nep-ind New Economics Papers
on Industrial Organization
Issue of 2007‒08‒18
six papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Endogenous Entry and Antitrust Policy By Federico Etro
  2. Why Should a Firm Choose to Limit the Size of its Market Area? By Marco Alderighi; Claudio A. Piga
  3. Fiscal Discrimination Between Consumer Groups: Tax Burden Distribution Under Price Discrimination By Jörg Plewka
  4. Competition Law and Policy Indicators for the OECD countries By Jens Høj
  5. A new approach to measuring competition in the loan markets of the euro area By Michiel van Leuvensteijn; Jacob A. Bikker; Adrian A.R.J.M. van Rixtel; Christoffer Kok-Sørensen∗
  6. Industry restructuring, OPEC response – and oil price formation By Finn Roar Aune, Klaus Mohn, Petter Osmundsen and Knut Einar Rosendahl

  1. By: Federico Etro (Department of Economics, University of Milan-Bicocca)
    Abstract: This article derives antitrust implications for markets where entry can be regarded as endogenous (contrary to most analysis within the post-Chicago tradition). Many applications concern issues of abuse of dominance. Endogenous entry requires a wide revision of our understanding of the role of incumbents in pricing, producing in the presence of network externalities and multi-sided markets, bundling products, price discriminating and delegating to retailers through vertical restraints: when entry is endogenous, leaders adopt aggressive strategies without exclusionary purposes and without affecting welfare negatively. Endogenous entry has also implications for the analysis of mergers (that take place only if create enough cost efficiencies and do not harm consumers), the evaluation of collusive cartels (that are unfeasible in markets where entry is endogenous) and state aids for exporting firms (which are always unilaterally optimal for international markets with free entry). The spirit of the policy recommendations of the Chicago school is broadly supported by our analysis in a solid game-theoretic framework.
    Keywords: Antitrust, Endogenous entry, Leadership, Chicago school
    JEL: L1
    Date: 2007
    URL: http://d.repec.org/n?u=RePEc:mib:wpaper:122&r=ind
  2. By: Marco Alderighi (University of Valle d'Aosta, Italy.); Claudio A. Piga (Dept of Economics, Loughborough University)
    Abstract: We study when a monopolistically-competitive firm may optimally choose to limit the size of its market. This may be the case when the cost of serving the market with geographically dispersed customers is increasing in size. We also investigate the incentives faced by a firm to limit the reach of its market, when it adopts different pricing schemes. We show that under certain assumptions the derived equilibria are constrained socially optimal.
    Keywords: Monopolistic competition; Transport costs; Endogenous fixed costs; Overlapping market areas
    JEL: D21 D43 F12 L13 R12
    Date: 2007–08
    URL: http://d.repec.org/n?u=RePEc:lbo:lbowps:2007_21&r=ind
  3. By: Jörg Plewka
    Abstract: In this paper it is analysed, how, under price discrimination, the tax burden is shared between the distinct consumer groups. Unit and ad valorem taxes are compared, revealing an impossibility of fiscal discrimination with regard to price changes. Contrary to conventional tax incidence analysis, it is shown that quantities traded do matter. Relative market shares are decisive for the distribution of tax burdens thereby opening up an opportunity for fiscal discrimination in choosing tax types. This discriminatory potential is limited and not caused by price discrimination per se but rather due to monopolistic supply.
