|
on Industrial Organization |
|
Issue of 2017‒06‒11
seven papers chosen by |
| By: | Aguirregabiria, Victor; Slade, Margaret |
| 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, inter-firm 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: | Collusion; demand for differentiated products; dynamic structural models; empirical auction models; Empirical IO; inter-firm contracts; production functions |
| JEL: | C57 L10 L20 L30 L40 L50 |
| Date: | 2017–06 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:12074&r=ind |
| By: | Guillem Roig |
| Abstract: | In a dynamic competition model where firms initially share half of the market and consumers have switching costs, consumers' sophistication, lifespan and concentration impact the possibility to set collusive prices. I first show that with strategic long-run consumers, collusion is harder to implement than when consumers are not strategic: with sophisticated consumers, a deviating fi rm can cash-in the rents that a buyer obtains after switching. I then study the consequences of relaxing buyers concentration and show that collusion is then easier to maintain than with non-strategic consumers: with strategic consumers a firm must offer a low price at the moment of deviation as consumers can bene t from increased competition, emerging from an asymmetric market structure, without having to pay switching costs. The paper suggests simple policy recommendations: it does not suffice to educate consumers about the competitive effects of their current purchasing decisions, but central purchasing agencies also need to be promoted. |
| Keywords: | Switching cost, Price collusion; Strategic consumers |
| JEL: | D43 L13 L12 |
| Date: | 2017–05–25 |
| URL: | http://d.repec.org/n?u=RePEc:col:000092:015621&r=ind |
| By: | In Kyung Kim (Department of Economics, Nazarbayev University); Yoon-Jin Lee (Department of Economics, Kansas State University); Young-Ro Yoon (Department of Economics, Wayne State University) |
| Abstract: | In a homogeneous goods market, due to the lack of the preemption effect, each firm’s demand is likely to be proportional to its share of total output. Firms are inclined to supply more to increase their market shares, but should also consider the potential cost from excess supply. Thus, firms should make strategic decisions on how much to supply. We study this topic by considering an oligopoly market in which firms make decisions sequentially under a fixed price. We first provide a theoretical model and find the conditions under which either an efficient supply or oversupply occurs. Our model proposes two practical ways to evaluate the efficiency of a market, specifically regarding excess supply, that do not require information about market demand. Using these, we evaluate the efficiency of the Korean movie theater industry. Our empirical findings indicate oversupply of seating capacity in that industry. |
| Keywords: | oversupply, first mover advantage, market efficiency, movie theater industry |
| JEL: | L13 L22 L82 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:naz:wpaper:1703&r=ind |
| By: | Roberto Burguet; Vaiva Petrikaite |
| Abstract: | We study a market with horizontally differentiated products and sequential consumer search. Firms send adverts to consumers to inform about their existence. Advertising may be either random or targeted. Targeting increases search intensity, which intensifies competition. However, targeted consumers draw higher valuations on average, which creates incentives to raise prices. The first effect dominates when search costs are sufficiently low, but the second may prevail when search costs are high. As a result, with high search costs, targeting results in higher prices and lower consumer surplus, while the opposite holds true when search costs are low. A larger advertising cost helps firms segment the market if they can target adverts. |
| Keywords: | random advertising, targeted advertising, horizontal differentiation, sequential search |
| JEL: | L13 D83 |
| Date: | 2017–06 |
| URL: | http://d.repec.org/n?u=RePEc:bge:wpaper:971&r=ind |
| By: | Daniel Garcia |
| Abstract: | This paper studies dynamic pricing in markets with search frictions. Sellers have a single unit of a good and post prices in every trading period. Buyers have to incur a search cost to match with a new seller and upon matching they observe the price and the realization of some idiosyncratic match value. There is no discounting but trade ends at an exogenously given deadline. We show that equilibrium involves trading in nitely many trading periods and the volume of trade increases over time. Under mild conditions on the buyerto- seller ratio and the distribution of valuations, prices decrease at increasing rates as the deadline approaches. We derive the gains from trade in equilibrium and their distribution between buyers and sellers. For the case in which the measures of buyers and sellers coincide, we provide a full characterization of the (unique) equilibrium for a class of distribution functions. We nally discuss implications for market design, including the use of platform fees and cancellation policies. |
| JEL: | D11 D83 L13 |
| Date: | 2017–05 |
| URL: | http://d.repec.org/n?u=RePEc:vie:viennp:1703&r=ind |
| By: | In Kyung Kim (Nazarbayev University); Vladyslav Nora (Nazarbayev University) |
| Abstract: | We examine the effects of integration between distribution and exhibition on product mix and availability in the movie theater industry. Our model predicts that integrated theaters engage in foreclosure, but also have higher incentives to acquire demand information. We estimate that integrated theaters allocate more seats to their own titles, mostly at the expense of small independent movies. However, we find that despite this foreclosure effect integrated theaters match demand better turning away significantly fewer consumers and achieving higher consumer welfare than independent theaters. Our results suggest that the efficiency gains of vertical integration dominate the losses from foreclosure. |
| Keywords: | vertical integration, foreclosure, product availability, movie theater industry |
| JEL: | L13 L22 L82 |
| Date: | 2017–01 |
| URL: | http://d.repec.org/n?u=RePEc:naz:wpaper:1701&r=ind |
| By: | Liliana Manea (University Athenaeum Bucharest, Romania); Shawki Said Mohamed Ali (Misr University for Science and Technology, Egypt) |
| Abstract: | Mergers and acquisitions have become an increasingly common reality of organizational life. It seems that almost daily one hears of corporations - some willingly, some not - involved in such transformation as part of strategy designed to achieve corporate growth, economies of scale, vertical integration, diversification, and even provision of capital for future leveraged buyouts. From a human resource point of view, merger and acquisitions are corporate events that have the potential to create severe personal trauma and stress which can result in psychological, behavioral, health, performance and survival problems for both the individuals and companies involved. |
| Keywords: | merger, acquisition, corporate growth, performance, human resources, economic integration |
| JEL: | M14 |
| Date: | 2017–01 |
| URL: | http://d.repec.org/n?u=RePEc:smo:wpaper:10&r=ind |