nep-ind New Economics Papers
on Industrial Organization
Issue of 2012‒06‒13
six papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. How Much Do Cartels Typically Overcharge? By Marcel Boyer; Rachidi Kotchoni
  2. M&A as a Driver of Global Competition in the Brewing Industry By Madsen, Erik Strøjer; Pedersen, Kurt; Lund-Thomsen, Lars
  3. Financial Mergers and Their Consequences By Scherer, F. M.
  4. Market Power in the Global Economy: The Exhaustion and Protection of Intellectual Property By Kamal Saggi
  5. Industry Effects on Firm and Segment Profitability Forecasting: Do Aggregation and Diversity Matter? By Yim, Andrew; Schröder, David
  6. Spatial competition in the French supermarket industry By Stéphane Turolla

  1. By: Marcel Boyer; Rachidi Kotchoni
    Abstract: The estimation of cartel overcharges lie at the heart of antitrust policy on cartel proscution as it constitutes a basic element in the determination of fines. Connor and Lande (2008) conducted a survey of cartels and found a mean overcharge estimates in the range of 31% to 49%. By examining more sources, Connor (2010) finds a mean of 50.4% for successful cartels. However, the data used in those studies are estimates obtained in different ways, sources and contexts rather direct observations. Therefore, these data are subject to model error, estimation error and publication bias. A quick glance at the Connor database reveals that the universe of overcharge estimates is asymmetric, heterogenous and contains a number of influential observations. Beside the fact that overcharge estimates are potentially biased, fitting a linear regression model to the data without providing a carefull treatment of the problems raised above may produce distorted results. We conduct a meta-analysis of cartel overcharge estimates in the spirit of Connor and Bolotova (2006) while providing a sound treatment of those matters. We find typical bias-corrected mean and median overcharge estimates of 13.62% and 13.63% for cartels with initial overcharge estimates lying between 0% and 50% and bias-corrected mean and median overcharges estimates of 17.52% and 14.05% for the whole sample. Clearly, our results have significant antitrust policy implications. <P>L’estimation des surprix des cartels est au cœur de la politique de lutte aux cartels, car elle est un élément clé de la détermination des pénalités. Connor et Lande (2008) survolent la littérature sur les majorations de prix des cartels et concluent à une augmentation moyenne variant entre 31 % et 49 %. Considérant un échantillon plus grand, Connor (2010) trouve une moyenne de 50,4 % pour les cartels réussis. Cependant, les échantillons utilisés dans ces études sont constitués d’estimations venant de différentes études ou cas et non pas d’observations directes. De ce fait, ces échantillons héritent possiblement d’erreurs de modélisation et d’estimation, ainsi que d’un biais de publication. Une analyse sommaire des surprix dans l’échantillon de Connor révèle une distribution asymétrique, de l’hétérogénéité et la présence d’observations aberrantes. Ainsi, au-delà du fait que les estimations des surprix sont potentiellement biaisées, l’estimation d’un modèle de régression linéaire avec de telles données sans un traitement adéquat des problèmes ci-dessus pourrait produire des distorsions dans les résultats. Nous présentons une méta-analyse dans l’esprit de Connor and Bolotova (2006), mais qui tient compte adéquatement des problèmes mentionnés ci-dessus. Après correction du biais d’estimation, nos résultats suggèrent que la moyenne et la médiane des majorations de prix sont de l’ordre de 13,62 % avec une médiane de 13,63 % pour les cartels dont les majorations de prix se situaient initialement entre 0 % et 50 % et de l’ordre de 17,52 % avec une médiane de 14,05 % pour l’ensemble des cartels. Nos résultats débouchent sur des enjeux importants en politique de la concurrence.
