nep-ind New Economics Papers
on Industrial Organization
Issue of 2018‒05‒07
nine papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Blockchain: The birth of Decentralized Governance By Benito Arruñada; Luis Garicano
  2. Product Line Strategy within a Vertically Differentiated Duopoly under Non-negativity Outputs Constraints By Tetsuya Shinkai; Ryoma Kitamura
  3. A cautionary note on using hotelling models in platform markets By Jeitschko, Thomas D.; Kim, Soo Jin; Yankelevich, Aleksandr
  4. Winning by Losing: Evidence on the Long-Run Effects of Mergers By Malmendier, Ulrike; Moretti, Enrico; Peters, Florian
  5. Competition agency guidelines and policy initiatives regarding the application of competition law vis-à-vis intellectual property: An analysis of jurisdictional approaches and emerging directions By Anderson, Robert D.; Chen, Jianning; Müller, Anna Caroline; Novozhilkina, Daria; Pelletier, Philippe; Sen, Nivedita; Sporysheva, Nadezhda
  6. Does price competition damage healthcare quality? By Anne-Fleur Roos; Eddy van Doorslaer; Owen O'Donnell; Erik Schutt; Marco Varkevisser
  7. Market Entry, Fighting Brands and Tacit Collusion: The Case of the French Mobile Telecommunications Market By Bourreau, Marc; Sun, Yutec; Verboven, Frank
  8. The Development of Firm Size and Innovativeness in the Pharmaceutical industry between 1989 and 2010 By Martin Backfisch
  9. Competition, Productivity, and Survival of Grocery Stores in the Great Depression By Emek Basker; Chris Vickers; Nicolas L. Ziebarth

  1. By: Benito Arruñada; Luis Garicano
    Abstract: By allowing networks to split, decentralized blockchain platforms protect members against hold up, but hinder coordination, given that adaptation decisions are ultimately decentralized. The current solutions to improve coordination, based on “premining” cryptocoins, taxing members and incentivizing developers, are insufficient. For blockchain to fulfill its promise and outcompete centralized firms, it needs to develop new forms of “soft” decentralized governance (anarchic, aristocratic, democratic, and autocratic) that allow networks to avoid bad equilibria.
    Keywords: blockchain, Platforms, Networks, hold-up, Coordination, relational capital, incomplete contracts, decentralized governance
    JEL: D23 L12 L22 L86
    Date: 2018–04
    URL: http://d.repec.org/n?u=RePEc:bge:wpaper:1038&r=ind
  2. By: Tetsuya Shinkai (School of Economics, Kwansei Gakuin University); Ryoma Kitamura (Faculty of Economics, Ryukoku University)
    Abstract: We consider product line strategies of duopolistic firms supplying two vertically differentiated products with non-negativity output constraint and its expectation on rival's product line reaction. We consider a game in which there exists a heterogeneous unit production costs in high quality goods but is homogeneous in low quality product between firms. We derive equilibria for the game and characterize graphically firms' product line strategies and the realized profits of both firms through quality superiority and relative cost efficiency ratios. We also show that the efficient cost firm earns more than the inefficient firm except for the special case where both firms specialize in low quality good. We also illustrate that firms can correctly conjecture the ex ante relationship between the quality superiority of both goods and the relative cost efficiency ratios of firms on high quality good ex post in equilibrium.
    Keywords: Multi-product firm; Duopoly; Substitution of Production between products; Vertical product differentiation
    Date: 2018–05
    URL: http://d.repec.org/n?u=RePEc:kgu:wpaper:179&r=ind
  3. By: Jeitschko, Thomas D.; Kim, Soo Jin; Yankelevich, Aleksandr
    Abstract: We study a Hotelling framework in which customers first pay a monopoly platform to enter the market before deciding between two competing services on opposite ends of a Hotelling line. This setup is common when modeling competition in Internet content provision. We find that standard taken-for-granted solution methods under full market coverage break down, and that in the unique full-coverage equilibrium, the competing service providers set substantially lower prices. Standard methods and prices are restored by giving service providers the first move.
