nep-ind New Economics Papers
on Industrial Organization
Issue of 2015‒12‒08
seven papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Imperfect Certification under Cournot Duopoly By Charu Grover; Sangeeta Bansal
  2. Conglomerate Mergers: Comparison with Vertical Foreclosure By Proctor, Adrian
  3. Effective European Antitrust: Does EC Merger Policy Generate Deterrence By Clougherty, Joseph A.; Duso, Tomaso; Lee, Miyu; Seldeslachts, Jo
  4. Addressing fragmentation in EU mobile telecom markets By Mario Mariniello; Francesco Salemi
  5. Patent Protection and the Industrial Composition of Multinational Activity: Evidence from U.S. Multinational Firms By Olena Ivus; Walter Park; Kamal Saggi
  6. Where Have China’s State Monopolies Gone? By Paul Hubbard
  7. Diversification and firm performance: A study of Indian manufacturing firms By Ravichandran, Archana; Bhaduri, Saumitra

  1. By: Charu Grover (Centre for International Trade and Development,Jawaharlal Nehru University); Sangeeta Bansal (Centre for International Trade and Development,Jawaharlal Nehru University)
    Abstract: Environmental quality is often a credence good and consumers are unable to distinguish between green and brown products. The paper aims to investigate the role of certification in providing information about product quality and reducing market inefficiencies when the certification process is imperfect. We consider a duopoly in a vertically differentiated product model where firms compete in quantities. The papers shows that in the absence of labelling, the brown firm drives out the green firm if the cost of producing green product is sufficiently high. If both firms produce positive quantities in the market, the green firm covers a higher market share and obtains larger revenue. We then characterise pooling and separating equilibrium under imperfect certification contingent on certification fee. The paper shows that under imperfect certification, it is not optimal to subsidize certification.
  2. By: Proctor, Adrian
    Abstract: This article compares and contrasts the approach to merger issues in vertical and conglomerate cases including likely efficiencies, useful data, and the approach to looking at each of ability, incentive, and effect in turn. The paper considers when conglomerate mergers are more likely to mirror vertical cases and result in static price rises. The article considers the relationship between conglomerate foreclosure and predatory pricing to determine whether merger analysis is the most suitable place to intervene and stop short-term benefits that may harm competition in the longer term. Finally, potential amendments to the existing framework are discussed.
    Keywords: Conglomerate merger vertical foreclosure competition price discrimination
    JEL: L4 L44
    Date: 2015–12–01
  3. By: Clougherty, Joseph A.; Duso, Tomaso; Lee, Miyu; Seldeslachts, Jo
    Abstract: We estimate the deterrence effects of European Commission (EC) merger policy instruments over the 1990-2009 period. Our empirical results suggest that phase-1 remedies uniquely generate robust deterrence as – unlike phase-1 withdrawals, phase-2 remedies, and preventions – phase-1 remedies lead to fewer merger notifications in subsequent years. Furthermore, the deterrence effects of phase-1 remedies work best in high-concentration industries; i.e., industries where the HHI is above the 0.2 cut-off level employed by the EC. Additionally, we find that phase-1 remedies do not deter clearly pro-competitive mergers, but do deter potentially anti-competitive mergers in high-concentration industries.
    Keywords: competition policy; deterrence; European Commission; merger policy
    JEL: K21 K40 L40
    Date: 2015–11
  4. By: Mario Mariniello; Francesco Salemi
    Abstract: Highlights - Mobile telecommunications markets are an important part of the European Commission’s strategy for the completion of the European Union Digital Single. The use of mobile telecommunications – particularly mobile data access – is growing and becoming an increasingly important input for the economy. - The EU currently does not have a unified mobile telecommunications market. The EU compares favourably to the United States in terms of prices and connection speed, but lags behind in terms of coverage of high-speed 4G wireless connections. -Europe’s long-term goal should be to make data access easier by increasing highspeed wireless coverage while keeping prices down for users. An increase in cross-border competition could help to achieve that goal. - The Commission has two important levers to help stimulate cross-border supply - (a) ensuring competition in intra-country mobile markets in order to provide an incentive for operators to expand into other jurisdictions, and (b) reducing mobile operators’ costs of expansion into multiple EU countries. The further development of policies on international roaming and radio spectrum management will be central to this effort.
    Date: 2015–08
  5. By: Olena Ivus (Queen's University); Walter Park (American University); Kamal Saggi (Vanderbilt University)
    Abstract: Using data on U.S. firms' technology licensing to local agents in developing countries, this paper examines the impact of patent protection on internal and arms-length technology transfer. The effects of protection vary across products according to their complexity. Consistent with theories of internalization, we find that patent reforms enable local firms to attract more arms-length technology transfer, especially of simple products which are relatively easy to imitate. Affiliated licensing also rises among simple products, but falls among complex products. The results withstand several robustness checks, including controlling for endogeneity by using colonial origin as an instrument, and are equally strong whether patent protection is measured by its intensity or by the timing of reforms. The results have significance for patent policy in the developing world, where access to knowledge is critical. Through arms-length technology contracts, proprietary knowledge diffuses beyond firm boundaries, enabling local agents to access not only the protected technology but also know-how.
    Keywords: International Technology Transfer, Licensing, Developing Countries, Product Complexity, Intellectual Property Rights, and Imitation Risk
    JEL: O3 F2
    Date: 2015–12–02
  6. By: Paul Hubbard (Crawford School, ANU)
    Abstract: If China’s economy is an example of ‘state-capitalism’, then its large, state-owned enterprises (SOEs) could be expected to monopolise key sectors. But previous estimates of industrial concentration using the Herfindahl-Hirschman Index (HHI) have suggested that the level of industrial concentration – and therefore the potential for the abuse of monopoly power – is very low. These studies have significantly underestimated HHI, since they do not consolidate subsidiary enterprises in Chinese survey data into larger business groups, or according to ultimate ownership. After making these adjustments, a measure of potential HHI shows that large state monopolies remain in oil and gas, electricity, tobacco and, potentially, automobiles. In particular, SOEs supervised by the central government are heavily invested in potentially concentrated industries. But aggregate profits of the state sector are driven more by the portfolio distribution of assets between resources, manufacturing and utilities, rather than industrial concentration within sectors.
    Keywords: Chinese economy, industrial concentration, state-owned enterprises
    JEL: L1 L3 L4 L6
    Date: 2015–11
  7. By: Ravichandran, Archana; Bhaduri, Saumitra
    Abstract: The advantages and disadvantages of diversification and its impact on productivity or performance of a firm have been debated upon by academics and business professionals all over, although views on the topic still differ widely. While popular views are that related diversification increases value and unrelated diversification decreases value, the results of research conducted on the effects of overall diversification (without distinguishing between related and unrelated diversification) on productivity are of conflicting nature. This paper focuses on this relationship in the context of the Indian manufacturing sector. Along with this, it also expounds on the existence of an optimal diversification point for the Indian context. Data used is obtained from CMIE Prowess for the period 2003 to 2014 and standard econometric analysis on panel data is carried out to find the stated relationship. Tobin’s q is used as a measure of performance of the firm. The results show that highly diversified firms perform poorly on account of vertical diversification while horizontal diversification has a positive effect on performance.
    Keywords: productivity, diversification, Tobin’s q, related, unrelated
    JEL: D22 L25
    Date: 2015–06

This nep-ind issue is ©2015 by Kwang Soo Cheong. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.