nep-ind New Economics Papers
on Industrial Organization
Issue of 2015‒05‒16
nine papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Effectiveness of quality signalling: brand versus certification By Ding, Yulian; Veeman, Michele
  2. Home Bias in Multimarket Cournot Games By Catherine Roux; Luís Santos-Pinto; Christian Thöni
  3. Payment Evasion By Buehler, Stefan; Halbheer, Daniel; Lechner, Michael
  4. Firm-Specific Information and Explicit Collusion in Experimental Oligopolies By Francisco Gomez-Martin; Sander Onderstal; Joep Sonnemans
  5. Bargaining agenda in public and private monopoly. By Fanti, Luciano; Buccella, Domenico
  6. Dynamics of yardstick regulation: Historical cost data and the ratchet effect By Meya, Johannes
  7. On the Extent to which the Presence of Intermediate-stop(s) Air Travel Products Influences the Pricing of Nonstop Air Travel Products By Gayle, Philip; Wu, Chi-Yin
  8. Portfolio Considerations in Differentiated Product Purchases: An Application to the Japanese Automobile Market By Wakamori, Naoki
  9. Specialisation as a trend in modern hotel industry By Nadia Pavia; Jasmina Gržinić; Tamara Floričić

  1. By: Ding, Yulian; Veeman, Michele
    Keywords: Consumer/Household Economics, Production Economics,
    Date: 2015–03
  2. By: Catherine Roux; Luís Santos-Pinto; Christian Thöni
    Abstract: We explore the role played by trade costs for the home bias in trade. In a series of Cournot duopoly experiments with a home and an export market, we compare output choices when firms face different levels of export costs. We find that there is two-way trade in identical products and that firms hold the majority market share in their home market. The resulting home bias turns out to be, however, stronger than that predicted by theory, and it even occurs without trade costs. We have strong evidence that collusion contributes to the home bias observed in our experiment.
    Keywords: Intra-Industry Trade; Spatial Oligopoly; Home Bias; Collusion; Experiment
    JEL: F12 L13 C91
    Date: 2015–04
  3. By: Buehler, Stefan; Halbheer, Daniel; Lechner, Michael
    Abstract: This paper models payment evasion as a source of profit by letting the firm choose the purchase price and the fine imposed on detected payment evaders. For a given price and fine, the consumers purchase, evade payment, or choose the outside option. We show that payment evasion leads to a form of second-degree price discrimination in which the purchase price exceeds the expected fine faced by payment evaders. We also show that higher fines do not necessarily reduce payment evasion. Using data on fare dodging on public transportation, we quantify expected fines and payment evasion.
    Keywords: Deterrence; Fine; Price Discrimination; Pricing
    JEL: L20 L30
    Date: 2015–05
  4. By: Francisco Gomez-Martin (University of Amsterdam); Sander Onderstal (University of Amsterdam); Joep Sonnemans (University of Amsterdam)
    Abstract: We experimentally study the effect of information about competitors’ actions on cartel stability and firms’ incentives to form cartels in Cournot markets. As in previous experiments, markets become very competitive when individualized information is available and participants cannot communicate. In contrast, when communication is possible, results reverse: Markets become less competitive and cartels become more stable when individualized information is available. We also observe that the extra profits that firms obtain thanks to the possibility to communicate are higher when individualized information is present, suggesting that firms have greater incentives to form cartels in that situation.
    Keywords: Cournot oligopoly; Cartels; Information; Experiments
    JEL: C92 L13 L41
    Date: 2015–05–10
  5. By: Fanti, Luciano; Buccella, Domenico
    Abstract: This paper analyses the choice of the bargaining agenda in a public/private unionised monopoly. Both the public and private monopolist always prefers the Right-To-Manage (RTM) to the Efficient Bargaining (EB) agenda. Private monopoly is socially preferred to the public one and conflict of interests on the preferred agenda arises between Government on one side and workers and consumers on the other side. In case of threat of market entry, the public (private) monopolist may strategically commit to RTM (EB) to deter entrance. If RTM is the ex-ante industry practice, a public incumbent company cannot use the EB agenda as a strategic tool to deter entry, while an incumbent private company can use it. An opposite result holds when EB is the established practice in the industry: the incumbent public company can use RTM to deter entry, while the incumbent private company cannot. The social welfare implications are analysed.
    Keywords: Public and private monopoly; Efficient Bargaining; Right-to-manage; Entry; Firm-union bargaining agenda
    JEL: H44 J51 L13
    Date: 2015–05
  6. By: Meya, Johannes
    Abstract: Real life applications of yardstick regulation frequently refer to historical cost data. While yardstick regulation cuts the link between firms own costs and prices firms may charge in a static setting, it does not do so in a dynamic setting where historical cost data is used. A firm can influence the price it will be allowed to charge in the future if its behavior today can affect future behavior of other firms that determines the price this firm will be able to charge later on. This paper shows that, assuming that slack, inflation of costs, is beneficial to firms, a trade-off between short term profit through abstinence from slack in (infinitely) many periods arises. A ratchet effect that yardstick regulation was meant to overcome can occur and firms can realize positive rents because of the use of historical cost data, even if firms are identical. Equilibria with positive slack can exist without any collusion between firms or threat. Moreover, this problem is more severe if the firm with lowest costs of all other firms instead of the average firm is the yardstick.
