nep-ind New Economics Papers
on Industrial Organization
Issue of 2018‒12‒10
eight papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. On bundling and entry deterrence By Andrea Greppi; Domenico Menicucci
  2. Multiproduct Mergers and Quality Competition By Johnson, Justin Pappas; Rhodes, Andrew
  3. Inventory Behavior, Demand, and Productivity in Retail By Maican, Florin; Orth, Matilda
  4. The Effectiveness of Leniency Programs when Firms choose the Degree of Collusion By Winand Emons
  5. M&A Advisory and the Merger Review Process By Michele Bisceglia; Salvatore Piccolo; Emanuele Tarantino
  6. Measuring Long-Run Price Elasticities in Urban Travel Demand By Donna, Javier D.
  7. Minority share acquisitions and collusion: evidence from the introduction of national leniency programs By Heim, Sven; Hueschelrath, Kai; Laitenberger, Ulrich; Spiegel, Yossi
  8. Competition policy issues in mobile network sharing: a European perspective By Zoltan Papai; Gergely Csorba; Peter Nagy; Aliz McLean

  1. By: Andrea Greppi; Domenico Menicucci
    Abstract: A multiproduct dominant firm faces the threat of entry from another multiproduct firm or from single-product firms. We inquire whether the possibility of bundling by the dominant firm is more effective in deterring entry in one setting or the other. We extend the analysis of a model in Hurkens et al. (2018) to explore how the dominance level affects the comparison. For instance, for intermediate dominance levels an integrated firm is more vulnerable to bundling than separate firms, but bundling is a credible action for the dominant firm more often when it faces separate rivals than an integrated rival.
    Keywords: Competitive Bundling, Entry deterrence.
    JEL: D43 L13 L41
    Date: 2018
  2. By: Johnson, Justin Pappas; Rhodes, Andrew
    Abstract: We investigate mergers in markets where quality differences between products are central. In our model, firms may sell multiple products, and merging and non-merging firms may reposition their product lines by adding or removing products following a merger. We find that such mergers are materially different from those studied in the existing literature. Mergers without synergies may raise consumer surplus, but only when the pre-merger industry structure satisfies certain observable features. Synergies may lower consumer surplus. Mergers are more readily profitable when an industry exhibits multiple qualities, and mergers between small numbers of firms with small market shares may be profitable. Some nonmerging firms may benefit while others lose following a merger. We also provide a new measure of industry concentration: the Quality-adjusted Herfindahl-Hirschman Index extends the standard Herfindahl-Hirschman Index to markets in which quality differences are central.
    Date: 2018–11
  3. By: Maican, Florin (Department of Economics); Orth, Matilda (Research Institute of Industrial Economics (IFN))
    Abstract: This paper studies the factors underlying the heterogeneity in inventory behavior and performance across retail stores. We use a dynamic model of multi-product retailers and local competition to estimate store productivity and consumers’ perceived quality of the shopping experience, and we analyze their relationship with inventory behavior and product variety. Using novel and detailed data on Swedish stores and their products, we find that stores learn from demand to improve future productivity. Store productivity is the main primitive that increases inventory turnover and product variety, and this increase is larger for stores with already high inventory turnover. Stores in small markets with intense competition from rivals have higher inventory turnover. Consumers in large markets and markets with large investments in technology benefit from a broader product variety. Counterfactual experiments show that the increase in inventory turnover due to innovations in productivity is three times greater when uncertainty in demand is reduced by 30 percent. Our analysis highlights important trade-offs between productivity and demand that allow retailers to reach high levels of inventory turnover and offer a broad product variety to consumers.
    Keywords: Productivity; Inventory performance; Supply chain management; Product variety
    JEL: L11 L13 L25 L81 M21
    Date: 2018–11–08
  4. By: Winand Emons
    Abstract: An antitrust authority deters collusion using nes and a leniency program. It chooses the probability of an investigation. Firms pick the degree of collusion: The more they collude, the higher are pro ts, but so is the probability of detection. Firms thus trade-o higher pro ts against higher expected nes. If rms are suciently patient, leniency is ine ective; it may even increase collusion. Increasing the probability of an investigation at low levels does not increase deterrence. Increasing the probability of an investigation at high levels reduces collusion, yet never completely.
