nep-ind New Economics Papers
on Industrial Organization
Issue of 2015‒09‒18
four papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. A Unified Model of Spatial Price Discrimination By Eleftheriou, Konstantinos; Michelacakis, Nickolas
  2. Competition, product safety, and product liability By Chen, Yongmin; Hua, Xinyu
  3. Industrial Agglomeration and Use of the Internet By Chia-Lin Chang; Michael McAleer; Yu-Chieh Wu
  4. Intrafirm Trade and Vertical Fragmentation in U.S. Multinational Corporations By Natalia Ramondo; Veronica Rappoport; Kim J. Ruhl

  1. By: Eleftheriou, Konstantinos; Michelacakis, Nickolas
    Abstract: We present a general model of mixed oligopoly, where competing firms exercise spatial price discrimination. Our findings indicate that the Nash equilibrium locations of firms are always socially optimal irrespective of the number of competitors, the level of privatization, the form of the transportation costs and the number and/or the varieties of the produced goods. An immediate implication of this result is that this form of competition is preferable from a welfare point of view.
    Keywords: Mixed oligopoly; Social optimality; Spatial competition; Differentiated goods
    JEL: L13 L32 L33 R32
    Date: 2015–09–10
    URL: http://d.repec.org/n?u=RePEc:pra:mprapa:66557&r=all
  2. By: Chen, Yongmin; Hua, Xinyu
    Abstract: A firm's incentive to invest in product safety is affected by both the market environment and the liability when its product causes consumer harm. A long-standing question in law and economics is whether competition can (partially) substitute for product liability in motivating firms to improve product safety. We investigate this issue in a spatial model of oligopoly with product differentiation, where reputation provides a market incentive for product safety and higher product liability may distort consumers' incentive for proper product care. We find that partial liability, together with reputation concerns, can motivate firms to make socially desirable safety investment. Increased competition due to less product differentiation lowers equilibrium market price, which diminishes a firm's gain from maintaining reputation and raises the socially desirable product liability. On the other hand, an increase in the number of competitors reduces both the benefit from maintaining reputation and the potential cost savings from cutting back safety investment; consequently, the optimal liability may vary non-monotonically with the number of competitors in the market. In general, therefore, the relationship between competition and product liability is subtle, depending on how competition is measured.
    Keywords: product safety, product liabilty, competition
    JEL: K13 L13 L15
    Date: 2015–09–04
    URL: http://d.repec.org/n?u=RePEc:pra:mprapa:66450&r=all
  3. By: Chia-Lin Chang (Department of Applied Economics, Department of Finance, National Chung Hsing University, Taiwan); Michael McAleer (Econometric Institute, Erasmus School of Economics, Erasmus University Rotterdam and Tinbergen Institute, The Netherlands, Department of Quantitative Economics, Complutense University of Madrid, and Institute of Economic Research, Kyoto University.); Yu-Chieh Wu (Department of Applied Economics. National Chung Hsing University Taichung, Taiwan)
    Abstract: Taiwan has been hailed as a world leader in the development of global innovation and industrial clusters for the past decade. This paper investigates the effects of industrial agglomeration on the use of the internet and internet intensity for Taiwan manufacturing firms, and analyses whether the relationships between industrial agglomeration and total expenditure on internet usage for industries are substitutes or complements. The sample observations are based on 153,081 manufacturing plants, and covers 26 2-digit industry categories and 358 geographical townships in Taiwan. The Heckman selection model is used to adjust for sample selectivity for unobservable data for firms that use the internet. The empirical results from two-stage estimation show that: (1) for the industry overall, a higher degree of industrial agglomeration will not affect the probability that firms will use the internet, but will affect the total expenditure on internet usage; and (2) for 2-digit industries, industrial agglomeration generally decreases the total expenditure on internet usage, which suggests that industrial agglomeration and total expenditure on internet usage are substitutes.
    Keywords: Industrial agglomeration and clusters, Global innovation, Internet penetration, Manufacturing firms, Sample selection, Incidental truncation.
    JEL: D22 L60
    Date: 2015–08
    URL: http://d.repec.org/n?u=RePEc:ucm:doicae:1509&r=all
  4. By: Natalia Ramondo; Veronica Rappoport; Kim J. Ruhl
    Abstract: Using firm-level data, we document two new facts regarding intrafirm trade and the activities of the foreign affiliates of U.S. multinational corporations. First, intrafirm trade is concentrated among a small number of large affiliates within large multinational corporations; the median affiliate ships nothing to the rest of the corporation. Second, we find that the input-output coefficient linking the parent's and affiliate's industries of operation—a characteristic commonly associated with production fragmentation— is not related to a corresponding intrafirm low of goods.
    Keywords: Intrafirm trade, multinational corporations, international value chains
    JEL: F12 F14 L11 L25
    Date: 2015–09
    URL: http://d.repec.org/n?u=RePEc:cep:cepdps:dp1371&r=all

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