nep-ind New Economics Papers
on Industrial Organization
Issue of 2012‒01‒03
seven papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Verti-zontal Differentiation in Monopolistic Competition By Francesco Di Comite; Jacques-François Thisse; Hylke Vandenbussche
  2. Impact Evaluation of Merger Decisions By Oliver Budzinski
  3. Newspaper vs. Online Advertising – Is There a Niche for Newspapers in Modern Advertising Markets? By Nadine Lindstädt; Oliver Budzinski
  4. Inter-firm R&D networks in the global pharmaceutical biotechnology industry during 1985 - 1998: A conceptual and empirical analysis By Krogmann, Yin; Schwalbe, Ulrich
  5. Assessing the cost competitiveness of China’s Shipbuilding Industry By Liping Jiang; Siri Pettersen Strandenes
  6. Competing in the Higher Education Market: Empirical Evidence for Economies of Scale and Scope in German Higher Education Institutions By Maria Olivares; Heike Wetzel
  7. Competitive Balance and Revenue Sharing in Sports Leagues with Utility-Maximizing Teams By Helmut Dietl; Martin Grossmann; Markus Lang

  1. By: Francesco Di Comite (Université Catholique de Louvain and European Commission); Jacques-François Thisse (Université Catholique de Louvain); Hylke Vandenbussche (National Bank of Belgium)
    Abstract: The recent availability of trade data at a firm-product-country level calls for a new generation of models able to exploit the large variability detected across observations. By developing a model of monopolistic competition in which varieties enter preferences non-symmetrically, we show how consumer taste heterogeneity interacts with quality and cost heterogeneity to generate a new set of predictions. Applying our model to a unique micro-level dataset on Belgian exporters with product and destination market information, we find that heterogeneity in consumer tastes is the missing ingredient of existing monopolistic competition models necessary to account for observed data patterns.
    Keywords: Heterogeneous firms, Product Differentiation, Monopolistic Competition, Nonsymmetric varieties
    JEL: D43 F12 F14 L16
    Date: 2011–10–17
  2. By: Oliver Budzinski (Department of Environmental and Business Economics, University of Southern Denmark)
    Abstract: This paper provides a comparative analysis of methods for the empirical ex post evaluation of merger control decisions. It develops a competition-policy oriented framework of assessment criteria for the leading evaluation methods and applies them to structural modeling and simulation, differences-in-differences methods, event studies as well as survey-based methods. It concludes that a method-mix is recommendable, however, under the exclusion of event studies that fail to secure a minimum level of reliability regarding the evaluation results. Furthermore, it warns against overly optimistic expectations about the effects of systematic impact evaluations of merger decisions. I like to thank the participants of the OECD Roundtable „Impact Evaluation of Merger Decisions“ (Paris, Juni 2011), Arndt Christiansen and Knud Sinding for valua-ble comments on earlier versions of this paper as well as Janne Mordhorst for valuable editorial assistance.
    Keywords: Empirical methods of industrial organization, merger control, competition policy, antitrust decisions, comparative analysis
    JEL: C18 C54 L41 L40 K21
    Date: 2011–09
  3. By: Nadine Lindstädt (Department of Environmental and Business Economics, University of Southern Denmark); Oliver Budzinski (Department of Environmental and Business Economics, University of Southern Denmark)
    Abstract: Newspapers have experienced declining circulation figures and declining advertising revenues for several years. In particular, declining advertising figures put a threat on newspapers – this is especially severe in the US where 73% of their revenues are generated through advertising. On the advertising side many companies have expanded their advertising expenditure towards online. Consequently, there are concerns about online advertising substituting newspaper advertising – in the same way as it has been feared for many years for the readership side. Both possible effects might put a threat on the further existence of (print) newspapers. However, though the internet – compared to newspapers – offers a variety of advantages for advertising companies, substitution tendencies cannot be generalized. In particular, we argue that newspaper advertising offers great benefits for the retailing industry. Consequently, we believe that retail advertising offers a niche for regional and local newspapers that can be expected to represent a sustainable segment of complementarity within the otherwise predominantly substitutional advertising markets. The paper substantiates this argument by applying the economic theory of advertising – in particular the differentiation between persuasive/complementary and informative advertising. The latter one presents the reason for retailers to continue advertising in newspapers. Subsequently, we conclude that no complete substitution between newspaper and online advertising can be expected to take place on the advertising side in the foreseeable future. The authors like to thank the participants of the EMMA-conference in Moscow (June 2011) and the members of the research group ‘Markets & Competition’ as well as Anna Lund Jepsen for helpful comments on an earlier version of this paper.
