nep-com New Economics Papers
on Industrial Competition
Issue of 2017‒04‒09
nine papers chosen by
Russell Pittman
United States Department of Justice

  1. On the Coalitional Stability of Monopoly Power in Differentiated Bertrand and Cournot Oligopolies By Aymeric Lardon
  2. Comparing Welfare and Profit in Quantity and Price Competition within Stackelberg Mixed Duopolies By Hirose, Kosuke; Matsumura, Toshihiro
  3. Essays on Consumer Welfare By Lin, P.
  4. Very Simple Markov-Perfect Industry Dynamics : Theory By Abbring, Jaap; Campbell, J.R.; Tilly, J.; Yang, N.
  5. The asymptotic core, nucleolus and Shapley value of smooth market games with symmetric large players By Benyamin Shitovitz; Rubinchik, Anna
  6. Public R&D support in Italy. Evidence from a new firm-level patent data set By Aiello, Francesco; Albanese, Giuseppe; Piselli, Paolo
  7. Homing choice and platform pricing strategy By Shekhar, Shiva
  8. Insurance and Insurance Markets By Dionne, Georges; Harrington, Scott
  9. Preisdiskriminierung und Marktmacht auf den internationalen Düngemittelmärkten: Empirische Evidenz aus dem russischen Düngemittelexportmarkt By Goretzki, Philipp; Perekhozhuk, Oleksandr; Glauben, Thomas; Loy, Jens-Peter

