nep-ind New Economics Papers
on Industrial Organization
Issue of 2022‒09‒26
eight papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Online video sharing and revenues during the Pandemic. Evidence from musical stream data By Mourelatos, Evangelos; Mourelatos, Haris
  2. "Cartel destabilization effect of leniency programs". By Joan-Ramon Borrell; Carmen García; Juan Luis Jiménez; José Manuel Ordóñez-de-Haro
  3. Competition, Alignment, and Equilibria in Digital Marketplaces By Meena Jagadeesan; Michael I. Jordan; Nika Haghtalab
  4. Growth expectations and the dynamics of firm entry By Enisse Kharroubi
  5. Dynamics of First-Time Patenting Firms By Nilsen, Øivind A.; Raknerud, Arvid
  6. Should Product-Specific Advertisement be Regulated in Pharmaceutical Markets? By Junichiro Ishida; Tsuyoshi Takahara
  7. The Steering Incentives of Gatekeepers in the Telecommunications Industry By Brian McManus; Aviv Nevo; Zachary Nolan; Jonathan W. Williams
  8. A fundamental Game Theoretic model and approximate global Nash Equilibria computation for European Spot Power Markets By Ioan Alexandru Puiu; Raphael Andreas Hauser

  1. By: Mourelatos, Evangelos; Mourelatos, Haris
    Abstract: This study examines how instant online video sharing affects artists' musical streams during the pandemic. On average, the use of the TikTok app significantly increases artists' streams, by approximately 5%. This increase is even higher for male, European and dj Mag 2020 new entry artists.
    Keywords: Covid-19,Streams,Online video sharing
    JEL: I1 L82 Z10
    Date: 2022
  2. By: Joan-Ramon Borrell (Universitat de Barcelona, Dep. d’Econometria, Estadística i Economia Aplicada- Institut d'Economia Aplicada (IREA) - Grup de Governs i Mercats (GiM), 1-11 John M. Keynes Street, Spain; and, University of Navarra, IESE Business School, Public-Private Sector Research Center.); Carmen García (Universidad de Las Palmas de Gran Canaria. Facultad de Economía, Empresa y Turismo. 35017. Las Palmas de Gran Canaria.); Juan Luis Jiménez (Universidad de Las Palmas de Gran Canaria. Facultad de Economía, Empresa y Turismo. Despacho D. 2-12. 35017. Las Palmas de Gran Canaria.); José Manuel Ordóñez-de-Haro (Universidad de Málaga, Dep. de Teoría e Historia Económica, Pl. El Ejido, s/n. 29013. Málaga.)
    Abstract: This paper investigates the theoretically and empirically unsettled question of the effect of the leniency programs on cartel duration, cartel fines and the length of the investigation. The fact that leniency programs were implemented in two different jurisdictions (EU and Spain) at different moments of time, and the exogeneity of the date of introduction, allow us to identify and quantify the effect of the programs on the outcomes using difference-in-difference program evaluation techniques. We empirically show that leniency programs destabilize existing cartels in the short run as expected from theory and previous empirical papers, and then dissuade the creation of new cartels in the long run. Deterrence effects dominate empirically in the long run, although theoretically they might not dominate, and previous empirical findings were inconclusive. Fines per firm increase substantially after the introduction of the leniency policy, despite whistleblowing firms are partially or totally exempted from fines. The duration of the investigation increases with the introduction of the leniency programs. Leniency programs have sharp and clear short-run cartel destabilization and long-run cartel dissuasion effects.
    Keywords: Antitrust, Competition Policy, Cartels, Leniency programs. JEL classification: D7, K2, L4, O4.
    Date: 2022–09
  3. By: Meena Jagadeesan; Michael I. Jordan; Nika Haghtalab
    Abstract: Competition between traditional platforms is known to improve user utility by aligning the platform's actions with user preferences. But to what extent is alignment exhibited in data-driven marketplaces? To study this question from a theoretical perspective, we introduce a duopoly market where platform actions are bandit algorithms and the two platforms compete for user participation. A salient feature of this market is that the quality of recommendations depends on both the bandit algorithm and the amount of data provided by interactions from users. This interdependency between the algorithm performance and the actions of users complicates the structure of market equilibria and their quality in terms of user utility. Our main finding is that competition in this market does not perfectly align market outcomes with user utility. Interestingly, market outcomes exhibit misalignment not only when the platforms have separate data repositories, but also when the platforms have a shared data repository. Nonetheless, the data sharing assumptions impact what mechanism drives misalignment and also affect the specific form of misalignment (e.g. the quality of the best-case and worst-case market outcomes). More broadly, our work illustrates that competition in digital marketplaces has subtle consequences for user utility that merit further investigation.
