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on Industrial Organization |
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Issue of 2013‒01‒07
ten papers chosen by |
| By: | Kalina Manova; Zhiwei Zhang |
| Abstract: | This paper proposes that quality differentiation is an important feature of the operations of multi-product firms. We develop a model in which manufacturers vary product quality across their product range by using inputs of different quality levels. Firms core competency is in varieties of superior quality that bring higher sales despite being more expensive. Using detailed customs data for China, we establish four new stylized facts consistent with this model. First, firms earn more bilateral and global revenues from their more expensive products. Second, exporters focus on their top expensive goods, drop cheaper articles and earn lower revenues in markets where they sell fewer varieties. Third, companies' sales are more skewed towards their core expensive goods in destinations where they offer less items. Finally, export prices are positively correlated with input prices across products within a firm. Our results have important implications for the aggregate and distributional effects of trade reforms and exchange rate movements. |
| JEL: | D22 F10 F12 F14 L10 L11 L15 |
| Date: | 2012–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:18637&r=ind |
| By: | Rosa-Branca Esteves (Universidade do Minho - NIPE) |
| Abstract: | This paper investigates the competitive and welfare effects of information accuracy improvements in markets where firms can price discriminate after observing a private and noisy signal about a consumer’s brand preference. It shows that firms charge more to customers they believe have a brand preference for them, and that this price has an inverted-U shaped relationship with the signal’s accuracy. In contrast, the price charged after a disloyal signal has been observed falls as the signal’s accuracy rises. While industry profit and overall welfare fall monotonically as price discrimination is based on increasingly more accurate information, the reverse happens to consumer surplus. |
| Keywords: | Competitive Price Discrimination, Imperfect Customer Recognition, Imperfect Information |
| JEL: | D43 D80 L13 L40 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:nip:nipewp:12/2012&r=ind |
| By: | Bouckaert, J.M.C.; Degryse, H.A.; Dijk, T. van (Tilburg University, Tilburg Law and Economics Center) |
| Abstract: | Abstract: We study the competitive and welfare consequences when only one firm must commit to uniform pricing while the competitor’s pricing policy is left unconstrained. The asymmetric no-discrimination constraint prohibits both behaviour-based price discrimination within the competitive segment and third-degree price discrimination across the monopolistic and competitive segments. We find that an asymmetric no-discrimination constraint only leads to higher profits for the unconstrained firm if the monopolistic segment is large enough. Therefore, a regulatory policy objective of encouraging entry is not served by an asymmetric no-discrimination constraint if the monopolistic segment is small. Only when the monopolistic segment is small and rivalry exists in the competitive segment does the asymmetric no-discrimination constraint enhance welfare. |
| Keywords: | Dominant firms;price discrimination;competition policy;regulation. |
| JEL: | D11 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:kubtil:2012004&r=ind |
| By: | Yukihiko Funaki (Waseda University); Harold Houba (VU University Amsterdam); Evgenia Motchenkova (VU University Amsterdam) |
| Abstract: | We consider price-fee competition in bilateral oligopolies with perfectly-divisible goods, non-expandable infrastructures, concentrated agents on both sides, and constant marginal costs. We define and characterize stable market outcomes. Buyers exclusively trade with the supplier with whom they achieve maximal bilateral joint welfare. Prices equal marginal costs. Threats to switch suppliers set maximal fees. These also arise from a negotiation model that extends price competition. Competition in both prices and fees necessarily emerges. It improves welfare compared to price competition, but consumer surpluses do not increase. The minimal infrastructure achieving maximal aggregate welfare differs from the one that protects buyers most. |
| Keywords: | Assignment Games; Infrastructure; Negotiations; Non-linear pricing; Market Power; Countervailing power |
| JEL: | C78 L10 L14 D43 R10 |
| Date: | 2012–12–14 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:uvatin:20120139&r=ind |
| By: | Filistrucchi, L.; Geradin, D.A.A.G.; Damme, E.E.C. van (Tilburg University, Tilburg Law and Economics Center) |
| Abstract: | Abstract: We review the burgeoning literature on two-sided markets focusing on the different definitions that have been proposed. In particular, we show that the well-known definition given by Evans is a particular case of the more general definition proposed by Rochet and Tirole. We then identify the crucial elements that make a market two-sided and, drawing from both theory and practice, derive suggestions for the identification of the two-sided nature of a market. Our suggestions are relevant not only for the analysis of traditional two-sided markets, such as newspapers and payment cards, but also for the analysis of many new markets, such as those for online social networks, online search engines and Internet news aggregators. |
| Keywords: | two-sided markets;platforms;network effects. |
| JEL: | L40 L50 K21 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:kubtil:2012008&r=ind |
| By: | Sadowska, M.; Willems, Bert (Tilburg University, Tilburg Law and Economics Center) |
