nep-ind New Economics Papers
on Industrial Organization
Issue of 2012‒12‒06
nine papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Measuring Industry Agglomeration and Identifying the Driving Forces By Howard, Emma; Newman, Carol; Tarp, Finn
  2. Market power, efficiencies, and entry: Evidence from an airline merger By Hüschelrath, Kai; Müller, Kathrin
  3. Hotelling Models with Price-Sensitive Demand and Asymmetric Transport Costs: An Application to Public Transport Scheduling By Adriaan Hendrik van der Weijde; Erik T. Verhoef; Vincent A. C. van den Berg
  4. Do buyer groups facilitate collusion? By Normann, Hans-Theo; Rösch, Jürgen; Schultz, Luis Manuel
  5. Cartel and Monopoly Policy By Hugues Bouthinon-Dumas; Frédéric Marty
  6. Cartel enforcement in the European Union: Determinants of the duration of investigations By Hüschelrath, Kai; Laitenberger, Ulrich; Smuda, Florian
  7. The value of bluer skies: How much do consumers gain from entry by JetBlue Airways in long-haul US Airline Markets? By Hüschelrath, Kai; Müller, Kathrin
  8. Monopoly R&D and Compatibility Decisions in Network Industries By Jong-Hee Hahn; Jin-Hyuk Kim
  9. Who's afraid of big bad banks? Bank competition, SME, and industry growth By Inklaar, Robert; Koetter, Michael; Noth, Felix

  1. By: Howard, Emma; Newman, Carol; Tarp, Finn
    Abstract: Understanding industry agglomeration and its driving forces is critical for the formulation of industrial policy in developing countries. Crucial to this process is the definition and measurement of agglomeration. We propose a new measure and examine what
    Keywords: industry agglomeration, technology spillovers, labour market pooling, Vietnam
    Date: 2012
    URL: http://d.repec.org/n?u=RePEc:unu:wpaper:wp2012-84&r=ind
  2. By: Hüschelrath, Kai; Müller, Kathrin
    Abstract: We investigate the competitive effects of the merger between Delta Air Lines and Northwest Airlines (2009) in the domestic U.S. airline industry. Applying fixed effects regression models we find that the transaction led to short term price increases of about 11 percent on overlapping routes and about 10 percent on routes which experienced a merger-induced switch of the operating carrier. Over a longer period, however, our analysis reveals that both merger efficiencies and post-merger entry by competitors initiated a downward trend in prices leaving consumers with a small net price increase of about 3 percent on the affected routes. --
    Keywords: airline industry,merger,market power,efficiencies,entry-inducing effects
    JEL: L40 L93
    Date: 2012
    URL: http://d.repec.org/n?u=RePEc:zbw:zewdip:12070&r=ind
  3. By: Adriaan Hendrik van der Weijde (VU University Amsterdam); Erik T. Verhoef (VU University Amsterdam); Vincent A. C. van den Berg (VU University Amsterdam)
    Abstract: We formulate a horizontal differentiation model with price-sensitive demand and asymmetric transport costs, in the context of transport scheduling. Two competitors choose fares and departure times in a fixed time interval. Consumers are distributed uniformly along the interval; their location indicates their desired departure time. In a standard Hotelling model, locations are chosen before prices. In our context, the opposite order is also conceivable, but we show that it does not result in a Nash equilibrium; the same is true for a game in both variables are chosen simultaneously. We also discuss Stackelberg game structures and second-best regulation. We conclude that the addition of price-sensitive demand results in equilibria in the traditional Hotelling model with price setting; there, services are scheduled closer together than optimal. We also show that it is possible to include asymmetric schedule delay functions. Our results show that departure times can be strategic instruments. Optimal regulatory strategies depend on the value of schedule delay, and on whether the regulator can commit.
