|
on Industrial Organization |
|
Issue of 2012‒02‒20
ten papers chosen by |
| By: | Ken-Ichi Shimomura (Research Institute for Economics and Business Administration, Kobe University, Nada-ku, Kobe, Japan); Jacques-François Thisse (CORE-Université catholique de Louvain (Belgium), CREA-Université du Luxembourg and CEPR) |
| Abstract: | Many industries are made of a few big firms, which are able to manipulate the market outcome, and of a host of small businesses, each of which has a negligible impact on the market. We provide a general equilibrium framework that encapsulates both market structures. Due to the higher toughness of competition, the entry of big firms leads them to sell more through a market expansion effect generated by the shrinking of the monopolistically competitive fringe. Furthermore, social welfare increases with the number of big firms because the pro-competitive effect associated with entry dominates the resulting decrease in product diversity. |
| Keywords: | oligopoly, monopolistic competition, product differentiation, welfare |
| JEL: | L13 L40 |
| Date: | 2012–02 |
| URL: | http://d.repec.org/n?u=RePEc:kob:dpaper:dp2012-03&r=ind |
| By: | Gu, Yiquan; Wenzel, Tobias |
| Abstract: | This paper introduces price-dependent individual demand into the circular city model of product differentiation. We show that for any finite number of firms, a unique symmetric price equilibrium exists provided that demand functions are not too convex. As in the case of unit demand, the number of firms under free entry decreases in the fixed cost of entry while increases in the transportation cost of consumers. However, this number is no longer always in excess of the socially optimal level. Insufficient entry occurs when the fixed and transportation costs are high. -- |
| Keywords: | spatial models,price-dependent demand,horizontal product differentiation,demand elasticity,excess entry theorem |
| JEL: | L11 L13 R1 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:dicedp:43&r=ind |
| By: | Englmaier, Florian; Gratz, Linda; Reisinger, Markus |
| Abstract: | We analyze the profitability of third degree price discrimination under consideration of consumers' fairness concerns within an experiment and explain the results within a theoretical framework. We find that with an increase in the price differential negative reciprocal reactions by disadvantaged consumers become stronger compared to positive reciprocal reactions by advantaged consumers. Consequently, the profit maximizing price differential lies below the one predicted to be optimal by standard theory. Further, profitability increases when consumers who are regarded as poorer are charged lower prices compared to when the wealth of the different consumer groups is unknown. |
| Keywords: | price discrimination; reciprocal fairness; inequity aversion; experimental economics |
| JEL: | D11 D12 E3 |
| Date: | 2012–02 |
| URL: | http://d.repec.org/n?u=RePEc:lmu:muenec:12735&r=ind |
| By: | Bouckaert, J.M.C.; Degryse, H.A.; Dijk, T. van (Tilburg University, Center for Economic Research) |
| Abstract: | Abstract: We study the competitive and welfare consequences when only one firm must commit to uniform pricing while the competitor’s pricing policy is left unconstrained. The asymmetric no-discrimination constraint prohibits both behaviour-based price discrimination within the competitive segment and third-degree price discrimination across the monopolistic and competitive segments. We find that an asymmetric no-discrimination constraint only leads to higher profits for the unconstrained firm if the monopolistic segment is large enough. Therefore, a regulatory policy objective of encouraging entry is not served by an asymmetric no-discrimination constraint if the monopolistic segment is small. Only when the monopolistic segment is small and rivalry exists in the competitive segment does the asymmetric no-discrimination constraint enhance welfare. |
| Keywords: | Dominant firms;price discrimination;competition policy;regulation. |
| JEL: | D11 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:kubcen:2012009&r=ind |
| By: | Hüschelrath, Kai; Veith, Tobias |
| Abstract: | Cartel detection is usually viewed as a key task of either competition authorities or compliance officials in firms with an elevated risk of cartelization. We argue that customers of hard core cartels can have both incentives and possibilities to detect such agreements on their own initiative through the use of market-specific data sets. We apply a unique data set of about 340,000 market transactions from 36 smaller and larger customers of German cement producers and show that a price screen would have allowed particularly larger customers to detect the upstream cement cartel before the competition authority. The results not only suggest that monitoring procurement markets through screening tools has the potential of substantial cost reductions - thereby improving the competitive position of the respective user firms - but also allow the conclusion that competition authorities should view customers of potentially cartelized industries as important allies in their endeavour to fight hard core cartels. -- |
| Keywords: | business economics,procurement,antitrust policy,cartels,detection,screening |
| JEL: | D24 L41 L61 M11 M21 K21 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:11066&r=ind |
| By: | Karle, Heiko; Klein, Tobias J.; Stahl, Konrad O. |
