nep-ind New Economics Papers
on Industrial Organization
Issue of 2021‒11‒08
four papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Liquidation value of productive assets and product differentiation By Simone Boccaletti; Vittoria Cerasi
  2. A Sufficient Statistics Approach for Welfare Analysis of Oligopolistic Third-Degree Price Discrimination By Takanori ADACHI; Michal FABINGER
  3. Revealed Preference Tests for Price Competition in Multi-product Differentiated Markets By Yuta Yasui
  4. Automotive Global Value Chains in Europe By Matteo Gaddi; Nadia Garbellini

  1. By: Simone Boccaletti; Vittoria Cerasi
    Abstract: This study examines the choice of individual companies to adapt productive assets (PAs) to specific production. To soften competition, companies may modify their assets to increase product differentiation. However, this decision alters the liquidation value of the assets in the case of bankruptcy for the presence of redeployment costs (larger for specialized assets) faced by potential buyers. We determine the equilibrium level of specialization of PAs, pointing to a novel trade-off between product market differentiation and the resale value of PAs. We find that industry entry and redeployment costs, together with the number of potential bidders in the second-hand market of PAs are important factors in explaining the degree of product differentiation.
    Keywords: Asset Specificity; Horizontal Differentiation; Bankruptcy; Second-hand market of productive assets.
    JEL: G32 G33 L11
    Date: 2021–10
  2. By: Takanori ADACHI; Michal FABINGER
    Abstract: This paper proposes a sufficient statistics approach to welfare analysis of third-degree price discrimination in differentiated oligopoly. Specifically, our sufficient conditions for price discrimination to increase or decrease aggregate output, social welfare, and con-sumer surplus simply entail a cross-market comparison of multiplications of two or three of the sufficient statistics—pass-through, conduct, and profit margin—that are functions of first-order and second-order elasticities of the firm’s demand. Notably, these results are derived under a general class of demand, and can be readily be extended to accom-modate heterogeneous firms. These features suggest that our approach has potential for conducting welfare analysis without a full specification of an oligopoly model.
    Keywords: Third-Degree Price Discrimination; Oligopoly; Sufficient Statistics.
    JEL: D43 L11 L13
    Date: 2021–10
  3. By: Yuta Yasui (School of Economics and Management, Kochi University of Technology)
    Abstract: Assumptions of competitive structure are often crucial for marginal cost estimation and counterfactual predictions. This paper introduces tests for price competition among multi-product rms. The tests are based on the firm's revealed preference (revealed pro t function). In contrast to other approaches based on estimated demand functions such as conduct parameter estimation, the proposed tests do not require any instrumental variables, even though the models can accommodate structural error terms. In this paper, I employ a demand structure introduced by Nocke and Schutz (2018), the discrete/continuous choice model, which nests the multinomial logit demand and CES demand functions. Any price and quantity data can be rationalized by price competition under a discrete/continuous choice model and increasing marginal costs. Adding more assumptions to the demand function, such as logit, CES, or the co-evolving and log-concave property produces some falsifiable restrictions.
    Keywords: revealed preference, multi-product, conduct, discrete/continuous
    Date: 2021–10
  4. By: Matteo Gaddi (Fondazione Claudio Sabattini); Nadia Garbellini (Universita di Modena e Reggio Emilia.)
    Abstract: In this paper we examine the main transformations that are affecting European automotive industry and which challenges, in particular due to the transition to new forms of propulsion, the industry is going to face. The automotive industry is central to the European economy and the nature of the Global Value Chains are rapidly shifting. While individual countries have developed economic plans to address this, a broader EU wide plan is critically important to addressing the employment and environmental effects of these shifts.
    Keywords: Automotive Industry, Global Value Chains, European Industrial Policy
    JEL: L23 L24 L52 L62 L9 L98 R11
    Date: 2021–07–15

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