nep-com New Economics Papers
on Industrial Competition
Issue of 2013‒12‒15
28 papers chosen by
Russell Pittman
US Government

  1. Free Entry and Social Efficiency under Unknown Demand Parameters By Batlome Janjgava
  2. Monopoly price discrimination with constant elasticity demand By Aguirre Pérez, Ignacio; Cowan, Simon George
  3. Deceptive Advertising with Rational Buyers By Giovanni Ursino; Salvatore Piccolo; Piero Tedeschi
  4. Market Size, Competition, and the Product Mix of Exporters By Marc Melitz; Thierry Mayer; Gianmarco I.P. Ottaviano
  5. “One more lie: the ‘Monday effect’ in Spain’s retail petrol market” By Juan Luis Jiménez; Jordi Perdiguero
  6. Indirect Network Effects and the Quality Dimension: A Look at the Gaming Industry By Jin-Hyuk Kim; Jeffrey T. Prince; Calvin Qiu
  7. An Experimental Approach to Merger Evaluation By Christopher T. Conlon; Julie Holland Mortimer
  8. Do MSRPs Decrease Prices? By Babur De los Santos; In Kyung Kim; Dmitry Lubensky
  9. Service-based versus Facility-based Competition in Local Access Networks By M. Bourreau; P. Dogan
  10. The Relative Efficacy of Price Announcements and Express Communication for Collusion: Experimental Findings By Joseph E. Harrington, Jr; Roberto Hernan-Gonzalez; Praveen Kujal
  11. Disruption costs and the choice of technology By Carlos J.Pérez; Carlos J.Ponce
  12. Optimal sales schemes for network goods By Alexei Parakhonyak; Nick Vikander
  13. Damage rules and the patent hold-up problem : An analysis of Article L. 615-7 By Bertrand Chopard; Thomas Cortade; Eric Langlais
  14. Essays on financial fragility and regulation. By Ma, K.
  15. The Interaction between Private and Public IPR Protection in a Software Market: A Positive and Normative Analysis By Kresimir Zigic; Jiri Strelicky; Michael Kunin
  16. Europe's Revolving Doors: Import Competition and Endogenous Firm Entry Institutions By Povilas Lastauskas
  17. Communication and Efficiency in Competitive Coordination Games By Cason, Timothy; Sheremeta, Roman; Zhang, Jingjing
  18. Who Disseminates Technology to Whom, How, and Why: Evidence from Buyer-Seller Business Networks By Tomohiro MACHIKITA; Yasushi UEKI
  19. Adverse selection and risk adjustment under imperfect competition By Normann Lorenz
  20. Termination fees revisited. By Jullien, Bruno; Rey, Patrick; Sand-Zantman, Wilfried
  21. Competing for Customers in a Social Network (R) By Pradeep Dubey; Rahul Garg; Bernard De Meyer
  22. Cooperation in Product Development and Process R&D Between Competitors By M. Bourreau; P. Dogan
  23. Modularity and Product Innovation in Digital Markets By M. Bourreau; P. Dogan; M. Manant
  24. Exclusive Dealing: Before Bork, and Beyond By J. Mark Ramseyer; Eric Rasmusen
  25. Measuring Consumer Preferences for Video Content Provision via Cord-Cutting Behavior By Jeffrey T. Prince; Shane Greenstein
  26. Bargaining over a Divisible Good in the Market for Lemons By Dino Gerardi; Lucas Maestri
  27. The Regulation of Entry By Simeon Djankov; Rafael LaPorta; Florencio Lopez-de-Silanes; Andrei Shleifer
  28. Liberalization of electricity retailing in Europe: coming back or going forth? By Silvia Concettini; Anna Créti

  1. By: Batlome Janjgava
    Abstract: In the paper, I examine free entry in homogeneous product markets and its social efficiency. Previous research on free entry in homogeneous product markets has shown that under Cournot oligopoly with fixed setup costs the free entry equilibrium always delivers excessive entry. In contrast, I demonstrate in this paper that free entry along with excessive entry might also lead to a socially insufficient number of firms when a demand parameter uncertainty is considered. My findings support the validity of the traditional wisdom in industrial organization that free entry is desirable for social efficiency and call for revision of restrictive entry regulation practices which been based on previous research findings.
