A Leverage Theory of Tying in Two-Sided Markets with Nonnegative Price Constraints

Motivated by recent antitrust cases in markets with zero-pricing, we develop a leverage theory of tying in two-sided markets. In the presence of the nonnegative price constraint, the Chicago school critique of tie-ins fails to hold. In the independent products case, tying provides a mechanism to circumvent the constraint in the tied market without inviting aggressive responses by the rival firm. In the complementary products case, the “price squeeze” mechanism cannot be used to extract surplus from the more efficient rival firm without tying. We identify conditions under which tying in two-sided markets is profitable and explore its welfare implications. (JEL D42, K21, L12, L41)

Identifying Industry Margins with Price Constraints: Structural Estimation on Pharmaceuticals

We develop a structural model to investigate the effects of pharmaceutical price regulation on demand and on manufacturers’ price-setting behavior in France. We estimate price-cost margins in a regulated market with price constraints and infer whether these constraints are binding, exploiting cost restrictions across drugs, which come from observing the same drugs in potentially price-constrained markets (France) and in markets where prices are unregulated (United States and Germany). Our counterfactual simulations suggest that price constraints generated modest savings for anti-ulcer drugs in 2003–2013 (2 percent of total expenses), relative to a free pricing scenario, and shifted consumption from generic to branded drugs. (JEL C51, D24, I18, L13, L51, L65)

Control of price acceptability under the univariate Vasicek model

The valuation of the probability of a financial contract to be lower or higher than a given price under the univariate Vasicek model is discussed in this paper. This price restriction can be justified by consistency reasons, since some prices may not be coherent on a financial point of view, e.g. they imply negative yields, or thought as unreachable by the asset manager. At first, assuming that the pricing functions is monotone, the price constraints are formulated in terms of a threshold on the value of the spot rate process. Since this process is Gaussian, these limits are reformulated in terms of a barrier of the Gaussian increments. Next, once the thresholds are identified, the probability to satisfy the price restriction after the generation of the spot rate at one future date can be computed. Then, assuming that the bounds on the spot rate are constant during a Monte-Carlo simulation, the probability of generating a path of this process that does not satisfy the constraint is valued using some results related to the hitting times. Lastly, the proposed approach is applied to various interest rates sensitive contracts and is illustrated by some numerical examples.

An Indoor Multi-Function Environment Detector Model

Modern people spend more than 90% of their life indoors and therefore the indoor environment quality has great impact on the body health and working efficiency of human beings. A series of detectors thus been developed to evaluate the indoor environment quality. Nevertheless, these devices are either expensive or too simple. In this paper, a portable detector model, basing on the Lego Blocks Principle, is proposed. Users are able to select sensing modules according to their preference based on the precision requirements, price constraints and size limitations before piling them together like blocks to realize the multi-parameter detection. The measuring results are sent to the terminal mobile phones or remote server for future procession.