nep-ind New Economics Papers
on Industrial Organization
Issue of 2015‒02‒16
fifteen papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Second-Degree Price Discrimination on Two-Sided Markets By Böhme, Enrico
  2. Bargaining Power and Local Heroes By Heimeshoff, Ulrich; Klein, Gordon
  3. Do Leniency Policies facilitate Collusion? Experimental Evidence By Rau, Holger; Clemens, Georg
  4. Remedies vs. Extreme Options in Merger Control By Dertwinkel-Kalt, Markus; Wey, Christian
  5. Cournot Oligopoly, Homogeneous Products and Grappa Market: An Econometric Study By Laura Onofri; Vasco Boatto
  6. The future of the transport industry By Aggelos AGGELAKAKIS; Joao Bernardino; Maria Boile; Panayotis Christidis; Ana Condeco; Michael Krail; Anestis Papanikolaou; Max Reichenbach; Jens Schippl
  7. Empirical Games of Market Entry and Spatial Competition in Retail Industries By Victor Aguirregabiria; Junichi Suzuki
  8. Asset Divestment as a Response to Media Attacks in Stigmatized Industries By Durand , Rodolphe; Vergne , Jean-Philippe
  9. Competition and R&D Financing Decisions: Theory and Evidence from the Biopharmaceutical Industry By Richard T. Thakor; Andrew W. Lo
  10. R&D, Patenting and Market Regulation: Evidence from EU Electricity industry By Carlo Cambini; Federico Caviggioli; Giuseppe Scellato
  11. Deregulating fixed voice services? Empirical evidence from the European Union By Lange, Mirjam R. J.; Šaric, Amela
  12. Opportunity cost for the digital dividend bandwidth: Application and comparison with LTE auctions outcomes By Garelli, Nicola
  13. Analysing standardisation processes as technology trajectories in the mobile ecosystem: Implications for competition and innovation By Hallingby, Hanne Kristine
  14. Innovation in European telecommunication regulation: The diffusion of regulatory remedies By Klein, Gordon; Wendel, Julia
  15. Game-theoretical models of the competitive dynamics in optical network service provision By Waldman, Helio; Bortoletto, Rodrigo Campos

  1. By: Böhme, Enrico
    Abstract: The paper provides an analysis of the second-degree price discrimination problem on a monopolistic two-sided market. In a simple framework with two distinct types of agents on market side 1, we show that under incomplete information the extent of platform access for high-demand agents is strictly reduced below the benchmark level with complete information. In addition, the paper finds that it is feasible in the monopoly optimum that the bundle for low-demand agents is more expensive than the one for high-demand agents if the extent of interaction with agents from the opposite market side is assumed to be bundle-specific.
    JEL: D42 D82 L12
    Date: 2014
  2. By: Heimeshoff, Ulrich; Klein, Gordon
    Abstract: Retailer bargaining power is an important aspect of many international antitrust investigations. Size and market share analysis are often the cornerstones of bargaining power identi cation. However, other factors, like consumer behavior, i.e. "one-stop shopping", can heavily a ect the bargaining environment. We show and quantify, analyzing a natural experiment of a supply boycott of small local beer breweries towards a national retailer, that "one-stop shopping" leads to severe purchasing externalities, which is a novel nding. This results in a shift in the bargaining position in favor of the manufacturer, which is elevant for antitrust investigations. Neglecting those externalities in investigations and focusing mainly on size arguments may lead to a wrong assessment of bargaining power. Therefore a careful a case by case analysis of bargaining power is necessary in antitrust investigations.
    JEL: L42 L81 L13
    Date: 2014
  3. By: Rau, Holger; Clemens, Georg
    Abstract: This paper experimentally analyzes the cartel coordination challenge induced by the discrimination of cartel ringleaders in leniency policies. Ringleaders often take a leading role in the coordination and formation of a cartel. A leniency policy which grants amnesty to all "whistleblowers" except for ringleaders may therefore reduce the incentive to become a ringleader and may disrupt cartel formation. We analyze discriminatory and non-discriminatory leniency policies in a multi-stage cartel formation experiment where multiple ringleaders may emerge. Although theory predicts that cartels will always be reported, whistleblowing rarely occurs. Paradoxically the discriminatory leniency policy induces more firms to become ringleaders, which ultimately facilitates coordination in the cartel.
    JEL: L41 K21 C92
    Date: 2014
  4. By: Dertwinkel-Kalt, Markus; Wey, Christian
    Abstract: We investigate how remedies in merger control affect information acquisition by an antitrust agency. We identify conditions under which an ''extreme options'' regime which does not allow for remedies improves information acquisition by the agency which increases consumer surplus. The legislator (''principal'') and the agency share the same objective function with the only exception that the latter must bear information costs. When remedies are not feasible, then the agency's incentive to acquire information is relatively large as a false decision tends to have large adverse effects. When remedies are feasible, the intermediate option does not involve such risks, so that incentives to acquire information decreases. However, our results depend crucially on the institutional environment. In the case of an adversial system, information acquisition incentives are not per se lower if remedies are feasible.
