nep-com New Economics Papers
on Industrial Competition
Issue of 2014‒11‒12
27 papers chosen by
Russell Pittman
United States Department of Justice

  1. Choosing whether to compete: Price and format competition with consumer confusion By Paolo Crosetto; Alexia Gaudeul
  2. Either or Both Competition: A "Two-sided" Theory of Advertising with Overlapping Viewerships By Attila Ambrus; Emilio Calvano; Markus Reisinger
  3. Strategic Trade Policies with Endogenous Choice of Competition Mode under a Vertical Structure By Choi, Kangsik; Lim, Seonyoung
  4. Strategic Trade Policies in International Rivalry When Competition Mode is Endogenous By Choi, Kangsik; Lee, Ki-Dong; Lim, Seonyoung
  5. Cooperative vs. non-cooperative R&D incentives under incomplete information By Kabiraj, Tarun; Chattopadhyay, Srobonti
  6. Asymmetric Pricing Caused by Collusion By Obradovits, Martin
  7. Empirical Analysis of the Assessment of Innovation Effects in U.S. Merger Cases By Wolfgang Kerber; Benjamin Kern; Ralf Dewenter
  8. Demand Estimation Under Incomplete Product Availability By Christopher T. Conlon; Julie Holland Mortimer
  9. Full Cost, Profit and Competition By Jael, Paul
  10. Market Structure and the Pricing of New Products: A Nested Logit Approach with Asymmetric Firms By Sylvia Bleker; Christiaan Behrens; Paul Koster; Erik T. Verhoef
  11. Incomplete information and R&D organization By Chattopadhyay, Srobonti; Kabiraj, Tarun
  12. Heterogeneous Penalties and Private Information By Marvao, Catarina
  13. Research among Copycats: R&D, Spillovers, and Feedback Strategies By Grega Smrkolj; Florian Wagener
  14. Preferred Suppliers in Asymmetric Auction Markets By Robert Burguet; Martin K. Perry
  15. Banking Competition and Stability: The Role of Leverage By Xavier Freixas; Kebin Ma
  16. Price Differentiation and Discrimination in Transport Networks By Adriaan Hendrik van der Weijde
  17. What is 'Firm Heterogeneity' in Trade Models? The Role of Quality, Scope, Markups and Cost By Colin Hottman; Stephen J. Redding; David E. Weinstein
  18. Trust, Leniency and Deterrence By Bigoni, Maria; Fridolfsson, Sven-Olof; Le Coq, Chloé; Spagnolo, Giancarlo
  19. The Economics of Internet Media By Peitz, Martin; Reisinger, Markus
  20. Does Competition make Banks more Risk-seeking? By Stefan Arping
  21. The Emergence of For-Profit Higher Education Institutions By Jacqmin, Julien
  22. Competition Policy and Intellectual Property: Insights from Developed Country Experience By Scherer, F. M.; Watal, Jayashree
  23. Investment in Fixed Broadband Networks and Access Regulation in Developed and Developing countries: Panel Data Applications By Ben Dkhil, Inès
  24. Opening Access to Research By Armstrong, Mark
  25. Search Costs, Information Exchange and Sales Concentration in the Digital Music Industry By Nestor Duch-Brown; Bertin Martens
  26. Demand Model Simulation in R with Endogenous Prices and Unobservable Quality By Toro Gonzalez, Daniel
  27. The Industrial Organisation of the Dance Industry in the Netherlands: a Transaction Cost Perspective on Hybrid Forms of Organisation By Frank A.G. den Butter; Jelle Joustra

  1. By: Paolo Crosetto (GAEL, Universite de Grenoble); Alexia Gaudeul (DFG RTG 1411, EIC, Friedrich-Schiller-Universität Jena)
    Abstract: We run a market experiment where firms can choose not only their price but also whether to present comparable offers. They are faced with artificial demand from consumers who make mistakes when assessing the net value of products on the market. If some offers are comparable however, some consumers favor the best of the comparable offers vs. non-comparable offers. We vary the number of such consumers as well as the strength of their preferences for the best of the comparable offers. In treatments where firms observe the past decisions of their competitors, firms learn not to present comparable offers especially when many consumers prefer comparable offers. This occurs after initial periods with strong competition and leads to lower welfare for all consumers. In treatments where firms cannot monitor the competition, firms end up having to present comparable offers, which leads to an improvement in welfare for all consumers.
