nep-ind New Economics Papers
on Industrial Organization
Issue of 2015‒08‒25
eight papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. A Cournot triopoly with two identical producers By Alina Szuz; Anna Agliari; Tonu Puu
  2. Research and Development of an Optimally Regulated Monopolist with Unknown Costs By Ismail Saglam
  3. Economic Features of the Internet and Network Neutrality By Nicholas Economides
  4. Policy Instruments, Patents and International Technology Diffusion in a North-South Duopoly By Julien Berthoumieu
  5. Improving “National Brands”: Reputation for Quality and Export Promotion Strategies By Julia Cage; Dorothée Rouzet
  6. Competition Law and Policy in Singapore By Burton ONG
  7. E-commerce trends and impacts across Europe By Marin Falk and Eva Hagsten
  8. Advertising Competition in the French Free-To-Air Television Broadcasting Industry By Ivaldi, Marc; Zhang, Jiekai

  1. By: Alina Szuz (Independent researcher); Anna Agliari (Catholic University of Sacred Heart); Tonu Puu (Center for Regional Science, Umeå University, Umeå, Sweden)
    Abstract: In the present paper we analyze a Cournot oligopoly with three competitors, and we assume that two of them behave in the same way. Therefore the game reduces to a duopoly competition. We assume an iso-elastic demand function derived from a Cobb-Douglas utility function and linear costs. Furthermore the competitors adjust their moves giving a weight ߠ to the best calculated reply and another ሺ1 − ߠሻ for their own previous move. The adjustment process shows that the Cournot equilibrium point loses stability through a Neimark-Sacker bifurcation of subcritical type and this implies that diferent attractors may coexist. We show that the different attractors appear and/or disappear due to the occurrence of homoclinic and border collision bifurcations.
    Keywords: Cournot oligopoly; two-dimensional piecewise discrete map; subcritical Neimark-Sacker bifurcation; homoclinic bifurcation.
    Date: 2015–08
  2. By: Ismail Saglam (Department of Economics, Ipek University)
    Abstract: This paper studies whether a monopolist with private marginal cost information has incentives to make cost-reducing innovations through research and development (R&D) when its output and price are regulated according to the incentive-compatible mechanism of Baron and Myerson (1982). Under several assumptions concerning the cost of R&D and the regulator's beliefs about the marginal cost, we characterize the optimal level of R&D activities for the regulated monopolist when these activities are observed by the regulator as well as when they are not. We show that the regulated monopolist always chooses a higher level of R&D activities when its activities are unobserved. In situations where the social welfare attaches a sufficiently high weight to the monopolist welfare, the monopolist's R&D activities in the unobservable case even realize at a higher level than its activities when its output and price are not regulated. Moreover, whenever R&D activities increase productive efficiency, a less efficient monopolist would choose a higher level of R&D activities than a more efficient monopolist, irrespective of the observability of R&D.
    Keywords: Monopoly, Regulation,Research and Development
    JEL: D82 L51 O32
    Date: 2015–07
  3. By: Nicholas Economides (Stern School of Business, New York University. 44 West 4th Street, New York, NY 10012)
    Abstract: We discuss the issue of a possible abolition of network neutrality and the introduction of paid prioritization by residential broadband access networks.We show that, in short run analysis where bandwidth is fixed, and in the absence of congestion, network neutrality tends to maximize total surplus. When an ISP violates network neutrality and invests the extra profits to bandwidth expansion, the presence of more bandwidth alleviates the allocative distortion, and can even reverse it. We also discuss the network neutrality issue under the assumption of congestion, and characterize the set of utility functions for which network neutrality is optimal, as well as utility functions where it is optimal to prioritize. Finally, we review regulatory rules in the United States on network neutrality.
    Keywords: Internet, pricing, network neutrality, price discrimination, prioritization
    JEL: D43 L11 L1
    Date: 2015–04
  4. By: Julien Berthoumieu (Larefi - Laboratoire d'analyse et de recherche en économie et finance internationales - Université Montesquieu - Bordeaux 4)
    Abstract: This paper analyzes the relationship between public policy instruments and technology diffusion in a North-South duopoly, within an inter-temporal model where time is continuous. Initially, the Northern firm benefits from a new technology while the Southern firm uses only an old technology. There is a monopoly period with the new technology for the Northern firm. At the end, there is then technology diffusion from the Northern firm to the Southern firm. The Northern firm files patent in order to slow down diffusion. This article studies the impact of policy instruments: (i) a production subsidy, a patent subsidy and an import tariff implemented by the Northern country, (ii) a production subsidy, a public Research and Development investment and an import tariff implemented by the Southern country. The results show that the Northern government’s policies slow down technology diffusion by increasing the monopoly period with the new technology while the Southern government’s policies accelerate it. Welfare analysis demonstrates that governments are encouraged to implement each policy instrument, except in the case of patent subsidy. The Northern government is encouraged to tax patent expenditures. Nevertheless, the patent subsidy may be optimal if the Northern firm invests in Research and Development due to its technological advantage with the patent.
