nep-ind New Economics Papers
on Industrial Organization
Issue of 2014‒04‒18
four papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Asymmetric Information and Imperfect Competition in the Loan Market By Crawfordy, Gregory S; Pavaniniz, Nicola; Schivardi, Fabiano
  2. Doing R&D in a Closed or Open Mode: Dynamics and Impacts on Productivity By Julio Rosa; Pierre Mohnen
  3. Rationalizability and Efficiency in an Asymmetric Cournot Oligopoly By Gabriel Desgranges; Stéphane Gauthier
  4. Regulating gasoline retail markets: The case of Germany By Wittmann, Nadine

  1. By: Crawfordy, Gregory S (University of Zurich, CEPR and CAGE); Pavaniniz, Nicola (zUniversity of Zurich); Schivardi, Fabiano (xLUISS, EIEF and CEPR)
    Abstract: We measure the consequences of asymmetric information in the Italian market for small business lines of credit. Exploiting detailed, proprietary data on a random sample of Italian firms, the population of medium and large Italian banks, individual lines of credit between them, and subsequent individual defaults, we estimate models of demand for credit, loan pricing, loan use, and firm default based on the seminal work of Stiglitz and Weiss (1981) to measure the extent and consequences of asymmetric information in this market. While our data include a measure of observable credit risk comparable to that available to a bank during the application process, we allow firms to have private information about the underlying riskiness of their project. This riskiness influences banks’ pricing of loans as higher interest rates attract a riskier pool of borrowers, increasing aggregate default probabilities. Data on default, loan size, demand, and pricing separately identify the distribution of private riskiness from heterogeneous firm disutility from paying interest. Preliminary results suggest evidence of asymmetric information, separately identifying adverse selection and moral hazard. We use our results to quantify the impact of asymmetric information on pricing and welfare, and the role imperfect competition plays in mediating these effects.
    Keywords: Italian, asymmetric information
    Date: 2013
  2. By: Julio Rosa; Pierre Mohnen
    Abstract: On the one hand, firms prefer to perform R&D in an open mode (letting R&D be performed extramurally or even selling their R&D services) to benefit from knowledge spillovers and complementarities between internal and external R&D. On the other hand, they may also like to perform R&D in a closed mode (funding and executing their R&D intramurally) to minimize outgoing externalities. We examine the dynamic process by which firms change the way of doing R&D and how these strategic choices of doing R&D affect their productivity growth. This study is based on the Statistics Canada Research and Development in Canadian Industry survey (RDCI), which collects data on R&D performed in the business sector in Canada. The paper is based on data for the period 1997 to 2006. The panel dimension of the data allows to control for unobserved characteristics of R&D performers by estimating a multinomial Logit model with unobserved heterogeneities using maximum simulated likelihood (MSL) method. Les firmes sont tiraillées entre deux façons de faire de la R-D. D’un côté, elles préfèrent faire la R-D de manière ouverte (en faisant faire de la R-D extramuros ou même en vendant des services de R-D) afin de bénéficier d’externalités de connaissance et de complémentarités entre la R-D interne et la R-D externe. D’un autre côté, elles préconisent de faire la R-D en mode fermé (en faisant de la recherche intramuros et en se finançant sur base de fonds propres ou de subventions) afin de minimiser les fuites de connaissance. Dans cette étude, nous examinons la dynamique des choix quant à la façon de faire de la recherche et l’effet de ces choix sur les rendements de celle-ci. Nous nous basons sur les données de l’enquête de Statistique Canada sur la recherche et développement dans l’industrie canadienne (RDIC) pour la période 1997-2006. La dimension panel de la base de données nous permet de contrôler pour l’hétérogénéité individuelle inobservée dans l’estimation d’un modèle Logit multinomial dynamique à partir de la méthode du maximum de vraisemblance simulé.
    Keywords: R&D; State Dependence; Dynamic Multinomial Logit; Panel-data; Maximum Simulated Likelihood; Open Innovation, persistance, modèle Logit multinomial dynamique, données panel, maximum de vraisemblance simulé, innovation ouverte
    Date: 2013–11–01
  3. By: Gabriel Desgranges (THEMA - Théorie économique, modélisation et applications - CNRS : UMR8184 - Université de Cergy Pontoise); Stéphane Gauthier (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris 1 - Panthéon-Sorbonne, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris)
    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
    Date: 2014–03
  4. By: Wittmann, Nadine
    Abstract: In 2011, price peaks in retail gasoline prices caused public outrage and attracted the attention of German regulatory agencies. After having examined the market, competition authorities concluded that tacit collusion existed but could not easily be prosecuted under the given competition law. In several other countries, various types of regulatory schemes are implemented to tackle tacit collusive behavior. E.g. there are price ceilings established in Luxembourg or per day limits of price increases given in Austria. However, research has found that none of them has led to satisfactory results. Hence, the following paper proposes a different regulatory approach, i.e. the implementation of corrective taxes. Results show that a special type of variable tax scheme successfully manages to render collusion an unprofitable business. In addition, it is also easy to levy and monitor. Thereby, the inherent vice of the gasoline retail market, i.e. the transparency that enables tacit - and therefore non-prosecutable - collusion, could be turned into a regulatory virtue as it becomes a powerful means to help successfully tackle imperfect competition and to bring about a more efficient market outcome. --
    Keywords: gasoline retail market,regulation,market structure and antitrust,collusion
    JEL: Q48 D42 D43
    Date: 2014

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