nep-ind New Economics Papers
on Industrial Organization
Issue of 2019‒05‒13
ten papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Are global brands trustworthy? The role of brand affect, brand innovativeness, and consumer ethnocentrism By Richard Huaman Ramirez; Noël Albert; Dwight Merunka
  2. Non-horizontal mergers with investments into compatibility By Gregor Langus; Vilen Lipatov; Jorge Padilla
  3. Platform competition: market structure and pricing By Borsenberger, Claire; Cremer, Helmuth; Joram, Denis; Lozachmeur, Jean-Marie; Malavolti, Estelle
  4. Price Commitments in Standard Setting under Asymmetric Information By Boone, Jan; Schuett, Florian; Tarantino, E.
  5. Uncertain Commitment Power in a Durable Good Monopoly By Seres, Gyula
  6. Experimentation in Dynamic R&D Competition By Anastasios Dosis; Abhinay Muthoo
  7. Conditions for the stability of a Cournot duopoly model with tax evasion and time delay By Raul Villafuerte-Segura; Eduardo Alvarado-Santos; Benjamin A. Itza-Ortiz
  8. Local Search Markets and External Competition By Patrick Legros; Konrad Stahl
  9. "Yogurt Cartel" of Private Label Providers in France: impact on prices and welfare By Bonnet, Céline; Bouamra-Mechemache, Zohra
  10. Limit Pricing Oligopoly Market: Evidence from Tamilnadu Politics By Pazhanisamy, R.

  1. By: Richard Huaman Ramirez (EM Strasbourg - Ecole de Management de Strasbourg); Noël Albert (Kedge Business School [Talence]); Dwight Merunka (AMU IAE - Institut d'Administration des Entreprises (IAE) - Aix-en-Provence - AMU - Aix Marseille Université, CERGAM - Centre d'Études et de Recherche en Gestion d'Aix-Marseille - AMU - Aix Marseille Université - UTLN - Université de Toulon)
    Abstract: This research is interested in extending our understanding of how global brands can positively influence brand trust by introducing two new mediating variables – brand affect and brand innovativeness, and testing the moderating role of consumer ethnocentrism in these relationships.
    Date: 2019
  2. By: Gregor Langus; Vilen Lipatov; Jorge Padilla
    Abstract: We set up a model to analyze the effects of mergers between sellers of complementary components where firms invest in compatibility and can engage in bundling. We consider the impact of merger on prices, investment and consumer surplus. We also analyse when the merged firm may have an incentive and ability to foreclose rivals.
    Keywords: mergers, complementary goods, welfare effects, foreclosure, compatibility
    JEL: L13 L41
    Date: 2019
  3. By: Borsenberger, Claire; Cremer, Helmuth; Joram, Denis; Lozachmeur, Jean-Marie; Malavolti, Estelle
    Abstract: We consider an e-commerce sector with two retailers (which may be marketplaces) and two delivery operators. Products are differentiated according to the retailer and the mode of delivery. The representation of product differentiation is inspired by the Anderson, De Palma and Thisse (2002) discrete choice model. We examine vertical integration of a retailer/ delivery operator pair. Vertical restraints like bundling and/or foreclosure are then considered on top of the integration. Vertical integration in itself eliminates double marginalization, which enhances consumerswelfare. On the other hand, it reduces product variety, and the market power it conveys is likely to reduce profits of the remaining firms. Bundling or foreclosure can be expected to further exacerbate these negative effects. Our most remarkable result is that vertical integration of a single retailer/operator pair will lead to bundling and foreclosure, and possibly the complete exit of the remaining retailers and operators. This is true even when no explicit bundling or foreclosure is put in place on an a priori basis. Consequently, a competition authority that is concerned with total welfare, should not allow the initial merger.
    Keywords: E-commerce; delivery operators; vertical integration; bundling; foreclosure
    Date: 2019–04–25
  4. By: Boone, Jan (Tilburg University, TILEC); Schuett, Florian (Tilburg University, TILEC); Tarantino, E.
    Abstract: Many observers have voiced concerns that standards create essentiality and thus monopoly power for the holders of standard essential patents (SEPs). To address these concerns, Lerner and Tirole (2015) advocate structured price commitments, whereby SEP holders commit to the maximum royalty they would charge were their technology included in the standard. We consider a setting in which a technology implementer holds private information about demand. In this setting, price commitments increase efficiency not only by curbing SEP holders' market power, but also by alleviating distortions in the design of the royalty scheme. In the absence of price commitments, the SEP holder distorts the implementer's output downward in the low-demand state to reduce the high-demand type's information rent. Price commitments reduce this distortion.
    Keywords: standardization; standard-essential patents; price commitments; Information asymmetry
    JEL: D82 L15 L24
    Date: 2019
  5. By: Seres, Gyula (Tilburg University, Center For Economic Research)
    Abstract: This paper considers dynamic pricing strategies in a durable good monopoly model with uncertain commitment power to set price paths. The type of the monopolist is private information of the firm and not observable to consumers. If commitment to future prices is not possible, the initial price is high in equilibrium, but the firm falls prey to the Coase conjecture later to capture the residual demand. The relative price cut is increasing in the probability of commitment as buyers anticipate that a steady price is likely and purchase early. Pooling in prices may occur for perpetuity if commitment is suciently weak. Polling for innity is also preserved if committing to a high price is endogenously chosen by the firm.
