nep-ind New Economics Papers
on Industrial Organization
Issue of 2015‒04‒11
nine papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Oligopolistic vs. monopolistic competition: do intersectoral effects matter? By d’ASPREMONT, Claude; DOS SANTOS FERRERIA, Rodolphe
  2. Toward a theory of monopolistic competition By PARENTI, Mathieu; USHCHEV, Philip; THISSE, Jacques-François
  3. Horizontal and Vertical Firm Networks, Corporate Performance and Product Market Competition By Bischoff, Oliver; Buchwald, Achim
  4. An integrative framework of attributions after a business failure By Amankwah-Amoah, Joseph
  5. Information theory of firm By Ledenyov, Dimitri O.; Ledenyov, Viktor O.
  6. Competing one-way essential complements: the forgotten side of net neutrality By Broos, Sébastien; Gautier, Axel
  7. Revealing incentives for Compatibility Provision in Vertically differentiated Network Industries By Filomena Garcia; Cecilia Vergari
  8. Retail Agglomeration and Competition Externalities: Evidence from Openings and Closings of Multiline Department Stores in the US By John M. Clapp; Stephen L. Ross; Tingyu Zhou
  9. Industrial Upgrading in Global Production Networks: The Case of the Chinese Automotive Industry By Yansheng LI; Xin Xin KONG; Miao ZHANG

  1. By: d’ASPREMONT, Claude (CORE, UniversitéCatholique de Louvain, Voie du Roman Pays 34, B-1348 Louvain-la-Neuve, Belgium); DOS SANTOS FERRERIA, Rodolphe (BETA, Université de Strasbourg, France, and FCEE, Universidade Cataolica Portuguesa, Lisbon, Portugal)
    Abstract: Recent extensions of the standard Dixit-Stiglitz (1977) model, that go beyond the CES sub-utility assumption, while maintaining monopolistic competition, have mainly emphasized the role of iintrasectoral substitutability. We argue that introducing oligopolistic competition can be an alternative extension, still tractable, allowing to restore the role of intersectoral substitutability and reinforcing the general equilibrium dimension of the model. For this purpose, we use the concept of oligopolistic equilibrium and derive a comprehensive formula to characterize the set of potential equilibria with varying competitive toughness. For two particular competitive regimes, price competition and quantity competition, we show how, with strategic interactions, procompetitive or anti-competitive effects now depend on the elasticity of intersectoral substitution as compared to the elasticity of intrasectoral substitution.
    Keywords: monopolistic competition, oligopolistic competition, general equilibrium, intersectoral substitution
    JEL: D43 D51 L13
    Date: 2015–02–02
  2. By: PARENTI, Mathieu (Université catholique de Louvain, CORE, Belgium; NRU-Higher School of Economics, Russia); USHCHEV, Philip (NRU-Higher School of Economics, Russia); THISSE, Jacques-François (Université catholique de Louvain, CORE, Belgium; NRU-Higher School of Economics, Russia; CEPR)
    Abstract: We propose a general model of monopolistic competition, which encompasses existing models while being flexible enough to take into account new demand and competition features. The basic tool we use to study the market outcome is the elasticity of substitution at a symmetric consumption pattern, which depends on both the per capita consumption and the total mass of varieties. We impose intuitive conditions on this function to guarantee the existence and uniqueness of a free-entry equilibrium. Comparative statics with respect to population size, GDP per capita and productivity shock are characterized through necessary and sufficient conditions. Finally, we show how our approach can be generalized to the case of a multisector economy and extended to cope with heterogeneous firms and consumers.
    Keywords: monopolistic competition, general equilibrium, additive preferences, homothetic preferences
    JEL: D43 L11 L11 L13
    Date: 2014–11–18
  3. By: Bischoff, Oliver; Buchwald, Achim
    Abstract: This paper sheds new light on the assessment of firm networks via multiple directorships in terms of corporate firm performance. Using a large sample of European listed firms in the period from 2003 to 2011 and system GMM we find a significant compensation effect on corporate firm performance for the initial negative effect of horizontal multiple directorships by product market competition. In markets with effective competition, horizontal multiple directorships turn out to be an efficient mechanism to increase firm performance and thus assure competitive advantages. By contrast, linkages between up- and downstream firms have no significant influence on financial performance, irrespective of the level of competition intensity.
    Keywords: Horizontal and Vertical Firm Networks, Multiple Directorships, Corporate Governance, Product Market Competition, Dynamic Panel
    JEL: C23 G32 G34 L14 L25 L40
    Date: 2015–04–01
  4. By: Amankwah-Amoah, Joseph
    Abstract: Purpose – Although business failure has garnered a plethora of scholarly attention, there remains an ambiguity and lack of clarity about the process and types of attribution after a business failure. This article examines types of attributions after a business failure. Design/methodology/approach – The paper is based on a synthesis of the multiple streams of research on the subject. This led to the development of an integrated framework of attributions after business failure. Findings – The paper integrates the business failure literature and attribution theory to develop a 2x2 conceptual framework which not only accounts for the effect on pace (time), but also locus of causality in the attribution process. Crossing the two main causes of business failure with two types of attribution produces the 2x2 matrix of types of attribution after a business failure which includes: early internal attribution, late internal attribution, early external attribution and late external attribution. Research limitation/implications – Our theorisation of the literature offers a number of implications for theory and practice. Originality/value – The study also explains the underlying processes inherent in learning from others’ failures and consequences of business failure. Our framework removes some of the ambiguity in the existing literature and outlines a number of fruitful avenues for future research.
