nep-com New Economics Papers
on Industrial Competition
Issue of 2009‒03‒28
nine papers chosen by
Russell Pittman
US Department of Justice

  1. Pricing in networks By Francis Bloch; Nicolas Quérou
  2. Convergence in the Finite Cournot Oligopoly with Social and Individual Learning By Thomas Vallée; Murat Yildizoglu
  3. Cross-Border Mergers and Acquisitions: Financial and Institutional Forces By Nicolas Coeurdacier; Roberto A. De Santis; Antonin Aviat
  4. Competition Policy Reform in Agriculture: A Comparison of the BRICs Countries By Davenport, Scott; Chadha, R; Gale, R
  5. Product bundling in global ocean transportation By Acciaro, M.; Haralambides, H.E.
  6. Spatial asymmetric duopoly with an application to Brussels' airports By Fay Dunkerley; André De Palma; Stef Proost
  7. The Impact of Regulatory Intervention in the UK Store Card Industry By Yingqi Wei; Caroline Elliott
  8. Evidence for increasing concentration in plant breeding industries in the United States and the European Union By Nolan, Elizabeth; Santos, Paulo
  9. The Impact of Price Discrimination on Revenue: Evidence from the Concert Industry By Pascal Courty; Mario Pagliero

  1. By: Francis Bloch (Department of Economics, Ecole Polytechnique - CNRS : UMR7176 - Polytechnique - X); Nicolas Quérou (School of Management and Economics - Queen's University of Belfast)
    Abstract: This paper studies optimal pricing in networks in the presence of local consumption or price externalities. It analyzes the relation between prices and nodal centrality measures. Using an asymptotic approach, it shows that the ranking of optimal prices and strategies can be reduced to the lexicographic ranking of a specific vector of nodal characteristics. In particular, this result shows that with positive consumption externalities, prices are higher at nodes with higher degree, and with relative price externalities, prices are higher at nodes which have more neighbors of smaller degree.
    Keywords: Social Networks, Network Externalities, Oligopolies
    Date: 2008–10
  2. By: Thomas Vallée (LEMNA - Université de Nantes); Murat Yildizoglu (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université de la Méditerranée - Aix-Marseille II - Université Paul Cézanne - Aix-Marseille III - Ecole des Hautes Etudes en Sciences Sociales - CNRS : UMR6579)
    Abstract: Convergence to the Nash equilibrium in a Cournot oligopoly is a question that recurrently arises as a subject of controversy in economics. The development of evolutionary game theory has provided an equilibrium concept more directly connected with adjustment dynamics, and the evolutionary stability of the equilibria of the Cournot game has been extensively studied in the literature. Several articles show that the Walrasian equilibrium is the stable ESS of the Cournot game. But no general result has been established for the difficult case of simultaneous heterogenous mutations.Authors propose specific selection dynamics to analyze this case. Vriend (2000) proposes using a genetic algorithm for studying learning dynamics in this game and obtains convergence to Cournot equilibrium with individual learning. The resulting convergence has been questioned by Arifovic and Maschek (2006). The aim of this article is to clarify this controversy: it analyzes the mechanisms that are behind these contradictory results and underlines the specific role of the spite effect. We show why social learning gives rise to the Walrasian equilibrium and why, in a general setup, individual learning can effectively yield convergence to the Cournot equilibrium. We also illustrate these general results by systematic computational experiments.
    Keywords: Cournot oligopoly; Learning; Evolution; Selection; Evolutionary stability; Nash equilibrium; Genetic algorithms
    Date: 2009–03–15
  3. By: Nicolas Coeurdacier (London Business School, Regent's Park, London NW1 4SA, UK.); Roberto A. De Santis (European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.); Antonin Aviat (Paris School of Economics, Pse--Ens, 48 bd Jourdan, F-75014 Paris, France.)
    Abstract: Cross-border mergers and acquisitions (M&As) sharply increased over the last two decades. It is often pointed out that cross-border capital reallocation is partly the result of financial liberalization policies, government policies and regional agreements. In this paper, we identify some of the main forces driving cross-border M&As using a unique database on bilateral cross-border M&As at the sectoral level (in manufacturing and services) over the period 1985-2004. We focus on the role of institutional and financial developments with a special attention to the role played by the European Integration process. We identify the impact of (i) joining the European Union and (ii) joining the Euro on cross-border M&As. We show that EU and EMU have almost doubled M&As in manufacturing towards their members from all over the globe, with an additional 50% increase within EMU countries. Conversely, the service sector did not exploit the opportunity offered by the single currency. We also show how cross-border M&As are linked to the acquirer expected profitability and provide insights on the effectiveness of policies to attract foreign capital (such as corporate tax incentives, and interventions to improve the country's financial system and product market regulations). JEL Classification: F30, F36, F41, G11.
    Keywords: Cross Mergers and Acquisitions, Gravity Equation, Euro.
    Date: 2009–03
  4. By: Davenport, Scott; Chadha, R; Gale, R
    Abstract: This paper forms part of a project titled ‘Facilitating Efficient Agricultural Markets in India: An Assessment of Competition and Regulatory Reform Requirements funded by the Australian Centre for International Agricultural Research (ACIAR). The project follows from previous research which found that India’s border reforms need to be complemented by ‘behind-the-border’ domestic reforms if government policy objectives of improved productivity, higher rural employment and incomes and enhanced food security are to be met. The project is being undertaken by Indian and Australian collaborators with expertise in agricultural policy development. Stage 1 of the project is designed to develop a common understanding among those collaborators of contemporary market based policy development principles and the extent to which they have been adopted in other developing countries. The BRICs economies of Brazil, Russia, India and China, as well as South Africa, were chosen for this purpose. A comparative overview of agricultural policy developments in these economies is