nep-ind New Economics Papers
on Industrial Organization
Issue of 2011‒07‒13
eight papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Nonprofit and profit companies in monopolistic competition By Skak, Morten
  2. Regulatory unbundling in telecommunications By Knieps, Günter
  3. Price Competition on Network By Carlos Lever Guzmán
  4. Competition and Commercial Media Bias By A. Blasco; F. Sobbrio
  5. Price setting in a leading Swiss online supermarket By Martin Berka; Michael B. Devereux; Thomas Rudolph
  6. Entry and Competition in the Pharmaceutical Market following Patent Expiry By Appelt, Silvia
  7. The Global Entry of New Pharmaceuticals: A Joint Investigation of Launch Window and Price By Verniers, I.; Stremersch, S.; Croux, C.
  8. Refusal to Deal, Intellectual Property Rights, and Antitrust By Chen, Yongmin

  1. By: Skak, Morten (Department of Business and Economics)
    Abstract: A homogenous goods market with nonprofit and profit companies engaged in monopolistic competition is proposed. In a short run equilibrium, entrance of more companies of both types increases consumer surplus and reduces company profit. However, nonprofit companies under a long run zero profit constraint will act inefficiently and have higher marginal costs than profit companies. From this follows that more funds for donations to nonprofit companies reduce the welfare to be gained on the market. Depending on the size of donations, nonprofit companies may have higher, the same or lower (quality) output than profit companies.
    Keywords: Nonprofit; Market structure; Monopolistic competition; Efficiency; Funding; Donations; Grants; Welfare
    JEL: I31 I38 L10 L13 L21 L25 L31 L33 L38
    Date: 2011–01–01
  2. By: Knieps, Günter
    Abstract: Due to its dynamic nature, and the increasing importance of competitive sub-parts, the telecommunications sector provides particularly interesting insights for studying regulatory unbundling. Based on the theory of monopolistic bottle-necks the fallacies of overregulation by undue unbundling obligations are indicated. Neither the promotion of infrastructure competition by mandatory un-bundling of competitive subparts of telecommunications infrastructure, nor regulatory induced network fragmentation within monopolistic bottleneck com-ponents is justified. The impact of the shrinking of the areas of network specific market power on the remaining unbundling regulation is analyzed. Finally, the phasing-out potentials of unbundling regulation in European telecommunica-tions markets are pointed out. --
    Date: 2011
  3. By: Carlos Lever Guzmán
    Abstract: We present a model of imperfect price competition where not all firms can sell to all consumers. A network structure models the local interaction of firms and consumers. We find that aggregate surplus is maximized with a fully connected network, which corresponds to perfect competition, and decreases monotonically as the network becomes less connected until firms become local monopolists. When we study which networks are likely to form in equilibrium, we find that stable networks are not fully connected but are connected enough to rule out local monopolists. Our results extend to oligopolistic competition when consumers can either buy from a single firm or from all firms.
    Keywords: Network markets, price competition, oligopoly competition, Bertrand competition.
    JEL: D43 D85 L11 L13
    Date: 2011–07
  4. By: A. Blasco; F. Sobbrio
    Abstract: This paper reviews the empirical evidence on commercial media bias (i.e., advertisers inuence over news reports) and then introduces a simple model to summarize the main elements of the theoretical literature. The analysis provides three main policy insights for media regulators: i) Media regulators should target their monitoring efforts towards news contents upon which advertisers are likely to share similar preferences; ii) In advertising industries characterized by highly correlated products, an increase in the degree of competition may translate into a lower accuracy of news reports; iii) A sufficiently high degree of competition in the market for news may drive out commercial media bias.
    JEL: L13 L15 L82 D82
    Date: 2011–06
  5. By: Martin Berka; Michael B. Devereux; Thomas Rudolph
    Abstract: We study a newly released data set of scanner prices for food products in a large Swiss online supermarket. We find that average prices change about every two months, but when we exclude temporary sales, prices are extremely sticky, changing on average once every three years. Non-sale price behavior is broadly consistent with menu cost models of sticky prices. When we focus specifically on the behavior of sale prices, however, we find that the characteristics of price adjustment seems to be substantially at odds with standard theory.
    Date: 2011–07
  6. By: Appelt, Silvia
    Abstract: This dissertation encompasses three essays on entry and competition in the German generic drug market. The first paper examines the market entry decisions of generic companies and finds that original drug producrs do not create barriers to entry by launching a generic version of the brand drug prior to patent expiry. The second paper examines generic market share dynamics and patients‘ switching behaviors among generic drugs. The analysis shows that generic market shares are little influenced by prices and highly persistent over time, conferring a substantial advantage to first generic entrants. Price differentials likewise have a negligible impact on the likelihood that patients switch to a generic drug offered by a different manufacturer. The third paper investigates generic price differentials and provides evidence of economies of scope and reputation effects.
    Keywords: Generic Entry; Generic Market Share Dynamics; Patient Switching Behavior; Generic Price Dispersion
    Date: 2011–06–01
  7. By: Verniers, I.; Stremersch, S.; Croux, C.
    Abstract: Research on the launch of new products in the international realm is scarce. The present paper is the first to document how launch window (difference in months between the first worldwide launch and the subsequent launch in a specific country) and launch price are interrelated and how regulation influences both launch window and launch price. The research context is the global – 50 countries worldwide – launch of 58 new ethical drugs across 29 therapeutic areas. We show that the fastest launch occurs when the launch price is moderately high and the highest launch price occurs at a launch window of 85 months. We find that the health regulator acts strategically in that the extent to which it delays the launch of a new drug increases with the price of the new drug. We also find that regulation overall increases the launch window, except for patent protection. Surprisingly, regulation does not directly impact launch price. The descriptive information on average launch window and launch price and the interconnection between launch window and launch price allows managers in ethical drug companies to build more informed decisions for international market entry. This study also provides public policy analysts with more quantitative evidence regarding launch window and launch price on a broad sample of countries and categories.
    Keywords: entry timing;international new product launch;launch price;launch window;pharmaceutical;regulation
    Date: 2011–05–03
  8. By: Chen, Yongmin
    Abstract: A vertically integrated firm, having acquired the intellectual property (IP) through innovation to become an input monopolist, can extract surplus by supplying efficient downstream competitors. That the monopolist would refuse to do so is puzzling and has led to numerous debates in antitrust. In this paper, I clarify the economic logic of refusal to deal, and identify conditions under which prohibiting such conduct would raise or lower consumer and social welfare. I further show how IP protection (as determined by IP laws) and restrictions on IP holders' conduct (as determined by antitrust laws) may interact to affect innovation incentive and post-innovation market performance.
    Keywords: Refusal to Deal; Intellectual Property Rights; IP protection; Antitrust; innovation
    JEL: O3 L1 L4
    Date: 2011–06

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