    Keywords: Business failure; attribution; collapse
    JEL: L1 L2 M0 M11 M14
    Date: 2014
  5. By: Ledenyov, Dimitri O.; Ledenyov, Viktor O.
    Abstract: The article formulates the information theory of firm, introduces the concept of firm as an operating system, which controls the firm’s operation by the means of the information resources processing, in an analogy with the operating system at a microprocessor in the computing devices, represents the director as an information processing element, describes the board of directors as the electronically-scanned electronically-steered phased array radar, considers the scientific problem of strategy creation by the interlocking interconnecting overlapping directors in the boards of directors in the firms in the economic system with the induced nonlinearities. We highlight a fact that the director makes the information sensing, filtering, processing, resonant absorption, analysis, decision making, strategy creation, hence it can be empirically represented as a processing element with the Harvard or von Neumann director’s mindset architectures in line with the digital signal processing science. We think that the board of directors in corporate governance system can be theoretically represented as the electronically-scanned electronically-steered phased array radar with a certain number of electronic devices (directors can be modeled as electronic devices with the active antenna elements, filters banks, digital signal processors, memory chipsets in agreement with the microwave and digital signal processing sciences). We developed the MicroITF operating system and software programs, 1) to control the firm operation by the means of the information resources processing; 2) to accurately characterize the director’s performance by means of a) the filtering of the generated/transmitted/received information by the director into the separate virtual channels, depending on the information content, and b) the measurement of the levels of signals in every virtual channel with the generated/transmitted/received information by the director, in the overlapping interconnecting interlocking directors networks in the boards of directors in the firms during the Quality of Service (QofS) measurements process, and 3) to create the winning virtuous business strategies by the interlocking interconnecting directors in the boards of directors in the firms, using the patented recursive artificial intelligence algorithm.
    Keywords: information theory of firm, firm business strategy creation, optimal corporate governance structures, board of directors composition, interlocking directors networks, boards seats accumulation number, information flows measurements, operating systems in computing devices, digital signal processing, information absorption, econophysics, microeconomics
    JEL: C0 D8 G30 G34 L0 L1 L2 L22 M1 M10 M13
    Date: 2015–03–31
  6. By: Broos, Sébastien (Université de Liège, HEC Management School, Belgium); Gautier, Axel (Université catholique de Louvain, CORE, Belgium)
    Abstract: We analyze the incentives of internet service providers (ISPs) to break net neutrality by excluding internet applications competing with their own products, a typical example being the exclusion of VoIP applications by telecom companies offering internet and voice services. Exclusion is not a concern when the ISP is a monopoly because it can extract the additional surplus created by the application through price rebalancing. When ISPs compete, it could lead to a fragmented internet where only one firm offers the application. We show that, both in monopoly and duopoly, prohibiting the exclusion of the app and surcharges for its use –a strong form of net neutrality– is not welfare improving.
    Keywords: net neutrality, foreclosure, one-way essential complements
    JEL: L12 L13 L51 L96
    Date: 2014–12–15
  7. By: Filomena Garcia (Indiana University and ISEG/UECE); Cecilia Vergari (University of Bologna)
    Abstract: Abstract: We determine the incentives for compatibility provision of firms that produce network goods with different intrinsic qualities. We consider the case in which both firms have the power to veto compatibility and the case in which none has this power. We obtain that if consumers have a strong preference for the network, there are multiple equilibria in pricing and consumer decisions. We show that in some equilibria, it is the high quality firm that invests in compatibility, whereas in others, the low quality fi rm triggers compatibility. The socially optimal compatibility level is zero, except under strong network effects, where one of the equilibria has all consumers buying the low quality good. In this case, a partial level of compatibility is optimal. Comparison between the privately and the socially optimal levels of compatibility depends on whether or not rms have veto power over compatibility.
    Keywords: Compatibility, vertical
    Date: 2015–05
  8. By: John M. Clapp (University of Connecticut); Stephen L. Ross (University of Connecticut); Tingyu Zhou (Concordia University)
    Abstract: From the perspective of an existing retailer, the optimal size of a cluster of retail activity represents a trade-off between the marginal increases in consumer attraction from another store against the depletion of the customer base caused by an additional competitor. We estimate opening and closing probabilities of multi-line department stores (“anchors”) as a function of pre-existing anchors by type of anchor store (low-priced, mid-priced or high-priced) using a bias corrected probit model with county and year fixed effects. We find strong negative competitive effects of an additional same type but no effect on openings of anchors of another type.
    Keywords: Multi-line Department Stores, Shopping Centers, Openings, Closings, Bias-Corrected Probit
    JEL: D43 L1 L21 L81 R1 R3 R12 R33
    Date: 2015–04
  9. By: Yansheng LI (Beijing Zhengxiang Yongdao Management Consulting Company); Xin Xin KONG (Chinese Academy of Science and Technology for Development); Miao ZHANG (Department of Development Studies, University of Malaya)
    Abstract: This article examines the development of China’s automotive industry. The evidence shows that integration in global production networks has stimulated upgrading of technological capabilities among automotive firms. However, the competitiveness and intra-industry analyses show mixed results. Although intraindustry trade in automotive products has improved since 2000, the trade competitiveness of completely built up vehicles has largely remained in low value added activities. Nevertheless, firm-level evidence shows that the industry has undergone considerable upgrading, albeit in low value added activities. Trade integration and host-country institutional support have been the prime driving forces of technological upgrading in the automotive industry in China.
    Keywords: automotive industry, foreign firms, production networks, technological capabilities
    JEL: L62 L22 L14 O31
    Date: 2015–02

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