nep-ind New Economics Papers
on Industrial Organization
Issue of 2019‒03‒11
nine papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Monopolistic competition for the market with heterogeneous firms and Schumpeterian growth By Federico Etro
  2. Some causal effects of an industrial policy By Criscuolo, Chiara; Martin, Ralf; Overman, Henry G.; Van Reenen, John
  3. Quality and Price Personalization under Customer Recognition: A Dynamic Monopoly Model By Didier Laussel; Ngo Van Long; Joana Resende
  4. Data brokers co-opetition By Yiquan Gu; Leonardo Madio; Carlo Reggiani
  5. Stock Market Impact of Cross-Border Acquisitions in Emerging Markets By Norbäck, Pehr-Johan; Persson, Lars
  6. Concentration in International Markets: Evidence from US Imports By Bonfiglioli, Alessandra; Crinò, Rosario; Gancia, Gino
  7. Bundling and exporting: evidence from German SMEs By Aquilante, Tommaso; Vendrell-Herrero, Ferran
  8. Collusion between Retailers and Customers: The Case of Insurance Fraud in Taiwan By Pierre Picard; Jennifer Wang; Kili Wang
  9. Spatial drivers of firm entry in Iran By Cheratian, Iman; Goltabar, Saleh; Calá, Carla Daniela

  1. By: Federico Etro
    Abstract: I study monopolistic competition in patent races where firms are heterogeneous in R&D costs. Only the most efficient firms invest, and they invest more when the value of innovation is higher, while the endogenous set of active firms depends on the profitability of innovation. In particular, selection effect (increasing R&D productivity) emerge after a reduction of the entry cost or after an increase (a reduction) of the value of innovation if the elasticity of the probability of innovation is increasing (decreasing) in investment. In Schumpeterian models selection effects foster endogenous growth.
    Keywords: Patent races, heterogeneous firms, monopolistic competition, Schumpeterian growth.
    JEL: L1 O3 O4
    Date: 2019
  2. By: Criscuolo, Chiara; Martin, Ralf; Overman, Henry G.; Van Reenen, John
    Abstract: We exploit changes in the area-specific eligibility criteria for a program to support jobs through investment subsidies. European rules determine whether an area is eligible for subsidies, and we construct instrumental variables for area eligibility based on parameters of these rule changes. Areas eligible for higher subsidies significantly increased jobs and reduced unemployment. A 10-percentage point increase in the maximum investment subsidy stimulates a 10 percent increase in manufacturing employment. This effect exists solely for small firms: large companies accept subsidies without increasing activity. There are positive effects on investment and employment for incumbent firms but not Total Factor Productivity.
    JEL: E24 G31 H25 L25 L52 R23
    Date: 2019–01–01
  3. By: Didier Laussel; Ngo Van Long; Joana Resende
    Abstract: We present a model of hyper-segmentation of market, where a monopolist firm uses information technology to acquire, in one period, all the information about the preferences of consumers who purchase its vertically differentiated products within that period. Lower consumer types have an incentive to delay their purchases until next period in order to obtain a higher (and non-distorted) quality offer. The monopolist counters this incentive by offering higher informational rents. We analyse the dynamic game between the monopolist and the customers. We find that in a Markov perfect equilibrium, the firm expands the market progressively. The market is not covered in a twinkle of an eye, i.e., the dynamics is non-Coasian. Also, contrary to the Coasian result for a durable-good monopoly, we find that the profit of our non-durable good monopoly increases as the interval of commitment shrinks. The model yields some implications for regulatory policies regarding information collection and commitment period. Nous présentons un modèle d’hyper-segmentation du marché, dans lequel une entreprise monopoliste utilise les technologies de l’information pour acquérir, en une période, toutes les informations relatives aux préférences des consommateurs qui achètent ses produits différenciés verticalement au cours de cette période. Les consommateurs dont la préférence pour la qualité est faible ont l’intérêt à reporter leurs achats à la période suivante afin d'obtenir une offre de qualité supérieure (sans distorsion). Le monopoleur contrecarre cette intention en proposant des primes d’information plus élevés. Nous analysons le jeu dynamique entre le monopoleur et ses clients. Nous constatons que dans un équilibre parfait de Markov, l'entreprise élargit progressivement le marché. Le marché n’est pas couvert en un clin d’œil, c’est-à-dire que la dynamique n’est pas coasienne. En outre, contrairement au résultat coasien pour un monopole sur les biens durables, nous constatons que le profit de notre monopole sur les biens non durables augmente à mesure que l’intervalle d’engagement diminue. Le modèle entraîne certaines implications pour les politiques réglementaires en matière de collecte d'informations et de période d'engagement.
    Keywords: Coasian Dynamics, Information Collection, Monopoly, Regulatory Policies, La dynamique coasienne, La collecte d’information, Monopole, Politiques réglementaires
    JEL: L12 L15
    Date: 2019–02–25
  4. By: Yiquan Gu; Leonardo Madio; Carlo Reggiani
    Abstract: Data brokers collect, manage, and sell customer data. We propose a simple model, in which data brokers sell data to downstream firms. We characterise the optimal strategy of data brokers and highlight the role played by the data structure for co-opetition. If data are “sub-additive”, with the combined value lower than the sum of the values of the two datasets, data brokers share data and sell them jointly. When data are “additive” or “supra- additive”, with the combined value equal to or greater than the sum of the two datasets, data brokers compete. Results are robust to several extensions.
