nep-ind New Economics Papers
on Industrial Organization
Issue of 2021‒08‒09
eight papers chosen by

  1. Strategic Pricing and Ratings By Anton Sobolev; Konrad Stahl; André Stenzel; Christoph Wolf
  2. "Mixed oligopoly and predatory public firms". By Joan-Ramon Borrell; Carlos Suarez
  3. Pricing Art and the Art of Pricing : On Returns and Risk in Art Auction Markets By Li, Yuexin; Ma, X.; Renneboog, Luc
  4. The R&D investment decision game with product differentiation By Domenico Buccella; Luciano Fanti; Luca Gori
  5. “An Elephants’ Graveyard”: the Deregulation of American Industry in the Late Twentieth Century By Richard N. Langlois
  6. Patterns of development in the European biopharmaceutical industry. A network analysis of cross-sectoral linkages (2000-2016) By Emanuela Sirtori; Alessandra Caputo; Domenico Scalera
  7. Horizontal Foreclosure with Vertically Shared Large Value: Qualcomm's License Fee Contracts and Anti-Monopoly Decisions by Government in China's Smartphone Integrated Circuits Market, 2011-2014 By WATANABE Mariko
  8. Concentration, Retail Markups, and Countervailing Power: Evidence from Retail Lotteries By Giroldo, Renato; Hollenbeck, Brett

