nep-ind New Economics Papers
on Industrial Organization
Issue of 2018‒12‒24
six papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Competition in two sided markets with congestion By Swapnil Sharma
  2. Firm R&D investment and export market exposure By Peters, Bettina; Roberts, Mark J.; Vuong, Van Anh
  3. How 'Big Data' affects competition law analysis in Online Platforms and Agriculture: does one size fit all? By Atik, Can
  4. Firms’ Markup, Cost, and Price Changes when Policymakers Permit Collusion: Does Antitrust Immunity Matter? By Gayle, Philip; Xie, Xin
  5. Competition policy questions in mobile network sharing By Pápai, Zoltán; Csorba, Gergely; Nagy, Péter; McLean, Aliz
  6. Unbundling, regulation and pricing: Evidence from electricity distribution By Heim, Sven; Krieger, Bastian; Liebensteiner, Mario

  1. By: Swapnil Sharma (Indira Gandhi Institute of Development Research)
    Abstract: Two sided markets involve two groups of agents who interact via "platforms". This paper analyses competition in a two sided market with congestion. The existing literature's on pricing mechanisms of two-sided markets has concluded that pricing mechanism depends on the following three factors: relative size of cross group externalities, fixed price or per transaction charge by platform, and single homing or multiple homing of agents. This paper extends the analysis by including the effect of congestion on pricing mechanisms in a two sided market. It concludes that in the case of single homing of agents, profits of the platform increase due to congestion if the agents have a low tolerance level, whereas in the case of multi homing, profits of the platform increase due to congestion if the agents have a high tolerance level.
    Keywords: Network externalities, Congestion
    JEL: L10 L11 L14 D43
    Date: 2018–11
  2. By: Peters, Bettina; Roberts, Mark J.; Vuong, Van Anh
    Abstract: In this article we study differences in the returns to R&D investment between firms that sell in international markets and firms that only sell in the domestic market. We use German firm-level data from the high-tech manufacturing sector to estimate a dynamic structural model of a firm's decision to invest in R&D and use it to measure the difference in expected long-run benefit from R&D investment for exporting and domestic firms. The results show that R&D investment leads to a higher rate of product and process innovation among exporting firms and these innovations have a larger impact on productivity improvement in export market sales. As a result, exporting firms have a higher payoff from R&D investment, invest in R&D more frequently than firms that only sell in the domestic market, and, subsequently, have higher rates of productivity growth. The endogenous investment in R&D is an important mechanism that leads to a divergence in the long-run performance of firms that differ in their export market exposure. Simulating the introduction of trade tariffs we find a substantial reduction in firms' productivity growth and incentive to invest in R&D.
    Keywords: R&D choice,Export,Innovation,Productivity,Dynamic structural model
    JEL: F14 L25 O31 O32
    Date: 2018
  3. By: Atik, Can
    Date: 2018
  4. By: Gayle, Philip; Xie, Xin
    Abstract: Airlines wanting to cooperatively set prices for their international air travel service must apply to the relevant authorities for antitrust immunity (ATI). Whether consumers, on net, benefit from a grant of ATI to partner airlines has caused much public debate. This paper investigates the impact of granting ATI to oneworld alliance members on their price, markup, and various measures of cost. The evidence suggests that implementation of the oneworld alliance without ATI did not have a statistically significant impact on the markup of products offered by the members, and there is no evidence that the subsequent grant of ATI to various members resulted in higher markups on their products. We find evidence suggesting that the grant of ATI facilitated a decrease in partner carriers’ marginal and fixed costs. Furthermore, member carriers’ price did not increase (decreased) in markets where their services do (do not) overlap, implying that consumers, on net, benefit from the grant of ATI in terms of price changes.
    Keywords: Airline Competition; Strategic Alliances; Antitrust Immunity
    JEL: L13 L40 L93
    Date: 2018–11–09
  5. By: Pápai, Zoltán; Csorba, Gergely; Nagy, Péter; McLean, Aliz
    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. Not all NSAs are created equal: the assessment of the balance of harm and 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
    Date: 2018
  6. By: Heim, Sven; Krieger, Bastian; Liebensteiner, Mario
    Abstract: Unbundling of vertically integrated utilities has become an integral element in the regulation of network industries and has been implemented in many jurisdictions. The idea of separating the network, as the natural monopoly, from downstream retailing, which may be exposed to competition, is still subject to contentious debate. This is because there is much empirical evidence that unbundling eliminates economies of vertical integration while empirical evidence on price reducing effects is still lacking. In this paper we study the effect of legal unbundling on grid charges in the German electricity distribution industry. Using panel data on German distribution system operators (DSOs) we exploit the variation in the timing of the implementation of legal unbundling and the fact that not all DSOs had to implement unbundling measures. We are also able to identify heterogeneous effects of legal unbundling for different types of price regulation, because we observe a switch in the price regulation regime from rate-of-return regulation to incentive regulation during our observation period. Our findings suggest that legal unbundling of the network stage significantly decreases grid charges in the range of 5% to 9%, depending on the type of price regulation in place.
    Keywords: Vertical Integration,Electricity Distribution,Unbundling,Regulation
    JEL: D22 L11 L22 L51 L94 Q48
    Date: 2018

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