nep-ind New Economics Papers
on Industrial Organization
Issue of 2017‒05‒07
five papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Market Power and Growth through Vertical and Horizontal Competition By Gilad Sorek
  2. Price promotions and brand equity: the role of brand types By Kuntner, Tobias
  3. Empirical Models of Firms and Industries By Aguirregabiria, Victor; Slade, Margaret E.
  4. Zone Pricing in Retail Oligopoly By Brian Adams; Kevin R. Williams
  5. Price Discrimination and Dispersion under Asymmetric Profiling of Consumers By Paul Belleflamme; Wing Man Wynne Lam; Wouter Vergote

  1. By: Gilad Sorek
    Abstract: I study the implications of innovators' market power to growth and welfare in a two-R&D-sector economy. In this framework either vertical or horizontal competition is binding in the price setting stage, depending on the model parameters and the implemented market-power policy. I consider two alternative policies that are commonly, yet separately, used in the literature to constraint innovators' market power: patent lagging-breadth protection and direct price controls. I show that (a) the alternative policies may have non-monotonic and contradicting effects on growth (b) unconstrained market power may yields either excessive or insufficient growth compared with social optimum and (c) the social optimum can be achieved by reducing innovators market power with the proper policy instrument, along with a corresponding flat rate R&D-subsidy.
    Keywords: Patent Breadth; Price control; Two-R&D-Sector; Growth
    JEL: O31 O40
    Date: 2017–04
  2. By: Kuntner, Tobias
    Abstract: Purpose – This study investigates whether the influence of selected marketing-mix elements on brand equity differs for different types of brands. The main focus is on price promotions’ influence. In addition, the impact of discount-store distribution is explored. Design/methodology/approach – This study applies fixed-effects regression to analyze German panel data, which includes 126 national brands in four product categories across five years. Findings – The results reveal that frequent price promotions and intensive discount-store distribution have a negative influence on brand equity. However, this effect differs across brand types: the higher a brand’s initial equity level, the more harmful is the impact of these marketing activities on brand equity. Research implications – This study shows that brand types play an important role in moderating the influence of marketing activities on brand equity. Thus, further research endeavors may generate new insights by accounting for these brand-related differences in their investigations. Practical implications – Managers of high-equity brands should avoid frequent price promotions and intensive discount-store distribution. In contrast, managers of low-equity brands may use these instruments more widely because their detrimental effects are less severe. Originality/value – Current research mainly focuses on improving the conceptualization of brand equity or exploring different kinds of marketing-mix elements. Findings on potential effect moderators are scarce. Thus, this study substantiates and extends existing findings by emphasizing the importance of distinguishing different brand types when investigating the effect of marketing-mix elements on brand equity.
    Keywords: Price promotion,Brand equity,Brand type,Panel data
    Date: 2017
  3. By: Aguirregabiria, Victor; Slade, Margaret E.
    Abstract: We review important developments in Empirical Industrial Organization (IO) over the last three decades. The paper is organized around six topics: collusion, demand, productivity, industry dynamics, interfirm contracts, and auctions. We present models that are workhorses in empirical IO, and describe applications. For each topic, we discuss at least one empirical application using Canadian data.
    Keywords: Empirical IO; collusion, demand for differentiated products; production functions; dynamic structural models; interfirm contracts
    JEL: C57 L10 L20 L30 L40 L50
    Date: 2017–04–27
  4. By: Brian Adams (Bureau of Labor Statistics); Kevin R. Williams (Cowles Foundation, Yale University)
    Abstract: We quantify the welfare effects of zone pricing, or setting common prices across distinct markets, in retail oligopoly. Although monopolists can only increase profits by price discriminating, this need not be true when firms face competition. With novel data covering the retail home improvement industry, we find that Home Depot would benefit from finer pricing but that Lowe’s would prefer coarser pricing. Zone pricing softens competition in markets where firms compete, but it shields consumers from higher prices in markets where firms might otherwise exercise market power. Overall, zone pricing produces higher consumer surplus than finer pricing discrimination does.
    Keywords: Zone pricing, Market segmentation, Price discrimination in oligopoly, Micromarketing, Retailing
    JEL: C13 L61 L20 L67 L81
    Date: 2017–02
  5. By: Paul Belleflamme (Aix-Marseille Univ. (Aix-Marseille School of Economics), CNRS, EHESS and Centrale Marseille); Wing Man Wynne Lam (University of Liège); Wouter Vergote (CEREC, University Saint-Louis)
    Abstract: Two duopolists compete in price on the market for a homogeneous product. They can use a 'profiling technology' that allows them to identify the willingness-to-pay of their consumers with some probability. If both firms have profiling technologies of the exact same precision, or if one firm cannot use any profiling technology, then the Bertrand paradox continues to prevail. Yet, if firms have technologies of different precisions, then the price equilibrium exhibits both price discrimination and price dispersion, with positive expected profits. Increasing the precision of both firms’ technologies does not necessarily harm consumers.
    Keywords: price discrimination, price dispersion, Bertrand competition
    JEL: D11 D18 L12 L86
    Date: 2017–04

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