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on Industrial Organization |
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Issue of 2022‒10‒10
twelve papers chosen by |
| By: | Jacques Thépot (LaRGE Research Center, Université de Strasbourg) |
| Abstract: | This paper is motivated by two correlated trends observed in the digital economy: (i) the increasing need for common infrastructures providing data and facilities (ii) the monopolization of key industries. We develop a Cournot oligopoly model where a public good is used as common resource of firms with heterogeneous productivities. The public good is provided by a public agency charging Lindahl prices as wholesale prices. When the agency is a zero-profit entity, the market equilibrium price is an increasing function of the Herfindahl index of the productivities. This result is extended to alternative situation in terms of objective and cost structure of the agency. In mixed resource-based industries, private provision of the resource is also available. Strong firms (with high productivity) may have an incentive to share the common resource with the weak ones and then to reduce the use of the private resource. The misrevelation of productivities is an essential issue in this public good context. It is proved here that productivities are underevaluated in the common resource case and overevaluated in the private case. |
| Keywords: | oligopoly, commons, Lindahl prices, misreporting. |
| JEL: | C72 D43 H41 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:lar:wpaper:2022-03&r= |
| By: | Mary Amiti; Sebastian Heise |
| Abstract: | Many studies have documented that market concentration has risen among U.S. firms in recent decades. In this paper, we show that this rise in concentration was accompanied by tougher product market competition due to the entry of foreign competitors. Using confidential census data covering the universe of all firm sales in the U.S. manufacturing sector, we find that rising import competition increased concentration among U.S. firms by reallocating sales from smaller to larger U.S. firms and by causing firm exit. However, this increase in concentration was counteracted by the expansion of foreign firms, which reduced domestic firms’ share of the U.S. market inclusive of foreign firms’ sales. We find that once the sales of foreign exporters are taken into account, U.S. marketconcentration in manufacturing was stable between 1992 and 2012. |
| Keywords: | market concentration, markups, import competition, international trade |
| JEL: | F14 F60 L11 |
| Date: | 2022–08 |
| URL: | http://d.repec.org/n?u=RePEc:cen:wpaper:22-34&r= |
| By: | Noriyuki Doi (Emeritus Professor and Visiting Researcher at Innovation System Research Center, Kwansei Gakuin University) |
| Abstract: | The rise of the sharing economy is affecting many aspects such as consumption pattern of goods and services, existing business fields and labor markets. The business has an influence on competition and public policies in the field and related industries as well. In particular, a platform’s network management, called as platform curation, is emphasized as a private regulation or self-regulation. It plays a key role in the sharing business, and suggests new and challenging perspectives, opportunities and policy issues. This paper focuses on curation, and suggests its major implications for research and public policy. |
| Keywords: | sharing economy, market failure, curation, self-regulation, co-regulation |
| JEL: | L41 L42 L43 |
| Date: | 2022–09 |
| URL: | http://d.repec.org/n?u=RePEc:kgu:wpaper:240&r= |
| By: | Jeon, Doh-Shin; Lefouili, Yassine; Madio, Leonardo |
| Abstract: | We study a platform’s incentives to delist IP-infringing products and the effects of holding the platform liable for the presence of such products on innovation and consumer welfare. For a given number of buyers on the platform, platform liability increases innovation by reducing the competitive pressure that innovative products face from IP-infringing products. However, platform liability can have unintended consequences, which can overturn this intended effect on innovation. Moreover, there can be a misalignment of interests between innovators and buyers as platform liability reduces consumer surplus for a given number of innovators. We also analyze how different types of cross-group network effects affect the impact of platform liability on innovation and consumer welfare. |
| Keywords: | Platform, Liability, Intellectual Property, Innovation. |
| JEL: | K40 K42 K13 L13 L86 |
| Date: | 2022–09–19 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:127344&r= |
| By: | Robert M. Adams; Vitaly M. Bord; Bradley Katcher |
| Abstract: | Credit cards are one of the most ubiquitous consumer financial products in the United States, with more than 75 percent of households owning at least one general purpose credit card in 2019. According to the G.19 Consumer Credit Statistical release, revolving consumer credit, which mainly consists of credit cards and related plans, stood at over one trillion dollars at the end of 2021. |
| Date: | 2022–09–09 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfn:2022-09-09&r= |
| By: | Alejandra Medina (OECD); Adriana de la Cruz (OECD); Yun Tang (OECD) |
| Abstract: | This working paper documents the trends in the ownership structures of listed companies around the world and the rise in ownership concentration. It identifies three major trends in corporate ownership: the dominance of company group structures, in particular in a number of emerging markets; the growth of state ownership through various state controlled investors; and the re concentration of ownership in the hands of large institutional investors, in particular investors that follow passive index investment strategies. The paper also discusses the implications for corporate governance of corporate ownership by private companies, states and institutional investors in global public equity markets. |
| Date: | 2022–09–19 |
| URL: | http://d.repec.org/n?u=RePEc:oec:dafaae:27-en&r= |
| By: | Jose de Jesus Herrera-Velasquez (Graduate School of Economics, Kyoto University) |
| Abstract: | This study explores the reciprocal effects between agency problems and market competition. We develop an adverse selection model of a competing conglomerate with production constraints. The conglomerate participates as the leader in two different duopolistic markets with a Stackelberg-Cournot framework and heteroge- neous goods. The conglomerate is run by its headquarters and two division man- agers. The agency problem arises because the market demand size is a manager's private information, which the headquarters try to elicit by a contract mechanism. We fully characterize a first and a second-best contract. When the production constraints make the first best outcome unattainable, the second-best contract is either separating or pooling, depending on the severity of the constraints. The sep- arating second-best contract sometimes improves the ex-ante welfare in comparison to a symmetric information benchmark. The pooling second-best contract never improves the ex-ante welfare. We also find that at an intermediate level of substi- tutability, the second-best contract is most likely to coincide with the first-best one, and any departure from that level toward either substitutability or complementarity makes the attainment of the first-best outcome less likely. |
