nep-ind New Economics Papers
on Industrial Organization
Issue of 2010‒11‒06
six papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Spying in Multi-market Oligopolies By Pascal Billand; Christophe Bravard; Subhadip Chakrabarti; Sudipta Sarangi
  2. Online Privacy and Price Discrimination By Curtis R. Taylor; Vincent Conitzer; Liad Wagman
  3. Imperfect Platform Competition: A General Framework By Alexander White; E. Glen Weyl
  4. Antitrust in two-sided markets: Is competition always desirable? By Fiedler, Ingo C
  5. Using Rival Effects to Identify Synergies and Improve Merger Typologies By Joseph A. Clougherty, Tomaso Duso
  6. Electricity Price Modelling with a Regime Switching Volatility By Silvana Musti; Viviana Fanelli

  1. By: Pascal Billand (CREUSET, Jean Monnet University); Christophe Bravard (CREUSET, Jean Monnet University); Subhadip Chakrabarti (School of Management and Economics, Queen’s University Belfast); Sudipta Sarangi (DIW Berlin and Department of Economics, Louisiana State University)
    Abstract: We consider a multimarket framework where a set of firms compete on two interrelated oligopolistic markets. Prior to competing in these markets, firms can spy on others in order to increase the quality of their product. We characterize the equilibrium espionage networks and networks that maximize social welfare under the most interesting scenario of diseconomies of scope. We find that in some situations firms may refrain from spying even if it is costless. Moreover, even though spying leads to increased product quality, there exist situations where it is detrimental to both consumer welfare and social welfare.
    Keywords: Oligopoly, Multimarket, Networks
    JEL: C70 L13 L20
    Date: 2010–09
  2. By: Curtis R. Taylor; Vincent Conitzer; Liad Wagman
    Date: 2010–10–26
  3. By: Alexander White (Department of Economics, Harvard University); E. Glen Weyl (Harvard University Society of Fellows; Toulouse School of Economics)
    Abstract: We propose a general model of imperfect competition among multi-product firms, the consumption of whose goods yields externalities from one consumer to another. We extend the allocation approach of the Weyl (2010) monopoly model, proposing a solution concept, Insulated Equilibrium, that allows for tractable analysis of competition. In such an equilibrium each firm’s price on one side of the market adjusts to all firms’ participation levels on the other side, so as to insulate its own allocation. This eliminates both the indeterminacy of consumer reactions once platforms have set their tariffs and the multiplicity of reaction functions that platforms can have to one another’s tariffs. Our approach allows us to derive intuitive first-order conditions characterizing equilibrium without restrictive assumptions and to analyze the effects of competition, mergers and regulation.
    Keywords: Two-sided Markets, Multi-sided Platforms, Quality Competition, Oligopoly, Antitrust of Network Industries
    JEL: D21 D43 L13
    Date: 2010–09
  4. By: Fiedler, Ingo C
    Abstract: The main objective of antitrust interventions is to assure competition in markets to benefit consumers. This paper challenges this common approach by examining the case of a satellite broadcasting network with monopoly power. First, satellite TV is identified as a two-sided market. It is then analyzed in the framework of the canonical model for two-sided markets developed by Rochet & Tirole (2004). The main finding is that the satellite network maximizes his profits by choosing a price formation which maximizes the overall welfare of all market participants. Even if the satellite network uses his monopoly power to introduce a fee to receive satellite TV, it would do so only until the semi-elasticity of the amount of consumers in regard to the per-interaction-price equals the one of the TV stations – exactly the point where welfare is maximized. It is therefore concluded that antitrust cases have to take a more in-depth look at two-sided markets before deciding that competition is best for consumers.
    Keywords: Antitrust, two-sided markets, broadcasting, welfare
    Date: 2010–10–25
  5. By: Joseph A. Clougherty, Tomaso Duso
    Abstract: The strategic management literature has found it difficult to differentiate between collusive and efficiency-based synergies in horizontal merger activity. We propose a schematic to classify mergers that yields more information on merger types and merger effects, and that can, moreover, distinguish between mergers characterized largely by collusion-based synergies and mergers characterized largely by effi-ciency-based synergies. Crucial to the proposed measurement procedure is that it encompasses the impact of merger events not only on merging firms – as is custom – but also on non-merging competitor firms (the rivals). Employing the event-study methodology with stock-market data on samples of large horizontal mergers drawn from the US and UK (an Anglo-Saxon sub-sample) and from the European continent, we demonstrate how the proposed schematic can better clarify the nature of merger activity. <br> <br> <i>ZUSAMMENFASSUNG - Die Literatur über strategisches Management hatte bisher Schwierigkeiten, zwischen wettbewerbsschädlichen und Effizienz steigenden Synergien bei horizontalen Zusammenschlüssen zu differenzieren. Wir schlagen einen konzeptionellen Rahmen vor, um Fusionen zu klassifizieren, welcher mehr Informationen sowohl über die Fusionstypologie als auch über die Wirkung von Zusammenschlüssen entschlüsselt und welcher eine klare Abgrenzung zwischen wettbewerbsschädlichen und wettbewerbsfreundlichen Fusionen erlaubt. Fundamental für diesen konzeptionellen Rahmen ist, dass er nicht nur die Wirkung der Fusion auf die fusionierenden Unternehmen (was typisch in der Literatur ist) umfasst, sondern auch ihre Wirkung auf die Rentabilität der Wettbewerber. Wir wenden eine Ereignisstudienmethode mit Aktiendaten an, um unsere Kategorisierung empirisch umzusetzen. Im Vergleich einer Stichprobe von Fusionen in der angelsächsischen Welt (US und Großbritannien) mit Fusionen zwischen kontinentaleuropäischen Firmen zeigen wir, wie unsere Methodologie hilfreich sein kann, die Art der Fusionsaktivitäten zu identifizieren.<i>
    Date: 2010–10
  6. By: Silvana Musti; Viviana Fanelli
    Abstract: We present a methodology to model electricity price dynamics by applying the interest rate theory toolkit. We construct the electricity market following [16] and applying the Heath, Jarrow and Morton ([7]) model. The electricity returns forward curve evolution using the Regime Switching Volatility is the instrument chosen to reflect into a simulating model the natural seasonality of electricity prices. The model calibration and the volatility parameters estimation allow to simulate in a realistic way the future electricity prices.
    Date: 2010–06

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