nep-ind New Economics Papers
on Industrial Organization
Issue of 2012‒11‒11
four papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Vertical Syndication-Proof Competitive Prices in Multilateral Markets By O. Tejada and M. Alvarez-Mozos
  2. Collusive market sharing with spatial competition By Kai Andree; Mike Schwan
  3. Monopolistic Competition: CES Redux? By Paolo Bertoletti; Paolo Epifani
  4. First mover advantages in mobile telecommunications: Evidence from OECD countries By Muck, Johannes; Heimeshoff, Ulrich

  1. By: O. Tejada and M. Alvarez-Mozos (Universitat de Barcelona)
    Abstract: A multi-sided Bohm-Bawerk assignment game (Tejada, to appear) is a model for a multilateral market with a finite number of perfectly complementary indivisible com- modities owned by different sellers, and inflexible demand and support functions. We show that for each such market game there is a unique vector of competitive prices for the commodities that is vertical syndication-proof, in the sense that, at those prices, syndication of sellers each owning a different commodity is neither beneficial nor detri- mental for the buyers. Since, moreover, the benefits obtained by the agents at those prices correspond to the nucleolus of the market game, we provide a syndication-based foundation for the nucleolus as an appropriate solution concept for market games. For different solution concepts a syndicate can be disadvantageous and there is no escape to Aummans paradox (Aumann, 1973). We further show that vertical syndication- proofness and horizontal syndication-proofness in which sellers of the same commod- ity collude are incompatible requirements under some mild assumptions. Our results build on a self-interesting link between multi-sided Bohm-Bawerk as- signment games and bankruptcy games (ONeill, 1982). We identify a particular subset of Bohm-Bawerk assignment games and we show that it is isomorphic to the whole class of bankruptcy games. This isomorphism enables us to show the uniqueness of the vec- tor of vertical syndication-proof prices for the whole class of Bohm-Bawerk assignment market using well-known results of bankruptcy problems.
    Keywords: bankruptcy problem, assignment problem, cooperative game, market, syndicate
    JEL: C71 D43
    Date: 2012
    URL: http://d.repec.org/n?u=RePEc:bar:bedcje:2012283&r=ind
  2. By: Kai Andree; Mike Schwan
    Abstract: This paper develops a spatial model to analyze the stability of a market sharing agreement between two firms. We find that the stability of the cartel depends on the relative market size of each firm. Collusion is not attractive for firms with a small home market, but the incentive for collusion increases when the firm’s home market is getting larger relative to the home market of the competitor. The highest stability of a cartel and additionally the highest social welfare is found when regions are symmetric. Further we can show that a monetary transfer can stabilize the market sharing agreement.
    Date: 2012–10
    URL: http://d.repec.org/n?u=RePEc:pot:vwldis:105&r=ind
  3. By: Paolo Bertoletti (Department of Economics and Management, University of Pavia); Paolo Epifani (Department of Economics, IGIER and Baffi Centre, Università Bocconi)
    Abstract: We investigate competitive, selection and reallocation effects in monopolistic competition trade models. We argue that departing from CES preferences in an otherwise standard Dixit-Stiglitz setup with additive preferences seems to involve implausible assumptions about consumer behavior and inconsistent competitive effects. In the presence of trade costs, selection effects à la Melitz (2003) are instead generally robust to the assumptions about preferences. However, they are unambiguously associated to aggregate productivity gains only when preferences are CES. We also study competitive effects in alternative monopolistic competition settings featuring non-additive preferences, strategic interaction and consumers’ preference for an ideal variety. We find that none of the these setups delivers a compelling pro-competitive mechanism. Overall, our results suggest that in monopolistic competition, consistent with CES preferences, larger markets select more aggressively on productivity rather than forcing firms to move down their average cost curves.
    Keywords: Monopolistic Competition; CES Preferences; International Trade; Competitive, Selection and Reallocation Effects.
    JEL: F1
    Date: 2012–10
    URL: http://d.repec.org/n?u=RePEc:pav:demwpp:demwp0004&r=ind
  4. By: Muck, Johannes; Heimeshoff, Ulrich
    Abstract: We explore the existence of first mover advantages in mobile telecommunications markets. Building on a data set comprising monthly penetration rates, market concentration, number of active operators, and market shares of 90 followers from 33 OECD countries, we estimate a dynamic growth model. Our analysis delivers five key results. Regarding a follower's longrun market share, we observe that (1) the penetration rate at the time of market entry exerts an inverted u-shaped effect, suggesting the existence of an optimal time for issuing additional licenses for mobile network operation; (2) the concentration rate at market entry exerts a positive effect, implying that it is easier for followers to enter a more concentrated market; (3) both the number of active operators at market entry and the number of currently active operators have a negative impact. Furthermore, we find that a follower's rate of convergence to the long-run market share is (4) negatively influenced by the current market concentration and number of active operators; (5) negatively affected by changes in the penetration rate since market entry, which strongly indicates the presence of substantial first mover advantages for pioneering network operators. --
    Keywords: First mover advantages,Asymmetric regulation,Market share convergence,Mobile telecommunications
    JEL: L96 K23 O33
    Date: 2012
    URL: http://d.repec.org/n?u=RePEc:zbw:dicedp:71&r=ind

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