nep-com New Economics Papers
on Industrial Competition
Issue of 2012‒06‒25
thirty-one papers chosen by
Russell Pittman
US Department of Justice

  1. Quality Competition and a Demand Spillover Effect: A Case of Product Differentiated Duopoly By Tsuyoshi Toshimitsu
  2. Product innovation in a vertically differentiated model By L. Filippini; C. Vergari
  3. Dynamic Product Diversity By Caminal, Ramon
  4. Differentiation in a Two-Dimensional Market with Endogenous Sequential Entry By Michler, Jerey D.; Gramig, Benjamin M.
  5. Competition under Consumer Loss Aversion By Karle, Heiko; Peitz, Martin
  6. Estimating Market Power Exertion under Bilateral Imperfect Competition By Park, Seongjin; Chung, Chanjin; Han, Sungill; Ji, In Bae
  7. Pricing behaviour at capacity constrained facilities By Huric Larsen, Jesper Fredborg
  8. A Price Theory of Vertical and Lateral Integration (Revised Version) By Legros, Patrick; Newman, Andrew
  9. Buying to Sell: Private Equity Buyouts and Industrial Restructuring By Norbäck, Pehr-Johan; Persson, Lars; Tag, Joacim
  10. A note on acquisition of complements in a vertically differentiated market By O. Tarola; C. Vergari
  11. Outsourcing versus vertical integration: A dynamic model of industry equilibrium By Román Fossati
  12. Trust and Deterrence By Bigoni, Maria; Fridolfsson, Sven-Olof; Le Coq, Chloé; Spagnolo, Giancarlo
  13. The Stackelberg Model as a Partial Solution to the Problem of Pricing in a Network By Jolian McHardy; Michael Reynolds; Stephen Trotter
  14. Promotion Pass-Through and Consumer Search: An Empirical Analysis By Richards, Timothy J.; Gomez, Miguel I.; Lee, Jun
  15. Does merger simulation Work? A “natural experiment” in the Swedish analgesics market By Jonas BJÖRNERSTEDT; Frank VERBOVEN
  16. An analysis of market power in the U.S. brewing industry: A Simultaneous Equation Approach By McCafferty, Michael; Bhuyan, Sanjib
  17. Using Difference-in-Differences to Estimate Damages in Healthcare Antitrust: A Case Study of Marshfield Clinic By Martha A. Starr; R. Forrest McCluer
  18. Regulated Prices, Rent-Seeking, and Consumer Surplus By Jeremy Bulow; Paul Klemperer
  19. Patent licensing with Bertrand competitors By Stefano Colombo; Luigi Filippini
  20. Bargaining failures and merger policy By Burguet, Roberto; Caminal, Ramon
  21. Is a “Firm” a Firm? A Stackelberg Experiment By Andreas Hildenbrand
  22. Estimating price rigidity in vertically differentiated food product categories with private labels By Bocionek, Milena; Anders, Sven; Kiesel, Kristin
  23. Market Structure and Market Performance in E-Commerce By Hackl, Franz; Kummer, Michael E; Winter-Ebmer, Rudolf; Zulehner, Christine
  24. An Exploration of Product Choices in U.S. Biotech Corn Seed Market By Zhang, Wenhui; Shi, Guanming
  25. Price Discrimination with Asymmetric Firms: The Case of the U.S. Carbonated Soft Drinks Market By Liu, Yizao; Shen, Shu
  26. Television Advertising and Soda Demand By Lopez, Rigoberto A.; Liu, Yizao; Zhu, Chen
  27. Spatial Price Competition in the Non-Alcoholic Beverage Industry in the United States By Dharmasena, Senarath; Capps, Oral, Jr.
  28. Product differentiation and brand competition in the Italian breakfast cereal market: a distance metric approach By Sckokai, Paolo; Varacca, A.
  29. Multi-stage Market Power in the Italian Fresh Meat Industry By Moro, Daniele; Paolo, Sckokai; Veneziani, Mario
  30. Efficiency of Indian Commercial Banks: The Post-Reform Experience from Mergers & Acquisitions By Bhattacharyya, Surajit; Chatri, Ankit
  31. Competition in the Portuguese Economy:An overview of classical indicators By Ana Cristina Soares; João Amador

  1. By: Tsuyoshi Toshimitsu (School of Economics, Kwansei Gakuin University)
    Abstract: Employing the price-quality competition model in a horizontally differentiated products market, we analyze how a demand spillover effect associated with upgrading the quality level of a product affects the strategic relationship between firms and the property of a subgame perfect Nash equilibrium. In particular, we show that the strategic relationship depends on the degree of a demand spillover effect. Then, we consider the cases of second-best policy and cooperative quality choice. Furthermore, we illustrate that there exists a natural Stackelberg equilibrium under asymmetric demand spillover effects that is Pareto superior to other equilibria. Finally, we examine an optimal policy with international R&D rivalry.
