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on Industrial Organization |
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Issue of 2014‒04‒11
eleven papers chosen by |
| By: | Gabriel Desgranges (THEMA - Université de Cergy); Stéphane Gauthier (Centre d'Economie de la Sorbonne - Paris School of Economics) |
| Abstract: | We study rationalizable solutions in a linear asymmetric Cournot oligopoly. We show that symmetry across firms favors multiplicity of rationalizable solutions: A merger (implying a greater asymmetry across firms) makes out-of-equilibrium behavior less likely and should dampen &lquo;coordination&rquo; volatility. The market structure maximizing consumers' surplus at a rationalizable solution is not always the competitive one: This may be a symmetric oligopoly with few firms. An empirical illustration to the airlines industry shows that a reallocation of 1% of market share from a small carrier to a larger one yields a 1.3% decrease in volatility, measured by the within carrier standard error of the number of passengers. |
| Keywords: | Competition policy, Cournot oligopoly, dominance solvability, efficiency, rationalizability, stability, airline industry. |
| JEL: | D43 D84 L40 |
| Date: | 2014–03 |
| URL: | http://d.repec.org/n?u=RePEc:mse:cesdoc:14028&r=ind |
| By: | Feldman, Maryann (Department of Public Policy, University of North Carolina at Chapel Hill, Chapel Hill, NC, USA); Tavassoli, Sam (CITR, Blekinge Inst of Technology) |
| Abstract: | The focus of this paper is on the question of how new industries originate in places. There is often confusion between the process of diffusion and the locational factors that give rise to early stage creative discovery. There is a long and distinguished literature that considers the diffusion of ideas. Diffusion is important as it influences the general uptake and implementation of ideas across geography but it is a different process than our focus here. We advance the argument that the creation of new industries is a process that has inherently geographic features. Something new is created out of prior knowledge but a more complex process is required to develop an industry and reap the economic benefits. |
| Keywords: | new industries; Schmookler scissor; locational factors |
| Date: | 2014–03–31 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:bthcsi:2014-002&r=ind |
| By: | Dieter Pennerstorfer (WIFO) |
| Abstract: | This paper investigates the influence of competition on price and product quality among Austrian camping sites, a market charactised by both horizontal (spatial) and vertical product differentiation. Theoretically, the effect of competition on quality is ambiguous and depends on the degree of cost substitutability between output and quality. Estimating a system of equations shows that intense competition has a positive impact on product quality and a negative effect on prices (conditional on quality). As high quality is associated with high prices, the total effect of competition on prices is quite small. |
| Keywords: | Spatial competition, price and quality competition, retail markets, camping sites |
| Date: | 2014–04–02 |
| URL: | http://d.repec.org/n?u=RePEc:wfo:wpaper:y:2014:i:466&r=ind |
| By: | Naylor, Robin (Department of Economics, University of Warwick); Soegaard, Christian (Department of Economics, University of Warwick) |
| Abstract: | We show that a firm's profits under Cournot oligopoly can be increasing in the number of firms in the industry if wages are determined by decentralised bargaining in unionised bilateral oligopoly. The intuition for the result is that increased product market competition following an increase in the number of firms is mirrored by increased labour market rivalry which induces (profit-enhancing) wage moderation. Whether the product or labour market effect dominates depends both on the extent of union bargaining power and on the nature of union preferences. An incumbent monopolist will have an incentive to accommodate entry if the labour market effect dominates. We also show that this incentive is stronger if the incumbent anticipates that, post entry, it will be able to act as a Stackelberg leader. Key words: Oligopoly ; wage bargaining ; profits and entry JEL classification: D43 ; J50 ; L13 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:wrk:warwec:1044&r=ind |
| By: | Feicht, Robert; Grimm, Veronika; Seebauer, Michael |
