nep-ind New Economics Papers
on Industrial Organization
Issue of 2022‒02‒21
ten papers chosen by

  1. Intangible Assets, Industry Performance and Finance During Crises By Carlo Altomonte; Peter Bauer; Alberto Maria Gilardi; Chiara Soriolo
  2. The 2021 EU Survey on Industrial R&D Investment Trends By Lesley Potters
  3. Multi-Product Establishments and Product Dynamics By Masashige Hamano; Keita Oikawa
  4. Opportunism Problems of Colluding Manufacturers By Jana Gieselmann; Matthias Hunold; Johannes Muthers; Alexander Rasch
  5. Behavior-based price discrimination and signaling of product quality By Li, Jianpei; Zhang, Wanzhu
  6. Combinable products, price discrimination, and collusion By Döpper, Hendrik; Rasch, Alexander
  7. Digitalization, copyright and innovation in the creative industries: an agent-based model By Alessandro Nuvolari; Arianna Martinelli; Elisa Palagi; Emanuele Russo
  8. Consumer inertia and firm incumbency in liberalised retail electricity markets: an empirical investigation By Massimo Dragotto; Marco Magnani; Paola Valbonesi
  9. Mergers and Acquisitions by Chinese Multinationals in Europe: The Effect on the Innovation Performance of Acquiring Firms By Tian Xiong
  10. Entry and Spatial Competition of Intermediaries: Evidence from Thailand’s Rice Market By Bunyada Laoprapassorn

