nep-ind New Economics Papers
on Industrial Organization
Issue of 2018‒12‒03
five papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. The Effect of Horizontal Mergers, When Firms compete in Prices and Investments By Massimo Motta; Emanuele Tarantino
  2. Patent Pools, Vertical Integration, and Downstream Competition By Markus Reisinger; Emanuele Tarantino
  3. Monopsony and Two-part Tariffs By Roger D. Blair; Christina DePasquale
  4. Insuring product markets By Jeroen (J.) Hinloopen; Lting Zhou
  5. Does market size matter for charities By Lapointe, Simon; Perroni, Carlo; Scharf, Kimberley; Tukiainen, Janne

  1. By: Massimo Motta; Emanuele Tarantino
    Abstract: We study the effects of mergers when firms offer differentiated products and compete in prices and investments. Since it is in principle ambiguous, we use aggregative game theory to sign the net effect of the merger: We find that only if it entailed sufficient efficiency gains, could the merger raise total investments and consumer surplus. We also prove there exist classes of models for which the results obtained with cost-reducing investments are equivalent to those with quality-enhancing investments. Finally, we show that, from the consumer welfare point of view, a R&D cooperative agreement is superior to any consumer-welfare reducing merger.
    Keywords: horizontal mergers, innovation, investments, research joint ventures, competition
    JEL: K22 D43 L13 L41
    Date: 2018–11
  2. By: Markus Reisinger; Emanuele Tarantino
    Abstract: Patent pools are commonly used to license technologies to manufacturers. Whereas previous studies focused on manufacturers active in independent markets, we analyze pools licensing to competing manufacturers, allowing for multiple licensors and non-linear tariffs. We find that the impact of pools on welfare depends on the industry structure: Whereas they are procompetitive when no manufacturer is integrated with a licensor, the presence of vertically integrated manufacturers triggers a novel trade-off between horizontal and vertical price coordination. Specifically, pools are anticompetitive if the share of integrated firms is large, procompetitive otherwise. We then formulate information-free policies to screen anticompetitive pools.
    Keywords: patent pools and horizontal pricing agreements, complementary patents, vertical integration and restraints, antitrust policy
    JEL: K11 L41 L42 O34
    Date: 2018–11
  3. By: Roger D. Blair; Christina DePasquale
    Abstract: In his classic article, Walter Oi (1971) analyzed two-part tariffs by a monopolist. We adapt his analysis to the case of monopsony. We show that the resulting offer is that the seller pays its producer surplus as an access fee in exchange for the buyers promise to buy everything that the seller wants to sell when price equals marginal cost. In addition, we show that this is equivalent to the surplus that the buyer captures with first-degree price discrimination as well as an all-or-nothing offer. We also extend this analysis to the case of uncertainty for a risk-averse monopsonist.
    Date: 2018–10
  4. By: Jeroen (J.) Hinloopen (University of Amsterdam); Lting Zhou (Tinbergen Institute)
    Abstract: We formally link insurance markets with product markets and identify a demand effect of insurance: if risk-averse consumers can buy insurance against possible product failure, there will be some additional consumers that buy the product because they can also purchase protection. The concomitant upward pressure on price is further fueled by those consumers that have a higher willingness to pay if they can also buy insurance. But a higher price causes those consumers to leave the market that would have bought the product absent insurance. Introducing insurance thus has an ambiguous effect on price, consumers' surplus, and total surplus.
    Keywords: product failure; insured loss; insurance; product markets; demand effect of insurance
    JEL: D21 D43 L13
    Date: 2018–11–20
  5. By: Lapointe, Simon; Perroni, Carlo; Scharf, Kimberley; Tukiainen, Janne
    Abstract: We analyze implications of market size for market structure in the charity sector. While a standard model of oligopolistic for-profit competition predicts a positive relationship between market size and firm size, our analogous model of competition between prosocially motivated charities predicts no such correlation. If charities are biased towards their own provision, a positive association between market size and provider size can arise. We examine these predictions empirically for six different local charity markets. Our empirical findings suggest that charities do not solely pursue prosocial objectives, and that increased competition in the charity sector can lead to rationalization in provision
    Keywords: Competition in charity sectors; Market structure
    JEL: H41 L11 L13 L31 L33
    Date: 2018–12–01

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