    Keywords: demand spillover effect, quality choice, product differentiation, Bertrand duopoly, a natural Stackelberg equilibrium, cooperative investment, optimal investment policy
    JEL: L12 L13
    Date: 2012–06
  2. By: L. Filippini; C. Vergari
    Abstract: We study the licensing incentives of an independent input producer owning a patented product innovation which allows the downstream firms to improve the quality of their final goods. We consider a general two-part tariff contract for both outside and incumbent innovators. We find that technology diffusion critically depends on the nature of market competition (Cournot vs. Bertrand). Moreover, the vertical merger with either downstream firm is always privately profitable and it is welfare improving for large innovations: this implies that not all profitable mergers should be rejected.
    JEL: L15 L13 L24
    Date: 2012–06
  3. By: Caminal, Ramon
    Abstract: The goal of this paper is to study the frequency of new product introductions in monopoly markets where demand is subject to transitory saturation. We focus on those types of goods for which consumers purchase at most one unit of each variety, but repeat purchases in the same product category. The model considers infinitely-lived, forward-looking consumers and firms. We show that the share of potential surplus that a monopolist is able to appropriate increases with the frequency of introduction of new products and the intensity of transitory saturation. If the latter is sufficiently strong then the rate of introduction of new products is higher than socially desirable (excessive dynamic product diversity).
    Keywords: demand cycles; product diversity; repeat purchases; transitory saturation
    JEL: L12 L13
    Date: 2012–05
  4. By: Michler, Jerey D.; Gramig, Benjamin M.
    Keywords: Marketing,
    Date: 2012
  5. By: Karle, Heiko; Peitz, Martin
    Abstract: We address the effect of contextual consumer loss aversion on firm strategy in imperfect competition. Consumers are fully informed about match value and price at the moment of purchase. However, some consumers are initially uninformed about their tastes and form a reference point consisting of an expected match—value and price distribution, while others are perfectly informed all the time. We show that, in duopoly, a larger share of informed consumers leads to a less competitive outcome if the asymmetry between firms is sufficiently large and that narrowing the set of products which consumers consider leads to a more competitive outcome.
    Keywords: Contextual loss aversion , reference-dependent utility , behavioral industrial organization , imperfect competition , product differentiation
    JEL: D83 L13 L41 M37
    Date: 2012
  6. By: Park, Seongjin; Chung, Chanjin; Han, Sungill; Ji, In Bae
    Keywords: Demand and Price Analysis, Research Methods/ Statistical Methods,
    Date: 2012
  7. By: Huric Larsen, Jesper Fredborg
    Abstract: Entry of new firms can be difficult or even impossible at capacity constrained facilities, despite the actual cost of entering is low. Using a game theoretic model of incumbent firms’ pricing behaviour under these conditions, it is found that under the assumption of Bertrand competition and firms having different costs, the optimal pricing behaviour imply price stickiness and upward pricing. The findings further suggest a competitive behaviour of incumbents of disposing weaker opponents only if, it leads to weaker competitors entering the market and to use weaker opponents to shelter the incumbent. The results propose a new explanation of the mixed empirical findings on incumbent pricing to entry and suggest that competition authorities should use an effect-based approach to detect the behaviour.
    Keywords: Pricing behaviour; capacity constrained; congestion; game theory; competition policy; regulation; games of incomplete and asymmetric information; Bayesian equilibrium
    JEL: D21 L11 D43
    Date: 2012–02–01
  8. By: Legros, Patrick; Newman, Andrew
    Abstract: We present a perfectly-competitive model of firm boundary decisions and study their interplay with product demand, technology, and welfare. Integration is pri- vately costly but is effective at coordinating production decisions; non-integration is less costly, but coordinates relatively poorly. Output price influences the choice of ownership structure: integration increases with the price level. At the same time, own- ership affects output, since integration is more productive than non-integration. For a generic set of demand functions, the result is heterogeneity of ownership and perfor- mance among ex-ante identical enterprises. The price mechanism transmutes demand shifts into industry-wide re-organizations and generates external effects from techno- logical shocks: productivity changes in some firms may induce ownership changes in others. If the enterprise managers have full title to its revenues, market equilibrium ownership structures are second-best efficient. When managers have less than full revenue claims, equilibrium can be inefficient, with too little integration.
