nep-ind New Economics Papers
on Industrial Organization
Issue of 2021‒12‒20
eight papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. The Assessment of COVID-19 Effect on European Union Industrial Sector By Tudorache, Maria-Daniela; Nae, Maria Tamara; Jianu, Ionut
  2. Cross-Product and Cross-Market Adjustments Within Multiproduct Firms: Evidence from Antidumping Actions By Xiaohua Bao; Bruce A. Blonigen; Zhi Yu
  3. M&A and Cybersecurity Risk: Empirical Evidence By Gabriele Lattanzio; Jerome Taillard
  4. Strategic data sales to competing firms By DELBONO Flavio; REGGIANI Carlo; SANDRINI Luca
  5. The Choice of Technology and Economic Geography By Zhou, Haiwen
  6. Empirical Perspectives on Auctions By Ali Hortaçsu; Isabelle Perrigne
  7. Geographical Indications and Welfare: Evidence from the US Wine Market By Raj Chandra; Gabriel E. Lade; GianCarlo Moschini
  8. Organizational Structure and Pricing: Evidence from a Large U.S. Airline By Ali Hortaçsu; Olivia R. Natan; Hayden Parsley; Timothy Schwieg; Kevin R. Williams

  1. By: Tudorache, Maria-Daniela; Nae, Maria Tamara; Jianu, Ionut
    Abstract: In this paper, we estimated the impact of COVID-19 shock on the industrial production and on the confidence in industry at European Union level, using Panel EGLS method - weighted by Cross-section SUR option. The negative impact we found on both indicators is quite high and may severely affect the economy, in the absence of political support and in the case of prolonging COVID-19 crisis or starting another lockdown waves. The largest drops of industrial production were found in Italy, Slovakia, Romania and Hungary, while Latvia, Malta, Finland and the Netherlands were less vulnerable to the COVID- 19 shock. Through this paper, we also identified a high similarity between the dynamics of industrial production and the industrial confidence index. The outlooks are still exposed to uncertainty, but these have been improved in the latest months.
    Keywords: industrial production,crisis,coronavirus,COVID-19,confidence
    JEL: C23 I15 L16
    Date: 2021
  2. By: Xiaohua Bao; Bruce A. Blonigen; Zhi Yu
    Abstract: Multiproduct firms are responsible for the vast majority of global trade. A prior literature examines how multiproduct firms respond to trade liberalizations that simultaneously affect all of the firms' products and inputs. In contrast, our study uses Chinese firm-product-level export data to examine how an AD action, a very targeted trade policy against a specific product in a specific export destination, affects a multiproduct firms' price and quantity decisions across its other products and export destinations. We find robust evidence for a new phenomenon we call within-firm cross-product trade deflection whereby an AD duty against one of the firm's products in one of its export destinations is associated with reduced prices and increased sales of its other products across all markets. This type of effect depends on increasing costs from joint production within multiproduct firms, something that is often assumed away in many models of the multiproduct firm. We also document for the first time a within-firm chilling effect whereby an AD action in one export destination on a product leads the firm to raise price and lower quantity of the product in other export destinations to lower the risk of AD actions in these other markets.
    JEL: F13 F14 L11 L23
    Date: 2021–11
  3. By: Gabriele Lattanzio (Nazarbayev University, Graduate School of Business); Jerome Taillard (Babson College, Department of Finance)
    Abstract: Using text-based measures of cybersecurity risk, we document that low cybersecurity risk firms are more likely to initiate or be targeted for an M&A transaction. Further, we show that the market has recently started to price cybersecurity risk at the time of a deal announcement and – consistent with this finding - attempted mergers are significantly less likely to fail if the selected target has a low cybersecurity risk profile. Cyber risk is finally reflected in merger premium, which appears to be systematically higher for mergers where the acquirer exhibits low cybersecurity risk levels. These findings offer novel evidence on the economic impact of cybersecurity risk on the market for corporate control.
