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

  1. Market collusion with joint harm and liability sharing By Andreea Cosnita-Langlais; Maxime Charreire; Florian Baumann
  2. Optimal dynamic antitrust fines By Merino Troncoso, Carlos
  3. Tying in evolving industries, when future entry cannot be deterred By Chiara Fumagalli; Massimo Motta
  4. Digital Advertising and Purchasing: Fun or a New Type of Deception? By Julli, Kenneth
  5. Demand Analysis with Many Prices By Victor Chernozhukov; Jerry A. Hausman; Whitney K. Newey
  6. Digital Infrastructure and Entrepreneurship: The Digital Era's Enabling Effect By Caceres-Diaz, Piero; Usero-Sanchez, María Belén; Montoro-Sanchez, Angeles
  7. Multisided Markets & Platform Dominance By Alleman, James; Baranes, Edmond; Rappoport, Paul
  8. Does the Provision of Physician Services Respond to Competition? By Philippe CHONÉ; Elise COUDIN; Anne PLA
  9. Delivery in the city: evidence on monopolistic competition from New York restaurants By Cosman, Jacob; Schiff, Nathan

  1. By: Andreea Cosnita-Langlais; Maxime Charreire; Florian Baumann
    Abstract: When it is impossible to identify ex post the producer of a product causing harm or the damage caused is indivisible although caused by multiple injurers, courts must apportion the total damage among tortfeasors. In this model we examine how such liability sharing rules affect the likelhood of tacit collusion. For this we use a standard Cournot oligopoly model where firms are collectively held liable for joint harm inflicted on third parties. The damage caused may be either linear or cumulative in total industry output. With repeated market interaction and grim strategies, we investigate the sustainability of collusion to derive some policy implications.
    Keywords: Cournot oligopoly, liability sharing rules, market collusion
    JEL: L41 L13 K13
    Date: 2019
  2. By: Merino Troncoso, Carlos
    Abstract: Standard antitrust optimal fines rely on a microeconomic static model. Motchenkova describes optimal antitrust dynamic sanctions and their application for EU and US methodology. For the EU fine, and based on this methodology, we find an equilibrium point for a high level of offense (2 times normal profits ) and a high detection probability (0.6).
    Keywords: antitrust,cartel,differential games
    JEL: K21 L4
    Date: 2019–11–01
  3. By: Chiara Fumagalli; Massimo Motta
    Abstract: We show that the incentive to engage in exclusionary tying (of two complementary products) may arise even when tying cannot be used as a defensive strategy to protect the incumbent's dominant position in the primary market. By engaging in tying, an incumbent firm sacrifices current profits but can exclude a more efficient rival from a complementary market by depriving it of the critical scale it needs to be successful. In turn, exclusion in the complementary market allows the incumbent to be in a favorable position when a more efficient rival will enter the primary market, and to appropriate some of the rival's efficiency rents. The paper also shows that tying is a more profitable exclusionary strategy than pure bundling, and that exclusion is the less likely the higher the proportion of consumers who multi-home.
    Keywords: Inefficient foreclosure, Tying, Scale economies, Network Externalities
    JEL: K21 L41
    Date: 2019
  4. By: Julli, Kenneth
    Abstract: The digital world operates differently from the old world of print media. Notably, online advertising and purchasing are performed in a fast paced and interactive process. When purchasing online, the first screen a consumer sees is similar to the print advertisements of old. However, unlike print advertising, the first digital screen gives way to an interactive process as the consumer clicks through pages to complete their online transaction. The Organisation for Economic Co-operation and Development (OECD) has observed that "trust is essential in situations where uncertainty and interdependence exist." Existing laws that govern misleading and deceptive advertising must be adapted to the new digital world. Consumers need to have trust that the prices they see online are the prices they will actually pay as they click through to complete their transaction. In recognition of the importance of digital platforms, and the high levels of trust consumers place in the digital world, governments are beginning to develop regulations specific to the digital world. Additionally, and more than ever, regulators such as the Canadian Competition Bureau are responding to evolving challenges in the digital economy. In particular, the Bureau's Deceptive Marketing Practices Directorate has committed to investigating misleading representations made online to foster a transparent digital economy in line with consumer protection...
    Date: 2019
  5. By: Victor Chernozhukov; Jerry A. Hausman; Whitney K. Newey
    Abstract: From its inception, demand estimation has faced the problem of "many prices." This paper provides estimators of average demand and associated bounds on exact consumer surplus when there are many prices in cross-section or panel data. For cross-section data we provide a debiased machine learner of consumer surplus bounds that allows for general heterogeneity and solves the "zeros problem" of demand. For panel data we provide bias corrected, ridge regularized estimators of average coefficients and consumer surplus bounds. In scanner data we find smaller panel elasticities than cross-section and that soda price increases are regressive.
    JEL: C13 C14 C21 C23 C55 D12
    Date: 2019–11
  6. By: Caceres-Diaz, Piero; Usero-Sanchez, María Belén; Montoro-Sanchez, Angeles
