nep-ind New Economics Papers
on Industrial Organization
Issue of 2020‒11‒30
five papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Monopolies: Silent Spreaders of Poverty and Economic Inequality By David Fettig; James A. Schmitz
  2. Coordinate to obfuscate? The role of prior announcements of recommended prices By Foros, Øystein; Nguyen-Ones, Mai
  3. Price-setting mixed duopoly, partial privatisation and subsidisation By Ohnishi, Kazuhiro
  4. Product Recalls and Firm Reputation By Boyan Jovanovic
  5. Encouraging digital security innovation: Global Forum on Digital Security for Prosperity By OECD

  1. By: David Fettig; James A. Schmitz
    Abstract: The Covid-19 crisis has exposed the vast inequalities that exist within the US economy. As the virus has spread silently, it has laid bare other crises that face our nation---especially the economic vulnerabilities of the country's poor and marginalized. Many of these vulnerabilities can, in fact, be traced back to a single cause that itself has spread silently, but over the last several decades, not months: Monopolies. That monopolies are "silent spreaders of poverty and economic inequality" was well known to economic and legal scholars of the 1930s and 1940s. Wendell Berge, who was Assistant Attorney General for Antitrust in the 1940s, wrote: "Monopoly conditions have often grown up almost unnoticed by the public until one day it is suddenly realized that an industry is no longer competitive but is governed by an economic oligarchy." The harm caused by these monopolies that have mostly avoided detection often exist in markets with small firms, low concentration levels, and small price-cost margins, as in residential construction, or wreak their harm in public institutions, where prices and concentration have no meaning. While there has been a very welcome resurgence in the concern about monopolies in the last decade or so, this has primarily involved vast corporations, and often about their threat to democratic institutions. Though greatly welcomed, we should not let apprehension with these larger companies distract us from the many hidden monopolies that have silently spread harm to the poor for the last 100 years -- not just the last 10 or so. We should stand on the shoulders of giants that taught us this about monopolies, not only Berge, but Thurman Arnold, Henry Simons, and others.
    Keywords: Monopoly; Competition; Inequality; Cournot; Sabotage; Harberger; COVID-19; Thurman Arnold; Henry Simons; Silent spreaders; Housing
    JEL: D22 D42 K0 L0 L12
    Date: 2020–09–22
  2. By: Foros, Øystein (Dept. of Business and Management Science, Norwegian School of Economics); Nguyen-Ones, Mai (Dept. of Business and Management Science, Norwegian School of Economics)
    Abstract: Firms may want to coordinate industry-wide price jumps that are predictable for rivals, however, unpredictable for consumers. We show how such coordination is carried out in Norwegian gasoline retailing. Overnight, the market leader initiated an equilibrium transition from regular to non-regular price jumps. Prior announcements of a non-transaction price variable, recommended prices, are used to coordinate the timing and the level of industry-wide price jumps.
    Keywords: Price coordination; consumer obfuscation; prior announcements
    JEL: D22 D43 L11 L13
    Date: 2020–11–18
  3. By: Ohnishi, Kazuhiro
    Abstract: This paper examines partial privatisation in a price-setting mixed duopoly model to reassess the welfare effect of production subsidies. It is shown that the result of this study is basically the same as that of the existing quantity-setting mixed market model.
    Keywords: Partial privatisation; Price competition; Subsidisation
    JEL: C72 D21 L32
    Date: 2020–11–10
  4. By: Boyan Jovanovic
    Abstract: Product-recall data and information on stock-price reactions to recalls are used to estimate the value of reputation in a model in which product quality is not contractible. A recall is the result of a product defect that signals low effort. The recall triggers a reduction in the firm's product price and value which then both rise steadily until its next defect occurs. We estimate that reputation accounts for 8.3 percent of firm value and that welfare is 26 percent of its first best level. A policy intervention that attains first best is a recall tax accompanied by a flow subsidy.
    JEL: L11
    Date: 2020–10
  5. By: OECD
    Abstract: This document summarises discussions held at the second annual event of the OECD Global Forum on Digital Security for Prosperity. The event, held on 14-15 November 2019 in London, brought together 160 experts and 30 speakers from government, business, civil society, the technical community and academia to discuss how to encourage digital security innovation. Participants explored the roles that different stakeholders can play in stimulating digital security innovation, including how governments can support it for example by implementing tax incentives, acting as an early customer for innovative products, and enacting flexible and outcome-based regulation. A digital security innovation ecosystem is the most important component of a strategic approach, as it brings together different stakeholder groups in a dedicated location. Participants discussed how different ecosystems can learn from one another through international co-operation and considered how governments can encourage digital security by design in innovation more generally.
    Date: 2020–11–20

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