nep-ind New Economics Papers
on Industrial Organization
Issue of 2012‒12‒22
five papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Price Response, Asymmetric Information, and Competition By Joshua Sherman; Avi Weiss
  2. On the Optimal Number of Firms in the Commons: Cournot vs Bertrand By D. Dragone; L. Lambertini; A. Palestini; A. Tampieri
  3. Optimal Access Regulation with Downstream Competition By Flavio Menezes; John Quiggin; Tina Kao
  4. Collusion through joint R&D: An empirical assessment By Duso, Tomaso; Röller, Lars-Hendrik; Seldeslachts, Jo
  5. Who is Exposed to Gas Prices? How Gasoline Prices Affect Automobile Manufacturers and Dealerships By Meghan R. Busse; Christopher R. Knittel; Florian Zettelmeyer

  1. By: Joshua Sherman; Avi Weiss (Bar-Ilan University)
    Abstract: We compare predictions from a theoretical model based on the structure of the main outdoor retail market in Jerusalem with the results of an empirical analysis of price response to changes in cost. We find that firms without adjacent competition exhibit both upward and downward price rigidity, an outcome we ascribe to asymmetric information between the consumer and the firm. Given that previous studies have focused on downward price rigidities of firms with market power, our findings highlight the importance of accounting for transitory information asymmetries between the consumer and the firm when studying price rigidity.
    Keywords: price response, price rigidity, information asymmetry, market power
    JEL: L11 L13
    Date: 2012–10
  2. By: D. Dragone; L. Lambertini; A. Palestini; A. Tampieri
    Abstract: We revisit the debate on the optimal number of firms in the commons in a differential oligopoly game in which firms are either quantity- or price-setting agents. Production exploits a natural resource and involves a negative externality. We calculate the number of firms maximising industry profits, finding that it is larger in the Cournot case. While industry structure is always inefficient under Bertrand behaviour, it may or may not be so under Cournot behaviour, depending on parameter values. The comparison of private industry optima reveals that the Cournot steady state welfare level exceeds the corresponding Bertrand magnitude if the weight of the stock of pollution is large enough.
    JEL: C73 L13 Q20 Q51
    Date: 2012–12
  3. By: Flavio Menezes (School of Economics, The University of Queensland); John Quiggin (School of Economics, The University of Queensland); Tina Kao
    Abstract: We analyze the setting of access prices for a bottleneck facility where the facility owner also competes in the deregulated downstream market. We consider a continuum of market structures from Cournot to Bertrand. These market structures are fully characterized by a single parameter representing the intensity of competition. We first show how the efficient component pricing rule (ECPR) should be modified as the downstream competitive intensity changes. We then analyse the optimal access price where a regulator trades off production efficiency and pro-competitive effects to maximize total surplus.
    Date: 2012–12–03
  4. By: Duso, Tomaso; Röller, Lars-Hendrik; Seldeslachts, Jo
    Abstract: This paper tests whether upstream R&D cooperation leads to downstream collusion. We consider an oligopolistic setting where firms enter in research joint ventures (RJVs) to lower production costs or coordinate on collusion in the product market. We show that a sufficient condition for identifying collusive behavior is a decline in the market share of RJV-participating firms, which is also necessary and sufficient for a decrease in consumer welfare. Using information from the U.S. National Cooperation Research Act, we estimate a market share equation correcting for the endogeneity of RJV participation and R&D expenditures. We find robust evidence that large networks between direct competitors - created through firms being members in several RJVs at the same time - are conducive to collusive outcomes in the product market which reduce consumer welfare. By contrast, RJVs among non-competitors are efficiency enhancing. --
    Keywords: Research Joint Ventures,Innovation,Collusion,NCRA
    JEL: K21 L24 L44 D22 O32
    Date: 2012
  5. By: Meghan R. Busse; Christopher R. Knittel; Florian Zettelmeyer
    Abstract: Many consumers are keenly aware of gasoline prices, and consumer responses to gasoline prices have been well studied. In this paper, by contrast, we investigate how gasoline prices affect the automobile industry: manufacturers and dealerships. We estimate how changes in gasoline prices affect equilibrium prices and sales of both new and used vehicles of different fuel economies. We investigate the implications of these effects for individual auto manufacturers, taking into account differences in manufacturers' vehicle portfolios. We also investigate effects on manufacturers' affiliated dealership networks, including effects implied by the changes in used vehicle market outcomes.
    JEL: L1 L2 L9 Q4
    Date: 2012–12

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