| Chapter I studies the incentives for, and effects of, mergers when firms are allowed to use two part tariffs both before and after a merger. The model developed in this chapter shows that many of the results from linear-price models do not necessarily hold when firms use two part tariffs. The model also shows how firms can exercise new market power after a merger. If feasible, a merged firm will want to sell its outputs in bundles. Bundling may not always be feasible, and it is demonstrated that the best alternative to bundling depends on how substitutable the merged firm's products are for each other: the merged firm will either increase fixed fees and variable prices, or will drop one of its products. This chapter also develops a modified model with equilibria in which outside firms are harmed by an anti-competitive merger.; Chapter 2 contains a model with limited contractual restrictions in which exclusive contracting can arise in equilibrium. The novelty in the model is the introduction of a new buyer bringing additional demand into a market. The demand of the new buyer, by itself, is insufficient to support the entry of a new seller. The model predicts that for a wide range of parameter values, an incumbent firm can profitably sign exclusive contracts with existing buyers.; Chapter 3 studies the properties of incomplete information trading mechanisms when the agents involved have an ex-ante opportunity to make investments that alter the distribution of ex-post payoffs. At all times agents have private information about their preferences, and agents can make costly and unobservable, and therefore non-contractible, investments which alter the ex-post distribution of types. The focus of this paper is on how mechanisms affect the incentive to invest, and on how con-contractible investment opportunities affect equilibrium mechanisms. |
