nep-ind New Economics Papers
on Industrial Organization
Issue of 2015‒02‒05
five papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. On the Use of Price-cost Tests in Loyalty Discounts: Which Implications from Economic Theory? By Chiara Fumagalli; Massimo Motta
  2. The impact of maximum markup regulation on prices By Christos Genakos; Pantelis Koutroumpis; Mario Pagliero
  3. Consumer search: evidence from path-tracking data By Fabio Pinna; Stephan Seiler
  4. A quantitative analysis of the used-car market By Alessandro Gavazza; Alessandro Lizzeri; Nikita Roketskiy
  5. Regulatory Objectives and the Intensity of Unbundling in Electricity Markets By Lindemann, Henrik

  1. By: Chiara Fumagalli (Università Bocconi, CSEF and CEPR); Massimo Motta (ICREA-Universitat Pompeu Fabra and Barcelona Graduate School of Economics)
    Abstract: Recent cases in the US (Meritor, Eisai) and in the EU (Intel ) have revived the debate on the use of price-cost tests in loyalty discount cases. We draw on existing recent economic theories of exclusion and develop new formal material to argue that economics alone does not justify applying a price-cost test to predation but not to loyalty discounts. Still, the latter contain features (they reference rivals and allow to discriminate across buyers and/or units bought) that have a higher exclusionary potential than the former, and this may well warrant closer scrutiny and more severe treatment from antitrust agencies and courts.
    Keywords: Market-share discounts, Inefficient foreclosure, Exclusive dealing
    JEL: K21 L41
    Date: 2015–01–22
  2. By: Christos Genakos; Pantelis Koutroumpis; Mario Pagliero
    Abstract: We study the repeal of a regulation that imposed maximum wholesale and retail markups for all but five fresh fruits and vegetables. We compare the prices of products affected by regulation before and after the policy change and use the unregulated products as a control group. We find that abolishing regulation led to a significant decrease in both retail and wholesale prices. However, markup regulation affected wholesalers directly and retailers only indirectly. The results are consistent with markup ceilings providing a focal point for collusion among wholesalers.
    Keywords: Markups; markup regulation; policy evaluation
    JEL: L0 L1 L4 L5
    Date: 2014–10
  3. By: Fabio Pinna; Stephan Seiler
    Abstract: We estimate the effect of consumer search on the price of the purchased product in a physical store environment. We implement the analysis using a unique data set obtained from radio frequency identification tags, which are attached to supermarket shopping carts. This technology allows us to record consumers' purchases as well as the time they spent in front of the shelf when contemplating which product to buy, giving us a direct measure of search effort. Controlling for a host of confounding factors, we estimate that an additional minute spent searching lowers price paid by $2.10 which represents 8 percent of average trip-level expenditure.
    Keywords: Consumer search; in-store marketing; path data
    JEL: D12 D83 L11 L15
    Date: 2014–09
  4. By: Alessandro Gavazza; Alessandro Lizzeri; Nikita Roketskiy
    Abstract: We quantitatively investigate the allocative and welfare effects of secondary markets for cars. An important source of gains from trade in these markets is the heterogeneity in the willingness to pay for higher-quality (newer) goods, but transaction costs are an impediment to instantaneous trade. Calibration of the model successfully matches several aggregate features of the U.S. and French used-car markets. Counterfactual analyses show that transaction costs have a large effect on volume of trade, allocations, and the primary market. Aggregate effects on consumer surplus and welfare are relatively small, but the effect on lower-valuation households can be large.
    JEL: N0 L91 L96 L81
    Date: 2014–11
  5. By: Lindemann, Henrik
    Abstract: Despite the positive effect electricity grids separated from generation and supply by ownership are expected to have on the level of competition in the non-network activities, several EU member states still adhere to a solely legally unbundled transmission grid. This choice might be induced by regulators focusing on objectives other than the promotion of consumer interests: theoretically analyzing the decisions an authority takes on both the unbundling regime and the grid charge when it supervises a network monopolist providing a downstream Cournot duopoly with capacity, we find an agency pursuing consumer-oriented goals to always implement Ownership Unbundling. For a regulator acting in the interests of the industry or the government, though, results suggest the authority to be indifferent between Legal and Ownership Unbundling; minor potential drawbacks of a network separated by ownership for the agency or the companies might then tip the scales and cause the regulator to adhere to Legal Unbundling.
    Keywords: Legal Unbundling,Ownership Unbundling,Regulatory Authorities,Regulatory Objectives
    JEL: D73 L12 L13 L42 L50 L51 L94
    Date: 2015–01

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