nep-com New Economics Papers
on Industrial Competition
Issue of 2014‒06‒07
six papers chosen by
Russell Pittman
US Government

  1. Non-Price Competition in a Modular Economy By Bin-Tzong Chie; Shu-Heng Chen
  2. Network E¤ects, Aftermarkets and the Coase Conjecture : A Dynamic Markovian Approach By Didier LAUSSEL; Ngo Van LONG; Joana RESENDE
  3. Dynamic Adverse Selection and the Supply Size By Ennio Bilancini; Leonardo Boncinelli
  4. " Concurrence ", de quoi parlons-nous ? By David Cayla
  5. Opening Access to Research By Mark Armstrong
  6. Hospital Mergers with Regulated Prices By Kurt R. Brekke; Luigi Siciliani; Odd Rune Straume

  1. By: Bin-Tzong Chie; Shu-Heng Chen
    Abstract: While it has been well acknowledged by economists for a long time that competition is not just about price, the conventional quantity-based economic models have difficulties integrating price competition and quality competition into a coherent framework. In this paper, motivated by Herbert Simon’s view of near decomposability or modularity, we propose a quality-based economic model called the modular economy. In this modular economy, quality is manifested by the evolutionary design of more sophisticated and customized products that can satisfy consumers’ satisfaction to a higher degree. Two essential features of the modular economy are founded through the agent-based simulation of a duopolistic competition. First, market competition tends to be self-annihilating; the competition will eventually end up with a dominant or a monopoly firm (conglomerate). Second, the high-markup firm has a better chance to be the only survivor than its low-markup competitor. We analyze these features through the complex cyclical dynamics of prices, profits, dividends, investment, working capital, and quality.
    Keywords: Modularity, Near Decomposability, Modular Economy, Nonprice Competition, Co-Evolving, Agent-Based Modeling
    Date: 2014
  2. By: Didier LAUSSEL; Ngo Van LONG; Joana RESENDE
    Abstract: This paper analyses the dynamic problem faced by a monopolist …rm that produces a durable good (in the primary market) and also participates in the market for complementary goods and services (the aftermarket). Considering the possibility of network effects in both markets, we investigate the Markov Perfect Equilibrium of the dynamic game played by the monopolist and the forward-looking consumers. We characterize the evolution of the monopolists equilibrium network and the equilibrium price trajectories. We show that the Coase Conjecture remains valid if there are only primary network effects, while it fails when aftermarket network effects are present. We also fi…nd that the properties of the Markov Perfect Equilibrium vary drastically with the intensity of aftermarket network effects.
    Keywords: durable good, network externalities, aftermarkets, Coase Conjecture
    JEL: L12 L14
    Date: 2014
  3. By: Ennio Bilancini; Leonardo Boncinelli
    Abstract: In this paper we examine the problem of dynamic adverse selection in a stylized market where the quality of goods is a seller’s private information while the realized distribution of qualities is public information. We show that in equilibrium all goods can be traded if the size of the supply is publicly available to market participants. Moreover, we show that if exchanges can take place frequently enough, then agents roughly enjoy the entire potential surplus from exchanges. We illustrate these findings with a dynamic model of trade where buyers and sellers repeatedly interact over time. We also identify circumstances under which only full trade equilibria exist. Further, we give conditions for full trade to obtain when the realized distribution of qualities is not public information and when new goods enter the market at later stages.
    Keywords: dynamic adverse selection; supply size; frequency of exchanges; asymmetric information
    JEL: D82 L15
    Date: 2014–04
  4. By: David Cayla (GRANEM - Groupe de Recherche Angevin en Economie et Management - Université d'Angers)
    Abstract: Rarement concept économique n'a été autant diffusé et autant mal défini que le concept de concurrence. Selon les écoles de pensée la concurrence relève soit d'un processus dynamique porteur d'innovations, soit d'une structure de marché garantissant des prix faibles et des produits homogènes. Or, ces différentes visions, contradictoires entre elles, sont utilisées ensemble pour vanter les bienfaits d'une norme qui fait de la concurrence le pivot d'une autorégulation harmonieuse des marchés. Il y a là cependant un véritable " triangle d'incompatibilités ", puisque les trois objectifs assignés à la politique de la concurrence que sont l'émulation productive, l'autorégulation performante et la maximisation du bien-être des consommateurs sont incompatibles entre eux. Enfin, nous montrons que la clarification du concept de concurrence pourrait être l'occasion d'une remise en question de la conception néoclassique des marchés et de sa courbe d'offre.
    Keywords: concurrence, économie de la concurrence, politique de la concurrence, microéconomie, économie industrielle, économie hétérodoxe
    Date: 2014–05–20
  5. By: Mark Armstrong
    Abstract: Traditionally, the scholarly journal market operates so that research institutions are charged high prices and the wider public is often excluded altogether, while authors can usually publish for free and commercial publishers enjoy high profits.� Two forms of open access regulation can mitigate these problems: (i) direct price regulation of the form whereby a journal must charge a price of zero to all readers, or (ii) mandating authors or publishers to make freely available an inferior substitute to the publishing paper.� The former policy is likely to result in authors paying to publish, which may lead to a reduction in the quantity of published papers and may make authors less willing to publish in selective journals.� Recent UK policy towards open access is discussed.
    Keywords: publishing, journals, open access, two-sided markets, regulation
    JEL: D83 I23 L17 L51 L86
    Date: 2014–05–20
  6. By: Kurt R. Brekke (Department of Economics, Norwegian School of Economics); Luigi Siciliani (Department of Economics and Related Studies; and Centre for Health Economics, University of York); Odd Rune Straume (Universidade do Minho - NIPE)
    Abstract: We study the effects of a hospital merger using a spatial competition framework with semialtruistic hospitals that invest in quality and expend cost-containment effort facing regulated prices. We find that the merging hospitals always reduce quality, whereas non-merging hospitals respond by increasing (reducing) quality if qualities are strategic substitutes (complements). A merger leads to higher average treatment cost efficiency and, if qualities are strategic substitutes, might also increase average quality in the market. If a merger leads to hospital closure, the resulting effect on quality is positive (negative) for all hospitals in the market if qualities are strategic substitutes (complements). Whether qualities are strategic substitutes or complements depends on the degree of altruism, the effectiveness of cost-containment effort, and the degree of cost substitutability between quality and treatment volume.
    Keywords: Hospital mergers; Quality competition; Cost efficiency; Antitrust
    JEL: I11 I18 L13 L44
    Date: 2014

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