nep-ind New Economics Papers
on Industrial Organization
Issue of 2009‒09‒26
seven papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Quantity-setting games with a dominant firm By Attila Tasnádi
  2. Mergers in Imperfectly Segmented Markets By Pio Baake; Christian Wey
  3. Horizontal mergers, firm heterogeneity, and R&D investments By Noriaki Matsushima; Yasuhiro Sato; Kazuhiro Yamamoto
  4. Price and promotion effects of supermarket mergers By Davis, David E.
  5. Price-taking Strategy Versus Dynamic Programming in Oligopoly By HUANG Weihong
  6. Raising capital in an insurance oligopoly market By Julien Hardelin; Sabine Lemoyne De Forges
  7. Whither Broadband Policy? In Search of Selective Intervention By Filippo Belloc; Antonio Nicita; Maria Alessandra Rossi

  1. By: Attila Tasnádi
    Abstract: We consider a possible game-theoretic foundation of Forchheimer’s model of dominant-firm price leadership based on quantity-setting games with one large firm and many small firms. If the large firm is the exogenously given first mover, we obtain Forchheimer’s model. We also investigate whether the large firm can emerge as a first mover of a timing game. Keywords
    Keywords: Forchheimer; Dominant firm; Price leadership.
    JEL: D43 L13
    Date: 2009–09–25
    URL: http://d.repec.org/n?u=RePEc:eei:rpaper:eeri_rp_2009_25&r=ind
  2. By: Pio Baake; Christian Wey
    Abstract: We present a model with firms selling (homogeneous) products in two imperfectly segmented markets (a "high-demand" and a "low-demand" market). Buyers are mobile but restricted by transportation costs, so that imperfect arbitrage occurs when prices differ in both markets. We show that equilibria are distorted away from Cournot outcomes to prevent consumer arbitrage. Furthermore, a merger can lead to an equilibrium in which only the "high-demand" market is served. This is more likely (i) the lower consumers' transportation costs and (ii) the higher the concentration of the industry. Therefore, merger incentives are much larger than standard analysis suggests.
    Keywords: Imperfect Market Segmentation, Oligopoly, Price Discrimination, Consumer Arbitrage, Mergers
    JEL: D43 L13 L41
    Date: 2009
    URL: http://d.repec.org/n?u=RePEc:diw:diwwpp:dp919&r=ind
  3. By: Noriaki Matsushima; Yasuhiro Sato; Kazuhiro Yamamoto
    Abstract: We investigate the incentive and the welfare implications of a merger when heterogeneous oligopolists compete both in process R&D and on the product market. We examine how a merger affects the output, investment, and profits of firms, whether firms have merger incentives, and, if so, whether such mergers are desirable from the viewpoint of social welfare. We also derive equilibrium configurations and explore their welfare properties.
    Date: 2009–09
    URL: http://d.repec.org/n?u=RePEc:dpr:wpaper:0754&r=ind
  4. By: Davis, David E. (Department of Economics, South Dakota State University)
    Abstract: I use a unique data set of retail food prices to analyze mergers between supermarket chains. The data allow for an examination of the effects of mergers on prices, the frequency of promotions, and the depth of promotions. I find that increases in a chain’s share of the total US food sales are associated with price decreases, suggesting that supermarkets enjoy economies of scale and/or benefit from an improved bargaining position relative to their suppliers after a merger. I also find that mergers are associated with decreases in the frequency and depth of price-promotions.
    Keywords: Food prices, supermarket, merger, price discrimination
    JEL: L11 L81 D4
    Date: 2009–09
    URL: http://d.repec.org/n?u=RePEc:sda:workpa:12009&r=ind
  5. By: HUANG Weihong (Division of Economics,School of Humanities and Social Sciences, Nanyang Technological University, Singapore; Nanyang Technological University, Singapore)
    Abstract: In a quantity-competed duopoly, one firm is a naive price-taker (who responses only to the last period’s price) while the other has all the market information so as be able to optimize its profit stream (either discounted or un-discounted) dynamically over a finite or infinite horizon. With a traditional linear economy, we are able to derive algebraically the optimal policies of all periods for the dynamic optimizer. A counter-intuitive phenomenon is then observed: regardless of the planning horizon and the discounted factor, there exists a relative profitability range of initial prices, starting with which the price-taker make higher profit than the dynamic optimizer. Furthermore, with the increase in the planning horizon, the price-taker’s relative profitability range increases accordingly and finally covers the entire economically meaningful range.
    Keywords: Economics; dynamic programming; Bellman’s optimality principle; applied OR; duopoly
    Date: 2009–04
    URL: http://d.repec.org/n?u=RePEc:nan:wpaper:0904&r=ind
  6. By: Julien Hardelin (Department of Economics, Ecole Polytechnique - CNRS : UMR7176 - Polytechnique - X, AgroParisTech ENGREF - (-)); Sabine Lemoyne De Forges (Department of Economics, Ecole Polytechnique - CNRS : UMR7176 - Polytechnique - X, AgroParisTech ENGREF - (-))
    Abstract: We consider an oligopoly of firms that compete on price. Firms produce a non-stochastic output, insurance coverage, which is sold before the true cost is known. They behave as if they were risk-averse for a standard reason of costly external finance. The model consists in a two-stage game. At stage 1, each firm chooses its internal capital level. At stage 2, firms compete on price. We characterize the conditions for Nash equilibria and analyze the strategic impact of capital choice on the market. We discuss the model with regard to insurance industry specificity and regulation.
    Keywords: Price Competition; Risk-averse Firms; Insurance Market; Capital Choice.
    Date: 2009–09–16
    URL: http://d.repec.org/n?u=RePEc:hal:wpaper:hal-00417573_v1&r=ind
  7. By: Filippo Belloc; Antonio Nicita; Maria Alessandra Rossi
    Abstract: The broadband plans deployed by governments have not benefited so far from substantive theoretical or empirical economic insights on the relative effectiveness of alternative combinations of policy interventions (on which more will be said in the next section). This paper make a first attempt at filling this gap by exploring whether some (set of) policy tools has so far proven to be more effective than others. We collected detailed data on the policies adopted by 21 OECD countries and perform a cross-country analysis. Our evidence suggests the relevance of the institutional environment form one side and the importance of demand-side interventions from the other. Interventions on the supply side appear to be less effective on broadband diffusion than those on the demand side
    Keywords: telecommunications policy, broadband, infrastructure investment
    JEL: K20 L96
    Date: 2009–08
    URL: http://d.repec.org/n?u=RePEc:usi:wpaper:567&r=ind

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