    Keywords: Tax incidence, unit tax, ad valorem tax, price discrimination
    JEL: H22 L11
    Date: 2007–07
    URL: http://d.repec.org/n?u=RePEc:rwi:repape:0019&r=ind
  4. By: Jens Høj
    Abstract: The aim of this paper is to construct indicators that measure the strength of policies aimed at preserving and promoting market competition by empowering antitrust and sectoral authorities. The indicators, which cover both general and sector-specific competition policies, extend previous OECD work covering economy-wide and sector-specific regulations that restrict competition and promote governance. It focuses on information for 2003 provided by a number of OECD sources. The results show relatively little variation in the overall indicator across countries, partly reflecting the convergence of competition policies across the OECD area over the past decade. However, inspection of individual elements reveals that enforcement efforts (both in terms of devoted resources and actually implemented sanctions) and policies in network industries vary considerably across countries. Thus, the main conclusion arising from this work is that member countries have been improving the general competition policy framework, but still have to fully implement the improved framework. Moreover, there remains a considerable scope for further progress in promoting competition in network industries. <P>Indicateurs de l'efficacité de la politique de la concurrence dans les pays de l'OCDE <BR>Ce document de travail présente la construction d'indicateurs mesurant l'impact des politiques qui encouragent le maintien et le développement de la concurrence des marchés en renforçant les autorités pro-concurrentielles et sectorielles. Ces indicateurs qui couvrent les politiques de concurrence au niveau global et sectoriel sont un prolongement des travaux précédents de l'OCDE concernant les restrictions de la concurrence dans l'économie au sens large ainsi que par secteur. Les indicateurs décrits ici sont construits à partir de données en provenance de sources de l'OCDE et concernent l'année 2003. L'indicateur le plus agrégé varie peu d’un pays à un autre, reflétant en partie la convergence des politiques pro-concurrentielles au sein de l’OCDE au cours de la dernière décennie. Une analyse plus détaillée montre cependant que les efforts de mise en oeuvre des régulations sur les marchés des biens et services (ressources allouées, sanctions prises) et les politiques concernant les industries de réseaux sont beaucoup plus variables. Au total, les pays membres ont certes mis en place des politiques pro-concurrentielles théoriquement bonnes, mais il reste encore à compléter leur mise en oeuvre. De plus, il subsiste de nombreux domaines, notamment dans les industries de réseau où l'amélioration de la concurrence peut grandement progresser.
    Keywords: politique de la concurrence, regulated industries, enforcement, product market competition, antitrust law, concurrence sur les marchés de biens
    JEL: K2 L5
    Date: 2007–08–08
    URL: http://d.repec.org/n?u=RePEc:oec:ecoaaa:568-en&r=ind
  5. By: Michiel van Leuvensteijn; Jacob A. Bikker; Adrian A.R.J.M. van Rixtel; Christoffer Kok-Sørensen∗
    Abstract: This paper is the first that applies a new measure of competition, the Boone indicator, to the banking industry. This approach is able to measure competition of bank market segments, such as the loan market, whereas many well-known measures of competition can consider the entire banking market only. A caveat of the Boone-indicator may be that it assumes that banks generally pass on at least part of their efficiency gains to their clients. Like most other model-based measures, this approach ignores differences in bank product quality and design, as well as the attractiveness of innovations. We measure competition on the lending markets in the five major EU countries as well as, for comparison, the UK, the US and Japan. Bearing the mentioned caveats in mind, our findings indicate that over the period 1994-2004 the US had the most competitive loan market, whereas overall loan markets in Germany and Spain were among the best competitive in the EU. The Netherlands occupied a more intermediate position, whereas in Italy competition declined significantly over time. The French, Japanese and UK loan markets were generally less competitive. Turning to competition among specific types of banks, commercial banks tend to be more competitive, particularly in Germany and the US, than savings and cooperative banks.
    Keywords: Banking industry, competition, loan markets, marginal costs, market shares;
    JEL: D4 G21 L1
    Date: 2007–05
    URL: http://d.repec.org/n?u=RePEc:hit:hitcei:2007-6&r=ind
  6. By: Finn Roar Aune, Klaus Mohn, Petter Osmundsen and Knut Einar Rosendahl (Statistics Norway)
    Abstract: Increased focus on shareholder returns, capital discipline and return on capital employed (RoACE) caused a slowdown in investment rates and production growth among international oil companies around the turn of the century. Focusing on supply side dynamics of the oil market, we explore a hypothesis that the restructuring in the international oil industry towards the end of the 1990s had long-lived effects on OPEC strategies – and on oil price formation. Based on a partial equilibrium model for the global oil market, we examine the effects of the industry restructuring on oil supply and oil prices, compared with a counterfactual reference scenario characterised by industrial stability and unchanged price ambitions within OPEC. A key result is that important factors behind the currently high oil price can be traced back to the industrial restructuring and to the Asian economic crisis. This suggests that temporary economic and financial shocks may have a long-term impact on oil price formation.
    Keywords: Oil market; investment behaviour; market power; equilibrium model
    JEL: G31 L13 Q41
    Date: 2007–07
    URL: http://d.repec.org/n?u=RePEc:ssb:dispap:511&r=ind

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