    Keywords: decision rights; incomplete contracting; industrial organization; integration; ownership
    JEL: D2 D4 L1 L2
    Date: 2012–06
  9. By: Norbäck, Pehr-Johan; Persson, Lars; Tag, Joacim
    Abstract: We investigate how temporary ownership by private equity firms affects industry structure, competition and welfare. Temporary ownership leads to strong investment incentives because equilibrium resale prices are determined partly by buyers' incentives to block rivals from obtaining assets. These strong incentives benefit consumers, but harm rivals in the industry. Evaluating optimal antitrust policy, we point out that an active private equity market can aid antitrust authorities by triggering welfare enhancing mergers and by preventing concentration in the industry. By spreading costs of specializing in restructuring over multiple markets, private equity firms have stronger incentives than incumbents to invest in acquiring specialized restructuring skills.
    Keywords: antitrust; competition policy; leveraged buyouts; mergers and acquisitions; private equity; temporary ownership
    JEL: G32 G34 L13 L22
    Date: 2012–05
  10. By: O. Tarola; C. Vergari
    Abstract: This note is concerned with the e¤ects of joint ownership of complements when they are vertically differentiated. We provide strong arguments for the positive nature of network integration among firms, while showing at the same time that, in some circumstances, anti-competitive consequences can be observed under acquisition.
    JEL: L1 L4
    Date: 2012–06
  11. By: Román Fossati (Universidad Carlos III de Madrid)
    Abstract: Empirical evidence shows that vertically integrated producers are more productive, bigger and are matched to better suppliers (with high productivity and size). I present a dynamic stochastic model of an industry with heterogeneous firms interacting as buyers and sellers, and market frictions that induce a hold-up problem to the manufacturers to account for these facts. In the model economy, an industrial structure emerges as the result of optimal investment decisions that firms undertake under uncertainty. Firms choose whether to integrate, link to external sellers or buy inputs in the market. This theoretical environment provides a natural framework to answer several questions: Why do supply relations vary across industries and across firms within industries? Why aren’t all large firms vertically integrated? How do changes in the properties of uncertainty at firm level determine differences in the vertical structure of an industry? We find that higher uncertainty is associated with higher likelihood of outsourcing; vertically integrated firms are larger and more efficient; otherwise identical downstream firms may differ in their vertical structure, and those that are vertically integrated can end up disintegrated or remain integrated. We also analyze the effects of changes in costs of vertical integration and outsourcing on welfare, aggregate output and productivity.
    Keywords: firm dynamics; vertical integration; industrial structure; idiosyncratic uncertainty
    JEL: D21 D40 D92 L10 L22
    Date: 2012–05–30
  12. By: Bigoni, Maria; Fridolfsson, Sven-Olof; Le Coq, Chloé; Spagnolo, Giancarlo
    Abstract: This paper presents results from a laboratory experiment on the channels through which different law enforcement strategies deter cartel formation. With leniency policies offering immunity to the first reporting party a high fine is the main determinant of deterrence, having a strong effect even when the probability of exogenous detection is zero. Deterrence appears then mainly driven by 'distrust', the fear of partners deviating and reporting. Absent leniency, the probability of detection and the expected fine matter the most, and low fines are exploited to punish defections. The results appear relevant to several other crimes sharing cartels' strategic features, including corruption and financial fraud.
    Keywords: Antitrust; Betrayal; Cartels; Collusion; Distrust; Fines; Leniency; Whistleblowers
    JEL: C92 D03 K21 K42 L41
    Date: 2012–06
  13. By: Jolian McHardy (Department of Economics, University of Sheffield); Michael Reynolds (School of International Studies, University of Bradford); Stephen Trotter (Centre for Economic Policy, University of Hull)
    Abstract: We consider an application of the Stackelberg leader-follower model in prices in a simple two-firm network as a possible way to help resolve externalities that can be harmful to firm profit and welfare. Whilst independent pricing on the network yields lower profit and sometimes even lower welfare than monopoly pricing, we show that by allowing the firms to collude on some prices in a first-stage and set remaining prices independently (competitively) in a second stage, both profit and welfare gains can be made.
