nep-ind New Economics Papers
on Industrial Organization
Issue of 2017‒03‒12
six papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Handbook of Game Theory and Industrial Organization: An Introduction By Marini, Marco A.; Corchon, Luis
  2. Mixed Duopoly: Differential Game Approach By Koichi Futagami; Toshihiro Matsumura; Kizuku Takao
  3. Multi-Product Firms and Product Quality By Manova, Kalina; Yu, Zhihong
  4. Service regulations, input prices and export volumes: evidence from a panel of manufacturing firms By Mónica Correa-López; Rafael Doménech
  5. Incumbents' Asymmetric Responses to Environmentally Friendly Entrants in the Automotive Industry By Uwe Cantner; Josefine Diekhof
  6. Vertical Integration and Relational Contracts: Evidence from the Costa Rica Coffee Chain By Macchiavello, Rocco; Miquel-Florensa, Josepa

  1. By: Marini, Marco A.; Corchon, Luis
    Abstract: We introduce here the volume Handbook of Game Theory and Industrial Organization, by L. C. Corchón and M. A. Marini (ed.), Edward Elgar, Cheltenam, UK and Northampton, MA, by describing its main aim and its basic structure.
    Keywords: Industrial Organization, Game Theory.
    JEL: C0 C7 C72 D2 D21 D22 D23 D24 D4 D42 D43 D44 D47 D8 I0 L1 L11 L15 L4 L44 L6 L7
    Date: 2016–12–15
  2. By: Koichi Futagami (Graduate School of Economics, Osaka University); Toshihiro Matsumura (Institute of Social Science, The University of Tokyo); Kizuku Takao (Department of Economics, Aomori Public University)
    Abstract: Previous studies in differential games reveal that intertemporal strategic behaviors have an important role for various economic problems. However, most of their analyses are limited to cases where objective functions are identical among agents. In this paper, we characterize the open-loop Nash equilibrium and the Markov perfect Nash equilibrium of a mixed duopoly game where a fully or partially state-owned firm and a fully private firm compete in the quantities of homogeneous goods with sticky prices. We show that in the Markov perfect Nash equilibrium, an increase in the governments f share-holdings of the state-owned firm has a non-monotonic effect on the price, and in a wide range of parameter spaces, it increases the price. These results are derived from the interaction of an asymmetric structure of agents f objectives and inter-temporal strategic behaviors, which are in sharp contrast with those in the open-loop Nash equilibrium. We provide new implications for privatizationpolicies in the presence of dynamic interactions, against the static analyses.
    Keywords: Mixed Duopoly, Open-loop Nash equilibrium, Markov Perfect Nash equilibrium
    JEL: C73 D43 L32
    Date: 2017–03
  3. By: Manova, Kalina; Yu, Zhihong
    Abstract: We examine the global operations of multi-product firms. We present a flexible heterogeneous-firm trade model with either limited or strong scope for quality differentiation. Using customs data for China during 2002-2006, we empirically establish that firms allocate activity across products in line with a product hierarchy based on quality. Firms vary output quality across their products by using inputs of different quality levels. Their core competence is in varieties of superior quality that command higher prices but nevertheless generate higher sales. In markets where they offer fewer products, firms concentrate on their core varieties by dropping low-quality peripheral goods on the extensive margin and by shifting sales towards top-quality products on the intensive margin. The product quality ladder also governs firms' export dynamics, both in general and in response to the exogenous removal of MFA quotas on textiles and apparel. Our results inform the drivers and measurement of firm performance, the effects of trade reforms, and the design of development policies.
    Keywords: export prices; multi-product firms; product quality; Trade; trade reforms
    JEL: D22 F10 F12 F14 L10 L11 L15
    Date: 2017–02
  4. By: Mónica Correa-López (Banco de España); Rafael Doménech (BBVA RESEARCH AND UNIVERSITY OF VALENCIA)
    Abstract: Using a panel of firm-level data from Spanish manufacturers, this study shows that better service regulation reduces the price of intermediate inputs paid by downstream firms. The beneficial cost effects of services reforms extend to both large and small-to-medium sized corporations (SMEs), but the former tend to enjoy greater gains. This feature also manifests itself in international markets. We identify an input cost channel through which service regulations affect the volume of exports of large manufacturers, while the evidence of such channel is weaker for SMEs. Our estimates indicate that, from 1991 till 2007, large firms increased their volume of exports by an average of 22% as a result of the direct input cost effect of services reforms, such that the firms that benefited the most typically belonged to industries more dependent on service inputs. Furthermore, convergence to the “best practice” regulatory framework in services would have raised exports at least by an additional 10%. We conclude that firm size is relevant for the connection between services reforms, intermediate input prices and export volumes
    Keywords: service regulations, intermediate input prices, exports, firm size
    JEL: L11 L43 F14
    Date: 2017–03
  5. By: Uwe Cantner (School of Economics and Business Administration, Friedrich-Schiller-University Jena); Josefine Diekhof (DFG-GRK-1411 "The Economics of Innovative Change", PhD program of the Max Planck Institute of Economics & Friedrich-Schiller University Jena)
    Abstract: In the context of technological change, the influence of innovative entrants on incumbents is considered a major driving force. Using global patent data, we analyze this influence for the case of the transition from combustion engine vehicles towards alternative technology vehicles (ATVs). Entrants play a key role in developing ATV-related patents, whereas automotive incumbents are considered as being less motivated in pursuing this new technology. Our results indicate that entrants' ATV-related knowledge accumulation stimulates incumbents' ATV-related research. Domestic entrants had a positive effect on the large incumbent majority that exhibited low ATV patent stocks whereas incumbents with high ATV patent stocks reacted with decreasing patenting; which is assumed to be a sign of R&D outsourcing or strategic acquisitions. Entrants in foreign countries yielded increasing incumbent responses along increasing incumbents' ATV patent stocks; which is in line with previously found competitive reactions to entry. Further, younger entrants, pre-entry patent- inexperienced entrants, and entrant leaders with greater technological relevance were more influential than their counterparts (old, experienced, and less technological relevant). This suggests that not only diversifying but also new establishments have an effect on incumbents. As technological leading and inexperienced entrants showed a stronger effect on incumbents but were outnumbered by their counterparts, it underpins that entrants with important characteristics and not the pure number of entrants drive these effects on incumbents.
    Keywords: Environmental Economics, Technological Change, Industry Dynamics, Entrepreneurship, Transport Industry, Electric Vehicle
    JEL: Q55 O3 Q52 R49 L91 L26 O31
    Date: 2017–03–10
  6. By: Macchiavello, Rocco; Miquel-Florensa, Josepa
    Abstract: This paper compares integrated firms, long-term relationships and markets, and how they adapt to shocks in the Costa Rican coffee chain. The industry is characterised by significant uncertainty. Supply failures responses to unanticipated increases in reference prices reveal that integration and relationships reduce opportunism. Trade volumes responses to weather-induced increases in supply reveal that relationships provide demand assurance, although less than integration does. This benefit of integration is offset by costs when trading outside of the integrated chain. The evidence supports models in which firms boundaries alter temptations to renege on relational contracts and, consequently, the allocation of resources.
    Keywords: Adaptation; Demand Uncertainty; relational contracts; Supply Chain; vertical integration
    JEL: D23 L14 L22 O12 Q13
    Date: 2017–02

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