nep-ind New Economics Papers
on Industrial Organization
Issue of 2015‒01‒26
four papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Instrument-free Identification and Estimation of Differentiated Products Models By David Byrne; Susumu Imai; Vasilis Sarafidis; Masayuki Hirukawa
  2. Minimum quality standards and non-compliance By Birg, Laura; Voßwinkel, Jan S.
  3. Optimal production channel for private labels: Too much or too little innovation? By Claire Chambolle; Clémence Christin; Guy Meunier
  4. Registered cartels in Austria: Coding protocol By Fink, Nikolaus; Schmidt-Dengler, Philipp; Stahl, Konrad O.; Zulehner, Christine

  1. By: David Byrne (University of Melbourne); Susumu Imai (UTS and Queen's University); Vasilis Sarafidis (Monash University); Masayuki Hirukawa (Setsunan University)
    Abstract: We propose a new methodology for estimating the demand and cost functions of differentiated products models when demand and cost data are available. The method deals with the endogeneity of prices to demand shocks and the endogeneity of outputs to cost shocks, but does not require instruments for identification. We establish non-parametric identification, consistency and asymptotic normality of our estimator. Using Monte-Carlo experiments, we show our method works well in contexts where instruments are correlated with demand and cost shocks, and where commonly-used instrumental variables estimators are biased and numerically unstable.
    Keywords: Instrument-free, Differentiated goods oligopoly, BLP, parametric identification, nonparametric identification, sieve
    JEL: C13 C14 L13 L41
    Date: 2015–01
  2. By: Birg, Laura; Voßwinkel, Jan S.
    Abstract: This paper studies the effect of non-compliance with a minimum quality standard on prices, quality, and welfare in a vertical differentiation model. Non-compliance with a minimum quality standard by a low-quality firm reduces quality levels of both firms, increases the price for the high-quality product, decreases the price for the low-quality product, and shifts demand from the low-quality to the high-quality firm. Under non-compliance, an increase in the standard increases the quality difference, increases the price difference, and shifts demand from the high-quality to the low-quality firm. Stricter government enforcement decreases the quality level of the low-quality firm, increases the price of the high-quality product and shifts demand from the low-quality firm to the high-quality firm. Non-compliance of the low quality firm increases profits for both firms, reduces consumer surplus and increases or decreases welfare depending on the market size, the effect of quality levels of the externality, the detection probability, and the minimum quality level.
    Keywords: minimum quality standard,non-compliance,enforcement
    JEL: K42 L13 L50
    Date: 2015
  3. By: Claire Chambolle (INRA-UR1303 ALISS); Clémence Christin (Normandie Université, UCBN, CREM-UMR CNRS 6211); Guy Meunier (INRA-UR1303 ALISS)
    Abstract: We analyze the impact of the private label production channel on innovation. A retailer may either choose to integrate backward with a small firm (insourcing) or rely on a national brand manufacturer (outsourcing) to produce its private label. The trade-off between insourcing and outsourcing strategies is a choice between too much or too little innovation (i.e. quality investment) on the private label. When insourcing, an outside-option effect leads the retailer to over-invest to increase its buyer power. When outsourcing, a hold-up effect leads to under-investment. In addition, selecting the national brand manufacturer may create economies of scale that spur innovation.
    Keywords: Private label, vertical relations, buyer power, innovation
    JEL: L14 L15 L42
    Date: 2014–07
  4. By: Fink, Nikolaus; Schmidt-Dengler, Philipp; Stahl, Konrad O.; Zulehner, Christine
    Abstract: In the period following WW II. until the country accessed the European Union, cartels were legalized in Austria, upon registration with the Austrian Cartel Court. We obtained access to the registration data, and scanned them all towards a microeconomic analysis of contracting behavior between firms competing, in principle, in their respective markets. In this paper, we give a detailed account of our procedure of coding the data from the scanned documents.
    Keywords: Collusion,legal cartels,contracts
    JEL: L41 L43
    Date: 2014

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