nep-ind New Economics Papers
on Industrial Organization
Issue of 2011‒01‒23
six papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Advances in price time series tests for antitrust market definition By Willem H. Boshoff
  2. Regulatory Barriers to Entry in Industrial Sectors By Kotsios, Panayotis
  3. Spatial Cournot Competition and Consumers’ Heterogeneity: A Note By Corrado Benassi
  4. The Institutional Design of European Competition Policy By Antonio Manganelli; Antonio Nicita; Maria Alessandra Rossi
  5. The R&D‐Patent relationship: An Industry Perspective By Jérôme Danguy; Gaétan de Rassenfosse; Bruno Van Pottelsberghe
  6. Technology, Business Models and Network Structure in the Airline Industry By Xavier Fageda; Ricardo Flores-Fillol

  1. By: Willem H. Boshoff (Department of Economics, University of Stellenbosch)
    Abstract: Market definition is an important first step in any competition policy investigation. In competition policy, a market represents the set of products (product market) or regions (geographic market) that constrain the market power of the firm being investigated. Various quantitative tools have been developed for market definition. Econometric tests on price co-movement represent one such set of tools: two regions or products are considered part of the same market if their prices co-move. However, price co-movement tests, especially the more advanced econometric tests, have been criticized in the competition policy literature. This paper applies a range of tools, including correlation analysis, Granger-causality tests, unit root tests and the recent autoregressive distributed lag (ARDL) bounds test, to data from the 2006-2008 competition investigation into business practices in the South African dairy industry. The paper argues that different price tests ask different questions and that it is not useful to argue, say, that the market suggested by a more advanced price test differs from the market suggested by a simple correlation statistic. The paper also responds to the continued practice of criticizing price co-movement for market definition on the basis of the poor performance of conventional price tests: many conventional tests have long been shown to suffer from small-sample power and size problems, but critics fail to account for recent improvements in this regard. The paper concludes that while no single price test offers conclusive evidence on the market, the combination of results offer a rich picture useful for market definition purposes.
    Keywords: market definition, price correlation, unit root, bounds test, law of one price
    JEL: L40 L11 C32 D4
    Date: 2011
  2. By: Kotsios, Panayotis
    Abstract: The entry of new competitors operates as a balancing force against high levels of industrial concentration and the abuse of dominant position by firms with large market shares. Entry increases supply, lowers prices, intensifies innovation and brings equilibrium to the markets that don’t operate in a socially desirable manner. This paper examines the impact of regulatory restrictions to the entry of new competitors in industrial sectors. It provides a short description of the 13 most important sources of regulatory barriers and assesses their role and importance as entry barriers. The conclusion is that regulatory restrictions can be a very important, almost insurmountable barrier to the entry of new competitors, but their role is not always socially harmful. The use of certain sources of regulatory barriers is effective in protecting social welfare instead of harming it. Barriers that promote new competition or are applied in order to protect consumer welfare are socially useful, while barriers that restrict competition and limit new competitor entry, in cases other than natural monopolies, are socially harmful.
    Keywords: entry; competition; industry; barriers
    JEL: L0
    Date: 2010–03
  3. By: Corrado Benassi (Dipartimento di Scienze Economiche, Alma Mater Studiorum - Università di Bologna; The Rimini Centre for Economic Analysis)
    Abstract: We consider the standard model of spatial Cournot competition and show that a necessary condition for dispersion equilibria is that the distribution be not unimodal.
    Keywords: Spatial Cournot competition, consumers’ distribution
    JEL: D31 D40
    Date: 2011–01
  4. By: Antonio Manganelli; Antonio Nicita; Maria Alessandra Rossi
    Abstract: This paper analyzes the institutional design of the European competition policy system. Besides the multi-level public enforcement, the paper describes other two fundamental dimensions of the European competition policy system: the relationship between public and private enforcement and that between competition law enforcement and sector specific regulation, with particular regards with the Electronic Communications sector. The main effort of the paper consists in representing the EU Competition policy system as a web of vertical and horizontal relationships among a large set of actors, sometimes coordinated by formal or informal mechanisms but still characterized by competence overlaps and strategic interdependencies. Finally the paper aims at assessing the relevant economic trade-offs associated to these overlaps and interactions in terms of efficiency and effectiveness of the system, giving some policy suggestions for the future evolution of its overall design.
    Keywords: Competition policy; institutional design; multi-level governance; public and private enforcement; competition policy in regulated industries
    Date: 2010–10–08
  5. By: Jérôme Danguy; Gaétan de Rassenfosse; Bruno Van Pottelsberghe
    Abstract: This paper aims at contributing to the literature on the relationship between research efforts and patent counts. It is claimed that the “propensity-to-patent” should be split into an “appropriability propensity” and a “strategic propensity”. The empirical contribution is based on a unique panel dataset composed of 18 industries in 19 countries over 19 years, and relies on five alternative patent indicators. The results confirm that the distinction between the two types of propensity matter. The sharp increase in patenting observed in most patent offices seems to be due to greater internationalization of patents rather than to a burst in innovations.
    Keywords: propensity to patent, strategic propensity, appropriability,; research productivity
    Date: 2011–01
  6. By: Xavier Fageda (Department of Economic Policy, Universitat de Barcelona, Avinguda Diagonal 690, 08034 Barcelona, Spain.); Ricardo Flores-Fillol (Department of Economics, Universitat Rovira i Virgili, Avinguda de la Universitat 1, 43204 Reus, Spain.)
    Abstract: Network airlines have been increasingly focusing their operations on hub airports through the exploitation of connecting traffic, allowing them to take advantage of economies of traffic density, which are unequivocal in the airline industry. Less attention has been devoted to airlines? decisions on point-to-point thin routes, which could be served using different aircraft technologies and different business models. This paper examines, both theoretically and empirically, the impact on airlines ?networks of the two major innovations in the airline industry in the last two decades: the regional jet technology and the low-cost business model. We show that, under certain circumstances, direct services on point-to-point thin routes can be viable and thus airlines may be interested in deviating passengers out of the hub.
    Keywords: regional jet technology, low-cost business model, point-to-point network, hub-and-spoke network
    JEL: L13 L2 L93
    Date: 2010–12

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