nep-ind New Economics Papers
on Industrial Organization
Issue of 2015‒02‒11
eight papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Pricing a Package of Services By Ketelaar, Felix; Szalay, Dezso
  2. Price Comparison Websites By Ronayne, David
  3. Do M&A Lawsuits Discipline Managers' Investment Behavior? By Bourveau , Thomas; Spira , Sven
  4. A primer on damages of cartel suppliers: Determinants, standing US vs. EU and econometric estimation By Bueren, Eckart; Smuda, Florian
  5. A tale of two regulators: telecom policy participation in Canada By Tamara Shepherd; Gregory Taylor; Catherine Middleton
  6. The new UK model of press regulation By Hugh Tomlinson
  7. Price dispersion and station heterogeneity on German retail gasoline markets By Haucap, Justus; Heimeshoff, Ulrich; Siekmann, Manuel
  8. Market Structure in Transition: Entry and Competition in Slovakia By Martin Lábaj; Karol Morvay; Peter Silaniè; Christoph Weiss

  1. By: Ketelaar, Felix; Szalay, Dezso
    Abstract: We study a tractable two-dimensional model of price discrimination. Consumers combine a rigid with a more flexible choice, such as choosing the location of a house and its quality or size. We show that the optimal pricing scheme involves no bundling if consumer types are affiliated. Conversely, if consumer types are negatively affiliated over some portion of types then some bundling occurs.
    Keywords: Bundling; Monopoly; Multidimensional screening; Price discrimination
    JEL: D42 D82 D86
    Date: 2014–12
  2. By: Ronayne, David (Department of Economics, University of Warwick)
    Abstract: Price comparison websites are commonly thought to benefit consumers by increasing competitive pressure between firms, in turn lowering prices faced by consumers. This article investigates the impact of the introduction of a PCW or ‘web aggregator’ to the market for a homogeneous good. We find that the introduction of a PCW increases prices, harming consumers. Under competing aggregators, consumer welfare does not improve when consumers check only one, and is only guaranteed to improve when they check all of them. Furthermore, when consumers do not check all, increasing the number of aggregators can increase prices. All equilibria feature price dispersion. Key words: JEL classification:
    Date: 2015
  3. By: Bourveau , Thomas; Spira , Sven
    Abstract: Using securities lawsuits related to M&A as an industry shock, the authors examine whether litigation risk acts as an external governance mechanism by disciplining managers' investment decisions. In the two years following an M&A lawsuit (a lawsuit where plaintiffs allege that the firm hid poor performance related to a prior acquisition), they find that industry peers experience higher bidder announcement returns, choose more adequate methods of payment, and engage in fewer diversifying and smaller takeovers. Collectively, this evidence is consistent with post lawsuit deals being of higher quality. Furthermore, the authors find that peer firms respond to the increased litigation risk by reducing abnormally high investment expenditures. Finally, the reactions are stronger among firms with fewer anti-takeover provisions. Overall, their results show that M&A lawsuits can have an industry-wide deterrence effect on firms' suboptimal investment behavior.
    Keywords: Litigation Risk; Mergers; Investment Decisions; Corporate Governance
    Date: 2014–06–04
  4. By: Bueren, Eckart; Smuda, Florian
    Abstract: While private actions for damages against price-cartels by direct and indirect customers receive much attention, it is largely unresolved to what extent other groups that are negatively affected may claim compensation. This paper focuses on probably the most important one: suppliers to a downstream sellers' cartel. The paper shows graphically and analytically that cartel suppliers are negatively affected by the conspiracy depending on three effects: a direct quantity, a price and a cost effect. The article then examines whether suppliers are entitled to claim ensuing losses as damages in the US and the EU, with exemplary looks at England and Germany, thereby delineating the boundaries of the right to damages in different legal systems. We find that, while the majority view in the US denies standing, the emerging position in the EU, considering also recent case law and the forthcoming Damages Directive, allows for approving cartel supplier damage claims. We argue that this can indeed be justified in view of the different institutional context and the goals assigned to the right to damages in the EU. The Annex complements our result that supplier damage claims are practically viable by showing how supplier damages can be estimated econometrically with an adjusted residual demand model.
