nep-ind New Economics Papers
on Industrial Organization
Issue of 2009‒03‒22
five papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Market Sharing and Price Leadership By Farm, Ante
  2. Competition Law, Cartel Enforcement & Leniency Program By Samà, Danilo
  3. On the measurement of market power in the banking industry By Delis, Manthos D; Staikouras, Christos; Varlagas, Panagiotis
  4. Anti-Competitive Effects of resale-Below-Cost Laws By Marie-Laure Allain; Claire Chambolle
  5. The Effects of Retail Regulations on Prices: Evidence from the Loi Galland By Pierre Biscourp; Xavier Boutin; Thibaud Vergé

  1. By: Farm, Ante (Swedish Institute for Social Research, Stockholm University)
    Abstract: This paper proposes an alternative to the traditional model of supply and demand in markets where consumers take prices as given. Within the framework of “no side payments and partial preplay communication” firms are assumed to decide non-cooperatively on production and marketing while the market price is set by a competitive price leader, i.e. a firm preferring the lowest market price. Predictions include excess supply and a revenuemaximizing market price in markets where production precedes sales. In markets where sales precede production competitive price leadership predicts monopoly pricing but not necessarily monopoly profits if firms are “sufficiently similar”, while the presence of firms with high costs or low capacities will make it possible for the price leader, in some circumstances, to increase its market share and also its profits by reducing its price. And the threat of costly competition for market shares may reduce the market price even for identical firms.
    Keywords: Pricing; oligopoly; price leadership; market sharing
    JEL: L13
    Date: 2009–03–12
  2. By: Samà, Danilo
    Abstract: The present assessment focuses the attention on the antitrust action in detecting and fighting oligopolistic collusion, analyzing the development of the innovative and modern leniency policy. Following the examination of the main conditions and reasons for cartel stability and sustainability, our attempt is to comprehend under which circumstances leniency program represents a functional and successful tool for preventing the formation of anti-competitive agreements. The problem statement that follows is therefore: how can Law&Economics approach help competition authorities to achieve and realize this form of enforcement?
    Keywords: Antitrust Cartels Enforcement Game Theory Leniency Program Oligopolistic Markets
    JEL: L5 L16 C7 K21 L1
    Date: 2008–12–01
  3. By: Delis, Manthos D; Staikouras, Christos; Varlagas, Panagiotis
    Abstract: This paper compares the estimates of the two most widely used non-structural models for market power measurement in banking, namely the conduct parameter method and the revenue test, as applied to a panel of Greek banks over the period 1993-2004. We also propose a dynamic reformulation of these models within a panel data context, in order to address possible statistical problems associated with the dynamic nature of bank-level data. The results suggest that both static methods provide lower estimates of market power relative to their dynamic counterparts. Therefore, the inclusion of some dynamics in the models, even though it increased estimation complexity, helped to reveal some collusive behavior of banks.
    Keywords: Market power estimation; Conduct parameter method; Revenue test; Greek banking sector
    JEL: L10 P20 G21
    Date: 2008–06–12
  4. By: Marie-Laure Allain (CREST - Centre de Recherche en Économie et Statistique - INSEE - École Nationale de la Statistique et de l'Administration Économique, Department of Economics, Ecole Polytechnique - CNRS : UMR7176 - Polytechnique - X); Claire Chambolle (Department of Economics, Ecole Polytechnique - CNRS : UMR7176 - Polytechnique - X, INRA - LORIA)
    Abstract: We show that resale-below-cost laws enable producers to impose industry-wide price-floors to retailers. This mechanism suppresses downstream competition but also and more surprisingly dampens upstream competition, leading to higher prices and lower welfare. Price-floor may be more profitable for producers than resale price maintenance contracts and, when a resale price maintenance restraint may have ambiguous effect on welfare, price-floors are always welfare damaging. Retailers' buyer power appears as a key for a price-floor to work out.
    Keywords: Price-floor, Resale Price Maintenance, Buyer Power, Competition
    Date: 2009–03–11
  5. By: Pierre Biscourp (ENSAE); Xavier Boutin (INSEE (D3E-MSE) and CREST-LEI); Thibaud Vergé (CREST-LEI)
    Abstract: In 1997, a new legislation banning below-invoice retail prices came into force in France. Individually negotiated discounts could no longer be passed on to consumers, which is equivalent to allowing industry-wide price floors. The anti-competitive effects of such practices are well-known. The elimination of intra-brand competition is expected to lead to a sharp increase in the retail prices. Using CPI raw data, we find evidence supporting this claim. The modification or revocation of the existing legislation (as it has been done in Ireland in December 2005) would then be expected to reduce retail prices.
    Keywords: retail prices, pricing regulations, resale price maintenance
    JEL: L42 L81 K23
    Date: 2008–05

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