D4 - Market Structure, Pricing, and DesignReturn

Innovation is an important topic in economics. This paper highlights duopoly innovation under the Hotelling model with game theory approaches. This paper argues that market power, as measured by the cost advantage of a dominant firm over its rival, serves to enhance the incentive to innovate in a Hotelling model of spatial competition. This result implies that a firm with cost advantage will have a larger incentive than its rivals to further its cost advantage as new opportunities for innovation arise thereby implying that innovation increases concentration. This result is in contrast to the result obtained by Holmes et al. (2012) who use the Betrand model to show that "market power" lowers the incentive to innovate. We think that the inelastic demand causes this economic phenomenon.

This paper highlights the monopoly firms' commitments for goods requiring high maintenance expenditure, such as elevators, televisions and computers. A guarantee time limit model to maintain these special goods is presented in this paper. Based on this model, several types of commitments with different guarantee time limits are compared under monopoly conditions. This paper finds that the guarantee pattern has no effect on the monopoly firm's profits if all information is known to both the consumer and the monopolist. It is also shown that if a monopoly firm exaggerates its product quality claims in its advertisements, then it cannot meet its warranty guarantees. Industrial organizational theory is employed to analyze maintenance guarantees in this work.

In transition countries, especially in the period of central planning or semi-command regulation, prices of goods and services in the non-tradable sector were regulated, which was one of the main obstacles to normal functioning of the supply-demand market mechanism after the breakdown of the socialist economic system. In the period of economic transition reestablishment of market institutions arises, with price deregulation as one of the fundamental constitutional parts of this process. But in the case of transition economies there exists a recognized doubt in an immediately well functioning market system after deregulation because of inadequate development of the economic system in the past that produced a gap in the development of institutions typical for market economies. The aim of this article is to present the results of the empirical analysis on the market outcomes of price deregulation for chimney sweep services in the Slovenian economy. For this purpose we developed an original model for analysing market outcomes after price deregulation occurs. For the selected case study we recognize large cumulative price growth, that was a consequence of significant supply-side imperfection, since the selection among suppliers is based on the concession system at the municipality level.