nep-com New Economics Papers
on Industrial Competition
Issue of 2017‒06‒18
six papers chosen by
Russell Pittman
United States Department of Justice

  1. Robust Pooling for Contracting Models with Asymmetric Information By Kerkkamp, R.B.O.; van den Heuvel, W.; Wagelmans, A.P.M.
  2. Dynamic analysis of discontinuous best response with innovation By Fabio Lamantia; Mario Pezzino
  3. Estimating market power Evidence from the US Brewing Industry By Jan De Loecker; Paul T. Scott
  4. How Much Product Variety is Required? Evidence from the Movie Theater Market By In Kyung Kim
  5. Relationships matter: The impact of bank-firm relationships on mergers and acquisitions in Japan By FRENCH, Joseph; YAN, Juxin; YASUDA, Yukihiro
  6. Private labels : The brands of the future By Keller, Kristopher

  1. By: Kerkkamp, R.B.O.; van den Heuvel, W.; Wagelmans, A.P.M.
    Abstract: We consider principal-agent contracting models between a seller and a buyer with single- dimensional private information. The buyer's type follows a continuous distribution on a bounded interval. We present a new modelling approach where the seller oers a menu of nitely many contracts to the buyer. The approach distinguishes itself from existing methods by pooling the buyer types using a partition. That is, the seller rst chooses the number of contracts oered and then partitions the set of buyer types into subintervals. All types in a subinterval are pooled and oered the same contract by the design of our menu. We call this approach robust pooling and apply it to utility maximisation and cost min- imisation problems. In particular, we analyse two concrete problems from the literature. For both problems we are able to express structural results as a function of a single new parameter, which remarkably does not depend on all instance parameters. We determine the optimal par- tition and the corresponding optimal menu of contracts. This results in new insights into the (sub)optimality of the equidistant partition. For example, the equidistant partition is optimal for a family of instances for one of the problems. Finally, we derive performance guarantees for the equidistant and optimal partitions for a given number of contracts. For the considered problems the robust pooling approach has good performances with only a few contracts.
    Keywords: mechanism design, asymmetric information, robust pooling, optimal partitioning, performance guarantees
    Date: 2017–03–14
  2. By: Fabio Lamantia; Mario Pezzino
    Date: 2017
  3. By: Jan De Loecker; Paul T. Scott
    Abstract: While inferring markups from demand data is common practice, estimation relies on difficult-to-test assumptions, including a specific model of how firms compete. Alternatively, markups can be inferred from production data, again relying on a set of difficult-to-test assumptions, but a wholly different set, including the assumption that firms minimize costs using a variable input. Relying on data from the US brewing industry, we directly compare markup estimates from the two approaches. After implementing each approach for a broad set of assumptions and specifications, we find that both approaches provide similar and plausible markup estimates in most cases. The results illustrate how using the two strategies together can allow researchers to evaluate structural models and identify problematic assumptions.
    Keywords: Markups, Demand systems, Production Functions, Conduct
    Date: 2017–01
  4. By: In Kyung Kim (Department of Economics, Nazarbayev University)
    Abstract: This paper empirically investigates the effect of the entry of new theaters on the number of movies playing in incumbent theaters and in the market as a whole, as well as its effect on consumer welfare via the change in product variety and availability. Estimation results suggest that whereas the entry of competitors to a market does not affect the number of movies playing in a theater, the total number of movies playing in the market increases after the entry of new theaters. These findings imply that a theater offers a movie lineup different from those of rivals in order to ease competition, which leads to an increase in market-wide movie variety. We also find robust evidence that the net effect of increased movie variety in the market after the entry of new theaters on consumer welfare is non-monotonic; it is positive only for the first few entrants to a monopoly market.
    Keywords: product variety, consumer welfare, movie theater industry
    JEL: L13 L22 L82
    Date: 2017–06
  5. By: FRENCH, Joseph; YAN, Juxin; YASUDA, Yukihiro
    Abstract: We dissect the influence of bank-firm relationships on mergers and acquisitions in Japan. Using a comprehensive data set spanning fifteen years, we show that stronger bank-firm relationships generally increase the likelihood and size of M&A. Contrary to conventional wisdom of the adverse effects of bank-firm relationships in Japan, such as ‘zombie lending', our results indicate that Japanese banks facilitate restructuring in the 2000's. However, in cases where a bank plays a dual role as a lender and shareholder to a firm, the likelihood and size of M&A declines. This result stems from a bank's desire to maintain existing corporate governance mechanisms and control rights.
    Keywords: Mergers and Acquisitions, Relationship Banking, Japan
    JEL: G01 G21 G34
    Date: 2016–06–14
  6. By: Keller, Kristopher (Tilburg University, School of Economics and Management)
    Abstract: This dissertation consists of three essays that study private labels’ evolution from private labels as brand class to individual private-label brands from three different perspectives. In the second chapter of this dissertation (essay 1), I study the antecedents and performance implications of retailer’s decisions whether to attach their name to a private-label tier or develop a stand-alone brand name. In the third chapter (essay 2), mirroring the contention that it “is easier to build equity in a single brand,” I study retailers’ occasional practice of rebranding private-label tiers from multiple, category-specific private labels to one umbrella brand across product categories and its effects on the brand’s strength, marketing effectiveness as well as the marketing-mix setting (marketing conduct). Finally, in the fourth chapter (essay 3), I document retailers’ increasing practice to launch more and more unique private label SKUs, historically a forte of national brands, and assess to what extent unique new private label SKUs help in growing a category vis-à-vis unique new national brand SKUs.
    Date: 2017

This nep-com issue is ©2017 by Russell Pittman. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.