nep-com New Economics Papers
on Industrial Competition
Issue of 2013‒12‒20
fourteen papers chosen by
Russell Pittman
US Government

  1. Competitive Market Segmentation By Silvio Sticher
  2. Firm competition in a probabilistic framework of consumer choice By Hao Liao; Rui Xiao; Duanbing Chen; Matus Medo; Yi-Cheng Zhang
  3. Exclusivity Clauses: Enhancing Competition, Raising Prices By Marc Blatter; Silvio Sticher
  4. The Value of Network Information By Itay P. Fainmesser; Andrea Galeotti
  5. Quantity or quality? Knowledge alliances and their effects on patenting By Hottenrott, Hanna; Lopes-Bento, Cindy
  6. Open Source Software Subsidies and Network Compatibility in a Mixed Duopoly By Thierry Pénard; Mourad Zeroukhi
  7. Welfare-Improving Ambiguity in Insurance Markets with Asymmetric Information By : Kostas Koufopoulos; : Roman Kozhan
  8. Airline Pricing Behaviour under Limited Intermodal Competition By Bergantino, Angela Stefania; Capozza, Claudia
  9. Flex Cars and Competition in Ethanol and Gasoline Retail Markets By Juliano Assuncao; Joao Paulo Pessoa; Leonardo Rezende
  10. High growth firms, innovation and competition: the case of the US pharmaceutical industry By Mariana Mazzucato; Stuart Parris
  11. Spatial Price Differentiation and Regional Market Power. The Case of Food-Retailing in Austria By Dieter Pennerstorfer; Franz Sinabell
  12. Consumer choice of electricity supplier: Investigating preferences for attributes of electricity services. By Ndebele, T.; Marsh, D.
  13. Mobile application value for consumers By Christine Gonzalez; Élodie Huré
  14. Vplyv intenzity konkurencie na stratégiu podniku By Zagorsek, Branislav

  1. By: Silvio Sticher
    Abstract: In a two-firm model where each firm sells a high-quality and a low-quality version of a product, customers differ with respect to their brand preferences and their attitudes towards quality. We show that the standard result of quality-independent markups crucially depends on the assumption that the customers' valuation of quality is identical across firms. Once we relax this assumption, competition across qualities leads to second-degree price discrimination. We find that markups on low-quality products are higher if consuming a low-quality product involves a firm-specific disutility. Likewise, markups on high-quality products are higher if consuming a high-quality product creates a firm-specific surplus.
    Keywords: price differentiation; vertical competition
    JEL: D43 L13 L15
    Date: 2013–12
  2. By: Hao Liao; Rui Xiao; Duanbing Chen; Matus Medo; Yi-Cheng Zhang
    Abstract: We develop a probabilistic consumer choice framework based on information asymmetry between consumers and firms. This framework makes it possible to study market competition of several firms by both quality and price of their products. We find Nash market equilibria and other optimal strategies in various situations ranging from competition of two identical firms to firms of different sizes and firms which improve their efficiency.
    Date: 2013–12
  3. By: Marc Blatter; Silvio Sticher
    Abstract: In a setting where retailers and suppliers compete for each other by offering binding contracts, exclusivity clauses serve as a competitive device. As a result of these clauses, firms addressed by contracts only accept the most favorable deal. Thus the contract-issuing parties have to squeeze their final customers and transfer the surplus within the vertical supply chain. We elaborate to what extent the resulting allocation depends on the sequence of play and discuss the implications of a ban on exclusivity clauses.
    Keywords: exclusive dealing; exclusive provision
    JEL: D86 L13 L42
    Date: 2013–11
  4. By: Itay P. Fainmesser; Andrea Galeotti
    Abstract: The business model of companies such as Facebook, MySpace, and Twitter, relies on mon- etizing the information on the interactions and in uences of their users. How valuable is such information, and is its use benecial or detrimental for consumer welfare? We study these questions in a model where a monopoly sells a network good and may price discriminate using network information: information on consumers in uences and/or on consumers susceptibili- ties to influence. Our framework incorporates a rich set of market products, including goods characterized by global and local network effects. We derive results on the value of network information and determine under which conditions, relative to uniform price, consumer surplus increases. We demonstrate the applicability of our framework using survey data on various types of relationships.