| Abstract: | Abstract: In November 2011 Sweden abolished the uniform national electricity price and introduced separate price zones. This was the result of an antitrust settlement between the Commission and the Swedish network operator, which was accused of discriminating between domestic and export electricity transmission services and segmenting the internal market. Based on this case, we show how the Commission uses competition law enforcement to foster market integration in the energy sector. We find that, even though the Commission’s action under competition rules was contrived and lacked economic depth, the commitment package provides an economically sound, longterm solution to network access and congestion management in Sweden. Such a quick and far-reaching change of Swedish congestion management could not have been achieved by Swedish policymakers or enforcement of the EU sector-specific regulation. |
| Keywords: | competition policy;Article 102 TFEU;commitment decisions;European energy markets;transmission congestion;Swedish network operator. |
| JEL: | K21 K23 K K42 L43 L44 L94 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:kubtil:2012043&r=ind |
| By: | Zhou, J. (Tilburg University, Tilburg Law and Economics Center) |
| Abstract: | Abstract: Colluding firms often exchange private information and make transfers within the cartels based on the information. Estimating the impact of such collusive practices— known as the “lysine strategy profile (LSP)â€â€” on cartel duration is difficult because of endogeneity and omitted variable bias. I use firms’ linguistic differences as an instrumental variable for the LSP in 135 cartels discovered by the European Commission since 1980. The incidence of the LSP is not significantly related to cartel duration. After correction for selectivity in the decision to use the LSP, statistical tests are consistent with a theoretic prediction that the LSP increases cartel duration. Journal of Economic Literature |
| Keywords: | the lysine strategy profile;post-agreement information exchange;within-cartel transfers;monitoring;verification and promotion of compliance;cartel duration;endogenous covariates. |
| JEL: | D43 K21 K42 L13 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:kubtil:2012009&r=ind |
| By: | Nikita Roketskiy (New York University); Alessandro Lizzeri (New York University); Alessandro Gavazza (New York University) |
| Abstract: | We quantitatively investigate the allocative and welfare effects of secondary markets for cars. Gains from trade in these markets arise because of heterogeneity in the willingness to pay for higher-quality (i.e., newer) goods, but transaction costs are an impediment to instantaneous trade. We explore how the income distribution affects this heterogeneity---income is an important determinant of willingness to pay for quality. Calibration of the model matches several aggregate features of U.S. and French used-car markets well. Counterfactual analyses show that transaction costs have a large effect on volume of trade, allocations, and the primary market, but small effects on consumer surplus and welfare. |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed012:173&r=ind |
| By: | Hackl, Franz; Kummer, Michael E.; Winter-Ebmer, Rudolf; Zulehner, Christine |
| Abstract: | We investigate the effect of market structure on market performance in the market for consumer electronics. This research is novel, because we exploit product life cycle information to build an instrumental variable for the number of firms in a market, a variable which hitherto had to be treated as exogenous in comparable studies on seller-behavior in e-commerce. We combine data from Austria's largest online site for price comparisons with retail-data on whole sale prices provided by a major hardware producer for consumer electronics. We observe input prices of firms, and all their moves in the entry and the pricing game. Using this information for 80 digital cameras, we generate instrumental variables based on the shops' entry decisions in the past. We find that instrumenting is particularly important for estimating the effect of competition on the markup of the price-leader. -- |
| Keywords: | Retailing,Product Life Cycle,Market Structure,Market Performance,Markup,Price Dispersion |
| JEL: | L11 L13 L81 D43 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:11084r&r=ind |
| By: | Cremers, Katrin; Schliessler, Paula |
| Abstract: | This paper looks at the decision to settle patent litigation in Germany from a new angle by focusing on detailed data on within-trial actions and motivations by plain-tiff, defendant and the courts. Using a new dataset covering about 80% of all patent litigation cases in Germany between 2000 and 2008 we estimate the likelihood of within-trial settlement. We find that the within-trial settlement decision is to some degree driven by the proceedings that change the pre-trial setting of the negotiations in terms of information and stakes and make previously refused settlement a new option. Additionally, firm-specific stakes as measured by the relation of the involved parties to the disputed patent as well as firm-specific strategies are found to affect the general willingness to settle after the filing of a court case. The results suggest that pre-trial failure of settlement negotiations can to some extent be offset by within-trial settlement through efforts made by court and involved parties, but that the disposition to settle is to a larger degree determined by firm-specific stakes and strategies in the case. -- |
| Keywords: | Patent,Patent Litigation,Settlement |
| JEL: | O34 K41 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:12084&r=ind |