underway drawing observations about policy reform impacts on agricultural production and the extent to which policy reforms have been consistent with competition policy and microeconomic reform principles applied in developed economies, such as Australia. The extent to which trade practices law has emerged in developing economies as an alternative to direct regulation is also considered. Preliminary findings are reported to facilitate broader discussion and encourage input from interested parties. Stage 2 of the project, commencing later in 2009, will involve the application of competition policy principles to the marketing regulations of a selection of agricultural industries in India. Consideration will be given to clarifying regulatory objectives, assessing their consistency with accepted forms of ‘market failure’ and assessing whether regulatory measures address those policy objectives in a manner least restrictive on competition. As well as facilitating efficient policy reform within India’s agricultural sector, the project aims to enhance the development of market based agricultural policy frameworks and the policy development skills of Indian and Australian policy makers.
    Date: 2009
  5. By: Acciaro, M.; Haralambides, H.E. (Erasmus Econometric Institute)
    Abstract: There are over 20 'components' in an international door-to-door transportation, ranging from warehousing and distribution, to forwarding, documentation, transportation, customs clearance, etc.. As tariffs in ocean transportation tend to converge due to competition and service homogenization, carriers, in competition with third party logistics service providers, strive to integrate door-to-door services under their control. In doing so, and among others, they invest heavily in logistics rather than ships that can nowadays be easily chartered in from institutional investors. Integration efforts however have been met with varying degrees of success in the face of skeptical and suspicious shippers requiring cost break down and more transparency. With the use of game theory, this paper attempts to develop winning service bundling strategies for ocean carriers, i.e. global supply chain solutions under all-in prices. Preliminary results show that, under certain conditions, bundling can be an equilibrium strategy for one or more carriers, and despite leveraging around captive liner services and potentially enhanced profits, bundling does not necessarily lead to a loss in social welfare.
    Keywords: bundling;liner shipping;vertical integration;integrated logistics
    Date: 2008–08–27
  6. By: Fay Dunkerley (CES - KU Leuven - CES - KU Leuven); André De Palma (ENS Cachan - Ecole Normale Supérieure de Cachan - Ecole Normale Supérieure de Cachan, Department of Economics, Ecole Polytechnique - CNRS : UMR7176 - Polytechnique - X); Stef Proost (CES - KU Leuven - CES - KU Leuven)
    Abstract: In this paper the problem of a city with access to two firms or facilities (shopping malls, airports, commercial districts) selling a differentiated product (shopping, flights) and/or offering a differentiated workplace is studied. Transport connections to one facility are congested. A model is presented for this asymmetric duopoly game that can be solved for a Nash equilibrium in prices and wages. A comparative statics analysis is used to illustrate the properties of the equilibrium. A numerical model is then applied to the two Brussels airports. Three stylised policies are implemented to address the congestion problem: expansion of transport capacity; congestion pricing; and a direct subsidy to the uncongested facility. Our results indicate that the degree of intrinsic differentiation between the two firms is crucial in determining the difference in profit and market share. Price and wage differences also depend on trip frequency and consumer preferences for diversity. Congestion pricing is the most effective policy tool but all three options are shown to have attractive attributes.
    Keywords: duopoly, imperfect competition, congestion, general equilibrium, airport competition
    Date: 2008–12
  7. By: Yingqi Wei; Caroline Elliott
    Abstract: The paper examines the impact of regulatory intervention on store card interest rates, for a panel of UK store cards. The analysis is timely given the public attention that high store card interest rates have attracted in the UK, and the enquiries by the Office of Fair Trading and the Competition Commission into the industry. Panel data Tobit estimation methods are used in conjunction with intervention analysis so that the impact of the investigations on store card interest rates can be examined. Results suggest that there is a significant negative impact on store card interest rates of approximately 4%. The impact of macroeconomic factors and credit card interest rates on store card interest rates are also taken into account, results indicating that store cards and credit cards should be considered as competing sources of credit.
    Keywords: Store card industry; competition policy; panel data; Tobit estimation
    Date: 2009
  8. By: Nolan, Elizabeth; Santos, Paulo
    Abstract: There is evidence of an increase in market concentration and in the importance of private plant breeding in the seed industry following the widespread adoption of Intellectual Property Rights regimes for the industry in the developed world. We use data from the US Patent and Trademark Office, US Plant Variety Protection Office and various European Plant Variety Protection databases to estimate the extent of these changes in the seed corn industry.
    Keywords: Intellectual Property Rights, R&D, market concentration, germplasm,
    Date: 2009
  9. By: Pascal Courty; Mario Pagliero
    Abstract: Concert tickets can either be sold at a single price or at multiple prices corresponding to different seating categories. We study the relationship between price discrimination and revenue by examining variations in the number of seating categories across concert, tour, artist, location, and time. Offering multiple seating categories leads to revenues that are approximately 5 percent higher than with single price ticketing. The return to price discrimination is higher in markets with more heterogeneous demand, in smaller venues and in more competitive markets. The return of increasing from three to four categories of seating is about half that of increasing from one to two.
    Keywords: Price discrimination, return to price discrimination, second degree price discrimination
    JEL: D42 L82 Z11
    Date: 2009

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