nep-ind New Economics Papers
on Industrial Organization
Issue of 2016‒08‒28
four papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Monopolistic competition without apology By Thisse, Jacques-François; Ushchev, Philip
  2. Quality and Competition between Public and Private Firms By Liisa Laine; Ching-to Albert Ma
  3. Structural Change and Global Value Chains in the EU By Roman Stöllinger
  4. Does Organizational Form Drive Competition? Evidence from Coffee Retailing By Brian Adams; Joshua Gans; Richard Hayes; Ryan Lampe

  1. By: Thisse, Jacques-François; Ushchev, Philip
    Abstract: We provide a selective survey of what has been accomplished under the heading of monopolistic competition in industrial organization and other economic fields. Among other things, we argue that monopolistic competition is a market structure in its own right, which encompasses a much broader set-up than the celebrated constant elasticity of substitution (CES) model. Although oligopolistic and monopolistic competition compete for adherents within the economics profession, we show that this dichotomy is, to a large extend, unwarranted.
    Keywords: monopolistic competition; oligopoly; product differentiation; the negligibility hypothesis
    JEL: D43 L11 L13
    Date: 2016–08
  2. By: Liisa Laine (University of Jyvaskyla); Ching-to Albert Ma (Boston University)
    Abstract: We study a multi-stage, quality-price game between a public firm and a private firm. The market consists of a set of consumers who have di§erent quality valuations. A public firm aims to maximize social surplus, whereas the private firm maximizes profit. In the first stage, both firms simultaneously choose qualities. In the second stage, both firms simultaneously choose prices. Consumers' qualty valuations follow a general distribution. Firms' unit production cost is a an increasing and convex function of quality. There are multiple equilibria. In some, the public firm chooses a low quality, and the private firm chooses a high quality. In others, the opposite is true. We characterize subgame-perfect equilibria, and provide conditions on consumer valuation distribution for first-best equilibrium qualities. Various policy implications are drawn.
    Keywords: price-quality competition, quality, public firm, private firm
    JEL: D4 L1 L2 L3
    Date: 2016–03
  3. By: Roman Stöllinger (The Vienna Institute for International Economic Studies, wiiw)
    Abstract: Abstract Manufacturing activity in the EU is increasingly concentrated in a Central European (CE) manufacturing core, implying divergent paths of structural change across Member States. This ‘manufacturing divide’ within Europe coincides with deepening economic integration in general and the emergence of global value chains (GVCs) in particular. Focusing on the manufacturing sector, this paper investigates the relationship between structural change and integration into GVCs in EU Member States over the period 1995-2011. The empirical findings suggest a non-linear relationship between the two phenomena Members of the CE manufacturing core benefit from participation in GVCs in terms of structural change towards manufacturing, whereas in other EU Member States GVC participation, if anything, accelerates the deindustrialisation process.
    Keywords: global value chains, structural change, manufacturing divide, European integration
    JEL: L16 F15 F62
    Date: 2016–07
  4. By: Brian Adams; Joshua Gans; Richard Hayes; Ryan Lampe
    Abstract: This article examines patterns of entry and exit in a relatively homogeneous product market to investigate the impact of entry on incumbent firms and market structure. In particular, we are interested in whether the organizational form of entrants matters for the competitive decisions of incumbents. We assess the impact of chain stores on independent retailers in the Melbourne coffee market using annual data on the location and entry status of 4,768 coffee retailers between 1991 and 2010. The long panel enables us to include market fixed effects to address the endogeneity of store locations. Logit regressions indicate that chain stores have no discernible effect on the exit or entry decisions of independent stores. However, each additional chain store increases the probability of another chain store exiting by 2.5 percentage points, and each additional independent cafe increases the probability of another independent cafe exiting by 0.5 percent. These findings imply that neighboring independents and chains operate almost as though they are in separate markets. We offer additional analysis suggesting consumer information as a cause of this differentiation.
    JEL: L11 L15
    Date: 2016–08

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