  1. By: Carlo Altomonte; Peter Bauer; Alberto Maria Gilardi; Chiara Soriolo
    Abstract: We take the global financial crisis (GFC), as an example of major crises, to study the trends of intangible investment, the link between industrial performance and intangible assets, and the differences of financing of intangible versus tangible assets during crises. We find an upward trend in investment intensities (investment-to-value added) for several kinds of intangible assets in almost all advanced EU countries, and in almost all sectors based on industry-level data. This trend started well before the GFC and the crisis had little impact on it, in contrast to tangible investment intensities, which declined a lot. Then we explore the potential role that intangible assets may play in weathering the negative effects of major crises using industry-level data. One of the main results about industrial performance is that pre-crisis R&D investment is robustly associated with economic resilience during the GFC, and higher productivity growth in the aftermath. Finally, we investigate how a financial turmoil may affect the financing of different assets. We combine insights from a macro (industry-level) and a micro (firm-level) approach to shed light on the importance of financial shocks in intangible investment. We find differences from tangible investment, mainly that tangibles are more sensitive to demand shocks, while intangible investment is more vulnerable to financial shocks. For the latter, our main explanation is that tight credit conditions create a trade-off between tangible and intangible investment financing.
    Keywords: productivity, financial crisis, resilience, intangible assets
    JEL: G01 D22 D24 G31
    Date: 2022
  2. By: Lesley Potters (European Commission - JRC)
    Abstract: The EU Survey on Industrial R&D Investment Trends has provided insights on R&D strategies of top EU R&D corporate investors as listed in the EU R&D Scoreboard for the past 17 years. These largest R&D investors have a big impact on the whole ecosystem in the twin transition. This survey aims at giving better insights into what current trends in industrial innovation and R&D investment fit into the ambitions of the European Green Deal. This survey goes beyond publicly available data of R&D levels and trends and aims at better understanding location strategies, technological developments among different sectors and innovation collaboration of the largest R&D performers that are responsible for the bulk of private R&D in the EU.
    Keywords: Industrial R&D, top R&D investors, innovation, company performance, economic and innovation performance
    Date: 2022–02
  3. By: Masashige Hamano; Keita Oikawa
    Abstract: The current paper builds a general equilibrium model based on heterogeneous productivities of establishments and heterogeneous tastes at the product level. Establishments choose endogenously their product mix over the business cycle given different income elasticities across products in consumer preferences. We calibrate and estimate the model's shock processes with Japanese data and find that (de)regulation policy at entry, incumbent firms or establishments and each product level provide substantially different outcomes, thereby providing a caveat for policy debate.
    Date: 2022–02
  4. By: Jana Gieselmann (HHU); Matthias Hunold; Johannes Muthers; Alexander Rasch
    Abstract: In a market with two exclusive manufacturer-retailer pairs, we show that colluding manufacturers may not be able to attain supra-competitive profits when contracts with retailers are secret. The stability of manufacturer collusion depends on the retailers’ beliefs. We consider various dynamic beliefs and find that industry-profit-maximizing collusion is feasible for some. Collusion is even renegotiation-proof under trigger beliefs if a novel condition of opportunism-proofness holds, which can be more demanding than the standard stability condition. Trigger beliefs are not flexible enough to allow for formation of collusion. We demonstrate that adaptive beliefs may be necessary for the formation of manufacturer collusion in a non-collusive industry.
    Keywords: opportunism, credible punishment, cartel formation, manufacturer collusion, vertical relations, renegotiation-proof, secret contracting
    JEL: C73 D43 L13 L41 L81
    Date: 2021–12
  5. By: Li, Jianpei; Zhang, Wanzhu
    Abstract: We analyse a two-period model in which a monopolistic seller may adopt behavior-based price discrimination (BBPD) and charge consumers different prices based on their purchasing histories. We show that if there is quality uncertainty and prices convey valuable information about product quality, BBPD can be profitable for the seller both when the seller can and can not commit to future prices, contrasting the traditional view that the seller would like to avoid BBPD due to strategic delay of consumption on the consumers' side. BBPD increases consumers' sensitivity to a price change in the first period and enables the high type seller to signal product quality with relatively low prices, effectively reducing signaling costs in comparison to uniform pricing. In the separating equilibria that survive the intuitive criterion, first-time purchasers pay lower prices than repeat purchasers.
    Keywords: Behavior-based Price Discrimination (BBPD); Quality Uncertainty; Signaling
    JEL: D82 L11 L15
    Date: 2022–01–17
  6. By: Döpper, Hendrik; Rasch, Alexander
    Abstract: We analyze the effect of different pricing schemes on horizontally differentiated firms' ability to sustain collusion when customers have the possibility to combine (or mix) products to achieve a better match of their preferences. To this end, we compare two-part tariffs with linear prices and quantity-independent fixed fees in two different scenarios. First, we consider exogenously determined pricing schedules such as in the case of legal or third-party restrictions. We find that the additional price component of the two-part tariff makes it more difficult to sustain collusion. Additionally, the pricing schedule that is most beneficial for customers in absence of collusion harms customers most in presence of (partial) collusion. Second, we consider the scenario in which firms endogenously choose collusive tariffs. We find that firms can commit to using only the fixed price component of the two-part tariff to facilitate collusion at maximum prices. However, once we consider partial collusion, firms prefer to use both price components of the two-part tariffs. We discuss policy implications in the context of the media and entertainment industry.
    Keywords: Collusion,Combinable products,Media markets,Mixing,Price discrimination,Two-part tariff
    JEL: D43 L13 L41 L82
    Date: 2022
  7. By: Alessandro Nuvolari; Arianna Martinelli; Elisa Palagi; Emanuele Russo
    Abstract: The ambiguity of the empirical results on the relationship between copyright and creativity calls for a better theoretical understanding of the issue, possibly enlarging the analysis to other factors such as technology and copyright enforcement. This paper addresses these complex policy issues by developing an agent-based model (ABM) to study how the interplay between digitization and copyright enforcement affects the production and access to cultural goods. The model includes creators who compete in different submarkets and invest in activities that might lead to the generation of creative outputs in existing submarkets, new (to the creators) submarkets, or in newly 'invented' submarkets. Finally, the model features a copyright system that provides creators with the exclusive right to reproduce their original copies and a pirate market responsible for creating and distributing pirated copies.
    Keywords: Innovation; Intellectual property rights; Creative industries; Copyright; Agent-based models.
    Date: 2022–01–28
  8. By: Massimo Dragotto (Dept. of Economics and Management, University of Padova, Italy); Marco Magnani (Dept. of Economics and Management, University of Padova, Italy and Italian Regulatory Authority for Energy, Network and the Environment (ARERA)); Paola Valbonesi (Dept. of Economics and Management, University of Padova, Italy and Higher School of Economics, National Research University, (HSE-NRU), Moscow)
    Abstract: By exploiting an original 4-year dataset on the Italian retail electricity market, we investigate the relationship between firm incumbency — measured by market concentration at the regional level — and consumer inertia — identified by the yearly percentage of consumers switching providers and/or contract, both from the regulated to the free market and within the free market. Our main results show that i) regions recording stronger firm incumbency exhibit larger consumer inertia in leaving the regulated market, this effect being reinforced by the number of active free market retailers; ii) switching by consumers who already are in the free market is, instead, positively affected by firm incumbency. In light of these results, we provide prescriptions for policymakers targeting the migration of consumers towards free-market contracts and, consequently, full energy market liberalisation.
    Keywords: Electricity Retail Markets, Liberalisation in Electricity Markets, Incumbency, Consumer Behaviour
    JEL: D12 L11 L98 Q48
    Date: 2021–11
  9. By: Tian Xiong (Europäisches Institut für Internationale Wirtschaftsbeziehungen (EIIW))
    Abstract: This study aims to investigate the effects of mergers and acquisitions (M&As) by Chinese multinational firm in the EU28 on the subsequent innovation performance of acquiring firms with different technological intensities and types of corporate ownership The study does so by applying the Zero-Inflated Negative Binomial estimation to analyze novel longitudinal firm-level data covering the period from 2010 to 2018. The empirical evidence suggests that Chinese acquiring firms are generally able to enhance their innovation performance after merging or acquiring firms from the EU28 countries. Furthermore, this study reveals that medium low- and low-tech firms significantly improved their innovation performance after undertaking M&As, but the same effect cannot be identified for firms in the high- and medium high-tech groups. Finally, strong evidence confirms the significant increase in innovation output of private-owned enterprises in the post-acquisition era compared with state-owned or -controlled enterprises.
    Keywords: mergers and acquisitions, M&A, innovation performance, emerging market multinationals (EMNEs), learning, China, EU
    JEL: O1 O3 F23
    Date: 2022–01
  10. By: Bunyada Laoprapassorn
    Abstract: How does the market power along the agricultural value chains mediate the effects of policies on the welfare of farmers? Using microdata on farmers and rice mills in Thailand, I document heterogeneity in the spatial density of rice mills. I further provide reduced-form evidence that a one standard deviation increase in local competition among rice mills leads to a 7.7% increase in farmer prices. Informed by the empirical findings, I propose and estimate a quantitative spatial model that accounts for the market power and entry-location choices of intermediaries. I then simulate two policy counterfactuals. I find that gains to farmers from a country-wide improvement in road infrastructure are regressive; the percentage increase in income of the top decile farmers is on average 11% larger than that of the bottom decile. Changes in the entry decisions of the rice mills further exacerbate the regressive effect, more than doubling the gap between the percentage change in income of the top and bottom decile farmers. The second counterfactual simulation shows that the market power of intermediaries could lead to a lower than socially optimal level of technology adoption among farmers.
    Keywords: Intermediaries; Spatial Competition; Trade costs
    JEL: D43 F12 L13 O13
    Date: 2022–01

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