nep-ind New Economics Papers
on Industrial Organization
Issue of 2016‒09‒04
four papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Direct-to-Consumer Advertising and Online Search By Matthew Chesnes; Ginger Zhe Jin
  2. Network externalities and process R&D: A Cournot-Bertrand comparison By Mili Naskar; Rupayan Pal
  3. A Model of Biased Intermediation By de Cornière, Alexandre; Taylor, Greg
  4. Competition in Swedish passenger railway : entry in an open-access market By Vigren, Andreas

  1. By: Matthew Chesnes; Ginger Zhe Jin
    Abstract: Beginning in 1997, the Food and Drug Administration (FDA) allowed television advertisements to make major statements about a prescription drug, while referring to detailed drug information on the internet (FDA 1997; 2015). The hope was that consumers would seek additional information online to fully understand the risks and benefits of taking the medication. To better understand the effects of the policy, we analyze direct-to-consumer advertising (DTCA) and search engine click-through data on a set of drugs over a three-year period. Regression analysis shows that advertising on a prescription drug serves to increase the frequency of online search and subsequent clicks for that drug, as well as search for other drugs in the same class. We find the relationship between DTCA and search is stronger for younger drugs, for those drugs that treat acute conditions, those drugs that are less likely to be covered by insurance, and those whose searcher population tends to be older. These findings suggest that DTCA motivates consumers to search online for drug information, but the magnitude of the effect is heterogeneous and potentially associated with clicks on websites that are more promotional in nature.
    JEL: D83 I12 K32 L81
    Date: 2016–08
    URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:22582&r=ind
  2. By: Mili Naskar (Indira Gandhi Institute of Development Research); Rupayan Pal (Indira Gandhi Institute of Development Research)
    Abstract: This paper examines the implication of the nature of competition in a market with network externalities on strategic investment in process R&D by firms. It shows that network externalities have a positive effect on process R&D, regardless of the nature of product market competition; but, that effect is larger under Bertrand competition than under Cournot competition. If network externalities are sufficiently strong, regardless of the degree of product differentiation, Bertrand firms have a stronger incentive for process R&D than Cournot firms. Otherwise, if network externalities are not sufficiently strong, the higher the degree of product differentiation, the greater is the possibility of Bertrand R&D to be higher than Cournot R&D.
    Keywords: Process R&D, Network Externalities, Cournot, Bertrand, Product Differentiation
    JEL: L13 D43 O31
    Date: 2016–07
    URL: http://d.repec.org/n?u=RePEc:ind:igiwpp:2016-020&r=ind
  3. By: de Cornière, Alexandre; Taylor, Greg
    Abstract: This paper studies situations in which some consumers rely on a potentially biased intermediary to choose among downstream firms. We introduce the notion that firms' and consumers' payoffs can be congruent or conflicting, and show that this has important implications for the effects of bias. Under congruence, the firm towards which the intermediary is biased invests more than its rival and consumers can be better-off than under no bias. Under conflict, bias hurts consumers and the favored firm charges higher prices. We study various oft-proposed policies for dealing with a biased intermediary and show that the efficacy of each intervention depends strongly on whether the environment exhibits congruence or conflict. We discuss how the model relates to recent issues in online markets.
    Keywords: bias; intermediary; regulation
    JEL: D21 L15 L40
    Date: 2016–08
    URL: http://d.repec.org/n?u=RePEc:cpr:ceprdp:11457&r=ind
  4. By: Vigren, Andreas (VTI)
    Abstract: The Swedish market for passenger railway services has been open to competition since the year 2010. Although minor entries have been made since this date, the incumbent SJ only faced substantial competition when MTR Express entered the Stockholm-Gothenburg line in March 2015. Using unique Sweden ticket price data from operators' websites, this paper investigates what effects this entry has had on market prices. The results show that the incumbent's prices decreased by 12.8 percent on average between March 2015 and June 2016. The price level of the competitor is well below the average price that was offered on the railway market in the pre-entry period. Further, the largest price reduction, in percentage terms, was found on tickets booked 10 days before the departure date. Finally, the decrease in the average price of the incumbent seems to be an ongoing process, and a further drop in price would not be unexpected.
    Keywords: Railway; Entry; Open access; Competition; Prices; Web crawler
    JEL: C10 L19 L92 R40
    Date: 2016–08–29
    URL: http://d.repec.org/n?u=RePEc:hhs:ctswps:2016_018&r=ind

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