nep-ind New Economics Papers
on Industrial Organization
Issue of 2022‒05‒16
six papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. From Scarcity to Abundance: Government and Private Initiatives to Manage the Allocation of N95 Masks in the U.S. During the COVID-19 Pandemic By Paul L. Joskow
  2. Concentration and Competition: Evidence from Europe and Implications for Policy By Gábor Koltay; Szabolcs Lorncz; Tommaso M. Valletti
  3. Doubling Back on Double Marginalization By Laurent Linnemer
  4. Is the Price Right? The Role of Morals, Ideology, and Tradeoff Thinking in Explaining Reactions to Price Surges By Elias, Julio; Lacetera, Nicola; Macis, Mario
  5. Data Production and the coevolving AI trajectories: An attempted evolutionary model. By Andrea Borsato; Andre Lorentz
  6. Capacity investments in a competitive energy market By Lukas Block; Bastian Westbrock

  1. By: Paul L. Joskow
    Abstract: This paper examines the structure, behavior and performance of the N95 respirator market in the U.S. before and during the COVID-19 pandemic (2020-early 2022). It focuses on the behavior and performance of government and private sector organizations in the allocation of scarce supplies of N95 respirators during the pandemic in the U.S. The experience with the supply, demand, allocation, rationing, and pricing of N95s during the first two years of the pandemic provides instructive examples of how the public and private sectors can work in tandem with regulatory support rather than coercion to achieve widely accepted public health goals. Of particular interest is the adoption of voluntary private market segmentation, rationing and price maintenance policies during roughly the first year of the pandemic, led by the dominant U.S. manufacturer of N95s.
    JEL: I18 L1 L11 L14 L21 L5 L81
    Date: 2022–03
  2. By: Gábor Koltay; Szabolcs Lorncz; Tommaso M. Valletti
    Abstract: The paper provides new evidence on proxy indicators of market power for major European countries. The data shows moderately increasing average industry concentration over the last two decades, a considerably increasing proportion of high concentration industries, and an overall tendency towards oligopolistic structure. Estimates of aggregate profitability also show a sustained increase over the recent decades for European economies. While the academic and policy debate is not settled as to whether the causes of these trends are policy driven or reflect technological improvement, our findings suggest that competition policy is likely to face more challenges as large companies are becoming more common in more and more industries.
    Keywords: mergers, antitrust, European Union, concentrations, industries
    JEL: L10 L40 G34
    Date: 2022
  3. By: Laurent Linnemer
    Abstract: “Double marginalization” and “Elimination of Double marginalization” are catch-phrases commonly used in the IO literature. In this note, I trace back the origin of the idea to Chapter IX, on complementary goods monopolies, of Cournot (1838). Through the years Cournot’s contribution remained a reference but ended being viewed as a special case of the bilateral monopoly model. Yet, it is worth wondering why the most cited paper on this issue is nowadays Spengler (1950) which contains only an informal treatment of the question. In addition to retracing the origin of the idea, I emphasize the elegant proof of Cournot for the simultaneous game and extend it to the sequential game. I also show that prices are usually higher in the sequential game but that they could be lower if demand is very convex.
    Keywords: Cournot, complements, successive monopolies
    JEL: B16 B21 K21 L12 L13 L42
    Date: 2022
  4. By: Elias, Julio (Universidad del CEMA); Lacetera, Nicola (University of Toronto); Macis, Mario (Johns Hopkins University)
    Abstract: Price surges often generate social disapproval and requests for regulation and price controls, but these interventions may cause inefficiencies and shortages. To study how individuals perceive and reason about sudden price increases for different products under different policy regimes, we conduct a survey experiment with Canadian and U.S. residents. Econometric and textual analyses indicate that prices are not seen just as signals of scarcity; they cause widespread opposition and strong and polarized moral reactions. However, acceptance of unregulated prices is higher when potential economic tradeoffs between unregulated and controlled prices are salient and when higher production costs contribute to the price increases. The salience of tradeoffs also reduces the polarization of moral judgments between supporters and opponents of unregulated pricing. In part, the acceptance of free price adjustments is driven by people's overall attitudes about the function of markets and the government in society. These findings are corroborated by a donation experiment, and they suggest that awareness of the causes and potential consequences of price increases may induce less extreme views about the role of market institutions in governing the economy.
    Keywords: price surges, price controls, preferences, morality, tradeoffs
    JEL: C91 D63 D91 I11
    Date: 2022–04
  5. By: Andrea Borsato; Andre Lorentz
    Abstract: This paper contributes to the understanding of the relationship between the nature of data and the Artificial Intelligence (AI) technological trajectories. We develop an agentbased model in which firms are data producers that compete on the markets for data and AI. The model is enriched by a public sector that fuels the purchase of data and trains the scientists that will populate firms as workforce. Through several simulation experiments we analyze the determinants of each market structure, the corresponding relationships with innovation attainments, the pattern followed by labour and data productivity, and the quality of data traded in the economy. More precisely, we question the established view in the literature on industrial organization according to which technological imperatives are enough to experience divergent industrial dynamics on both the markets for data and AI blueprints. Although technical change behooves if any industry pattern is to emerge, the actual unfolding is not the outcome of a specific technological trajectory, but the result of the interplay between technology-related factors and the availability of data-complementary inputs such as labour and AI capital, the market size, preferences and public policies.
    Keywords: Artificial Intelligence, Data Markets, Industrial Dynamics, Agent-based Models.
    JEL: L10 L60 O33 O38
    Date: 2022
  6. By: Lukas Block (Paderborn University); Bastian Westbrock (Hamburg University)
    Abstract: We study the abilities of competitive markets to produce sufficient energy capacities to meet a fixed energy demand. Renewable energy producers with stochastic outputs and no variable costs compete against conventional energy producers with deterministic, pollutant outputs and increasing marginal costs. We find that either market forces are strong enough to serve the entire demand, or they are too weak such that the market fails and nothing is produced. This crucially depends on the relative cost of renewable energy investments, such that relatively cheap renewable energy causes the market to fail. Welfare analyses show that with increasing levels of conventional energy pollution the ability of the market to produce an efficient outcome further declines. As a policy implication, our findings refute the use of a strategic reserve as a blackout backstop solution. Instead, a capacity mechanism consisting of a tax-and-subsidy scheme can align the market outcome with the efficient solution for all pollution levels and relative costs of renewable energy capacities.
    Keywords: Renewable versus conventional energy, capacity mechanisms, strategic reserves, capacity payments
    JEL: D41 L11 Q48
    Date: 2022–04

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