nep-ind New Economics Papers
on Industrial Organization
Issue of 2021‒10‒04
seven papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Cournot Platform Competition with Mixed-Homing By Mark J. TREMBLAY; Takanori ADACHI; Susumu SATO
  2. Dynamic Games in Empirical Industrial Organization By Victor Aguirregabiria; Allan Collard-Wexler; Stephen P. Ryan
  3. Some Efficiency Aspects of Monopolistic Competition: Innovation, Variety and Transaction costs By Todorova, Tamara
  4. Structural Empirical Analysis of Contracting in Vertical Markets By Robin S. Lee; Michael D. Whinston; Ali Yurukoglu
  5. Price Discrimination in the Transport Industry and the Gains from Trade By Zheng, Han
  6. Unilateral Sharing of Customer Data for Strategic Purposes By Chongwoo Choe; Jiajia Cong; Chengsi Wang
  7. Exploring Horizontal Mergers in Swedish District Courts Using Convex and Nonconvex Technologies: Usefulness of a Conservative Approach By Xiaoqing Chen; Kristiaan Kerstens; Qingyuan Zhu

  1. By: Mark J. TREMBLAY; Takanori ADACHI; Susumu SATO
    Abstract: Firms in traditional markets often compete in output `a la Cournot. In this paper, we consider Cournot platform competition in two-sided markets with single-, multi-, and mixed-homing allocations and find that the markup and markdown terms are distorted toward zero for (i) greater levels of platform competition and (ii) greater levels of singlehoming. Furthermore, we develop side specific conduct parameters that depend on the underlying platform conduct as well as the homing allocation; these effectively extend the monopoly platform Lerner indices from Armstrong (2006) and Weyl (2010) to the general case of platform competition. Finally, we show that, in utter contrast to the welfare results in traditional Cournot markets, greater Cournot platform competition often decreases welfare across all feasible homing allocations.
    Keywords: Two-sided markets, conduct parameter, network externality, Lerner index,single-homing, multi-homing, mixed-homing.
    JEL: D40 L10 L20 L40
  2. By: Victor Aguirregabiria; Allan Collard-Wexler; Stephen P. Ryan
    Abstract: This survey is organized around three main topics: models, econometrics, and empirical applications. Section 2 presents the theoretical framework, introduces the concept of Markov Perfect Nash Equilibrium, discusses existence and multiplicity, and describes the representation of this equilibrium in terms of conditional choice probabilities. We also discuss extensions of the basic framework, including models in continuous time, the concepts of oblivious equilibrium and experience-based equilibrium, and dynamic games where firms have non-equilibrium beliefs. In section 3, we first provide an overview of the types of data used in this literature, before turning to a discussion of identification issues and results, and estimation methods. We review different methods to deal with multiple equilibria and large state spaces. We also describe recent developments for estimating games in continuous time and incorporating serially correlated unobservables, and discuss the use of machine learning methods to solving and estimating dynamic games. Section 4 discusses empirical applications of dynamic games in IO. We start describing the first empirical applications in this literature during the early 2000s. Then, we review recent applications dealing with innovation, antitrust and mergers, dynamic pricing, regulation, product repositioning, advertising, uncertainty and investment, airline network competition, dynamic matching, and natural resources. We conclude with our view of the progress made in this literature and the remaining challenges.
    JEL: C01 L0
    Date: 2021–09
  3. By: Todorova, Tamara
    Abstract: We stress some efficiency aspects of monopolistic competition justifying it on account of its tendency to innovate and the questionable excess capacity paradigm. Some further efficiency aspects revealed are product variety and transaction cost savings. We view the monopolistically competitive firm as an essential source of technological innovation, product variety and cost economies. While perfect competition is universally considered a benchmark and a social optimum, we consider it a strongly unrealistic theoretical setup where the monopolistically, rather than the perfectly, competitive firm turns out to be the true type of competition and social optimum in the real world of positive transaction costs. The monopolistically competitive firm not only offers product variety and innovation but is the optimal institutional arrangement under positive transaction costs.
    Keywords: efficiency; innovation; variety; monopolistic competition; perfect competition; transaction costs
    JEL: D23 D24 D43 L13 O3
    Date: 2021
  4. By: Robin S. Lee; Michael D. Whinston; Ali Yurukoglu
    Abstract: This chapter presents an overview of advances in the structural analysis of contracting in vertical markets over the past fifteen years. We provide a discussion of theoretical models of contracting and bargaining that form the basis of recent empirical work, and then present common approaches used by researchers to take these models to the data. We also briefly survey the structural empirical literature on topics in vertical markets (including horizontal and vertical mergers, price discrimination, and nonlinear and exclusionary contracts), and conclude with a discussion of potential topics for future research.
    JEL: L1 L13
    Date: 2021–09
  5. By: Zheng, Han
    Abstract: This paper shows that the shipping industry could hamper the endogenous firm selection into production which is conducive to the overall productivity enhancement and welfare gains, through its discriminatory price. Naturally, if the shipping industry charges a higher transport price to the more productive manufacturing firms, sabotaging their competitive edges, those productive firms would not be capable of expanding as well as they otherwise would do under uniform transport fees, leaving enough space for the less productive firms to survive. Therefore, the effect from another source of gains from trade, firm selection is dampened. Elimination of this discriminatory practice could potentially increase the gains from trade.
    Keywords: Price discrimination, Shipping industry, Heterogeneous firms, The gains from trade
    JEL: F12 L91 R13 R41
    Date: 2021–09
  6. By: Chongwoo Choe (Department of Economics, Monash University); Jiajia Cong (School of Management, Fudan University); Chengsi Wang (Department of Economics, Monash University)
    Abstract: We study how a data-rich firm can benefit by unilaterally sharing its customer data with a data-poor competitor when the data can be used for price discrimination. By sharing data on consumers that are more loyal to the competitor while keeping the data on the competitor's most loyal consumers to itself, the firm can induce the competitor to raise its price for consumers it does not have data on. This makes both firms better off than without data sharing.
    Keywords: customer data sharing, price discrimination
    JEL: L11 L13 L40 M30
    Date: 2021–09
  7. By: Xiaoqing Chen (School of Economics and Management, Southeast University, Nanjing, Jiangsu, China, and IESEG School of Management, 3 rue de la Digue, F-59000 Lille, France); Kristiaan Kerstens (Univ. Lille, CNRS, IESEG School of Management, UMR 9221 - LEM - Lille Economie Management, F-59000 Lille, France); Qingyuan Zhu (Nanjing University of Aeronautics & Astronautics, College of Economics and Management, Nanjing, China)
    Abstract: Swedish district courts have undergone a major mergers and acquisitions program between 2000 and 2010 to centralize activity in larger and fewer courts. The purpose of this contribution is to conduct an efficiency analysis of these courts to identify the eventual efficiency gains. Distinguishing mainly between technical and scale efficiency and determining the returns to scale of individual observations, we try to find the potential rationales behind this merger wave. We are to the best of our knowledge the first to combine traditional convex with nonconvex nonparametric frontier methods to calculate efficiency before and after the mergers. It turns out that the nonconvex methods provide a more cogent ex post explanation of this merger wave.
    Keywords: Horizontal merger, Technical efficiency, Scale efficiency, Data Envelopment Analysis, Free Disposal Hull
    Date: 2021–08

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