| Summary: | 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.
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