  1. By: Aymeric Lardon (Université Côte d'Azur, France; GREDEG CNRS)
    Abstract: In this article we revisit the classic comparison between Bertrand and Cournot competition in the presence of a cartel of firms that faces outsiders acting individually. This competition setting enables to deal with both non-cooperative and cooperative oligopoly games. We concentrate on industries consisting of symmetrically differentiated products where firms operate at a constant and identical marginal cost. First, while the standard Bertrand-Cournot rankings still hold for Nash equilibrium prices, we show that the results may be altered for Nash equilibrium quantities and profits.Second, we define cooperative Bertrand and Cournot oligopoly games with transferable utility on the basis of their non-cooperative foundation. We establish that the core of a cooperative Cournot oligopoly game is strictly included in the core of a cooperative Bertrand oligopoly game when the number of firms is lower or equal to 25. Otherwise the cores cannot be compared. Moreover, we focus on the aggregate-monotonic core, a subset of the core, that has the advantage to select point solutions satisfying both core selection and aggregate monotonicity properties. We succeed in comparing the aggregate-monotonic cores between Bertrand and Cournot competition regardless of the number of firms.
    Keywords: Bertrand, Cournot, Differentiated oligopoly, Cartel, Nash equilibrium, Core, Aggregate-monotonic core
    JEL: C71 D43
    Date: 2017–03
  2. By: Hirose, Kosuke; Matsumura, Toshihiro
    Abstract: We compare welfare and profits under price and quantity competition in mixed duopolies, wherein a state-owned public firm competes against a private firm. It has been shown that price competition yields larger profit for the private firm and greater welfare if the two firms move simultaneously, regardless of whether the private firm is domestic or foreign. We investigate welfare and profit rankings under Stackelberg competition. Under public leadership, the profit and welfare rankings have common features with the simultaneous-move game, regardless of the nationality of private firms. By contrast, under private leadership, the result depends on the nationality of the private firm. When the private firm is domestic, welfare is greater under quantity competition, while the result is reversed when the private firm is foreign. However, regardless of nationality, private firms earn more under price competition. Introducing the nonnegative profit constraint in the public firm improves welfare and increases the private firm's profit, and price competition yields a higher profit for private firms regardless of nationality and which firm is the leader. However, this constraint affects the welfare ranking. Under private leadership, quantity competition yields greater welfare regardless of the nationality of the private firm. These results indicate that profit ranking is fairly robust to the time structure in mixed Stackelberg duopolies, but welfare ranking is not.
    Keywords: public leadership; private leadership; mixed markets; Cournot-Bertrand comparison
    JEL: H42 H44 L13 L32
    Date: 2017–03–20
  3. By: Lin, P. (Tilburg University, School of Economics and Management)
    Abstract: The fast-changing retail industry (with its numerous new product developments and new marketing channels) has policy makers worried about possible detrimental effects of these changes for consumer welfare. Despite the interest of policy makers, only few marketing studies have considered the impact of retailing on consumer welfare. This dissertation contributes to the consumer welfare research from a marketing/retailing perspective. In contrast to the marketing literature, where consumer welfare is a relatively understudied topic, the economics literature has long considered consumer welfare effects. The large majority of the economic literature examines changes in consumer welfare through a price effect. If an ‘event’ leads to lower prices for consumers, this event is considered to be welfare enhancing, as consumers’ purchasing power (or spending ability) goes up. Higher prices, on the other hand, are welfare destroying. However, consumer welfare is not just about lower prices. Consumers also benefit from having a variety of choices. There is value in having a range of options to choose from. Both the price component and the variety component of consumer welfare are addressed in the three empirical essays that make up this dissertation.
    Date: 2017
  4. By: Abbring, Jaap (Tilburg University, Center For Economic Research); Campbell, J.R.; Tilly, J.; Yang, N. (Tilburg University, Center For Economic Research)
    Abstract: This paper develops a simple model of firm entry, competition, and exit in oligopolistic markets. It features toughness of competition, sunk entry costs, and market-level demand and cost shocks, but assumes that firms' expected payoffs are identical when entry and survival decisions are made. We prove that this model has an essentially unique symmetric Markov-perfect equilibrium, and we provide an algorithm for its computation. Because this algorithm only requires finding the fixed points of a finite sequence of contraction mappings, it is guaranteed to converge quickly.
    Keywords: demand uncertainty; dynamic oligopoly; firm entry and exit; sunk costs; toughness of competition
    JEL: L13 C25 C73
    Date: 2017
  5. By: Benyamin Shitovitz (University of Haifa, Department of Economics); Rubinchik, Anna (University of Amsterdam)
    Abstract: We examine the asymptotic nucleolus of a smooth and symmetric oligopoly with an atomless sector in a transferable utility (TU) market game. We provide sufficient conditions for the asymptotic core and the nucleolus to coincide with the unique TU competitive payoff distribution. This equivalence results from nucleolus of a finite TU market game belonging to its core, the core equivalence in a symmetric oligopoly with identical atoms and single-valuedness of the core in the limiting smooth game. In some cases (but not always), the asymptotic Shapley value is more favourable for the large traders than the nucleolus, in contrast to the monopoly case (Einy et al. in J Econ Theory 89(2):186–206, 1999), where the nucleolus allocation is larger than the Shapley value for the atom
    Keywords: Mixed games · Oligopoly · Asymptotic nucleolus · Asymptotic Shapley value
    JEL: C71 D40 D43
  6. By: Aiello, Francesco; Albanese, Giuseppe; Piselli, Paolo
    Abstract: This paper evaluates the impact of R&D public support on the innovation activities of a sample of Italian SMEs. Unlike most of the literature, the analysis focuses more deeply on the innovation output than on the innovation input. The innovation output is measured through patent data. By using a new data set obtained by combining information from EPO records and the Capitalia data set on Italian corporations, we find that publicly supported firms have similar patenting activity to other R&D performers, regardless of the type of policy tool used to foster innovation. However, as far as patenting is concerned, supported SMEs face higher R&D spending than others.
    Keywords: Patents; R&D policy support; SMEs
    JEL: C21 L1 O31 O38
    Date: 2017–03–27
  7. By: Shekhar, Shiva
    Abstract: We compare a discriminatory pricing regime with a non-discriminatory regime in a competitive bottleneck model where content providers endogenously sort into single or multi-homers. We find that consumer prices rise when the share of single-homers increases in the non-discriminatory case, while they stay constant in the discriminatory pricing regime. A discriminatory pricing regime leads to higher platform profits than the non-discriminatory regime when the share of single-homers are relatively high. When the share of single-homers is relatively high (low), the discriminatory pricing regime leads to higher (lower) consumer surplus and social welfare when compared with the non-discriminatory regime.
    Keywords: price discrimination,two-sided markets,platforms,platform competition,network effects
    JEL: D43 L14 L82 L13
    Date: 2017
  8. By: Dionne, Georges (HEC Montreal, Canada Research Chair in Risk Management); Harrington, Scott (University of Pennsylvania)
    Abstract: Kenneth Arrow and Karl Borch published several important articles in the early 1960s that can be viewed as the beginning of modern economic analysis of insurance activity. This chapter reviews the main theoretical and empirical contributions in insurance economics since that time. The review begins with the role of utility, risk, and risk aversion in the insurance literature and then summarizes work on the demand for insurance, insurance and resource allocation, moral hazard, and adverse selection. It then turns to financial pricing models of insurance and to analyses of price volatility and underwriting cycles; insurance price regulation; insurance company capital adequacy and capital regulation; the development of insurance securitization and insurance-linked securities; and the efficiency, distribution, organizational form, and governance of insurance organizations.
    Keywords: Insurance; insurance market; risk sharing; moral hazard; adverse selection; demand for insurance; financial pricing of insurance; price volatility; insurance regulation; capital regulation; securitization; insurance-linked security; organization form; governance of insurance firms.
    JEL: D80 D81 D82 G22 G30
    Date: 2017–03–30
  9. By: Goretzki, Philipp; Perekhozhuk, Oleksandr; Glauben, Thomas; Loy, Jens-Peter
    Abstract: Der vorliegende Beitrag stellt empirische Ergebnisse zur Analyse von Marktverhalten der russischen Exporteure auf den internationalen Märkten für Düngemittel vor. Der Fokus auf Russland begründet sich darin, dass das Land beim Einsturz des Kali-Kartells stark im Rampenlicht stand. Bei zwei der drei exportierten Düngemittelgüter hat Russland einen sehr großen Anteil an den Gesamtexporten und macht, mit einigen wenigen anderen Ländern zusammen, über die Hälfte der globalen Versorgung aus. Zur Überprüfung der Hypothesen zum Marktverhalten wird als Grundmodell der "pricing-to-market" (PTM)-Ansatz nach KRUGMAN (1986, 1987) gewählt. Zur empirischen Überprüfung kommt das weiterentwickelte Modell von KNETTER (1989) zur Anwendung. Im Ergebnis zeigt sich, dass ein imperfekter Wettbewerb auf dem russischen Exportmarkt für Stickstoffdüngemittel in zwei Drittel der untersuchten Destinationsländer herrscht. Auf dem Exportmarkt für Kali ließ sich nur in einem von 9 untersuchenden Ländern ein ausreichend vollkommener Markt finden.
    Keywords: Marktmacht,Preisdiskriminierung,Internationaler Markt,Düngemittel,Russland,pricing-to-market (PTM),market power,price discrimination,international market,fertilizer,Russia
    JEL: D43 F12 F14 L11 L13
    Date: 2017

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