nep-ind New Economics Papers
on Industrial Organization
Issue of 2022‒12‒12
seven papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Cournot vs. Bertrand competition in the international transport market with environmental standards By Marie-Laure Cabon-Dhersin
  2. On the Welfare Effects of Adverse Selection in Oligopolistic Markets By Marco de Pinto; Laszlo Goerke; Alberto Palermo
  3. Travel Circle: A Model of Supply Chains By Lau, C. Oscar
  4. Ownership Diversification and Product Market Pricing Incentives By Albert Banal-Estanol; Jo Seldeslachts; Xavier Vives
  5. Consumer sovereignty in the digital society By Alexandre Chirat
  6. AI, Skill, and Productivity: The Case of Taxi Drivers By Kanazawa, Kyogo; Kawaguchi, Daiji; Shigeoka, Hitoshi; Watanabe, Yasutora
  7. Creative Disruption – Technology innovation, labour demand and the pandemic By Erling Barth; Alex Bryson; Harald Dale-Olsen

  1. By: Marie-Laure Cabon-Dhersin (LERN - Laboratoire d'Economie Rouen Normandie - UNIROUEN - Université de Rouen Normandie - NU - Normandie Université - IRIHS - Institut de Recherche Interdisciplinaire Homme et Société - UNIROUEN - Université de Rouen Normandie - NU - Normandie Université)
    Abstract: We revisit the classic comparison of Bertrand and Cournot competition by studying how the form of competition between shipping companies affects transport prices, international trade, consumer and producer surplus, and social welfare in two countries that coordinate their environmental policies. We show that the standard Bertrand-Cournot ranking only prevails when pollution abatement technologies are sufficiently efficient.
    Date: 2022
  2. By: Marco de Pinto; Laszlo Goerke; Alberto Palermo
    Abstract: We consider a principal-agent relationship with adverse selection. Principals pay informational rents due to asymmetric information and sell their output in a homogeneous Cournot-oligopoly. We find that asymmetric information may mitigate or more than compensate the welfare reducing impact of market power, irrespective of whether the number of firms is given exogenously or determined endogenously by a profit constraint. We further show that welfare in a setting with adverse selection may be higher than the maximized welfare level attainable in a world with perfect observability.
    Keywords: adverse selection, oligopoly, welfare
    JEL: D43 D82 L51
    Date: 2022
  3. By: Lau, C. Oscar
    Abstract: Travel circle is a metaphor for supply chains: in travel circle, travelers are transported by carriers in multiple legs from the center to diverse destinations on the circumference; in supply chains, goods are transformed in multiple stages by firms from natural resources into differentiated products. The model is generated using only three cost parameters. At the start of supply chains, a few firms mass-produce standardized commodities at low unit costs; at the end, many firms produce distinctive products in small scales at high unit costs. As an extension, the circle’s size is endogenized to account for consumers’ preferences for varieties.
    Keywords: Product differentiation, Scale economies, Entry game
    JEL: L11 L13 L23 L25
    Date: 2022–11–06
  4. By: Albert Banal-Estanol; Jo Seldeslachts; Xavier Vives
    Abstract: We link investor ownership to profit loads on rival firms by the managers of a firm. We propose a theory model in which we distinguish between passive and active investors’ holdings, where passive investors are relatively more diversified. We find that if passive investors become relatively bigger, then common ownership incentives increase. We show that these higher incentives, in turn, are linked to higher firm markups. We empirically confirm these relationships for public US firms in the years 2004-2012, where the financial crisis coincides with passive investors’ rise. The found effects are small but non-negligible.
    Keywords: Common ownership, investor diversification, product markets
    Date: 2022
  5. By: Alexandre Chirat
    Abstract: Do uses of digital technologies in the framework of early 21st century capitalism promote or reduce the expression of consumer sovereignty ? This paper addresses this question through the lens of John Kenneth Galbraith’s theory of consumption. First, I recall the main stakes of his theory. Second, I highlight the main differences between traditional advertising and online behavioral advertising. Third, I explain how online behavioral advertising strengthens the “dependence effect” and “revised sequence” depicted by Galbraith within the context of the industrial society. Fourth, I discuss some normative challenges raised by digital platform corporations to individual sovereignty. Lastly, I argue that platform capitalism appear as a mature form of the “new industrial state”, one important difference being that digital platform corporations, rather than traditional industrial corporations, largely preside over the allocation of resources in the economy.
    Keywords: Consumer sovereignty – online behavioral advertising - digital economics – platform capitalism
    JEL: B2 P1 M3 L2
    Date: 2022
  6. By: Kanazawa, Kyogo (University of Tokyo); Kawaguchi, Daiji (University of Tokyo); Shigeoka, Hitoshi (Simon Fraser University); Watanabe, Yasutora (University of Tokyo)
    Abstract: We examine the impact of Articial Intelligence (AI) on productivity in the context of taxi drivers. The AI we study assists drivers with finding customers by suggesting routes along which the demand is predicted to be high. We find that AI improves drivers' productivity by shortening the cruising time, and such gain is accrued only to low-skilled drivers, narrowing the productivity gap between high- and low-skilled drivers by 14%. The result indicates that AI's impact on human labor is more nuanced and complex than a job displacement story, which was the primary focus of existing studies.
    Keywords: artificial intelligence, skill, productivity, taxi-drivers, prediction, demand forecasting, machine learning
    JEL: J22 J24 L92 R41
    Date: 2022–10
  7. By: Erling Barth (Institute for Social Research, Oslo, and ESOP, Department of Economics, University of Oslo); Alex Bryson (University College London, IZA, NIESR); Harald Dale-Olsen (Institute for Social Research, Oslo, and IZA)
    Abstract: We utilize a new survey on Norwegian firms’ digitalization and technology investments, linked to population-wide register data, to show that the pandemic massively disrupted the technology investment plans of firms, not only postponing investments, but also introducing new technologies. More productive firms innovated, while less productive firms postponed investments. Most innovations were permanent, not due to acceleration of existing plans, thus the pandemic yields long-term influence in directions unanticipated before the pandemic. The new technologies are associated with increased labour demand for skilled workers, and reduced demand for unskilled workers, particularly for the more productive firms
    Keywords: Technology investments, Digitalization, Labour demand, Pandemic, COVID-19
    JEL: D22 D24 F14 L11 L60
    Date: 2022–11–01

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