nep-ind New Economics Papers
on Industrial Organization
Issue of 2015‒08‒30
six papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. How Much Do Cartel Overcharge? (The "Working Paper" Version) By Marcel Boyer; Rachidi Kotchoni
  2. ANTITRUST VERSUS INDUSTRIAL POLICIES, ENTRY AND WELFARE By Guy Meunier; Jean-Pierre Ponssard; Francisco Ruiz-Alizeda
  3. Multiproduct Monopoly Made Simple By Mark Armstrong; John Vickers
  4. Upward Pricing Pressure Formulations with Logit Demand and Endogenous Partial Acquisitions By Fotis, Panagiotis; Polemis, Michael; Eleftheriou, Konstantinos
  5. Blockchains as a Path to a Network of Systems - An Emerging New Trend of the Digital Platforms in Industry and Society By Mattila, Juri; Seppälä, Timo
  6. The break of brand exclusivity in Brazilian credit card acquiring: effects and markup-cost decomposition in a price dispersion setting By Gabriel Garber; Márcio Issao Nakane

  1. By: Marcel Boyer; Rachidi Kotchoni
    Abstract: The estimation of cartel overcharges lies at the heart of antitrust policy on cartel prosecution as it constitutes a key element in the determination of fines. Connor and Lande (2008) conducted a survey of cartels and found a mean overcharge estimate in the range of 31% to 49%. By examining more sources, Connor (2010) finds a mean of 50.4% for successful cartels. However, the data used in those studies are estimates obtained from different methodologies, sources and contexts rather than from direct observations. Therefore, these data are subject to model error, estimation error, endogeneity bias, and publication bias. An examination of the Connor database reveals that the universe of overcharge estimate is asymmetric, heterogenous and contains a number of influential observations. Beside the fact that overcharge estimates are potentially biased, fitting a linear regression model to the data without providing a carefull treatment of the problems raised above may produce distorted results. We conduct a meta-analysis of cartel overcharge estimates in the spirit of Connor and Bolotova (2006) while providing a sound treatment of these matters. We find bias-corrected mean and median overcharge estimates of 15.47% and 16.01%. Clearly, our results have significant antitrust policy implications. L’estimation des surprix des cartels est au coeur de la politique de lutte aux cartels car elle est un élément clé de la détermination des pénalités. Connor et Lande (2008) survolent la litérature sur les majorations de prix des cartels et concluent à une augmentation moyenne variant entre 31% et 49%. Considérant un échantillon plus grand, Connor (2010) trouve une moyenne de 50,4% pour les cartels réussis. Cependant, les données utilisées dans ces études sont des estimations obtenues à partir de méthodologies, sources, et contextes différents plutôt que d’observations directes. De ce fait, ces données héritent potentiellement d’erreurs de modélisation et d’estimation, ainsi que de biais d'endogenéité et de publication. L’analyse directe des surprix dans l’échantillon de Connor révèle une distribution asymétrique, une importante hétérogénéité et la présence d’observations aberrantes. Au-delà du fait que les estimations des surprix sont potentiellement biaisées, l’estimation d’un modèle de régression linéaire avec de telles données sans un traitement adéquat des problèmes identifiés ci-dessus pourait produire des résultats fallacieux. Nous présentons une méta-analyse dans l’esprit de Connor and Bolotova (2006), mais qui tient compte adéquatement des problèmes mentionnés ci-dessus. Après correction des biais, nous obtenons une moyenne et une médiane de majorations de prix de l’ordre de 15,47% et 16,01%. Nos résultats débouchent sur des enjeux importants en matière de politique de la concurrence.