    Keywords: asymmetric dominance, attraction effect, collusion, competition, confusopoly, experiment, framing, industrial organization, obfuscation, oligopoly, price comparison, shrouding, spurious complexity, standardization, transparency
    JEL: C92 D18 D43 L13 L15
    Date: 2014–11–04
  2. By: Attila Ambrus (Duke University); Emilio Calvano (CSEF, Università di Napoli Federico II); Markus Reisinger (Otto Beisheim School of Management)
    Abstract: In media markets, consumers spread their attention to several outlets, increasingly so as consumption migrates online. The traditional framework for studying competition among media outlets rules out this behavior by assumption. We propose a new model that allows consumers to choose multiple outlets and use it to study the effect of strategic interaction on advertising levels, and the impact of entry and mergers. We show that novel forces come into play, which reflect the outlets' incentives to control the composition of the customer base in addition to its size. We link consumer preferences and advertising technologies to market outcomes. The model can explain a number of empirical regularities that are difficult to reconcile with existing models.
    Keywords: Media Competition, Two-Sided Markets, Multi-Homing, Viewer Composition, Viewer, Preference Correlation
    JEL: D43 L13 L82 M37
    Date: 2014–10–18
  3. By: Choi, Kangsik; Lim, Seonyoung
    Abstract: This paper examines the endogenous choice of competition mode with strategic export policies in vertically related markets. We show that (i) regardless of the nature of goods, choosing Bertrand competition is the dominant strategy for downstream firms, which leads downstream firms to face a prisoners' dilemma; (ii) the optimal export intervention can be a subsidy under Bertrand competition; and (iii) when the choice of competition mode is delegated to upstream firms or to the upstream firm on country and the downstream firm in the other country, multiple equilibria (quantity-price and price-quantity competitions) can be sustained except those for which goods are sufficiently close complements. With the exception of such a case, Bertrand competition can be sustained with this delegation of competition mode choice. Thus, a conflict of interest between downstream and upstream firms may or may not occur, as social welfare depends on who chooses the competition mode and the degree of imperfect complementarity. This contrasts with the result under free trade, which shows that there is no conflict of interests between upstream and downstream firms with Cournot (Bertrand) competition when the goods are substitutes (complements) in equilibrium.
    Keywords: Choice of Cournot and Bertrand, Subsidy, Vertical Structure, Delegation, Welfare.
    JEL: F10 F12 L13
    Date: 2014–10–04
  4. By: Choi, Kangsik; Lee, Ki-Dong; Lim, Seonyoung
    Abstract: We investigate government subsidy policies in which a home firm and a foreign firm choose to strategically set prices or quantities in a third market. We show that even though each firm can earn higher profits under Cournot competition than under Bertrand competition regardless of the nature of goods, choosing Bertrand competition is the dominant strategy for both firms. This can lead each firm to face a prisoners' dilemma in equilibrium. We also show that from the aspects of governments under subsidy regime, Cournot competition is more efficient than Bertrand competition when the goods are substitutes, and vice versa when the goods are complements. However, trade liberalization such as via free trade agreements brings about a change in the competition mode from Bertrand competition to Cournot competition if goods are substitutes. On the other hand, if goods are complements, there are no such a change in the competition mode and Bertrand competition prevails the market. Hence, a move toward free trade among countries increases not only profits of firms but also the welfare of both countries irrespective of the nature of goods.
    Keywords: Subsidy, Cournot, Bertrand, Social Welfare, Prisoners' Dilemma.
    JEL: F12 F13 L13
    Date: 2014–11–06
  5. By: Kabiraj, Tarun; Chattopadhyay, Srobonti
    Abstract: This paper studies incentives for cooperative research vis-à-vis non-cooperative research in an incomplete information framework. We show that with quantity competition under asymmetric information, the expected payoff from non-cooperative research goes down compared to the case of symmetric information; hence RJV incentives of the firms are larger under asymmetric information. In either case, however, the larger is the size of the cost-reducing innovation the lower is the incentive for cooperative research. Finally in our model, incomplete information does not affect the consumers’ welfare, but the firms become worse off.