| Abstract: | We experimentally investigate a Bertrand market with homogenous goods where sellers may behave socially responsible by donating a share of their profits to an existing non-profit organization. In our experiment, we find that this Corporate Social Responsibility (CSR) component is used independent of its credibility. However, market outcomes in terms of prices and profits do neither significantly differ with respect to the credibility of the CSR component nor in comparison to a market without the availability of CSR components. Moreover, prices have the main impact on purchase decisions while higher donations only affect purchase decisions when they are credible and price differences are negligible. We conclude that competition severely limits the possibility to attract customers with CSR components. Actual donations are small and the burden induced by the CSR components is shifted partly to the buyers resulting in equal profits in all treatments. -- |
| Keywords: | Corporate Social Responsibility,Competition,Charitable Giving,Experiment |
| JEL: | C92 D22 M31 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:iwqwdp:032014&r=ind |
| By: | Maliranta, Mika; Määttänen, Niku |
| Abstract: | Radical innovations require risk-taking. However, it is hard to find an objective measure for innovation investments that would take riskiness into account. In this paper, we investigate how a simple measure of firms’ innovation investments, namely the employee share of managers and professionals, is associated with profit risk at the firm level. Using data that cover essentially all firms in the Finnish business sector, we first document that labor productivity dispersion is very high among firms with a high employment share of managers and professionals. We also find that the dispersion in the return to firms’ total capital is particularly high among young firms with a high employment share of managers and professionals. We then build a simple model where firms’ innovation activities and firm risk are interrelated. We use the model to analyze how the asymmetric tax treatment of profits and losses in corporate taxation influences firms’ innovation decision in market equilibrium and whether innovation subsidies can improve industry productivity by mitigating such a tax distortion. |
| Keywords: | productivity, R&D, innovation, corporate taxation |
| JEL: | E23 L16 O47 |
| Date: | 2014–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:rif:report:22&r=ind |
| By: | Lionel Nesta (OFCE); Thomas Grebel |
| Abstract: | We investigate the conditions under which R&D investment by rival firms may be negatively or positively correlated. Using a two-stage game the influence of spillovers and product substitution is investigated. It is shown that under Cournot competition, the sign of the R&D reaction function depends on four types of environments in terms of the level of product substitution and of spillovers. We then test the prediction of the model on the world’s largest manufacturing corporations. We assume that firms make oblivious R&D investments based on the R&D decision of the average rival company. We then develop a dynamic panel data model that accounts for the endogeneity of the decision of the mean rival firms. Results corroborate the validity of the theoretical model. |
| Keywords: | Process R&D; spillovers; product substitution ; reaction function; GMM |
| JEL: | D43 L13 O31 |
| Date: | 2013–10 |
| URL: | http://d.repec.org/n?u=RePEc:spo:wpecon:info:hdl:2441/f6h8764enu2lskk9p529o10r5&r=ind |
| By: | Mauro Napoletano (OFCE); Mario V Tomasello; Antonios Garas; Frank Schweitzer (Chair of Systems Design) |
| Abstract: | Drawing on a large database of publicly announced R&D alliances, we track the evolutionof R&D networks in a large number of economic sectors over a long time period (1986-2009). Our main goal is to evaluate temporal and sectoral robustness of the main statisticalproperties of empirical R&D networks. By studying a large set of indicators, we providea more complete description of these networks with respect to the existing literature. Wefind that most network properties are invariant across sectors. In addition, they do notchange when alliances are considered independently of the sectorsto which partners belong.Moreover, we find that many properties of R&D networks are characterized by a rise-and-fall dynamics with a peak in the mid-nineties. Finally, we show that suchproperties of empirical R&D networks support predictions of the recent theoretical literature on R&D network formation. |
| Date: | 2013–09 |
| URL: | http://d.repec.org/n?u=RePEc:spo:wpecon:info:hdl:2441/f6h8764enu2lskk9p5487a6cm&r=ind |
| By: | Heshmati, Almas (Centre of Excellence for Science and Innovation Studies (CESIS), & Department of Economics, Sogang University); Lenz-Cesar, Flávio (Ministry of Communications, Esplanada dos Ministério) |
