Thesis advisor: Frank Gollop / My doctoral dissertation consists of three essays in the field of Industrial Organization. The first two consider exclusive dealing contracts between upstream and downstream firms theoretically, while the third measures consumer substitution among geographically differentiated air travel products empirically. In the first chapter I study the ability of an incumbent seller to use exclusive dealing contracts to foreclose efficient entry when there are n downstream buyers, where n can be viewed as a measure of the degree of downstream competition. The effect of downstream competition on the ability of the upstream incumbent to use exclusive contracts anticompetitively depends on whether upstream firms compete over linear or two-part prices. The model also highlights an interesting effect of the sunk cost of upstream entry that is ignored in models with exactly two buyers. In the second chapter I investigate the ability of an incumbent monopolist to exclude a potential entrant via exclusive dealing contracts when these contracts include an agreement over price. I find that a simple entry game yields both exclusionary and entry equilibria. The exclusionary equilibrium is unique, however, under most reasonable assumptions; for example if buyers are downstream competitors, if entry or the marginal cost of the potential entrant are uncertain, or if the incumbent can commit not to compete for unsigned buyers. When buyers compete with one another downstream, the optimal guaranteed price is above (below) the marginal cost of the incumbent when downstream buyers compete over strategic complements (substitutes). In the third and final chapter (co-authored with Kyle Buika) I study the question of geographic market definition in the US airline industry. Though an accurate definition of an economic market is important for any study of industry, there is no rule governing what exactly constitutes a market. To define a market we must ask the question "between which products do consumers substitute,'' knowing that the answer to this question will depend on how "close'' products are to one another in product space, as well as how close they are to one another, and to consumers, in geographic space. We estimate a discrete choice model of air travel demand that uses known information about the locations of products and consumers, which allows us to study substitution patterns among air travel products at different airports. We evaluate the commonly used city-pair and airport-pair definitions of a market for air travel, and conclude that a city-pair is the appropriate definition. We also employ the Hypothetical Monopolist test for antitrust market definition, as defined by the Department of Justice and Federal Trade Commission, and conclude that the relevant geographic market for antitrust analysis is, according to this test, frequently more narrowly defined as an airport-pair. Finally we conduct merger simulations under different market definitions and compare the results to those obtained using our own results, and conclude that accounting for geography is important when studying mergers. / Thesis (PhD) — Boston College, 2011. / Submitted to: Boston College. Graduate School of Arts and Sciences. / Discipline: Economics.

Submitted by Daniella Santos (daniella.santos@fgv.br) on 2009-11-30T17:28:59Z No. of bitstreams: 1 Tese_Rafael_Coutinho_Costa_Lima.pdf: 555268 bytes, checksum: a06061bb98e0ddefd846ff6034a22317 (MD5) / Approved for entry into archive by Antoanne Pontes(antoanne.pontes@fgv.br) on 2009-12-01T11:42:43Z (GMT) No. of bitstreams: 1 Tese_Rafael_Coutinho_Costa_Lima.pdf: 555268 bytes, checksum: a06061bb98e0ddefd846ff6034a22317 (MD5) / Made available in DSpace on 2009-12-01T11:42:43Z (GMT). No. of bitstreams: 1 Tese_Rafael_Coutinho_Costa_Lima.pdf: 555268 bytes, checksum: a06061bb98e0ddefd846ff6034a22317 (MD5) / This thesis consists of three chapters that have as unifying subject the frame-work of common agency with informed principals. The first two chapters analyze the economic effects of privately informed lobbying applied to tariff protection (Chapter 1) and to customs unions agreements (Chapter 2). The third chapter investigates the choice of retailing strutures when principals (the producers) are privately informed about their production costs. Chapter 1 analyzes how lobbying affects economic policy when the interest groups have private information. I assume that the competitiveness of producers are lobbies private information in a Grossman and Helpman (1994) lobby game. This allows us to analyze the e¤ects of information transmission within their model. I show that the information transmission generates two informational asymmetry problems in the political game. One refers to the cost of signaling the lobby's competitiveness to the policy maker and the other to the cost of screening the rival lobby's competitiveness from the policy maker. As an important consequence information transmission may improve welfare through the reduction of harmful lobbying activity. Chapter 2 uses the framework of chapter 1 to study a customs union agreement when governments are subject to the pressure of special interest groups that have better information about the competitiveness of the industries they represent. I focus on the agreement's effect on the structure of political influence. When join a customs union, the structure of political pressure changes and with privately informed lobbies, a new effect emerges: the governments can use the information they learn from the lobby of one country to extract rents from the lobbies of the other country. I call this the 'information transmission effect'. This effect enhances the governments'bargaining power in a customs union and makes lobbies demand less protection. Thus, I find that information transmission increases the welfare of the agreement and decreases tari¤s towards non-members. I also investigate the incentives for the creation of a customs union and find that information transmission makes such agreement more likely to be politically sustainable. Chapter 3 investigates the choice of retailing structure when the manufacturers are privately informed about their production costs. Two retailing structures are analyzed, one where each manufacturer chooses her own retailer (exclusive dealing) and another where the manufacturers choose the same retailer (common agency). It is shown that common agency mitigates downstream competition but gives the retailer bargaining power to extract informational rents from the manufacturers, while in exclusive dealing there is no downstream coordination but also there are no incentives problem in the contract between manufacture and retailer. A pre- liminary