Skip to Content

Introduction to the Symposium on Advertising and Disclosure

Legros P.  2009.  Introduction to the Symposium on Advertising and Disclosure. The Journal of Industrial Economics. 57(1):1-6.

An Example of Dominant Firm Pricing

According to DigiTimes Sstems, some manufacturers of tablet PC have reevaluated the prices of their products following Apple introductory pricing of the iPad. The article points out that these vendors initially intented to price their product 20-30% lower than the iPad, suggesting indeed that the industry is looking at Apple as a price leader. See also Tablet Manufacturers Reevaluating Pricing Options in Light of iPad Announcement.

When Competitors Hope that you Succeed

The introduction of the Apple iPad is seen by firms already offering eReaders as a positive: rather than being afraid that Apple will eat their market share, the competitors hope that the iPad will create a demand push for such devices. Hence, even if Apple gets a lion share of the increasing market -- like they did with the iPod and the iPhone -- the increased demand will benefit all. See a recent Financial Times article on this.

Price Discrimination, Drug Wars and Parallel Trade

Drugs are sold at different prices in different EU countries; prices are often set via negotiation between the state and the pharmaceutical drugs and reflect the importance of the social security system, the bargaining powers of the different parties. Arbitragers can therefore buy drugs in countries with low prices and resell them in countries with high prices and make a profit; this (legal) practice is called "parallel trade". The amount of parallel trade for pharmaceutical drugs is of the order of 10% of the total sales in Europe. This puts limits on the ability of firms to price discriminate across countries. Recently (see the FT article http://www.ft.com/cms/s/0/cdc5066a-c7d1-11de-8ba8-00144feab49a.html ), the French government is introducing a law proposal by which pharmaceutical drugs will be able to charge a higher price locally for drugs that are exported, effectively cutting down on the ability of arbitragers to earn profits.

Timing Advertising Wars

Business week reports plans by Apple to launch a massive advertising campaign at the time Windows 7 is released, see the October 14 article Can Apple Spoil Microsoft's Day? What should be the timing of advertising: simultaneously with the campaign of a competitor or with a lag?

Vertical Guidelines

The new EC Block Exemption for Vertical Agreements has come into application on June 1st, 2000.. You should review the old and the proposed new guidelines and provide a critical assessment of them in light of economic theory. There is for instance in the recent proposal the idea that resale price maintenance may be permissible (for temporary special offers); a feature that is under attack in US courts (e.g., Leegin Creative Leather Products Inc. v. PSKS Inc.)

Net neutrality

The internet has developed in an environment characterized by freedom of interconnection and access. This freedom has also lead to the development of exchange of information, of digital content and the inventions of platforms that facilitate such exchange. Traditional sellers of content (music majors in particular) have fought early on for protection and this has lead to a fascinating debate of the effect of internet on creativity. Some like Lawrence Lessig have defended the idea that the internet allows creativity to be separated from the profit motive and that any legislation putting barriers on exchange will eventually hinder innovation and creativity. More recently, additional pressures for regulation of access in the internet have been felt and another lively debate is underway concerning whether the internet should be neutral ("net neutrality") or whether some form of discrimination of access should be allowed.

Because discrimination in access may have competition policy consequences, this topic is relevant for the course and may provide an interesting example of how new market forms may be shaped by, or lack of, regulation.

As the bibliography shows, economists are somewhat in favor of some regulation -- hence taking a view partly in opposition to Lessig's. If you choose this topic, you should articulate the types of regulation that may be considered, their effects on innovation and "creativity" and on entry barriers.

EU Competition Policy in a Global World

Dewatripont M, Legros P.  2009.  EU Competition Policy in a Global World. The European Union and Global Governance. :87-103.
Syndicate content