    Keywords: Cartel overcharges, Antitrust, Heckman, Meta-analysis, Surprix de cartel, Politique de la concurrence, Heckman, Meta-analyse
    Date: 2012–05–01
    URL: http://d.repec.org/n?u=RePEc:cir:cirwor:2012s-15&r=ind
  2. By: Madsen, Erik Strøjer (Department of Economics, Aarhus School of Business); Pedersen, Kurt (Institut for Marketing og Organisation - Ledelse); Lund-Thomsen, Lars (BSS, Biblioteker - Biblioteket)
    Abstract: The international beer brewing industry has experienced massive changes over the last decade. Industry concentration has increased dramatically, and the leading brewer groups have globalised their operations across virtually all continents. The paper describes the development and puts it into an industrial economics framework. Based on a major data base the paper further assesses the effects of M&A strategies in the global beer industry
    Keywords: No; keywords
    JEL: A10
    Date: 2011–09–21
    URL: http://d.repec.org/n?u=RePEc:hhs:aareco:2011_010&r=ind
  3. By: Scherer, F. M. (Harvard University)
    Abstract: This paper, written for a Columbia Law School - American Bar Association conference, analyzes the massive merger wave that has led to substantially increased concentration of banking activity in the United States. One consequence is the rise of banks "too big to fail." The structural changes have also been associated with a striking increase in financial institutions' share of all U.S. corporate profits along with employee compensation out of line with norms for individuals of comparable ability. Data on concentration in well-defined banking markets are quite scarce, but fragmentary evidence suggests appreciable monopoly pricing power potential in some product markets. Mergers that lead to concentration have for decades been the focus of antitrust activity. But a review of the record shows an emphasis on mergers that raise local banking market concentration and nearly total neglect of other important lines, on which data are lacking. If antitrust actions were to be taken against the concentration of power in those lines, offsetting advantages in the form of realized scale economies would have to be weighed. A review of the most recent evidence suggests that difficult tradeoffs might be confronted.
    Date: 2012–05
    URL: http://d.repec.org/n?u=RePEc:ecl:harjfk:rwp12-018&r=ind
  4. By: Kamal Saggi (Department of Economics, Vanderbilt University)
    Abstract: We develop a North-South model in which a firm that enjoys monopoly status in the North (by virtue of a patent or a trademark) has the incentive to price discriminate internationally because Northern consumers value its product more than Southern ones. While North's policy regarding the territorial exhaustion of intellectual property rights (IPR) determines whether the firm can exercise market power across regions, Southern policy regarding the protection of IPR determines the firm's monopoly power within the South. In equilibrium, each region's policy takes into account the firm's pricing strategy, its incentive to export, and the other region's policy stance. Major results are: (i) the North is more likely to choose international exhaustion if the South protects IPR whereas the South is more willing to offer such protection if the North implements national exhaustion; (ii) the firm values IPR protection less than the freedom to price discriminate internationally if and only if its quality advantage over Southern imitators exceeds a certain threshold; and (iii) requiring the South to protect IPR increases global welfare iff such protection is necessary for inducing the firm to export to the South.
    Keywords: Exhaustion of IPRs, imitation, market power, TRIPS, welfare
    JEL: F13 F10 F15
    Date: 2012–03
    URL: http://d.repec.org/n?u=RePEc:van:wpaper:1204&r=ind
  5. By: Yim, Andrew; Schröder, David
    Abstract: Abstract. A recent study shows that industry-specific analysis has no incremental advantage over economy-wide analysis in forecasting firm profitability. This result seems puzzling because some earlier studies have documented the importance of industry effects in explaining firm profitability. We reconcile the apparent inconsistency by showing that industry effects on profitability forecasting exist at the more refined business segment level, but are obscured by aggregated reporting at the firm level. Using segment-level analysis as well as firm-level analysis that also utilizes segment-level information, we provide consistent evidence supporting that industry-specific analysis is more accurate than economy-wide analysis in predicting the profitability of business segments and the profitability of single-segment firms.
    Keywords: Segment profitability; Earnings predictability; Earnings persistence; Aggregation; Diversity; Industry membership
    JEL: L25 M41 G00 M21
    Date: 2012–06–01
    URL: http://d.repec.org/n?u=RePEc:pra:mprapa:39190&r=ind
  6. By: Stéphane Turolla
    Abstract: This paper challenges the conventional wisdom on the competitive grocery retail sector in France. To that end, I develop a structural model of spatial competition that accounts for (i) market geography on consumers' preferences, and (ii) differences in their shopping list. The demand estimates are used to recover stores' price-cost margin under alternative pricing strategies. I select the best pricing model by applying non-nested tests and show that retailers noticeably distort their offer in highly concentrated markets. Finally, I perform counterfactual experiments to quantify the expected gain of an additional store on consumer welfare and retail prices.
    Keywords: spatial competition, structural model, discrete choice model, differentiated products, supermarket industry
    JEL: C35 L13 L81
    Date: 2012
    URL: http://d.repec.org/n?u=RePEc:rae:wpaper:201201&r=ind

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