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on Industrial Organization |
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Issue of 2010‒08‒06
four papers chosen by |
| By: | Yonghong An, Michael R. Baye, Yingyao Hu, John Morgan, and Matt Shum |
| Abstract: | This paper (1) presents a general model of online price competition, (2) shows how to structurally estimate the underlying parameters of the model when the number of competing firms is unknown or in dispute, (3) estimates these parameters based on UK data for personal digital assistants, and (4) uses these estimates to simulate the competitive effects of horizontal mergers. Our results suggest that competitive effects in this online market are more closely aligned with the simple homogeneous product Bertrand model than might be expected given the observed price dispersion and number of firms. Our estimates indicate that so long as two firms remain in the market post merger, the average transaction price is roughly unaffected by horizontal mergers. However, there are potential distributional effects; our estimates indicate that a three-to-two merger raises the average transaction price paid by price sensitive "shoppers" by 2.88 percent, while lowering the average transaction price paid by consumers "loyal" to a particular firm by 1.37 percent. |
| Date: | 2010–07 |
| URL: | http://d.repec.org/n?u=RePEc:jhu:papers:564&r=ind |
| By: | Chirco, Alessandra; Colombo , Caterina; Scrimitore, Marcella |
| Abstract: | The paper shows that strategic quantity competition can be characterized by behavioral heterogeneity, once competing firms are allowed in a pre-market stage to optimally choose the behavioral rule they will follow in their strategic choice of quantities. In particular, partitions of the population of identical firms in profit maximizers and relative profit maximizers turn out to be deviation-proof equilibria, both in simultaneous and sequential game structures. Our findings that in a strategic framework heterogeneous behavioral rules are consistent with individual incentives provides a game-theoretic microfoundation of heterogeneity. |
| Keywords: | Behavioral Heterogeneity; Endogenous Motives; Relative Performance; Multistage Games; Quantity Competition. |
| JEL: | L21 L13 C72 |
| Date: | 2010–07 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:24165&r=ind |
| By: | Carlos D. Santos (Dpto. Fundamentos del Análisis Económico) |
| Abstract: | Competition has long been regarded as productivity enhancing. Understanding the mechanism by which competition affects innovation and productivity is therefore an important topic for economic policy. The main contribution of this paper is to disentangle the relationship between competition and two sides of innovation: product and process. I write down a model and discuss the conditions under which we can identify the causal mechanism. Overall I find that competition, measured by the number of competitors or market shares, has negative effects on product innovation and no effects on process innovation. The explanation is very simple. By shifting demand, competition directly changes the optimality condition for product but not for process innovation. Thus, competition has no direct effects on process innovations or, as a consequence, productivity. |
| Keywords: | competition, innovation, R&D, product innovation, process innovation |
| JEL: | L11 L60 O30 |
| Date: | 2010–07 |
| URL: | http://d.repec.org/n?u=RePEc:ivi:wpasad:2010-26&r=ind |
| By: | Stefan AMBEC; Mark A. COHEN; Stewart ELGIE; Paul LANOIE (IEA, HEC Montréal) |
| Abstract: | Twenty years ago, Harvard Business School economist and strategy professor Michael Porter stood conventional wisdom about the impact of environmental regulation on business on its head by declaring that well designed regulation could actually enhance competitiveness. The traditional view of environmental regulation held by virtually all economists until that time was that requiring firms to reduce an externality like pollution necessarily restricted their options and thus by definition reduced their profits. After all, if there are profitable opportunities to reduce pollution, profit maximizing firms would already be taking advantage of those opportunities. Over the past 20 years, much has been written about what has since become known simply as the Porter Hypothesis (“PH”). Yet, even today, there is conflicting evidence, alternative theories that might explain the PH, and oftentimes a misunderstanding of what the PH does and does not say. This paper provides an overview of the key theoretical and empirical insights on the PH to date, draw policy implications from these insights, and sketches out major research themes going forward. |
| Keywords: | Porter Hypothesis, environmental policy, innovation, performance. |
| Date: | 2010–07 |
| URL: | http://d.repec.org/n?u=RePEc:iea:carech:1002&r=ind |