nep-ind New Economics Papers
on Industrial Organization
Issue of 2019‒03‒04
eight papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Big Data and Firm Dynamics By Farboodi, Maryam; Mihet, Roxana; Philippon, Thomas; Veldkamp, Laura
  2. Controlling Sellers Who Provide Advice: Regulation and Competition By Bardey, David; Gromb, Denis; Martimort, David; Pouyet, Jérôme
  3. Market Power and Income Taxation By Louis Kaplow
  4. Organizing Competition for the Market By Iossa, Elisabetta; Rey, Patrick; Waterson, Michael
  5. Downstream competition and profits under different input price bargaining structures By Buccella, Domenico; Fanti, Luciano
  6. Vertical financial interest and corporate influence By Hunold, Matthias; Schlütter, Frank
  7. U.S. Demand for Citrus Beverages By Grigoryan, Sona; Lopez, Jose
  8. Rigidities and adjustments of daily prices to costs: Evidence from supermarket data By Giulietti, Monica; Otero,Jesus; Waterson, Michael

  1. By: Farboodi, Maryam; Mihet, Roxana; Philippon, Thomas; Veldkamp, Laura
    Abstract: We study a model where firms accumulate data as a valuable intangible asset. Data accumulation affects firms' dynamics. It increases the skewness of the firm size distribution as large firms generate more data and invest more in active experimentation. On the other hand, small data-savvy firms can overtake more traditional incumbents, provided they can finance their initial money-losing growth. Our model can be used to estimate the market and social value of data.
    Keywords: Big Data; firm size
    Date: 2019–01
  2. By: Bardey, David; Gromb, Denis; Martimort, David; Pouyet, Jérôme
    Abstract: A monopoly seller advises buyers about which of two goods best fits their needs but may be tempted to steer buyers towards the higher margin good. For the seller to collect information about a buyer's needs and provide truthful advice, the profits from selling both goods must lie within an implementability cone. In the optimal regulation, pricing distortions and information-collection incentives are controlled separately by price regulation and fixed rewards respectively. This no longer holds when the seller has private information about costs as both problems interact. We study the extent to which competition and the threat by buyers to switch sellers can substitute for regulation.
    Keywords: asymmetric information; Expertise; Mis-Selling; regulation
    JEL: D82 G24 I11 L13 L15 L51
    Date: 2019–02
  3. By: Louis Kaplow
    Abstract: Does significant market power or the presence of large rents affect optimal income taxation, calling for greater redistribution due to tainted gains? Or perhaps less because of an additional wedge that distorts labor effort? Do concerns about inequality have implications for antitrust, regulation, trade, and other policies that influence market power, which contributes to inequality? This article addresses these questions in a model with heterogeneous abilities and hence a concern for distribution, markups, multiple sectors, ownership that is a function of income, allowance for any share of profits to be recoveries of investments (including rent-seeking efforts), endogenous labor supply, and a nonlinear income tax. In this model, proportional markups with no profit dissipation have no effect on the economy, and a policy that reduces a nonproportional markup raises (lowers) welfare when it is higher (lower) than a weighted average of other markups. With proportional (partial or full) profit dissipation, proportional markups are equivalent to a downward shift of the distribution of abilities, and the welfare effect of correcting nonproportional markups associated with nonproportional profit dissipation now depends also on the degree of dissipation and how that is affected by the policy. In all cases, optimal policies maximize consumer plus producer surplus, without regard to a policy’s distributive effects on consumers and profits or how markups and income taxation distort labor effort.
    JEL: D42 D61 H21 H23 K21 L12 L40
    Date: 2019–02
  4. By: Iossa, Elisabetta (University of Rome Tor Vergata, GREEN-Bocconi and EIEF); Rey, Patrick (University of Toulouse); Waterson, Michael (University of Warwick)
    Abstract: The paper studies competition for the market in a setting where incumbents (and, to a lesser extent, neighboring incumbents) benefit from a cost advantage. The paper first compares the outcome of staggered and synchronous tenders, before drawing the implications for market design. We find that the timing of tenders should depend on the likelihood of monopolization. When monopolization is expected, synchronous tendering is preferable, as it strengthens the pressure that entrants exercise on the monopolist. When instead other firms remain active, staggered tenderingis preferable, asitmaximizesthe competitivepressure that comes from the other firms.
    Keywords: Dynamic procurement ; incumbency advantage ; local monopoly ; competition ; asymmetric auctions ; synchronous contracts ; staggered contracts
    JEL: D44 H40 H57 L43 L51
    Date: 2019
  5. By: Buccella, Domenico; Fanti, Luciano
    Abstract: In a vertically related duopoly with input price bargaining, this paper re-examines the downstream firms’ profitability under different market competition degrees. Downstream firms earn highest profits with semi-collusion whose level depends on product differentiation and relative parties’ bargaining power. Holding fixed the upstream suppliers’ bargaining power, the more the products are differentiated, the higher the downstream firms’ collusive level that maximize profits, regardless of the negotiations’ structure. On the other hand, holding fixed the product differentiation degree: 1) with uncoordinated bargaining, the higher the upstream suppliers’ bargaining power is, the lower the downstream firms’ collusive level is; 2) with upstream firms’ bargaining coordination, a U-shaped relation exists between the upstream firms’ power and the downstream firms’ collusive level that maximizes their profits.
    Keywords: Decentralized/semi-coordinated bargaining; Right-to-Manage; Conjectural Variation model
    JEL: D43 J51 L13
    Date: 2019–02
  6. By: Hunold, Matthias; Schlütter, Frank
    Abstract: The established literature on partial vertical ownership has derived distinct pro- and anti-competitive effects, depending on whether the upstream or the downstream firm holds the shares (forward or backward). We show that forward ownership can have the same effects as backward ownership (and vice versa) when it entails both profit and control rights. Moreover, we demonstrate novel anti-competitive effects of partial ownership that arise when the upstream tariffs are non-linear. This contrasts well-established findings that are based on linear tariffs and adds to the current debate on how to treat partial shareholdings in merger control.
    Keywords: corporate influence,financial interest,minority shareholding,partial ownership
    JEL: L22 L40 L8
    Date: 2019
  7. By: Grigoryan, Sona; Lopez, Jose
    Keywords: Agribusiness, Demand and Price Analysis
    Date: 2019–02
  8. By: Giulietti, Monica (Loughborough University); Otero,Jesus (Universidad del Rosario); Waterson, Michael (University of Warwick)
    Abstract: We assess the extent of inertia in grocery retail prices using data on prices and costs from a large supermarket chain in Colombia. Relative to previous work our analysis benefits from the daily frequency of the data and the availability of reliable replacement cost data. We uncover evidence supporting the existence of significant nominal rigidities in reference prices (three months) and even more so in reference costs (about five months). There is evidence that the price and cost rigidities differ depending on the type of product, being on average smaller in the case of perishable goods. Using an Error Correction Model framework, we examine the path of prices relative to costs, to determine the speed of adjustment of prices to shocks.
    Keywords: nominal rigidities ; prices ; costs ; grocery trade ; error correction
    JEL: C32 E31 L11 L81
    Date: 2019

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