    Keywords: free entry; welfare; collusion; beliefs; learning; self-confirming equilibrium; escape dynamics;
    JEL: D60 D83 D43 L13 L40 L51
    Date: 2013–10
  2. By: Aguirre Pérez, Ignacio; Cowan, Simon George
    Abstract: This paper presents new results on the welfare e¤ects of third-degree price discrimination under constant elasticity demand. We show that when both the share of the strong market under uniform pricing and the elasticity di¤erence between markets are high enough,then price discrimination not only can increase social welfare but also consumer surplus.
    JEL: L12 L13 D42
    Date: 2013–11
  3. By: Giovanni Ursino (Università Cattolica del Sacro Cuore); Salvatore Piccolo (Università Cattolica delSacro Cuore di Milano and CSEF); Piero Tedeschi (Università Cattolica del Sacro Cuore)
    Abstract: We study a Bertrand game where two sellers supplying products of different and unverifiable qualities can outwit potential clients through (costly) deceptive advertising. We characterize a class of pooling equilibria where sellers post the same price regardless of their quality and low quality ones deceive buyers. Although in these equilibria low quality goods are purchased with positive probability, the buyer’s (expected) utility can surprisingly be higher than in a fully separating equilibrium, which suggests that (absent price regulation) a per se rule banning deceptive practices may harm consumers. We also argue that sellers invest more in deceptive advertising the better their reputation vis-à-vis potential clients – i.e., firms that are better trusted by customers, have greater incentives to invest in deceptive advertising. Finally, we characterize the optimal monitoring effort exerted by a regulatory agency who seeks to identify and punish deceptive practices. We show that consumer surplus maximization requires a higher monitoring e¤ort than social welfare maximization.
    Keywords: Misleading Advertising, Deception, Bayesian Consumers, Asymmetric Information
    JEL: L13 L15 L4
    Date: 2013–12–10
  4. By: Marc Melitz; Thierry Mayer; Gianmarco I.P. Ottaviano
    Abstract: We build a theoretical model of multi-product firms that highlights how competition across market destinations affects both a firm's exported product range and product mix. We show how tougher competition in an export market induces a firm to skew its export sales towards its best performing products. We find very strong confirmation of this competitive effect for French exporters across export market destinations. Theoretically, this within firm change in product mix driven by the trading environment has important repercussions on firm productivity. A calibrated fit to our theoretical model reveals that these productivity effects are potentially quite large.
    Date: 2013–01
  5. By: Juan Luis Jiménez (Universidad de Las Palmas de Gran Canaria); Jordi Perdiguero (Universitat Autònoma de Barcelona)
    Abstract: Empirical evidence drawn from the economic literature points to a low level of competition in the retail petrol market. Similar evidence can be found for the Spanish market. In fact, both Spain’s antitrust authority (Comisión Nacional de la Competencia) and its energy regulator (Comisión Nacional de la Energía) have recently initiated disciplinary proceedings against the majors on the grounds of suspected price manipulation in the retail petrol market. They are accused of cutting retail prices on Mondays so as to distort the rank position of Spain in European Union statistics in a practice that has received the name of the ‘Monday effect’. Here, we analyze this effect by constructing a database that includes daily retail prices for all petrol stations in Spain in the period 2009-2012, and a more detailed database for the city of Barcelona in 2013. Our estimations confirm that: i) in 2011 and 2012 prices fell on Mondays at retailers branded by majors; ii) prices were unchanged at stations in our two control groups; iii) prices were also seen to fall when a more detailed analysis was conducted, and this price cut was also found in 2013. In short, one more indicator of collusion in this sector and … one more lie.
    Keywords: Petrol; Antitrust; Monday effect. JEL classification: L13, L59, L71.
