nep-ind New Economics Papers
on Industrial Organization
Issue of 2014‒11‒12
eight papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Asymmetric Pricing Caused by Collusion By Obradovits, Martin
  2. Incomplete information and R&D organization By Chattopadhyay, Srobonti; Kabiraj, Tarun
  3. Research among Copycats: R&D, Spillovers, and Feedback Strategies By Grega Smrkolj; Florian Wagener
  4. Price Differentiation and Discrimination in Transport Networks By Adriaan Hendrik van der Weijde
  5. Cooperation in traffic routing games on scale free wireless networks By Dávid Csercsik
  6. Investment in Fixed Broadband Networks and Access Regulation in Developed and Developing countries: Panel Data Applications By Ben Dkhil, Inès
  7. Services Trade Restrictiveness Index (STRI): Transport and Courier Services By Massimo Geloso Grosso; Hildegunn Kyvik Nordås; Asako Ueno; Frederic Gonzales; Iza Lejárraga; Sébastien Miroudot; Dorothée Rouzet
  8. The Industrial Organisation of the Dance Industry in the Netherlands: a Transaction Cost Perspective on Hybrid Forms of Organisation By Frank A.G. den Butter; Jelle Joustra

  1. By: Obradovits, Martin
    Abstract: In many markets, empirical evidence suggests that positive production cost shocks are transmitted more quickly and fully to final prices than negative ones. This article explains asymmetric price adjustment caused by firms imperfectly colluding on supra-competitive price levels. While positive cost shocks are transmitted instantaneously, negative price adjustments only occur once aggregate market demand turns out unexpectedly low. In equilibrium, this can be supported whenever demand is sufficiently stable, and negative cost shocks are not too large.
    Keywords: asymmetric price adjustment, asymmetric pricing, rockets and feathers, collusion, price transmission
    JEL: D21 D43 L13
    Date: 2014–09–25
  2. By: Chattopadhyay, Srobonti; Kabiraj, Tarun
    Abstract: The paper studies incentives for cooperative research vis-à-vis non-cooperative research under incomplete information when the R&D outcome is stochastic and continuously distributed with a given mean and a constant variance. We show that the non-cooperative R&D incentive increases with the variance of the R&D outcome. And this result does not depend on the nature of the product market competition.
    Keywords: Cooperative R&D, non-cooperative R&D, incomplete information, variance of the research outcome
    JEL: D43 L13 O31
    Date: 2014–09–10
  3. By: Grega Smrkolj (Newcastle University, United Kingdom); Florian Wagener (University of Amsterdam, the Netherlands)
    Abstract: We study a stochastic dynamic game of process innovation in which firms can initiate and terminate R&D efforts and production at different times. We discern the impact of knowledge spillovers on the investments in existing markets, as well as on the likely structure of newly forming markets, for all possible asymmetries between firms. We show that the relation between spillovers, R&D efforts, and surpluses is non-monotonic and dependent on both the relative and absolute efficiency of firms. Larger spillovers increase the likelihood that a new technology is brought to production, but they do not necessarily make the industry more competitive.
    Keywords: Differential game, Feedback Nash equilibrium, Numerical partial differential equations, R&D, Spillovers
    JEL: C61 C63 C73 D43 D92 L13 O31
    Date: 2014–08–22
  4. By: Adriaan Hendrik van der Weijde (VU University Amsterdam)
    Abstract: This paper analyzes the effects of price differentiation and discrimination by a monopolistic transport operator, which sets fares in a congestible network. Using three models, with different spatial structures, we describe the operator’s optimal strategies in an unregulated market, a market where price differentiation is not allowed (i.e., ticket prices must be the same for all users), and a market where price discrimination is illegal (i.e., ticket prices must only differ with the marginal external costs of users), and analyze the welfare effects of uniform and non-discriminatory pricing policies. The three models allow us to consider three different forms of price differentiation and discrimination in networks: by user class, by origin-destination pair, and by route. We generalize the existing literature, in which groups usually only differ in their value of time, and hence, there is no distinction between differentiation and discrimination. In our models, users may also have different marginal external costs; we show how these two differences interact. We also show how non-differentiated and non-discriminatory policies may increase or decrease welfare, and that non-discrimination can be worse than non-differentiation. The network models show that results obtained for a single-link network can be generalized to a situation where operators price-discriminate or differentiate based on users’ origins and destinations, but not directly to a situation in which differentiation is based on route choices.
    Keywords: price differentiation, price discrimination, transport, networks, congestion
    JEL: L11 L51 L91
    Date: 2014–08–01
  5. By: Dávid Csercsik (Game Theory Research Group, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences and Pázmány Péter Catholic University)
    Abstract: Local routing protocols in scale free networks have been extensively studied. In this paper we consider a wireless contextualization of this routing problem and analyze on the one hand how cooperation affects network efficiency, and on the other hand the stability of cooperation structures. Cooperation is interpreted as local exchange of topological information between cooperating agents, and the payoff of a certain node is defined based on its energy consumption during the routing process. We show that if the payoff of the nodes is the energy saving compared to the all-singleton case, basically coalitions are not stable. We introduce coalitional load balancing and net reward to enhance coalitional stability and thus the more efficient operation of the network. As in the proposed model cooperation strongly affects routing dynamics of the network, externalities will arise and the game is defined in a partition function form.