    Keywords: Cooperative R&D, non-cooperative R&D, RJV, incomplete information, consumers’ welfare.
    JEL: D43 L13 O31
    Date: 2014–09–30
  6. By: Obradovits, Martin
    Abstract: In many markets, empirical evidence suggests that positive production cost shocks are transmitted more quickly and fully to final prices than negative ones. This article explains asymmetric price adjustment caused by firms imperfectly colluding on supra-competitive price levels. While positive cost shocks are transmitted instantaneously, negative price adjustments only occur once aggregate market demand turns out unexpectedly low. In equilibrium, this can be supported whenever demand is sufficiently stable, and negative cost shocks are not too large.
    Keywords: asymmetric price adjustment, asymmetric pricing, rockets and feathers, collusion, price transmission
    JEL: D21 D43 L13
    Date: 2014–09–25
  7. By: Wolfgang Kerber (University of Marburg); Benjamin Kern (University of Marburg); Ralf Dewenter (HSU Hamburg)
    Abstract: In this empirical study all mergers that have been challenged by the U.S. antitrust agencies FTC and DOJ between 1995 and 2008 were analyzed in regard to the question to what extent and how the agencies assessed the innovation effects of mergers. Theoretical background is the still open question how negative effects of mergers on innovation should be taken into account in merger policy. Although we can show in our study that in one third of all challenged mergers also innovation concerns were raised, the results also point to a still existing large degree of uneasiness and inconsistencies of the agencies in regard to the assessment of innovation effects. A particularly interesting result is that - despite the wide-spread rejection of the "innovation market approach" in the antitrust debate - the agencies used more an innovationspecific assessment approach that includes also innovation in the market definition than the pure traditional product market concept. Additionally, we also found significant differences between the assessment approaches of the FTC and the DOJ.
    Keywords: innovation, merger policy, US antitrust, innovation market
    JEL: K21 L12 L41 O31
    Date: 2014
  8. By: Christopher T. Conlon (Department of Economics, Columbia University); Julie Holland Mortimer (Boston College)
    Abstract: All-Units Discounts are vertical rebates in which a manufacturer pays a retailer a linear wholesale price up to a quantity threshold; beyond the threshold, the retailer receives a discount on all future and previous units. Such contracts, which are common in many industries, potentially have both efficiency and foreclosure effects. Using a new dataset containing detailed information on the sales and rebate payments of a retailer in the confections industry, we estimate structural models of demand and retailer effort to quantify the efficiency gains induced by the contract. We show how the contract allocates the cost of a stock-out between the manufacturer and retailer, and find evidence that the contract increases industry profitability, but fails to implement the product assortment that maximizes social surplus for the industry. Finally, we point out that the impact of many upstream mergers is felt through wholesale prices instead of retail prices. We examine the impact of various upstream mergers on the willingness of the dominant manufacturer to offer rebate contracts, and the impact that the rebate contracts have on social welfare.
    Date: 2014–09–25
  9. By: Jael, Paul
    Abstract: During the marginalist controversy, full costers failed to convince economists of the superiority of full cost pricing over marginal theory of imperfect competition. The controversy was closed prematurely; various contributions published immediately thereafter in the fifties did not renew the debate despite their relevance. Topics included entry prevention, target rate of profit and the emergence of the market price The present paper shows that the full cost pricing is not so justified by the need for a rule of thumb than as a rational behaviour aiming at long term profit maximisation, especially in the case of highly competitive markets with few suppliers. The paper focuses also on the relationship between full cost pricing and changes in demand (mostly cyclical). It is also shown that the race for performance deserves a central position in the analysis of competition; it is too often neglected in favour of the sole competition on margins.
