nep-ind New Economics Papers
on Industrial Organization
Issue of 2010‒11‒20
six papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Too Much Information Sharing? Welfare Effects of Sharing Acquired Cost Information in Oligopoly By Juan José Ganuza; Jos Jansen
  2. Pre-play communication in Cournot competition: An experiment with students and managers By Waichman, Israel; Requate, Till; Siang, Ch'ng Kean
  3. The Inefficiency of Market Transparency – A Model with Endogenous Entry By Yiquan Gu; Burkhard Hehenkamp
  4. Advance-Purchase Discounts as a Price Discrimination Device. . By Nocke, Volker; Peitz, Martin; Rosar, Frank
  5. Multimarket Contact in Vertically Related Markets By Talat S. Genc; Sencer Ecer
  6. Time-varying spot and futures oil price dynamics By Guglielmo Caporale; Davide Ciferri; Alessandro Girardi

  1. By: Juan José Ganuza (Universitat Pompeu Fabra, Department of Economics and Business); Jos Jansen (Max Planck Institute for Research on Collective Goods)
    Abstract: By using general information structures and precision criteria based on the dispersion of conditional expectations, we study how oligopolists’ information acquisition decisions may change the effects of information sharing on the consumer surplus. Sharing information about individual cost parameters gives the following trade-off in Cournot oligopoly. On the one hand, it decreases the expected consumer surplus for a given information precision, as the literature shows. On the other hand, information sharing increases the firms’ incentives to acquire information, and the consumer surplus increases in the precision of the firms’ information. Interestingly, the latter effect may dominate the former effect.
    Keywords: Oligopoly, information acquisition, information sharing, Information structures, Consumer surplus
    JEL: D82 L13 L40 D83
    Date: 2010–09
  2. By: Waichman, Israel; Requate, Till; Siang, Ch'ng Kean
    Abstract: This study investigates the impact of pre-play communication on the outcomes in Cournot duopoly and triopoly experiments, using both students and managers as subjects. Communication is implemented by two different devices, a 'standardized-communication' and a free-communication device. We find that the effect of communication on collusion is larger in duopoly than in triopoly. Moreover, managers behave in a similar way under the two communication devices, while students are more influenced by the free-communication than by the standardized-communication device. In addition, managers select lower aggregate quantities than students, and communication enhances the difference between the subject pools in duopoly but reduces this difference in triopoly. Inspecting individual behavior, in all treatments the output adjustment is significantly correlated with the previous round's best response strategy. In the treatments with communication, the effect of imitation becomes larger and crowds out the effect of myopic best response. Finally, in all treatments duopoly results in more collusion than triopoly. --
    Keywords: artefactual field experiment,subject pools,Cournot oligopoly,managers,cheap talk
    JEL: L13 C93 C72 D43 D21
    Date: 2010
  3. By: Yiquan Gu; Burkhard Hehenkamp
    Abstract: Including the entry decision in a Bertrand model with imperfectly informed consumers, we introduce a trade-off at the level of social welfare. On the one hand, market transparency is beneficial when the number of firms is exogenously given. On the other, a higher degree of market transparency implies lower profits and hence makes it less attractive to enter the market in the first place. It turns out that the second effect dominates: too much market transparency has a detrimental effect on consumer surplus and on social welfare.
    Keywords: Market transparency; endogenous entry; homogenous products
    JEL: D43 L13 L15
    Date: 2010–11
  4. By: Nocke, Volker; Peitz, Martin; Rosar, Frank
    Abstract: In an intertemporal setting in which individual uncertainty is resolved over time, advancepurchase discounts can serve to price discriminate between consumers with different expected valuations for the product. Consumers with a high expected valuation purchase the product before learning their actual valuation at the offered advance-purchase discount; consumers with a low expected valuation will wait and purchase the good at the regular price only in the event where their realized valuation is high. We characterize the profitmaximizing pricing strategy of the monopolist. Furthermore, adopting a mechanism design perspective, we provide a necessary and sufficient condition under which advance-purchase discounts implement the monopolist’s optimal mechanism.
    JEL: D42 L12
    Date: 2010
  5. By: Talat S. Genc (Department of Economics,University of Guelph); Sencer Ecer (Department of Economics, Istanbul Technical University)
    Abstract: We analyze collusion in two comparable market structures. In the first market structure only one firm is vertically integrated; there is one more independent firm in the upstream industry and another independent firm in the downstream industry. In the second market structure, there are only two vertically integrated firms that can trade among themselves in the intermediate good market. The second market structure mimics markets like the California gasoline market where firms vertically integrated through refinery, and retail markets. We rank these two market structures in terms of ease of collusion and show that while under some circumstances collusion is not possible in the market with one vertically integrated firm, collusion is possible in the market structure with two vertically integrated firms. We conclude that vertical (multimarket) contact facilitates collusion and vertical mergers suspected to lead to subsequent vertical mergers in an industry should receive higher antitrust scrutiny relative to single isolated vertical mergers.
    Keywords: Multimarket; collusion; vertical integration; gasoline markets
    JEL: D43 L11 L94
    Date: 2010
  6. By: Guglielmo Caporale; Davide Ciferri; Alessandro Girardi
    Abstract: We investigate the role of crude oil spot and futures prices in the process of price discovery by using a cost-of-carry model with an endogenous convenience yield and daily data over the period from January 1990 to December 2008. We provide evidence that futures markets play a more important role than spot markets in the case of contracts with shorter maturities, but the relative contribution of the two types of market turns out to be highly unstable, especially for the most deferred contracts. The implications of these results for hedging and forecasting crude oil spot prices are also discussed.
    Keywords: Cointegration, Oil market, Futures prices, Price Discovery.
    JEL: C32 C51 G13 G14
    Date: 2010–07–01

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