nep-ind New Economics Papers
on Industrial Organization
Issue of 2022‒05‒09
four papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Resale Price Maintenance Guidance in Ireland: A Paradox? By Gorecki, Paul; O'Toole, Francis
  2. Intangible Capital and Labor Productivity Growth – Revisiting the Evidence: An Update By Roth, Felix
  3. The Impact of Product Differentiation on Retail Bundling in a Vertical Market By Angelika Endres-Fröhlich; Burkhard Hehenkamp; Joachim Heinzel
  4. The Impact of Product Qualities on Downstream Bundling in a Distribution Channel By Angelika Endres-Fröhlich; Joachim Heinzel

  1. By: Gorecki, Paul; O'Toole, Francis
    Abstract: In 2021 the Competition and Consumer Protection Commission (CCPC), Ireland’s competition agency, advanced the proposition that, in effect, minimum, fixed and, although it appears inadvertent, maximum resale price maintenance (RPM) are per se breaches of competition law. Such a position is inconsistent with the European Commission’s Vertical Block Exemption Regulation and Guidance, past CCPC decisional practice and the efficiency provisions of both EU and Irish competition law. Prior to the introduction of civil fines for breaches such as RPM, as part of the implementation of the ECN+ Directive in 2022, the CCPC should state whether it views minimum and fixed RPM as per se breaches of competition law and why; or as seems more likely, that given the hardcore characterisation of minimum and fixed RPM by the European Commission, the CCPC envisages it would be difficult but not impossible for the efficiency defence to be successfully employed to justify such forms of RPM. The agency also needs to clearly articulate its position on maximum RPM, which it also appears to treat – inappropriately – in the same way as minimum and fixed RPM.
    Keywords: Resale price maintenance; per se; by object; by effect; Competition & Consumer Protection Commission; Competition Act 2002; Article 101(3); Section 4(5); Vertical Block Exemption Regulation; and Guidance.
    JEL: L11 L42
    Date: 2022–04–20
  2. By: Roth, Felix
    Abstract: This contribution analyzes the impact of intangible capital on labor productivity growth across countries at the aggregate and sectoral levels by employing an econometric growth-accounting approach. First, our results show that intangible capital deepening accounts for around 50 percent of labor productivity growth at both the aggregate and sectoral level. Second, we find that this positive impact of intangible capital on productivity growth at both levels of aggregation is driven by investments in economic competencies, the only intangible group not covered in the national accounts. Third, our results reveal deep sectoral heterogeneities regarding investments and productivity effects of different intangible types. These findings have important implications for future EU industrial policies and are directly relevant to the EU's efforts to close its productivity gap with the US.
    Keywords: intangible capital,labor productivity growth,cross-country sectoral panel analysis,manufacturing,market services,EU
    JEL: C23 E22 L16 L60 L80 O47 O52
    Date: 2022
  3. By: Angelika Endres-Fröhlich (Paderborn University); Burkhard Hehenkamp (Paderborn University); Joachim Heinzel (Paderborn University)
    Abstract: We study the effects of product differentiation on the bundling incentives of a two-product retailer. Two monopolistic manufacturers each produce a differentiated good. One sells it to both retailers, while the other only supplies a single retailer. Retailers compete in prices. Retail bundling is profitable when the goods are close substitutes. Only then is competition so intense that the retailer uses bundling to relax competition both within and across product markets, despite an aggravation of the double marginalization problem. Our asymmetric market structure arises endogenously for the case of close substitutes. In this case, bundling reduces social welfare.
    Keywords: retail bundling; upstream market power; double marginalization; product differentiation
    JEL: D43 L13 L42
    Date: 2022–04
  4. By: Angelika Endres-Fröhlich (Paderborn University); Joachim Heinzel (Paderborn University)
    Abstract: Research has found that downstream bundling aggravates the problem of double marginalization in a decentralized channel, but reduces the intensity of downstream price competition when trading homogeneous goods. We study the validity of those results in a set-up where the traded goods have heterogeneous product qualities. We find that the quality relation between the goods determines whether the competition reduction effect of bundling outweighs the aggravation of double marginalization in a decentralized channel. Thus, the quality relation between the goods determines the profitability of downstream bundling. The underlying market consists of a distribution channel with two downstream firms and two price-setting monopolistic upstream producers. One upstream firm sells good 1 exclusively to one downstream firm and the other upstream firm sells good 2 to both downstream firms. The downstream firms compete in prices and the two-product downstream firm has the option to bundle both goods. In particular, we find bundling to be profitable for the two-product downstream firm only when the quality of good 2 exceeds the quality of good 1. However, we find bundling always to be profitable when the production process is controlled by the downstream industry. The impact on total welfare is ambiguous and depends on the distribution of market power in the channel and the quality levels of the goods.
    Keywords: double marginalization; downstream bundling; leverage theory; quality differentiation
    JEL: D21 D61 L11 L15
    Date: 2022–04

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