nep-ind New Economics Papers
on Industrial Organization
Issue of 2018‒05‒21
three papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Vertical integration in the e-commerce sector By Borsenberger, Claire; Cremer, Helmuth; Joram, Denis; Lozachmeur, Jean-Marie
  2. Are R&D subsidies effective? The effect of industry competition By Xin, Xiang
  3. A Mechanism for Institutionalised Threat of Regulation: Evidence from the Swedish District Heating Market By Bonev, Petyo; Glachant, Matthieu; Söderberg, Magnus

  1. By: Borsenberger, Claire; Cremer, Helmuth; Joram, Denis; Lozachmeur, Jean-Marie
    Abstract: This paper studies vertical integration of a retailer and an operator in the e-commerce sector. It shows first that the comparison between independent oligopoly and integrated monopoly involves a tradeoff between competition and double marginalization which will have the opposite effect. With linear demand we need at least 3 firms (upstream and downstream) for the independent oligopoly to yield larger surplus. With constant elasticity demand, on the other hand, this is always true. Second it considers a setting where the number of firms is endogenous and determined such that gross profits cover fixed costs. While the integration of a single retailer-delivery operator pair may initially be welfare improving, the resulting market structure may not be sustainable. Furthermore, there exist a range of fixed costs for which the integrated monopoly emerges (following a single integration) and is welfare inferior to the initial independent equilibrium even when the reduction in the number of fixed costs is taken into account. Within this setting it also shows that multiple integration is typically welfare superior (for a given total number of firms) to the integration of a single retailer-delivery operator. Third and last, it considers an extension wherein customers differ according to their location, urban or rural, involving di¤erent delivery costs. It shows that urban integration is more likely to have an adverse effect on welfare than full integration.
    Keywords: vertical integration; parcel delivery; e-commerce
    JEL: L42 L81 L87
    Date: 2018–05
  2. By: Xin, Xiang
    Abstract: This study explores the effect of industry competition on public R&D subsidies' effectiveness. The author finds the non-linear threshold effect of industry competition on R&D subsidies' effectiveness. Specifically, R&D subsidies' effectiveness reaches its peak when industry competition lies between the two estimated thresholds.
    Keywords: social status,redistribution,externalities,optimal taxation
    JEL: H25 L11 G31 G38
    Date: 2018
  3. By: Bonev, Petyo; Glachant, Matthieu; Söderberg, Magnus
    Abstract: This is the first study that uses a natural experiment to test the Regulatory Threat Hypothesis. We use a unique novel dataset on unregulated Swedish local district heating monopolists and a new measure of threat - customer complaints. Our results support the Regulatory Threat Hypothesis: firms reduce prices when they feel threatened by price regulation. We also find evidence that (otherwise unrelated) monopolists homogenize locally prices to reduce complaints and thus to reduce threat of regulation. This mechanism is related to Yardstick competition and to behavioral theories of fair pricing.
    Keywords: Regulatory Threat, Monopoly, Price Setting, Spatial Interaction, Natural Experiment
    JEL: L11 L12
    Date: 2018–05

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