  1. By: Anton Sobolev; Konrad Stahl; André Stenzel; Christoph Wolf
    Abstract: A seller serving two generations of short lived heterogeneous consumers sells a product under uncertain demand. We characterize the seller's optimal pricing, taking into account that the current period's price affects the information transmission to the next period consumers via consumer ratings. While the seller always prefers to generate more information, it is not necessarily in the consumers' interest. We characterize situations in which consumer surplus and welfare are decreasing in additional information. We provide conditions under which aggregate consumer surplus and welfare are lower with than without a rating system.
    Keywords: Online Markets, Rating, Reputation
    JEL: D83 L12 L13 L81
    Date: 2021–07
  2. By: Joan-Ramon Borrell (Universitat de Barcelona.); Carlos Suarez (Universidad Jorge Tadeo Lozano, Universitat Barcelona.)
    Abstract: In this paper, we propose a mixed duopoly model in which the public company aims to maximize a weighted function of profits and a function of its production scale. We found that if the weight to the scale of production is high the public firms may exclude its rivals from the market (exercising predatory prices). We also find that the profit sacrifice by the public firm to get this exclusion is higher if there are marked differences between the cost efficiency of private and public firms.
    Keywords: Mixed Oligopoly, Predatory prices, Public firm. JEL classification: L13, L94, C10.
    Date: 2021–07
  3. By: Li, Yuexin (Tilburg University, Center For Economic Research); Ma, X. (Tilburg University, Center For Economic Research); Renneboog, Luc (Tilburg University, Center For Economic Research)
    Keywords: auction; art investment; alternative investments; cultural economics; hedonic pricing model; repeat sales model; portfolio optimization
    Date: 2021
  4. By: Domenico Buccella; Luciano Fanti; Luca Gori
    Abstract: This article extends the classical d'Aspremont and Jacquemin's (1988, 1990) cost-reducing R&D model with spill-overs to allow quantity-setting firms (Cournot rivalry) to play the non-cooperative R&D investment decision game with horizontal product differentiation. Unlike Bacchiega et al. (2010), who identify a parametric region – defined by the extent of technological spill-overs and the efficiency of R&D activity – in which the game is a prisoner's dilemma (self-interest and mutual benefit of cost-reducing innovation conflict), this work shows that product differentiation changes the game into a deadlock (self-interest and mutual benefit do not conflict), irrespective of the parameter scale (thus, holding also in the absence of spill-over effects). The social welfare when the degree of product differentiation is high enough and a deadlock characterises investing in cost-reducing R&D is larger than when firms do not invest in R&D, irrespective of the technological spillovers extent and the R&D activity's efficiency. These findings suggest that investing in R&D challenges the improvement of interventions aimed at favouring product differentiation. These results also hold for pricesetting firms (Bertrand rivalry).
    Keywords: Process innovation, Nash equilibrium, Social welfare
    JEL: D43 L13 O31
    Date: 2021–07–01
  5. By: Richard N. Langlois (University of Connecticut)
    Abstract: This paper is an excerpt from a larger book project called The Corporation and the Twentieth Century, which chronicles and interprets the institutional and economic history – the life and times, if you will – of American business in the twentieth century. This excerpt examines the era of industrial deregulation of the late twentieth century. As had been the case with financial deregulation, it argues, industrial deregulation and the internationalization of trade were largely a manifestation of the misalignment of the postwar regulatory regime with the realities of economic growth. This misalignment created profit opportunities for entrepreneurs not only in the realm of technology but also, and perhaps more crucially, in the realm of institutions. In some cases, entrepreneurs would expend resources in order to foment political change. In other cases, technological and institutional innovation, aided at times by the depredations of the regulation itself, would so reduce the available rents of a regulatory regime that its supporting coalition would collapse
    Keywords: Deregulation; institutional innovation; technological change; antitrust
    JEL: D23 K21 L4 L51 L52 L6 L9 N42 N62 N72 N82 O3 P12 P P16
    Date: 2021–07
  6. By: Emanuela Sirtori (CSIL Centre for Industrial Studies); Alessandra Caputo (CSIL Centre for Industrial Studies); Domenico Scalera (Department of Law and Economics. University of Sannio, Italy)
    Abstract: This paper aims at identifying geographical patterns of Biopharma transformation trends in the EU over the period 2000-2016 through an analysis of cross-regional and cross-sectoral linkages. To this purpose, information on co-patenting, mergers and acquisitions, and joint ventures and alliances is used to carry out a network analysis at region level. Results show an increasing involvement of European regions in cross-sectoral Biopharma operations. However, while the network displays a tendency to enlarge toward the East (Poland) and West (Spain), a significant reduction in the activity of peripheral nodes in the Southern and Northern borders of the network is observed. More recently, the overall interconnectedness of the network slightly decreases; the network becomes sparser, showing a propensity toward regionalisation of cross-sectoral linkages. Finally, by exploiting information on the location of companies and inventors involved in cross-sectoral operations, the investigation allows pinpointing regional communities and their evolution throughout the yearsClassification-JEL: O18, R11, R58
    Keywords: Biopharmaceutical industry, Cross-sectoral linkages, Emerging Industries, Network analysis
    JEL: R11 R12 L14 L65
    Date: 2021–07–01
  7. By: WATANABE Mariko
    Abstract: In 2015, the Chinese competition authority announced a sanction against Qualcomm, a leading semiconductor manufacturer in the United States. This study investigates whether Qualcomm's pricing strategy limited competition with its rivals. The study estimated two demand functions for handsets and integrated circuit (IC) chips, as well as the marginal cost of smartphones. It then factored in the price of IC chips. Based on the estimated prices of chips and demand parameters, the study identified the competitive relationship regarding the IC chips at the product level. The following were the results of the analysis; the cost of smartphone handsets with Qualcomm's chipset installed is lower than those of rival products. Meanwhile, Qualcomm's chip generates a higher willingness to pay (WTP) by engaging in transactions with increasing numbers of handset assemblers. Qualcomm did not commit vertical foreclosures since its products are not exclusive but the company expanded their customer bases and contributed to the improvement of their customers' ability to set higher WTP and higher prices for their products. However, the company committed horizontal foreclosures, as evident from the pricing of its licensing, where Qualcomm limits competition by raising the cost for rivals; this observation is consistent with the authority's determination. This form of anti-competitive conduct is most severe in the CDMA2000 market in China.
    Date: 2021–07
  8. By: Giroldo, Renato; Hollenbeck, Brett
    Abstract: In this note, we investigate the causal link between market concentration and markups in a retail setting. We study the Washington retail cannabis industry, which features exogenous variation in market concentration that resulted from retail licenses being awarded via lotteries. We observe markups directly. We find a negative causal relationship between markups and concentration, where more concentrated markets have significantly lower markups and wholesale prices. The results provide direct evidence of countervailing buyer power by retailers. These results highlight the value of using industry specific data and rich models of competition to advance the debate on concentration and markups.
    Keywords: markups, market concentration, retail, countervailing buyer power, cannabis policy
    JEL: E20 L13 L16 L22 L41 L81 M31 R12 R32
    Date: 2021–07–31

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