nep-ind New Economics Papers
on Industrial Organization
Issue of 2011‒06‒11
four papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Follower payoffs in symmetric duopoly games. By von Stengel, Bernhard
  2. SP Betting as a Self-Enforcing Implicit Cartel By Adi Schnytzer; Avichai Snir
  3. Corruption as an Alternative to Limit Pricing By Raluca Elena Buia
  4. Does Competition Raise Productivity Through Improving Management Quality? By John Van Reenen

  1. By: von Stengel, Bernhard
    Abstract: This paper compares the leader and follower payoff in a duopoly game, as they arise in sequential play, with the Nash payoff in simultaneous play. If the game is symmetric, has a unique symmetric Nash equilibrium, and players' payoffs are monotonic in the opponent's choice along their own best reply function, then the follower payoff is either higher than the leader payoff, or even lower than in the simultaneous game. This gap for the possible follower payoff had not been observed in earlier duopoly models of endogenous timing.
    Date: 2010–07
  2. By: Adi Schnytzer (Bar-Ilan University); Avichai Snir (Bar-Ilan University)
    Abstract: A large share of the UK off-course horse racing betting market involves winning payouts determined at Starting Prices (SP). This implies that gamblers can bet with off-course bookies on any horse before a race at the final pre-race odds as set by on-course bookies for that horse. Given the oligopolistic structure of the off-course gambling market in the UK, a market that is dominated by a small number of large bookmaking firms, we study the phenomenon of SP as a type of self-enforcing implicit collusion. We show that given the uncertainty about a race outcome, and their ability to influence the prices set by on-course bookies, agreeing to lay bets at SP is superior for off-course bookies as compared with offering fixed odds. We thus extend the results of Rotemberg and Saloner (1990) to markets with uncertainty about both demand and outcomes, We test our model by studying the predicted effects of SP betting on the behavior of on-course bookies. Using data drawn from both the UK and Australian on-course betting markets, we show that the differences between these markets are consistent with the predicted effects of SP betting in the UK off-course market and its absence from the Australian market.
    Date: 2011–03
  3. By: Raluca Elena Buia (Department of Economics, University Of Venice Cà Foscari)
    Abstract: We explore to what extent bribery can be an alternative way of fighting rivals’ entry on the market when there is uncertainty about the degree of corruption in the public sector. For high levels of corruption, “covert” fight through bribery is the optimal choice of an incumbent. For low degree of corruption, instead, the incumbent prefers to act strategically but overtly by playing a limit pricing game.
    Keywords: Corruption, Bribery, Production licence, Moral cost, Covert/overt fight
    JEL: D21 D73 H40
    Date: 2011
  4. By: John Van Reenen
    Abstract: A classic question in industrial organization is whether competition raises productivity and if so, through what mechanism? I discuss recent empirical evidence from both large-scale databases and specific industries which suggests that tougher competition does indeed raise productivity and one of the main mechanisms is through improving management practices. To establish this, I report on new research seeking to quantify management. I relate this to theoretical perspectives on the economics of competition and management, arguing that management should be seen at least in part as a transferable technology. A range of recent econometric studies suggest that (i) competition increases management quality and (ii) improved management quality boosts productivity.
    Keywords: management, productivity, organization
    JEL: L2 M2 O32 O33
    Date: 2010–12

This nep-ind issue is ©2011 by Kwang Soo Cheong. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.