nep-ind New Economics Papers
on Industrial Organization
Issue of 2012‒09‒16
four papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Upward Pricing Pressure in Two-Sided Markets By Affeldt, P.; Filistrucchi, L.; Klein, T.J.
  2. Product quality, competition, and multi-purchasing By Anderson, Simon P.; Foros, Øystein; Kind, Hans Jarle
  3. Patents versus R&D subsidies in a Schumpeterian growth model with endogenous market structure By Chu, Angus C.; Furukawa, Yuichi
  4. Sales-Maximization vs. Profit-Maximization: Managerial Behavior at Japanese Regional Banks 1980-2009 By Kozo Harimaya; Takao Ohkawa; Makoto Okamura; Tetsuya Shinkai

  1. By: Affeldt, P.; Filistrucchi, L.; Klein, T.J. (Tilburg University, Center for Economic Research)
    Abstract: Abstract: Pricing pressure indices have recently been proposed as alternative screening devices for horizontal mergers involving differentiated products. We extend the concept of Upward Pricing Pressure (UPP) proposed by Farrell and Shapiro (2010) to two-sided markets. Examples of such markets are the newspaper market, where the demand for advertising is related to the number of readers, and the market for online search, where advertising demand depends on the number of users. The formulas we derive are useful for screening mergers among two-sided platforms. Due to the two-sidedness they depend on four sets of diversion ratios that can either be estimated using market-level demand data or elicited in surveys. In an application, we evaluate a hypothetical merger in the Dutch daily newspaper market. Our results indicate that it is important to take the two-sidedness of the market into account when evaluating UPP.
    Keywords: Merger evaluation;two-sided markets;network effects;UPP.
    JEL: L13 L40 L82
    Date: 2012
    URL: http://d.repec.org/n?u=RePEc:dgr:kubcen:2012069&r=ind
  2. By: Anderson, Simon P. (Dept. of Economics, University of Virginia); Foros, Øystein (Dept. of Finance and Management Science, Norwegian School of Economics and Business Administration); Kind, Hans Jarle (Dept. of Economics, Norwegian School of Economics)
    Abstract: In a Hotelling duopoly model, we introduce quality that is more appreciated by closer consumers. Then higher common quality raises equilibrium prices, in contrast to the standard neutrality result. Furthermore, we allow consumers to buy one out of two goods (single-purchase) or both (multi-purchase). Prices are strategically independent when some consumers multi-purchase because suppliers price the incremental benefit to marginal consumers. In a multi-purchase regime, there is a hump-shaped relationship between equilibrium prices and quality when quality functions overlap. If quality is sufficiently good, it might be a dominant strategy for each supplier to price high and eliminate multi-purchase.
    Keywords: Hotelling model with quality; multi-purchase; incremental pricing; content competition
    JEL: D00 D40
    Date: 2012–08–28
    URL: http://d.repec.org/n?u=RePEc:hhs:nhhfms:2012_009&r=ind
  3. By: Chu, Angus C.; Furukawa, Yuichi
    Abstract: In this note, we explore the different implications of patent breadth and R&D subsidies on economic growth and endogenous market structure in a Schumpeterian growth model. We find that these two policy instruments have the same positive effect on economic growth when the model exhibits counterfactual scale effects under an exogenous number of firms. However, when the model becomes scale-invariant under an endogenous number of …firms, R&D subsidies increase economic growth but decrease the number of firms, whereas patent breadth expands the number of firms but reduces economic growth. Therefore, R&D subsidy is perhaps a more suitable policy instrument than patent breadth for the purpose of stimulating economic growth.
    Keywords: economic growth; endogenous market structure; patents; R&D subsidies
    JEL: O30 O40
    Date: 2012–08
    URL: http://d.repec.org/n?u=RePEc:pra:mprapa:41083&r=ind
  4. By: Kozo Harimaya (Faculty of Business Administration, Ritsumeikan University); Takao Ohkawa (Faculty of Economics, Ritsumeikan University); Makoto Okamura (Faculty of Economics, Ritsumeikan University); Tetsuya Shinkai (School of Economics, Kwansei Gakuin University)
    Abstract: In this paper, we analyze the managerial behavior of firms by estimating a nested objective function consistent with the framework of Fershtman and Judd (1987). Using data for Japanese regional banks for FY 1980-FY 2009, we focus on oligopolistic behavior in the domestic loan market and examine the intensity with which managers attempt to maximize sales and profits. We find that sales-maximization explains the behavior of Japanese regional banks more adequately and appropriately than profit-maximization. In particular, yearly fluctuations of the degree of managerial objectives suggest that the effort to maximize sales has intensified after full-scale liberalization of interest rates.
    Keywords: firm objective, strategic delegation, managerial incentives, financial liberalization and banking
    JEL: L13 L21 G21
    Date: 2012–09
    URL: http://d.repec.org/n?u=RePEc:kgu:wpaper:94&r=ind

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