nep-ind New Economics Papers
on Industrial Organization
Issue of 2013‒12‒15
five papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Monopoly price discrimination with constant elasticity demand By Aguirre Pérez, Ignacio; Cowan, Simon George
  2. Free Entry and Social Efficiency under Unknown Demand Parameters By Batlome Janjgava
  3. Do MSRPs Decrease Prices? By Babur De los Santos; In Kyung Kim; Dmitry Lubensky
  4. The Regulation of Entry By Simeon Djankov; Rafael LaPorta; Florencio Lopez-de-Silanes; Andrei Shleifer
  5. Economic analysis of the European cement industry By Marcel Boyer; Jean-Pierre Ponssard

  1. By: Aguirre Pérez, Ignacio; Cowan, Simon George
    Abstract: This paper presents new results on the welfare e¤ects of third-degree price discrimination under constant elasticity demand. We show that when both the share of the strong market under uniform pricing and the elasticity di¤erence between markets are high enough,then price discrimination not only can increase social welfare but also consumer surplus.
    JEL: L12 L13 D42
    Date: 2013–11
  2. By: Batlome Janjgava
    Abstract: In the paper, I examine free entry in homogeneous product markets and its social efficiency. Previous research on free entry in homogeneous product markets has shown that under Cournot oligopoly with fixed setup costs the free entry equilibrium always delivers excessive entry. In contrast, I demonstrate in this paper that free entry along with excessive entry might also lead to a socially insufficient number of firms when a demand parameter uncertainty is considered. My findings support the validity of the traditional wisdom in industrial organization that free entry is desirable for social efficiency and call for revision of restrictive entry regulation practices which been based on previous research findings.
    Keywords: free entry; welfare; collusion; beliefs; learning; self-confirming equilibrium; escape dynamics;
    JEL: D60 D83 D43 L13 L40 L51
    Date: 2013–10
  3. By: Babur De los Santos (Department of Business Economics and Public Policy, Indiana University Kelley School of Business); In Kyung Kim (Department of Economics, Indiana University); Dmitry Lubensky (Department of Business Economics and Public Policy, Indiana University Kelley School of Business)
    Abstract: The nature of manufacturer’s suggested retail prices (MSRP) and whether their effect is pro or anticompetitive is not well understood. Opposing theories suggest that manufacturers may attempt to reduce retail prices to deter double marginalization or increase retail prices to foster upstream or downstream collusion. We exploit a policy experiment in South Korea in which MSRPs were banned and then reinstated one year later to estimate their impact on prices. The ban increased prices by 2.3 percent and the reinstatement decreased prices by 2.6 percent, demonstrating the pro-competitive effect of MSRPs. Based on a lack of evidence that recommendations act as binding price ceilings, we offer an alternative explanation in which MSRPs provide information to searching consumers. We demonstrate that the removal of recommendations can reduce search and increase prices.
    Keywords: recommended retail price, suggested retail price, list price, non-binding price, search with uncertainty, vertical restraints, resale price maintenance
    JEL: L11 L40 L81
    Date: 2013–12
  4. By: Simeon Djankov; Rafael LaPorta; Florencio Lopez-de-Silanes; Andrei Shleifer
    Abstract: We present new data on the regulation of entry of start-up firms in 85 countries. The data cover the number of procedures, official time, and official cost that a start-up must bear before it can operate legally. The official costs of entry are extremely high in most countries. Countries with heavier regulation of entry have higher corruption and larger unofficial economies, but not better quality of public or private goods. Countries with more democratic and limited governments have lighter regulation of entry. The evidence is inconsistent with public interest theories of regulation, but supports the public choice view that entry regulation benefits politicians and bureaucrats.
  5. By: Marcel Boyer (UdeM - Université de Montréal - Université de Montréal, CIRANO - Centre interuniversitaire de recherche en analyse des organisations - Université du Québec à Montréal); Jean-Pierre Ponssard (Department of Economics, Ecole Polytechnique - CNRS : UMR7176 - Polytechnique - X)
    Abstract: We present a methodology to assess the profitability of a capital intensive industry over a business cycle and to make projections of profitability for different investment strategies under various hypothetical scenarios for environmental and competition policies. The methodology is applied to the European cement industry over the period 2004‐2012 (Part I) and over the next 10/15 years (Part II) using publicly available data, interviews of financial analysts and industry experts.
    Keywords: return on assets, capital intensive industry, business cycle, European cement industry.
    Date: 2013–12–09

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