nep-ind New Economics Papers
on Industrial Organization
Issue of 2019‒04‒29
six papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Optimal Destabilization of Cartels By Ludwig von Auer; Tu Anh Pham
  2. Endogenous Public and Private Leadership with Diverging Social and Private Marginal Costs By Haraguchi, Junichi; Matsumura, Toshihiro
  3. Marketing agencies and collusive bidding in online ad auctions By Francesco Decarolis; Maris Goldmanis; Antonio Penta
  4. The Producer Surplus Associated with Gasolne Fuel Use in the United States By Sun, Yongling; Delucchi, Mark A.; Lawell, C.-Y. Cynthia L.; Ogden, Joan M.
  5. Measuring competitive balance in Formula One Racing By Budzinski, Oliver; Feddersen, Arne
  6. Has the Swedish Business Sector Become More Entrepreneurial than the US Business Sector? By Heyman, Fredrik; Norbäck, Pehr-Johan; Persson, Lars

  1. By: Ludwig von Auer; Tu Anh Pham
    Abstract: The literature on cartel stability sidelines antitrust policy, whereas the literature on antitrust policy tends to neglect issues of cartel stability. This paper attempts to connect these two interrelated aspects in the context of an augmented quantity leadership model. The cartel is the Stackelberg quantity leader and the fringe firms are in Cournot competition with respect to the residual demand. The antitrust authority decides on its own investigative effort and on the size of the fine that cartel members have to pay when they are detected. For testifying cartel members a leniency program is implemented. Our framework takes into account that these antitrust policy instruments are not costless for society. Our model demonstrates that the optimal antitrust policy exploits the inherent instability of a cartel to reduce its size.
    Keywords: antitrust, stability, Cournot fringe, oligopoly, leniency
    JEL: L13 L41
    Date: 2019
    URL: http://d.repec.org/n?u=RePEc:trr:wpaper:201907&r=all
  2. By: Haraguchi, Junichi; Matsumura, Toshihiro
    Abstract: We investigate endogenous timing in a mixed duopoly with price competition and with social marginal cost differing from private marginal costs. We find that any equilibrium timing patterns--Bertrand, Stackelberg with private leadership, Stackelberg with public leadership, and multiple Stackelberg equilibria-- emerge. When the foreign ownership share in a private firm is less than 50%, public leadership more likely emerges than private leadership. Conversely, private leadership can emerge in a unique equilibrium when the foreign ownership share in a private firm is large. These results may explain recent policy changes in public financial institutions in Japan. We also find a nonmonotone relationship between the welfare advantage of public and private leadership and the difference between social and private marginal costs for a private firm. A nonmonotone relationship does not emerge in profit ranking.
    Keywords: public financial institutions, differentiated products, Bertrand, Stackelberg, payoff dominance
    JEL: H42 L13
    Date: 2019–04–20
    URL: http://d.repec.org/n?u=RePEc:pra:mprapa:93450&r=all
  3. By: Francesco Decarolis; Maris Goldmanis; Antonio Penta
    Abstract: The transition of the advertising market from traditional media to the internet has induced a proliferation of marketing agencies specialized in bidding in the auctions that are used to sell ad space on the web. We analyze how collusive bidding can emerge from bid delegation to a common marketing agency and how this can undermine the revenues and allocative efficiency of both the Generalized Second Price auction (GSP, used by Google and Microsoft-Bing and Yahoo!) and the of VCG mechanism (used by Facebook). We find that, despite its well-known susceptibility to collusion, the VCG mechanism outperforms the GSP auction both in terms of revenues and efficiency.
    Keywords: Collusion, digital marketing agencies, facebook, google, GSP, internet auctions, online advertising, VCG
    JEL: C72 D44 L81
    Date: 2019–04
    URL: http://d.repec.org/n?u=RePEc:upf:upfgen:1657&r=all
  4. By: Sun, Yongling; Delucchi, Mark A.; Lawell, C.-Y. Cynthia L.; Ogden, Joan M.
    Abstract: Estimating the producer surplus – the revenue above the average long-run cost – is an important part of social cost-benefit analyses of changes in petroleum use. This paper estimates the producer surplus associated with changes in gasoline fuel use in the United States, and then applies the estimates of producer surplus to two kinds of social cost-benefit analyses related to petroleum use: (1) estimating the wealth transfer from consumers to producers as a result of policies that affect oil use and oil imports to the US, and (2) comparing the actual average cost of gasoline with the average cost of environmentally superior alternatives to gasoline, such as hydrogen. Our results show that a 50% reduction in gasoline use in the US in 2004 would have saved the US $72 billion in producer surplus payments to foreign oil producers. Applying our estimates to the comparison of the social lifetime cost of hydrogen vehicles versus gasoline vehicles, we find that inconsistently counting producer surplus from a US national perspective while counting climate change damages from a global perspective can overstate the present value lifetime costs of gasoline vehicles by $2,200 to $9,800 per vehicle.
    Keywords: Social and Behavioral Sciences, oil, marginal costs, producer surplus, gasoline, wealth transfer, drilling costs, exploratory wells, development wells
    Date: 2019–01–01
    URL: http://d.repec.org/n?u=RePEc:cdl:itsrrp:qt0591r5x3&r=all
  5. By: Budzinski, Oliver; Feddersen, Arne
    Abstract: The Formula One Championship (F1) is one of the biggest sports businesses in the world. But, however, it seems to astonish that only very few scholarly articles analyze the F1 business. The aim of this study is to contribute to closing two gaps in the existing literature: it contributes (1) to the (sports) economic analysis of the F1 business and (2) to the literature on competitive balance in non-team sports. Like competitive balance in team sport leagues, also for F1 racing three dimensions can be distinguished: (a) race-specific competitive balance, (b) within-season competitive balance, and (c) between-season competitive balance. In addition to classical tools and data, some new and F1 specific indicators, like average lead changes or leading distance, are employed. Also, pitfalls induced especially by the used data source or calculation method are highlighted.
    Keywords: Formula One Motor Racing,competitive balance,empirical industry study,sports economics
    JEL: L83 C01 L13 M21
    Date: 2019
    URL: http://d.repec.org/n?u=RePEc:zbw:tuiedp:121&r=all
  6. By: Heyman, Fredrik; Norbäck, Pehr-Johan; Persson, Lars
    Abstract: Recent studies document a 30-year decline in various measures of entrepreneurship in the U.S. Using detailed Swedish employer-employee data over the period 1990 to 2013, we find young firms to be more prominent in the Swedish business sector than in the U.S. business sector. Young Swedish firms, aged five years or less, account for more than half of all firms during this period. We also observe an increase in Swedish entrepreneurial activity for start-ups. However, increasing job destruction rates for young firms has implied a declining employment share for younger firms from the mid-2000s. Moreover, most of the job creation by young firms occurs in the expanding service sector. We discuss different explanations for why Sweden appears not to have the same strong decline in entrepreneurial activity as the U.S. has had during the last two decades. We argue that one important explanation is economic reforms in Sweden in the 1990s that mitigated several hurdles to entrepreneurship.
    Keywords: entrepreneurship; industrial structure and structural change; job dynamics; Matched employer-employee data
    JEL: J23 K23 L26 L51
    Date: 2019–04
    URL: http://d.repec.org/n?u=RePEc:cpr:ceprdp:13683&r=all

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