nep-ind New Economics Papers
on Industrial Organization
Issue of 2014‒01‒17
seven papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Second Degree Price Discrimination in a Market for Credence Goods By Dulleck, Uwe; Kerschbamer, Rudolf; Konovalov, Alexander
  2. A Kreps-Scheinkman állítás érvényessége lineáris keresletű vegyes duopóliumok esetén By Bakó, Barna; Tasnádi, Attila
  3. Explicit Collusion under Antitrust Enforcement By Igor Mouraviev
  4. Hub and spoke collusion by embargo By Patrick VAN CAYSEELE; Simon MIEGIELSEN
  5. A Note on Networks of Collaboration in Multi-market Oligopolies By Pascal Billand; Christophe Bravard; Subhadip Chakrabarti; Sudipta Sarangi
  6. Competition and Cooperation in Network Games By Konovalov, Alexander
  7. Determinants of Investment under Incentive Regulation: The Case of Norwegian Electricity Distribution Networks By R. Poudineh; T. Jamasb

  1. By: Dulleck, Uwe (QUT School of Economics and Finance); Kerschbamer, Rudolf (Dept of Economics, University of Innsbruck and CEPR); Konovalov, Alexander (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: This article studies second-degree price-discrimination in markets for credence goods. Such markets are affected by asymmetric informationbecause expert sellers are better informed than their customers about the quality that yields the highest surplus from trade. We show that discrimination regards the amount of advice offered to customers and that it leads to a different equilibrium distortion depending on the main source of heterogeneity among consumers. If consumers differ mainly in the expected cost needed to generate consumer surplus, the inefficiency occurring at the bottom of the type distribution involves overprovision of quality. By contrast, if consumers differ in the surplus generated whenever the consumer’s needs are met, the inefficiency involves underprovision of quality.
    Keywords: Price Discrimination; Credence Goods; Experts; Discounters; Distribution Channels
    JEL: D40 D82 L15
    Date: 2014–01
  2. By: Bakó, Barna; Tasnádi, Attila
    Abstract: In this paper we extend Kreps and Scheinkam's (1983) results to mixed-duopolies with linear demands and constant unit costs. We show that quantity precommitment and Bertrand competition yield to Cournot outcomes not only in the case of private firms but also when a public firm is involved.
    Keywords: pice-setting, Kreps and Scheinkman's result, Cournot, Bertrand-Edgeworth
    JEL: D43 L13
    Date: 2014–01–06
  3. By: Igor Mouraviev (Center for Mathematical Economics, Bielefeld University)
    Abstract: The article seeks to fill the gap between tacit and explicit collusion in a setting where firms observe only their own output levels and a common price, which includes a stochastic component. Without communication, firms fail to discriminate between random shocks and marginal deviations, which constrains the scope for collusion. By eliminating uncertainty about what has happened, communication facilitates detection of deviations but reduces collusive profi?ts due to the risk of exposure to legal sanctions. With the optimal collusive strategy, firms communicate only if the market price falls somewhat below the trigger price. Moreover, they tend to communicate more often as they become less patient, a cartel grows in size, or demand uncertainty rises.
    Keywords: Collusion, Communication, Imperfect Monitoring, Frequency of Meetings
    JEL: D82 L41
    Date: 2013–07
    Abstract: A common supplier (the hub) could try to enforce a collusive outcome between his buyers (the spokes) if they are unable to sustain such an agreement among themselves. We derive necessary and sufficient conditions under which the hub is willing to assume the policing role in a cartel.
    Date: 2013–12
  5. By: Pascal Billand (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - École Normale Supérieure (ENS) - Lyon - PRES Université de Lyon); Christophe Bravard (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - École Normale Supérieure (ENS) - Lyon - PRES Université de Lyon); Subhadip Chakrabarti (Finance and economics research group. School of management. Queen's University. Belfast - Queen's University); Sudipta Sarangi (Department of Economics, Louisiana State University - Department of Economics, Louisiana State University)
    Abstract: In this note, we extend the Goyal and Joshi's model of network of collaboration in oligopoly to multi-market situations. We examine the incentive of firms to form links and the architectures of the resulting equilibrium networks in this setting. We also present some results on efficient networks.
    Keywords: R&D Collaborations; Network Formation; Multi-market Oligopolies
    Date: 2014–01–07
  6. By: Konovalov, Alexander (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: We consider games where agents are embedded in a network of bilateral relationships and have multivariate strategy sets. Some components of their strategies correspond to individual activities, while the other strategic components are related to joint activities and interaction with the partners. We introduce several new equilibrium concepts that account for the possibility that players act competitively in individual components of their strategy but cooperate on the components corresponding to joint activity or collaboration. We apply these concepts to the R&D collaboration networks model where firms engage in bilateral joint projects with other firms. The analysis shows that investments are highest under bilateral cooperation and lowest under full cooperation because the spillovers associated to bilateral collaboration are bound to the partnership. This leads to welfare being maximized under bilateral collaboration when there are a few firms in the market and under non-cooperation in markets with many firms; full cooperation is never social welfare maximizing. Investigating the issue of endogenous network formation, we find that bilateral cooperation increases (lowers) the profits of more (less) connected firms. However, this does not always lead to a denser stable network of R&D collaboration under bilateral cooperation.
    Keywords: network games; bilateral cooperation; hybrid equilibrium; R&D collaboration networks
    JEL: L13 L14 L22 O31 O32
    Date: 2014–01
  7. By: R. Poudineh; T. Jamasb
    Abstract: Investment in electricity networks, as regulated natural monopolies, is among the highest regulatory and energy policy priorities. Given the large scale of required investments in the coming years, impelled by the need for decarbonising the electricity sector, identifying investment drivers of power networks facilitates effective regulatory treatment of investment under incentive regulation. This study analyses the determinants of investment in Norwegian electricity distribution networks using a panel dataset of 126 companies from 2004 to 2010. A Bayesian Model Averaging approach is used to provide a robust statistical inference by taking into account the uncertainties around model selection and estimation. The results show that five factors drive nearly all network investments: depreciation, number of network stations, energy density, cost of energy not supplied, and number of leisure homes. Among these, depreciation plays the most important role regardless of the choice of prior. The study finds no evidence of impact on investments by weather and geographic factors which might be due to small variations of these factors across the country. Finally, distributed generations show no effect on investments reflecting the fact that Norwegian distribution networks are already adapted to connect many dispersed small scale hydroelectric resources.
    Keywords: distribution network, investment, regulation, Bayesian model averaging
    JEL: D21 L43 L51 L52 C11
    Date: 2013–07–20

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