nep-ind New Economics Papers
on Industrial Organization
Issue of 2016‒12‒04
six papers chosen by

  1. The Formation of Consumer Brand Preferences By Bronnenberg, Bart; Dube, Jean-Pierre
  2. Network Effects, Bargaining Power, and Product Review Bias: Theory and Evidence By Tom Hamami
  3. Electricity network charging for flexibility By Pollitt, M. G.
  4. Drugs, Showrooms and Financial Products: Competition and Regulation when Sellers Provide Expert Advice By Bardey, David; Gromb, Denis; Martimort, David; Pouyet, Jérôme
  5. Market structure, patient choice and hospital quality for elective patients By Giuseppe Moscelli; Hugh Gravelle; Luigi Siciliani
  6. Collusion in Vertical Relationships: The Case of Insurance Fraud in Taiwan By Pierre Picard; Kili Wang

  1. By: Bronnenberg, Bart; Dube, Jean-Pierre
    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: L11 L15 M31 M37
    Date: 2016–11
  2. By: Tom Hamami
    Abstract: I construct a theoretical framework for expert product reviews and demonstrate how the existence of positive network effects can make review inflation profitable even when fully rational consumers understand the existence of bias. This finding moreover suggests that product reviews, in addition to transmitting information, may also serve as a coordination mechanism for early adopters. Empirical application to video game review data suggests that this industry is in an inflation equilibrium. Specifically, I find evidence that reviews are inflated for games produced by large firms and for those that are part of pre-existing game franchises. Additionally, I find that review inflation is heterogeneous across genres that vary by the extent to which they produce network externalities, and I argue that this result is inconsistent with alternative explanations of review inflation.
    JEL: L14 L15 D21 D22
    Date: 2016–11–29
  3. By: Pollitt, M. G.
    Abstract: This paper discusses the principles of electricity network charging in the light of increasing amounts of distributed generation and the potential for significant increases in electric vehicles or distributed electrical energy storage. We outline cost reflective pricing, traditional public service pricing, platform market pricing and customer-focussed business model pricing. We focus on the particular problem of how to recover network fixed costs and a recent example from Australia. We conclude that there are serious issues for regulators to address, but that potential solutions at the distribution level may already exist at the transmission level.
    Keywords: network charging methodology, platform market.
    JEL: L94
    Date: 2016–12–01
  4. By: Bardey, David; Gromb, Denis; Martimort, David; Pouyet, Jérôme
    Abstract: We consider a market in which sellers can exert an information-gathering effort to advise buyers about which of two goods best fits their needs. Sellers may steer buyers towards the higher margin good. We show that for sellers to collect and reveal information, profits on both goods must be sufficiently close to each other, i.e., lie within an implementability cone, which competition or regulation may ensure. Instruments to do so vary with the context. Controlling market power while improving the quality of advice is more difficult when sellers have private information on the profitability of the goods.
    Keywords: asymmetric information; Competition; Expertise; Mis-Selling; regulation; Retailing
    JEL: D82 G24 I11 L13 L15 L51
    Date: 2016–11
  5. By: Giuseppe Moscelli (Centre for Health Economics, University of York, York, UK.); Hugh Gravelle (Centre for Health Economics, University of York, York, UK.); Luigi Siciliani (Department of Economics and Related Studies, University of York, York, UK.)
    Abstract: We examine the change in the effect of market structure on hospital quality for elective procedures (hip and knee replacements, and coronary artery bypass grafts) following the 2006 loosening of restrictions on patient choice of hospital in England. We allow for time-varying endogeneity due to the effect of unobserved patient characteristics on patient choice of hospital using Two Stage Residual Inclusion. We find that the change in the effect of market structure due to the 2006 choice reforms was to reduce quality by increasing the probability of a post-operative emergency readmission for hip and knee replacement patients. There was no effect of the choice reform on hospital quality for coronary bypass patients. We find no evidence of self-selection of patients into hospitals, suggesting that a rich set of patient-level covariates controls for differences in casemix.
    Keywords: competition, quality, hospital, choice, electives.
    JEL: H51 I11 I18 L32 L33
    Date: 2016–11
  6. By: Pierre Picard (Ecole Polytechnique [Palaiseau]); Kili Wang (Tamkang University)
    Abstract: The delegation of services from producers to retailers is frequently at the origin of transaction costs, associated with the discretion in the way retailers do their job. This is particularly the case when retailers and customers collude to exploit loopholes in the contracts between producers and customers. In this paper, we analyze how insurance distribution channels may affect such misbehaviors, when car repairers are joining policy holders to defraud insurers. We focus attention on the Taiwan automobile insurance market by using a database provided by the largest Taiwanese automobile insurer. The theoretical underpinning of our analysisis provided by a model of claims fraud with collusion and audit. Our econometric analysis con firms that fraud occurs through the postponing of claims to the end of the policy year, possibly by filing on single claim for several events. It highlights the role of car dealer owned insurance agents in the collusive fraud mechanism.
    Keywords: Insurance, Fraud, Audit, Insurance distribution
    Date: 2016–10–04

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