    Abstract: Scholars have failed to give infrastructure due importance in entrepreneurship studies. Not too far from now, digital infrastructure has been recognized as the most conducive for entrepreneurial activity. Nevertheless, it has not been properly included in opportunitymotivated entrepreneurship (OE) studies, being OE the most propitious to economic growth. Accordingly, our research is the first one to focus on this link. By recognizing the importance of individuals' resources such as human, social, and financial capital for OE; an interaction model is considered. Using logistic regression analysis through a data set of 463,454 individuals from 37 countries (2011-2016), we validate this relationship and find it varies depending on the existing institutional system. Particularly, results suggest that fixed and mobile broadband fulfill distinct roles when relating to OE. Implications of this study may be of interest to policymakers.
    Keywords: Opportunity entrepreneurship,Broadband,External enablers
    JEL: L26 L96 H54
    Date: 2019
  7. By: Alleman, James; Baranes, Edmond; Rappoport, Paul
    Abstract: The internet giants - Facebook, Amazon, Netflix and Google, among others - have transformed society with both positive and negative effects. The negative effects have been stark. There have been huge disruptions caused by e-commerce. More recently, subtler, but even more serious negative effects are only now being recognized: threats to democracy, violations of privacy, and monopolistic behavior. By traditional measures Facebook and Google are highly concentrated. Each has obtained de facto monopolistic or oligopolistic power with little concern on the part of government. Facebook and Google and other internet giants are multisided markets (MSM); their economic rents are "hidden" from the public. On the user-side of the market, prices are zero - "free." On the other side of the market, Facebook's and Google's revenues are derived from advertising which appears when the users click on advertiser's web sites. Facebook and Google can extract exorbitant prices for ads, since they are virtually the only source that can target ads directly to potential customers. This is where the economic rents are not so obvious. This paper addresses the monopolistic/monopsony aspect of the internet giants. In the singlesided market, monopoly pricing is well defined - as well as tests for predatory behavior; not so with multisided markets. Since the definition of markets is central to the legal enforcement of antitrust statutes, the paper examines non-transactional multisided markets for their potential for determining consumers' harm and welfare effects, as well as defining monopoly and predatory pricing in this context. Initial estimates of Google's and Facebook's social cost in terms of consumers' welfare loss are $54 and $33 billion, respectively and increasing cost to consumers at least $87 billion dollars. It demonstrates and quantifies that dominate internet platforms can create three major harms to consumers: - Increasing prices to consumers via added costs to the products being advertised, - Elimination (or non-emergence) of competition in markets to the products being advertised, - Increasing prices to consumers beyond the cost of advertising via the market power of the remaining firms in the market of the products being advertised The paper outlines potential remedies to ameliorate the problems.
    Keywords: Advertising,Antitrust,Consumers' Surplus,Internet,Platform Economics,Regulation,Two-Sided/Multisided Markets
    JEL: D42 D43 K21 L12 L13 L22 L51 L96
    Date: 2019
  8. By: Philippe CHONÉ (Centre for Research in Economics and Statistics (CREST).); Elise COUDIN (Centre for Research in Economics and Statistics and Institut National de la Statistique et des Etudes Economiques (INSEE).); Anne PLA (Ministry for Solidarity and Health, Direction de la Recherche, des Etudes, de l’Evaluation et des Statistiques.)
    Abstract: We assess the extent to which specialist physicians respond to local competition when deciding how much services to provide under a fee-for-service payment system. We use an exhaustive administrative panel data set of French physicians, and account for the dual nature of the regulatory environment, with part of the physicians being subject to price regulation. The activity of fee-regulated physicians depends only on their individual preferences, and is not affected by changes in their demand or competitive environment. By contrast, the prices charged by free-billing physicians decrease and their activity increases with physician density. Reaction functions are upward-slopping, with the quantities of services provided being strategic complements. Our findings are consistent with a static oligopoly model where the consumption-leisure preferences of doctors exhibit strong income effects.
    Keywords: Fee-for-service payment, physician labor supply, income effects, spatial competition.
    JEL: I11 L13
    Date: 2019–10–17
  9. By: Cosman, Jacob; Schiff, Nathan
    Abstract: We examine the response to entry in a large market with differentiated products using a novel longitudinal dataset of over 550,000 New York City restaurant menus from 68 consecutive weeks. We compare “treated” restaurants facing a nearby entrant to “control” restaurants with no new competition, matching restaurants using location characteristics and a pairwise distance measure based on menu text. Restaurants frequently adjust prices and product offerings, but we find no evidence that they respond differentially to new competition. However, restaurants in the top entry decile are 5% more likely to exit after a year than restaurants in the lowest entry decile.
    Keywords: spatial competition, monopolistic competition, product differentiation, entry
    JEL: D22 D43 L13
    Date: 2019–10

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