nep-ind New Economics Papers
on Industrial Organization
Issue of 2016‒11‒06
six papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Cartel Dating By H. Peter Boswijk; Maurice J.G. Bun; Maarten Pieter Schinkel
  2. Non-comparative and comparative advertising in oligopolistic markets By Alipranti, Maria; Mitrokostas, Evangelos; Petrakis, Emmanuel
  3. Advance Selling, Competition, and Brand Substitutability By Oksana Loginova
  4. Vertical Information Restraints: Pro- and Anti-Competitive Impacts of Minimum Advertised Price Restrictions By John Asker; Heski Bar-Isaac
  5. Retail Prices in a City By Eizenberg, Alon; Lach, Saul; Yiftach, Merav
  6. The French Aerospace Sector Collaboration Network : Structural Dynamics And Firm Performance By Johannes VAN DER POL

  1. By: H. Peter Boswijk (University of Amsterdam, The Netherlands); Maurice J.G. Bun (University of Amsterdam, The Netherlands); Maarten Pieter Schinkel (University of Amsterdam, The Netherlands)
    Abstract: The begin and end dates of cartels are often ambiguous, despite competition authorities stating them with precision. The legally established infringement period(s), based on documentary evidence, need not coincide with the period(s) of actual cartel effects. In this paper, we show that misdating cartel effects leads to a (weak) overestimation of but-for prices and an underestimation of overcharges. Total overcharges based on comparing but-for prices to actual prices are a (weak) underestimation of the true amount overcharged, irrespective of the type and size of the misdating. The bias in antitrust damage estimation based on predicted cartel prices can have either sign. We extend the before-during-and-after method with an empirical cartel dating procedure that uses multiple structural break tests to determine the actual begin and end date(s) of the effects of collusive agreements. Empirical findings in the European Sodium Chlorate cartel corroborate our theoretical results.
    Keywords: Cartel; antitrust damages; dates; structural change; break test; but-for
    JEL: C22 C51 L41
    Date: 2016–11–01
  2. By: Alipranti, Maria; Mitrokostas, Evangelos; Petrakis, Emmanuel
    Abstract: We study firms' advertising strategies in an oligopolistic market in which both non-comparative and comparative advertising are present. We show that in equilibrium firms mix over the two types of advertising, with the intensity of comparative advertising exceeding that of non-comparative advertising; moreover, that the intensity of comparative increases relatively to non-comparative advertising as market competition intensifies. Interestingly, the use of comparative advertising may lead to higher consumers' surplus and welfare in a mixed advertising market than in the absence of advertising or when either comparative or non-comparative advertising is not present.
    Keywords: Comparative Advertising,Non-comparative advertising,Oligopoly,Product Differentiation
    JEL: L13 M37
    Date: 2016
  3. By: Oksana Loginova (University of Missouri)
    Abstract: This paper studies the impact of competition on the benefits of advance selling. I construct a two-period price-setting game with heterogeneous consumers and two firms that produce different brands. Some consumers prefer one brand, others prefer the other brand. Consumers derive common value from their preferred brand, but they differ in how strongly they dislike their less preferred brand. I consider the situation in which one firm can offer consumers the opportunity to pre-order its product in advance of the regular selling season. I calculate the benefits of advance selling when this firm faces competition from the other firm in the regular selling season and when it does not. I show that competition enhances the benefits of advance selling when in the advance selling season consumers are uncertain about which brand they will prefer. Comparative statics analysis with respect to brand substitutability reveals some interesting results. For example, I find that in the competitive setting the firm has greater incentives to advance sell when the brands are more substitutable, while the reverse holds in the monopolistic setting.
    Keywords: advance selling, price competition, strategic consumers, valuation uncertainty, consumer heterogeneity, substitutability of brands
    JEL: C72 D42 D43 L12 L13 M31
    Date: 2016–10
  4. By: John Asker; Heski Bar-Isaac
    Abstract: We consider vertical contracts where the retail market may involve search frictions. Minimum advertised price restrictions (MAP) act as a restraint on customers’ information and so can increase search frictions in the retail sector. Such restraints, thereby, soften retail competition—an impact also generated by resale price maintenance (RPM). However, by accommodating (consumer or retailer) heterogeneity, MAP can allow for higher manufacturer profits than RPM. We show that they can do so through facilitating price discrimination among consumers; encouraging service provision; and facilitating manufacturer collusion. Thus, welfare effects may be positive or negative compared to RPM or to the absence of such restrictions.
    JEL: K21 L13 L15 L22 L42
    Date: 2016–10
  5. By: Eizenberg, Alon; Lach, Saul; Yiftach, Merav
    Abstract: We study grocery price differentials across neighborhoods in a large metropolitan area (the city of Jerusalem, Israel). Prices in commercial areas are persistently lower than in residential neighborhoods. We also observe substantial price variation within residential neighborhoods: retailers that operate in peripheral, non-affluent neighborhoods charge some of the highest prices in the city. Using CPI data on prices and neighborhood-level credit card data on expenditure patterns, we estimate a model in which households choose where to shop and how many units of a composite good to purchase. The data and the estimates are consistent with very strong spatial segmentation. Combined with a pricing equation, the demand estimates are used to simulate interventions aimed at reducing the cost of grocery shopping. We calculate the impact on the prices charged in each neighborhood and on the expected price paid by its residents - a weighted average of the prices paid at each destination, with the weights being the probabilities of shopping at each destination. Focusing on prices alone provides an incomplete picture and may even be misleading. Specifically, we find that interventions that make the commercial areas more attractive and accessible yield only minor price reductions, yet expected prices decrease in a pronounced fashion. The benefits are particularly strong for residents of the peripheral, non-affluent neighborhoods.
    Keywords: consumer mobility; Retail prices; spatial segmentation
    JEL: L10 L11 L13
    Date: 2016–10
  6. By: Johannes VAN DER POL
    Abstract: The focus of this paper is on the link between network structure and the financial performance of the individual firm. Under the hypothesis that firms access diverse and valuable knowledge through collaboration we analyse how firms pick their collaborators and how knowledge flows impact the financial performance of the firm. \r\nFirst, the evolution of the structure of the collaboration network of the French aerospace sector is analysed between 1980 and 2013. The global structure is identified and, using an ERGM and clustering identification, the structure of the network is explained. Second, a panel regression identifies a link between the position of the individual firm inside the network and their financial performance.
    Keywords: Network analysis ; Innovation network ; ERGM ; Performance ; Small World ; Scale-free
    JEL: L25 C23 D85 L14 C20
    Date: 2016

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