nep-ind New Economics Papers
on Industrial Organization
Issue of 2010‒09‒03
five papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. The Impact of Firm Entry Regulation on Long-living Entrants By Susanne Prantl
  2. Entry and Incumbent Innovation By Philipp Weinscheink
  3. Multiproduct Firms and Price-Setting: Theory and Evidence from U.S. Producer Prices By Saroj Bhattarai; Raphael Schoenle
  4. An Econometric Analysis of 3G Auction Spectrum Valuations By Erik Bohlin; Gary Madden; Aaron Morey
  5. The Creation of a Market for Retail Electricity Supply By Stephen Littlechild

  1. By: Susanne Prantl (Max Planck Institute for Research on Collective Goods, Bonn)
    Abstract: What is the impact of firm entry regulation on sustained entry into self-employment? How does firm entry regulation influence the performance of long-living entrants? In this paper, I address these questions by exploiting a natural experiment in firm entry regulation. After German reunification, East and West Germany faced different economic conditions, but fell under the same law that imposes a substantial mandatory standard on entrepreneurs who want to start a legally independent firm in one of the regulated occupations. The empirical results suggest that the entry regulation suppresses long-living entrants, not only entrants in general or transient, short-lived entrants. This effect on the number of long-living entrants is not accompanied by a counteracting effect on the performance of long-living entrants, as measured by firm size several years after entry.
    Keywords: Firm entry regulation, sustained entry, self-employment, firm size
    JEL: K20 L25 L26 L50 M13 P52
    Date: 2010–07
    URL: http://d.repec.org/n?u=RePEc:mpg:wpaper:2010_30&r=ind
  2. By: Philipp Weinscheink (Max Planck Institute for Research on Collective Goods, Bonn)
    Abstract: We explore how the threat of entry influences the innovation activity of an incumbent. We show that the incumbent’s investment is hump-shaped in the entry threat. When the entry threat is small and increases, the incumbent invests more to deter entry, or to make it unlikely. This is due to the entry deterrence effect. However, when the threat becomes huge, entry can no longer profitably be deterred or made unlikely and the investment becomes small. Then the Schumpeterian effect dominates. These results turn out to be very robust.
    Date: 2010–05
    URL: http://d.repec.org/n?u=RePEc:mpg:wpaper:2010_17&r=ind
  3. By: Saroj Bhattarai (Pennsylvania State University); Raphael Schoenle (Brandeis University)
    Abstract: In this paper, we establish three new facts about price-setting by multi-product firms and contribute a model that can match our findings. On the empirical side, using micro-data on U.S. producer prices, we first show that firms selling more goods adjust their prices more frequently but on average by smaller amounts. Moreover, the higher the number of goods, the lower is the fraction of positive price changes and the more dispersed the distribution of price changes. Second, we document substantial synchro- nization of price changes within firms across products and show that synchronization plays a dominant role in explaining pricing dynamics. Third, we find that within-firm synchronization of price changes increases as the number of goods increases. On the theoretical side, we present a state-dependent pricing model where multi-product firms face both aggregate and idiosyncratic shocks. When we allow for firm-specific menu costs and trend in ation, the model matches the empiricalfindings.
    Keywords: Multi-product firms; Number of Goods; State-dependent pricing; U.S. Producer prices
    JEL: E30 E31 L11
    Date: 2010–07
    URL: http://d.repec.org/n?u=RePEc:pri:cepsud:1245&r=ind
  4. By: Erik Bohlin; Gary Madden; Aaron Morey
    Abstract: Scarce radio spectrum is assigned to mobile network operators (MNOs) by national regulatory authorities (NRAs). Spectrum is usually assigned by beauty contest or an auction. The process requires that winners make a payment to the government. MNOs seek scarce spectrum to enable the provision of wireless services for profit. While MNOs are imperfectly aware of their costs, NRAs rely solely on MNOs for this information. As such, NRAs set spectrum assignment conditions (including minimum bid price) largely ignorant of MNO operating conditions. This study examines the performance of 3G auction outcomes in terms of the prices paid by winners via an econometric analysis of a unique sample of national 3G spectrum auctions. These winning bids depend on national and mobile market conditions, spectrum package attributes, license process, and post-award operator requirements. Finally, model estimation accounts for the censored nature of these data.
    Keywords: Mobile telephone markets, spectrum allocation, spectrum bid price
    JEL: D44 L96
    Date: 2010–07–01
    URL: http://d.repec.org/n?u=RePEc:rsc:rsceui:2010/55&r=ind
  5. By: Stephen Littlechild
    Abstract: In this paper we discuss the EU policy on electricity markets integration by reviewing the experience of the Electricity Regional Initiatives. The regional approach to market integration delivered important results in areas such as coordination among national transmission system operators, implementation of market-based mechanisms for cross-border transmission capacity allocation and transparency. Furthermore, the inclusive governance process lead by ERGEG gave voice to all relevant stakeholders. However, there are indications that the regional model reached its limit when faced with the objective of coordinating day-ahead and real-time markets. The unanimity approach at the regional level made the intra-regional decision-making process extremely slow. Further, inter-regional integration issues have not been solved yet and attempts to tackle them by prioritising projects in some Regions weakened the pluralistic attributes of the regional model. The Third Legislative Energy Package has the potential to overcome some of these shortcomings by empowering pan-European institutions (ENTSO and ACER) and by involving Member States in the decision making process. Some weaknesses of the second-package, though, persist in the new framework. First, there are no provisions ensuring that ENTSO will have appropriate incentives to act in the interest of European consumers. Second, the Third Package perpetuates the separation between within-country congestion management – which remains a national issue – and cross-border congestion management – to be dealt with at the EU level. This two-tier approach is inconsistent with the highly meshed nature of the European network and is likely to result in inefficient market design. Further, the implementation of coordinated cross-border and national congestion management mechanisms requires considering geographically differentiated prices within countries, a politically unattractive result for most Member States.
    Keywords: retail competition, electricity regulation
    JEL: L94
    Date: 2010–07–09
    URL: http://d.repec.org/n?u=RePEc:rsc:rsceui:2010/57&r=ind

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