nep-ind New Economics Papers
on Industrial Organization
Issue of 2016‒06‒18
ten papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. "Regulation versus Regulated Monopolization of a Cournot Oligopoly with Unknown Costs" By Ismail Saglam
  2. Search Frictions, Competing Mechanisms and Optimal Market Segmentation By Cai, Xiaoming; Gautier, Pieter A.; Wolthoff, Ronald
  3. When Can A Demand System Be Described By A Multinomial Logit With Income Effect? By Jacques-Francois Thisse; Philip Ushchev
  4. Competition Policy and Incentives for Innovation By Shastitko. Andrey; Komkova, Anastasia Andreevna; Kurdin, Alexander; Shastitko, Anastasia
  5. Cross-ownership, R&D Spillovers, and Antitrust Policy By López, Ángel Luis; Vives, Xavier
  6. The effects of endogenous enforcement on strategic uncertainty and cartel deterrence By Carsten J. Crede; Liang Lu
  7. Income Effects and Vertical Differentiation in International Trade By Pierre M. Picard; Alessandro Tampieri
  8. Entry in first-price auctions with signaling By Olivier Bos; Tom Truyts
  9. Management as a Technology? By Nicholas Bloom; Raffaella Sadun; John Van Reenen
  10. The Impact of Merger Legislation on Bank Mergers By Siedlarek, Jan-Peter; Carletti, Elena; Ongena, Steven; Spagnolo, Giancarlo

  1. By: Ismail Saglam (Department of Economics, Ipek University)
    Abstract: This paper studies whether a Cournot oligopoly with unknown costs should be left unregulated, or regulated according to the optimal mechanism of Gradstein (1995), or first monopolized and then regulated according to the optimal mechanism of Baron and Myerson (1982). We show that the answer to this question depends on the number o the oligopolistic firms and the size of their fixed costs, as well as on the weight of the producer welfare in the social objective function.
    Keywords: Monopoly, Oligopoly, Cournot Competition, Regulation, Asymmetric Information
    JEL: D82 L51
    Date: 2016–06
    URL: http://d.repec.org/n?u=RePEc:ipk:wpaper:1602&r=ind
  2. By: Cai, Xiaoming; Gautier, Pieter A.; Wolthoff, Ronald
    Abstract: In a market in which sellers compete for heterogeneous buyers by posting mechanisms, we analyze how the properties of the meeting technology affect the allocation of buyers to sellers. We show that a separate submarket for each type of buyer is the efficient outcome if and only if meetings are bilateral. In contrast, a single market with all agents is optimal if and only if the meeting technology satisfies a novel condition, which we call "joint concavity". Both outcomes can be decentralized by sellers posting auctions combined with a fee that is paid by (or to) all buyers with whom the seller meets. Finally, we compare joint concavity to two other properties of meeting technologies, invariance and non rivalry, and explain the differences.
    Keywords: competing mechanisms; matching function; meeting technology; search frictions
    JEL: C78 D44 D83
    Date: 2016–06
    URL: http://d.repec.org/n?u=RePEc:cpr:ceprdp:11310&r=ind
  3. By: Jacques-Francois Thisse; Philip Ushchev (National Research University Higher School of Economics)
    Abstract: We show that a wide class of demand systems for dierentiated products, such as those generated by additive preferences, indirectly additive preferences, and Kimball-like homothetic preferences, can be given a multinomial logit foundation provided that the conditional indirect utility is nonlinear and varies with the whole price array.
    Keywords: discrete choice, multinomial logit, demand systems, additive preferences, homothetic preferences
    JEL: D43 L11 L13
    Date: 2016
    URL: http://d.repec.org/n?u=RePEc:hig:wpaper:139/ec/2016&r=ind
  4. By: Shastitko. Andrey (Lomonossov Moscow State University, Russian Presidential Academy of National Economy and Public Administration (RANEPA)); Komkova, Anastasia Andreevna (Russian Presidential Academy of National Economy and Public Administration (RANEPA)); Kurdin, Alexander (National Research University Higher School of Economics, Moscow State University, Russian Presidential Academy of National Economy and Public Administration (RANEPA)); Shastitko, Anastasia (Russian Presidential Academy of National Economy and Public Administration (RANEPA))
    Abstract: The work is dedicated to the identification and study of the relationship between the intensity of competition, market structures, competition policy and innovation activity. Critical analysis of foreign research shows that a universal solution, this problem has not, and the effects of competition policy on innovation in practice depends on a number of specific national and sectoral factors. Impact of innovation activity in respect of competition policy instruments is comprehensive, taking into account their impact on several aspects of the activities of businesses and entrepreneurs' expectations, as well as the availability of related markets. The paper evaluates the effects of the complex. Built in the theoretical model shows that the "inhospitable" attitude antitrust authorities to potentially anti-competitive actions of enterprises can be deterrent to innovative activity, but the rejection of antitrust measures may be harmful to consumers. The best option of competition policy seems favorable attitude towards business initiatives in the case of a likely increase their innovation potential with the simultaneous implementation of compensatory measures or protective active competition policy.
