nep-com New Economics Papers
on Industrial Competition
Issue of 2015‒05‒30
ten papers chosen by
Russell Pittman
United States Department of Justice

  1. Net neutrality and inflation of traffic By Peitz, M.; Schütt, F.
  2. Peer Effects in Endogenous Networks By Timo Hiller; Timo Hiller
  3. Unbundling Truthful Revelation when Auctioning Bundled Goods By Pascal Courty; Daniel Rondeau; Maurice Doyon
  4. Full cost, profit et concurrence By Jael, Paul
  5. Walrasian equilibrium as limit of a competitive equilibrium without divisible goods By Michael Florig; Jorge Rivera Cayupi
  6. Competition in Lending and Credit Ratings By Javed I. Ahmed
  7. Parallel Imports and Repair Services By ISHIKAWA Jota; MORITA Hodaka; MUKUNOKI Hiroshi
  8. The Market Value of R&D in Weak Innovation Regimes: Evidence from India By Sunil Kanwar; Bronwyn H. Hall
  9. Bank Competition and Risk Appetite: Evidence from Tunisia By ZAGHDOUDI, Khemais; HAMDI, Helmi; DKHILI, Hichem; HAKIMI, Abdelaziz
  10. “Fast Charging Stations: Simulating Entry and Location in a Game of Strategic Interaction” By Valeria Bernardo; Joan-Ramon Borrell; Jordi Perdiguero