    Keywords: Stackelberg; pricing; network
    JEL: L11 L14 L51
    Date: 2012–06
  14. By: Richards, Timothy J.; Gomez, Miguel I.; Lee, Jun
    Keywords: Cereal, Panel Data, Retail-Price Pass-Through, Threshold Error Correction Model, Price Transmission Asymmetry, Industrial Organization, Marketing, C32, Q17,
    Date: 2012
    Abstract: We exploit a natural experiment associated with a large merger in the Swedish market for analgesics (painkillers). We confront the predictions from a merger simulation study, as conducted during the investigation, with the actual merger effects over a two-year comparison window. The merger simulation model is based on a constant expenditures specification for the nested logit model (as an alternative to the typical unit demand specification). The model predicts a large price increase of 34% by the merging firms, because there is strong market segmentation and the merging firms are the only competitors in the largest segment. The actual price increase after the merger is of a similar order of magnitude: +42% in absolute terms and +35% relative to the “control group” of non-merging rivals. These findings suggest strong support for merger simulation and structural models of competition more generally. But a closer look at a wider range of merger predictions leads to more nuanced conclusions. First, both merging firms raised their prices by a similar percentage, while the simulation model predicted a larger price increase for the smaller firm. Second, the merging firms’ market shares dropped (as predicted), but one of the outsider firms’ market share also dropped (because it raised prices by a larger amount than predicted).
    Date: 2012–06
  16. By: McCafferty, Michael; Bhuyan, Sanjib
    Keywords: Agribusiness, Marketing,
    Date: 2012
  17. By: Martha A. Starr; R. Forrest McCluer
    Abstract: In calculating damages in healthcare antitrust cases, the difference-in-difference (DID) approach provides a potentially valuable means of controlling for lawful factors that influence prices, such as case-mix and quality of care, as distinct from price differentials due to unlawful behavior. After first comparing DID to traditional methods of estimating damages, this paper uses DID to analyze data from a well-known case against Marshfield Clinic, a large multispecialty group practice that was found to have illegally allocated markets for physician services in Central Wisconsin. Using a specification similar to what was used in the case, we find that illegal behavior accounted for about two-fifths of the Clinic's extra increase in costs per patient during the damage period. The courts, however, were not persuaded that the analysis adequately controlled for legal factors. We discuss potential pitfalls in using DID to estimate damages suggested by the case, as well as possible ways around them.
    Keywords: healthcare antitrust, differences-in-differences, damage estimation JEL Classifications: I11, L4, K21, K41, C20
    Date: 2012–02
  18. By: Jeremy Bulow (Graduate School of Business, Stanford University, USA); Paul Klemperer (Nuffield College, Oxford University)
    Abstract: Price controls lead to misallocation of goods and encourage rent-seeking. The misallocation effect alone ensures that a price control always reduces consumer surplus in an otherwise-competitive market with convex demand if supply is more elastic than demand; or with log-convex demand (e.g., constantelasticity) even if supply is inelastic. The same results apply whether rationed goods are allocated by costless lottery, or whether costly rent-seeking and/or partial decontrol mitigates the inefficiency. Our analysis exploits the observation that in any market, consumer surplus equals the area between the demand curve and the industry marginal revenue curve.
    Keywords: Price Control, Rationing, Allocative Efficiency, Microeconomic Theory, Marginal Revenue, Minimum Wage, Rent Control, Consumer Welfare, Rent Seeking
    JEL: D45 D61 D6
    Date: 2012–03–01
  19. By: Stefano Colombo (DISCE, Università Cattolica); Luigi Filippini (DISCE, Università Cattolica)
    Abstract: We study optimal licensing contracts in a differentiated Bertrand duopoly, and show that per-unit contracts are preferred to ad valorem contracts by the patentee, while welfare is higher under the ad valorem contract. The difference between Cournot and Bertrand case is explained in terms of quantity effect and profits effect.
