nep-ind New Economics Papers
on Industrial Organization
Issue of 2011‒07‒02
three papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Consumer behavioural biases in competition: A survey By Huck, Steffen; Zhou, Jidong
  2. Side Effects of Competition: the Role of Advertising and Promotion in Pharmaceutical Markets By Guy David; Sara Markowitz
  3. Barriers to Entry, Deregulation and Workplace Training By Andrea Bassanini; Giorgio Brunello

  1. By: Huck, Steffen; Zhou, Jidong
    Abstract: This is a survey of studies that examine competition in the presence of behaviourally biased or boundedly rational consumers. It will tackle questions such as: How does competition and pricing change when consumers are biased? Can inefficiencies that arise from consumer behavioural biases be mitigated by lowering barriers to entry? Do biased consumers make rational ones better or worse off? And will biased consumer behaviour be overcome through learning or education?
    Keywords: Behavioural Economics; Industrial Organization; Biased Consumers
    JEL: D21 D4 L1
    Date: 2011–05
    URL: http://d.repec.org/n?u=RePEc:pra:mprapa:31794&r=ind
  2. By: Guy David; Sara Markowitz
    Abstract: The extent of pharmaceutical advertising and promotion can be characterized by a balancing act between profitable demand expansions and potentially unfavorable subsequent regulatory actions. However, this balance also depends on the nature of competition (e.g. monopoly versus oligopoly). In this paper we model the firm’s behavior under different competitive scenarios and test the model’s predictions using a novel combination of sales, promotion, advertising, and adverse event reports data. We focus on the market for erectile dysfunction drugs as the basis for estimation. This market is ideal for analysis as it is characterized by an abrupt shift in structure, all drugs are branded, the drugs are associated with adverse health events, and have extensive advertising and promotion. We find that advertising and promotion expenditures increase own market share but also increase the share of adverse drug reactions. Competitors’ spending decreases market share, while also having an influence on adverse drug reactions.
    JEL: I0 K0 K2
    Date: 2011–06
    URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:17162&r=ind
  3. By: Andrea Bassanini (OECD); Giorgio Brunello (University of Padova)
    Abstract: We study the impact of regulatory barriers to entry on workplace training. We develop a model of training in imperfectly competitive product and labour markets. The model indicates that there are two contrasting effects of deregulation on training. As stressed in the literature, with a given number of firms, deregulation reduces the size of rents per unit of output that firms can reap by training their employees. Yet, the number of firms increases following deregulation, thereby raising output and profit gains from training and improving investment incentives. The latter effect prevails. In line with the predictions of the theoretical model, we find that the substantial deregulation in the 1990s of heavily regulated European industries (energy, transport and communication) increased training incidence.
    Keywords: training, product market competition, regulatory reform, Europe.
    JEL: J24 L11 O43
    Date: 2011–06
    URL: http://d.repec.org/n?u=RePEc:pad:wpaper:0137&r=ind

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