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on Industrial Organization |
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Issue of 2014‒05‒17
fifteen papers chosen by |
| By: | David Encaoua (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: | Book's Review:Louis Kaplow, Competition Policy and Price Fixing, Princeton University Press, Princeton and Oxford, 2013 |
| Keywords: | collusive behavior: economic and legal approaches |
| Date: | 2014–04 |
| URL: | http://d.repec.org/n?u=RePEc:hal:cesptp:halshs-00989261&r=ind |
| By: | Cosnita-Langlais, Andreea (University Paris Ouest Nanterre La Défense); Sørgard, Lars (Dept. of Economics, Norwegian School of Economics and Business Administration) |
| Abstract: | This paper deals with the enforcement of merger policy, and aims to study how merger emedies affect the deterrence accomplished by controlling mergers. We determine the optimal frequency of investigations launched by the agency, and identify situations where the introduction of remedies can lead to a lower welfare. We find that the potential for remedies can make it less likely that the worst mergers are deterred. Even if the worst mergers are deterred, the potential for remedies can lead to more mergers with a negative impact to be proposed, and eventually to more decision errors by the antitrust authorities. |
| Keywords: | Merger control; merger remedies; enforcement; deterrence. |
| JEL: | K21 L41 |
| Date: | 2014–03–25 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:nhheco:2014_007&r=ind |
| By: | Brent Hueth; GianCarlo Moschini (Center for Agricultural and Rural Development (CARD)) |
| Abstract: | When the threat of entry by followers includes cooperative firms, the maximum fixed cost that a profit maximizing leader can endure is endogenous. The aggressive strategy required for entry deterrence curtails the leader’s expected profit and can discourage its initial entry. In such circumstances a cooperative firm may yet be viable, despite having a cost handicap and no first-mover advantage. |
| Keywords: | cooperatives, endogenous entry, entry deterrence, nonconvexity. JEL codes: L22, P13 |
| Date: | 2014–05 |
| URL: | http://d.repec.org/n?u=RePEc:ias:fpaper:14-wp547&r=ind |
| By: | Daniel W. Elfenbein; Raymond Fisman; Brian McManus |
| Abstract: | Quality certification programs help consumers to identify high-quality products or sellers in markets with information asymmetries. Using data from eBay UK’s online marketplace, we study how certification’s impact on consumer demand varies with market- and seller-level attributes, exploiting quasi-experimental variation in sellers’ certification status. The positive effects of eBay’s “top rated seller” certification are stronger for categories with relatively few other certified sellers, in more competitive markets, and for sellers with shorter records of past performance. These findings indicate certification provides its greatest value when certification is rare, the product space is crowded, and for sellers lacking established reputations. |
| JEL: | D82 L15 L25 L86 |
| Date: | 2014–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:20074&r=ind |
| By: | Satoh, Atsuhiro; Tanaka, Yasuhito |
| Abstract: | We consider a simple model of the choice of strategic variables under relative profit maximization by firms in an asymmetric oligopoly with differentiated substitutable goods such that there are three firms, Firm 1, 2 and 3, demand functions are linear and symmetric, marginal costs are constant, there is no fixed cost, Firm 2 and 3 have the same cost function, but Firm 1 has a different cost function. In such a model we show that there are two pure strategy sub-game perfect equilibria. One is such that all firms choose the outputs as their strategic variables, and the other is such that Firm 2 and 3 choose the outputs as their strategic variables, and Firm 1 chooses the price as its strategic variable. |
| Keywords: | relative profit maximization; asymmetric oligopoly; choice of strategic variables |
| JEL: | D43 |
| Date: | 2014–05–11 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:55886&r=ind |
| By: | Tanaka, Yasuhito |