    Date: 2013–12
  6. By: Jin-Hyuk Kim (University of Colorado at Boulder); Jeffrey T. Prince (Department of Business Economics and Public Policy, Indiana University Kelley School of Business); Calvin Qiu (Independent)
    Abstract: We present theoretical and empirical analyses of indirect network effects for a hardware market with vertically differentiated complementary goods. We demonstrate that the heretofore typical use of aggregate software counts can mis-measure the presence and/or magnitude of indirect network effects. We show this is true when there is correlation along the quality dimension between the marginal utility of software and either 1) the response of software supply to an increase in installed base, or 2) conditional variation in software availability. We illustrate this idea using a simple monopolistic competition model, and through empirical analysis of the 7th-generation console market.
    Keywords: indirect network effects, vertical differentiation, video game industry
    JEL: L14 L82
    Date: 2013–05
  7. By: Christopher T. Conlon; Julie Holland Mortimer
    Abstract: The 2010 Department of Justice and Federal Trade Commission Horizontal Merger Guidelines lay out a new standard for assessing proposed mergers in markets with differentiated products. This new standard is based on a measure of ``upward pricing pressure,'' (UPP) and the calculation of a ``gross upward pricing pressure index'' (GUPPI) in turn relies on a ``diversion ratio,'' which measures the fraction of consumers of one product that switch to another product when the price of the first product increases. One way to calculate a diversion ratio is to estimate own- and cross-price elasticities. An alternative (and more direct) way to gain insight into diversion is to exogenously remove a product from the market and observe the set of products to which consumers actually switch. In the past, economists have rarely had the ability to experiment in this way, but more recently, the growth of digital and online markets, combined with enhanced IT, has improved our ability to conduct such experiments. In this paper, we analyze the snack food market, in which mergers and acquisitions have been especially active in recent years. We exogenously remove six top-selling products (either singly or in pairs) from vending machines and analyze subsequent changes in consumers' purchasing patterns, firm profits, diversion ratios, and upward pricing pressure. Using both nonparametric analyses and structural demand estimation, we find significant diversion to remaining products. Both diversion and the implied upward pricing pressure differ significantly across manufacturers, and we identify cases in which the GUPPI would imply increased regulatory scrutiny of a proposed merger.
    JEL: L0 L4 L44
    Date: 2013–12
  8. By: Babur De los Santos (Department of Business Economics and Public Policy, Indiana University Kelley School of Business); In Kyung Kim (Department of Economics, Indiana University); Dmitry Lubensky (Department of Business Economics and Public Policy, Indiana University Kelley School of Business)
    Abstract: The nature of manufacturer’s suggested retail prices (MSRP) and whether their effect is pro or anticompetitive is not well understood. Opposing theories suggest that manufacturers may attempt to reduce retail prices to deter double marginalization or increase retail prices to foster upstream or downstream collusion. We exploit a policy experiment in South Korea in which MSRPs were banned and then reinstated one year later to estimate their impact on prices. The ban increased prices by 2.3 percent and the reinstatement decreased prices by 2.6 percent, demonstrating the pro-competitive effect of MSRPs. Based on a lack of evidence that recommendations act as binding price ceilings, we offer an alternative explanation in which MSRPs provide information to searching consumers. We demonstrate that the removal of recommendations can reduce search and increase prices.
    Keywords: recommended retail price, suggested retail price, list price, non-binding price, search with uncertainty, vertical restraints, resale price maintenance
    JEL: L11 L40 L81
    Date: 2013–12
  9. By: M. Bourreau; P. Dogan
  10. By: Joseph E. Harrington, Jr (Dept of Business Economics & Public Policy, The Wharton School, University of Pennsylvania); Roberto Hernan-Gonzalez (Dept of Economic Theory and History, Universidad de Granada); Praveen Kujal (Middlesex University)
    Abstract: Collusion is when firms coordinate on suppressing competition, and coordination typically requires that firms communicate in some manner. This study conducts experiments to determine what modes of communications are able to produce and sustain collusion and how the efficacy of communication depends on firm heterogeneity and the number of firms. We consider two different communication treatments: non-binding price announcements and unrestricted written communication. Our main findings are that price announcements allow subjects to coordinate on a high price but only under duopoly and when firms are symmetric. While price announcements do result in higher prices when subjects are asymmetric, there is little evidence that they are coordinating their behavior. When subjects are allowed to engage in unrestricted communication, coordination on high prices occurs whether they are symmetric or asymmetric. We find that the incremental value to express communication (compared to price announcements) is greater when firms are asymmetric and there are more firms.