    Keywords: yardstick regulation,yardstick competition,ratchet effect,historical cost data
    JEL: L51 L98 C73
    Date: 2015
  7. By: Gayle, Philip; Wu, Chi-Yin
    Abstract: Analysts of air travel markets, which include antitrust authorities, are interested in understanding the extent to which the presence of intermediate stop(s) products influences the pricing of nonstop products. This paper uses a structural econometric model to investigate the potential pricing interdependence between these two product types in domestic air travel markets. Counterfactual experiments using the estimated model suggest that in many (but far from a majority) markets the current prices of nonstop products are at least 5% lower than they would otherwise be owing to the presence of intermediate-stop(s) products.
    Keywords: Substitutability and Pricing Interdependence between Differentiated Air Travel Products; Discrete Choice Demand Model; Random Coefficients Logit
    JEL: L13 L40 L93
    Date: 2015–05–05
  8. By: Wakamori, Naoki
    Abstract: Consumers often purchase more than one differentiated product, assembling a portfolio, which might potentially affect substitution patterns of demand and, as a consequence, oligopolistic firms’ pricing strategies. To study such consumers’ portfolio considerations, this paper develops and estimates a structural model that allows for flexible complementarities/substitutabilities, using Japanese household-level data on automobile purchases. My estimates suggest that complementarities arise when households purchase a combination of one small automobile and one minivan as their portfolio. Simulation results suggest that, due to such portfolio considerations, a policy proposal of repealing the current tax subsidies for small eco-friendly automobiles would not necessarily sharply decrease the demand.
    Keywords: Multiple Discrete Choices; Complementarities; Environmental Policy
    JEL: D43 L13 L62 Q58
    Date: 2015–04–21
  9. By: Nadia Pavia (Faculty of Tourism and Hospitality Management, Opatija, University of Rijeka, Croatia); Jasmina Gržinić (Faculty of Economics and Tourism, Juraj Dobrila University of Pula, Pula, Croatia); Tamara Floričić (Faculty of Economics and Tourism, Juraj Dobrila University of Pula, Pula, Croatia)
    Abstract: Purpose – In this paper, the importance of the organisation of specialised hotel offer is researched, as well as its competitiveness in the market. The research goal is determination of changes in hotel competitiveness levels following implementation of specialised label standards for the purposes of as high as possible quality organisation of the hotel industry in destination and resource valorisation. Design – The paper is conceived in the way that it presents Croatian hotel industry problem areas from different aspects. First of all, the problem is researched from the legislative aspect, followed by research on positions in specialisation in the Croatian hotel industry. The next component analyses hotel management attitudes on hotel performance and its competitiveness following the realised specialisation and, finally, attitudes of the legislative institution, which proscribes the specialisation standard, are examined. Methodology – To test the hypothesis, two interview researches were conducted which, with their results, synergically contribute to the derivation of conclusions. In the paper preparation, methods of data collection and creative thinking techniques, as well as other scientific and research methods were used. The statistical method includes processing and illustration of statistical information while meta-analysis and the historical method were used in the analysis of numerous scientific and professional works, with the aim of importance evaluation of Croatian hotel industry specialisation certification. Methodology is oriented to the research of the concept of special interest hotels and the sustainability-oriented business philosophy on the repositioning of Istria tourist destination and achieving business excellence. Approach – Authors' arguments and predictions are also presented in the paper. Specialisation in the hotel industry that promotes sustainable products and services on a segmented market are impetus for qualitative response to globalisation processes (synergy of differentiation, specialisation, globalisation and sustainable development). Findings – How much competitiveness and perception of specialised hotels have changed will, in this paper, be considered by means of qualitative research of hotel management attitudes. Introduction of specialised hotel content for groups with particular interests animates tourist trend development in pre and post-season periods, with implementation of entertainment and activity programmes and animation. Conclusions should contribute to new knowledge and point to the need for change and impact trends towards market and business excellence. Originality – The research originality is primarily evidenced in the first consideration and official listing of certified hotels by the Croatian Ministry of Tourism. Unsorted Ministry data is summarised and shaped into a table which implies the trends of development of specialised hotels in the Republic of Croatia. The researched hotel managers and the Ministry of Tourism staff, responsible for this segment, point to the new knowledge and open domains for new future research.
    Keywords: hotels, repositioning, selective offer, destination, quality, specialised label
    JEL: L83

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