nep-ind New Economics Papers
on Industrial Organization
Issue of 2017‒05‒21
three papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Multiproduct retailing and buyer power: The effects of product delisting on consumer shopping behavior By Jorge Florez-Acosta; Daniel Herrera-Araujo
  2. Oligopolistic competition for the provision of hospital care By Laura Levaggi; Rosella Levaggi
  3. The European Construction Value Chain: Performance, Challenges and Role in the GVC By Paul Baker; Luca Giustozzi; Jakub Gloser; Doris Hanzl-Weiss; Erik Merkus; Roelof-Jan Molemaker; Robert Stehrer

  1. By: Jorge Florez-Acosta (Universidad del Rosario - Universidad del Rosario); Daniel Herrera-Araujo (PSE - Paris-Jourdan Sciences Economiques - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics)
    Abstract: This paper empirically examines the effects of product delisting on consumer shopping behavior in a context of grocery retailing by large multiproduct supermarket chains. A product is said to be delisted when a supermarket stops supplying it while it continuous being sold by competing stores. We develop a model of demand in which consumers can purchase multiple products in the same period. Consumers have heterogeneous shopping patterns: some find it optimal to concentrate purchases at a single store while others prefer sourcing several separate supermarkets. We account for this heterogeneity by introducing shopping costs, which are transaction costs of dealing with suppliers. Using scanner data on grocery purchases by French households in 2005, we estimate the parameters of the model and retrieve the distribution of shopping costs. We find a total shopping cost per store sourced of 1.79 e on average. When we simulate the delisting of a product by one supermarket, we find that customers’ probability of sourcing that store decreases while the probability of sourcing competing stores increases. The reduction in demand is considerably larger when consumers have strong feelings of loyalty for the delisted brand. This suggests that retailers may be hurting themselves, and not only manufacturers, when they delist a product. However, when customers are loyal to the store, such effects are lower, suggesting that inducing store loyalty in customers (through strong private labels and loyalty programs, for example) appears to have an effect on vertical negotiations and, in particular, it enables powerful retailers to impose vertical restraints on manufacturers.
    Keywords: Grocery retailing, supermarket chains, buyer power, vertical,restraints, product delisting, shopping costs, one-and multistop shopping,Simulated Maximum likelihood, D12, L13, L22, L81
    Date: 2017–02
  2. By: Laura Levaggi (Libera Università di Bolzano, Italy); Rosella Levaggi (Università di Brescia, Italy)
    Abstract: Competition in the market for health care has followed different patterns, and some health care systems have opted for mixed markets where public organisations compete alongside private ones. Empirical evidences on these market structures are however mixed. In this article we argue that public hospitals which have different objectives than private ones and faces different constraints, are also perceived differently by patients. For this reason we model the market for hospital care as Salop circle with a centre where the public hospital is located; private providers are located on the circle. We show that, depending on the difference in the productivity advantage, mixed markets may outperform both the benchmark (one public hospital at the centre) and private competition (N private providers competing along the circle), but the welfare distribution of these improvements should be carefully analysed. In some cases monopoly franchise on the mixed market should be introduced to redistribute these benefits.
    Keywords: Private hospitals, Public hospitals, Salop competition
    JEL: D47 H44 L51
  3. By: Paul Baker; Luca Giustozzi; Jakub Gloser; Doris Hanzl-Weiss (The Vienna Institute for International Economic Studies, wiiw); Erik Merkus; Roelof-Jan Molemaker; Robert Stehrer (The Vienna Institute for International Economic Studies, wiiw)
    Abstract: Abstract Several years after the global slump, the construction industry and many countries and sectors with construction-related activities and firms tied to them still feel the impact of that financial and economic crisis. In contrast, several years prior to the crisis, there had been a major construction bubble. This report outlines the significance of the construction sector for the EU economy, given its potential in job creation in micro and small enterprises as well as its role as a major consumer of intermediate products and related services. Developments within the industry have wide-reaching implications for the nature of growth that can be achieved, not least in terms of achieving the ambition of smart, sustainable and inclusive growth that is at the heart of the Europe 2020 strategy. Furthermore, a modernisation of the sector and improvements in the efficiency of building construction are also key aspects for the transformation of the EU’s energy system as pointed out in the ‘Energy Roadmap 2050’. In this context, the Commission introduced its ‘Strategy for the sustainable competitiveness of the construction sector and its enterprises’ that contained a proposed Action Plan Construction 2020 aimed at addressing challenges within the 2020 time horizon. This Action Plan focuses on five thematic priorities which aim to address economic, skills, environmental, regulatory, and international challenges. This study provides an assessment of the role and dynamics of the construction industry in the European Union and its interlinkages with other industries over the last fifteen years. The report draws a picture of a sector in transformation, partly still suffering from the ramifications of the global crisis, and points to the new foundations from which the sector and the whole value chain can develop towards the future.
    Keywords: construction industry, construction value chains, trade, qualitative scenarios
    JEL: L1 L74
    Date: 2017–05

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