    Keywords: pricing; competition; market structure; full cost
    JEL: D22 D40 D49
    Date: 2014–10–31
  10. By: Sylvia Bleker (VU University Amsterdam, the Netherlands); Christiaan Behrens (VU University Amsterdam, the Netherlands); Paul Koster (VU University Amsterdam, the Netherlands); Erik T. Verhoef (VU University Amsterdam, the Netherlands)
    Abstract: This article investigates competition in a market with an emerging technology using a discrete choice model to analyze demand and welfare. We focus on industry structure and investigate the impact of different market structures on demand for the new technology and on welfare. The car market serves as a prime example of such a market, where electric vehicles (EV’s) represent the new technology competing with standard cars with internal combustion engines (ICV’s). To analyze such a market, we use a nested logit model. In contrast to earlier literature, we allow firms to be asymmetric and active in multiple nests, with different numbers of variants in each nest, which can add up to any market share. Additionally, we add to existing literature by considering the case where substitutability between firms is stronger than between technologies, by nesting products by technology instead of by firm. We find implicit analytical solutions for the equilibrium mark-ups which can be used when there are two nests in the market; within that restriction firms can be asymmetric. Numerically, we find that EV sales are higher if offered by a new entrant only selling EV’s as opposed to when it is supplied by a firm selling variants of both types. We present an index based on mark-up differences between variants in the market, which can be used to a priori determine whether a change in market structure would increase or decrease welfare. These results are general to the nested logit model, and the index can thus be used in any market, as long as the market is sufficiently accurately described by the nested logit model.
    Keywords: Nested logit model, asymmetry, market structure, welfare indices, emerging technology
    JEL: D43 D60 L11 L91
    Date: 2014–10–28
  11. By: Chattopadhyay, Srobonti; Kabiraj, Tarun
    Abstract: The paper studies incentives for cooperative research vis-à-vis non-cooperative research under incomplete information when the R&D outcome is stochastic and continuously distributed with a given mean and a constant variance. We show that the non-cooperative R&D incentive increases with the variance of the R&D outcome. And this result does not depend on the nature of the product market competition.
    Keywords: Cooperative R&D, non-cooperative R&D, incomplete information, variance of the research outcome
    JEL: D43 L13 O31
    Date: 2014–09–10
  12. By: Marvao, Catarina (Stockholm Institute of Transition Economics)
    Abstract: The theoretical framework of the adequacy or otherwise of fine reductions under the EU and US Leniency Programmes has been explored widely. However, the characteristics of the reporting cartel members remain unexplained. This is the first paper to develop a model where heterogeneous cartel members have private information on the probability of conviction. It is shown that firms which receive higher fines are more likely to report the cartel. To validate this result and analyze the sources of fine heterogeneity, data for EU and US cartels are used. Being the first reporter is shown to be correlated with recidivism, leadership and other fine reductions. Some characteristics of the cartels where reporting occurred are also unveiled. Identifying the characteristics of the reporting firms is vital to dissolve and dissuade cartels and the wider policy implications of these findings are discussed in the paper.
    Keywords: Cartels; competition policy; Leniency Programme; private information; self-reporting
    JEL: D43 K21 K42 L13 L40 L51
    Date: 2014–10–06
  13. By: Grega Smrkolj (Newcastle University, United Kingdom); Florian Wagener (University of Amsterdam, the Netherlands)
    Abstract: We study a stochastic dynamic game of process innovation in which firms can initiate and terminate R&D efforts and production at different times. We discern the impact of knowledge spillovers on the investments in existing markets, as well as on the likely structure of newly forming markets, for all possible asymmetries between firms. We show that the relation between spillovers, R&D efforts, and surpluses is non-monotonic and dependent on both the relative and absolute efficiency of firms. Larger spillovers increase the likelihood that a new technology is brought to production, but they do not necessarily make the industry more competitive.
    Keywords: Differential game, Feedback Nash equilibrium, Numerical partial differential equations, R&D, Spillovers
    JEL: C61 C63 C73 D43 D92 L13 O31
    Date: 2014–08–22
  14. By: Robert Burguet; Martin K. Perry
    Abstract: This paper examines preference in procurement with asymmetric suppliers. The preferred supplier has a right-of-first-refusal to obtain the contract at a price equal to the bid of a competing supplier. Despite the inefficiency created by the right-of-first-refusal, preference increases the joint surplus of the buyer and the preferred supplier. The buyer can increase his surplus by holding a pre-auction for the right-of-first-refusal. This is true even when the ex ante stronger supplier wins this pre-auction for preference.
