nep-ind New Economics Papers
on Industrial Organization
Issue of 2014‒03‒01
six papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. A Note on Merger and Acquisition Evaluation By Benjamin Furlan; Harald Oberhofer; Hannes Winner
  2. Process Innovation and Product Quality Improvement in a Dynamic Monopoly By L. Lambertini; R. Orsini
  3. An analysis of brand relationship with the perceptive of customer based brand equity pyramid By Umesh Ramchandra Raut; Pedro Quelhas Brito
  4. The Structure and Evolution of Buyer-Supplier Networks By Mizuno, Takayuki; Souma, Wataru; Watanabe, Tsutomu
  5. Second Opinions in Markets for Expert Services: Experimental Evidence By Wanda Mimra; Alexander Rasch; Christian Waibel
  6. Real-time versus Day-ahead Market Power in a Hydro-based Electricity Market By Mauritzen, Johannes; Tangerås, Thomas

  1. By: Benjamin Furlan; Harald Oberhofer; Hannes Winner (WIFO)
    Abstract: This note proposes the continuous treatment approach as a valuable alternative to propensity score matching for evaluating economic effects of mergers and acquisitions (M&As). This framework allows to consider the variation in treatment intensities explicitly, and it does not call for the definition of cut-off values in traded ownership shares in order to construct a binary treatment indicator. We demonstrate the usefulness of this approach using data from European M&As and by relying on the example of post-M&A employment effects.
    Keywords: Merger and acquisition evaluation, continuous treatment models, generalised propensity score matching, employment effects
    Date: 2014–02–18
  2. By: L. Lambertini; R. Orsini
    Abstract: We investigate the optimal R&D portfolio of a single-product monopolist investing in cost-reducing activities accompanied by efforts improving the quality of its product. There emerges that the firm’s relative incentives along the two directions are conditional upon market affluency, measured by consumers’ willingness to pay for quality, and R&D efforts are complements at equilibrium. We also perform the stability analysis, showing that a stable branch exists along the quality dimension only.
    JEL: L12 O31
    Date: 2014–02
  3. By: Umesh Ramchandra Raut (Faculty of Economics (FEP), University of Porto, Portugal); Pedro Quelhas Brito (Faculty of Economics (FEP), University of Porto, Portugal)
    Abstract: The construct of a brand relationship is quite complex. Numerous types of brand relationships can be identify and each of them is associated with different emotions and norms. Works on relationship marketing implies that developing relationship between consumers and their preferred brand is important. The presence of strong brand in the market is the source of various financial rewards to organization and due to this, creation strong brand is top priority for many organizations. Brand resonance is the term which focuses on the various stages of consumer brand relationship through which consumer connected with brand. Our move toward a science of consumer-brand relationships presents many challenges, many doubts that something so idiosyncratic can be brought to the level of generalizability that science requires. Literature of branding verify that the brand resonance is not depends on one thing only; it shows the impact of many brand related factors. Marketers must know the nature and mode of the consumer’s relationship with their brand. This study presents the brief discussion on brand resonance with help of literature of branding.
    Keywords: Brand, brand resonance, brand relationship, brand attachment, brand loyalty
    JEL: M31
    Date: 2014–02
  4. By: Mizuno, Takayuki; Souma, Wataru; Watanabe, Tsutomu
    Abstract: In this paper, we investigate the structure and evolution of customer-supplier networks in Japan using a unique dataset that contains information on customer and supplier linkages for more than 500,000 incorporated non-financial firms for the five years from 2008 to 2012. We find, first, that the number of customer links is unequal across firms; the customer link distribution has a power-law tail with an exponent of unity (i.e., it follows Zipf’s law). We interpret this as implying that competition among firms to acquire new customers yields winners with a large number of customers, as well as losers with fewer customers. We also show that the shortest path length for any pair of firms is, on average, 4.3 links. Second, we find that link switching is relatively rare. Our estimates indicate that the survival rate per year for customer links is 92 percent and for supplier links 93 percent. Third and finally, we find that firm growth rates tend to be more highly correlated the closer two firms are to each other in a customer-supplier network (i.e., the smaller is the shortest path length for the two firms). This suggests that a non-negligible portion of fluctuations in firm growth stems from the propagation of microeconomic shocks - shocks affecting only a particular firm - through customer-supplier chains.
    Keywords: buyer-supplier networks, supply chains, input-output analysis, power-law distributions, firm dynamics
    JEL: L11 L14 C67
    Date: 2014–01
  5. By: Wanda Mimra (ETH Zurich, Switzerland); Alexander Rasch (Duesseldorf Institute for Competition Economics (DICE) and University of Cologne); Christian Waibel (ETH Zurich, Switzerland)
    Abstract: We experimentally investigate the role of second opinions in markets where experts like doctors both diagnose and provide the services. Experts may exploit their informational advantage over customers and overtreat by providing a more costly and expensive treatment than necessary. We show that introducing costly second opinions significantly reduces the level of overtreatment. Market efficiency rises as the reduction in treatment costs—due to less overtreatment—exceeds the increase in incurred search costs. Lowering customers’ search costs leads to significantly more second opinions, however, the overtreatment level does not decrease.
    Keywords: Credence goods; Experts; Second opinion; Overtreatment; Search costs.
    JEL: D82 L15
    Date: 2014–02
  6. By: Mauritzen, Johannes (Research Institute of Industrial Economics (IFN)); Tangerås, Thomas (Research Institute of Industrial Economics (IFN))
    Abstract: We analyse in a theoretical framework the link between real-time and day-ahead market performance in a hydro-based and imperfectly competitive wholesale electricity market. Theoretical predictions of the model are tested on data from the Nordic power exchange, Nord Pool Spot (NPS).We reject the hypothesis that prices at NPS were at their competitive levels throughout the period under examination. The empirical approach uses equilibrium prices and quantities and does not rely on bid data nor on estimation of demand or marginal cost functions.
    Keywords: Hydro power; Market power; Nord Pool Spot
    JEL: D43 D92 L13 L94 Q41
    Date: 2014–02–19

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