    JEL: L13 K21 L40
    Date: 2014
  5. By: Laura Onofri; Vasco Boatto
    Abstract: In this study, using scanner data, collected from super-market transactions in 2009, we estimate an eight equations simultaneous model with a 3SLS routine, with the objective to empirically analyze the Grappa market structure. Results show that the supply side of the Grappa market is characterized by an oligopolistic structure, where the dominant firms compete as oligopolists à la Cournot with homogeneous products. Firms’ competition is mostly played on the quantity grounds and mostly disregards product differentiation strategies. The dominant firms produce and supply a “cheap”, homogenous product. Interpretation of the results focus on cultural consumption of this very “ancient” liquor and corroborate previous studies, where hedonic analysis of the demand side has shown consumers’ very low/null implicit prices for the product differentiated characteristics.
    Keywords: Cournot oligopoly, 3SLS, scanner data, grappa market.
    JEL: L13 Q11 C3
    Date: 2015–01–01
  6. By: Aggelos AGGELAKAKIS (CERTH/HIT); Joao Bernardino (TIS); Maria Boile (CERTH/HIT); Panayotis Christidis (European Commission – JRC - IPTS); Ana Condeco (European Commission – JRC - IPTS); Michael Krail (Fraunhofer ISI); Anestis Papanikolaou (CERTH/HIT); Max Reichenbach (Karlsruhe Institute of Technology- ITAS); Jens Schippl (Karlsruhe Institute of Technology- ITAS)
    Abstract: This publication aims to bridge the gap between the analysis of the trends in the European transport system and the evaluation of their impacts on competitiveness. Specifically, this report presents the future challenges, demand drivers and upcoming innovations which can have a considerable impact on the global demand patterns for the passenger and freight transport and how this might affect the competitiveness of related industries and service providers. Emphasis is given to targeted research strategies. The goal is to investigate the challenges for the European transport sector in the long term, in order to develop the suitable strategic options for European transport research policy.
    Keywords: transport, industry, competitiveness, research
    JEL: L90 L99 R23 R40 R49
    Date: 2015–01
  7. By: Victor Aguirregabiria; Junichi Suzuki
    Abstract: We survey the recent empirical literature on structural models of market entry and spatial competition in oligopoly retail industries. We start with the description of a framework that encompasses various models that have been estimated in empirical applications. We use this framework to discuss important specification assumptions in this literature: firm heterogeneity; specification of price competition; structure of spatial competition; firms' information; dynamics; multi-store firms; and structure of unobservables. We next describe different types of datasets that have been used in empirical applications. Finally, we discuss econometric issues that researchers should deal with in the estimation of these models, including multiple equilibria and unobserved market heterogeneity. We comment on the advantages and limitations of alternative estimation methods, and how these methods relate to identification restrictions. We conclude with some issues and topics for future research.
    Keywords: Retail industries; Market entry and exit; Spatial competition; Econometrics of discrete choice games
    JEL: L11 L13 L81 R30
    Date: 2015–02–02
  8. By: Durand , Rodolphe; Vergne , Jean-Philippe
    Abstract: In stigmatized industries characterized by social contestation, hostile audiences, and distancing between industry insiders and outsiders, firms facing media attacks follow different strategies from firms in uncontested industries. Because firms avoid publicizing their tainted-sector membership, when threatened, they can respond by divesting assets from that industry. The authors' analyses of the arms industry demonstrate that media attacks on the focal firm and its peers both increase the likelihood of divestment for the focal firm. Specifically, attacks on the focal firm are the most consequential, followed by attacks on peers in the same industry subcategory, and by attacks on peers in different subcategories. These findings shed new light on divestment as a response to media attacks in stigmatized industries and lead the authors to rethink impression management theory.
    Keywords: stigma; impression management; divestment; media; categories; reputation; defense industry
    JEL: L14 L60 M10
    Date: 2014–03–25
  9. By: Richard T. Thakor; Andrew W. Lo
    Abstract: R&D-intensive firms such as biotechnology and pharmaceutical companies follow very different corporate financial policies from firms in less R&D-intensive industries. To account for these differences, we propose an equilibrium model for such firms in which their capital structure, amount of R&D investment, and information disclosure policy are all endogenously determined in response to the degree of competition in the industry. The key results are that, as competition increases, such firms will: (1) increase R&D investment and reduce investment in assets-in-place that support existing products; (2) carry more cash and maintain less net debt; and (3) experience declining betas but greater total stock return volatility due to higher idiosyncratic risk. While the focus is on the biopharmaceutical industry, the results are broadly applicable to other R&D-intensive industries as well. We confirm the model's empirical implications using historical data from the biopharmaceutical industry, and our tests also deal with the endogeneity issue introduced by the fact that a firm's R&D investments and the product-market competition it faces influence each other.