    Keywords: data brokers, personal information, privacy, co-opetition
    JEL: D43 L13 L86 M31
    Date: 2019
  5. By: Norbäck, Pehr-Johan (Research Institute of Industrial Economics (IFN)); Persson, Lars (Research Institute of Industrial Economics (IFN))
    Abstract: Entry by multinational enterprises (MNEs) into emerging markets has increased substantially over the last decades. Many of these MNE entries have taken place in concentrated markets. To capture these features, we construct a strategic interaction model of MNE cross-border acquisition and greenfield entry into an oligopolistic market. We provide an event study framework suitable to derive predictions for the stock market values of MNE entries. We show that share values of acquirers will increase when an acquisition is announced if and only if the domestic assets are not too strategically important. If there is risk associated with cross-border M&As, we show that such risks reduce the likelihood and the acquisition price of cross-border M&As. These mechanisms provide an explanation for why acquirers tend to overperform when acquiring in emerging markets but underperform when acquiring in developed markets. We also show that shareholders of targets firms in emerging markets may benefit from not selling their firms too early in the development phase.​
    Keywords: FDI; Cross-Border Mergers and Acquisitions; Stock Market Value; Emerging Markets
    JEL: F23 G34 L13
    Date: 2019–02–28
  6. By: Bonfiglioli, Alessandra; Crinò, Rosario; Gancia, Gino
    Abstract: We use transaction-level data to study changes in the concentration of US imports. Concentration has fallen in the typical industry, while it is stable by industry and country of origin. The fall in concentration is driven by the extensive margin: the number of exporting firm has grown, and the number of exported products has fallen more for top firms. Instead, average revenue per product of top firms has increased. At the industry level, top firms are converging, but top firms within country are diverging. These facts suggest that intensified competition in international markets coexists with growing concentration among national producers.
    Keywords: Concentration; Firm Heterogeneity; International trade; Superstar Firms; US Imports
    JEL: E23 F12 F14 L11 R12
    Date: 2019–03
  7. By: Aquilante, Tommaso (Bank of England); Vendrell-Herrero, Ferran (University of Birmingham)
    Abstract: This paper studies the effect of bundling products and services on the export performance of firms. Using a unique sample, we document several facts about German small and medium enterprises (SMEs). First, bundling is a relatively rare activity, which is unevenly spread across sectors. Second, SMEs that bundle products and services are more productive than those selling products and services separately. Third, these firms tend to be more internationally oriented. While most of the existing literature focuses on large firms, we contribute to the literature by uncovering a robust positive relation between product-service bundling and exporting in SMEs. Importantly, the competitiveness-enhancing effect of bundling goes beyond manufacturing, affecting non-manufacturing firms also. To mitigate endogeneity concerns, we exploit the panel structure of the data and implement several (doubly robust) propensity score matching techniques.
    Keywords: Bundling; innovation; export; SMEs
    JEL: D22 F10 F14 F23 L80
    Date: 2019–03–01
  8. By: Pierre Picard (CREST - Centre de Recherche en Economie et en Statistique - ENSAE ParisTech - École Nationale de la Statistique et de l'Administration Économique); Jennifer Wang; Kili Wang (TKU - Tamkang University [New Taipei])
    Abstract: The outsourcing of retail services is frequently at the origin of agency costs, associated with the discretion in the way retailers do their job. This is particularly the case when retailers and customers collude to exploit loopholes in the contracts between producers and customers. In this paper, we analyze how insurance distribution channels may a¤ect such misbehaviors, when car repairers join policyholders to defraud insurers. We focus attention on the Taiwan automobile insurance market by using a database provided by two large Taiwanese automobile insurers. The theoretical underpinning of our analysis is provided by a model of claims fraud with collusion and audit. Our econometric analysis confirms that fraud occurs through the postponing of claims to the end of the policy year, possibly by filing a single claim for several events. It highlights the role of car dealer agencies in the collusive fraud mechanism..
    Date: 2019–02–21
  9. By: Cheratian, Iman; Goltabar, Saleh; Calá, Carla Daniela
    Abstract: Given the importance of entry promotion to prompt economic growth and promote structural transformation, this paper investigates the regional determinants of firm entry in the 30 Iranian regions, considering four different sizes -micro, small, medium and large- over 2000-2015. Using a new and unique database, we estimate panel non-spatial and spatial lag and error dependence models. We find that regional factors explain firm entry, but the impact is not homogeneous across firms of different size. We also find that most types of firms are influenced by the negative effect of economic sanctions during the sample period. Keywords: firm entry, ecological approach, spatial models, Iranian economy.
    Keywords: Dinámica Empresarial; Creación de Empresas; Distribución Espacial; Iran;
    Date: 2019–01

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