nep-ind New Economics Papers
on Industrial Organization
Issue of 2011‒02‒12
seven papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Review of Economic Theories of Regulation By Johan den Hertog
  2. Endogenous Timing in a Mixed Duopoly: Wighted Welfare and Price Competition. By Juan Carlos Barcena-Ruiz; Maximo Sedano
  3. Quality competition with profit constraints: Do non-profit firms provide higher quality than for-profit firms? By Kurt R. Brekke; Luigi Siciliani; Odd Rune Straume
  4. Product innovation and market acquisition of firms By GABSZEWICZ, Jean; TAROLA, Ornella
  5. Bargaining and delay in patent licensing By MAULEON, Ana; VANNETELBOSCH, Vincent; VERGARI, Cecilia
  6. Digital piracy : theory By BELLEFLAMME, Paul; PEITZ, Martin
  7. Dynamic Price Dependence of Canadian and International Art Markets: An Empirical Analysis By Douglas James Hodgson; Aylin Seckin

  1. By: Johan den Hertog
    Abstract: This paper reviews the economic theories of regulation. It discusses the public and private interest theories of regulation, as the criticisms that have been leveled at them. The extent to which these theories are also able to account for privatization and deregulation is evaluated and policies involving re-regulation are discussed. The paper thus reviews rate of return regulation, price-cap regulation, yardstick regulation, interconnection and access regulation, and franchising or bidding processes. The primary aim of those instruments is to improve the operating efficiency of the regulated firms. Huge investments will be needed in the regulated network sectors. The question is brought up if regulatory instruments and institutions primarily designed to improve operating efficiency are equally well-placed to promote the necessary investments and to balance the resulting conflicting interests between for example consumers and investors.
    Keywords: Regulation, Deregulation, Public Interest Theories, Private Interest Theories, Interest Groups, Public Choice, Market Failures, Price-cap Regulation, Rate of Return Regulation, Yardstick Competition, Franchise Bidding, Access Regulation.
    JEL: D72 D78 H10 K20
    Date: 2010–12
    URL: http://d.repec.org/n?u=RePEc:use:tkiwps:1018&r=ind
  2. By: Juan Carlos Barcena-Ruiz (Universidad del País Vasco); Maximo Sedano (Universidad del País Vasco)
    Abstract: In this paper we analyse the endogenous order of moves in a mixed duopoly for differentiated goods. Firms choose whether to set prices sequentially or simultaneously. The private firm maximises profits while the public firm maximises the weighted sum of the consumer and producer surpluses (wighted welfare). It is shown that the result obtained in equilibrium depends crucially on the weigth given to the consumer surplus in weighted welfare and on the degree to which goods are substitutes or complements. We also anlyse whether the equilibria obtained maximise the sum of the consumer and producer suspluses or not. Finally we study whether the nationality of the private firm influences the results.
    Keywords: Mixed duopoly; Price competition; Endogenous timing; Weighted welfare
    JEL: L00 L30
    Date: 2011–01–31
    URL: http://d.repec.org/n?u=RePEc:ehu:ikerla:201146&r=ind
  3. By: Kurt R. Brekke (Department of Economics and Helth Economics Bergen, Norwegian School of Economics and Business Administration); Luigi Siciliani (Department of Economics and Centre for Health Economics, University of York, Heslington); Odd Rune Straume (Universidade do Minho - NIPE)
    Abstract: In many markets, such as education, health care and public utilities, firms are often profit-constrained either due to regulation or because they have non-profit status. At the same time such firms might have altruistic concerns towards consumers. In this paper we study semi-altruistic firms’ incentives to invest in quality and cost-reducing effort when facing constraints on the distribution of profits. Using a spatial competition framework, we derive the equilibrium outcomes under both quality competition with regulated prices and quality price competition. Profit constraints always lead to lower cost-efficiency, whereas the effects on quality and price are ambiguous. If altruism is high (low), profit-constrained firms offer higher (lower) quality and lower (higher) prices than firms that are not profit-constrained. Compared with the first-best outcome, the cost-efficiency of profit-constrained firms is too low, while quality might be over- or underprovided. Profit constraints may improve welfare and be a complement or substitute to a higher regulated price, depending on the degree of altruism.
