Three essays in industrial organization

Chapter 1: Coupon strategy and price discrimination. Firms frequently distribute coupons to offer discounts to customers. The coupon is devised to separate customers with higher valuations from those with lower valuations as firms exploit the difference in their costs of coupon redemption. The paper shows in equilibrium firms in a duopoly achieve price discrimination by higher price and issuing coupons. It solves the equilibria in both the case where all customers received coupons from both firms and the case where customers randomly receive the coupons from each firm. The paper also explores the effectiveness of the strategy by firms to honor its competitor's coupon and shows such a policy hurts instead of helping the firm's bottom line.; Chapter 2: R&D cooperation with intermediate inputs. Cooperative arrangements in R&D among otherwise competing firms have become a popular form of organization for technology investment among firms, since it to some extent mitigates the negative influence caused by spillovers that under mines firms' R&D incentives. However, it is observed that the research cooperations are distributed unevenly across different industries. The paper attempts to explain the uneven distribution through existence of intermediate input and further examine other impacts of the intermediate goods on firms' incentives to choose R&D cooperation over R&D competition. It shows that firms are less motivated to engage in R&D cooperation with intermediate input than without intermediate input. It is also revealed that firms always invest less in R&D when faced with upstream suppliers as part of the benefits from R&D are appropriated by upstream firms, which reduces the attractiveness of the R&D investment. However, the negative impact is mitigated if the intermediate input market becomes more competitive.; Chapter 3: The effect of switching cost on competition and R&D intensity. Switching cost deals with the phenomena when consumers often need to incur extra cost when changing from one supplier to another while no cost when staying with the existing supplier. In this paper, I study the effect of switching cost on competitive behavior and R&D intensity in the price competition for both the mature market and the new market. In particular, this paper looks into the competition of firms with price discrimination and no price discrimination and shows that whether or not price discrimination is allowed plays an important role in the equilibrium outcome. Also, a key concern related to switching cost is that firms will not commit enough R&D once they have locked up customers. The paper looks at the issue and show that firms will continue to engage in R&D. The total level of R&D is the same and only the distribution of the R&D between firms is changed, where firm with a smaller market share spends more in R&D than the firm with larger market share. Furthermore, it is proved that the independence property is robust to other innovation technology specifications as long as the firms possess the same innovation capabilities.