    Keywords: procurement auctions, vertical integration, bargaining solutions
    JEL: D44 D82 C79
    Date: 2014–10
  15. By: Xavier Freixas; Kebin Ma
    Abstract: This paper reexamines the classical issue of the possible trade-offs between banking competition and financial stability by highlighting different types of risk and the role of leverage. By means of a simple model we show that competition can affect portfolio risk, insolvency risk, liquidity risk, and systemic risk differently. The effect depends crucially on banks’ liability structure, on whether banks are financed by insured retail deposits or by uninsured wholesale debts, and on whether the indebtness is exogenous or endogenous. In particular we suggest that, while in a classical originate-to-hold banking industry competition might increase financial stability, the opposite can be true for an originate-to-distribute banking industry of a larger fraction of market short-term funding. This leads us to revisit the existing empirical literature using a more precise classification of risk. Our theoretical model therefore helps to clarify a number of apparently contradictory empirical results and proposes new ways to analyze the impact of banking competition on financial stability.
    Keywords: banking competition, financial stability, leverage
    JEL: G21 G28
    Date: 2014–08
  16. By: Adriaan Hendrik van der Weijde (VU University Amsterdam)
    Abstract: This paper analyzes the effects of price differentiation and discrimination by a monopolistic transport operator, which sets fares in a congestible network. Using three models, with different spatial structures, we describe the operator’s optimal strategies in an unregulated market, a market where price differentiation is not allowed (i.e., ticket prices must be the same for all users), and a market where price discrimination is illegal (i.e., ticket prices must only differ with the marginal external costs of users), and analyze the welfare effects of uniform and non-discriminatory pricing policies. The three models allow us to consider three different forms of price differentiation and discrimination in networks: by user class, by origin-destination pair, and by route. We generalize the existing literature, in which groups usually only differ in their value of time, and hence, there is no distinction between differentiation and discrimination. In our models, users may also have different marginal external costs; we show how these two differences interact. We also show how non-differentiated and non-discriminatory policies may increase or decrease welfare, and that non-discrimination can be worse than non-differentiation. The network models show that results obtained for a single-link network can be generalized to a situation where operators price-discriminate or differentiate based on users’ origins and destinations, but not directly to a situation in which differentiation is based on route choices.
    Keywords: price differentiation, price discrimination, transport, networks, congestion
    JEL: L11 L51 L91
    Date: 2014–08–01
  17. By: Colin Hottman; Stephen J. Redding; David E. Weinstein
    Abstract: We estimate a structural model of heterogeneous multiproduct firms to examine the sources of firm heterogeneity emphasized in the recent trade and macro literatures. Using Nielsen barcode data on prices and sales, we estimate elasticities of substitution within and between firms, and use the estimated model to recover unobserved qualities, marginal costs and markups. We find that variation in firm quality and product scope explains at least four fifths of the variation in firm sales. Most firms are well approximated by the monopolistic competition benchmark of constant markups, but the largest firms that account for most of aggregate sales depart substantially from this benchmark. Although the output of multiproduct firms is differentiated, cannibalization is quantitatively important for the largest firms. This imperfect substitutability of products within firms, and the fact that larger firms supply more products than smaller firms, implies that standard productivity measures are not independent of demand system assumptions and probably dramatically understate the relative productivity of the largest firms.
    Keywords: Firm heterogeneity, multiproduct firms, cannibalization effects
    JEL: L11 L21 L25 L60
    Date: 2014–09
  18. By: Bigoni, Maria (University of Bologna); Fridolfsson, Sven-Olof (The Swedish Competition authority (Konkurrensverket), Research Institute of Industrial Economics (IFN)); Le Coq, Chloé (Stockholm School of Economics, SITE); Spagnolo, Giancarlo (Tor Vergata University, Stockholm School of Economics, SITE, and CEPR)
    Abstract: This paper presents results from a laboratory experiment studying the channels through which dierent law enforcement strategies deter cartel formation. With leniency policies oering immunity to the rst reporting party, a high ne is the main determinant of deterrence, having a strong eect even when the probability of exogenous detection is zero. Deterrence appears to be mainly driven by `distrust'; here, the fear of partners deviating and reporting. Absent leniency, the probability of detection and the expected ne matter more, and low nes are exploited to punish defections. The results appear relevant to several other forms of crimes that share cartels' strategic features, including corruption and nancial fraud.