    Date: 2013
  11. By: Carlos J.Pérez; Carlos J.Ponce (Facultad de Economía y Negocios, Universidad Alberto Hurtado)
    Abstract: We study technology adoption in a dynamic model of price competition. Adoption involves disruption costs and learning by doing. Because of disruption costs, the adopting firm begins in a market disadvantage, which may persist if its rival captures the buyers it needs to learn the technology. The prospect of future rents by rival results in (i) failure to adopt Pareto superior technologies; (ii) an equilibrium preference for the choice of technologies with smaller (discounted) social value but flows payoffs that are received earlier firm is exposed to more competition.
    Keywords: Technology adoption, adoption breakdowns, triangular arrays, dynamics competition, endogenous impatience
    JEL: L10 O30
    Date: 2013–10
  12. By: Alexei Parakhonyak (National Research University Higher School of Economics, Moscow, Russia.); Nick Vikander (University of Copenhagen, Department of Economics.)
    Abstract: This paper examines the optimal sequencing of sales in the presence of network externalities. A firm sells a good to a group of consumers whose payoff from buying is increasing in total quantity sold. The firm selects the order to serve consumers so as to maximize expected sales. It can serve all consumers simultaneously, serve them all sequentially, or employ any intermediate scheme. We show that the optimal sales scheme is purely sequential, where each consumer observes all previous sales before choosing whether to buy himself. A sequential scheme maximizes the amount of information available to consumers, allowing success to breed success. Failure can also breed failure, but this is made less likely by consumers’ desire to influence one another’s behavior. We show that when consumers differ in the weight they place on the network externality, the firm would like to serve consumers with lower weights first. Our results suggests that a firm launching a new product should first target independent-minded consumers who can serve as opinion leaders for those who follow.
    Keywords: Product launch, Network externality, Sequencing of sales
    JEL: M31 D42 D82 L12
    Date: 2013
  13. By: Bertrand Chopard; Thomas Cortade; Eric Langlais
    Abstract: This paper provides an analysis of two damage rules (Lost Pro…fit versus Unjust Enrichment) introduced in the French Code de la Propriété Intellectuelle in 2007 (Loi du 27 Octobre 2007, Art. L. 615-7). We use a simple sequential game where both the decisions to infringe and to enforce the patent, as well as the decisions to accomodate, settle or litigate the case, and the outputs decisions (Cournot competition) are endogenous. We characterize the equilibria associated with each rule, and compare their properties. We show that: 1/ the Unjust Enrichment rule provides Patentees with higher damages compensation than the Lost Pro…fit one; however, 2/ Lost Profi…t induces more deterrence of infringement, and is associated with less trials than Unjust Enrichment; 3/ Unjust Enrichment may deter the Patentee to enforce his right; 4/ when there is a positive probability that the case settles, Patentee's expected utility is higher under Lost Profi…t than under Unjust Enrichment.