    Keywords: : Media economics, advertising, competition, complementation, substitution, online
    JEL: L82 A20 L13 M21
    Date: 2011–09
  4. By: Krogmann, Yin; Schwalbe, Ulrich
    Abstract: This paper analyses a large database on inter-firm R&D cooperation formed in the pharmaceutical biotechnology industry during the period 1985 - 1998. The results indicate that network size largely grows, whereas the density of the network declines during the periods. In the network analysis that emphasizes individual structural positions, the empirical results show that small biotechnological companies had a crucial bridging role for the large pharmaceutical firms in the second half of the 1980s. In the 1990s, the bridge role of biotechnology companies became less important and established pharmaceutical companies developed into dominant start players with many collaborators while holding central roles in the research network. The current analysis also shows that degree-based and betweenness-based network centralization are both low implying that the overall positional advantages are relatively equally distributed in the inter-firm R&D network of the pharmaceutical biotechnology industry. --
    Keywords: R&D networks,pharmaceutical biotechnology,network analysis,conceptual centrality,network visualization software
    JEL: C88 D85 L24 L65 O32
    Date: 2011
  5. By: Liping Jiang (Department of Environmental and Business Economics, University of Southern Denmark); Siri Pettersen Strandenes (Department of Economics, Norwegian School of Economics and Business Administration)
    Abstract: Cost has a significant impact on competitiveness within the shipbuilding industry. In China, low costs have created favourable conditions for domestic shipyards competing in the international market. However, China’s shipbuilders have been facing rising cost pressures in recent years, which may affect their industrial competitiveness. In this article, we assess China’s shipbuilding cost and its impact on the competitiveness of China’s shipbuilding industry. We make comparisons with China’s major competitors, South Korea and Japan, over the period from 2000 to 2009. First, we analyse principal factors that affect shipbuilding cost. Second, we examine the changes in China’s shipbuilding cost over the time period. Finally, we use shipbuilding cost and market share as the basis for analysing the competitiveness of the shipbuilding industry. The results reveal the sources and limiting factors of China’s cost advantage, as well as changes in its shipbuilding cost and competitiveness.
    Keywords: Shipbuilding cost; industry competitiveness; China’s shipbuilding industry
    Date: 2011–09
  6. By: Maria Olivares (University of Zuerich, Department of Business Administration, Switzerland); Heike Wetzel (University of Cologne, Institute of Energy Economics, Germany)
    Abstract: Since the late 1990s, the European higher education system has had to face deep structural changes. With the public authorities seeking to create an environment of quasi-markets in the higher education sector, the increased competition induced by recent reforms has pushed all publicly financed higher education institutions to use their resources more efficiently. Higher education institutions increasingly now aim at differentiating themselves from their competitors in terms of the range of outputs they produce. Assuming that different market positioning strategies will have different effects on the performance of higher education institutions, this paper explores the existence of economies of scale and scope in the German higher education sector. Using an input-oriented distance function approach, we estimate the economies of scale and scope and the technical efficiency for 154 German higher education institutions from 2001 through 2007. Our results suggest that comprehensive universities should indeed orientate their activities to the concept of a full-university that combines teaching and research activities across a broad range of subjects. In contrast, praxis-oriented small and medium-sized universities of applied sciences should specialise in the teaching and research activities they conduct.
    Keywords: Higher Education Production, Economies of Scale and Scope, Technical Efficiency, Stochastic Frontier Analysis, Input Distance Function
    JEL: L25 I23 D24
    Date: 2011–12
  7. By: Helmut Dietl (Department of Business Administration, University of Zurich); Martin Grossmann (Department of Business Administration, University of Zurich); Markus Lang (Department of Business Administration, University of Zurich)
    Abstract: This paper develops a contest model of a professional sports league in which clubs maximize a weighted sum of profits and wins (utility maximization). The model analyzes how more win-oriented behavior of certain clubs affects talent investments, competitive balance and club profits. Moreover, in contrast to traditional models, we show that revenue sharing does not always reduce investment incentives due to the dulling effect. We identify a new effect of revenue sharing called the "sharpening effect". In the presence of the sharpening effect (dulling effect), revenue sharing enhances (reduces) investment incentives and improves (deteriorates) competitive balance in the league.
    Keywords: Competitive balance, contest, invariance proposition, objective function, revenue sharing, team sports league, utility maximization
    JEL: L83 D43 C72
    Date: 2011–12

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