    Keywords: Two-part contracts; patent licensing, ad valorem royalties; Bertrand
    JEL: D45
    Date: 2012–04
  20. By: Burguet, Roberto; Caminal, Ramon
    Abstract: In this paper we study the optimal ex-ante merger policy in a model where merger proposals are the result of strategic bargaining among alternative candidates. We allow for firm asymmetries and, in particular, we emphasize the fact that potential synergies generated by a merger may vary substantially depending on the identity of the participating firms. The model demonstrates that, under some circumstances, relatively inefficient mergers may take place. That is, a particular merger may materialize despite the existence of an alternative merger capable of generating higher social surplus and even higher profits. Such bargaining failures have important implications for the ex-ante optimal merger policy. We show that a more stringent policy than the ex-post optimal reduces the scope of these bargaining failures and raises expected consumer surplus. We use a bargaining model that is flexible, in the sense that its strategic structure does not place any exogenous restriction on the dendogenous likelihood of feasible mergers.
    Keywords: bargaining; endogenous mergers; merger policy; synergies
    JEL: L13 L41
    Date: 2012–05
  21. By: Andreas Hildenbrand (University of Giessen)
    Abstract: Industrial organization is mainly concerned with the behavior of large firms. Experimental industrial organization therefore faces a problem: How can firms be brought into the laboratory? The main approach relies on framing: Call individuals “firms”! This experimental approach is not in line with modern industrial organization, according to which a firm’s market behavior is also determined by its organizational structure. In this paper, a Stackelberg experiment is considered in order to answer the question whether framing individual decision making as organizational decision making or implementing an organizational structure is more effective in generating profit-maximizing behavior. Firms are either represented by individuals or by teams. I find that teams’ quantity choices are more in line with the assumption of profit maximization than individuals’
    Keywords: industrial organization, Stackelberg game, individual behavior, team behavior, framing, experimental economics.
    JEL: C72 C91 C92 D43 L13
    Date: 2012
  22. By: Bocionek, Milena; Anders, Sven; Kiesel, Kristin
    Abstract: Relevance of the Topic: The rapid emergence of retail store brands, private labels (PL), over the past decades has created new and stiff competition for many established manufacturers of national grocery brands (NB). Apart from sizeable market shares in many staple food categories, retailers have successfully introduced new differentiated PL product lines to enter many higher quality segments (Dubois and Jódar-Rosell, 2010). PLs now account for 17% and 24% of the retail markets in the United States and Canada, respectively. Previous economic literature has addressed various issues and dimensions related to the competitive impact of PL including their economic significance to retail chains (Chintagunta et al. 2002), growth and development of PL product markets (Hoch and Banerji 1993), competitive interactions between PLs and NBs Cotterill et al. 2000; Bontemps et al. 2008; Karray and Herran 2009; Volpe 2010) and the use of private labels in exerting retail market power (Meza and Sudhir 2010). The economic literature has also taken great interest in retailer’s strategic use of PLs to counter the prior dominance of NB manufacturers (Richards, Hamilton and Patterson, 2010). However, the agri-food industrial organization literature has paid limited attention to the degree of price stability (rigidity) in the grocery-retailing sector given the otherwise high degree of price instability of many agricultural commodity and markets for intermediary goods. Of particular interest in this context has been the importance of the retail sales (discounting) phenomenon (Hosken and Reiffen 2001). Existing empirical studies show that many food products in retailing are characterized by relatively long periods of unchanged prices, followed by recurring periods of lower prices and after that a return to the initial level (Hosken and Reiffen 2001; Moeser 2002). Hosken, Matsa and Reiffen (2001) confirm that that within a product category the same items may be put on sale repeatedly, while others are rarely or never used in retail sales events. A number of possible triggers for price rigidity have been discussed. Differences in strategic management decisions between retail formats (Owen and Trzepacz 2002), the use of psychological pricing points (Slade 1998; Blinder et al. 1998; levy et al. 2011), and the economic literature evolving around concept of menu cost -the cost of changing retail shelf prices ((Levy et al. 1997; Owen and Trzepacz 2002). Despite the above evidence, still, empirical studies on price rigidity present in grocery retailing are underrepresented. And available evidence is mostly comprised of aggregate and largely descriptive analyses of cross-categorical data. Research Methodology: The objective of this paper to estimate the degree of price rigidity within vertically differentiated grocery-retail product categories that feature competing private labels and national brands. 1) To estimate price rigidity in categories where vertically differentiated PLs and NBs (basic, standard, premium) compete for consumer demand. The literature on retail private labels provides evidence of the increasing quality and differentiation of PLs used a strategic in the fight for market shares with established NBs in higher quality and premium product segments (e.g. organic). 