nep-ind New Economics Papers
on Industrial Organization
Issue of 2015‒02‒28
seven papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Selection Effects in Producer-Price Setting By Carlsson, Mikael
  2. Demand systems for market shares By Fosgerau, Mogens ; de Palma, André
  3. Stability in price competition revisited By Faias, Marta ; Hervés-Estévez, Javier ; Moreno-García, Emma
  4. Patent Litigation Insurance By Anne Duchêne
  5. Empirical Games of Market Entry and Spatial Competition in Retail Industries By Aguirregabiria, Victor ; Suzuki, Junichi
  6. Mobile Telecommunications and Digital Innovations By Olga Syraya
  7. The Role of State-Firm Relationships in Fostering Competitiveness: Telefonica’s Upgrading By Angela Garcia Calvo

  1. By: Carlsson, Mikael (Uppsala University )
    Abstract: We use micro data on product prices linked to information on the firms that set them to test for selection effects (state dependence) in micro-level producer pricing. In contrast to using synthetic data from a canonical Menu-Cost model, we find very weak, if any, micro-level selection effects when running price change probability regressions on actual data. Also, fitting a model that nests both time- and state-dependent elements (the CalvoPlus model of Nakamura and Steinsson, 2010), the parameters mimic the standard Calvo (1983) model. Thus, upstream in the supply chain, price setting is best characterized by a very low degree of self-selection.
    Keywords: Price-setting; Business Cycles; Micro Data
    JEL: D40 E30 L16
    Date: 2014–11–01
  2. By: Fosgerau, Mogens ; de Palma, André
    Abstract: We formulate a family of direct utility functions for the consumption of a differentiated good. This is used to generate a family of demand systems with flexible substitution patterns. Demand models for market shares can be estimated by regression enabling the use of instrumental variables. Models for microdata can be estimated with maximum likelihood. Our direct utility functions are based on a generalization of the Shannon entropy. They include dual representations of all additive random utility discrete choice models and more.
    Keywords: market shares; product differentiation; duality; discrete choice; entropy
    JEL: C25 D01 L1
    Date: 2015–02–02
  3. By: Faias, Marta ; Hervés-Estévez, Javier ; Moreno-García, Emma
    Abstract: We consider consumers with the same reservation price, who desire to buy at most one unit of a good. Firms compete only in prices but there are other features firms cannot control that would eventually lead an agent to buy in one firm or another. We introduce such uncertainty in a model of a price competition game with incomplete information. This competition takes place under stability and we provide equilibrium existence results. We analyze different specifications of residual demands which yield further interpretations that deepen the phenomenon of price dispersion, Bertrand’s paradox and market power.
    Keywords: Price competition, incomplete information, Nash equilibrium, ap- proximate equilibrium, price dispersion.
    JEL: C70 D4 L00 L1 L13
    Date: 2014–08–31
  4. By: Anne Duchêne
    Abstract: Empirical studies have found that high litigation costs often discourage small firms from investing in R&D, as they fear their patent will be infringed and they will not be able to afford litigation. As a solution, firms have been encouraged to purchase insurance policies which, by covering legal costs in the event of a trial, serve as a commitment to litigate so that settlement terms are more favorable to the insured, and potential infringement is less likely to occur. However, very few firms are purchasing insurance and the market remains poorly developed throughout the world. I show that firms might be discouraged from buying insurance because of information asymmetries, not only with insurance companies but also with their competitors. I study the situation of a patent holder, who perfectly knows the validity and enforceability (“strength”) of her patent, that has been infringed by a competitor with less information on the patent. The patent holder can purchase insurance to have a credible threat to litigate and increase the infringer’s settlement offer. But the decision to buy an insurance conveys information about the patent strength to the infringer. As a result the patent holder may prefer not to be insured rather than transmitting this information. This signaling effect can yield different equilibriums, in particular a pooling equilibrium “no insurance” where no patent holder purchases an insurance. I study if this situation might be improved by imposing a mandatory insurance or by giving the insurer a share of litigation proceeds.
    Keywords: litigation, settlement, patent litigation, insurance.
    JEL: D82 K41 G22 O34
    Date: 2015–02–10
  5. By: Aguirregabiria, Victor ; Suzuki, Junichi
    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: econometrics of discrete choice games; market entry and exit; retail industries; spatial competition
    JEL: L11 L13 L81 R30
    Date: 2015–02
  6. By: Olga Syraya (Europäisches Institut für Internationale Wirtschaftsbeziehungen (EIIW) )
    Abstract: This paper describes and analyzes the most recent international trends in the development of mobile communications. The first part deals with the key sectors of the mobile communications market: mobile network, handsets and smartphone operating systems. We focus on the current deployment of Long Term Evolution networks and present the main factors of their worldwide success and their advantages over previous mobile technologies. Furthermore, special attention is given to the historical development of the mobile communications sectoral system of innovation, which contributes to a better understanding of the success of 2G (GSM) and challenges faced by 3G (UMTS) technologies. Finally, we analyze the international diffusion of mobile communications from the lead market perspective, suggest new promising directions of research and outline policy measures for the promotion of mobile communications.
    Keywords: Regulation, Telecommunication, EU, Innovation, Convergence
    JEL: L43 L96 N14 O31
    Date: 2014–05
  7. By: Angela Garcia Calvo
    Abstract: This paper examines the structures behind competitive transformation in telecommunications. The analysis is based on qualitative evidence from Telefonica’s transformation since the mid-1980s and comparisons with BT, Orange, and Deutsche Telekom. Telecommunications is a critical industry whose services are crucial inputs for most economic activities. Telefonica’s upgrading remains a rare example in which a non-leading firm reached the efficiency frontier. I argue that Telefonica’s upgrading cannot be explained without defining business-state interactions in Spain and characterizing the impact of the shift from the natural monopoly to the market paradigm. Spain resolved the tension between government objectives to universalise service and Telefonica’s concern for profitability through a non-hierarchical system of negotiated interactions and mutual exchanges that helped the state and the incumbent further their respective goals. Overall, this paper enters into the debate about the state’s role in industrial transformation and provides insights about the conditions that favour competitiveness in telecommunications.
    Keywords: political economy, telecommunications, business-state relations, upgrading, competitiveness
    JEL: L1 L16 L96 L98
    Date: 2014

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