    Keywords: intensity of competition, market structures, competition policy, innovation activity
    Date: 2016–04–14
    URL: http://d.repec.org/n?u=RePEc:rnp:wpaper:1447&r=ind
  5. By: López, Ángel Luis; Vives, Xavier
    Abstract: This paper considers cost-reducing R&D investment with spillovers in a Cournot oligopoly with minority shareholdings. We find that, with high market concentration and sufficiently convex demand, there is no scope for cross-ownership to improve welfare regardless of spillover levels. Otherwise, there is scope for cross-ownership provided that spillovers are sufficiently large. The socially optimal degree of cross-ownership increases with the number of firms, with the elasticity of demand and of the innovation function, and with the extent of spillover effects. In terms of consumer surplus standard, the scope for cross-ownership is greatly reduced even under low market concentration.
    Keywords: Collusion; competition policy; innovation; minority shareholdings; modified HHI; partial merger
    JEL: D43 L13 O32
    Date: 2016–06
    URL: http://d.repec.org/n?u=RePEc:cpr:ceprdp:11315&r=ind
  6. By: Carsten J. Crede (University of East Anglia); Liang Lu (University of East Anglia)
    Abstract: This study experimentally investigates the impact of antitrust enforcement on cartel price decisions when fines and detection probabilities depend on them. We impose expected punishments that create two payoff–equivalent collusive price equilibria, of which one features a lower riskiness of collusion. Subjects are found to behave strategically in that they choose the equilibrium with a lower riskiness of collusion. This suggests that competition authorities can exploit the effects of such endogenous enforcement on strategic uncertainty between cartelists, i.e. a priori uncertainty about the actions of the other cartel members, to lower cartel prices. However, frequency deterrence might be reduced such that the overall welfare effects may be ambiguous.
    Keywords: antitrust, cartels, experiment, deterrence
    JEL: C92 D43 L13 L41
    Date: 2016–05–30
    URL: http://d.repec.org/n?u=RePEc:uea:wcbess:16-08&r=ind
  7. By: Pierre M. Picard (CREA, Université du Luxembourg); Alessandro Tampieri (CREA, Université du Luxembourg)
    Abstract: We analyse a trade model with non-homothetic preferences and different quality ver- sions of each product. Income effects drive the quality composition of consumption, pro- duction and trade flows. We show that a rise in local population fosters local asymmetric specialization in high-quality production and exports while it harms low income groups. By contrast, an increase in local productivity may generate specialization in high quality production, which in turn may trigger an immiserizing growth process. Weaker compa- rative advantages induce firm to move and make a local productivity improvement more likely to increase production of higher quality goods everywhere.
    Keywords: Heterogeneous firms, vertical differentiation, horizontal differentiation, trade, income heterogeneity
    JEL: F12 F16 L11 L15
    Date: 2016
    URL: http://d.repec.org/n?u=RePEc:luc:wpaper:16-05&r=ind
  8. By: Olivier Bos; Tom Truyts
    Abstract: We study the optimal entry fee in a symmetric private value first-price auction with signaling, in which the participation decisions and the auction outcome are used by an outside observer to infer the bidders’ types. We show that this auction has a unique fully separating equilibrium bidding function. The expected revenue maximizing entry fee is the maximal fee that guarantees full participation.
    Date: 2016–04
    URL: http://d.repec.org/n?u=RePEc:ete:ceswps:539875&r=ind
  9. By: Nicholas Bloom (Stanford University - Department of Economics); Raffaella Sadun (Harvard Business School, Strategy Unit); John Van Reenen (London School of Economics)
    Abstract: Are some management practices akin to a technology that can explain company and national productivity, or do they simply reflect contingent management styles? We collect data on core management practices from over 11,000 firms in 34 countries. We find large cross-country differences in the adoption of basic management practices, with the US having the highest size-weighted average management score. We present a formal model of "Management as a Technology", and structurally estimate it using panel data to recover parameters including the depreciation rate and adjustment costs of managerial capital (both found to be larger than for tangible non-managerial capital). Our model also predicts (i) a positive effect of management on firm performance; (ii) a positive relationship between product market competition and average management quality (part of which stems from the larger covariance between management with firm size as competition strengthens); and (iii) a rise (fall) in the level (dispersion) of management with firm age. We find strong empirical support for all of these predictions in our data. Finally, building on our model, we find that differences in management practices account for about 30% of cross-country total factor productivity differences.
    Keywords: management practices, productivity, competition
    JEL: L2 M2 O32 O33
    Date: 2016–05
    URL: http://d.repec.org/n?u=RePEc:hbs:wpaper:16-133&r=ind
  10. By: Siedlarek, Jan-Peter (Federal Reserve Bank of Cleveland); Carletti, Elena (Bocconi University, IGIER, and CEPR); Ongena, Steven (University of Zurich, the Swiss Finance Institute, and CEPR); Spagnolo, Giancarlo (Site-Stockholm School of Economics, the University of Rome Tor Vergata, EIEF, and CEPR)
    Abstract: We find that stricter merger control legislation increases abnormal announcement returns of targets in bank mergers by 7 percentage points. Analyzing potential explanations for this result, we document an increase in the pre-merger profitability of targets, a decrease in the size of acquirers, and a decreasing share of transactions in which banks are acquired by other banks. Other merger properties, including the size and risk profile of targets, the geographic overlap of merging banks, and the stock market response of rivals appear unaffected. The evidence suggests that the strengthening of merger control leads to more efficient and more competitive transactions.
    Keywords: banks; mergers and acquisitions; merger control; antitrust;
    JEL: G21 G34 K21 L40
    Date: 2016–06–01
    URL: http://d.repec.org/n?u=RePEc:fip:fedcwp:1614&r=ind

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