    Keywords: Hotelling Model,First Mover Advantage,Two-Sided Market
    JEL: D21 D43 L0
    Date: 2018
    URL: http://d.repec.org/n?u=RePEc:zbw:dicedp:286&r=ind
  4. By: Malmendier, Ulrike; Moretti, Enrico; Peters, Florian
    Abstract: We propose a novel approach to measuring returns to mergers. In a new data set of close bidding contests we use losers' post-merger performance to construct the counterfactual performance of winners had they not won the contest. Stock returns of winners and losers closely track each other over the 36 months before the merger, corroborating our approach to identification. Bidders are also very similar in terms of Tobins Q, profitability and other accounting measures. Over the three years after the merger, however, losers outperform winners by 24 percent. Commonly used methodologies such as announcement returns fail to identify acquirors' underperformance.
    Date: 2018–03
    URL: http://d.repec.org/n?u=RePEc:cpr:ceprdp:12830&r=ind
  5. By: Anderson, Robert D.; Chen, Jianning; Müller, Anna Caroline; Novozhilkina, Daria; Pelletier, Philippe; Sen, Nivedita; Sporysheva, Nadezhda
    Abstract: Competition agency guidelines, policy statements and related advocacy are an important vehicle for policy expression and the guidance of firms across the full spectrum of anti-competitive practices and market conduct. The role of guidelines and policy statements has, arguably, been particularly important in the context of the competition policy treatment of intellectual property rights, given the complexity of this area, the importance that competition agencies attach to it, and its importance for innovation, technology transfer and economic growth. As such, this important normative material also provides a useful empirical foundation for mapping relevant trends and the evolution of policy thinking over time and across jurisdictions. In this light, the paper examines the competition agency guidelines, policy statements and related initiatives regarding intellectual property (IP) of the following three sets of jurisdictions: (i) the United States, Canada, the European Union and Australia; (ii) Japan and Korea; and (iii) the BRICS economies (Brazil, China, India, Russia, and South Africa). It focuses, to the extent possible, on a common set of issues addressed in one way or another in the majority of these jurisdictions, comprising: (i) the treatment of licensing practices, including refusals to license; (ii) anti-competitive patent settlements; (iii) issues concerning standard-essential patents (SEPs); (iv) the conduct of patent assertion entities (PAEs); and (v) competition advocacy activities focused on the IP system. Additionally, while the primary focus of the paper is on competition agency guidelines, policy statements and advocacy activities relating to IP, reference is also made to enforcement and case developments where they are helpful in illustrating relevant approaches and trends. Overall, the analysis suggests, firstly, that, in contrast to the situation prevailing twenty or thirty years ago, interest in the systematic application of competition law vis-à-vis IP certainly is no longer a preoccupation of only a few traditional developed jurisdictions. Secondly, we find evidence of significant cross-jurisdictional learning processes and partial policy convergence across the jurisdictions surveyed. Thirdly, the analysis also reveals the continuing potential for coordination failures in regard to the approaches taken by national authorities in this area, for example where jurisdictions take different approaches to specific practices such as refusals to license and/or give differing weights to industrial policy as opposed to consumer welfare or other objectives in their policy applications.
    Keywords: competition agency guidelines,intellectual property,antitrust,innovation,licensing agreements,refusal to license,anti-competitive patent settlements,standard-essential patents (SEPs),patent assertion entities (PAEs),competition advocacy
    JEL: K21 L4 L41 L43 O3 O34
    Date: 2018
    URL: http://d.repec.org/n?u=RePEc:zbw:wtowps:ersd201802&r=ind
  6. By: Anne-Fleur Roos (ESHPM, Erasmus University Rotterdam); Eddy van Doorslaer (ESHPM, Erasmus University Rotterdam); Owen O'Donnell (Erasmus University Rotterdam, University of Macedonia); Erik Schutt (ESHPM, Erasmus University Rotterdam); Marco Varkevisser (ESHPM, Erasmus University Rotterdam)
    Abstract: One of the reasons why regulators are hesitant about permitting price competition in healthcare markets is that it may damage quality when information is poor. Evidence on whether this fear is well-founded is scarce. We provide evidence using a reform that permitted Dutch health insurers and hospitals to freely negotiate prices for elective procedures. Unlike previous research that has relied on indicators of the quality of urgent treatments, we take advantage of the plausible absence of selection bias in our setting to identify the effect on quality of non-acute hip replacements. Using administrative data on all admissions to Dutch hospitals, we find no evidence that increased exposure to price competition reduces quality measured by readmission rates, despite the lack of publicly available information on this outcome. In fact, there is evidence of a temporary, positive impact on quality. Our estimated null effect over the full post-liberalization period is robust.