    Keywords: antitrust, cartels, deterrence, leniency
    JEL: D43 K21 K42 L40
    Date: 2018–10
  5. By: Michele Bisceglia (Università di Bergamo); Salvatore Piccolo (Università di Bergamo and CSEF); Emanuele Tarantino (University of Mannheim, MaCCI and CEPR)
    Abstract: Two firms propose a merger to the antitrust authority. They are uninformed about the efficiencies generated by the merger, but can hire an expert to gather information on their behalf. The authority is also uninformed about the merger's efficiencies, but can run a costly internal investigation to learn them. We analyze the effect of the disclosure of the expert's contract on consumer welfare, and show that consumers are not necessarily better off with disclosure. This negative effect hinges on a free-riding problem between expert and authority in the information acquisition game, and is more relevant in highly competitive industries.
    Keywords: Advice, Competition Policy, Mergers, Advisory Contract, Disclosure.
    JEL: D43 L11 L42 L81
    Date: 2018–11–26
  6. By: Donna, Javier D.
    Abstract: This paper develops a structural model of urban travel to estimate long-run price elasticities. A dynamic discrete choice demand model with switching costs is estimated, using a panel dataset with public market-level data on automobile and public transit use for Chicago. The estimated model shows that long-run own- (automobile) and cross- (transit) price elasticities are more elastic than short-run elasticities, and that elasticity estimates from static and myopic models are downward biased. The estimated model is used to evaluate the response to a gasoline tax. Static and myopic models mismeasure long-run substitution patterns, and could lead to incorrect policy decisions.
    Keywords: Long-run price elasticities, Dynamic demand travel, Hysteresis
    JEL: L71 L91 L98
    Date: 2018–11–05
  7. By: Heim, Sven; Hueschelrath, Kai; Laitenberger, Ulrich; Spiegel, Yossi
    Abstract: There is a growing concern that minority shareholding (MS) in rival firms may facilitate collusion. To examine this concern, we exploit the fact that leniency programs (LPs) are generally recognized as a shock that destabilizes collusive agreements and study the effect that the introduction of an LP has on horizontal MS acquisitions. Using data from 63 countries over the period 1990-2013, we find a large increase in horizontal MS acquisitions in the year in which an LP is introduced, especially in large rivals. The effect is present however only in countries with an effective antitrust enforcement and low levels of corruption and only when the acquisitions involve stakes of 10% - 20%. These results suggest that MS acquisitions may stabilize collusive agreements that were destabilized by the introduction of the LP.
    Keywords: cartel stability; Collusion; Leniency Programs; minority shareholdings
    JEL: G34 K21 L4
    Date: 2018–11
  8. By: Zoltan Papai (Infrapont Economic Consulting, Hungary); Gergely Csorba (Center of Economics and Regional Sciences – Institute of Economics Hungarian Academy of Sciences and Infrapont Economic Consulting); Peter Nagy (Infrapont Economic Consulting); Aliz McLean (Infrapont Economic Consulting)
    Abstract: Network sharing agreements have become increasingly widespread in mobile telecommunications markets. They carry undeniable advantages to operators and consumers alike, but also the potential for consumer harm. We emphasize that not all NSAs are created equal: the assessment of harms and counterweighing benefits to customers due to an NSA is a complex endeavour. In this paper, we present a framework for the competitive assessment of NSAs, detailing the possible concerns that may arise, the main factors that influence their seriousness, ways to mitigate the concerns and the principles of assessing efficiency benefits.
    Keywords: mobile markets, network sharing, competition, competition assessment
    JEL: K21 L13 L41
    Date: 2018–10

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