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on Industrial Organization |
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Issue of 2012‒04‒10
six papers chosen by |
| By: | Fanti, Luciano; Gori, Luca; Sodini, Mauro |
| Abstract: | The present study analyses the dynamics of a nonlinear Cournot duopoly with managerial delegation and bounded rational players. Problems concerning strategic delegation (based on relative performance evaluations) have recently received in depth attention in both the theoretical and empirical industrial economics literatures. In this paper, we take a dynamic view of this problem and assume that the owners of both firms hire a manager and delegate output decisions to him. Each manager receives a fixed salary plus a bonus offered in a publicly observable contract. The bonus entitled to the manager hired by the owner of every firm is based on relative (profit) performance. Managers of both firms may collude or compete. In such a context, we find, in either cases of collusion and low degree of competition, that synchronised dynamics takes place. However, when the degree of competition increases the dynamics can undergo symmetry-breaking bifurcations that may cause relevant global phenomena. In particular, on-off intermittency and blow-out bifurcations are observed for several parameter values. Moreover, coexistence of attractors may also occur. The global behaviour of the noninvertible map is investigated through the study of the transverse Lyapunov exponent and the folding action of the critical curves of the map. These phenomena are impossible under profit maximisation. |
| Keywords: | Cournot; Managerial delegation; Nonlinear dynamics; Oligopoly; Relative profits |
| JEL: | L13 D43 C62 |
| Date: | 2012–04–04 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:37834&r=ind |
| By: | Mathiesen, Lars (Dept. of Economics, Norwegian School of Economics and Business Administration) |
| Abstract: | We are concerned with economic analyses of markets from the perspective of supporting a decision maker selling in the market. The competitive pressure and the price formation are central issues. The goal of this paper is to highlight the remarkably different price patterns obtained from different modes of seller behavior in a spatial market. This is exemplified by models of price taking versus the oligopolistic Cournot mode of behavior. Although a particular market, namely the European market for natural gas is used for illustration, the insights from this exercise apply to any industry where suppliers have market power, their locations differ, and their costs of supplying individual segments of the market are non-negligible and differ. When market power is present and one seeks insight into competition and price formation, details in other dimensions cannot compensate for not modeling the exertion of market power. |
| Keywords: | Price formation; Spatial market; Market power. |
| JEL: | C68 D41 D43 L11 L13 |
| Date: | 2012–04–02 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:nhheco:2012_005&r=ind |
| By: | CARLETTI, Elena; HARTMANN, Philipp; ONGENA, Steven; ; |
| Abstract: | We construct a unique dataset of legislative reforms in merger control legislation that occurred in nineteen industrial countries in the period 1987-2004, and investigate the economic impact of these changes on stock prices. In line with the hypothesis that merger control should challenge anticompetitive mergers and thus limit future monopolistic profits, we find that the strengthening of merger control decreases the stock prices of non-financial firms. In contrast, we find that bank stock prices increase. Cross sectional regressions show that the discretion embedded in the supervisory control of bank mergers is a major determinant of the positive bank stock returns. This suggests that merger control is anticipated to create a “separation of powers” and “checks and balances” mechanism in the banking sector that mitigates the potential for abuse and wasteful enforcement of the supervisory control. We provide a case study further supporting this interpretation. |
| Keywords: | merger control; legal institutions; financial regulation |
| JEL: | G21 G28 D4 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:eui:euiwps:eco2012/12&r=ind |
| By: | Jordi Perdiguero (Dept. de Política Econòmica. Grup de Recerca en Governs i Mercats (GiM). Institut d’Economia Aplicada (IREA). Universitat de Barcelona. Spain); Joan-Ramon Borrell (Dept. de Política Econòmica. Grup de Recerca en Governs i Mercats (GiM). Institut d’Economia Aplicada (IREA). Universitat de Barcelona. Spain) |
| Abstract: | Relevant market definition is still a key element of economic analysis of competition in the gasoline market. It is particularly difficult to handle when competition is local and market power is geographically constrained like is the case in the gasoline market. We analyse how the application of the hypothetical monopolist or Small but Significant Non-Transitory Increase in Prices (SSNIP) test performs for defining isochrones using only information on prices and distance among competitors. We conclude that geographic information systems can be very successfully used to define more precisely relevant geographic market in the gasoline retailing. The application to the Spanish gasoline market concludes that geographic relevant market is composed by 5-6 minutes of travel time. Localised market power should be taken into account when analysing the adverse effects of mergers and entry regulations in gasoline retailing. Only drawing small enough isochrones will drive competition in local markets because it is just close rivals that compete effectively with each other. |
| Keywords: | Gasoline, Market definition, Retailing. |
| JEL: | L11 L12 L14 R12 |
| Date: | 2012–03 |
| URL: | http://d.repec.org/n?u=RePEc:xrp:wpaper:xreap2012-04&r=ind |
| By: | Filistrucchi, L.; Antonielli, M. (Tilburg University, Center for Economic Research) |
| Abstract: | Abstract: We analyse a newspaper market where two editors first choose the political position of their newspaper, then set cover prices and advertising tariffs. We build on the work of Gabszewicz, Laussel and Sonnac (2001, 2002), whose model of competition among newspaper publishers we take as the stage game of an infinitely repeated game, and investigate the incentives to collude and the properties of the collusive agreements in terms of welfare and pluralism. We analyse and compare two forms of collusion: in the first, publishers cooperatively select both prices and political position; in the second, publishers cooperatively select prices only. We show that collusion on prices reinforces the tendency towards a Pensée Unique discussed in Gabszewicz, Laussel and Sonnac (2001), while collusion on both prices and the political line would tend to mitigate it. Our findings question the rationale for Joint Operating Agreements among US newspapers, which allow publishers to cooperate in setting cover prices and advertising tariffs but not the editorial line. We also show that, whatever the form of collusion, incentives to collude first increase, then decrease as advertising revenues per reader increase. |
| Keywords: | collusion;newspapers;two-sided markets;indirect network effects;pluralism;spatial competition. |
| JEL: | L41 L82 D43 K21 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:kubcen:2012024&r=ind |
| By: | Bejger, Sylwester |
| Abstract: | This article is devoted to the problem of the detection of overt or tacit collusion equilibrium in the context of the choice of the appropriate econometric method, a choice that is determined by the amount of information that the observer possesses. The author addresses this problem in two steps. First, to provide a theoretical background, he uses a collusion marker based on structural disturbances in a price process'; variance. Then, he applies a Markov switching model with switching in variance regimes. The author considers this method adequate and coherent with the problem structure and the research objective, and useful for assessing the functionality of the collusion marker he uses. He uses the model to examine the Indian cement industry in the period 1994-2009 and finds some objective indications of collusion and competition phases. These phases are confirmed by certain historical facts as well as by numerous research articles. -- |
| Keywords: | Explicit and tacit collusion,collusive equilibrium,cartel detection,cement industry,price variance,Markov switching model |
| JEL: | C22 L13 L61 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:ifwedp:201218&r=ind |