    Keywords: partition function form games, networks, local routing
    JEL: C71 L14 L96
    Date: 2014–06
  6. By: Ben Dkhil, Inès
    Abstract: Since the USA Telecommunications Act of 1996, the regulatory frameworks, have led to the requirement of different policy practices in many countries across the world in order to establish sustainable competition in whole telecommunication markets. These regulatory reforms are the privatization of the telecom historical integrated monopoly (the incumbent), the independency of the regulatory authority, the obligation of transparency of the access price and agreements & the unbundling, the separation and the access pricing policies. This paper suggests an empirical investigation on both the individual, and the global impacts of these different regulatory policy practices on broadband deployment. To this end, we construct a panel data covering 107 developed and developing countries over the period of eight years from 2004 to 2011. Using the Instrumental variables (IV) & the Generalized Method of Moments (GMM) with fixed effects and robust to heteroskedastic and autocorrelated errors, we show that the relationship between regulation and broadband investment is an inverted U shape in developed world while it takes a U form in developing countries. This means that in developed countries, a less restrictive regulatory policy spurs broadband deployment while more stringent policy discourages innovation in telecom industry. However, in the developing countries, the regulation has a strict negative impact on broadband deployment.
    Keywords: developed and developing countries, regulation, fixed broadband deployment, separation, unbundling, access pricing.
    JEL: C51 L59 L96
    Date: 2014–10–16
  7. By: Massimo Geloso Grosso; Hildegunn Kyvik Nordås; Asako Ueno; Frederic Gonzales; Iza Lejárraga; Sébastien Miroudot; Dorothée Rouzet
    Abstract: This paper presents the services trade restrictiveness indices (STRIs) for transport and courier services. The STRIs are composite indices taking values between zero and one, zero representing an open market and one a market completely closed to foreign services providers. The indices are calculated for 40 countries, the 34 OECD members and Brazil, China, India, Indonesia, Russia and South Africa. This report presents the first vintage of indicators for transport and courier services and captures de jure regulations in force in 2013. The STRI supports the view that these services are subject to very different regulatory frameworks and, in some cases, to a relatively elevated degree of regulation. Indices for air transport covering measures affecting commercial establishment and accompanying movement of natural persons are on average quite high (0.43), with little variation across countries. A preliminary assessment of restrictiveness in cross-border trade in the sector shows that, while some progress in easing restrictions has been achieved through open skies agreements, significant limitations remain in place. The maritime transport sector is moderately open with an average STRI of 0.25. Foreign equity restrictions are still quite common in the sector and contribute significantly to the index. Most other sector-specific restrictions are found in the cabotage market and in ports. In road freight transport, the results confirm that the domestic road freight transport regime has been significantly liberalised over the years, and currently commercial establishment in the sector is largely affected by horizontal measures. The overall level of restrictiveness is relatively low with an average of 0.16, but exhibits pretty large variation. With respect to rail freight, the STRI also supports the view that considerable reforms have been undertaken in the sector in the past decades. The average level of restrictiveness is moderate at 0.22, although two countries maintain a statutory state-owned monopoly, which implies that the sector is completely closed to foreign suppliers. Finally, for courier services the results show that the overall level of restrictiveness is moderate with a sample average of 0.26. There is, however, large variation in STRI indices among countries. The elevated levels of restrictiveness are found in countries where foreign equity restrictions or statutory monopolies exist.
    Keywords: services trade, courier services, transport services, services trade restrictions, regulation
    JEL: F13 F14 K33 L87 L91 L92 L93
    Date: 2014–11–04
  8. By: Frank A.G. den Butter (VU University Amsterdam); Jelle Joustra (VU University Amsterdam, the Netherlands)
    Abstract: The organization of Electronic Dance Music (EDM) events has become a major export product in the Netherlands. In order to respond quickly to the new trends and needs, innovative forms of cooperation between producers are to be set up for the organization of exciting new events. A case study on how these EDM events are actually organised in the Netherlands shows that the best way to do it is through hybrid forms of organisation, which combine horizontal forms of organisation through the market and vertical forms through the hierarchy. As EDM events are characterised by much asset specificity, the perspective of transaction cost economics indicates why this industry relies on hybrid forms of organisation. Trust between the collaborating partners, intrinsic motivation to be professional in the design and creation of new, ground-breaking music sensations and an extensiv e use of social media play a key role in lowering the transaction costs in the dance industry.
    Keywords: Industrial organization, coordination costs, transaction cost economics, resource based view, cooperation in hybrid organizations, Electronic Dance Music (EDM) events, trust, use of social media
    JEL: D23 D85 E23 L23 L24 L82 O31 P13
    Date: 2014–07–24

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