    Keywords: competition policy,comparative law,private enforcement,cartels,suppliers,quantification of damages,standing
    JEL: L41 K21
    Date: 2014
  5. By: Tamara Shepherd; Gregory Taylor; Catherine Middleton
    Abstract: What are the challenges to effective academic participation in telecommunications policymaking? In this article, the authors analyze their experiences with the Canadian Radio-television and Telecommunications Commission and Industry Canada as examples. Their goal is to increase academic policy engagement despite negligible government support for public interest advocacy, as traditional public interest values are discarded by regulators because new technologies are framed as individual rather than collective. Industry Canada is deemed opaque with an “advocacy deficit,” though the CRTC is more transparent and inviting. To succeed in both venues, academics need to work with advocacy organizations as “circumstantial activists.” Such academic participation can offer new conceptual frameworks, add nuance to discourse, substantiate the use of scholarly research in policy debates, and add to policy theory building.
    JEL: L91 L96
    Date: 2014–02
  6. By: Hugh Tomlinson
    Abstract: The Leveson Report on the Culture, Practices and Ethics of the Press proposed a system under which the independence and effectiveness of a self-regulator set up by the press could be assured through a process of independent “audit” or “recognition”. The Royal Charter on Self-Regulation of the Press establishes an independent Recognition Panel, which does not regulate the press, but decides whether a self-regulator meets pre-set criteria for regulatory independence and effectiveness. The Recognition Panel is independently appointed and protected from political interference by the terms of the Royal Charter and by a statutory requirement that a two-thirds majority of both Houses of Parliament is required to amend that Charter. There is a “double lock” on political interference with the recognition system. Under the system proposed by Leveson the press remains in operational control of its own regulation and politicians are excluded from any role in the process. The Recognition Panel is an auditor, not a regulator.
    JEL: L91 L96
    Date: 2014–03
  7. By: Haucap, Justus; Heimeshoff, Ulrich; Siekmann, Manuel
    Abstract: Price levels and movements on gasoline and diesel markets are heavily debated among consumers, policy-makers, and competition authorities alike. In this paper, we empirically investigate how and why price levels differ across gasoline stations in Germany, using eight months of data from a novel panel data set including price quotes from virtually all German stations. Our analysis specifically explores the role of station heterogeneity in explaining price differences across gasoline stations. Key determinants of price levels across fuel types are found to be ex-refinery prices as key input costs, a station's location on roads or highway service areas, and brand recognition. A lower number of station-specific services implies lower fuel price levels, so does a more heterogeneous local competitive environment.
    Keywords: Gasoline Pricing,Price Dispersion,Fuel Prices,Gasoline Stations
    JEL: L11 L71
    Date: 2015
  8. By: Martin Lábaj (University of Economics in Bratislava, Faculty of National Economy, Department of Economic Policy); Karol Morvay; Peter Silaniè; Christoph Weiss
    Abstract: The present paper provides first empirical evidence on the relationship between market size and the number of firms for a transition economy. We estimate size thresholds required to support different numbers of firms for seven retail and professional service industries in a large number of distinct geographic markets in Slovakia. The empirical analysis is carried out for three time periods (1995, 2001 and 2010) characterizing different stages of the transition process. Our results suggest that the relationship between market size and the number of firm has changed substantially over time. While entry threshold ratios tend to be larger than one and decline with the number of firms in most professions in 1995, the estimation results obtained for 2010 suggest entry threshold ratios much closer to one. This finding is consistent with observations suggesting a significant decline in entry barriers as well as an intensification of competition over time.
    Keywords: entry thresholds, competition, Slovakia, transition, geographic markets
    JEL: L22 D22 M13 R11
    Date: 2014–01–15

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