    Keywords: Antitrust, Cartel overcharges, Heckman, Heckit, Kullback-Leibler divergence, Meta-analysis, Antitrust, Surprix de cartel, Heckman, Heckit, Divergence de Kullback-Leibler, Meta-analyse
    Date: 2015–07–31
  2. By: Guy Meunier (INRA - Institut national de la recherche agronomique (INRA), Department of Economics, Ecole Polytechnique - CNRS - Polytechnique - X); Jean-Pierre Ponssard (CNRS, Department of Economics, Ecole Polytechnique - CNRS - Polytechnique - X); Francisco Ruiz-Alizeda (Department of Economics, Ecole Polytechnique - CNRS - Polytechnique - X)
    Abstract: In industries with large sunk costs, the investment strategy of competing firms depends on the regulatory context. We consider ex-ante industrial policies in which the sunk cost may be either taxed or subsidized, and antitrust policies which could be either pro-competitive (leading to divestiture in case of high ex-post protability) or lenient (allowing mergers in case of low ex-post protability). Through a simple entry game we completely characterize the impact of these policies and examine their associated dynamic trade-offs between the timing of the investment, the ex-post benefits for the consumers, and the possible duplication of fixed costs. We find that merger policies are dominated by ex-ante industrial policies, whereas the latter are dominated by divestiture policies only under very special circumstances.
    Date: 2015–02–16
  3. By: Mark Armstrong; John Vickers
    Abstract: We present a tractable class of multiproduct monopoly models that involve a generalized form of homothetic preferences. This class includes CES, linear and logit demand. Within the class, profit-maximizing quantities are proportional to efficient quantities. We discuss cost-passthrough, including cases where optimal prices do not depend on other products’costs. We show how the analysis can be extended to Cournot oligopoly. Finally, we discuss optimal monopoly regulation when the firm has private information about its vector of marginal costs, and show that if the probability distribution over costs satisfies an independence property, then optimal regulation leaves relative price decisions to the firm.
    Keywords: Multiproduct pricing, homothetic preferences, cost passthrough, monopoly regulation, multidimensional screening.
    JEL: D42 D82 L12 L51
    Date: 2015–08–20
  4. By: Fotis, Panagiotis; Polemis, Michael; Eleftheriou, Konstantinos
    Abstract: The aim of this paper is to derive the formula of Gross Upward Pricing Pressure Index (GUPPI), used on duopoly markets with differentiated products, when we allow for unilateral equity stakes (expressed as a function of victim's market share) to be endogenously determined. The results show that the unilateral effects of partial acquisitions, as they are measured by GUPPI when the percentage of equity stakes of the acquirer in the target firm is considered endogenous, may be higher than in the case where the said percentage is exogenously determined.
    Keywords: Differentiated Product Markets; GUPPI; Logit Demand; Endogenous Partial Acquisitions
    JEL: G3 L13 L16
    Date: 2015–03–26
  5. By: Mattila, Juri; Seppälä, Timo
    Abstract: At the beginning of the 1990s, the Internet’s various fragmented information networks were combined into one integrated network of systems. As a result, the commercial utilization of the Internet boomed, creating com- pletely new business models and economic structures in the process. A similar reaction is now anticipated from the digitalization of industry and society at large. However, the main question is: “How can all the separately structured, isolated systems be fused into one seamless network of systems?” So far, the problem has mainly been addressed from the standpoint of centralized and decentralized system architectures. Our analysis shows, however, that completely new and innovative technological approaches, such as the blockchain technology, are emerging to address this problem. These new distributed architecture solu- tions may completely revolutionize the anticipated structures and business models of the digitalization current- ly in progress, as they allow machines to autonomously share much more than just data, e.g. computing power, storage capacity or even electric power. As a result, understanding digitalization in its full capacity requires a systems approach and a new kind of higher-level thinking on the scale of a network of systems.
    Keywords: digitalization, industrial Internet, platforms, blockchain
    JEL: L14 L15 L86 L96 O33
    Date: 2015–08–13
  6. By: Gabriel Garber; Márcio Issao Nakane
    Abstract: Visanet monopolized Visa merchant acquiring activities in Brazil while Redecard did the same for MasterCard, until the industry was under authorities’ scrutiny and exclusivity was broken in mid-2010. In this paper, we perform two main tasks. First, we use the knowledge of part of the marginal cost specific to this industry (the interchange fee) to identify markup and marginal cost using individual merchant data. Then, we use this framework to evaluate the impact of the change of the environment on these price components. We find sizable reduction in markup as a result of increased competition.
    Keywords: Credit cards; two-sided markets; price discrimination
    JEL: L41 L12 L13 D22
    Date: 2015–08–10

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