2) To investigate the potential cost advantage if PLs and the impact of product-level retail margins as a determinant of price rigidity. In context of the increasing share of PLs bargaining power and PL retail margins have been discussed as potential contributors to retailer strategic pricing and promotional behavior. Available UPS-level wholesale price (price paid by the retailer) data enables us to analyze these components in the strategic uses of private labels and their potential impact on price rigidity across products and categories. 3) To test whether differences in underlying retailer management or distribution area (e.g. regional store management division), store size and configuration (e.g. store-storage area ratio), and store location (e.g. rural, urban, suburban) have an impact on price rigidity across vertically differentiated PLs and NBs. The analysis is based on a set of weekly store-level scanner data for a major North American retail chain with stores in the United States and Canada. Our data structure closely resembles the data set used by Eichenbaum, Jaimovich, and Rebelo (AER 2011) who assess the importance of nominal rigidities for retail pricing. The data is made available through the SIEPR-Giannini Data Center and covers 2004-2007 product-level sales in 200 UPC product categories for approximately 2,200 and 250 stores in the U.S. and Canada, respectively. Two case studies, salad dressing and packaged slide bacon, were chosen with regards to the paper’s focus of estimating rigidity among and between vertically differentiated PLs and NBs. The methodological framework is twofold. A regression approach used to explain price rigidity extends extents previous work by Herrmann et al. (2009) and Weber (2009). A second probabilistic model is used to estimate the probability of a price adjustment building on Kano’s (2007) paper. Potential for generating discussion during the meeting Our detailed case-study analysis of retail price rigidity and focus on vertically differentiated food–product categories reveals a number of interesting findings that go beyond existing research. Overall, our regression results indicate that retail price changes in both categories are not fully explained by retail sales and price jumps. We find some evidence of strategic retail behavior that deviates from the common ‘Hi-Lo’ retail price setting, where sales prices are followed by pre-promotion price levels. The results further reveal that price rigidity decreases as the share of discounts relative to the number of price observations increases. With sales increasing by 1%, price rigidity decreases by 0.5 %. We confirm the same qualitative effects for wholesale price adjustments on price rigidity. If the share of price wholesale price changes increases by 1%, price rigidity decreases by 0.035 %. Our results largely confirm previous results and offer several new contributions on the effect of wholesale price adjustments on retail price rigidity.
    Keywords: Price ridgity, private labels, quality levels, wholesale price, Demand and Price Analysis, Industrial Organization, Marketing,
    Date: 2012
  23. By: Hackl, Franz; Kummer, Michael E; Winter-Ebmer, Rudolf; Zulehner, Christine
    Abstract: We investigate the causal effect of market structure on market performance in the consumer electronics. We combine data from Austria's largest online site for price comparisons with retail data on wholesale prices provided by a major hardware producer for consumer electronics. We observe input prices of firms, and all their moves in the entry and the pricing game over the whole product lifecycle. Using this information for 70 digital cameras, we generate instrumental variables for the number of firms in the market based on the shops' entry decisions on other product markets in the past. We find that instrumenting is particularly important for estimating the effect of competition on the markup of the price leader.
    Keywords: Market Performance; Market Structure; Markup; Price Dispersion; Product Lifecycle; Retailing
    JEL: D43 L11 L13 L81
    Date: 2012–06
  24. By: Zhang, Wenhui; Shi, Guanming
    Abstract: We investigate the market and firm-specific factors that may impact firms’ product choices in the U.S. biotech corn seed market. Specifically, we estimate how the competition effects, the conglomeration effect, the similarity effect, and other market shifters influence firms’ variety choices under imperfect competition. In addition, we examine and compare such responses among different types of firms, including integrated biotech firms versus seed companies, and the incumbent firms versus the entrant firms.
    Keywords: variety choice, imperfect competition, biotech seeds, Crop Production/Industries, Research Methods/ Statistical Methods,
    Date: 2012
  25. By: Liu, Yizao; Shen, Shu
    Abstract: This paper investigates the relationship between price discrimination and vertical product differentiation, using National Brands and Private Labels in the Carbonated Soft Drink market as a case study. We decompose prices difference into quantity dis- count and cost difference across packagings and recover marginal cost by a structural demand model of consumer preference and firm behavior. Our results suggest that in the carbonated soft drinks market, both national brands and private labels offers quantity discount to consumers: consumers pay lower unit prices when buying larger packed soft drinks. In addition, the price curvature parameter is lower for private la- bels, implying that the price schedule is more curved for private label soft drinks than national brands. This means in the CSD market, private labels have more ability to perform price discrimination, segment consumers, and generate high revenues, com- paring to national brands. This result, to some extent, explains the growing market shares of private label soft drinks and the significant percentage of total sales from private labels goods for retailers, such as Wal-Mart and Target.