    Date: 2022–08
  4. By: Enisse Kharroubi
    Abstract: How do aggregate conditions affect the dynamics of firm entry? Do recessions force more firms out, allowing for more firms to enter subsequently? Or does this process require other circumstances to thrive? I look into these questions using sectoral data on firm entry and exit for the main economies of the Euro Area over 2009-2019. My main finding is that expected, rather than current, GDP growth shapes the dynamics of firm entry. Specifically, I find that entry increases with past exits at the sector-level, but only when aggregate GDP growth is forecasted to be strong. Also, with strong growth forecasts, past entry developments weight less on the subsequent sectoral entry dynamics. Periods of low entry and high exit, can therefore be followed by strong entry subsequently, when the economy is expected to grow strongly. These findings are robust to the inclusion of several controls. This includes the quality of insolvency proceedings, firms' ability to obtain credit or the presence of barriers to entry. Finally, I show that expectations of private and public investment drive the impact of growth expectations on the dynamics of firm entry.
    Keywords: firm entry, exit, growth expectations, private and public investment
    JEL: D25 D84 E32 E62 H32 M13
    Date: 2022–08
  5. By: Nilsen, Øivind A. (Dept. of Economics, Norwegian School of Economics and Business Administration); Raknerud, Arvid (SSB)
    Abstract: This paper investigates firm dynamics in the period before, during, and after an event consisting of a first published patent application. The analysis is based on patent data from the Norwegian Industrial Property Office merged with data from several business registers covering a period of almost 20 years. We apply an event study design and use matching to control for confounding factors. The first patent application by a young firm is associated with significant growth in employment, output, assets and public research funding. Moreover, our results indicate that economic activity starts to increase at least three years ahead of the first patent application. However, we find no evidence of additional firm growth after patent approval for successful applicants. Our findings indicate that the existence of a properly functioning patenting system supports innovation activities, especially early in the life cycle of firms.
    Keywords: Patenting; Firm performance; Panel data; Event study design
    JEL: C33 D22 O34
    Date: 2022–08–30
  6. By: Junichiro Ishida; Tsuyoshi Takahara
    Abstract: This paper examines the optimal content regulation of DTCA by comparing two forms of DTCA---product-specific and category-specific---and identifies a key tradeoff which underlies this policy debate. Our analysis suggests that the optimal form of DTCA depends crucially on the cost effectiveness of DTCA and the market-size distortion induced by DTCA. When the cost of advertisement is high, there often exists a Pareto-improving policy choice: category-specific DTCA is preferred when the market-size distortion is more severe while produce DTCA is preferred when it is less so. As the cost decreases, however, a conflict emerges between pharmaceutical firms and patients: firms are worse off under product-specific DTCA while patients are better off. We also find that the physician's reluctance to persuade misinformed patients can actually alleviate the market-size distortion and hence be welfare-enhancing.
    Date: 2022–07
  7. By: Brian McManus; Aviv Nevo; Zachary Nolan; Jonathan W. Williams
    Abstract: We study trade-offs faced by multiple-system operators (MSOs), the gatekeepers in the provision of internet service, when setting prices and quality for internet access and TV service. In response to improvements in over-the-top video (OTT), MSOs choose between accommodating OTT to share in the surplus it provides consumers, or steering consumers towards TV. We augment the standard mixed bundling model to show that in some cases MSOs have incentives to steer consumers towards TV, but that these incentives vary with the available pricing tools. We then estimate the distribution of model parameters using household panel data on subscription choices and internet usage. Our estimates imply that if MSOs can set different prices for different internet content, under many cost circumstances MSOs discount the OTT usage price. Furthermore, we find that the ability to charge prices based on internet usage strengthens the MSOs' incentive to improve OTT quality.
    JEL: L11 L13 L96
    Date: 2022–08
  8. By: Ioan Alexandru Puiu; Raphael Andreas Hauser
    Abstract: Spot electricity markets are considered under a Game-Theoretic framework, where risk averse players submit orders to the market clearing mechanism to maximise their own utility. Consistent with the current practice in Europe, the market clearing mechanism is modelled as a Social Welfare Maximisation problem, with zonal pricing, and we consider inflexible demand, physical constraints of the electricity grid, and capacity-constrained producers. A novel type of non-parametric risk aversion based on a defined worst case scenario is introduced, and this reduces the dimensionality of the strategy variables and ensures boundedness of prices. By leveraging these properties we devise Jacobi and Gauss-Seidel iterative schemes for computation of approximate global Nash Equilibria, which are in contrast to derivative based local equilibria. Our methodology is applied to the real world data of Central Western European (CWE) Spot Market during the 2019-2020 period, and offers a good representation of the historical time series of prices. By also solving for the assumption of truthful bidding, we devise a simple method based on hypothesis testing to infer if and when producers are bidding strategically (instead of truthfully), and we find evidence suggesting that strategic bidding may be fairly pronounced in the CWE region.
    Date: 2022–08

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