nep-ind New Economics Papers
on Industrial Organization
Issue of 2022‒03‒14
four papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Conditions for efficient entry and clustering By Smirnov, Vladimir; Waity, Andrew
  2. Capacity choice with upstream investment By Qing Hu; Tomomichi Mizuno
  3. The Inner Workings of a Hub-and-Spoke Caretl in the Automotive Fuel Industry By Daniel Chaves; Marco Duarte
  4. The broadband diffusion process and its determinants in Algeria: A simultaneous estimation By Bacha, Radia; Gasmi, Farid

  1. By: Smirnov, Vladimir; Waity, Andrew
    Abstract: We outline the conditions for efficient entry order and clustering in a triopoly preemption game in which firms differ in their sunk costs of entry. The critical factor turns out to be how symmetric the potential entrants are. If the cost asymmetry between the firms is sufficiently large, entry is always in the efficient order. On the other hand, if firms are relatively symmetric, entry order can be inefficient in that the firm with the second-lowest entry cost enters first. Furthermore, if there is any difference in entry costs between the two most efficient firms, there is never clustering (which is when firms enter the market at the same time). Lastly, in contrast to the case with relatively symmetric firms, when the cost asymmetry between firms is large, the leader's entry time in the triopoly is always earlier than it is in a duopoly.
    Keywords: timing games; asymmetric firms; clustering; inefficient entry
    Date: 2021–11
  2. By: Qing Hu (Faculty of Economics, Kushiro Public University of Economics / Research Fellow, Graduate School of Economics, Kobe University); Tomomichi Mizuno (Graduate School of Economics, Kobe University)
    Abstract: We consider a vertically related market with an upstream firm engaging in cost-reducing investment and n downstream firms competing on quantity. We analyze the capacity choice by downstream firms and find that over-capacity occurs in equilibrium if the number of downstream firms is large or the upstream investment is efficient.
    Date: 2022–02
  3. By: Daniel Chaves (University of Western Ontario); Marco Duarte
    Abstract: We analyze a hub-and-spoke cartel in the Brazilian automotivefuel industry. Using the court documents and detailed data on the supply chain we uncover three mechanisms beyond information sharing used by wholesalers (hub) to help retailers (spokes) solve the obstacles of price coordination: vertical transfers across asymmetric spokes; subsidies during punishment; and cost stabilization. We argue that wholesalers benefited from the cartel by being the exclusive supplier during the scheme. We use the synthetic control approach to quantify how successful the cartel was in increasing markups. We find that not only retailers, but wholesalers benefited from the cartel.
    Keywords: antitrust; Hub-and-Spoke collusion; vertical restraints
    JEL: K21 L12 D43
    Date: 2021
  4. By: Bacha, Radia; Gasmi, Farid
    Abstract: Digital transformation engendered by ICT advances, most notably broadband, pertains to many sectors that are known to drive economic development. This paper seeks to highlight market structure, institutional, and socio-economic factors that influence broadband adoption in Algeria. We apply to a novel 2003-2019 database a procedure that simultaneously, instead of sequentially as typically done, selects the best among the Bass, Gompertz, and Logistic innovation diffusion models estimated with Nonlinear Least Squares and searches for significant determinants of broadband adoption. We find that the data fits reasonably well the Gompertz and Logistic distributions with the latter outperforming the former not only from a statistical standpoint but also and more importantly for it captures Algeria's significant delay in the diffusion of broadband due to the social turmoil of the 1990 years’ decade. We identify some policy levers for fostering ICT applications. We find that the degree of concentration has a U-shaped impact on broadband adoption and that institutional quality, mobile broadband introduction, and tertiary education enrollment have a positive impact. These findings suggest that broadband adoption in Algeria can be expected to gain from encouraging entry with differentiated broadband services through higher-generation access technologies, improving regulatory governance, and enhancing digital literacy through higher education.
    Keywords: Broadband,;Digital transformation,;Innovation diffusion models; Regulation; Competition.
    JEL: L51 L86 L96 O2 O14 O33 O55
    Date: 2022–02

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