    Keywords: lost profi…t rule, unjust enrichment rule, intellectual property rights, patent litigations, pretrial negotiations
    JEL: L1 L4 D8 K2 K4
    Date: 2013
  14. By: Ma, K. (Tilburg University)
    Abstract: Abstract: This thesis investigates various issues in regulation, with three chapters on financial fragility and banking regulation, and one chapter on competition policy. Chapter 2 studies banks’ herding driven by their need for market liquidity, highlighting a trade-off between systemic risk and liquidity creation. The model also suggests that systemic risk and leverage are mutually reinforcing, offering an explanation of why banks collectively exposed themselves to mortgage-backed securities prior to the crisis, and why the exposure grew when banks were increasingly leveraged using wholesale short-term funding. Chapter 3 examines the possible trade-off between banking competition and financial stability by highlighting banks' endogenous leverage. Competition is shown to affect portfolio risk, insolvency risk, liquidity risk and systemic risk differently. The model leads us to revisit the existing empirical literature using a more precise taxonomy of risk and take into account endogenous leverage, thus clarifying a number of apparently contradictory empirical results. Chapter 4 presents a model where fire-sales and bank runs are self-fulfilling and mutually reinforcing. With endogenous fire sale prices, the model delivers two new policy insights: First Bank capital can have unintended consequences on illiquidity and contagion, and therefore is not a panacea for financial stability. Second, as acknowledging a crisis aggravates financial contagion, full commitment to regulatory transparency can be suboptimal from a social welfare point-of-view. Chapter 5 is devoted to antitrust policy. It studies how cost asymmetry affects the effectiveness of corporate leniency programs. The analysis shows that using leniency programs involves a trade-off between ex-ante deterrence and ex-post efficiency. For traditional antitrust investigation can both deter cartels and improve allocation, leniency programs should be viewed as a second best solution for budget-constrained antitrust authorities.
    Date: 2013
  15. By: Kresimir Zigic; Jiri Strelicky; Michael Kunin
    Abstract: Two software developers, each offering a product variety of different (exogenously given) quality, compete in prices for heterogeneous users who choose from purchasing a legal version, using an illegal copy, and not using a product at all. Using an illegal version violates intellectual property rights (IPR) and is thus punishable when disclosed. If a developer considers the level of piracy as high, he can introduce protection for his product in the form of restricting support and other services to illegal users. We study the positive and normative implications of the interaction between a regulator's IPR protection and the IPR protection that producers themselves may undertake to protect their IPR against the end users' software piracy. In particular, we aim to establish when the two forms of IPR protections (public and private) act as complements and when as substitutes to each other. Finally, we explore the situations in which there is (or is not) a conflict of interest between the regulator and the developers in this respect.
    Keywords: vertically differentiated duopoly; software piracy; Bertrand competition; private and public intellectual property rights protection;
    JEL: D43 L11 L21 O25 O34
    Date: 2013–09
  16. By: Povilas Lastauskas
    Abstract: The close relationship between politics and enterprises made the revolving door wide open and reinforced business influence on political decisions. The paper analyses relationship between firm entry institutions and import competition inside the EU. Though there is a clear tendency for entry and startup costs to decrease over time and particularly in space, I challenge the view that greater openness to trade automatically leads to improved firm entry institutions. My model enables calculating business entry impediments whereas lobbying game produces structural estimates of the counterfactual levels of trade, prices and earnings had no business obstacles existed. Conditions for active entry barriers are laid down in terms of extensive margin and asymmetries in technology and trade costs. Importantly, the model demonstrates that startling differences in firm regulation can be explained resorting to relative gains and losses accruing in a fully trading network as is the EU. More generally, understanding factors which affect imports is crucial for any model seeking to uncover ex ante welfare effects of trade
    Keywords: trade, entry institutions, firm heterogeneity, foreign competition
    JEL: C31 E02 F12 F14 F15 F55
    Date: 2013–09
  17. By: Cason, Timothy; Sheremeta, Roman; Zhang, Jingjing
    Abstract: Costless pre-play communication has been found to effectively facilitate coordination and enhance efficiency in games with Pareto-ranked equilibria. We report an experiment in which two groups compete in a weakest-link contest by expending costly efforts. Allowing intra-group communication leads to more aggressive competition and greater coordination than control treatments without any communication. On the other hand, allowing inter-group communication leads to less destructive competition. As a result, intra-group communication decreases while inter-group communication increases payoffs. Our experiment thus provides an example of an environment where communication can either enhance or damage efficiency. This contrasts sharply with experimental findings from public goods and other coordination games, where communication always enhances efficiency and often leads to socially optimal outcomes.