| Abstract: | In this note we investigate the relation between a Cournot equilibrium and a Bertrand equilibrium in a duopoly with differentiated goods in which each firm maximizes its relative profit that is the difference between its profit and the profit of the rival firm. We will show that when firms maximize relative profits, a Cournot equilibrium and a Bertrand equilibrium coincide, and the equilibrium outputs under relative maximization is larger than both of the equilibrium outputs at the Cournot equilibrium and the Bertrand equilibrium under absolute profit maximization. We assume that demand functions for the goods of the firms are linear, the marginal costs of the firms are constant and the fixed costs are zero. |
| Keywords: | relative profit maximization, duopoly, Cournot and Bertrand equilibria |
| JEL: | D43 |
| Date: | 2014–05–11 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:55890&r=ind |
| By: | Tanaka, Yasuhito |
| Abstract: | We study the choice of strategic variables by firms in a duopoly in which two firms produce differentiated substitutable goods and each firm maximizes its relative profit that is the difference between its profit and the profit of the rival firm. We consider a two stage game such that in the first stage the firms choose their strategic variables and in the second stage they determine the values of their strategic variables. We show that when the firms maximize their relative profits, the choice of strategic variables is irrelevant to the outcome of the game in the sense that the equilibrium outputs, prices and profits of the firms are the same in all situations, and so any combination of strategy choice by the firms constitutes a sub-game perfect equilibrium in the two stage game. We assume that demand functions for the goods are symmetric and linear, the marginal costs of the firms are common and constant, and the fixed costs are zero. |
| Keywords: | duopoly, relative profit maximization, choice of strategic variables |
| JEL: | D43 |
| Date: | 2014–05–11 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:55891&r=ind |
| By: | Tanaka, Yasuhito |
| Abstract: | We study the Stackelberg equilibrium in a symmetric duopoly with differentiated goods in which each firm maximizes its relative profit that is the difference between its profit and the profit of the rival firm. We show that the equilibrium output and price of the good of the leader and those of the follower are equal, that is, the role of leader or follower is irrelevant to the equilibrium, and the equilibrium outputs and prices do not change between the case where the firms are quantity setting firms and the case where the firms are price setting firms. We assume that demand functions are linear and symmetric, the marginal costs of the firms are common and constant, and the fixed costs are zero. |
| Keywords: | differentiated duopoly, relative profit maximization, Stackelberg model, irrelevance of leadership |
| JEL: | D43 |
| Date: | 2014–05–11 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:55887&r=ind |
| By: | Franz Hackl; Michael E. Kummer; Rudolf Winter-Ebmer; Christine Zulehner |
| Abstract: | We analyze the interaction between market structure and market performance and how it varies over the product cycle. To account for the potential endogeneity in this relation, we use an instrumental variable approach. We combine data from the largest Austrian online market for price comparisons with retail data on wholesale prices provided by a major hardware producer for consumer electronics. Our results show that instrumenting is important for estimating the empirical effect of competition on the markup of the price leader. One more firm in the market is associated with a reduction of the price leader’s markup which is equivalent to competition between existing firms for an additional three weeks in the product life cycle. Our results support search theoretic models and contradict models of monopolistic competition. Moreover our results support the existence of price dynamics over the product cycle. They also highlight the substitutability between newly innovated and old expiring technologies and how it varies with respect to competitors’ and own brand innovations. |
| Keywords: | Retailing, Product Life cycle, Market Structure, Market Performance, Markup, Price Dispersion |
| JEL: | L11 L13 L81 D43 |
| Date: | 2014–01 |
| URL: | http://d.repec.org/n?u=RePEc:jku:econwp:2014_04&r=ind |
| By: | Brian Baugh; Itzhak Ben-David; Hoonsuk Park |
| Abstract: | Several states have recently implemented laws requiring the collection of sales tax on online purchases. In practice, however, only Amazon.com has been affected. We find that households living in these states reduce Amazon expenditures by 9.5%, implying an elasticity of –1.3. We find the effect to be more pronounced for large purchases, for which we estimate an elasticity of –3.2. Further, we find that the decline in Amazon purchases is offset by a 2.0% increase in purchases at local brick-and-mortar retailers and a 19.8% increase in purchases at the online operations of competing retailers. |