    Keywords: Antitrust; Betrayal; Cartels; Collusion; Distrust; Fines; Leniency; Whistleblowers
    JEL: C92 D03 K21 K42 L41
    Date: 2014–09–18
  19. By: Peitz, Martin; Reisinger, Markus
    Abstract: We survey the economics literature on media as it applies to the Internet. The Internet is an important driver behind media convergence and connects information and communication technologies. While new Internet media share some properties with traditional media, several novel features have appeared: On the content side, aggregation by third parties that have no editorial policy and user-generated content have become increasingly important. On the advertiser side, fine-tuned tailoring and targeting of ads based on individual user characteristics are common features on many Internet media and social networks. On the user side, we observe increased possibilities of time-shifting, multi-homing, and active search. These changes have gone hand-in-hand with new players entering media markets, including search engines and Internet service providers. Some of these players face novel strategic considerations, such as how to present search results. In response to these changes, an emerging economics literature focuses on the allocative and welfare implications of this new media landscape. This paper is an attempt to organize these contributions and provide a selective account of novel economic mechanisms that shape market outcomes of Internet media. A large body of work has focused on the advertising part of the industry, while some studies also look at content provision and the interaction between the two.
    Keywords: Internet , media economics , digital media , targeting , news aggregation , search advertising , display advertising , two-sided markets
    JEL: L82 L86 M37 L13 D21 D22
    Date: 2014
  20. By: Stefan Arping (University of Amsterdam)
    Abstract: This article presents a model in which, contrary to conventional wisdom, competi- tion can make banks more reluctant to take excessive risks: As competition intensifies and margins decline, banks face more-binding threats of failure, to which they may respond by reducing their risk-taking. Yet, at the same time, banks become riskier. This is because the direct, destabilizing effect of lower margins outweighs the disciplining effect of competition; moreover, a substantial rise in competition reduces banks’ incentive to build precautionary capital buffers. A key implication is that the effects of competition on risk-taking and on failure risk can move in opposite directions.
    Keywords: Charter Value Hypothesis, Bank Franchise Value, Bank Competition, Financial Stability, Capital Requirements
    JEL: G2 G3
    Date: 2014–05–12
  21. By: Jacqmin, Julien
    Abstract: This paper examines the market conditions that facilitate the entry of for-profit institutions into the higher education market. I show how, despite significant government financial support for public institutions, for-profit institutions may still find it profitable to enter the market. They do so by spending large amounts of money on advertising campaigns in order to attract students who are relatively more influenced by the persuasive effect of advertising. I show that entry is more likely the more government subsidies are targeted directly toward students, as opposed to institutions. Even if it decreases social welfare, the introduction of market conditions that are friendly to for-profit universities will allow a government to fulfill its objective of increasing participation in the higher education system.
    Keywords: For-profit higher education institutions, competition, entry, advertising, mixed duopoly
    JEL: I20 I23 I28 L3 L30
    Date: 2014
  22. By: Scherer, F. M. (Harvard University); Watal, Jayashree (World Trade Organization)
    Abstract: This paper, written for a World Trade Organization compendium, investigates the possibilities open to developing nations for controlling the abuse of intellectual property rights, and in particular patents, under Articles 31 and 40 of the Uruguay Round TRIPS (trade-related aspects of intellectual property) treaty. Article 40 authorizes nations to use their competition policy laws to combat abuses of intellectual property rights, among other things, by invoking the compulsory licensing provisions of Article 31. This paper reviews historically the experience of competition policy authorities in dealing with patent and other intellectual property abuses in the United States, the European Community, Japan, Canada, South Africa, and other jurisdictions and reviews the known consequences of compulsory licensing orders inter alia for companies' continuing efforts to advance technology. Currently controversial fields such as pharmaceuticals and information technology are accorded special attention.
