nep-ind New Economics Papers
on Industrial Organization
Issue of 2013‒01‒12
seven papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Information and Learning in Oligopoly: an Experiment By M. Bigoni; M. Fort
  2. Beyond price discrimination: welfare under differential pricing when costs also differ By Chen, Yongmin; Schwartz, Marius
  3. The role of brand characteristics in brand alliance engagement with different types of partners: An exploratory study By Samuylova, E. B.; Muravskii, D. V.; Smirnova, M. M.; Alkanova, O. N.
  4. Target Advertising and Market Transparency By Stühmeier, Torben
  5. Brand equity in modern marketing theory By Muravskii, D. V.; Smirnova, M. M.; Alkanova, O. N.
  6. Cross-Border M&A and Innovative Activity: Firm-Level Evidence By Stiebale, Joel
  7. Welfare Analysis of Regulating Mobile Termination Rates in the UK with an Application to the Orange/T-Mobile Merger By David Harbord; Steffen Hoernig

  1. By: M. Bigoni; M. Fort
    Abstract: This paper presents an experiment on learning in repeated games, which complements the analysis of players' actual choices with data on the information acquisition process they follow. Subjects play a repeated Cournot oligopoly, with limited a priori information. The econometrics hinges on a model built upon Experience Weighted Attraction learning, and the simultaneous analysis of data on the information gathered and on actions taken by the subjects. Results suggest that learning is a composite process, in which different components coexist. Adaptive learning emerges as the leading element, but when subjects look at the strategies individually adopted by their competitors they tend to imitate the most successful behavior, which makes markets more competitive. Reinforcement learning also plays a role, as subjects favor strategies that have yielded higher profits in the past.
    JEL: L13 C92 C72
    Date: 2013–01
  2. By: Chen, Yongmin; Schwartz, Marius
    Abstract: We extend the analysis of monopoly third-degree price discrimination to the empirically important case where marginal costs also differ between markets. Differential pricing then reallocates output to the lower-cost markets, hence welfare can increase even if total output does not, unlike under pure price discrimination. To induce output reallocation the firm varies its prices but---again, unlike under pure price discrimination---with no upward bias in the average price. Due to this price dispersion, differential pricing motivated solely by cost differences will increase consumer surplus (and total welfare) for a broad class of demand functions. We also provide sufficient conditions for beneficial differential pricing in the hybrid case where both demand elasticities and marginal costs differ.
    Keywords: price discrimination; differential pricing; price dispersion; add-on pricing
    JEL: D4 L1
    Date: 2012–12–23
  3. By: Samuylova, E. B.; Muravskii, D. V.; Smirnova, M. M.; Alkanova, O. N.
    Abstract: Although there is plenty of work, in which co-branding is studied from the point of view of the consumer, there is a lack of empirical studies from a firm (managerial) perspective, which is important for the comprehensive understanding of co-branding. The goal of this research is to gain a better understanding of what determines the choice of brand allies and whether particular brand characteristics effect that choice. Therefore, the relationship between focal brand characteristics and brand alliance engagement with different types of partners is explored using a sample of 62 Russian and international brands. As a result, the existence of the relationship be-tween focal brand characteristics and brand alliance engagement with dif-ferent types of partners is revealed, a model, describing the firm’s alliance behavior depending on focal brand characteristic is created and directions for further research and practical implications are presented.
    Keywords: brand alliances, co-branding, brand equity, Eco-systems,
    Date: 2012
  4. By: Stühmeier, Torben
    Abstract: This paper examines the effects of increased transparency over online news sources, e.g. due to news aggregators, on online news outlets and the advertising industry. The role of news aggregators is controversially discussed, where the discussion widely points on user side effect. The present paper widens the discussion on the advertising side and shows that aggregators can help to better target advertising messages to a more homogenous group of users and, in turn, may both benefit advertisers and news outlets. --
    JEL: L22 L82 L86
    Date: 2012
  5. By: Muravskii, D. V.; Smirnova, M. M.; Alkanova, O. N.
    Abstract: In this paper, the prevalent approaches towards defining and measuring brand equity are discussed and systemized. The resulting classification allows matching particular types of brand metrics with coherent approaches to defining brand equity, which contributes to the convenience of making and justifying the choice of brand equity measures.
    Keywords: brand equity, brand equity measurement, defining brand equity,
    Date: 2012
  6. By: Stiebale, Joel
    Abstract: This paper provides empirical evidence on the relationship between cross-border mergers and acquisitions (M&A) and innovation. For the empirical analysis a unique firm-level data set is constructed that combines balance sheet data and an M&A database with information on patent applications. Within three years after a cross-border M&A, patent applications filed by the merged entity increase by more than 30%. Splitting patent applications by the inventors country it is found that the positive association with post-merger patenting is mainly driven by patents invented in the countries of the acquirers headquarter and its previous subsidiaries. In contrast, there is on average a decrease in patent applications invented in the targets country of more than 60%. Accounting for endogeneity of international acquisitions by estimating dynamic count data models and applying instrumental variable techniques, the results indicate that part of this correlation stems from a causal effect. --
    JEL: D22 F23 G34
    Date: 2012
  7. By: David Harbord; Steffen Hoernig
    Abstract: We present a calibrated model of the UK mobile telephony market with four mobile networks; calls to and from the fixed network; network-based price discrimination; and call externalities. Our results show that reducing mobile termination rates broadly in line with the recent European Commission Recommendation to either "pure long-run incremental cost"; reciprocal termination charges with fixed networks; or "Bill & Keep" (i.e. zero termination rates), increases social welfare, consumer surplus and networks' profits. Depending on the strength of call externalities, social welfare may increase by as much as £ 990 million to £ 4.5 billion per year, with Bill & Keep leading to the highest increase in welfare. We also apply the model to estimate the welfare effects of the 2010 merger between Orange and T-Mobile under different scenarios concerning MTRs, and predict that consumer surplus decreases strongly.
    Keywords: telecommunications, regulation, mobile termination rates, network effects, welfare, calibration; telecommunications, regulation, mobile termination rates, network effects, welfare, calibration JEL codes: D43, L13, L51, L96
    Date: 2012

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