Essays on industrial organization: Durable goods markets and regulation of network industries

The first essay provides a model of markets for durable experience goods. In equilibrium, consumers who had a good experience decide to keep their durable good for some time, despite depreciation, because they do not want to face the risk of replacing the good with a new one of uncertain quality. An implication of this pattern of behavior is incomplete trade in secondary markets. Such lack of trade has been interpreted (in light of the adverse selection literature) as an indication of inefficiency. In contrast, as long as experience involves idiosyncratic tastes, this lack of trade is efficient in my model. An important extension that is considered is a model where brands differ in their ex-ante distribution of experience. In this model, I show that the brand with larger probability of good fit exhibits (a) higher loyalty, (b) smaller price declines, and (c) longer ownership spells. These results are consistent with evidence from the automobile industry.;In the second essay I examine strategic behavior in durable goods oligopolies where upgrades are introduced. I find that the decision to introduce an upgrade does not depend on the number of firms. However, second-hand markets make upgrades more likely. If upgrades depend on risky investments, then R&D cooperation is incompatible with price competition. If firms cannot cooperate in R&D, under some circumstances they may invest more under price competition than under price collusion. I also explore the effect of behavior-based price discrimination on investments.;In the third essay I examine the investment incentives in cost reduction of a network owner that competes against differentiated rivals in a downstream market. Price cap regulation of the access charge increases the incumbent's investment, but the effect depends on the degree of substitutability between downstream goods. When the incumbent's retail price is also regulated, incentives are lower when a bypass technology is available, but tighter regulation can discourage rivals from investing in reducing bypass costs. When only access price is regulated, results are inconclusive, and depend on the structure of the demand functions, the distribution of consumers regarding bypass, and the effectiveness of investment in cost reduction.