    Date: 2013
  5. By: Hottenrott, Hanna; Lopes-Bento, Cindy
    Abstract: This study shows for a large sample of R&D-active manufacturing firms over the period 2000-2009 that knowledge alliances have a positive effect on patenting in terms of both quantity and quality. However, when distinguishing between alliances that aim at joint creation of new knowledge and alliances that aim at the exchange of knowledge, results suggest that creation alliances lead to more valuable patents as they receive significantly more forward citations per patent. Knowledge exchange alliances, on the other hand, are associated with patent quantity, but not quality. --
    Keywords: Knowledge Alliances,Patents,Innovation,R&D,Count Data Models
    JEL: O31 O32 O33 O34
    Date: 2013
  6. By: Thierry Pénard (University of Rennes 1, CREM CNRS UMR 6211 and IDEC); Mourad Zeroukhi (Foundation of the University of Rennes 1, CREM CNRS UMR 6211 and IDEC)
    Abstract: For many applications, open source software (OSS) can o¤er a high-quality alternative to proprietary software (e.g. Linux, Apache, Android,...). But even if OSS is usually free of charge, its installation and use require some skills. Should the government intervene to promote the di¤usion of OSS and provide some learning or …nancial support to potential adopters? This paper examines whether public subsidies towards open source software is socially desirable and how the extent of compatibility between open source software and proprietary software can infuence the amount of subsidies. We consider a mixed duopoly model in which a proprietary software (PS) company competes with an open source software (OSS) community. Users are heterogeneous in their ability to use OSS, and their utility depends on the number of users who have adopted the same software or a compatible software (existence of network externalities). Four situations are distinguished: full compatibility between OSS and PS, full incompatibility, and one-way compatibility (either only OSS or PS is compatible). We show that if the government only takes care of consumer surplus, public subsidies are welfare-enhancing. But the optimal level of subsidies is larger with full compatibility and PS compatibility than full incompatibility and OSS compatibility. These results suggest that government policy towards OSS must be conditional to the degree of compatibility between PS and OSS.
    Keywords: Open source software, Public subsidy, Network compatibility
    JEL: L11 L15 L17 L38
    Date: 2013–11
  7. By: : Kostas Koufopoulos; : Roman Kozhan
    Date: 2013
  8. By: Bergantino, Angela Stefania; Capozza, Claudia
    Abstract: This paper empirically analyses airline pricing for short-haul flights in contexts with no credible threat of inter-modal competition. To this end, we explore the southern Italian market since it is less accessible by other transport modes and thus fares are the direct outcome of air-related competition. We show, in fact, that market power matters, depending on the level of intra-modal competition, and that airlines apply differentiated mark-ups. Besides, consistent with the implementation of inter-temporal price discrimination (IPD), we find a non-monotonic inter-temporal profile of fares with a turning point included in the interval of the 43th to 45th days before departure. Finally, we provide evidence that in more competitive markets, airlines are more likely to engage in IPD.
    Keywords: airfares, market structure, intertemporal price discrimination
    JEL: L11 L13 L9 L93
    Date: 2013–11–27
  9. By: Juliano Assuncao; Joao Paulo Pessoa; Leonardo Rezende
    Abstract: In Brazil, gasoline and ethanol coexist as automotive fuels and are becoming closer substitutes as flex cars become more widely adopted. We employ this source of variation in a large panel of weekly prices at the station level to show that fuel prices have fallen in response to this change. This finding is evidence of market power in fuel retail and indicates that innovations that increase consumer choice benefit even those who choose not to adopt them. We also propose a model of price competition in this market and use it to estimate demand from price response functions.
