nep-ind New Economics Papers
on Industrial Organization
Issue of 2016‒10‒16
six papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Collusion, Firm Numbers and Asymmetries Revisited By Garrod, Luke; Olczak, Matthew
  2. The Formation of Consumer Brand Preferences By Bart J. Bronnenberg; Jean-Pierre H. Dubé
  3. Markups and Firm-Level Export Status: Comment By Deng, Zhongqi; Chen, Yongjun
  4. Do you mind me paying less? Measuring Other-Regarding Preferences in the Market for Taxis By Brit Grosskopf; Graeme Pearce
  5. The Superstar and the Followers: Intra-Firm Product Complementarity in International Trade By Arnarson, Björn Thor
  6. Cartel cases and the cartel enforcement process in the European Union 2001-2015: A quantitative assessment By Hellwig, Michael; Hüschelrath, Kai

  1. By: Garrod, Luke; Olczak, Matthew
    Abstract: Despite the fact that competition law prohibits explicit cartels but not tacit collusion, theories of collusion often do not distinguish between the two. In this paper, we address this issue and ask: under which types of market structures are cartels likely to arise when firms can alternatively collude tacitly? To answer this question, we analyse an infinitely repeated game where firms with (possibly asymmetric) capacity constraints can make secret price cuts. Tacit collusion can involve price wars on the equilibrium path. Explicit collusion involves firms secretly sharing their private information in an illegal cartel to avoid such price wars. However, this runs the risk of sanctions. We find that, in contrast to the conventional wisdom but consistent with the available empirical evidence, cartels are least likely to arise in markets with a few symmetric firms, because tacit collusion is relatively more appealing in such markets. We discuss the implications for anti-cartel enforcement policy.
    Keywords: cartel, tacit collusion, imperfect monitoring, capacity constraints
    JEL: D43 D82 K21 L44
    Date: 2016–09–30
  2. By: Bart J. Bronnenberg; Jean-Pierre H. Dubé
    Abstract: Brands and brand capital have long been theorized to play an important role in the formation of the industrial market structure of consumer goods industries. We summarize several striking empirical regularities in the concentration, magnitude and persistence of brand market shares in consumer goods categories. We then survey the theoretical and empirical literatures on the formation of brand preferences and how brand preferences contribute to our understanding of these empirical regularities. We also review the literature on how brand capital creates strategic advantages to firms that own established brands.
    JEL: A3 D12 D4 L0 L00 L11 L15 M31 M37 Y1 Y10 Y5 Y50
    Date: 2016–09
  3. By: Deng, Zhongqi; Chen, Yongjun
    Abstract: This paper reviews a recent paper by De Loecker and Warzynski (AER, 2012), which developed a method (so-called DLW method) to estimate markups (market powers) using plant-level production data. Although DLW aimed to explore the relationship between markups and export behavior, its core value is the estimation method of firm-level markups. However, this paper finds that the DLW method still has some errors, one is the disadvantages of supply-side model, the other is that they used an identical equation to estimate markup.
    Keywords: Market power; DLW method; Supply-side model; Parameters identification
    JEL: F12 L12 L41
    Date: 2016–10–12
  4. By: Brit Grosskopf; Graeme Pearce
    Abstract: We present a natural field experiment designed to measure other{regarding preferences in the market for taxis. We employed testers of varying ethnicity to take a number of predetermined taxi journeys. In each case we endowed them with only 80% of the expected fare. Testers revealed the amount they could afford to pay to the driver mid-journey and asked for a portion of the journey for free. In a 2x2 between{subjects design we vary the length of the journey and whether drivers havereputational concerns or not. We find that the majority of drivers give at least part of the journey for free and over 25% complete the journey. Giving is found to be proportional to the length of the journey, and the drivers' reputational concerns do not explain their behaviour. Evidence of strong out{group negativity against black testers by both white and South Asian drivers is also reported. In order to link our empirical analysis to behavioural theory we estimate the parameters of a number of utility functions. The data and the structural analysis lend support to the quantitative predictions of experiments that measure other{regarding preferences, and shed further light on how discrimination can manifest itself within our preferences.
    Date: 2016
  5. By: Arnarson, Björn Thor (Department of Economics, Lund University)
    Abstract: This paper investigates whether the exports of different products by the same firm are systematically interconnected. Using Swedish firm-registry data from 1997-2011, I first document that the distribution of firm export sales is skewed towards their best performing products (‘superstars’). I then use a novel instrumental variable approach to identify if the ‘superstar’ products induce more trade of non-superstar products. I find evidence that the exports of low-ranked (non-star) products of a firm complement the exports of a single superstar product to each destination. Extending the ‘superstar’ concept to a ‘superstar core’ of products strengthens this result (this includes the top decile of products in terms of export value). The results show that a 1% increase in the exports of the superstar product and the superstar core increases the exports of non-star products by 0.13% and 0.376%. Hence, I find that the exports of non-star products complements the superstar while conversely, the same complementarity is not found using low-ranked products as placebo-superstars. The main contribution of this paper is identifying a new, sizeable and systematic intra-firm-destination one-way complementarity between products that is missing in the current models of multi-product exporters.
    Keywords: Multi-product firms; product complementarity; spillovers; intra-firm spillover; international trade; inter-product spillover
    JEL: F10 F13 F14 L10 L20
    Date: 2016–10–11
  6. By: Hellwig, Michael; Hüschelrath, Kai
    Abstract: We provide a comprehensive quantitative assessment of cartels and the related cartel enforcement process in the European Union (EU) from 2001 to 2015. In a first step, we present a detailed characterization of all cartel cases decided by the European Commission (EC) with respect to various criteria such as the number of involved firm groups, cartel market shares and market share asymmetries, involved industries, affected countries, types of infringement, types of cartel breakdown as well as cartel duration. In a second step, we complement this cartel-based analysis with a quantitative assessment of the public cartel enforcement process in the European Union - subdivided further into its duration, types of cartel detection, the leniency program, the settlement procedure, overall fines imposed, and the conclusive appeals process with the General Court (GC) and the European Court of Justice (ECJ).
    Keywords: Competition Policy,Cartels,Collusion,Enforcement,European Union
    JEL: K21 L41
    Date: 2016

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