marginal utility is product-specific
or market-wide. When diminishing marginal utility is product-specific, i.e., when a consumer's
consumption of one product this period only lowers her marginal utilities of a subset of products next
period, collusion is easier to sustain since consumers can switch among firms to avoid utility loss on
the equilibrium path, while at least some consumers cannot switch when a firm deviates to capture all
consumers. When diminishing marginal utility is market-wide, i.e., when a consumer's consumption of
one product this period lowers her marginal utilities of all products next period, collusion is harder to
sustain due to endogenous demand fluctuations.
Chapter 2 studies collusion among experts with private information about customers' problems. On
the equilibrium path, a customer's problem is fixed with probability one through search for second
opinions. Even though a deviating expert can attract the customer with probability one by undercutting
the equilibrium prices as in collusion among search-good sellers, the attracted customer will search for
second opinions with positive probability and have her problem fixed by non-deviating experts. The
deviating firms' inability to capture the entire industry profit before triggering a price war renders
collusion among experts easier to sustain than collusion among search-good sellers.
Chapter 3 studies exclusive dealing when the incumbent may be displaced by a more efficient
entrant due to the need of paying a fixed cost to stay active. We show that the incumbent can deter
socially efficient entry through exclusive contracts under the one-buyer-one-supplier framework. This
result continues to hold in the presence of product differentiation, where exclusion may be more likely
to occur when the efficiency gap between the entrant and the incumbent falls into an intermediate
range.
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