    Keywords: monopoly; commitment; Information asymmetry
    JEL: D42 L12 D61 D82
    Date: 2019
  6. By: Anastasios Dosis (ESSEC - ESSEC Business School - Essec Business School - Economics Department - Essec Business School, THEMA - Théorie économique, modélisation et applications - UCP - Université de Cergy Pontoise - Université Paris-Seine - CNRS - Centre National de la Recherche Scientifique); Abhinay Muthoo (Departement of Economics - University of Warwick - University of Warwick [Coventry])
    Abstract: We study a two-stage, winner-takes-all, R&D race, in which, at the outset, firms are uncertain regarding the viability of the project. Learning through experimentation introduces a bilateral (dynamic) feedback mechanism. For relatively low-value products , the equilibrium stopping time coincides with the socially efficient stopping time although firms might experiment excessively in equilibrium; for relatively high-value products, firms might reduce experimentation and stop rather prematurely due to the fundamental free-riding effect. Perhaps surprisingly, a decrease in the value of the product can spur experimentation.
    Keywords: Experimentation,Learning,Dynamic R&D competition,inefficiency
    Date: 2019–02–04
  7. By: Raul Villafuerte-Segura; Eduardo Alvarado-Santos; Benjamin A. Itza-Ortiz
    Abstract: We study a Cournot duopoly model with tax evasion and time delay. We prove that if the marginal production costs of both competing firms are equal then the equilibrium point is asymptotically stable and independent of time delay. As consequence, our model can not have bifurcations if the delay, as a parameter, is varied. It further imply that less tax evasion and higher public revenue can be achieved either by increasing the effectiveness of audits or by adjusting the penalties for tax evasion.
    Date: 2019–05
  8. By: Patrick Legros; Konrad Stahl
    Abstract: Increased competition tends to benefit all buyers with increasing product variety and decreasing prices. However, if local and external market channels compete for the same class of products, increased competition from the external market crowds out local variety. Under local monopoly, local buyer surplus co-moves with external buyer surplus. Under local free entry oligopoly, buyer surplus is U-shaped. If buyer surplus in the external market is low, local surplus is better provided by local oligopoly, but moves against external surplus; if it is high, local and external surplus co-move, and local surplus is better provided by local monopoly.
    Keywords: Global competition, Monopoly, Oligopoly, Search
    JEL: D83 L12 L13 L81
    Date: 2019–04
  9. By: Bonnet, Céline; Bouamra-Mechemache, Zohra
    Abstract: During the period 2006 to 2012, French competition authorities pressed charges against the country’s top 11 firms for engaging in a price-fixing cartel in the fresh dairy store brand segment. Using an empirical vertical bargaining model, this paper studies the effects of the "yogurt cartel" on the price of store brand and national brand products, on the profit sharing between dairy dessert companies and retailers, and consumer welfare. We find that data supports collusive behavior in the dairy dessert market. The cartel leads to price effects for store brands varying from 7.3% for other dairy desserts to 11.3% for yogurts, and those price effects would even be stronger if the cartel also affects the ability of retailers to negotiate with manufacturers. We also show that in a hypothetical situation without the collusion of private label providers, the prices of national brands would have been higher and manufacturers’ profits for the sales of their national brand products would have been lower. The cartel thus benefits manufacturers both in the national brand and private label markets. We show that the national brand dairy dessert market should be taken into account when evaluating the damages to the private label dairy dessert market, which the French competition authorities failed to do.
    Keywords: Yogurt cartel; private label; bargaining; profit sharing; food; collusion.
    JEL: L13 L41 L66
    Date: 2019–05–02
  10. By: Pazhanisamy, R.
    Abstract: Limit pricing oligopoly market is a hypothetical market explained with various hypotheses in the literature which has limited scope for the real world economic evidence and its application which leads the impact of the operation of such market is mostly unknown among the policymakers and academics. The available literature evidences are mostly neglected to explore the scope of such markets conditions and failed to direct appropriate policies. In India among most of the national level parties and in the states levels there are two only have been surviving over the long periods. This trigger the intuition to inquire into answer the questions a) why the political market is appears to be an oligopolistic market? b) How it maintain the limit pricing policy to deter the entry of new ? c) How the share the market? d) Are they collusive oligopolistic or non collusive? e) Are they price leadership oligopolist or not? f) How could they operate in the long run while some of them closed it even within the short run? Since there are very limited attempts only are available to answers this question. This calls for an enquiry by incorporating the micro economics theory with the political system. This paper is attempted to fill this gap in research.
    Keywords: Limit Pricing Oligopoly,Oligopolitics,Breaking the Oligopoly Politics,Collusive and Non Collusive Politics,Entry Prevention in Politics,Political Micro Economics
    JEL: D01 D03 D43 D72 G18 H30 Q12 P48
    Date: 2019

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