    Keywords: contest, between-group competition, within-group competition, cooperation, coordination, free-riding, experiments
    JEL: C70 D72 H41
    Date: 2012
  18. By: Tomohiro MACHIKITA (Institute of Developing Economies and Stanford University); Yasushi UEKI (Institute of Developing Economies)
    Abstract: This paper investigates the relationship between firm-level upgrading and buyer-seller business networks in order to better understand how and to whom technology transfer occurs. Using firm’s self-reported buyer and supplier network data from business–to–business (B2B) markets in Southeast Asia, this paper finds the following results: (1) Firms are more likely to achieve product and process innovation if they invest in inhouse R&D and transfer technology from their production partners; (2) product and process innovation varies considerably across different types of buyers and suppliers; (3) negative impacts of local suppliers suggest the importance of input quality for product and process innovation; and (4) large differences in product and process innovations among firms with similar buyers and suppliers can be explained by differences in embodied technology transfer even within narrowly defined production partners’ ownership. Data from technology transfer in buyer-seller business networks provide the basis for detecting the key drivers of industrial upgrading in the context of B2B markets in emerging economies.
    Keywords: embodied technology transfer; linked manufacturer–supplier analysis.
    JEL: O12 O14 O32 L14 F14
    Date: 2013–11
  19. By: Normann Lorenz
    Abstract: This paper analyzes the distortions of health insurers’ benefit packages due to adverse selection when there is imperfect competition. Within a discrete choice setting with two risk types, the following main results are derived: For intermediate levels of competition, the benefit packages of both risk types are distorted in the separating equilibrium. As the level of competition decreases, the distortion decreases for the low risk type, but increases for the high risk type; in addition, the number of insurers offering the benefit package for the low risk type increases. If the level of competition is low enough, a pooling equilibrium emerges, which generally differs from the Wilson-equilibrium. It is shown that these results have important implications for risk adjustment: For intermediate levels of competition, risk adjustment can be ineffective or even decrease welfare if it is not reasonably precise.
    Keywords: Adverse selection, discrete choice, risk adjustment
    JEL: I18
    Date: 2013
  20. By: Jullien, Bruno; Rey, Patrick; Sand-Zantman, Wilfried
    JEL: L13 L51 L96
    Date: 2013
  21. By: Pradeep Dubey (Department of Economics, Stony Brook University); Rahul Garg (Opera Solutions, INDIA); Bernard De Meyer (PSE-Univesite Paris 1, Paris, FRANCE)
    Abstract: There are many situations in which a customer's proclivity to buy the product of any rm depends heavily on who else is buying the same product. We model these situations as non-cooperative games in which rms market their products to customers located in a \social network". Nash Equilibrium (NE) in pure strategies exist in general. In the quasi-linear version of the model, NE turn out to be unique and can be precisely characterized. If there are no a priori biases between customers and rms, then there is a cut-o level above which high cost rms are blockaded at an NE, while the rest compete uniformly throughout the network. Otherwise rms could end up as regional monopolies. We also explore the relation between the connectivity of a customer and the money rms spend on him. This relation becomes particularly transparent when externalities are dominant: NE can be characterized in terms of the invariant measures on the recurrent classes of the Markov chain underlying the social network. When we allow for cost functions of rms to be convex, instead of just linear, NE need no longer be unique as we show via an example. But uniqueness is restored if there is enough competition between rms or if their valuations of clients are anonymous. Finally we develop a general model of nonlinear externalities and show that existence of NE remains intact.
    Date: 2013–07
  22. By: M. Bourreau; P. Dogan
  23. By: M. Bourreau; P. Dogan; M. Manant
  24. By: J. Mark Ramseyer (Harvard Law School); Eric Rasmusen (Department of Business Economics and Public Policy, Indiana University Kelley School of Business)
    Abstract: Antitrust scholars have come to accept the basic ideas about exclusive dealing that Bork articulated in The Antitrust Paradox. Indeed, they have even extended his list of reasons why exclusive dealing can promote economic efficiency. Yet they have also taken up his challenge to explain how exclusive dealing could possibly cause harm, and have modelled a variety of special cases where it does. Some (albeit not all) of these are sufficiently plausible to be useful to prosecutors and judges.
