nep-ind New Economics Papers
on Industrial Organization
Issue of 2011‒04‒09
five papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. The Simple Diagrammatics of Price Signaling Quality By Leonard J. Mirman; Marc Santugini
  2. First mover advantages in the mobile telecommunications industry: A consumer-centric perspective By JP Eggers; Michal Grajek; Tobias Kretschmer
  3. The Econometrics of Cartel Overcharges By Marcel Boyer; Rachidi Kotchoni
  4. Evaluating Leniency and Modeling Cartel Durations: Time-Varying Policy Impacts and Sample Selection By Jun Zhou
  5. The Economics of Copyright Levies on Hardware By Patrick Legros; Victor Ginsburgh

  1. By: Leonard J. Mirman; Marc Santugini (IEA, HEC Montréal)
    Abstract: We present diagrammatic analysis of price signaling quality. We first study the behavior of the monopoly when price conveys information about quality. We then show the effect of information flows on welfare, i.e., profit and consumer surplus.
    Keywords: Asymmetric information, learning, monopoly, quality, signaling
    JEL: D21 D42 D82 D83 D84 L12 L15
    Date: 2011–03
  2. By: JP Eggers (NYU Stern School of Business); Michal Grajek (ESMT European School of Management and Technology); Tobias Kretschmer (LMU Munich)
    Abstract: This study offers a consumer-centric view of entry order advantages and the role of firm-level capabilities. Specifically, we consider the fact that early adopting consumers will be different from late adopting ones. We suggest that early entering firms will attract higher-profitability customers, and that this will be a key source of first-mover advantages. Additionally, this effect will be stronger for firms with strong technological capabilities as early adopters are generally more technology-oriented than late adopters. Conversely, firms with existing marketing and branding resources in the country will do better at attracting a high volume of less-profitable customers – standard late adopters that are swayed by brand effects. Our empirical results, drawn from data on the global mobile telecommunications industry, support our assertions and help us offer important depth to the discussion about first-mover advantages and the contingent role of firm capabilities.
    Keywords: first-mover advantage, mobile telecommunications, consumer-centric, pre-entry experience, firm capabilities
    JEL: C51 L10 O33
    Date: 2011–03–30
  3. By: Marcel Boyer; Rachidi Kotchoni
    Abstract: Connor and Lande (2006) conducted a survey of cartel overcharge estimates and found an average in the range of 31% to 49%. By examining more sources, Connor (2010b) finds a median of 23.3% for all type of cartels and a mean of 50.4% for successful cartels. However, the data used in these studies are estimates rather than true observations, since the true illegal profits of cartels are rarely observable. Therefore, these data are subject to model error, estimation error and publication bias. A quick glance at the Connor database reveals that the universe of overcharge estimates is asymmetric, heterogenous and contains a number of influential observations. Beside the fact that overcharge estimates are potentially biased, fitting a linear OLS model to the data without providing a carefull treatment of the problems raised by the publication bias, outliers, asymmetry, and heterogeneity will necessarily produce distorted results. We conduct a meta-analysis of cartel overcharge estimates in the spirit of Connor and Bolotova (2006), but providing a sound treatment of the matters raised above. We find a mean bias-corrected overcharge estimate of 13.8% for all cartels, and of 13.6% for cartels with initial estimates lying between 0% and 50%. <P>Connor et Lande (2006) survolent la littérature sur les majorations de prix imposées par les cartels et concluent à une augmentation moyenne variant entre 31 % et 49 %. Considérant un échantillon plus grand, Connor (2010b) trouve une médiane de 23,3 % pour tous les types de cartel et une moyenne de 50,4 % pour les cartels dont les majorations de prix estimées sont positives. Cependant, les échantillons utilisés dans ces études sont constitués d’estimations et non pas d’observations directes. De ce fait, ces échantillons héritent possiblement d’erreurs de modélisation et d’estimation, ainsi que d’un biais de publication. Une analyse sommaire des majorations dans l’échantillon de Connor révèle une distribution asymétrique, de l’hétérogénéité et la présence d’observations aberrantes. Ainsi, au-delà du fait que les estimations d’augmentation de prix par les cartels sont potentiellement biaisées, l’estimation d’un modèle par MCO avec de telles données sans un traitement adéquat de l’asymétrie, de l’hétérogénéité et des données aberrantes produirait des résultats déformés. Nous réalisons une nouvelle méta-analyse dans le même esprit que celui de Connor et Bolotova (2006), mais en proposant une prise en compte adéquate des problèmes mentionnés ci-dessus. Après correction du biais d’estimation, nos résultats suggèrent que la moyenne des majorations de pris estimées est de l’ordre de 13,8 % pour tous les types de cartels et de 13,6 % pour les cartels dont les estimations de majoration de prix se situaient initialement entre 0 % et 50 %.
    Keywords: Cartels, overcharges, Cartels, majoration de prix.
    Date: 2011–03–01
  4. By: Jun Zhou (University of Bonn)
    Abstract: The objective of this paper is to investigate the efficacy of the European Commission’s leniency in destabilizing and deterring cartels. I discuss a dynamic model of cartel formation and dissolution to illustrate how changes in antitrust policies and market and macroeconomic conditions might affect cartel duration. Comparative statics results are then corroborated with empirical estimates of a hazard function adjusted to account for both the heterogeneity of cartels and the non proportional time dependence suggested by theory. Statistical tests are consistent with the theoretic predictions that following a more efficacious leniency program, the average duration of discovered cartels rises in the short run and falls in the long-run.
    Keywords: Taxation, evaluation of antitrust policies, leniency, time-varying policy effcts, sample selection bias, appropriateness of proportional hazard assumption
    JEL: D43 K21 K42 L13
    Date: 2011–04
  5. By: Patrick Legros; Victor Ginsburgh
    Abstract: We provide an economic analysis of the static and dynamic effects of copyright levies on hardware. Contrary to copyright levies on supports such as tapes, CDs or DVDs, whose main use is to copy, levies on hardware do not modify the propensity of consumers to use 'illegal' content. They decrease both levels of 'legal' and 'shared' contents, leading to a decrease in the revenues from legal sales for copyright holders. The levies could compensate for the decrease but this would require copyright holders to receive a large share of the levies. Hence from a static perspective, levies on hardware are likely to fail achieving their goal of increasing the financial flow to copyright holders. We also consider a dynamic version of the model where artists are differentiated by reputation and where reputation and sales covary (more reputation leads to higher sales and higher sales to more reputation). Then, even if high reputation artists benefit from higher levies, lower reputation artists are hurt. Finally, we show that when content providers have market power and can choose between offering content at a unit price or through a subscription service, incentives to implement subscription models are decreasing in the level of levies on hardware, despite the fact that subscription services may eliminate piracy.
    Date: 2011–03

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