    Keywords: Consumer/Household Economics, Industrial Organization, Marketing,
    Date: 2012
  26. By: Lopez, Rigoberto A.; Liu, Yizao; Zhu, Chen
    Abstract: This study examines the effects of television advertising on consumer demand for carbonated soft drinks using a random coefficients logit model (BLP) with household and advertising data from seven U.S. cities over a three year period. We find that advertising decreases the price elasticity of demand, indicating that advertising plays predominantly a persuasive, therefore anti-competitive role in this market. Further results show that brand spillover effects are significant and that measuring advertising with gross rating points (GRPs) outperforms measuring it with expenditures, as is conventionally done. Finally, simulation results indicate that eliminating all television advertising would lower market shares of sodas as consumers migrate to other beverages such as juices, water and milk
    Keywords: advertising, demand, competition, consumer behavior, sodas, carbonated soft drinks, Demand and Price Analysis, Industrial Organization, Marketing, D12, L66, Q18, I18,
    Date: 2012–06–01
  27. By: Dharmasena, Senarath; Capps, Oral, Jr.
    Keywords: non-alcoholic beverages, spatial price competition, Nielsen data, Demand and Price Analysis, Industrial Organization, Marketing, C21, D11, L11,
    Date: 2012–06
  28. By: Sckokai, Paolo; Varacca, A.
    Abstract: This article employs a nation-wide sample of supermarket scanner data to study product and brand competition in the Italian breakfast cereal market. An Almost Ideal Demand System (AIDS) modelled to include Distance Metrics (DMs) and consistent with the methodology proposed by Pinske, Slade and Brett (2002), is estimated to study demand responses, substitution patterns, own-price and cross-price elasticities. Estimation results indicate a certain level of brand loyalty and opposite attitudes towards product type. Elasticities point out the presence of patterns of substitution within products sharing the same brand and similar nutritional characteristics.
    Keywords: Industrial Organization,
    Date: 2012
  29. By: Moro, Daniele; Paolo, Sckokai; Veneziani, Mario
    Abstract: In line with the New Empirical Industrial Organisation literature, a three-stage modelling of the fresh meat industry in Italy is developed to evaluate the extent of the oligopsonistic behaviour of downstream operators on upstream ones. Moreover, retailers are allowed to exercise oligopolistic market power over consumers purchasing three types of meats assumed substitutable in consumption. Employing a flexible technique for estimating such a model on a uniquely compiled database, evidence that market power is mainly exercised at the retail is unveiled. In fact, roughly 75 – 85% of the price margin at the retail level can be associated with the occurrence of oligopolistic market power. Empirical findings do not support the existence of oligopsonistic power of retailers over processors and of the latter over farmers.
    Keywords: market power, fresh meat, multistage marketing chain, Italy, Demand and Price Analysis, Industrial Organization, C330, L130, Q110,
    Date: 2012
  30. By: Bhattacharyya, Surajit; Chatri, Ankit
    Abstract: This paper explores the impact of M&A on technical efficiency of Indian commercial banks during the second decade of reforms. We use DEA to compute the relative technical efficiency of banks that participated in M&A activities. The technical efficiency is computed under both 'common' and 'separate' frontier with the assumption of 'constant' as well as 'variable' returns to scale. We also compare the post-amalgamation efficiency scores of the participating banks with that of a control group comprising of such banks that did not undergo any consolidation since 1991. Our results indicate evidence of efficiency gains for the merging and/or acquiring banks. At the same time there are banks that have experienced deterioration in their post-M&A average efficiency levels.
    Keywords: Commercial Banking; DEA; Technical Efficiency; Control Group
    JEL: C61 G21
    Date: 2012–06–05
  31. By: Ana Cristina Soares; João Amador
    Abstract: This article offers an extensive overview of competition indicators in the Portuguese economy in the period 2000-2009. The article covers qualitative competition indicators as well as classical<br />profitability and concentration measures, focusing on the differences between tradable and non-tradable sectors. The analysis carried out is distinct from that of competition authorities, aiming to set an overall scenario for competition developments. The article concludes that, although there are apparently no widespread problems, there is substantial room for improvements in business competition environment in several markets, notably in the non-tradable area.
    JEL: L10 L60 O50
    Date: 2012

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