nep-ind New Economics Papers
on Industrial Organization
Issue of 2020‒05‒25
four papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Everyday Regular Prices By Nicoletta Berardi; Federico Ravenna; Mario Samano
  2. Steering Incentives of Platforms: Evidence from the Telecommunications Industry By Brian McManus; Aviv Nevo; Zachary Nolan; Jonathan W. Williams
  3. The economics of the German investigation of Facebook's data collection By Budzinski, Oliver; Gruésevaja, Marina; Noskova, Victoriia
  4. Trade Induced Technological Change: Did Chinese Competition Really Increase European Innovation? By Douglas L. Campbell; Karsten Mau

  1. By: Nicoletta Berardi; Federico Ravenna; Mario Samano
    Abstract: Using a novel dataset from a large supermarket retailer in a European country that never engages in temporary sales, we establish that prices are actually as sticky as regular prices. Circumventing the debate on whether sales have to be included or excluded from price adjustments, we find evidence consistent with state-dependent price setting in a multiproduct firm. In particular, our data exhibit responsiveness of prices to changes to aggregate demand shifts, a more than trivial share of very small price changes, synchronization of price changes across items especially within the same product category. Price rigidity and the extent of state-dependence is heterogeneous across items. In particular, we find that pricing of top sales items (and even more of private label ones) is more flexible and state-dependent, which is consistent with price setting in a multiproduct firm characterized by rational inattention.
    Keywords: : Price Setting, Multiproduct Firm, State-Dependence, Synchronization, Rational Inattention, Sales Price, Regular Price.
    JEL: E31 D22 E4 E32
    Date: 2020
  2. By: Brian McManus; Aviv Nevo; Zachary Nolan; Jonathan W. Williams
    Abstract: We study the trade-offs faced by Internet Service Providers (ISPs) that serve as platforms through which consumers access both television and internet services. As online streaming video improves, these providers may respond by attempting to steer consumers away from streaming video toward their own TV services, or by attempting to capture surplus from this improved internet content. We augment the standard mixed bundling model to demonstrate the trade-offs the ISP faces when dealing with streaming video, and we show how these trade-offs change with the pricing options available to the ISP. Next, we use unique household-level panel data and the introduction of usage-based pricing (UBP) in a subset of markets to measure consumers' responses and to evaluate quantitatively the ISP's trade-offs. We find that the introduction of UBP led consumers to upgrade their internet service plans and lower overall internet usage. Our findings suggest that while steering consumers towards TV services is possible, it is likely costly for the ISP and therefore unlikely to be profitable. This is especially true if the ISP can offer rich pricing menus that allow it to capture some of the surplus generated by a better internet service. The results suggest that policies like UBP can increase ISPs' incentive to maintain open access to new internet content.
    JEL: L11 L13 L96
    Date: 2020–05
  3. By: Budzinski, Oliver; Gruésevaja, Marina; Noskova, Victoriia
    Abstract: The importance of digital platforms and related data-driven business models is ever increasing and poses challenges for the workability of competition in the respective markets (tendencies towards dominant platforms, paying-with-data instead of traditional money, privacy concerns, etc.). Due to such challenges, investigations of such markets are of high interest. One of recent cases is the investigation of Facebook's data collection practices by German competition authorities. Our paper, in contrast to the wide stream of legal studies on this case, aims to analyze whether Facebook's practices regarding data collection could constitute an abuse of market power from an economic perspective, more specifically against the background of modern data economics. In doing so we summarize the state of the advanced theories, including influences from behavioral economics, addressing such markets, and discuss four potential theories of harm.
    Keywords: data economics,big data,economics of privacy,competition,Facebook case,paying-with-data,abuse of dominance,market power,digital economy
    JEL: K21 L41 L86 L12 M21 L14 K42
    Date: 2020
  4. By: Douglas L. Campbell (New Economic School); Karsten Mau (School of Business and Economics, Maastricht University)
    Abstract: Bloom, Draca, and Van Reenen (2016) find that Chinese competition induced a rise in patenting, IT adoption, and TFP by up to 30% of the total increase in Europe in the early 2000s. Yet average patents per firm fell by 94% for the most China-competing firms in their sample, but also by 94% for non-competing firms. Their findings for patents appear to be driven by the decision to normalize patents by adding one (i.e., patents+1). Since China-competing firms had fewer patents to begin with, adding one induces bias, making it appear as though patents declined by a smaller percentage in the China-competing sectors. When we estimate a negative binomial regression using patents as the dependent variable, correcting several coding errors, we find no (or even negative) correlation between Chinese competition and patent growth.
    Keywords: Patents, China, Europe, Textiles, Trade Shocks, Manufacturing
    JEL: F14 F13 L25 L60

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