nep-ind New Economics Papers
on Industrial Organization
Issue of 2011‒08‒09
six papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Inventories and Endogenous Stackelberg Leadership in Two-period Cournot Oligopoly By Mitraille, Sébastien; Moreaux, Michel
  2. Leveraging Monopoly Power by Degrading Interoperability: Theory and evidence from computer markets By Genakos, Christos D.; Kühn, Kai-Uwe; Van Reenen, John
  3. Price setting in a leading Swiss online supermarket By Berka, Martin; Devereux, Michael B.; Rudolph, Thomas
  4. The Regulation of Interdependent Markets By Raffaele Fiocco; Carlo Scarpa
  5. Merger Efficiency and Welfare Implications of Buyer Power By Özlem Bedre-Defolie; Stéphane Caprice
  6. Brand mergers: Examining consumer response to name and logo design By Joana César Machado; Paulo Lencastre; Leonor Vacas de Carvalho; Patrício Costa

  1. By: Mitraille, Sébastien (Toulouse Business School); Moreaux, Michel (Toulouse School of Economics (IDEI and LERNA))
    Abstract: Two-period Cournot competition between n identical firms producing at constant marginal cost and able to store before selling has pure strategy Nash- perfect equilibria, in which some firms store to exert endogenously a leader- ship over rivals. The number of firms storing balances market share gains, obtained by accumulating early the output, with losses in margin resulting from increased competition and higher operation costs. This number and the industry inventories are non monotonic in n. Concentration (HHI) and competition increase due to the strategic use of inventories.
    JEL: D43 L13
    Date: 2011–07–27
    URL: http://d.repec.org/n?u=RePEc:ide:wpaper:24801&r=ind
  2. By: Genakos, Christos D.; Kühn, Kai-Uwe; Van Reenen, John
    Abstract: When will a monopolist have incentives to foreclose a complementary market by degrading compatibility/interoperability of his products with those of rivals? We develop a framework where leveraging extracts more rents from the monopoly market by 'restoring' second degree price discrimination. In a random coefficient model with complements we derive a policy test for when incentives to reduce rival quality will hold. Our application is to Microsoft’s strategic incentives to leverage market power from personal computer to server operating systems. We estimate a structural random coefficients demand system which allows for complements (PCs and servers). Our estimates suggest that there were incentives to reduce interoperability which were particularly strong at the turn of the 21st Century.
    Keywords: anti-trust; demand estimation; foreclosure; interoperability
    JEL: D43 L1 L4 O3
    Date: 2011–08
    URL: http://d.repec.org/n?u=RePEc:cpr:ceprdp:8502&r=ind
  3. By: Berka, Martin; Devereux, Michael B.; Rudolph, Thomas
    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.
    Keywords: online supermarket, price behavior, sticky price,
    Date: 2011–07–07
    URL: http://d.repec.org/n?u=RePEc:vuw:vuwecf:1685&r=ind
  4. By: Raffaele Fiocco; Carlo Scarpa
    Abstract: We examine the issue of whether two monopolists which produce substitutable goods should be regulated by one (centralization) or two (decentralization) regulatory authorities, when the regulator(s) can be partially captured by industry. Under full information, two decentral- ized agencies - each regulating a single market - charge lower prices than a unique regulator, making consumers better off. However, this leads to excessive costs for the taxpayers who subsidize the …rms, so that centralized regulation is preferable. Under asymmetric informa- tion about the firms' costs, lobbying induces a unique regulator to be more concerned with the industry's interests, and this decreases social welfare. When the substitutability between the goods is high enough, the firms'lobbying activity may be so strong that decentralizing the regulatory structure may be social welfare enhancing.
    Keywords: regulation, lobbying, asymmetric information, energy markets
    JEL: D82 L51
    Date: 2011–07
    URL: http://d.repec.org/n?u=RePEc:hum:wpaper:sfb649dp2011-046&r=ind
  5. By: Özlem Bedre-Defolie; Stéphane Caprice
    Abstract: This paper analyzes the welfare implications of buyer mergers, which are mergers between downstream firms from different markets. We focus on the interaction between the merger's effects on downstream efficiency and on buyer power in a setup where one manufacturer with a non-linear cost function sells to two locally competitive retail markets. We show that size discounts for the merged entity has no impact on consumer prices or on smaller retailers, unless the merger affects the downstream efficiency of the merging parties. When the upstream cost function is convex, we find that there are "waterbed effects", that is, each small retailer pays a higher average tariff if a buyer merger improves downstream efficiency. We obtain the opposite results, "anti-waterbed effects", if the merger is inefficient. When the cost function is concave, there are only anti-waterbed effects. In each retail market, the merger decreases the final price if and only if it improves the efficiency of the merging parties, regardless of its impact on the average tariff of small retailers.
    Keywords: Buyer mergers, non-linear supply contracts, merger efficiencies, size discounts, waterbed effects
    JEL: D43 K21 L42
    Date: 2011
    URL: http://d.repec.org/n?u=RePEc:diw:diwwpp:dp1144&r=ind
  6. By: Joana César Machado (Faculdade de Economia e Gestão, Universidade Católica Portuguesa - Porto); Paulo Lencastre (Faculdade de Economia e Gestão, Universidade Católica Portuguesa - Porto); Leonor Vacas de Carvalho (Universidade de Évora); Patrício Costa (Universidade do Porto)
    Abstract: It is critical to investigate reactions to the various name and logo redeployment alternatives available in the context of a brand merger. Yet research on this topic is relatively limited. This paper aims to start filling this gap in the literature, by developing a typology of the visual identity structures that may be assumed in the context of a merger, as well as an exploratory study (n = 467) analysing consumers’ preferences regarding the alternative branding strategies. It uses an innovative design, which gives respondents freedom to choose their preferred solution. Results suggest that there is a clear preference for figurative logos. Furthermore, there is evidence that the logo may play a role as important as the name in a merger, ensuring consumers that there will be a connection with the brand’s past. Data also show that the choice of the logo reflects consumers’ aesthetic responses, whereas the choice of the name reflects consumers’ evaluation of the brand’s offer or off the brand’s presence in the market. These results should guide managers in the evaluation and choice of the post-merger branding strategy.
    Keywords: brand identity, logos, brand mergers, consumer preferences
    Date: 2011–07
    URL: http://d.repec.org/n?u=RePEc:cap:mpaper:022011&r=ind

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