Robert Somogyi

    I work as Assistant Professor at the Budapest University of Technology and Economics, and as Research Fellow at the Institute of Economics of the Hungarian Academy of Sciences. I am also a Carrier Integration Fellow of the CERGE-EI Foundation.

 

    I completed my PhD in Economics at Ecole Polytechnique and CREST in 2016, after which I joined the CORE research center of Université catholique de Louvain for two years as a Postdoctoral researcher.

 

    My research interests are Microeconomic Theory, Industrial Organization of the Digital Economy, and Agent-based Computational Economics.

 



Email: somogyi [at] finance.bme.hu 



     

Work in progress:

        Bertrand-Edgeworth Competition with Capacity Uncertainty (with W. Vergotefirst draft available upon request)


Working papers:

         Prioritization vs Zero-rating: Discrimination on the Internet (with A. Gautierprevious version appeared in CORE Discussion Papers, 2018/23, Université catholique de Louvain)

This paper analyzes two business practices on the mobile internet market, paid prioritization and zero-rating. Both violate the principle of net neutrality by allowing the internet service provider to discriminate different content types. In recent years these practices have attracted considerable media attention and regulatory interest. The EU, and until recently the US have banned paid prioritization but tolerated zero-rating under conditions. With prioritization, the ISP delivers content at different speeds and it is equivalent to a discrimination in terms of quality. With zero-rating, the ISP charges different prices for content and it is equivalent to a discrimination in terms of prices. We first show that neither of these practices lead to the exclusion of a content provider, a serious concern of net neutrality advocates. The ISP chooses prioritization when traffic is highly valuable for content providers and congestion is severe, and zero-rating in all other cases. Furthermore, investment in network capacity is suboptimal in the case of prioritization and socially optimal under zero-rating. 

       Zero-rating and Net Neutrality (previous version appeared in CORE Discussion Papers, 2016/47, Université catholique de Louvain)

This paper studies zero-rating, an emerging business practice consisting in a mobile internet service provider (ISP) excluding the data generated by certain content providers (CPs) from its consumers’ monthly data cap. Being at odds with the principle of net neutrality, these arrangements have recently attracted regulatory scrutiny all over the word. I analyze zero-rating incentives of a monopolistic ISP facing a capacity constraint in a two-sided market where consumption provides utility for homogeneous consumers as well as advertising revenue for CPs. Focusing on a market with two CPs competing with each other and all other content which is never zero-rated, I identify parameter regions in which zero, one or two CPs are zero-rated. Surprisingly, the ISP may zero rate content when content is either very unattractive or very attractive for consumers, but not in the intermediary region. I show that zero-rating benefits consumers if content is attractive, whereas it may decrease social welfare in the case of unattractive content.



This paper studies the price-setting behavior of a monopoly facing two capacity constraints: one on the number of consumers it can serve, the other on the total amount of products it can sell. Facing two consumer groups that differ in their demands and the distribution of their willingness to pay, the monopoly's optimal non-linear pricing strategy consists of offering one or two price-quantity bundles. The characterization of the firm's optimal pricing in the short run as a function of its two capacities reveals a rich structure that gives rise to some surprising results. In particular, prices are non-monotonic in capacity levels. Moreover, there always exists a range of parameters in which weakening one of the capacity constraints decreases consumer surplus. In the long run, when the firm can choose how much capacity to build, prices and consumer surplus are monotonic in capacity costs.

       Competition with Dual Capacity Constraints

This paper studies duopoly pricing under dual capacity constraints, limiting both the total quantity and the number of consumers served. It extends both the analysis of monopoly pricing with dual capacity constraints and the symmetric models of Bertrand-Edgeworth competition with a single capacity. By isolating parameter regions where a symmetric pure-strategy equilibrium exists, I find that several types of equilibria are possible, depending on the model's specifications. For some of them, duopoly prices are identical to monopoly prices. Equilibrium prices are non-monotonic in capacity levels if consumers' valuations are sufficiently heterogeneous. Moreover, I show that despite their ability to price discriminate, competition may lead firms to charge identical prices across markets.


Since Kreps and Scheinkman's seminal article (1983) a large number of papers have analyzed capacity constraints' potential to relax price competition. However, the ensuing literature has assumed that products are either perfect or very close substitutes. Therefore none of the papers has investigated the interaction between capacity constraints and substantial local monopoly power. The aim of the present paper is to shed light on this question using a standard Hotelling setup. The high level of product differentiation results in a variety of equilibrium firm behavior and it generates at least one pure strategy equilibrium for any capacity level. Thus the presence of local monopoly power challenges one of the most general findings about Bertrand-Edgeworth competition: the non-existence of pure strategy equilibria for some capacity levels.

         

Publication:

        Price Rigidity and Strategic Uncertainty: An Agent-based Approach (with J. Vincze), International Journal of Agent Technologies and Systems, 3.4(2011), 57-69.