nep-ind New Economics Papers
on Industrial Organization
Issue of 2021‒09‒06
six papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. The Industrial Organization of Financial Markets By Robert Clark; Jean-François Houde; Jakub Kastl
  2. Estimating Endogenous Coalitional Mergers: Merger Costs and Assortativeness of Size and Specialization By Suguru Otani
  3. Opposing firm-level Responses to the China Shock: Horizontal Competition Versus Vertical Relationships? By Philippe Aghion; Antonin Bergeaud; Matthieu Lequien; Marc Melitz; Thomas Zuber
  4. Synergistic Competitive Advantage - The Modern Appeal of RBV and IO Theory in the Mergers and Acquisitions By Arup Barua; Alexandra Ioanid
  5. Estimating Demand with Multi-Homing in Two-Sided Markets By Pauline Affeldt; Elena Argentesi; Lapo Filistrucchi
  6. How Well Does Bargaining Work in Consumer Markets? A Robust Bounds Approach By Bradley Larsen; Joachim Freyberger

  1. By: Robert Clark; Jean-François Houde; Jakub Kastl
    Abstract: This chapter discusses recent developments in the literature involving applications of industrial organization methods to finance. We structure our discussion around a simple model of a financial intermediary that concentrates its attention either on (i) the retail market and hence engages in a traditional maturity transformation business by accepting funds that can be used to invest in risky projects (loans), or (ii) the investment business, financing its operations on the “wholesale” market and making markets or investing in higher return riskier projects. Our discussion is centered around the analysis of market structure and competition in each of these markets, focusing in turn on (i) primary and secondary markets for government and corporate debt, (ii) interbank loans, (iii) markets for retail funding, and (iv) credit markets, including mortgages.
    JEL: G2 L1 L51
    Date: 2021–08
  2. By: Suguru Otani
    Abstract: I present a structural empirical model of a one-sided one-to-many matching with complementarities to quantify the effect of subsidy design on endogenous merger matching. I investigate shipping mergers and consolidations in Japan in 1964. At the time, 95 firms formed six large groups. I find that the existence of unmatched firms enables us to recover merger costs, and the importance of technological diversification varies across carrier and firm types. The counterfactual simulations show that 20 \% of government subsidy expenditures could have been cut. Also, the government could have possibly changed the equilibrium number of groups between one and six.
    Date: 2021–08
  3. By: Philippe Aghion; Antonin Bergeaud; Matthieu Lequien; Marc Melitz; Thomas Zuber
    Abstract: We decompose the “China shock” into two components that induce different adjustments for firms exposed to Chinese exports: a horizontal shock affecting firms selling goods that compete with similar imported Chinese goods, and a vertical shock affecting firms using inputs similar to the imported Chinese goods. Combining French accounting, customs, and patent information at the firm-level, we show that the horizontal shock is detrimental to firms’ sales, employment, and innovation. Moreover, this negative impact is concentrated on low-productivity firms. By contrast, we find a positive effect - although often not significant - of the vertical shock on firms’ sales, employment, and innovation.
    JEL: F14 F16 F6 O31
    Date: 2021–08
  4. By: Arup Barua (South-Eastern Finland University of Applied Sciences, Finland); Alexandra Ioanid (University Politehnica of Bucharest, Romania)
    Abstract: The Resource-based View (RBV) and Industrial Organization (IO) theory have successfully clarified the competitive advantage for a single firm based on resources and market aspects but less so for knowing the competitive advantage for dual entities or companies. Therefore, this article attempts to investigate how a competitive advantage emerges in post-M&A. It illustrates that both theories together should contemplate the "synergistic competitive advantage" as a measurement of M&A performance, which explains the competitive advantage by the acquisition synergies, e.g., joint sales, expertise, revenue, and cost. The modern thought will widen the joint appeal of RBV and IO theory considering the SCP model because the synergy (i.e., a combined effect of two entities) should be a competitive, and competitive advantage should be synergistic for acquisition success. Future researchers are entreated to test the synergistic competitive advantage in post-M&A, evading the traditional competitive advantage. Decisively the implications and directions of future research would be illuminated.
    Keywords: RBV (Resource-based View), IO (Industrial Organization), SCP (Structure, Conduct, Performance), SCA (Synergistic Competitive Advantage), M&As (Mergers and Acquisitions)
    JEL: G34 M16 O19
    Date: 2021–07
  5. By: Pauline Affeldt; Elena Argentesi; Lapo Filistrucchi
    Abstract: We empirically investigate the relevance of multi-homing in two-sided markets. First, we build a micro-founded structural econometric model that encompasses demand for differentiated products and allows for multi-homing on both sides of the market. We then use an original dataset on the Italian daily newspaper market that includes information on double-homing by readers to estimate readers’ and advertisers’ demand. The results show that an econometric model that does not allow for multihoming is likely to produce biased estimates of demand on both sides of the market. In particular, on the reader side, accounting for multi-homing helps to recognize complementarity between products; on the advertising side, it allows to measure to what extent advertising demand depends on the shares of exclusive and overlapping readers.
    Keywords: Two-sided markets, platforms, multi-homing, media, advertising
    JEL: C51 D43 C13 L82 M37
    Date: 2021
  6. By: Bradley Larsen; Joachim Freyberger
    Abstract: This study provides a structural analysis of detailed, alternating-offer bargaining data from eBay, deriving bounds on buyers and sellers private value distributions using a range of assumptions on behavior. These assumptions range from very weak (assuming only that acceptance and rejection decisions are rational) to less weak (e.g., assuming that bargaining offers are weakly increasing in players' private values). We estimate the bounds and show what they imply for consumer negotiation behavior in theory and practice. For the median product, bargaining ends in impasses in 43% of negotiations even when the buyer values the good more than the seller.
    JEL: C57 C78 D47 D82 L81
    Date: 2021–08

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