    Keywords: Profit constraints, Quality competition, Semi-altruistic providers
    JEL: D21 D43 L13 L30
    Date: 2011
    URL: http://d.repec.org/n?u=RePEc:nip:nipewp:05/2011&r=ind
  4. By: GABSZEWICZ, Jean (Professor Emeritus, Université catholique de Louvain, CORE, B-1348 Louvain-la-Neuve, Belgium); TAROLA, Ornella (University of Rome "La Sapienza", Italy)
    Abstract: The paper explores the incentives for an incumbent firm to acquire an entrant willing to sell a product innovation, rather than openly compete with this entrant and, in case of acquisition, the incentives to sell simultaneously both the existing products and the new one, rather than specializing on a single variant. We prove that, in some circumstances, an incumbent firm can find it profitable to make an acquisition proposal to the entrant in order to deter entry. Nevertheless, in this acquisition scenario, a product proliferation strategy is never observed at equilibrium. Rather, the incumbent restricts itself to offer either its own variant or the product innovation produced by the entrant, depending on the quality differential existing between them. It follows that, while being available for sale, sometimes the innovation simply remains unexploited
    Date: 2010–12–01
    URL: http://d.repec.org/n?u=RePEc:cor:louvco:2010078&r=ind
  5. By: MAULEON, Ana (Facultés universitaires Saint-Louis, CEREC, B-1000 Brussels, Belgium and Université catholique de Louvain, CORE, B-1348 Louvain-la-Neuve, Belgium); VANNETELBOSCH, Vincent (Université catholique de Louvain, CORE, B-1348 Louvain-la-Neuve, Belgium); VERGARI, Cecilia (Department of Economic Sciences, University of Bologna, I-40125 Bologna, Italy)
    Abstract: We consider a model of licensing of a non-drastic innovation in which the patent holder (an outside innovator) negotiates either up-front fixed fees or per-unit royal- ties with two firms producing horizontally differentiated brands and competing à la Cournot. We investigate how licensing schemes (fixed fee or per-unit royalty) and the number of licenses sold (exclusive licensing or complete technology diffusion) affect price agreements and delays in reaching an agreement. We show that the patent holder prefers to license by means of up-front fixed fees except if market competition is mild and the innovation size is small. Once there is private information about the relative bargaining power of the parties, the patent holder may prefer licensing by means of per-unit royalties even if market competition is strong. Moreover, the delay in reaching an agreement is greater whenever the patent holder chooses to negotiate up-front fixed fees instead of per-unit royalties.
    Keywords: patent licensing, fixed fee, royalty, bargaining, private information
    JEL: C78 D43 D45 L13
    Date: 2010–12–01
    URL: http://d.repec.org/n?u=RePEc:cor:louvco:2010077&r=ind
  6. By: BELLEFLAMME, Paul (Université catholique de Louvain, CORE and Louvain School of Management, B-1348 Louvain-la-Neuve, Belgium); PEITZ, Martin (Department of Economics, University of Mannheim, D-68131 Mannheim, Germany)
    Abstract: This article reviews recent theoretical contributions on digital piracy. It starts by elaborating on the reasons for intellectual property protection, by reporting a few facts about copyright protection, and by examining reasons to become a digital pirate. Next, it provides an exploration of the consequences of digital piracy, using a base model and several extensions (with consumer sampling, network effects, and indirect appropriation). A closer look at market-structure implications of end-user piracy is then taken. After a brief review of commercial piracy, additional legal and private responses to end-user piracy are considered. Finally, a quick look at emerging new business models is taken.
    Keywords: information good, piracy, copyright, IP protection, internet, peer-to-peer, software, music
    JEL: L11 L82 L86
    Date: 2010–10–01
    URL: http://d.repec.org/n?u=RePEc:cor:louvco:2010060&r=ind
  7. By: Douglas James Hodgson; Aylin Seckin
    Abstract: Although the market for Canadian paintings is now of substantial magnitude, with several works having recently sold for well over a million dollars, it remains true that with very few exceptions, the works of Canadian painters are bought and sold only in Canada and held only by Canadian collectors. This market can thus be viewed as almost exclusively local, and it is therefore not clear that there should be any linkage between price movements for Canadian art and those for the mainstream international market in old master, impressionist, and modern art. This paper investigates the presence and nature of such time series dependence econometrically, both in terms of long term trends as reflected in the co-integrating relationship between Canadian and the international market, and in terms of short-run co-movements as represented in correlations. The possibility that the local market "follows" the international one is also considered through an analysis of Granger-Causality. For Canadian art prices we use a new hedonic index that has been computed using an updated version of the data set of Hodgson and Vorkink (2004), while for the international prices, we use an index provided by Mei and Moses. <P>
    Keywords: Alternative investments, Economics of art markets, Market for paintings, Time series analysis, CAPM,
    JEL: Z11 G11
    Date: 2011–01–01
    URL: http://d.repec.org/n?u=RePEc:cir:cirwor:2011s-14&r=ind

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