| Abstract: | This study utilizes results from an agent-based simulation model to conduct public policy simulation of firms’ networking and cooperation in innovation. The simulation game investigates the differences in sector responses to internal and external changes, including cross-sector spillovers, when applying three different policy strategies to promote cooperation in innovation. The public policy strategies include clustering to develop certain industries, incentives to encourage cooperative R&D and spin-off policies to foster entrepreneurship among R&D personnel. These policies are compared with the no-policy alternative evolving from the initial state serving as a benchmark to verify the gains (or loses) in the number of firms cooperating and networking. Firms’ behavior is defined according to empirical findings from analysis of determinants of firms’ participation in cooperation in innovation with other organizations using the Korean Innovation Survey. The analysis based on manufacturing sector data shows that firms’ decision to cooperate with partners is primarily affected positively by firm’s size and the share of employees involved in R&D activities. Then, each cooperative partnership is affected by a different set of determinants. The agent-based models are found to have a great potential to be used in decision support systems for policy makers. The findings indicate possible appropriate policy strategies to be applied depending on the target industries. We have applied few examples and showed how the results may be interpreted. Guidelines are provided on how to generalize the model to include a number of extensions that can serve as an optimal direction for future research in this area. |
| Keywords: | agent-based simulation; collaborative R&D; innovation networks; simulation game; policy strategy; |
| JEL: | C15 C71 D21 D85 L20 O31 |
| Date: | 2014–03–27 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:cesisp:0357&r=ind |
| By: | A.S. Hurn (School of Economics and Finance, Queensland University of Technology); Annastiina Silvennoinen (School of Economics and Finance, Queensland University of Technology); Timo Teräsvirta (Aarhus University and CREATES) |
| Abstract: | We consider a nonlinear vector model called the logistic vector smooth transition autoregressive model. The bivariate single-transition vector smooth transition regression model of Camacho (2004) is generalised to a multivariate and multitransition one. A modelling strategy consisting of specification, including testing linearity, estimation and evaluation of these models is constructed. Nonlinear least squares estimation of the parameters of the model is discussed. Evaluation by misspecification tests is carried out using tests derived in a companion paper. The use of the modelling strategy is illustrated by two applications. In the first one, the dynamic relationship between the US gasoline price and consumption is studied and possible asymmetries in it considered. The second application consists of modelling two well known Icelandic riverflow series, previously considered by many hydrologists and time series analysts. JEL Classification: C23, C51, L94, Q41. |
| Keywords: | Smooth transition, binary choice model, logit model, electricity spot prices, peak load pricing, price spikes |
| Date: | 2014–03–28 |
| URL: | http://d.repec.org/n?u=RePEc:aah:create:2014-09&r=ind |
| By: | Karlsson, Charlie (CITR, Blekinge Inst of Technology); Rouchy, Philippe (CITR, Blekinge Inst of Technology) |
| Abstract: | Large media clusters have emerged in a limited number of large cities, characterizing the geographical concentration of the global media industry. This paper starts by exploring the effect of the rapid advancement of Information and Communication Technologies (ICT) had on the media economy. It concludes that the role of the “weightless economy” on media cluster has enhanced its production and distribution functions. We review the specificities of media cluster that ties agglomeration to creative, diversified attributes of production and distribution. The implication is that media firms hold strong tendencies to cluster in urban regions since they make full usage of its resources, namely its export capabilities and import transformation strength. Finally, we invite researchers to consider Jacobs’ metropolitan and global reciprocating system of city growth as a valid unit for analysing media clusters. The question leads envisaging if media clusters' strong metropolitan base allows them to grow further through globalised circuits. The paper concludes that large, media clusters drive on intellectually dense network of information, which can only be cultivated through large agglomerations existing capabilities. Consequently, the research question focuses upon the economic role of knowledge in media creation and export replacement. We emphasize the strength of Jacob’s model of media cluster for understanding its mechanism of value creation and endogenous system of globalisation. |
| Keywords: | Clustering; media industry; agglomeration; weightless economy; creative industry; globalization; regional development |
| JEL: | L82 R11 |
| Date: | 2014–03–31 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:bthcsi:2014-001&r=ind |