Fatemi Ardestani, S.F.; (2009) Essays in industrial organisation. Doctoral thesis , UCL (University College London).

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Abstract

This thesis consists of three independent chapters: In the first chapter, we consider a Hotelling model of price competition where firms may acquire information regarding the preferences (i.e. “location”) of customers. By purchasing additional information, a firm has a finer partition regarding customer preferences, and its pricing decisions must be measurable with respect to this partition. If information acquisition decisions are common knowledge at the point where firms compete via prices, we show that a pure strategy subgame perfect equilibrium exists, and that there is “excess information acquisition” from the point of view of the firms. If information acquisition decisions are private information, a pure strategy equilibrium fails to exist. We compute a mixed strategy equilibrium for a range of parameter values. The second chapter investigates a case of national versus regional pricing. Competition authorities frequently view price discrimination by firms as detrimental to consumers. In the case of the UK supermarket industry they suggested a move to uniform pricing. Yet theoretical predictions are ambiguous about whether third degree price discrimination is beneficial or detrimental to consumers, and in general there will be some consumers who benefit while other lose out. In this chapter, we estimate the impact that the move from regional to uniform pricing had on Tesco’s profits and consumer's surplus. We estimate an AIDS model of consumer expenditure in the eggs market in a multi-stage budgeting framework allowing for very flexible substitution patterns between products at the bottom level. We use data on farm gate prices to instrument price in the demand equation. Our results suggest that switching to a regional pricing policy can potentially increase Tesco’s profit on eggs by 37%. However, while there are winners and losers, the overall effect on consumer welfare is not significant. In the third chapter, we study the kidney market in Iran. The most effective treatment for end-stage renal disease is a kidney transplant. While the supply of cadaveric kidneys is limited, the debate has been focused on the effects of the existence of a free market for human organs. Economists as well as medical and legal researchers are divided over the issue. Iran has a unique kidney market which has been in place for over 20 years, frequently reporting surprising success in reducing the waiting list for kidneys. This paper demonstrates how the Iranian system works and estimates the welfare effect of this system.

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