nep-ind New Economics Papers
on Industrial Organization
Issue of 2011‒09‒05
six papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Competition, Consumer Welfare, and the Social Cost of Monopoly By Yoon-Ho Alex Lee; Donald Brown
  2. From national monopoly to Multinational Corporation: how regulation shaped the road towards telecommunications internationalization By Clifton, Judith; Díaz-Fuentes, Daniel; Comín Comín, Francisco
  3. Inferring Agent Behavior and Economic Information, with Free Entry and Exit of Firms By Hernán Vallejo; Miguel Espinosa
  4. Price Cycles and Price Leadership in Gasoline Markets: New Evidence from Canada By David P.Byrne; Roger Ware
  5. Consolidation and Price Discrimination in the Cable Television Industry By David P.Byrne
  6. Regulatory federalism and industrial policy in broadband telecommunications By Daniel Montolio; Francesc Trillas

  1. By: Yoon-Ho Alex Lee; Donald Brown
    Date: 2011–08–25
  2. By: Clifton, Judith; Díaz-Fuentes, Daniel; Comín Comín, Francisco
    Abstract: One of the consequences of major regulatory reform of the telecommunications sector from the end of the 1970s – particularly, privatization, liberalization and deregulation – was the establishment of a new business environment which permitted former national telecommunications monopolies to expand internationally. From the 1990s, a number of these firms, particularly those based in Europe, joined the rankings of the world’s leading Multinational Corporations. Their internationalization was uneven, however: while some firms internationalised strongly, others went abroad much slower. This article explores how the regulatory framework within which telecommunications incumbents evolved over the long-term helped shape their subsequent, uneven, paths to internationalization. Two cases representing ´maximum variation´ are selected: Telefónica, whose early and unrelenting expansion transformed it into one of the world’s most international of Multinational Corporations, and BT, whose international ventures failed and, with decline domestic shares, forced the firm to partial de-internationalization, becoming the least international of the large European incumbents. Long-term ownership, access to capital, management style and exposure to liberalization strongly influenced firms’ approaches to internationalization.
    Keywords: Regulation; Telecommunications; Internationalization; Europe; Privatization; Liberalization; Multinational Corporations
    JEL: L96 N74 L51 F23 N44 N84 L98 H82
    Date: 2011
  3. By: Hernán Vallejo; Miguel Espinosa
    Abstract: This article proposes an identity regarding economic outcomes when producers maximize profits, with free entry and exit of firms. The identity links consumer and producer theory and leads to several results that contribute to understand what should -and should not- be expected under the assumptions made, from the behavior of firms and households, and from the technology of a firm. Given that unit prices are usually known, the identity also allows to infer the value of a range of economic variables, when reasonable information is available on the price elasticity of the residual demand, the marginal revenue associated to the residual demand, the marginal cost or the elasticity of scale.
    Date: 2011–05–31
  4. By: David P.Byrne; Roger Ware
    Abstract: This paper studies the determinants of Edgeworth Cycles, price leadership and coordination in retail gasoline markets using daily station-level price data for 110 markets in Ontario, Canada for 2007-2008. We find an “inverse-U” relationship between markets’ propensity to exhibit price cycles and their size. More concentrated markets are less likely to exhibits cycles and we highlight regional clustering among cycling and non-cycling markets. Within cycling markets, we find brands’ stations (Esso, Shell,Petro-Canada, Sunoco) lead price jumps and coordinate market prices, while independents (Ultramar, Pioneer, Olco, MacEwen) aggressively undercut prices over the cycle.
    Keywords: Retail gasoline prices; Edgeworth Cycles; Price leadership; Coordination
    JEL: L11 L9
    Date: 2011
  5. By: David P.Byrne
    Abstract: This paper measures the impact of consolidation on cable television prices, product quality,profits and consumer welfare. I estimate a multi-product monopoly model using panel data on cable menus and costs in Canada from 1990 to 1996. Using counterfactual simulations, I find mean consumer welfare rises with acquisitions, as does welfare inequality across consumers. Scale economies are the primary driver of consolidation effects quantitatively, with firm heterogeneity in demand and costs having a smaller impact. Regional consolidation yields non-negligible welfare gains, particularly in rural markets where potential cable quality improvements and cost reductions are the largest.
    Keywords: Consolidation; Price Discrimination; Economies of Scale; Firm Heterogeneity;
    Date: 2011
  6. By: Daniel Montolio (Universitat de Barcelona & IEB); Francesc Trillas (Universitat Autònoma de Barcelona, SP-SP Center (IESE) & IEB)
    Abstract: We analyse the impact of regulation, industrial policy and jurisdictional allocation on broadband deployment using a theoretical model and an empirical estimation. Although central powers may be more focused and internalize interjurisdictional externalities, decentralized powers may internalize local horizontal policy spillovers and use a diversity of objectives as a commitment device in the presence of sunk investments. The latter may, for instance, alleviate the collective action problem of the joint use of rights of way and other physical infrastructures. In the empirical exercise, using data for OECD and EU countries for the period 1999-2006, we examine whether centralization promotes new telecommunications markets, in particular the broadband access market. The existing literature, in the main, claims it does, but we find no support for this claim in our data. Our results show that indicators of national industrial policy are a weakly positive determinant of broadband deployment and that different measures of centralization are either irrelevant or have a negative impact on broadband penetration.
    Keywords: Regulation, industrial policy, decentralization, broadband
    JEL: L50 L96 K23 H77
    Date: 2011

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.