| Abstract: | We study a differentiated product market in which an investor initially owns a controlling stake in one of two competing firms and may acquire a non-controlling or a controlling stake in a competitor, either directly using her own assets, or indirectly via the controlled firm. While industry profits are maximized within a symmetric two product monopoly, the investor attains this only in exceptional cases. Instead, she sometimes acquires a noncontrolling stake. Or she invests asymmetrically rather than pursuing a full takeover if she acquires a controlling one. Generally, she invests indirectly if she only wants to affect the product market outcome, and directly if acquiring shares is profitable per se. -- |
| Keywords: | differentiated products,separation of ownership and control,private benefits of control |
| JEL: | L13 L41 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:11071&r=ind |
| By: | Hackl, Franz; Kummer, Michael E.; Winter-Ebmer, Rudolf; Zulehner, Christine |
| Abstract: | We investigate the effect of market structure on market performance in the market for consumer electronics. This research is novel, because we exploit product life cycle information to build an instrumental variable for the number of firms in a market, a variable which hitherto had to be treated as exogenous in comparable studies on seller-behavior in e-commerce. We combine data from Austria's largest online site for price comparisons with retail-data on whole sale prices provided by a major hardware producer for consumer electronics. We observe input prices of firms, and all their moves in the entry and the pricing game. Using this information for 80 digital cameras, we generate instrumental variables based on the shops' entry decisions in the past. We find that instrumenting is particularly important for estimating the effect of competition on the markup of the price-leader. -- |
| Keywords: | retailing,product life cycle,market structure,market performance,markup,price dispersion |
| JEL: | L11 L13 L81 D43 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:11084&r=ind |
| By: | Ciobanu, Oana<br/> Wang, Weimin |
| Abstract: | This paper examines firm entry and exit patterns in the Canadian business sector by using the Longitudinal Employment Analysis Program database developed by Statistics Canada. Our primary purpose is to present stylized facts and provide descriptive analysis of the entry and exit patterns in the Canadian economy in order to form a solid foundation for future in-depth theoretical and empirical studies of firm dynamics. In particular, this paper focuses on the relative importance of entrants and exiters in terms of both number and employment, the persistence of entry and exit patterns over time, and the correlation between industry entry and exit rates. |
| Keywords: | Business performance and ownership, Entry, exit, mergers and growth |
| Date: | 2012–01–25 |
| URL: | http://d.repec.org/n?u=RePEc:stc:stcp1e:2012022e&r=ind |
| By: | Clemens Haftendorn |
| Abstract: | Before 2004 South Africa was the dominant steam coal exporter to the European market. However a new market situation with rising global demand and prices makes room for a new entrant: Russia. The hypothesis investigated in this paper is that the three incumbent dominant firms located in South Africa and Colombia reacted to that new situation by exerting market power and withheld quantities from the market in 2004 and 2005. Three market structure scenarios of oligopoly with a competitive fringe are developed to investigate this hypothesis: a Stackelberg model with a cartel, a Stackelberg model with a Cournot-oligopoly as leader and a Nash-bargaining model. The model with a Cournot oligopoly as leader delivers the best reproduction of the actual market situation meaning that the dominant players exert market power in a non-cooperative way without profit sharing. Furthermore some methodological clarifications regarding the modeling of markets with dominant players and a competitive fringe are made. In particular we show that the use of mixed aggregated conjectural variations can lead to outcomes that are inconsistent with the actions of rational profit-maximizing players. |
| Keywords: | Atlantic coal market, partial equilibrium modeling, market power |
| JEL: | L13 L72 C69 C72 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp1185&r=ind |
| By: | Nikogosian, Vigen; Veith, Tobias |
| Abstract: | The literature on vertical integration in markets with regulated upstream prices suggests that the integrated upstream firm might engage in non-price discrimination. Several studies provide policy recommendations derived either from case study approaches or based on theoretical modeling which addresses the unbundling issue. In this study we analyze the impact of vertical integration of retail incumbent and network operator on retail prices and upstream charges. As the vertical structure is heterogeneous across the 850 German electricity submarkets for residential customers (there exist legally unbundled, vertically integrated or fully separated firms), we use firm level data to analyze the effects of different vertical structures and regulation schemes on retail electricity prices. We find significantly higher prices in markets with vertically integrated firms compared to markets with fully separated firms. This finding could indicate non-price discrimination. Furthermore, we find no evidence that legal unbundling eliminates the incentives for non-price discrimination because the prices do not differ from prices in markets under vertical integration. -- |
| Keywords: | electricity,regulation,vertical integration,legal and total unbundling,non-price discrimination |
| JEL: | L1 L5 L9 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:11069&r=ind |