    JEL: L0 K21
    Date: 2013–10
  25. By: Jeffrey T. Prince (Department of Business Economics and Public Policy, Indiana University Kelley School of Business); Shane Greenstein (Department of Management and Strategy, Kellogg School of Management, Northwestern University)
    Abstract: The television industry is undergoing a generational shift in structure; however, many demand-side determinants are still not well understood. We model how consumers choose video content provision among: over-the-air (OTA), paid subscription to cable or satellite, and online streaming (also known as over-the-top, or OTT). We apply our model to a U.S. dataset encompassing both the digital switchover for OTA and the emergence of OTT, along with a recession, and use it to analyze cord-cutting behavior (i.e., dropping of cable/satellite subscriptions). We find high levels of cord cutting during this time, and evidence that it became relatively more prevalent among low-income and younger households – suggesting this group responded to changes in OTA and streaming options. We find little evidence of households weighing relative content offerings/quality when choosing their means of video provision during the timespan of our data. This last finding has important ramifications for strategic interaction between content providers.
    Keywords: Telecommunications, Cord-cutting, video, digital switchover, online streaming, content
    JEL: L96
    Date: 2013–10
  26. By: Dino Gerardi; Lucas Maestri
    Abstract: A seller dynamically sells a divisible good to a buyer. It is common knowledge that there are gains from trade and that the gains per unit are decreasing. Payoffs are interdependent as in Akerlof's market for lemons. The seller is informed about the good's quality. The buyer makes an offer in every period and learns about the good's quality only through the seller's behavior. We characterize the stationary equilibrium when the time between offers is small. The owner of a high-quality good sells it in dribs and drabs, whereas the owner of a low-quality good constantly randomizes between selling small pieces and accepting an offer for all the remaining units. We use this characterization to analyze the limiting equilibrium outcome as the good becomes more divisible. We prove that there is slow trading: a valuable good is smoothly sold over time. In contrast, the good is never partially sold when gains per unit are increasing.
    JEL: C78 D82
    Date: 2013
  27. By: Simeon Djankov; Rafael LaPorta; Florencio Lopez-de-Silanes; Andrei Shleifer
    Abstract: We present new data on the regulation of entry of start-up firms in 85 countries. The data cover the number of procedures, official time, and official cost that a start-up must bear before it can operate legally. The official costs of entry are extremely high in most countries. Countries with heavier regulation of entry have higher corruption and larger unofficial economies, but not better quality of public or private goods. Countries with more democratic and limited governments have lighter regulation of entry. The evidence is inconsistent with public interest theories of regulation, but supports the public choice view that entry regulation benefits politicians and bureaucrats.
  28. By: Silvia Concettini (Universita degli Studi di Milano - [-], Université Paris Ouest Nanterre La Défense - [-]); Anna Créti (Department of Economics, Ecole Polytechnique - CNRS : UMR7176 - Polytechnique - X, Université Paris Dauphine - [-])
    Abstract: The aim of this article is to provide a mid-term evaluation of liberalization of electricity retailing in Europe taking into account some relevant analytic con- straints: di erent and often conflicting theoretical points of view, shortage of routinely collected data, problems in isolating the impact of single reforms in power sector and pervasive regulatory interventions. Theoretical approaches and empirical studies are discussed with the goal of testing the consistency of theory and practice. Our analysis suggests that direct bene ts of retail competition have been often overstated, particularly for small and residential customers. Final market has proven to be less dynamic than forecast and new entry in supply more di cult to sustain in the medium-long run. Regulatory requirements are demonstrated to be more signi cant than suggested in previous papers, due to non-negligible market imperfections. Our main conclusion is that it seems unlikely that \light-handed regulation" may fully substitute for \hard regulation" in this sector, especially for small and residential customers. Moreover, direct regulatory interventions remain essential for arranging and managing Default and Last Resort services and avoiding the risk of excluding \vulnerable customers" from trade. In the light of this limitations, further actions appear to be required to give a thorough organization to this business able to let expected outcomes of other related reforms (e.g. liberalization of generation) a stronger impact on nal customers' welfare.
    Date: 2013–12–09

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