    JEL: D82 D83 G31 G32 L11 L15 L25 L65
    Date: 2015–01
  10. By: Carlo Cambini; Federico Caviggioli; Giuseppe Scellato
    Abstract: In this paper we study the effects of the changes in the level of product market regulation on the industry-level innovation intensity in the Electricity sector across 16 European countries during years 1990-2009. We matched data on R&D budgets and EPO patent applications from IEA and Eurostat Databases and indexes of market regulation conditions from OECD, in order to test the impact of deregulatory policies on the propensity to innovate in new energy technologies. Our findings indicate an increase in the aggregated Electricity R&D and in patenting activities following market deregulation. Our measure of market regulation intensity is based on the aggregation of three factors that capture respectively entry barriers, public ownership and vertical integration. Econometric results suggest that policies aimed at a reduction in vertical integration have a positive impact on both industry-level R&D and patenting. The reduction of public ownership of incumbent operators and entry barriers are mostly associated to a significant increase in R&D expenditures. In the paper we discuss the implication of this evidence in light of the current trend in investment in the electricity sector in Europe.
    Keywords: Innovation, Patents, Regulation, Electricity.
    JEL: L94
    Date: 2015
  11. By: Lange, Mirjam R. J.; Šaric, Amela
    Abstract: This paper analyzes the relationship between the traditional fixed-line, mobile and Voice over IP (VoIP) telephony in the EU. In doing so, it aims at filling the gap in the empirical literature on the substitution patterns between these technologies in a comprehensive way. It relies on demand estimation for fixed-line telephony using a unique data set comprising 25 EU member states for the 2006:Q2 - 2011:Q4 period. Employing instrumental variable approach, demand-side substitution for VoIP as well as mobile telephony services is found to be prevalent. Estimated short-run own- and cross-price elasticities are in the inelastic range, however, in the long run demand is clearly elastic. Hence, our results underpin the Europeans Commission's current decision to lift the ex ante regulation on the fixed-line telephony market.
    Keywords: Fixed networks,Mobile services,Market definition,(De)regulation
    JEL: C23 L43 L51 L96
    Date: 2014
  12. By: Garelli, Nicola
    Abstract: Radio spectrum represents a scarce resource assigned to operators by national regulatory authorities through auctions, beauty contests or other mechanisms, aimed at introducing sufficient incentives for an optimal use of such a resource. A prerequisite for designing efficient assignment methods is that regulatory agencies, which typically rely on incomplete and asymmetric information, clearly identify the expected value of the spectrum, to be used to set auction bases, prices in beauty contests and administered incentive prices. Those considerations are particularly actual since the transition to digital television transmission opened the space for reallocating parts of the spectrum, to increase its efficiency. The paper aims at refining a techno-analytical approach to estimate the value of spectrum portions, with a methodology based on opportunity-cost evaluation and at comparing the results with the outcomes of the recent LTE spectrum auctions. Research results could be used by regulatory agencies and by operators to better shape their approach to spectrum valuation.
    Keywords: Spectrum management,Digital Dividend,LTE,Opportunity cost,Investment
    JEL: L51 L96
    Date: 2014
  13. By: Hallingby, Hanne Kristine
    Abstract: The traditional mobile industry expresses worries for the future due to converging technologies and new actors. Standards are the foundation for convergence, and have been central in all current subsectors of the mobile industry. However, subsectors have developed different technological knowledge, routines and path dependencies in their standardisation processes and can be understood as different technology trajectories within the same technology paradigm. The research question in this comparative case study is: What are characteristics, differences and similarities of important standardisation processes in the mobile telecommunication ecosystem? The systematic comparison suggests that the technology trajectories 3GPP and ETSI neither are able to spur necessary innovation in the wider ecosystem, nor to ensure satisfying profit. IETF and 3WC spur innovation through an extensive accessibility to standards, but appropriability conditions are challenging. It is private platforms such as Google and Apple that seem handle both aspects: to enable innovation and adoption by making technology elements public through extension markets, and simultaneously ensure profit by keeping technology private. This research contributes by clarifying how the tension between private and public goods is played out in major technology trajectories in the mobile telecommunication sector; especially helpful is the distinction between standard openness and extension markets as different means for making technology public. The four concepts developed for assessing the status of standardization processes can be used for structuring discussions on the issue, and for future analyses of technology innovations in the telecommunication sector.
    Date: 2014
  14. By: Klein, Gordon; Wendel, Julia
    Abstract: Regulation of traditional narrow- and broadband networks remains a key issue in telecommunication policies. Due to the vertical structure of telecommunication markets and to promote investment, regulatory policies in many European Member States focus on wholesale obligations (so-called remedies) which mandate incumbent operators to share sell or split their infrastructure. On the European level, such remedies were introduced with regularity (e.g. 'Local Loop Unbundling' in 2000). Interestingly, in most cases the obligations were before implemented and tested at the national level. This paper analyses the process of diffusion of different regulatory means across European Member States and presents respective factors of influence on the event of (non-)adoption by the NRAs. Using a panel of European countries for a time period of 17 years, we find different patterns for different regulatory policies and in particular an effect of current state of broadband penetration levels.
    Date: 2014
  15. By: Waldman, Helio; Bortoletto, Rodrigo Campos
    Date: 2014

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