nep-ind New Economics Papers
on Industrial Organization
Issue of 2017‒07‒16
seven papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Monopolistic Competition, As You Like It By Paolo Bertoletti; Federico Etro
  2. Collusive Vertical Relations By S. Bolatto; L. Lambertini
  3. Application Bundling in System Markets By de Cornière, Alexandre; Taylor, Greg
  4. Quantifying the Coordinated Effects of Partial Horizontal Acquisitions By Duarte Brito; Ricardo Ribeiro; Helder Vasconcelos
  5. Private Label Positioning and Product Line By Caprice, Stéphane
  6. OTT-messaging and mobile telecommunication: A joint market? - An empirical approach By Wellmann, Nicolas
  7. The Impact of Competition Policy Enforcement on the Functioning of EU Energy Markets By Tomaso Duso; Jo Seldeslachts; Florian Szücs

  1. By: Paolo Bertoletti (Department of Economics and Management, University Of Pavia); Federico Etro (Department of Economics, University Of Venice Cà Foscari)
    Abstract: We study imperfect and monopolistic competition with asymmetric preferences over a variety of goods provided by heterogeneous firms. We show how to compute equilibria through the Morishima elasticities of substitution. Simple pricing rules and closed-form solutions emerge under monopolistic competition when demands depend on common aggregators. This is the case for Generalized Additively Separable preferences (encompassing additive preferences and their Gorman-Pollak extensions), implicitly additive preferences and others. For applications to trade, with markups variable across goods of different quality, and to macroeconomics, with markups depending on aggregate variables, we propose specifications of indirectly additive, self-dual addilog and implicit CES preferences.
    Keywords: Imperfect competition, Monopolistic competition, Asymmetric preferences, Heterogeneous firms
    JEL: D11 D43 L11
    Date: 2017
  2. By: S. Bolatto; L. Lambertini
    Abstract: We investigate the possibility for two vertically related firms to at least partially collude on the wholesale price over an infinite horizon to mitigate or eliminate the effects of double marginalisation, thereby avoiding contracts which might not be enforceable. We characterise alternative scenarios envisaging different deviations by the upstream firm and different punishments. This allows us to show that the most efficient case is that in which the upstream firm deviates along its best reply function and the punishment prescribes the disruption of the vertical relation for good after a deviation from the collusive path.
    JEL: D43 L13 L42
    Date: 2017–06
  3. By: de Cornière, Alexandre; Taylor, Greg
    Abstract: Motivated by recent investigations over Google's practices in the smartphone industry, we study bundling in markets for devices that allow consumers to use applications. The presence of applications on a device increases demand for it, and application developers earn revenues by interacting with consumers. A firm that controls multiple applications can offer them to device manufacturers either individually or as a bundle. We present a novel mechanism through which anticompetitive bundling can be profitable: Bundling reduces rival application developers' willingness to pay manufacturers for inclusion on their devices, and allows a multiapplication developer to capture a larger share of industry profit. Bundling can also strengthen competition between manufacturers and thereby increase consumer surplus, even if it leads to foreclosure of application developers and a loss in product variety.
    Keywords: Antitrust; Bundling; Mobile telecommunications
    JEL: L4 L86
    Date: 2017–07
  4. By: Duarte Brito (Universidade Nova de Lisboa, Faculdade de Ciências e Tecnologia | Universidade de Évora, CEFAGE-UE); Ricardo Ribeiro (Universidade Católica Portuguesa, Católica Porto Business School); Helder Vasconcelos (Universidade do Porto, Faculdade de Economia and Center for Economics and Finance)
    Abstract: Recent years have witnessed an increased interest, by competition agencies, in assessing the competitive effects of partial acquisitions. We propose an empirical structural methodology to quantify the coordinated effects of such acquisitions on differentiated products industries, by evaluating the impact of such acquisitions on the minimum discount factors for which coordination can be sustained. The methodology can deal with settings involving all type of owners and ownership rights: owners that can be internal to the industry (rival firms) and external to the industry; and ownership rights that can involve financial interests and corporate control, can be direct and indirect, can be partial or full. We provide an empirical application of our proposed methodology to several acquisitions in the wet shaving industry. The results seem to suggest that the incentives of (i) the acquiring party’s firm to coordinate are non-decreasing after an acquisition (independently of whether it involves full or partial financial or corporate control rights, by internal or external owners), (ii) the acquired firm to coordinate are non-decreasing after acquisitions involving full or partial corporate control rights, but non-increasing after acquisitions involving full or partial financial rights, and (iii) the remaining firms in the industry to coordinate are non-increasing after an acquisition (again, independently of whether it involves full or partial financial or corporate control rights, by internal or external owners).
    Keywords: Antitrust, Coordinated Effects, Partial Acquisitions, Oligopoly, Differentiated Products, Demand Estimation
    JEL: D12 C54 L13 L41 L66
    Date: 2017–07
  5. By: Caprice, Stéphane
    Abstract: This article examines (i) how retailers position private label products, (ii) why private labels are sold in some product categories but not in others, and why some national brand products may have difficulty in accessing retailers' shelves, (iii) why some private label products are positioned as "premium" brands, and (iv) how consumers' surplus and total welfare are affected by private labels. We find that private label positioning leads to less differentiation in product category, which structurally changes a retailer's product line in return. Consumer welfare and total welfare are lower.
    Keywords: Private Label; National brand; Product Line.
    JEL: L13 L81
    Date: 2017–05
  6. By: Wellmann, Nicolas
    Abstract: OTT-messenger such as facebook, WhatsApp have gained wide popularity among mobile users while traffic of text messaging has been in strong decline in several countries. This work is the first to provide an empirical analysis how consumption of OTT-messengers affects demand for text messaging and mobile telephony services. Our findings suggest that social and messaging apps complement demand for text messaging and mobile voice services rather than replacing it. More generally we identify the different nature of mobile telecommunication services as key element to explain why reductions of text messaging traffic have been so drastic in some countries and why an analogue development for mobile voice is rather unlikely.
    Keywords: OTT-messenger,mobile telecommunication,market definition,regulation,mature markets,communication behavior
    JEL: L96 L43 L51 C33 C36
    Date: 2017
  7. By: Tomaso Duso; Jo Seldeslachts; Florian Szücs
    Abstract: We investigate the impact of competition policy enforcement on the functioning of European energy markets, and how sectoral regulation influences these outcomes. For this purpose, we compile a new dataset on the European Commission’s (EC) and EU member states’ competition policy decisions, and combine it with firm- and sector-level data. We find that EC merger policy has a positive and robust impact on (i) the level of competition; (ii) investment; and (iii) productivity. This impact, however, only shows up in low-regulated sectors. Other competition policy decisions – EC state aid and anti-trust interventions; as well as all individual Member State policy variables – do not have a uniform effect on energy markets’ functioning. Our findings are consistent with the idea that the EC’s merger policy actions have been used to overcome significant obstacles to a well-functioning EU energy sector and may well have shaped the overall development of gas and electricity markets in Europe.
    Keywords: Ex-post evaluation, energy markets, competition policy
    JEL: D24 L4 L98 Q4
    Date: 2017

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