nep-ind New Economics Papers
on Industrial Organization
Issue of 2005‒05‒23
five papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Do Vertical Mergers Facilitate Upstream Collusion? By Volker Nocke; Lucy White
  2. Price Adjustment at Multiproduct Retailers By Daniel Levy; Shantanu Dutta; Mark Bergen; Robert Venable
  3. Determinants of Profit in the Broadcasting Industry | Evidence from Japanese Micro Data| By Norihiro KASUGA; Manabu Shishikura
  4. Monopoly, asymmetric information, and optimal environmental taxation By Manel Antelo
  5. Do bank mergers affect Federal Reserve check volume? By Joanna Stavins

  1. By: Volker Nocke (Department of Economics, University of Pennsylvania); Lucy White (Finance, Harvard Business School)
    Abstract: In this paper we investigate the impact of vertical mergers on upstream firms’ ability to sustain collusion. We show in a number of models that the net effect of vertical integration is to facilitate collusion. Several effects arise. When upstream offers are secret, vertical mergers facilitate collusion through the operation of an outlets effect: Cheating unintegrated firms can no longer profitably sell to the downstream affiliates of their integrated rivals. Vertical integration also facilitates collusion through a reaction effect: the vertically integrated firm’s ‘contract’ with its downstream affiliate can be more flexible and thus allows a swifter reaction in punishing defectors. Offsetting these two effects is a possible punishment effect which arises if the integrated structure is able to make more profits in the punishment phase than a disintegrated structure.
    Keywords: vertical mergers, collusion
    JEL: L13 L42
    Date: 2003–11–17
    URL: http://d.repec.org/n?u=RePEc:pen:papers:03-033&r=ind
  2. By: Daniel Levy (Bar-Ilan University); Shantanu Dutta (University of Southern California); Mark Bergen (University of Minnesota); Robert Venable (Robert W. Baird, Co.)
    Abstract: We empirically study the price adjustment process at multiproduct retail stores. We use a unique store level data set for five large supermarket and one drugstore chains in the U.S., to document the exact process required to change prices. Our data set allows us to study this process in great detail, describing the exact procedure, stages, and steps undertaken during the price change process. We also discuss various aspects of the microeconomic environment in which the price adjustment decisions are made, factors affecting the price adjustment decisions, and firm-level implications of price adjustment decisions. Specifically, we examine the effects of the complexity of the price change process on the stores’ pricing strategy. We also study how the steps involved in the price change process, combined with the laws governing the retail price setting and adjustment, along with the competitive market structure of the retail grocery industry, influence the frequency of price changes. We also examine how the mistakes that occur in the price change process influence the actions taken by these multiproduct retailers. In particular, we study how these mistakes can make the stores vulnerable to civil law suits and penalties, and also damage their reputation. We also show how the mistakes can lead to stock outs or unwanted inventory accumulations. Finally, we discuss how retail stores try to minimize these negative effects of the price change mistakes.