| Keywords: | Adverse Selection; Contract Mechanism; Multimarket Competition; Stackelberg Oligopoly; Production Constraint |
| JEL: | C70 D21 D43 D82 D86 L13 |
| Date: | 2022–09 |
| URL: | http://d.repec.org/n?u=RePEc:kyo:wpaper:1083&r= |
| By: | José A. Azar; Steven T. Berry; Ioana Marinescu |
| Abstract: | Job differentiation gives employers market power, allowing them to pay workers less than their marginal productivity. We estimate a differentiated jobs model using application data from Careerbuilder.com. We find direct evidence of substantial job differentiation. Without the use of instruments for wages, job applications appear very inelastic with respect to wages. Plausible instruments produce elastic firm-level application supply curves. Under some assumptions, the implied market level labor supply elasticity is 0.5, while the firm level labor elasticity is 4.8. This suggests that workers may produce 21% more than their wage level, consistent with significant monopsony power. |
| JEL: | J42 L13 |
| Date: | 2022–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:30365&r= |
| By: | Leogrande, Angelo; Costantiello, Alberto; Laureti, Lucio |
| Abstract: | In this article we estimate the value of “Non-R&D Innovation Expenditures” in Europe. We use data from the European Innovation Scoreboard-EIS of the European Commission from the period 2010-2019. We test data with the following econometric models i.e.: Pooled OLS, Dynamic Panel, Panel Data with Fixed Effects, Panel Data with Random Effects, WLS. We found that “Non-R&D Innovation Expenditures” is positively associated among others to “Innovation Index” and “Firm Investments” and negatively associated among others to “Human Resources” and “Government Procurement of Advanced Technology Products”. We use the k-Means algorithm with either the Silhouette Coefficient and the Elbow Method in a confrontation with the network analysis optimized with the Distance of Manhattan and we find that the optimal number of clusters is four. Furthermore, we propose a confrontation among eight machine learning algorithms to predict the level of “Non-R&D Innovation Expenditures” either with Original Data-OD either with Augmented Data-AD. We found that Gradient Boost Trees Regression is the best predictor for OD while Tree Ensemble Regression is the best Predictor for AD. Finally, we verify that the prediction with AD is more efficient of that with OD with a reduction in the average value of statistical errors equal to 40,50%. |
| Keywords: | Innovation, and Invention: Processes and Incentives; Management of Technological Innovation and R&D; Diffusion Processes; Open Innovation. |
| JEL: | O30 O31 O32 O33 O34 |
| Date: | 2022–09–11 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:114526&r= |
| By: | Pöge, Felix (Boston University) |
| Abstract: | The relationship between competition and innovation is difficult to disentangle, as exogenous variation in market structure is rare. The 1952 breakup of Germany's leading chemical company, IG Farben, represents such a disruption. After the Second World War, the Allies occupying Germany imposed the breakup because of IG Farben's importance for the German war economy instead of standard antitrust concerns. In technology areas where the breakup reduced concentration, patenting increased strongly, driven by domestic firms unrelated to IG Farben. An analysis of patent texts shows that an increased propensity to patent does not drive the effect. Descriptively, IG Farben's successors increased their patenting activities as well, and their patenting specialized relative to the pre-breakup period. The results are consistent with a breakup-induced innovation increase by the IG Farben successors, which then spilled over to the wider chemical industry. |
| Keywords: | innovation, competition, merger, antitrust, IG Farben |
| JEL: | O31 L44 N44 |
| Date: | 2022–08 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp15517&r= |
| By: | Eric Langlais; Andreea Cosnita-Langlais |
| Abstract: | We endogenize location/product specification choices in a spatial Cournot duopoly on the linear market, when firms' output entails an accidental harm to the environment. Under a strict liability regime, the equilibrium involves no differentiation when the expected harm is low enough. This outcome is suboptimal, and identical to the spatial pattern obtained under a no-liability regime. With larger harm, the equilibrium displays some dispersion/product differentiation, the degree of which is increasing with the level of harm towards the first best locations/product choices. Our results are robusts when allowing for firms' investment in environmental measures. Moreover, we show that vertical/care differentiation occurs whenever horizontal product differentiation arises. Finally, we show that under a negligence rule, firms always comply with the due care level, but the equilibrium involves no differentiation, either horizontal/product or vertical/care. |
| Keywords: | Cournot competition, spatial model, strategic location, product choice, horizontal differentiation, vertical differentitation, environmental liability, strict liability, negligence. |
| JEL: | L41 K21 D82 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:drm:wpaper:2022-20&r= |
| By: | Ian McCarthy; Mehul V. Raval |
| Abstract: | Specialty hospitals tend to negotiate higher commercial insurance payments, even for relatively routine procedures with comparable clinical quality across hospital types. How specialty hospitals can maintain such a price premium remains an open question. In this paper, we examine a potential (horizontal) differentiation effect in which patients perceive specialty hospitals as sufficiently distinct from other hospitals, so that specialty hospitals effectively compete in a separate market from general acute care hospitals. We estimate this effect in the context of routine pediatric procedures offered by both specialty children’s hospitals as well as general acute care hospitals, and we find strong empirical evidence of a differentiation effect in which specialty children’s hospitals appear largely immune to competitive forces from non-children’s hospitals. |
| JEL: | I11 L11 L15 |
| Date: | 2022–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:30425&r= |