nep-ind New Economics Papers
on Industrial Organization
Issue of 2016‒12‒18
six papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Multiproduct Pricing Made Simple By Armstrong, Mark; Vickers, John
  2. Product Design and Decision Rights in Vertical Structures By Dubois, Pierre; Jullien, Bruno
  3. The Origin and Dynamics of Export Superstars By Freund, Caroline; Pierola, Denisse
  4. Vertical Mergers in Platform Markets By Pouyet, Jérôme; Trégouët, Thomas
  5. Essays on mergers and acquisitions By Faelten, A.
  6. How Do Product Market Regulations Affect Workers?: Evidence from the Network Industries By Oliver Denk

  1. By: Armstrong, Mark; Vickers, John
    Abstract: We study multiproduct firms in the contexts of unregulated monopoly, regulated monopoly and Cournot oligopoly. Using the concept of consumer surplus as a function of quantities (rather than prices), we present simple formulas for optimal prices and show that Cournot equilibrium exists and corresponds to a Ramsey optimum. We then discuss a tractable class of preferences that involve a generalized form of homotheticity. Profit-maximizing quantities are proportional to efficient quantities. We discuss optimal monopoly regulation when the firm has private information about its cost vector, and find situations where optimal regulation leaves relative price decisions to the firm.
    Keywords: cost passthrough; Cournot oligopoly; homothetic preferences; monopoly regulation; multidimensional screening; Multiproduct pricing; Ramsey pricing
    JEL: D42 D43 D82 L12 L13 L51
    Date: 2016–12
  2. By: Dubois, Pierre; Jullien, Bruno
    Abstract: The paper argues that the emergence of private labels can be partially explained by the new information technologies available at the retail level. In our approach, the owner of a brand has ìdecision rightsîon product design, while the details of the production and distribution are left to contractual negotiation. Manufacturers have privileged information about the cost of improving quality, while distributors have private information on the impact of quality on demand. We show that ownership of the brand should be allocated to the party with a relative informational advantage. In particular, if the information of the distributor improves due to a technological shock on data collection and information management, it may become optimal for the distributor to introduce its own brand, rather than to distribute a manufacturerís brand.
    Keywords: store brand, private label, asymmetric information, vertical structures, product design, decision rights
    Date: 2016–11
  3. By: Freund, Caroline; Pierola, Denisse
    Abstract: This paper uses firm-level data on manufacturing trade from 40 developing countries to explore how the five largest exporters in a country contribute to export growth and diversification. The origins of these firms are also studied. The data show that the top five exporters account for on average one third of exports, over half of export growth, and almost all of export diversification over a five-year period. Controlling for country and industry-fixed effects, the share of exports in the top five firms increases significantly as exports grow. Most top five exporters were already large five years ago or are new firms; it is extremely rare for these export super- stars to emerge from the bottom half of the firm-size distribution. They are producers, not traders, and are primarily foreign owned.
    Keywords: comparative advantage; export growth; firm size distribution; power law
    JEL: D22 F14 L11 L25
    Date: 2016–12
  4. By: Pouyet, Jérôme; Trégouët, Thomas
    Abstract: We analyze the competitive impact of vertical integration between a platform and a manufacturer when platforms provide operating systems for devices sold by manufacturers to customers, and, customers care about the applications developed for the operating systems. Two-sided network effects between customers and developers create strategic substitutability between manufacturers' prices. When it brings efficiency gains, vertical integration increases consumer surplus, is not profitable when network effects are strong, and, benefits the non-integrated manufacturer. When developers bear a cost to make their applications available on a platform, manufacturers boost the participation of developers by affiliating with the same platform. This creates some market power for the integrated firm and vertical integration then harms consumers, is always profitable, and, leads to foreclosure. Introducing developer fees highlights that not only the level, but also the structure of indirect network effects matter for the competitive analysis.
    Keywords: foreclosure; network effects; Two-sided markets; vertical integration
    JEL: D43 L10 L40
    Date: 2016–12
  5. By: Faelten, A.
    Abstract: “Essays on Mergers and Acquisitions" tackles some of the most prominent business challenges related to M&A activity. The Introduction examines the reasons why deals fail through well-known case studies; Chapter 1 presents a new index measuring countries M&A maturity worldwide; Chapter 2 focus on the importance of corporate governance when conducting deals in unknown territories; whilst Chapter 3 and 4 conduct research on companies’ decision to tap capital markets and their subsequent M&A activity.
    Date: 2016
  6. By: Oliver Denk
    Abstract: Knowing who gains and loses from regulatory reform is important for understanding the political economy of reform. Using micro-level data from 26 countries, this paper studies how regulatory reform of network industries, a policy priority in many advanced economies, influences the labour market situation of workers in network industries. Estimates are identified from changes in a worker’s pay, industry-level employment flows and regulation over time. The main finding is that the regulation of network industries provides workers in this industry with a wage premium and higher employment stability relative to similar workers in other industries. Regulatory reform therefore tends to align labour income and employment stability in the reformed industry with those in other industries. Workers in the reformed industry lose out compared with others, because they no longer benefit from “excess” pay and employment stability. Réglementation des marchés de produits : Quelles conséquences pour le marché du travail dans les industries de réseau ? Pour comprendre l’économie politique d’une réforme réglementaire, il est important de savoir qui seront les gagnants et qui seront les perdants. À partir de microdonnées recueillies dans 26 pays, cet article étudie les incidences que la déréglementation des industries de réseau – une priorité de l’action publique dans de nombreux pays avancés – peut avoir sur la situation des travailleurs employés dans ce secteur. Les effets sont estimés sur la base des variations observées au niveau des salaires, des flux de main-d’oeuvre et de la réglementation. Les principaux résultats de l’analyse montrent que, dans les industries de réseau, la réglementation se traduit par une prime de salaire et une plus grande stabilité de l’emploi que dans les autres secteurs. La déréglementation tend donc à aligner vers le bas les revenus salariaux et le niveau de stabilité de l’emploi des travailleurs concernés, qui sont les perdants de la réforme puisqu’ils ne bénéficient plus du surcroît de salaire et de stabilité dont ils jouissaient auparavant dans leur emploi.
    Keywords: employment stability, labour income, network industries, reform, regulation
    JEL: L52 J31 L98 J63
    Date: 2016–12–15

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