    Keywords: Healthcare; hospital; competition; quality; contracting
    JEL: I11 L14 L15
    Date: 2018–04–25
    URL: http://d.repec.org/n?u=RePEc:tin:wpaper:20180040&r=ind
  7. By: Bourreau, Marc; Sun, Yutec; Verboven, Frank
    Abstract: We study a major new entry in the French mobile telecommunications market, followed by the introduction of fighting brands by the three incumbent firms. Using an empirical oligopoly model with differentiated products, we show that the incumbents' launch of the fighting brands can be rationalized only as a breakdown of tacit collusion. In the absence of entry the incumbents successfully colluded on restricting their product variety to avoid cannibalization; the new entry of the low-end competition made such semi-collusion more difficult to sustain because of increased business stealing incentives. Consumers gained considerably from the added variety of the new entrant and the fighting brands, and to a lesser extent from the incumbents' price response to the entry.
    Keywords: Entry; fighting brand; Mobile telecommunications; product variety; semi-collusion
    JEL: L13 L96
    Date: 2018–04
    URL: http://d.repec.org/n?u=RePEc:cpr:ceprdp:12866&r=ind
  8. By: Martin Backfisch (DHBW CAS)
    Abstract: Within the last decades, there have been many technological and regulatory changes in the pharmaceutical industry. Some of these developments facilitate the innovative activities of large firms, while others foster small firms. It is therefore surprising that the implications of these changes in the pharmaceutical industry have not often been studied empirically. We contribute to the question of firm size and innovativeness in the pharmaceutical industry in presenting a brief review of the literature on innovative activities with a focus on the relation of different firm sizes in the pharmaceutical industry and present own empirical findings. Our results with project data from a broad range of firms show that the innovative activities of small firms measured by the share of their projects on all research projects have been rising strongly between 1989 and 2010. Further, the share of small firms on new drugs has been constantly increasing in this period. On the other hand, project success rates are lowest for small firms, while the rate of projects already discontinued in the preclinical phase is highest for them. We discuss these results and find that the reasons behind these developments are crucial to understand the innovative performance of the industry within the last 20 years.
    Keywords: pharmaceutical R&D; drug development; success rates; firm size
    JEL: O32 L65
    Date: 2018
    URL: http://d.repec.org/n?u=RePEc:mar:magkse:201813&r=ind
  9. By: Emek Basker; Chris Vickers; Nicolas L. Ziebarth
    Abstract: We study the grocery industry in Washington, DC, during the Great Depression using data from the 1929 Census of Distribution, a 1929–1930 survey by the Federal Trade Commission, and a 1935 business directory. We ?rst document the di?erences between chains and independents in the Washington, DC, grocery market circa 1929 to better understand chains' competitive advantages. Second, we study correlates of survival from 1929 to 1935, a period of major contraction and upheaval. We find that more productive stores survived at higher rates, as did stores with greater assortment and lower prices. Presaging the supermarket revolution, combination stores were much more likely to survive to 1935 than other grocery formats.
    Keywords: Grocery Stores, Survival, Great Depression, Chains
    JEL: L81 L11 N82
    Date: 2018–04
    URL: http://d.repec.org/n?u=RePEc:cen:wpaper:18-24&r=ind

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