  1. By: Peitz, M.; Schütt, F. (Tilburg University, TILEC)
    Abstract: Under strict net neutrality Internet service providers (ISPs) are required to carry<br/>data without any differentiation and at no cost to the content provider. We provide a simple framework with a monopoly ISP to evaluate different net neutrality rules. Content differs in its sensitivity to delay. Content providers can use congestion control techniques to reduce delay for their content, but do not take into account the effect of their decisions on the aggregate volume of traffic. As a result, strict net neutrality often leads to socially inefficient traffic inflation. We show that piece-meal departures from net neutrality, such as transmission fees or prioritization based on sensitivity to delay, do not necessarily improve efficiency. However, allowing the ISP to introduce bandwidth tiering and charge for prioritized delivery can implement the<br/>efficient allocation.
    Keywords: Net neutrality; network congestion; telecommunications,; uality of service
    JEL: L12 L51 L86
    Date: 2015
  2. By: Timo Hiller; Timo Hiller
    Abstract: This paper presents a simple model of strategic network formation with local complementarities in effort levels and positive local externalities for a general class of payoff functions. Results are obtained for one-sided and two-sided link creation. In both cases (pairwise) Nash equilibrium networks are nested split graphs, which are a strict subset of core-periphery networks. The relevance of the convexity of the value function (gross payoffs as a function of neighbours' effort levels when best responding) in obtaining nested split graphs is highlighted. Under additional assumptions on payoffs, we show that the only efficient networks are the complete and the empty network. Furthermore, there exists a range of linking cost such that any (pairwise) Nash equilibrium is inefficient and for a strict subset of this range any (pairwise) Nash equilibrium network structure is different from the efficient network. These findings are relevant for a wide range of social and economic phenomena, such as educational attainment, criminal activity, labor market participation, and R&D expenditures of firms.
    Keywords: Strategic network formation, peer effects, strategic complements, positive externalities.
    JEL: D62 D85
    Date: 2013–09
  3. By: Pascal Courty; Daniel Rondeau; Maurice Doyon
    Abstract: We study truthful revelation when a seller auctions bundles of goods and is interested in learning the buyer’s valuations for each individual good. We generalize the auction rules for the Becker- Degroot-Marschak mechanism and the Vickrey auction to induce truthful revelation.
    Keywords: Auction; truthful revelation; Becker-Degroot-Marschak mechanism; Vickrey auction
    JEL: D44 Q23 Q28
    Date: 2015–05
  4. 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: prix; concurrence; structure de marché; full cost
    JEL: D21 D40 D49
    Date: 2014
  5. By: Michael Florig; Jorge Rivera Cayupi
    Abstract: We study economies where all commodities are indivisible at the individual level, but per- fectly divisible at the aggregate level of the economy. Under the survival assumption, we show that any rationing equilibrium (Florig and Rivera [7]) in the discrete economy converges to a Walras equilibrium of the limit economy when the level of indivisibility becomes small. If the survival assumption is not satisfied, then rationing equilibrium converges to a hierarchic equilibrium (Florig [5]).
    Date: 2015–05
  6. By: Javed I. Ahmed (Office of Financial Research)
    Abstract: This article relates corporate credit rating quality to competition in lending between the public bond market and banks. In the model, the monopolistic rating agency's choice of price and quality leads to an endogenous threshold separating low-quality bank-dependent issuers from higher-quality issuers with access to public debt. In a baseline equilibrium with expensive bank lending, this separation across debt market segments provides information, but equilibrium ratings are uninformative. A positive shock to private (bank) relative to public lending supply allows banks to compete with public lenders for high-quality issuers, which threatens rating agency profits, and informative ratings result to prevent defection of high-quality borrowers to banks. This prediction is tested by analyzing two events that increased the relative supply of private vs. public lending sharply: legislation in 1994 that reduced barriers to interstate bank lending and the temporary shutdown of the high-yield bond market in 1989. After each event, the quality of ratings (based on their impact on bond yield spreads) increased for affected issuers. The analysis suggests that that the quality of credit ratings plays an important role in financial stability, as strategic behavior by the rating agency in an issuer-pays setting dampens the inuence of macroeconomic shocks. It also explains the use of informative unsolicited credit ratings to prevent unrated bond issues, particularly during good times. Additionally, the controversial issuer-pays model of ratings leads to more efficient outcomes than investor-pays alternatives.
    Keywords: Issuer pays, credit rating, segmented markets, unsolicited rating
    JEL: D82 E32 G24 G32
    Date: 2014–04–16
  7. By: ISHIKAWA Jota; MORITA Hodaka; MUKUNOKI Hiroshi
    Abstract: This study investigates the effect of parallel imports when the producer of a durable good may refuse to provide repair and maintenance services for parallel imported units, or charge higher prices for those services. By doing so, the producer is able to weaken intra-brand competition and reduce the degree of market integration, thereby mitigating the negative effect of parallel imports on profits. Although the lower degree of market integration increases the producer's profit, it does not always mean that the producer wants to improve the durability of the product. If the producer invests in improving the durability of the good, the service discrimination against the parallel imported units could lower the durability of the product. In this case, consumers in the importing country may suffer by permitting parallel imports, and the negative effect is amplified by trade liberalization.
    Date: 2015–05
  8. By: Sunil Kanwar; Bronwyn H. Hall
    Abstract: We revisit the relationship between market value and innovation in the context of manufacturing firms in a developing country, using Indian data from 2001 through 2010. Surprisingly, we find that financial markets value the R&D investment of Indian firms the same or higher than such investment is valued in developed economies like the US. Using a proxy for the option value of R&D, we find that this accounts for a very small part of the R&D valuation (5% at most). We also find that the market value-R&D relationship does not vary significantly across industry groups, although these results are imprecise.
    JEL: G12 O16 O30
    Date: 2015–05
  9. By: ZAGHDOUDI, Khemais; HAMDI, Helmi; DKHILI, Hichem; HAKIMI, Abdelaziz
    Abstract: In this paper, we investigate whether bank competition increases risk taking for the case of the Tunisian banks. Our data set covers nine Tunisian banks observed during the period from1980 to 2009 and we conducted an econometric model based on panel data estimations. The econometric results reveal the presence of a positive relationship between competition and bank risk taking. This shows that the functions of Tunisian banks remain based on the basic traditional activities and banks need to diversify their activities in safe functions to keep the banking sector stable and avoid bank failure.
    Keywords: Bank competition, Tunisian banks, Bank risk taking, Panel data analysis.
    JEL: G21 L11
    Date: 2015–05–19
  10. By: Valeria Bernardo (Faculty of Economics, University of Barcelona); Joan-Ramon Borrell (Faculty of Economics, University of Barcelona); Jordi Perdiguero (Faculty of Economics, Universitat Autònoma de Barcelona)
    Abstract: This paper uses a game of strategic interaction to simulate entry and location of fast charging stations for electric vehicles. It evaluates the equilibria obtained in terms of social welfare and firm spatial differentiation. Using Barcelona mobility survey, demographic data and the street graph we find that only at an electric vehicle penetration rate above 3% does a dense network of stations appear as the equilibrium outcome of a market with no fiscal transfers. We also find that price competition drives location differentiation measured not only in Euclidean distances but also in consumer travel distances.
    Keywords: Regional Planning; Electric Vehicle; Fast Charging; Games of Strategic Interaction; Entry Models JEL classification: Q48, Q58, L13, L43, R53
    Date: 2015–05

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