characterization of the choice of the retailing structure for the case of substitute goods shows that when the uncertainty about the cost increases relatively to the size of the market, exclusive dealing tends to be the chosen retailing structure. On the other hand, when the market is big relatively to the costs, common agency emerges as the retailing structure. This thesis has greatly benefited from the contribution of Professors Humberto Moreira and Thierry Verdier. It also benefited from the stimulating environment of the Toulouse School of Economics, where part of this work was developed during the year of 2007. / Esta tese consiste de três artigos que tem como elemento unificador o modelo de agência comum com principais informados. Os dois primeiros capítulos investigam os efeitos econômicos da influência de grupos de pressão (lobbies) sobre a escolha da tarifas de importação (Capítulo 1) e sobre acordos de comércio internacionais (Capítulo 2). O capítulo 3 investiga a escolha da estrutura de revenda quando os produtores possuem informação privada sobre os seus custos. O capítulo 1 analisa como a atividade de lobby afeta a política econômica quando grupos de interesses possuem mais informação que o governo. Modifica- se o modelo de Grossman e Helpman (1994), assumindo que a competitividade dos produtores é informação privada dos lobbies. Isto permite investigar quais os efeitos de transmissão de informação neste modelo. Esta assimetria de informação gera dois efeitos no jogo político, um associado ao problema de sinalização da competitividade do lobby para o governo e outro associado ao custo de um lobby fazer um screening da competitividade do lobby rival junto ao governo. O principal resultado deste modelo é que a transmissão de informação reduz a capacidade de influência dos lobbies, o que aumenta o bem-estar da sociedade. O capítulo 2 aplica o modelo do Capítulo 1 para entender os efeitos de transmissão de informação que surgem em uniões aduaneiras quando os lobbies possuem mais informação que o governo. O foco é dado nos efeitos políticos que surgem nestes acordos. Quando os países formam uma união aduaneira o equilíbrio de forças político e um novo efeito surge: os governos usam as informações privadas do lobby de um país para extrair renda dos lobbies dos outros países. Este efeito aumenta o poder de barganha dos governos dentro de uma união aduaneira e reduzam a capacidade de influência dos lobbies. Desta forma, a transmissão de informação aumenta os benefícios de uma união aduaneira e reduz a tarifas de importação para os países fora do acordo. Além disso, é investigado o papel da transmissão de informação a criação das uniões aduaneiras e o resultado encontrado é que esta aumenta as chances destes acordos serem implementados. O capítulo 3 investiga a escolha da estrutura de revenda quando os produtores possuem informação privada sobre seus custos de produção. Duas estruturas de revenda são analisadas, uma onde cada produtor escolhe um revendedor exclusivo (exclusive dealing) e outra onde ambos os produtores escolhemo mesmo revendedor (agência comum). Agência comum reduz a competição no mercado final, mas dá ao revendedor a capacidade de extrair lucro dos produtores utilizando a informação de um contra o outro. Enquanto que exclusive dealing aumenta a competição entre produtores, mas não cria problemas informacionais entre produtor e revendedor. Uma caracterização preliminar da escolha da estrutura de revenda para o caso de bens substitutos mostra que quando a incerteza quanto sobre o custo aumenta relativamente ao tamanho do mercado, exclusive dealing tende a ser a estrutura de revenda escolhida, enquanto que quando o tamanho do mercado é grande em relação aos custos, agência comum tende a ser a estrutura escolhida. Esta tese se beneficiou enormemente da contribuição dos professores Hum- berto Moreira e Thierry Verdier. Também se beneficiou o estimulante ambiente acadêmico da Toulouse School of Economis, onde parte dela foi desenvolvida du- rante o ano de 2007.

La presente tesi fornisce un contributo originale al dibattito esistente tra gli economisti industriali sul rapporto tra concorrenza e asimmetrie informative. Infatti, l’obiettivo principale di questo lavoro consiste nell'investigare, da un punto di vista teorico (e supportato dall'evidenza empirica), come alcune barriere informative presenti nel mercato influenzano le strategie imprenditoriali in diversi contesti competitivi, fornendo implicazioni di policy per autorità garanti della concorrenza e a tutela del consumatore. Nello specifico, il primo capitolo esamina gli incentivi di una impresa dominante in un mercato a monte a offrire contratti di esclusiva ad un monopolista nel mercato a valle, quando vi è incertezza riguardo alla domanda finale dei consumatori. Nei capitoli seguenti, invece, l’analisi si caratterizza dalla presenza del concetto comportamentale di "avversione alla perdita", particolarmente rilevante nelle decisioni di acquisto dei cosiddetti "beni di esperienza". In questi mercati le imprese possono decidere liberamente di permettere test sui propri prodotti prima del loro acquisto, modificando quindi l’utilità attesa dei consumatori. Il secondo capitolo analizza le strategie di vendita per un monopolista. Il terzo capitolo, invece, esamina l’equilibrio di mercato in un contesto competitivo e come l’utilizzo di test sui prodotti possa essere adoperato come strumento collusivo. / This dissertation provides an original contribution to the existing debate between industrial economists on the relationship between competition and information asymmetries. Indeed, the main goal of this work consists in investigating, from a theoretical point of view (and supported by empirical evidence), how some informational frictions in the market affect firm’s strategies in different competitive environments, providing policy implications for competition and consumer protection authorities. Specifically, the first chapter looks at the incentives of a dominant firm in an upstream market to offer exclusive dealing contracts to a monopolist in the downstream market, when there is uncertainty about consumer demand. In the following chapters, instead, the analysis is characterized by the presence of the behavioral concept of "loss aversion", which is particularly relevant in the purchase decisions of the so-called "experience goods". In these markets, firms can freely decide to allow product experimentation before purchase, thus modifying the consumers' expected utility. The second chapter analyzes the monopolist's sales strategies. The third chapter, instead, examines the market equilibrium in a competitive environment and how product experimentation can be used as a collusive device.