    Keywords: Flex-fuel vehicles, Gasoline, Ethanol, Price competition, Spatial Competition, Discrete equilibrium price dispersion
    JEL: L11 L13 L62 L71
    Date: 2013–12
  10. By: Mariana Mazzucato (SPRU, University of Sussex, UK); Stuart Parris (Faculty of Economics, Open University, UK)
    Keywords: R&D, Growth, Venture capitalist, quantile regression, pharmaceutical industry
    Date: 2013–12
  11. By: Dieter Pennerstorfer (WIFO); Franz Sinabell (WIFO)
    Abstract: A small number of firms have a large market share in the Austrian food retailing market. Market concentration has been growing over the last years which has raised concerns about market power. Previous studies on price setting behaviour in the food retailing market were at the national level and regional price setting has not yet been analysed. We use a panel data set of over 2,000 households with monthly food purchasing data and the number of outlets of the nine biggest food retailers in 120 districts to explore regional price setting behaviour. The analysis shows that only a small number of retailers seem to regionally differentiate prices extensively. It cannot be confirmed that spatial price differentiation is a way to exert market power in the Austrian food retailing market.
    Keywords: Market power, Food retailing, Spatial price differentiation, Austria
    Date: 2013–12–12
  12. By: Ndebele, T.; Marsh, D.
    Abstract: The retail electricity market in New Zealand is evolving as the government continues to promote the development of a competitive and efficient market. Encouraging consumer switching through the “What’s My Number” campaign is expected to put pressure on electricity retailers to reduce prices. Recent reports indicate that relatively few customers have switched supplier in the past two years despite potential average savings of NZ$165 per year per household. This suggests that non-price factors are also important determinants of switching behavior. We use choice experiments to investigate residential consumers’ preferences for the attributes of electricity suppliers and the possible role of attitudes in explaining preference heterogeneity among the sampled respondents. Data required for the study was collected through a web survey administered to an online panel of bill payers in New Zealand. Willingness to pay (WTP) is estimated for attributes of electricity suppliers such as renewable portfolio, local ownership, discount rates, fixed rate plan, loyalty rewards and supplier type. WTP estimates indicate the importance of the attributes and hence provide guidance to suppliers in designing their price and service offers. Knowledge of how attitudes influence switching behavior may inform future policy directed at stimulating competition in the retail market.
    Keywords: electricity suppliers, environmental attitude, choice experiments, latent class model, willingness to pay, Consumer/Household Economics, Demand and Price Analysis, Financial Economics, Resource /Energy Economics and Policy,
    Date: 2013–08
  13. By: Christine Gonzalez (Université de Montpellier 2, Montpellier Recherche en Management, France); Élodie Huré (ESC Rennes School of Business, France Author-Name : Karine Picot-Coupey Author-Workplace-Name : University of Rennes 1 (IGR-IAE), CREM UMR CNRS 6211, France)
    Abstract: A mobile application is an additional touchpoint that could enrich the relationship between consumers and retailers, if these latter understand how a mobile application usage is valued by the formers. This study aims to investigate the consumer value of mobile applications. It builds upon the literature on mobile services value and derives empirical findings from 30 semi-structured interviews of smartphone users, analysed with a content analysis assisted with the NVivo software. Grounded in a hierarchical multidimensional structure, the results indicate that the highest-order value of a mobile application is a synchronicity value enabling the consumer to get at the right time, the right place and in the right situation the right mix of value dimensions among the four following dimensions: situational, utilitarian, hedonic and social value. The results also show four outcomes of this consumer value of a mobile application: attitude toward the brand, omnichannel behaviour, word-of-mouth, future use of the application.
    Keywords: consumer value, shopping experience, mobile applications
    Date: 2013–12
  14. By: Zagorsek, Branislav
    Abstract: The aim of this paper is to identify relation between intensity of competition in business environment and the strategy. The aim is also to identify the relation between intensity of competition and factors of influence on the business. The research was done in Slovakia on 382 companies. Main methods used were survey, correlation analysis and synthetic indicator. The paper consists of theoretical overview, overview of methodology, research results and research results analysis and evaluation. The result is clarification of relation between strategy and dynamic business environment, dynamic business environment and competitive advantage, usage of information technologies and other factors.
    Keywords: strategy, business environment, competition, postindustrial era, competitive advantage
    JEL: L10 M10
    Date: 2013

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