nep-ind New Economics Papers
on Industrial Organization
Issue of 2012‒10‒06
four papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Directed Search and the Bertrand Paradox By Athanasios Geromichalos
  2. Antidumping and Market Competition: Implications for Emerging Economies By Chad P. Bown; Rachel McCulloch
  3. Privatization in a mixed oligopoly: Productivity, market concentration, and the optimal degree of privatization By Shinjiro Miyazawa
  4. Trade-offs between environmental regulation and market competition: airlines, emission trading systems and entry deterrence By Cristina Barbot; Ofelia Betancor; M. Pilar Socorro; M. Fernanda Viecens

  1. By: Athanasios Geromichalos (Department of Economics, University of California Davis)
    Abstract: I study a directed search model of oligopolistic competition, extended to incorporate general capacity constraints, congestion effects, and pricing based on ex-post realized demand. I show that as long as any one of these ingredients is present, the Bertrand paradox will fail to hold. Hence, I argue that, despite the emphasis that has been placed by the literature on sellers’ capacity constraints as a resolution to the paradox, the existence of such constraints is only a subcase of a general class of environments where the paradox fails. More precisely, Bertrand’s paradox will not arise whenever the buyers’ expected utility from visiting a specific seller is decreasing in that seller’s realized demand.
    Keywords: Directed Search, Bertrand Paradox, Capacity Constraints, Congestion Effects, State-contingent Pricing
    JEL: C78 D43 L13
    Date: 2012–09–25
  2. By: Chad P. Bown (The World Bank); Rachel McCulloch (Department of Economics, Brandeis University)
    Abstract: While the original justification of the antidumping laws in the industrial economies was to protect domestic consumers against predation by foreign suppliers, by the early 1990s the laws and their use had evolved so much that the opposite concern arose. Rather than attacking anti-competitive behavior, dumping complaints by domestic firms were being used to facilitate collusion among suppliers and enforce cartel arrangements. This paper examines the predation and anti-competitiveness issues from the perspective of the “new users” of antidumping—the major emerging economies for which antidumping is now a major tool in the trade policy arsenal. We examine these concerns in light of important ways in which the world economy and international trading system have been changing since the early 1990s, including more firms and more countries participating in international trade, but also more extensive links among suppliers and consumers through multinational firm activity and vertical specialization.
    Keywords: Antidumping, Temporary trade barriers, Competition, Antitrust, WTO
    JEL: F13
    Date: 2012–08
  3. By: Shinjiro Miyazawa (Graduate School of Economics, Kobe University)
    Abstract: This paper investigates the optimal degree of privatization for a public firm in a homogeneous mixed oligopoly. I show that full privatization is optimal when a public firm has a severe productivity disadvantage or competes with many private firms. The optimal degree of partial privatization is increasing in the degree of productivity disadvantage and the number of private firms. I further show that partial privatization can be optimal for a public firm even when full privatization would completely remove any productivity disadvantages.
    Keywords: quantity-setting competition, partial privatization, mixed oligopoly
    JEL: L13 L32 L33
    Date: 2012–10
  4. By: Cristina Barbot; Ofelia Betancor; M. Pilar Socorro; M. Fernanda Viecens
    Abstract: Emission trading systems (ETS) are being applied worldwide and in different economic sectors as an environmental regulatory tool that induces reductions of CO2 emissions. In Europe such a system is in place since 2005 for energy intensive installations and, since 1st January 2012, for airlines with flights arriving and departing from Community airports. The efficiency of the system should consider not only how it allows reaching an environmental goal, but also it should take into account its implications for market competition. In this work we develop a theoretical model that analyses the European ETS’s main features as devised for airlines, focusing on its effects on potential competition and entry deterrence. Contrary to other economic activities under ETS, potential competition is usual in most airline markets. Our results indicate that the share of capped allowances allocated initially for free to air operators may be a key element in deterring or allowing entry into the market. This result may be in collision with the general European principle of promoting competition and may represent a step backwards in the construction of a single European air transport market.
    Date: 2012–09

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