nep-ind New Economics Papers
on Industrial Organization
Issue of 2016‒04‒30
four papers chosen by

  1. Antitrust Market De nition and the Sensitivity of the Diversion Ratio By Lydia Cheung
  2. Incomplete contracts and the internal organization of firms By Philippe Aghion; Nick Bloom; John Van Reenen
  3. Dynamic Competition with Network Externalities: Why History Matters By Halaburda, Hanna; Jullien, Bruno; Yehezkel, Yaron
  4. Factors Impacting Wine Price Mark-Ups in Restaurants By Livat, Florine; Remaud, Hervé

  1. By: Lydia Cheung (School of Economics, Faculty of Business and Law, Auckland University of Technology)
    Abstract: The diversion ratio is a key ingredient for merger analysis, as mentioned in the new Horizontal Merger Guidelines (2010) in the U.S. and similar documents abroad. It is a measure of substitutability between merging goods, which determines the potential for price increase post-merger. There is little existing research on how the diversion ratio is to be estimated. This paper is the rst one to explore estimation issues through standard demand estimation techniques and how changes in the antitrust market de nition a ect the resultant diversion ratios. I use random draws of supermarket products from a supermarket dataset to show that the estimated diversion ratios are, in fact, not greatly a ected by market de nition. They have the same magnitude as baseline estimates and the rst signi cant gures vary within a small range.
    Keywords: horizontal merger; unilateral price e ect; di erentiated products; upward pricing pressure; diversion ratio; elasticity
    JEL: D12 L11 L13 L41
    Date: 2016–02
  2. By: Philippe Aghion; Nick Bloom; John Van Reenen
    Abstract: We survey the theoretical and empirical literature on decentralization within firms. We first discuss how the concept of incomplete contracts shapes our views about the organization of decision-making. We then overview the empirical evidence on the determinants of decentralization and on the effects of decentralization on firm performance. A number of factors highlighted in the theory are shown to be important in accounting for delegation, such as heterogeneity and congruence of preferences as proxied by trust. Empirically, competition, human capital, and IT also appear to foster decentralization. There are substantial gaps between theoretical and empirical work and we suggest avenues for future research in bridging this gap (JEL O31, O32, O33, F23).
    JEL: L22 L23
    Date: 2014–05
  3. By: Halaburda, Hanna; Jullien, Bruno; Yehezkel, Yaron
    Abstract: We consider dynamic competition among platforms in a market with network exter- nalities. A platform that dominated the market in the previous period becomes \focal" in the current period, in that agents play the equilibrium in which they adopt the focal platform whenever such equilibrium exists. Yet when faced with higher-quality competition, can a low-quality platform remain focal? In the finite-horizon case, the unique equilibrium is efficient for \patient" platforms; with an infinite time horizon, however, there are multiple equilibria where either the lowor high-quality platform dominates. If qualities are stochastic, the platform with a better average quality wins with a higher probability, even when its realized quality is lower, and this probability increases as platforms become more patient. Hence social welfare may decline as platforms become more forward looking.
    Keywords: network externalities, dynamic competition, coordination
    JEL: L1
    Date: 2016–03
  4. By: Livat, Florine; Remaud, Hervé
    Keywords: mark-up, wine, restaurant, sommelier, Demand and Price Analysis, Industrial Organization, Marketing,
    Date: 2016–04

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