nep-ind New Economics Papers
on Industrial Organization
Issue of 2011‒11‒28
eleven 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. Collusion in spatially separated markets with quantity competition By Kai Andree
  3. Market Share Indicates Quality By Amir Ban; Nati Linial
  4. Patent Disclosure in Standard Setting By Bernhard Ganglmair; Emanuele Tarantino
  5. How Do Experience and Shopping Frequency Affect Consumers Brand Choice? By Farina, Tatiana
  6. Vertical Integration, Innovation and Foreclosure By Allain, Marie-Laure; Chambolle, Claire; Rey, Patrick
  7. Market Size and Pharmaceutical Innovation By Dubois, Pierre; de Mouzon, Olivier; Scott Morton, Fiona; Seabright, Paul
  8. Patterns and effects of entry in US airline markets By Hüschelrath, Kai; Müller, Kathrin
  9. Airline Pricing under Different Market Conditions: Evidence from European Low-Cost Carriers By Volodymyr Bilotkach; Alberto A. Gaggero; Claudio A. Piga
  10. Competition and Industry Structure for International Rail Transportation By Friebel, Guido; Ivaldi, Marc; Pouyet, Jérôme
  11. Entry of Wal-Mart Supercenters and Supermarkets' Profit Margins By Rigoberto A. Lopez; Xiaoou Liu

  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
  2. By: Kai Andree
    Abstract: This paper develops the incentives to collude in a model with spatially separated markets and quantity setting firms. We find that increases in transportation costs stabilize the collusive agreement. We also show that, the higher the demand in both markets the less likely will collusion be sustained. Gross and Holahan (2003) use a similar model with price setting firms, we compare their results with ours to analyze the impact of the mode of competition on sustainability of collusion. Further we analyze the impact of collusion on social welfare and find that collusion may be welfare enhancing.
    Date: 2011–11
  3. By: Amir Ban; Nati Linial
    Abstract: Market share and quality, or customer satisfaction, go hand in hand. Yet the inference that higher market share indicates higher quality is seldom made. The skepticism is in part fueled by elitism, the association of mass popularity with lower quality, and by cynicism, ascribing market leadership to an entrenched position. We find that though such skepticism is often justified, it is correct to make a Bayesian inference that the product with the higher market share has the better quality under rather tame assumptions.
    Date: 2011–10
  4. By: Bernhard Ganglmair (Jindal School of Management, University of Texas at Dallas); Emanuele Tarantino (Department of Economics, University of Bologna)
    Abstract: We present a model of industry standard setting with two-sided asymmetric information about the existence of intellectual property. We provide an equilibrium analysis of (a) firms' incentives to communicate ideas for improvements of an industry standard, and (b) firms' decisions to disclose the existence of intellectual property to other participants of the standardization process.
    Keywords: patent holdup; patent disclosure; standard setting organizations; industry standards; disclosure rules; conversation; asymmetric information; Bertrand competition.
    JEL: D71 L15 O34
    Date: 2011–10
  5. By: Farina, Tatiana
    Date: 2011–10
  6. By: Allain, Marie-Laure; Chambolle, Claire; Rey, Patrick
    JEL: L13 L41
    Date: 2011–03–10
  7. By: Dubois, Pierre; de Mouzon, Olivier; Scott Morton, Fiona; Seabright, Paul
    Abstract: This paper quanti…es the relationship between market size and innovation in the pharmaceutical industry. We estimate the elasticity of innovation, as measured by the number of new chemical entities appearing on the market for a given disease class, to the potential market size represented by the willingness of su¤erers of diseases in that class (and others acting on their behalf such as insurers and governments) to spend on their treatment during the patent lifetime. We …nd positive signi…cant elasticities with a point estimate under our preferred speci…cation of 25.2%. This suggests that at the mean market size an additional $1.8 billion is required in additional patent life revenue to induce the invention of one additional new chemical entity. An elasticity substantially and signi…cantly below one-half is also a plausible implication of the hypothesis that innovation in pharmaceuticals is becoming more di¢ cult and expensive over time, as costs of regulatory approval rise and as the industry runs out of "low hanging fruit".
    Keywords: Innovation, Market Size, Elasticity, Pharmaceuticals
    JEL: O31 L65 O34
    Date: 2011–04
  8. By: Hüschelrath, Kai; Müller, Kathrin
    Abstract: We use T-100 traffic data and DB1B fare data from the U.S. Department of Transportation to identify patterns and effects of entry by network carriers and low-cost carriers in non-stop U.S. airline markets. For the sample period from 1996 to 2009, we find that entry activity of low-cost carriers did not only experience significant absolute increases but also led to substantial fare reductions. As route entries by network carriers do not have comparable effects, the existence and expansion of low-cost carriers must be considered as the main driver of competition in the domestic U.S. airline industry. --
    Keywords: Airline industry,liberalisation,entry,low-cost carriers
    JEL: L40 L93
    Date: 2011
  9. By: Volodymyr Bilotkach (University of California, Irvine); Alberto A. Gaggero (University of Pavia); Claudio A. Piga (Loughborough University; RCEA)
    Abstract: Traditional theories of airline pricing maintain that fares monotonically increase as fewer seats remain available on a flight. A fortiori, this implies a monotonically increasing temporal profile of fares. In this paper, we exploit the presence of drops in offered fares over time as an indicator of an active yield management intervention by two main European Low-Cost Carriers observed daily during the period June 2002 - June 2003. Our results indicate that yield management is effective in raising a flight's load factor. Furthermore, yield management interventions are more intense, and generate a stronger impact, on more competitive routes: one possible interpretation is that a reduction in competitive pressure allows the carriers to adopt a more standardized approach to pricing. Similarly, we find that yield management interventions are more effective in raising the load factor on routes where the customer mix is more heterogenous (i.e., it includes passengers traveling for leisure, business and for family matters). On markets with homogeneous customer base, no robust yield management effect was observed.
    Keywords: Easyjet, Intertemporal Pricing, Panel Data, Ryanair, Yield Management
    JEL: L11 L93
    Date: 2011–11
  10. By: Friebel, Guido (Goethe University Frankfurt); Ivaldi, Marc (Toulouse School of Economics); Pouyet, Jérôme (Paris School of Economics)
    Abstract: This paper investigates various options for the organization of the railway industry when network operators require the access to multiple national networks to provide international (freight or passenger) transport services. The EU rail system provides a framework for our analysis. Returns-to-scale and the intensity of competition are key to understanding the impact of vertical integration or separation between infrastructure and operation services within each country in the presence of international transport services. We also consider an option in which a transnational infrastructure manager is in charge of offering a coordinated access to the national networks. In our model, it turns out to be an optimal industry structure.
    Keywords: Network access, Vertical separation, Transport economics
    JEL: L14 L42 L51 L92
    Date: 2011–07–18
  11. By: Rigoberto A. Lopez (Department of Agriculture and Resource Economics, University of Connecticut); Xiaoou Liu
    Abstract: This article quantifies the impact of Wal-Mart Supercenters on supermarkets’ profitability via a two-stage dynamic entry game, using method of simulated moments and milk scanner data from Dallas/Fort Worth supermarkets. The empirical findings show that the entry of Wal-Mart Supercenters accounts for about an average 50% decrease in milk profit margins for incumbent supermarkets. Effects of scale are found to be more significant for Wal-Mart Supercenters than for incumbent supermarkets, granting Wal-Mart a competitive edge.
    Keywords: Wal-Mart, entry, profit margins, milk, dynamic games
    Date: 2011–06

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