Abstracts

Daniel R. Vincent

Downloadable Papers (Abstracts)
Daniel R. Vincent
Department of Economics
University of Maryland
College Park,
MD 20742
(301)-405 3485
(301)-405-3542 (FAX)
Daniel R. Vincent(e-mail)

Vincent, Daniel R.: “Auction Theory Implications for Antitrust,” chapter in Elgar Encyclopedia on the Economics of Competition and Regulation, ed. Michael Noah, forthcoming.

Abstract:

Auction theory has been used extensively in the theory and practice of anti-trust economics in many ways. This paper aims simply to cover in broad strokes what distinguishes the tools of auction theory from other standard tools of economic analysis in antitrust regulation. There are at least three facts about auctions that separate this methodology from other commonly used approaches: i) Auctions Have Rules -- auction mechanisms often provide an explicit description of the price formation and resource allocation process; ii) The Rules Determine Behavior -- equilibrium analysis offers predictions about the relationships between economic fundamentals such as preferences and technology and behavior in these mechanisms; and iii) The Rules Can Be Changed -- the auction mechanisms themselves are objects that can be constructed or modified to achieve certain goals or inform analyses.
To download this paper, click here

Vincent, Daniel R.: “Mixed Bundling and Mergers” (This is a significant reworking of "Mixed Bundling and Imperfect Competition (2014))

Abstract:

Beginning with two Hotelling duopolies where demand for the product in each market is independent of demand for the product in the other, the paper examines the price, profit and welfare consequences that result when first one firm in a market merges with a firm in the other market creating a single two-product firm and then the remaining two firms merge -- resulting in a duopoly of two-product firms. The paper demonstrates how to compute the equilibrium in each market structure. Assuming that firms cannot commit not to use all the pricing instruments at their disposal, mixed bundling by two-product firms emerges following each merger. While such behavior is a unilateral best response, the equilibrium consequences of these choices end up lowering total profits and welfare compared to the pre-merger markets suggesting that the opportunity to engage in mixed bundling cannot be the sole motivation for such mergers.
To download this paper, click here

Vincent, Daniel R.: “Multilateral Negotiations and Opportunism”

Abstract:

A model is constructed of dynamic bargaining over two part tariffs among a single upstream firm and a pair of downstream Bertrand competitors. It provides a sufficient condition under which a stationary subgame perfect equilibrium exists with immediate agreement. The equilibrium has the property that with either myopic agents or downstream firms selling independent products, the joint profit-maximizing outcome is achieved. When agents are forward looking and downstream products are substitutes, the incentive for opportunistic behavior causes equilibrium input prices to be below the profit-maximum but above the static pairwise proof prices. The predictions from this model are then contrasted with predictions from another commonly applied model of multi-lateral negotiations, Nash in Nash bargaining and shown to yield significantly different price effects.
To download this paper, click here

Vincent, Daniel R. and Alejandro M. Manelli: “Dominant-strategy and Bayesian incentive compatibility in multi-object trading environments”

Abstract:

When a single-object is to be traded, Bayesian and dominant-strategy incentive compatible mechanisms are interim-utility equivalent in independent, private-values environments; in the same environments, the equivalence breaks down when there are many distinct, indivisible objects to trade. We show that the fixed supply of each type of good imposes strong restrictions on the mechanisms that can be implemented. These restrictions can then be used to determine whether a given Bayesian mechanism has an equivalent dominant strategy mechanism in a multi-unit model.
To download this paper, click here

Vincent, Daniel R. and Marius Schwartz: “Platform Competition With User Rebates Under No Surcharge Rules”

Abstract:

We analyze competing strategic platforms setting fees to a local monopolist merchant and rebates to end users, when the merchant is prevented from surcharging platforms’ customers, as frequently occurs with credit cards. Each platform has an incentive to gain transactions by increasing the spread between its merchant fee and user rebate above its rival's spread. This incentive yields non-existence of pure strategy equilibrium in many natural environments. In some circumstances, there is a mixed strategy equilibrium where platforms choose fee structures that induce the merchant to accept only one platform with equal probability, a form of monopolistic market allocation.
To download this paper, click here

Manelli, Alejandro M. and Daniel R. Vincent: “Bayesian and Dominant Strategy Implementation in the Independent Private Values Model”

Abstract:

We prove---in the standard independent private-values model---that the outcome, in terms of expected probabilities of trade and expected transfers, of any Bayesian mechanism, can also be obtained with a dominant strategy mechanism.

To download this paper, click here

Marius Schwartz and Daniel Vincent: Quantity “Forcing” and Exclusion: Bundled Discounts and Nonlinear Pricing

Abstract:

Quantity “forcing” refers to pricing schemes that reward a buyer for purchasing some threshold quantity from a firm. When there are significant scale economies and buyers are unable to coordinate, economic theory shows that a firm can profitably use quantity forcing to exclude rivals, reducing overall welfare and harming some buyers. Inducements to reach the quantity threshold may be provided through nonlinear pricing of the target product alone or through bundled discounts on that firm’s other “monopoly” product(s). Open questions remain about whether bundled discounts are the most effective way to achieve exclusion. Alternatively, bundled discounts can be used to extract rent from a monopoly market but again, single-good nonlinear pricing schemes seem superior. Cost-based rules for detecting predation are problematic when applied to bundled discounts or to single-good nonlinear pricing. A workable policy rule that recognizes also the efficiency potential of such pricing practices should combine structural screens with a more detailed conduct inquiry.

To download this paper, click here

Manelli, Alejandro M. and Daniel R. Vincent: "Multi-Dimensional Mechanism Design: Revenue Maximization and the Multiple Good Monopolist", August, 2004.

Abstract:

The seller of N distinct objects is uncertain about the buyer's valuation for those objects. The seller's problem, to maximize expected revenue, consists of maximizing a linear functional over a convex set of mechanisms. A solution to the seller's problem can always be found in an extreme point of the feasible set.We identify the relevant extreme points and faces and exposed points of the feasible set. With N=1, the extreme points are easily described providing simple proofs of well-known results. The revenue-maximizing mechanism assigns the object with probability one or zero depending on the buyer's report. With N>1, extreme points often involve randomization in the assignment of goods. Virtually any extreme point of the feasible set maximizes revenue for a well-behaved distribution of buyer's valuations. We provide a simple algebraic procedure to determine whether a mechanism is an extreme point.