nep-ind New Economics Papers
on Industrial Organization
Issue of 2021‒02‒22
six papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Full Collusion with Entry and Incomplete Information By Ramakanta Patra; Tadashi Sekiguchi
  2. Exclusive Data, Price Manipulation and Market Leadership By Yiquan Gu; Leonardo Madio; Carlo Reggiani
  3. Data Brokers Co-Opetition By Yiquan Gu; Leonardo Madio; Carlo Reggiani
  4. Entry Deterrence and Free Riding in License Auctions: Incumbent Heterogeneity and Monotonicity By Biung-Ghi Ju; Seung Han Yoo
  5. THE IMPACT OF MERGERS AND ACQUISITIONS ON THE OPERATIONAL PERFORMANCE OF COMPANIES IN EMERGING CAPITAL MARKETS By Arzu Hajiyeva
  6. Sticky Price for Declining Risk? The Case of Cancellation Premia in the Hotel Industry By Nicola Lacetera; Claudio A. Piga; Lorenzo Zirulia

  1. By: Ramakanta Patra (Department of Accounting, Economics and Finance, Cardiff Metropolitan University); Tadashi Sekiguchi (Institute of Economic Research, Kyoto University)
    Abstract: This paper studies an infinitely repeated duopoly game with incomplete information and with costly entry decisions. Every period, each player learns her private type and decides whether to pay a cost in order for her to enter or not. If she enters, she plays a game belonging to a class that includes Bertrand duopoly and some auction games as special cases, either as a monopolist or as a duopolist. The players can communicate before they make their entry decisions. We study full collusion (joint profit maximization) in this environment which requires a higher-quality player to solely enter and to choose an action maximizing the stage payoff. We present a condition on the stage game which is both necessary and sufficient in order for full collusion to be an equilibrium outcome for sufficiently patient players. The condition is more likely to hold when the entry cost increases, which signifies that the entry cost is an important factor facilitating full collusion. We also show that under some parameter restrictions, asymmetric equilibria where only one player reveals her type every period sustain full collusion for a wider range of discount factors. These asymmetric equilibria reduce the total amount of communication, which makes it harder for antitrust authorities to detect collusion.
    Keywords: Bertrand Competition; Fixed Costs; Unknown Costs; Private Information; Infinitely Repeated Game; Pre-play Communication; One-sided Communication; Full Collusion
    JEL: C73 D43 K21 L0
    Date: 2021–02
    URL: http://d.repec.org/n?u=RePEc:kyo:wpaper:1055&r=all
  2. By: Yiquan Gu; Leonardo Madio; Carlo Reggiani
    Abstract: The unprecedented access of firms to consumer level data not only facilitates more precisely targeted individual pricing but also alters firms’ strategic incentives. We show that exclusive access to a list of consumers can provide incentives for a firm to endogenously assume the price leader’s role, and so to strategically manipulate its rival’s price. Prices and profits are non-monotonic in the length of the consumer list. For an intermediate size, price leadership entails an equilibrium outcome characterised by supra-competitive prices and low consumer surplus. In contrast, for short or long lists of consumers, exclusive data availability intensifies market competition.
    Keywords: Exclusive data, Personalised pricing, Price leadership, Strategic price manipulation
    JEL: D43 K21 L11 L13 L41 L86 M21 M31
    Date: 2021–01
    URL: http://d.repec.org/n?u=RePEc:liv:livedp:202102&r=all
  3. By: Yiquan Gu; Leonardo Madio; Carlo Reggiani
    Abstract: Data brokers share consumer data with rivals and, at the same time, compete withthem for selling. We propose a “co-opetition” game of data brokers and characterisetheir optimal strategies. When data are “sub-additive” with the merged value netof the merging cost being lower than the sum of the values of individual datasets,data brokers are more likely to share their data and sell them jointly. When data are“super-additive”, with the merged value being greater than the sum of the individualdatasets, competition emerges more often. Finally, data sharing is more likely whendata brokers are more efficient at merging datasets than data buyers.
    Keywords: data brokers, consumer information, co-opetition, data sharing
    JEL: D43 L13 L86 M31
    Date: 2021–01
    URL: http://d.repec.org/n?u=RePEc:liv:livedp:202101&r=all
  4. By: Biung-Ghi Ju (Department of Economics, Seoul National University, 1 Gwanak-ro, Gwanak-gu, Seoul, Republic of Korea, 08826); Seung Han Yoo (Department of Economics, Korea University, 145 Anam-ro, Seongbuk-gu, Seoul, Republic of Korea, 02841)
    Abstract: We examine free riding for entry deterrence in license auctions with heterogeneous incumbents. We establish the monotonicity of randomized preemptive bidding equilibria: an incumbent with a higher entry-loss rate has greater free-riding incentive, choosing a lower deterring probability. We then identify conditions for the existence of a series of fully or partially participating equilibria such that two or more incumbents with bounded heterogeneity in their entry-loss rates participate in randomized preemptive bidding. As an application, we examine a simple case of a bipartite group of participating incumbents consisting of one "leader" and many "followers". We show that the policy of limiting the leader's participation (set-asides for entrants, limiting participation of incumbents with excessive market shares, etc.) may or may not increase entry probability.
    Keywords: entry deterrence, free-rider problem, asymmetric auctions
    JEL: D44 D47 L13
    Date: 2021
    URL: http://d.repec.org/n?u=RePEc:iek:wpaper:2101&r=all
  5. By: Arzu Hajiyeva (World Economy, Azerbaijan State Economics University, Baku, Azerbaijan)
    Abstract: Modern trends in economic development, characterized by increased competition and globalization of markets, lead to a significant increase in mergers and acquisitions (M&A). Companies from emerging capital markets are beginning to play an increasingly significant role in these processes. It is very necessary to identify whether M&A deals create value for companies or are they just a convenient way for management to expand and strengthen its position. The article presents the results of a study of the effectiveness of transactions for the transfer of corporate control on a sample of companies from the BRICS countries in the period from 2009 to 2012. Based on the method of analysis of financial statements, we found an increase in the operating indicators of companies (EBITDA / Sales) as a result of mergers and acquisitions two years after their completion. The main determinants of the effectiveness of transactions initiated by companies from the BRICS countries are: deal size of acquitting company, friendly focus of the transaction and the stake share.
    Keywords: Mergers and acquisitions, BRICS, capital movement, emerging markets
    JEL: G34 F21
    Date: 2020–12
    URL: http://d.repec.org/n?u=RePEc:aly:journl:202067&r=all
  6. By: Nicola Lacetera; Claudio A. Piga; Lorenzo Zirulia
    Abstract: Using data from about seven millions room postings by hotels in France and the UK, we document that, rather than smoothly decreasing to zero, cancellation premia remain positive at roughly 10% to 15% of the full price until two days before the stay. A model where travelers have different willingness to pay and some overestimate the probability to cancel their trip explains this price-setting mode more consistently than alternative interpretations. We denote these strategies as a form of naivet�-based price discrimination. We use our model also to identify conditions under which these strategies are exploitative of certain consumers, or are welfare-enhancing instead.
    JEL: D21 D22 D91 L11 L83
    Date: 2021–02
    URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:28456&r=all

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