    Keywords: horizontal differentiation; scheduling; transport
    JEL: L11 L51 L91 R40
    Date: 2012–11–08
    URL: http://d.repec.org/n?u=RePEc:dgr:uvatin:20120119&r=ind
  4. By: Normann, Hans-Theo; Rösch, Jürgen; Schultz, Luis Manuel
    Abstract: We explore whether buyer groups, in which firms legally purchase inputs jointly, facilitate collusion in the product market. In a repeated game, abandoning the buyer group altogether or excluding single firms from them constitute more severe credible threats, hence, in theory buyer groups facilitate collusion. We run several experimental treatments in a three-firm Cournot framework to test these predictions, and we also explore the impact communication has on buyer groups. The experimental results show that buyer groups lead to lower outputs when groups can exclude single firms. Communication is identified as a main factor causing collusive product markets. --
    Keywords: buyer groups,cartels,collusion,communication,experiments,repeated games
    JEL: C7 C9 L4 L41
    Date: 2012
    URL: http://d.repec.org/n?u=RePEc:zbw:dicedp:74&r=ind
  5. By: Hugues Bouthinon-Dumas (ESSEC Business School - ESSEC Business School); Frédéric Marty (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - CNRS : UMR7321 - Université Nice Sophia Antipolis (UNS))
    Abstract: Firm strategies are deeply affected by the legal framework which rules the relationships between the economic agents regarding monopoly and cartel policy. Undertakings have to manoeuvre through a complex universe. Not only must they master the rules of the economic game of competition but also the legal rules of competition law which are characteristic of competition and add up to the aforementioned. Monopoly and cartel policy presents itself as an important limitation to the freedom of action of firms and as a source of risks because some of their behaviours or choices are likely to be challenged, even punished by the competition authorities for the sake of the market preservation. Yet, firms can be strongly tempted to be harmful to competition insomuch as cartel and monopolies or taking advantage of a dominant position are means generally efficient for reaching the goals companies are aiming at in a capitalistic economy: the increase of profits thanks to the growth of margins and the "quiet life" thanks to a better control of their environment. First we will present the bases of monopoly and cartel policy (1) then the rules that result from it (2) before taking into account the competition authority decisional practices and their consequences on the firms' strategies (3).
    Keywords: Politique de concurrence, abus de position dominante, cartel, insécurité juridique, approche par les effets
    Date: 2012–09–01
    URL: http://d.repec.org/n?u=RePEc:hal:journl:halshs-00727681&r=ind
  6. By: Hüschelrath, Kai; Laitenberger, Ulrich; Smuda, Florian
    Abstract: We provide an empirical assessment of EC cartel enforcement decisions between 2000 and 2011. Following an initial characterisation of our dataset, we especially investigate the determinants of the duration of cartel investigations. We are able to identify several key drivers of investigation length such as the Commission's speed of cartel detection, the type of cartel agreement, the affected industry or the existence of a chief witness. --
    Keywords: Competition Policy,Empirical Analysis,Cartels,European Union,Fines,Leniency,Duration of Investigation
    Date: 2012
    URL: http://d.repec.org/n?u=RePEc:zbw:zewdip:12071&r=ind
  7. By: Hüschelrath, Kai; Müller, Kathrin
    Abstract: The paper estimates the effects of entry by low-cost carrier JetBlue Airways in long-haul domestic U.S. airline markets. For the period from 2000 to 2009, we find that non-stop fares were on average about 21 percent lower post-entry; however, the magnitude of the price effect depends on the pre-entry market structure. While entry into monopoly markets triggered an average price decrease of about 25 percent, the respective average price drop for entries into oligopoly markets lied at about 15 percent. Based on additional estimates of the price and income elasticities for long-haul domestic U.S. flights, we conclude that JetBlue's long-haul entries alone led to an increase in consumer welfare of about USD 661 million. --
    Keywords: airline industry,entry,low-cost carrier,consumer welfare effects
    JEL: L40 L93
    Date: 2012
    URL: http://d.repec.org/n?u=RePEc:zbw:zewdip:12072&r=ind
  8. By: Jong-Hee Hahn (School of Economics, Yonsei University); Jin-Hyuk Kim
    Abstract: In network industries, we often observe frequent upgrades of existing products as well as delayed introductions of new products. In order to explain these contrasting phenomena, this paper examines a durable-good monopolist's incentive for R&D in- vestment in new product development in a market with network effects. We show that if the network effect is strong the monopolist underinvests in R&D compared to the commitment level, whereas overinvestment occurs when the network effect is weak. The monopolist also chooses full intergenerational compatibility between products. We then extend the analysis to the cases of potential entry and successive innovations, and examine how the results change in these extensions.
    Keywords: Planned Obsolescence, Network Effects, Vaporware
    JEL: L12 L15 M21
    Date: 2012–10
    URL: http://d.repec.org/n?u=RePEc:yon:wpaper:rwp-201243&r=ind
  9. By: Inklaar, Robert; Koetter, Michael; Noth, Felix
    Abstract: We test how bank market power influences technical change and resource allocation of informationally opaque firms. We use a dataset with approximately 700,000 firm-year observations of German small and medium-sized enterprises (SME) to identify the effect of bank market power using the dependence on external finance per industry and the regional demarcation of the German banking market. Market power generally spurs aggregate SME growth. Banks need to realize sufficient margins to generate useful private information. Bank market power spurs both technical change and reallocation of resources, but it reduces SME growth in industries that depend heavily on external finance. --
    Keywords: growth decomposition,reallocation,banking,market power
    JEL: E22 G21 O16 O41
    Date: 2012
    URL: http://d.repec.org/n?u=RePEc:zbw:fsfmwp:197&r=ind

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