nep-com New Economics Papers
on Industrial Competition
Issue of 2005‒04‒30
six papers chosen by
Russell Pittman
US Department of Justice

  1. The Economics of Books By Marcel F. M. Canoy; Jan C. van Ours; Frederick van der Ploeg
  2. Industry Concentration and Strategic Trade Policy in Successive Oligopoly By Gjermund Nese; Odd Rune Staume
  3. Cross-Country Relative Price Volatility: Effects of Market Structure By Yin-Wong Cheung; Eiji Fujii
  4. The Dynamics of Mergers and Acquisitions By Erwan Morellec; Alexei Zdhanov
  5. Product market competition and economic performance in Iceland By Thomas Laubach; Michael Wise
  6. Competition between open-source and proprietary organizations By Alex Gaudeul

  1. By: Marcel F. M. Canoy; Jan C. van Ours; Frederick van der Ploeg
    Abstract: The tensions between books and book markets as expressions of culture and books as products in profit-making businesses are analysed and insights from the theory of industrial organisation are given. Governments intervene in the market for books through laws concerning prices of books, grants for authors and publishers, a lower value-added tax, public libraries and education in order to stimulate the diversity of books on offer, increase the density of retail outlets and to promote reading. An overview of the different ways by which countries differ in terms of market structures and government policies is given. Particular attention is paid to retail price maintenance. Due to differences between European countries it is not a good idea to harmonise European book policies. Our analysis suggests that the book market seems quite able to invent solutions to specific problems of the book trade and that, apart from promoting reading, there is little need for government intervention.
    Keywords: books, publishers, authors, diversity, monopolistic competition, retail price maintenance, subsidies, libraries, internet
    JEL: D40 D60 L10 L40 Z11
    Date: 2005
  2. By: Gjermund Nese; Odd Rune Staume
    Abstract: We study a policy game between exporting and importing countries in vertically linked industries. In a successive international Cournot oligopoly, we analyse incentives for using tax instruments strategically to shift rents vertically, between exporting and importing countries, and horizontally, between exporting countries. We show that the equilibrium outcome depends crucially on the relative degree of competitiveness in the upstream and downstream parts of the industry. With respect to national welfare, a more competitive upstream industry may benefit an exporting (upstream) country and harm an importing (downstream) country. On the other hand, a more competitive downstream industry may harm exporting countries.
    Keywords: successive oligopoly, strategic trade policy, industry concentration
    JEL: F12 F13 L13
    Date: 2005
  3. By: Yin-Wong Cheung; Eiji Fujii
    Abstract: Using annual data on nine manufacturing sectors of eighteen OECD countries, the article studies the implications of market structure for cross-country relative price variability. It is found that, in accordance with predictions from a standard markup pricing model, reductions in market competition, along with increased nominal exchange rate volatility, are associated with greater variability of cross-country relative prices. The market structure also has similar effects on components of cross-country relative price variability. The empirical findings are robust to the inclusion of various control variables and alternative sample specifications.
    Keywords: relative price volatility, market structure, price-cost margin, variance decomposition
    JEL: F31 F41
    Date: 2005
  4. By: Erwan Morellec (HEC, University of Lausanne and FAME); Alexei Zdhanov (University of Rochester)
    Abstract: This paper presents a dynamic model of takeovers based on the stock market valuations of merging firms. The model incorporates competition and imperfect information and determines the terms and timing of takeovers by solving option exercise games between bidding and target shareholders. The implications of the model for returns to stockholders are consistent with the available evidence. Notably, the model predicts that (1) returns to target shareholders should be larger than returns to bidding shareholders, and (2) returns to bidding share-holders can be negative if there is competition for the acquisition of the target. In addition, the model generates new predictions relating these returns to the drift, volatility and correlation coefficient of the bidder and the target stock returns and to the dispersion of beliefs regarding the benefits of the takeover.
    Keywords: takeovers; real options; competition; learning.
    JEL: G13 G34
    Date: 2004–10
  5. By: Thomas Laubach; Michael Wise
    Abstract: This paper discusses the current state of product market competition in Iceland, including the legal and regulatory framework, and suggests directions for further improvement. Given the size of the economy, efficiency considerations dictate high concentration in many markets, and preventing abuse of market dominance is therefore a challenging task. Changes to competition law since the early 1990s have strengthened competitive forces in many sectors of the economy, and proposed amendments to that law would further improve market surveillance. The changes in the regulatory framework for telecommunications have helped vigorous competition to develop in most segments, but there remain problems in pricing of access to the local loop. In the still publicly owned electricity sector, however, competition in generation and sales is so far virtually non existent despite new legislation. Other policies discussed include agricultural support, policies towards foreign direct investment, and public procurement and provision of publicly funded services. This Working Paper relates to the 2005 OECD Economic Survey of Iceland ( <p> Concurrence sur les marchés de produits et performance économique en Islande <p> Ce document de travail examine l’état actuel de la concurrence sur les marchés de produits en Islande, sous l’angle juridique et réglementaire notamment, et suggère un certain nombre d’améliorations possibles. Étant donné la taille de l’économie, des raisons d’efficience impose une forte concentration sur de nombreux marchés et il est donc d’autant plus indispensable d’éviter les abus de position dominante. Les modifications apportées au droit de la concurrence depuis le début des années 90 ont renforcé les forces concurrentielles dans de nombreux secteurs de l’économie et les amendements proposés permettraient d’améliorer encore la surveillance des marchés. S’agissant des télécommunications, l’évolution du cadre réglementaire a permis le développement d’une concurrence intense dans la plupart des segments du marché, mais des problèmes subsistent en ce qui concerne la tarification de l’accès à la boucle locale. En revanche, dans le secteur de l’électricité qui est encore entre les mains de l’État, la concurrence est pratiquement inexistante jusqu’ici au niveau de la production et de la commercialisation, en dépit des nouvelles dispositions législatives. Les politiques concernant le soutien à l’agriculture, l’investissement direct étranger, les marchés publics et les services publics sont également examinées. Ce Document de travail se rapporte à l'Etude économique de l'OCDE de l'Islande, 2005 (
    Keywords: Productivity; product market competition; competition law; regulatory reform; network industries; public procurement; Iceland
    JEL: H57 K21 K23 L1 L4 L5 L94 L96
    Date: 2005–04–15
  6. By: Alex Gaudeul (University of East Anglia - Norwich & ESRC Centre for Competition Policy)
    Abstract: This paper models the competition between two production models: open- source and proprietary. An open-source and a proprietary project are put into competition. The open-source organization suffers from imperfect coordination between its volunteers and it will serve their needs in preference to those of the broader population. Commercial ventures are better coordinated and their user-orientation will lead them to develop better interfaces with users. However, open-source products are free, while an entrepreneur must pay its workers and will maximize profits by excluding some users though price. The paper derives conditions which determine the nature and size of the market for each type of product. Network effects encourage better coordination in open-source production and may deter the emergence of a proprietary alternative. Proprietary entrepreneurs specialize into niche markets when network effects are low, and compete directly with open- source products when network effects are high.
    Keywords: Open Source Software; Network Externalities; Information Goods; Intellectual Property; Duopoly; Production Systems; Competition; Non-Profit; Volunteer Organizations.
    JEL: D23 H41 L13 L22 L31 L86 O34 O38
    Date: 2005–04–25

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