    Keywords: Mergers and Acquisitions, Cybersecurity Risk, M&A Withdrawal, Valuation
    JEL: G30 G34 M14
    Date: 2021–10
  4. By: DELBONO Flavio; REGGIANI Carlo (European Commission – JRC); SANDRINI Luca
    Abstract: The unprecedented access of firms to consumer level data facilitates more precisely targeted individual pricing. We study the incentives of a data broker to sell data about a segment of the market to three competing firms. The segment only includes a share of the consumers in the market around one of the firms. Data are never sold exclusively. Despite the data are particularly tailored to the potential clientele of one of the firms, we show that the data broker has incentives to sell the list to its competitors. Such market outcome is not socially optimal, and a regulator that aims to maximise consumers and social welfare should consider mandating data sharing.
    Keywords: data markets, personalised pricing, price discrimination, oligopoly, selling mechanisms
    Date: 2021–12
  5. By: Zhou, Haiwen
    Abstract: Empirical evidence shows that firms located in regions with larger population size are on average larger and more productive. To explain this empirical observation, firms producing intermediate goods are assumed to choose their technologies with different levels of fixed and marginal costs. In this general equilibrium model of economic geography, intermediate good producers engage in oligopolistic competition. The model is tractable and leads to interesting and analytical results. An intermediate good producer in the region with a higher population produces a higher level of output and has a lower marginal cost of production regardless of the existence of regional trade. With regional trade, if a worker moves from the region with a lower number of workers to the region with a higher number of workers, intermediate good producers in both regions choose less advanced technologies.
    Keywords: Technology choice, economic geography, international trade, increasing returns, oligopoly
    JEL: D43 F12 L13 O14 R12
    Date: 2021–12–04
  6. By: Ali Hortaçsu; Isabelle Perrigne
    Abstract: The empirical analysis of auction data has become a thriving field of research over the past thirty years. Relying on sophisticated models and advanced econometric methods, it addresses a wide range of policy questions for both public and private institutions. This chapter offers a guide to the literature by stressing how data features and policy questions have shaped research in the field. The chapter is organized by types of goods for sale and covers auctions of timber, construction and services procurement, oil and gas leases, online auctions, internet advertising, electricity, financial securities, spectrum, as well as used goods. It discusses the idiosyncrasies of each applied setting and the respective empirical findings.
    JEL: G2 L11 L4 L71 L73 L74 L86 L94 L96
    Date: 2021–11
  7. By: Raj Chandra; Gabriel E. Lade; GianCarlo Moschini (Center for Agricultural and Rural Development (CARD) at Iowa State University)
    Abstract: A systematic component of wine quality is believed to depend on the geo-climatic factors of its production conditions. This belief has long been a motivation for the development of geographical indications for wines. In the United States, American Viticulture Areas (AVAs) represent the most common geographic factor firms use to differentiate their products. In this paper, we estimate a discrete choice model of US wine demand to study the market and welfare impact of AVAs. Specifically, we develop a two-level nested logit choice model, featuring many wine products and characteristics-including wine type, brands, and varietals, in addition to AVAs-and estimate it using Nielsen Consumer Panel data over the 2007-2019 period. We find significant welfare gains from AVA information on wine labels. Over the period of interest, the welfare gain attributable to AVAs is estimated at about $2.37 billion, with wine producers and retailers capturing approximately 80% of this surplus. Approximately 90% of consumer welfare gains are due to product differentiation and increased variety, with the remaining gains due to price decreases resulting from increased product competition.
    Date: 2021–12
  8. By: Ali Hortaçsu; Olivia R. Natan; Hayden Parsley; Timothy Schwieg; Kevin R. Williams
    Abstract: We study how organizational boundaries affect pricing decisions using comprehensive data from a large U.S. airline. We document that the firm's advanced pricing algorithm, utilizing inputs from different organizational teams, is subject to multiple biases. To quantify the impacts of these biases, we estimate a structural demand model using sales and search data. We recover the demand curves the firm believes it faces using forecasting data. In counterfactuals, we show that correcting biases introduced by organizational teams individually have little impact on market outcomes, but coordinating organizational outcomes leads to higher prices/revenues and increased dead-weight loss in the markets studied.
    JEL: C11 C53 D22 D42 L11 L93
    Date: 2021–11

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