    Keywords: Cost of Price Adjustment, Price Adjustment Process, Menu Cost, Posted Prices, Multiproduct Retailer, Price rigidity, Sticky Prices, Frequency of Price Changes, Time Dependent Pricing, Retail Supermarket and Drugstore Chains
    JEL: E31 E12 E50 G13 G14 L11 L15 L16 M21 M31 Q11 Q13
    Date: 2005–05–15
    URL: http://d.repec.org/n?u=RePEc:wpa:wuwpio:0505005&r=ind
  3. By: Norihiro KASUGA (Faculty of Economics, Nagasaki University); Manabu Shishikura (Institute for Information & Communications Policy)
    Abstract: The operating areas of each terrestrial broadcasting station in Japan are geographically divided by a licensing system and form oligopolies in each of their respective markets. These institutional constraints define the market structure, and as a result, affect the business performance of the broadcasting industry. The primary purpose for regulation is based on the gMedia Ownership Rule,h a rule designed for preserving gplurality,h gdiversityh and hlocalismh of stations. Similar rules exist in many countries, but benchmarks differ. To this end, if the regulative authority introduced a new regulation framework, it might be useful to improve the financial foundation of the licensed stations, thus preserving the original purpose of the rule. With the rapid progress of digital technology and the increasingly diversified selection of media types, the government needs to urgently review Japanfs old regulations with the aim of giving more freedom in the operation of terrestrial stations and so promote voluntary restructuring. Based on the above viewpoints, we implemented an econometric analysis with respect to factors that affect on the business performance (especially on profit) of each station. We focus on the terrestrial broadcasting industry because it plays a central role in the Japanese broadcasting system. As a result, we ascertained the following points. (1) Structural parameters: market share of each station has a positive correlation with profit, although market concentration appears to have no correlation. (2) Geographical parameters: the number of households per station and the income per household have positive correlations. (3) Business parameters: the aired ratio of self-produced TV programs has a positive correlation with revenue, although it has a negative correlation with profit. It is said that geographical environment is quite important for business performance in the broadcasting industry. This hypothesis is strongly supported by our results. Therefore deregulation and subsequent voluntary rearrangement may reinforce the operating basis of each station.
    Keywords: Terrestrial Broadcasting Station, Determinants of profit, Principle of Media Ownership Rule, Audience Share, Oligopoly
    JEL: D43 L13 L82
    Date: 2005–05–17
    URL: http://d.repec.org/n?u=RePEc:wpa:wuwpio:0505006&r=ind
  4. By: Manel Antelo (Universidad de Santiago de Compostela)
    Abstract: This paper aims to examine optimal environmental taxation in an incomplete-information two-period model in which a monopolistic firm produces and pollutes. It is assumed that the polluting firm is privately informed about its costs of production, and the policymaker, which can only infer the firm's costs from observing the output produced in the first period, has the chance to set environmental taxes to affect emissions; the emitter of pollution may then choose a non-optimal level of production in such a period in order to manipulate the policymaker's beliefs concerning its costs. If the policymaker values environmental quality sufficiently, the low-cost polluter has an incentive to misrepresent itself as a high-cost firm in order to secure a low environmental tax in the second period. This leads the high-cost polluting firm to produce, in the first period, an output level that is not higher than output which would be optimal if only short-term considerations were taken into account. The optimal environmental tax rate in the first period, when the firm's output is a signal of its cost, is then lower than or equal to what it would be if the firm's output was not a signal of firm's costs. The expected emissions in the former context are also lower than or equal to those in the latter case. By contrast, when the policymaker's valuation of the environment is sufficiently low, the environmental tax is negative (a subsidy per unit of pollutant emitted) in both the signaling and non-signaling contexts and no less in the former context than in the latter.
    Keywords: Environmental tax and subsidy policy, monopolistic polluting firm, vertical asymmetric information, signaling and non-signaling
    JEL: D62 D82 L13
    Date: 2005
    URL: http://d.repec.org/n?u=RePEc:cea:doctra:e2005_08&r=ind
  5. By: Joanna Stavins
    Abstract: The recent decline in the Federal Reserve’s check volumes has received a lot of attention. Although switching to electronic payments methods and electronic check-processing has been credited for much of that decline, some of it could be caused by changes following bank mergers involving Federal Reserve customer banks. This paper evaluates the effect of bank mergers on Federal Reserve check-processing volumes. ; Using inflow-outflow and regression methods, we find that mergers between two or more Reserve Bank customers have resulted in volume losses, especially during the first quarter following the merger. On average, the estimated cumulative loss of volume during the first five post-merger quarters was 2.6 million checks. While the overall number of checks in the United States has declined during the past few years, the Federal Reserve has lost additional check-processing volume because of bank mergers.
    Keywords: Bank mergers ; Check collection systems
    Date: 2004
    URL: http://d.repec.org/n?u=RePEc:fip:fedbpp:04-7&r=ind

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