    Date: 2014–02
  23. By: Ben Dkhil, Inès
    Abstract: Since the USA Telecommunications Act of 1996, the regulatory frameworks, have led to the requirement of different policy practices in many countries across the world in order to establish sustainable competition in whole telecommunication markets. These regulatory reforms are the privatization of the telecom historical integrated monopoly (the incumbent), the independency of the regulatory authority, the obligation of transparency of the access price and agreements & the unbundling, the separation and the access pricing policies. This paper suggests an empirical investigation on both the individual, and the global impacts of these different regulatory policy practices on broadband deployment. To this end, we construct a panel data covering 107 developed and developing countries over the period of eight years from 2004 to 2011. Using the Instrumental variables (IV) & the Generalized Method of Moments (GMM) with fixed effects and robust to heteroskedastic and autocorrelated errors, we show that the relationship between regulation and broadband investment is an inverted U shape in developed world while it takes a U form in developing countries. This means that in developed countries, a less restrictive regulatory policy spurs broadband deployment while more stringent policy discourages innovation in telecom industry. However, in the developing countries, the regulation has a strict negative impact on broadband deployment.
    Keywords: developed and developing countries, regulation, fixed broadband deployment, separation, unbundling, access pricing.
    JEL: C51 L59 L96
    Date: 2014–10–16
  24. By: Armstrong, Mark
    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) authors are required to publish in a journal which allows readers free and immediate access to their article, or (ii) authors are required to make freely available an inferior substitute to the published paper (and to publish in a journal which permits this). 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. The latter policy makes freely available only an inferior version of the published article, but may be consistent with authors publishing for free.
    Keywords: publishing, journals, open access, two-sided markets, regulation
    JEL: D4 D8 L5 L82
    Date: 2014–11
  25. By: Nestor Duch-Brown (European Commission - JRC - IPTS); Bertin Martens (European Commission - JRC - IPTS)
    Abstract: It is often assumed that consumers benefit from the internet because it offers a “long tail” with more variety of products to choose from. However, search costs may block the long tail effect and result in the dominance of superstars. This paper examines the variety hypothesis in the entire online market for digital music downloads in 17 countries over the period 2006-2011. First, we show that the entire distribution of legal music downloads is heavily skewed. Second, we hypothesise that a wide range of online information channels (sales and discovery platforms) play a role in this market. We find that the reduction of search costs implied by the generalisation of online information tools transforms demand as a result of changes in the dispersion of preferences. Ubiquitous and very popular discovery channels such as Facebook and iTunes tend to push consumers towards the superstars by shifting the demand curve but also towards the long-tail since they also generate rotations that promote niches. Conssequently, both the superstar and the long tail effects emerge even in mature digital markets.
    Keywords: digital markets, search costs, information, sales concentration, online markets
    JEL: C46 D12 L82
    Date: 2014–11
  26. By: Toro Gonzalez, Daniel
    Abstract: The aim of the present routine is to simulate a demand equation with endogenous prices and unobservable product quality and to retrieve the original parameters using the Control Function (CF) approach. The CF approach is a very useful and simple method to obtain unbiased estimates. The present R code helps to understand the underlying structure of the endogeneity problem in demand estimations. Results support the important bias correction of the CF approach.
    Keywords: R, Control Function, Demand Analisis, Endogeneity
    JEL: C13 C15 D49 E27
    Date: 2014–09–18
  27. By: Frank A.G. den Butter (VU University Amsterdam); Jelle Joustra (VU University Amsterdam, the Netherlands)
    Abstract: The organization of Electronic Dance Music (EDM) events has become a major export product in the Netherlands. In order to respond quickly to the new trends and needs, innovative forms of cooperation between producers are to be set up for the organization of exciting new events. A case study on how these EDM events are actually organised in the Netherlands shows that the best way to do it is through hybrid forms of organisation, which combine horizontal forms of organisation through the market and vertical forms through the hierarchy. As EDM events are characterised by much asset specificity, the perspective of transaction cost economics indicates why this industry relies on hybrid forms of organisation. Trust between the collaborating partners, intrinsic motivation to be professional in the design and creation of new, ground-breaking music sensations and an extensiv e use of social media play a key role in lowering the transaction costs in the dance industry.
    Keywords: Industrial organization, coordination costs, transaction cost economics, resource based view, cooperation in hybrid organizations, Electronic Dance Music (EDM) events, trust, use of social media
    JEL: D23 D85 E23 L23 L24 L82 O31 P13
    Date: 2014–07–24

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