nep-ind New Economics Papers
on Industrial Organization
Issue of 2015‒09‒26
six papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Entry Regulation in Retail Markets By Pozzi, Andrea; Schivardi, Fabiano
  2. Endogenous firms' organization, internal audit and leniency programs By Emilie Dargaud; Armel Jacques
  3. A theory on merger timing and announcement returns By Paulo J. Pereira; Artur Rodrigues
  4. The L&E of Intellectual Property – Do we get maximum innovation with the current regime? By Ejan Mackaay
  5. The Role of Buyer Power in Public Procurement Auctions: An Empirical Analysis By Strömbäck, Elon
  6. Competition, product safety, and product liability By Chen, Yongmin; Hua, Xinyu

  1. By: Pozzi, Andrea; Schivardi, Fabiano
    Abstract: We survey the empirical literature analyzing the consequences of entry regulation in retail industries. We begin by providing some background on the most common forms of entry regulation and their rationales. We use OECD data to show evidence of a general trend towards less stringent entry regulation in the past 15 years. However, substantial heterogeneity persists across countries. Next, we review a number of empirical contributions that analyze the effects of entry regulation on market outcomes. We compare studies relying on quasi-experimental variation in regulation to those based on structural models and comment on strengths and challenges of each approach. We summarize the results obtained by the literature with respect to several important outcomes that entry regulation can be expected to affect, such as market structure, entry, productivity and employment. We conclude presenting a few relevant topics that the literature has yet to address and, therefore, represent promising avenues for future research.
    Keywords: entry regulation; retail trade
    JEL: L5 L81 R52
    Date: 2015–09
  2. By: Emilie Dargaud (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - ENS Lyon - École normale supérieure - Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - Université Jean Monnet - Saint-Etienne - PRES Université de Lyon - CNRS); Armel Jacques (CEMOI - Centre d'Économie et de Management de l'Océan Indien - IAE - Institut d'Administration des Entreprises - Université de la Réunion - Université de la Réunion)
    Abstract: When multi-product firms make simultaneous price-fixing agreements on different markets, they may wish to compartmentalize their agreements managing them with different individuals in order to avoid the contagion of antitrust authority investigations. Sometimes the leniency programs are effcient to defeat this strategy and to induce CEO to launch internal investigations and report the obtained hard evidence to the antitrust authority. However these programs may have pro-collusive effects for centralized firms.
    Keywords: Collusion, antitrust policy, leniency programs, multimarket contact, organizational form
    Date: 2015–09–15
  3. By: Paulo J. Pereira (CEF.UP and Faculdade de Economia, Universidade do Porto.); Artur Rodrigues (School of Economics and Management and NIPE, University of Minho.)
    Abstract: This paper develops a dynamic model for the timing and terms of mergers and acquisitions. In contrast to other models, we show that firms agree about the timing independently from how the merger surplus is shared. Firms agree on the timing and discuss the sharing rule of the merger surplus according to their bargaining power or some other exogenous factor. We also show that, under asymmetric information, the combination of surprises regarding merger timing and merger terms, can produce either negative or positive abnormal returns for the merging firms.
    Keywords: Mergers, Merger terms, Timing, Uncertainty, Real Options, Event studies.
    JEL: G34 D81
    Date: 2015
  4. By: Ejan Mackaay
    Abstract: Innovation is crucial to economic growth – the essential path for lifting much of the world population out of dire poverty and for maintaining the living standard of those who already have. To stimulate innovation, the legal system has to support the means through which innovators seek to get rewarded for their efforts and risks taken. Amongst these means, some, such as the first mover advantage or 'lead time,' are not directly legal; but secrets and intellectual property rights are legal institutions supported for the specific purpose of stimulating innovation. Whilst the protection of secrets has not changed very much over recent years, intellectual property (or IP) has. IP borrows some features from ordinary property rights, but is also distinct, in that, unlike physical goods, information, the object of IP, is not inherently scarce; indeed as information and communication technologies expand, the creation and distribution of information is becoming ever cheaper and in many circumstances abundant, so that selection is of the essence ('on the internet, point of view is everything'). New information builds on already existing information. Where rights on information extend too far, their monopolising effect may hamper innovation. The paper investigates the underlying structure of IP rights and surveys what we know empirically about the incentive effects of IP as about industries that flourish without formal IP. L'innovation est essentielle à la croissance économique, elle-même la voie obligée pour faire sortir une grande partie de la population mondiale de la misère et pour maintenir le niveau de vie des personnes qui en sont déjà sorties. Pour stimuler l'innovation, le système juridique doit soutenir les moyens par lesquels les innovateurs cherchent rémunération de leurs efforts et des risques pris. Parmi ceux-ci, certains comme l'« avance de départ » ne sont pas directement juridiques; mais le secret commercial et la propriété intellectuelle sont des institutions juridiques soutenues dans le but précis de stimuler l'innovation. Alors que la protection des secrets n'a pas beaucoup évolué au cours des ans, la propriété intellectuelle (PI) l'a bien. La propriété intellectuelle emprunte certains traits de la propriété classique des biens matériels, mais est aussi distincte, en ce que, contrairement aux biens matériels, l'information – l'objet de la PI – n'est pas par nature rare ; en fait, à mesure que les technologies de l'information et des communications s'étendent, la création et la distribution de l'information devient toujours moins chère. Dans certains cas, l'information devient même abondante à telle enseigne que la sélection et essentielle ('on the internet, point of view is everything'). L'information nouvelle s'appuie sur de l'information déjà disponible. Là où les droits sur l'information, et notamment la PI, s'étendent trop loin, leurs effets monopolisateurs risquent d'interférer avec l'innovation. Le texte examine la structure sous-jacente des droits de propriété intellectuelle et fait un survol de ce que nous savons de manière « empirique » sur les effets incitatifs de la PI de même que des industries qui prospèrent sans droit de propriété intellectuelle formel.
    Keywords: intellectual property – copyright – innovation, propriété intellectuelle, droit d'auteur, innovation
    JEL: K00 K29 L17 O31 O34
    Date: 2015–09–15
  5. By: Strömbäck, Elon (Department of Economics, Umeå School of Business and Economics)
    Abstract: Throughout the world, green public procurement (GPP) has become an established environmental policy instrument. Advocates of this purchasing policy argue that the public sector can use its buyer power to incentivize industries into becoming less environmentally damaging. I study how GPP is organized in Sweden and the potential supplier’s response to varying buyer market shares. The level of GPP stringency is found to vary systematically with authority type, buyer market share, and political coalition in the relevant council or the Swedish Parliament. The results indicate quite substantial dispersion in GPP stringency and suggest a low degree of coordination when implementing the policy. After controlling for GPP stringency and other covariates, buyer market share is positively associated with the probability of potential suppliers submitting a bid.
    Keywords: Environmental policy; Regulation; Compliance cost; Endogenous entry; Buyer market share; Supplier incentives
    JEL: D78 H57 O38 Q58
    Date: 2015–09–15
  6. 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

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