nep-ind New Economics Papers
on Industrial Organization
Issue of 2018‒10‒29
seven papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. On the allocation of evidence among cartelists under a leniency program By Konstantinos Charistos
  2. Product Differentiation and Demand Elasticity By Richard L. Carson
  3. The Effect of Common Ownership on Profits : Evidence From the U.S. Banking Industry By Jacob P. Gramlich; Serafin J. Grundl
  4. IT and productivity: A firm level analysis By Emannuel Dhyne; Joep Konings; Joep Konings; Stijn Vanormelingen,
  5. The European Patent System: A Descriptive Analysis By Georg von Graevenitz; Antanina Garanasvili
  6. Monopsony in the UK By Will Abel; Silvana Tenreyro; Gregory Thwaites
  7. International airline codesharing and consumer choice behavior: misconceptions vs. quality signals By Gerben de Jong; Christiaan Behrens; Hester van Herk; Erik (E.T.) Verhoef

  1. By: Konstantinos Charistos (Department of Economics, University of Macedonia)
    Abstract: The impact of leniency programs on cartelists’ decision to allocate the incriminating evidence is investigated. Firms are allowed to possess either exclusive or common pieces of cartel-related evidence. The cartel organization is able to allocate the incriminating evidence in an attempt to enhance the sustainability of the illicit agreement. Assuming that the Antitrust Authority (AA) provides incentives that induce confession, reporting is either partial or universal. It is shown that in the former case the cartel organization selects to split and equally share the evidence (each firm possesses only exclusive pieces) whereas in the latter case every firm may possess perfect evidence. Unless the conviction of an investigated cartel is unlikely, when the AA optimally anticipates the cartel’s ability to allocate the evidence, only partial information is obtained.
    Keywords: Antitrust enforcement, Collusion, Leniency programs.
    JEL: K21 L12 L41
    Date: 2018–10
  2. By: Richard L. Carson (Department of Economics, Carleton University)
    Abstract: This paper argues that product differentiation is compatible with perfect competition under free entry and exit and small firm size relative to size of market. Despite Chamberlin’s view, monopolistic competitors are price takers, even though each firm’s product has no perfect substitute. There is a difference between perfect competition with product homogeneity and perfect competition with differentiated products, however. Advertising can pay off with differentiated products because products have separate identities—and price depends on quality—even though firms are price takers for any given quality. A differentiated oligopoly may resemble monopolistic competition a la Chamberlin in some ways.
    Keywords: Monopolistic Competition, Perfect Competition, Product Differentiation
    JEL: D41 D43
    Date: 2018–10–17
  3. By: Jacob P. Gramlich; Serafin J. Grundl
    Abstract: Theory predicts that "common ownership" (ownership of rivals by a common shareholder) can be anticompetitive because it reduces the weight firms place on their own profits and shifts weight toward rival firms held by common shareholders. In this paper we use accounting data from the banking industry to examine empirically whether shifts in the profit weights are associated with shifts in profits. We present the distribution of a wide range of estimates that vary the specification, sample restrictions, and assumptions used to calculate the profit weights. The distribution of estimates is roughly centered around zero, but we find statistically significant estimates in either direction in some cases. Economically, most estimates are fairly small. Our interpretation of these findings is that there is little evidence for economically important effects of common ownership on profits in the banking industry.
    Keywords: Banking ; Common Ownership ; Competition ; Profits
    JEL: L10 L40 L20 G21 G34
    Date: 2018–10–03
  4. By: Emannuel Dhyne (Economics and Research Department, National Bank of Belgium); Joep Konings (KU Leuven, VIVES; University of Liverpool Management School and CEPR); Joep Konings (KU Leuven, VIVES); Stijn Vanormelingen, (KU Leuven, Campus Brussels)
    Abstract: Using a novel comprehensive data set of IT investment at the firm level, we find that a firm investing an additional euro in IT increases value added by 1 euro and 38 cents on average. This marginal product of IT investment increases with firm size and varies across sectors. IT explains about 10% of productivity dispersion across firms. While we find substantial returns of IT at the firm level, such returns are much lower at the aggregate level. This is due to underinvestment in IT (IT capital deepening is low) and misallocation of IT investments.
    Keywords: Information technology, total factor productivty
    JEL: D24 L10 O14 O49
    Date: 2018–10
  5. By: Georg von Graevenitz (Queen Mary, University of London); Antanina Garanasvili (Bournemouth University)
    Abstract: The European Patent System consists of national patent offices (NPOs) and the supranational European Patent Office (EPO). EPO and the NPOs have granted patents in Europe side-by-side since 1980. The resulting patent system is complicated and less coordinated than might be expected. Firms must consider a number of variables when selecting the route of patenting they take within this system: price, rigour of examination, duration of examination, quality of legal redress. To date there is little descriptive evidence on how firms choose between EPO and national offices. This paper provides a rich descriptive analysis of patenting in Europe. We analyze how origin, size and technological focus of companies, affect how they choose among patent offices within the EPS and report differences in examination durations and grant rates across patent offices.
    Keywords: Patents, European Patent System, Validation, Patent Propensity
    JEL: O34 O31 L20 K11
    Date: 2018–10
  6. By: Will Abel (Bank of England); Silvana Tenreyro (Bank of England; Centre for Economic Policy Research (CEPR); Centre for Macroeconomics (CFM); London School of Economics and Political Science (LSE)); Gregory Thwaites (Centre for Macroeconomics (CFM); London School of Economics and Political Science (LSE))
    Abstract: We study the evolution and effects of monopsony power in the UK private sector labour market from 1998 to 2017. Using linked employee-firm micro-data, we find that: (1) Measures of monopsony have been relatively stable across the time period examined - rising prior to the crisis, before subsequently falling again. (2) There is substantial cross-sectional variation in monopsony at the industry level. (3) Higher levels of labour market concentration are associated with lower pay amongst workers not covered by a collective bargaining agreement. (4) For workers covered by a collective bargaining agreement, the association between labour market concentration and pay is greatly reduced and in most cases disappears. (5) The link between productivity and wage levels is weaker when labour markets are more concentrated.
    Date: 2018–10
  7. By: Gerben de Jong (VU Amsterdam, SEO Amsterdam Economics); Christiaan Behrens (VU Amsterdam, SEO Amsterdam Economics); Hester van Herk (VU Amsterdam); Erik (E.T.) Verhoef (VU Amsterdam)
    Abstract: We examine the impact of airline codesharing on consumer choice behavior in non-stop international route markets. Using stated preference data, we document that consumer valuation of flights by alien foreign carriers is significantly higher if these flights are offered as codeshare products by consumers' own national carrier or, to a lesser extent, a neighboring national carrier. We empirically rule out quality improvements and frequent flier programs as underlying drivers and explore two alternative explanations: misconceptions about codesharing and codesharing as a quality signal. We find that misconceptions are widespread, but that they do not cause higher valuation of codeshare products. Consistent with signaling, however, codeshare products are valued higher by more risk-averse consumers and on less familiar routes.
    Keywords: codesharing; consumer choice behavior; incomplete information; signaling; airline industry
    JEL: L11 L15 L93
    Date: 2018–10–22

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