    Date: 2015–05–25
  5. By: Julia Cage (ECON - Département d'économie - Sciences Po); Dorothée Rouzet (ECON - Département d'économie - Sciences Po)
    Abstract: This paper studies the effect of firm and country reputation on exports when buyers cannot observe quality prior to purchase. Firm-level demand is determined by expected quality, which is driven by the dynamics of consumer learning through experience and the country of origin’s reputation for quality. We show that asymmetric information can result in multiple steady-state equilibria with endogenous reputation. We identify two types of steady states: a high-quality equilibrium (HQE) and a low-quality equilibrium (LQE). In a LQE, only the lowest-quality and the highest-quality firms are active; a range of relatively high-quality firms are permanently kept out of the market by the informational friction. Countries with bad quality reputation can therefore be locked into exporting low-quality, low-cost goods. Our model delivers novel insights about the dynamic impact of trade policies. First, an export subsidy increases the steady-state average quality of exports and welfare in a LQE, but decreases both quality and welfare in a HQE. Second, there is a tax/subsidy scheme based on the duration of export experience that replicates the perfect information outcome. Third, a minimum quality standard can help an economy initially in a LQE moving to a HQE.
    Date: 2015
  6. By: Burton ONG (National University of Singapore)
    Abstract: This paper provides a bird’s eye view of developments in field of competition law and policy in Singapore over the past 10 years, highlighting the progress made in the areas of enforcement, regulatory policy and advocacy.
    Keywords: Competition Law, Antitrust, Singapore
    JEL: L10 L19
    Date: 2015–08
  7. By: Marin Falk and Eva Hagsten
    Abstract: This study investigates the patterns and trends of e-commerce activities as well as their impact on labour productivity growth in a group of European countries. At hand for the exercise is a unique panel of micro-aggregated firm-level data for 14 European countries spanning over the years 2002 to 2010. The empirical approach is twofold: A static specification and a dynamic panel data model. The former is a difference specification estimated by OLS and the latter uses system GMM to account for endogeneity of e-commerce activities. For the impact analysis e-commerce is narrowed down to e-sales, measured as the percentage of firms receiving orders online (EDI or websites) or as the share of total sales in firms. Descriptive statistics reveal that the proportion of firms engaging in e-sales activities is slowly growing over time starting from a low level. The OLS estimates, controlling for industry, time and country effects, show that the change in e-sales activities and labour productivity growth are significantly positively related. Specifically, an increase in e-sales raises the rate of labour productivity by 0.3 percentage points over a two-year period for the total sample. Services industries experience a larger impact than manufacturing. In addition, dynamic panel data estimates demonstrate that smaller firms gain the most from increases in e-sales. Overall, for the total business sector, these estimates reveal that the increase in e-sales activities during the period studied accounts for 17 per cent of the total growth in labour productivity.
    Date: 2015
  8. By: Ivaldi, Marc; Zhang, Jiekai
    Abstract: This paper investigates empirically the advertising competition in the French free TV broadcasting industry in a two-sided framework. We specify a structural model of oligopoly competition of free TVs, and identify the shape and magnitude of the feedback loop between the TV viewers and the advertisers using French market data from March 2008 to December 2013. We contribute to the literature by implementing a simple procedure to test the conduct of TV channels, and identify that the nature of competition is of Cournot type on the French TV advertising market. In line with a decision of French anti-trust authority in 2010 which authorized the acquisition of two free broadcasting TV channels by a big media group under behavioral remedies, a series of competitive analysis has been conducted: We find firstly that the surpls of TV viewers keep raising after the decision of acquisition, suggesting that the implemented policy has been efficient in protecting the consumer surplus; Then, we find, by counterfactual simulation, that the merger of advertising agencies would not affect importantly the equilibrium outcomes in this industry, due to the strong network externalities between the TV viewers and the advertisers.
    Keywords: advertising; behavioral remedies; competition; market conduct; media; TV; two-sided market
    JEL: D22 D43 K21 L11 L13 L22 L41 M37
    Date: 2015–08

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