nep-ind New Economics Papers
on Industrial Organization
Issue of 2016‒02‒29
five papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Vertical organization of production and firm growth By Fabio Pieri
  2. False Advertising By Rhodes, Andrew; Wilson, Chris M
  3. Market Structure and Competition in Transition:Results from a Spatial Analysis By Martin Labaj; Karol Morvay; Peter Silanic; Christoph Weiss; Biliana Yontcheva
  4. Market Structure and Competition in the Health-care Industry: Results from a Transition Economy By Martin Lábaj; Alzbeta Siskovicova; Barbora Skalicanova; Peter Silanic; Christoph Weiss; Biliana Yontcheva
  5. Higher prices, higher quality? Evidence from German nursing homes By Herr, Annika; Hottenrott, Hanna

  1. By: Fabio Pieri
    Abstract: This paper empirically explores if different vertical organizational forms (i.e. vertical integration versus dis-integration) give rise to unlike growth ''behaviors'' within the same industry. An econometric analysis is conducted in a sample of around 500 Italian machine tool (MT) builders for the period 1998-2007, implementing instrumental variables to control for the endogeneity of the organizational form in the relation. Ceteris paribus, vertically integrated firms result to be characterized by a less dispersed distribution of growth rates than their dis-integrated counterparts. Several concurring factors, such as adjustment costs, organizational slacks and a better management of fluctuations in the markets of intermediate and final products, may explain the more ÒstableÓ growth profile of vertically integrated firms. By means of analyzing how different organizational forms map into the distribution of output growth rates, this work provides insight into the firm dynamics in a mature industry in which both vertically integrated and dis-integrated firms coexist.
    Keywords: Vertical integration, Firm growth, Variance-vertical integration scaling relation, Instrumental variables, Quantile regression, Italian machine tool industry
    JEL: D22 L23 L24 L26 L64
    Date: 2016
    URL: http://d.repec.org/n?u=RePEc:trn:utwprg:2016/01&r=ind
  2. By: Rhodes, Andrew; Wilson, Chris M
    Abstract: There is widespread evidence that some firms use false advertising to overstate the value of their products. Using a model in which a policymaker is able to punish such false claims, we characterize a natural equilibrium in which false advertising actively influences rational buyers. We analyze the effects of policy under different welfare objectives and establish a set of demand and parameter conditions where policy optimally permits a positive level of false advertising. Further analysis considers some wider issues including the implications for product investment and industry self-regulation.
    Keywords: Misleading Advertising; Product Quality; Pass-through; Self-Regulation
    JEL: D83 L15 M37
    Date: 2015–12–14
    URL: http://d.repec.org/n?u=RePEc:pra:mprapa:68869&r=ind
  3. By: Martin Labaj (Department of Economics, Vienna University of Economics and Business); Karol Morvay (Department of Economic Policy, University of Economics in Bratislava); Peter Silanic (Department of Economic Policy, University of Economics in Bratislava); Christoph Weiss (Department of Economics, Vienna University of Economics and Business); Biliana Yontcheva (Department of Economics, Vienna University of Economics and Business)
    Abstract: The present paper provides first microlevel (indirect) empirical evidence on changes in the determinants of firm profitability, the role of fixed and sunk costs, as well as the nature of competition for a transition economy. We estimate size thresholds required to support different numbers of firms for four retail and professional service industries in a large number of geographic markets in Slovakia. The three time periods in the analysis (1995, 2001 and 2010) characterize different stages of the transition process. Specific emphasis is given to spatial spill-over effects between local markets. Estimation results obtained from a spatial ordered probit model suggest that entry barriers have declined considerably (except for restaurants) and the intensity of competition has increased. We further find that demand spill-overs and/or the effects associated with a positive correlation in unobservable explanatory variables seem to outweigh negative spill-over effects caused by competitive forces between neighboring cities and villages. The importance of these spatial spill-over effects differs across industries.
    Keywords: entry thresholds, competition, Slovakia, transition, geographic markets
    JEL: L22 D22 M13 R11
    Date: 2016–02
    URL: http://d.repec.org/n?u=RePEc:wiw:wiwwuw:wuwp218&r=ind
  4. By: Martin Lábaj (Institute of Economic Research SAS); Alzbeta Siskovicova; Barbora Skalicanova; Peter Silanic; Christoph Weiss; Biliana Yontcheva
    Abstract: The present paper provides first empirical evidence on the relationship between market size and the number of fi rms in the health-care industry for a transition economy. We estimate market size thresholds required to support diff erent numbers of suppliers (fi rms) for three occupations in the health-care industry in a large number of distinct geographic markets in Slovakia, taking into account the spatial interaction between local markets. The empirical analysis is carried out for three time periods (1995, 2001 and 2010) characterizing diff erent stages of the transition process. Our results suggest that the relationship between market size and the number of fi rms diff ers both across industries, and across periods. Furthermore, we fi nd evidence for correlation in entry decisions across administrative borders.
    Keywords: entry thresholds, competition, Slovakia, health-care industry
    JEL: L22 D22
    Date: 2015–12–10
    URL: http://d.repec.org/n?u=RePEc:brt:depwps:010&r=ind
  5. By: Herr, Annika; Hottenrott, Hanna
    Abstract: Objectives: This study investigates the relationship between prices and quality of 7,400 German nursing homes controlling for income, nursing home density, demographics, labour market characteristics, and infrastructure at the regional level. Method: We use a cross section of public quality reports for all German nursing homes, which had been evaluated between 2010 and 2013 by external institutions. Our analysis is based on multivariate regressions in a two stage least squares framework, where we instrument prices to explain their effect on quality. Results: Descriptive analysis shows that prices and quality do not only vary across nursing homes, but also across counties and federal states and that quality and prices correlate positively. Second, the econometric analysis, which accounts for the endogenous relation between negotiated price and reported quality, shows that quality indeed positively depends on prices. In addition, more places in nursing homes per people in need are correlated with both lower prices and higher quality. Finally, unobserved factors at the federal state level explain some of the variation of reported quality across nursing homes. Conclusion: Our results suggest that higher prices increase quality. Furthermore, since reported quality and prices vary substantially across federal states, we conclude that the quality and prices of longtermcare facilities may well be compared within federal states but not across.
    Keywords: nursing homes,care quality,price,long-term care,two-stage least squares
    JEL: I11 L11 L15 I18
    Date: 2016
    URL: http://d.repec.org/n?u=RePEc:zbw:dicedp:208&r=ind

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