| JEL: | D12 D40 L51 |
| Date: | 2014–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:20052&r=ind |
| By: | Hyo Won Lee (Yonsei University); Yun Jeong Choi (Yonsei University) |
| Abstract: | The corporate leniency program has played an important role in detecting cartels that damages consumer welfare and competition. This study investigates the impacts of Korea¡¯s leniency revision in 2005 on cartel stability by using a Poisson regression. The estimation results show that the new leniency program increases the detection rate and decreases the formation rate, confirming the validity of the theoretical model of Miller(2008). Therefore, the effectiveness of the full leniency to the first applicants under the new leniency program provides some policy implication on the revision direction of the leniency program. |
| Keywords: | Collusion, Corporate Leniency Program, Poisson regression, Cartel duration |
| JEL: | C72 D43 K21 L41 |
| Date: | 2014–04 |
| URL: | http://d.repec.org/n?u=RePEc:yon:wpaper:2014rwp-65&r=ind |
| By: | Meersman, Hilde (University of Antwerp); Strandenes, Siri Pettersen (Dept. of Economics, Norwegian School of Economics and Business Administration); Van de Voorde, Eddy (University of Antwerp) |
| Abstract: | Price level and price transparency are input to shippers’ choice of supply chain and transport mode. In this paper, we analyse current port pricing structures in the light of the pricing literature and consider opportunities for improvement. We present a detailed overview of pricing criteria, who sets prices and who ultimately foots the bill for port-of-call charges, cargo-handling fees and congestion charges. Current port pricing practice is based on a rather linear structure and fails to incorporate modern pricing tools such as price differentiation or revenue management. Consequently, ports apply neither profit maximising pricing nor pricing designed to exploit available capacity more efficiently. |
| Keywords: | Infrastructure pricing; pricing models; seaports. |
| JEL: | D49 R48 |
| Date: | 2014–04–10 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:nhheco:2014_014&r=ind |
| By: | Aviral Kumar Tiwari; Suresh K.G.; Mohamed Arouri; Frédéric Teulon |
| Date: | 2014–05–15 |
| URL: | http://d.repec.org/n?u=RePEc:ipg:wpaper:2014-292&r=ind |
| By: | Steve Cicala |
| Abstract: | This paper evaluates changes in fuel procurement practices by coal- and gas-fired power plants in the United States following state-level legislation that ended cost-of-service regulation of electricity generation. I find that deregulated plants substantially reduce the price paid for coal (but not gas), and tend to employ less capital-intensive sulfur abatement techniques relative to matched plants that were not subject to any regulatory change. Deregulation also led to a shift toward more productive coal mines. I show how these results lend support to theories of asymmetric information, capital bias, and regulatory capture as important sources of regulatory distortion. |
| JEL: | D24 D72 D82 L11 L43 L51 L94 L98 Q4 Q48 |
| Date: | 2014–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:20109&r=ind |
| By: | Myrto Kalouptsidi |
| Abstract: | This paper provides a model-based empirical strategy to, (i) detect the presence and magnitude of government subsidies and (ii) quantify their impact on production reallocation across countries, industry prices, costs and consumer surplus. I construct and estimate an industry model that allows for dynamic agents in both demand and supply and apply my strategy to world shipbuilding, a classic target of industrial policy. I find strong evidence consistent with China having intervened and reducing shipyard costs by 15-20%, corresponding to 5 billion US dollars between 2006 and 2012. Standard detection methods employed in subsidy disputes yield less than a third of this magnitude. The subsidies led to substantial reallocation of ship production across the world, with Japan in particular losing significant market share. They also misaligned costs and production, while leading to minor surplus gains for shippers. Finally, I find that production subsidies had a stronger impact than capital subsidies. |
| JEL: | L0 |
| Date: | 2014–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:20119&r=ind |