nep-ind New Economics Papers
on Industrial Organization
Issue of 2006‒04‒29
eleven papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Profitability Measures and Competition Law By Paul A.Grout; Anna Zalewska
  2. Strategic complementarity in multi-stage games By Vives, Xavier
  3. Entry Deterrence and Entry Accommodation Strategies of a Multiproduct Firm Regulated with Dynamic Price Cap By Paula Sarmento; António Brandão
  4. Product Innovation and Transportation Technology in a Cournot Duopoly. By A. Mantovani
  5. Empirical Analysis of Retail Competition: Spatial Differentiation at Wal-Mart, Amazon.com, and Their Competitors By Lesley Chiou
  6. Differential Games and Oligopoly Theory: An Overview. By R. Cellini; L. Lambertini
  7. Price vs Quantityin a Repeated Differentiated Duopoly. By L. Lambertini; C. Schultz
  8. Price vs Quantity in a Dynamic Duopoly Game with Capacity Accumulation. By R. Cellini; L. Lambertini
  9. Stackelberg Leadership in a Dynamic Duopoly with Capital Accumulation. By L. Lambertini
  10. Non-Linear Marcket Demand and Capital Accumulation in A Differential Oligopoly Game. By R. Cellini; L. Lambertini
  11. A Differential Oligopoly Game with Differentiated Goods and Sticky Prices. By R. Cellini; L. Lambertini

  1. By: Paul A.Grout; Anna Zalewska
    Abstract: The paper outlines various measures of profitability and considers what role they can play in competition law. We argue that profitability measures can provide a good answer to the wrong question and a much less good answer to the question we really want to answer. Using appropriate definitions of asset value it is possible to identify whether a firm earns more than the absolute minimum needed to cover cost and compensate for risk, i.e., whether profitability measures such as the internal rate of return and the accounting rate of return are above the cost of capital. However, both the empirical evidence we present and theory indicates that this does not really help in most cases. Knowing that a firm is earning say, half a percent more than the cost of capital is not really much help in almost all competition law cases. But we show that once the rate of return deviates from the cost of capital it becomes hard to measure. Using simple examples we show that shifts in cash flows that preserve the net present value of a project can have dramatic effects on profitability measures. Hence, it is hard to assess the quantity of the “excessive” return. Furthermore, this problem is likely to be far more prevalent today than in the past given the growth in outsourcing (since outsourcing has exactly this type of effect on cash flows). Despite such problems, we argue that the measurement of profit has a role to play in competition law but that the analysis is far more of an art form and far less of a simple statistical procedure.
    Keywords: profitability measures, excess return, competition
    JEL: K21 L43 G38
    Date: 2006–01
    URL: http://d.repec.org/n?u=RePEc:bri:cmpowp:06/144&r=ind
  2. By: Vives, Xavier (IESE Business School)
    Abstract: We provide sufficient conditions in finite-horizon multi-stage games for the value function of each player, associated to extremal Markov perfect equilibria, to display strategic complementarities and for the contemporaneous equilibrium to be increasing in the state variables.
    Keywords: Markov game; supermodularity; two-stage game; adjustment costs; learning curve; network effects;
    Date: 2006–03–21
    URL: http://d.repec.org/n?u=RePEc:ebg:iesewp:d-0619&r=ind
  3. By: Paula Sarmento (CETE, Faculdade de Economia, Universidade do Porto); António Brandão (CETE, Faculdade de Economia, Universidade do Porto)
    Abstract: In this paper we study the way a multiproduct firm, regulated through a dynamic price cap, can develop a price strategy that uses the regulatory policy to deter entry. We consider a firm that initially operates as a monopolist in two markets but faces potential entry in one of the markets. We conclude that the regulated firm can have the incentive to block the entry. This strategy leads to the reduction of the price in both markets. However, the final effect of the entry deterrence strategy on total consumer surplus is not always positive.
    Keywords: price cap regulation, entry
    JEL: L11 L51
    Date: 2005–05
    URL: http://d.repec.org/n?u=RePEc:por:cetedp:0502&r=ind
  4. By: A. Mantovani
    URL: http://d.repec.org/n?u=RePEc:bol:bodewp:416&r=ind
  5. By: Lesley Chiou (Department of Economics, Occidental College)
    Abstract: This paper quantifies the degree of competition and spatial differentiation across retail channels by exploiting a unique dataset that describes a consumer's choice of store. I estimate a consumer's choice of retailer in the sales market for DVDs among online, mass merchant, electronics, video specialty, and music stores. Using a discrete choice model, I allow for unobserved heterogeneity in preferences for store types and disutility of travel. A consumer's traveling cost varies by income, and substitution occurs proportionately more among stores of the same type. Conditional on price and distance, the average consumer still prefers Wal-Mart over most other stores.
    Keywords: discrete choice, retail, spatial differentiation
    JEL: C25 L81
    Date: 2005–05
    URL: http://d.repec.org/n?u=RePEc:occ:wpaper:3&r=ind
  6. By: R. Cellini; L. Lambertini
    URL: http://d.repec.org/n?u=RePEc:bol:bodewp:369&r=ind
  7. By: L. Lambertini; C. Schultz
    URL: http://d.repec.org/n?u=RePEc:bol:bodewp:379&r=ind
  8. By: R. Cellini; L. Lambertini
    URL: http://d.repec.org/n?u=RePEc:bol:bodewp:449&r=ind
  9. By: L. Lambertini
    URL: http://d.repec.org/n?u=RePEc:bol:bodewp:442&r=ind
  10. By: R. Cellini; L. Lambertini
    URL: http://d.repec.org/n?u=RePEc:bol:bodewp:372&r=ind
  11. By: R. Cellini; L. Lambertini
    URL: http://d.repec.org/n?u=RePEc:bol:bodewp:440&r=ind

This nep-ind issue is ©2006 by Kwang Soo Cheong. 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 http://nep.repec.org. For comments please write to the director of NEP, Marco Novarese at <director@nep.repec.org>. 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.