nep-ind New Economics Papers
on Industrial Organization
Issue of 2023‒03‒13
seven papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Strategic choice of price-setting algorithms By Buchali, Katrin; Grüb, Jens; Muijs, Matthias; Schwalbe, Ulrich
  2. Resale price maintenance in a successive monopoly model By Dertwinkel-Kalt, Markus; Wey, Christian
  3. Policies to strengthen the resilience of global value chains: Empirical evidence from the COVID-19 shock By Cyrille Schwellnus; Antton Haramboure; Lea Samek
  4. Facts of US Firm Scale and Growth 1970-2019: An Illustrated Guide By Robert Parham
  5. Cryptocurrency competition: An empirical test of Hayek's vision of private monies By Mayer, Fabian; Bofinger, Peter
  6. How the green and digital transitions are reshaping the automotive ecosystem By Antoine Dechezleprêtre; Luis Díaz; Milenko Fadic; Guy Lalanne
  7. New approaches to shipbuilding capacity assessments By Karin Gourdon; Laurent Daniel; Takuya Adachi; Emilie Berger

  1. By: Buchali, Katrin; Grüb, Jens; Muijs, Matthias; Schwalbe, Ulrich
    Abstract: Recent experimental simulations have shown that autonomous pricing algorithms are able to learn collusive behavior and thus charge supra-competitive prices without being explicitly programmed to do so. These simulations assume, however, that both firms employ the identical price-setting algorithm based on Q-learning. Thus, the question arises whether the underlying assumption that both firms employ a Q-learning algorithm can be supported as an equilibrium in a game where firms can chose between different pricing rules. Our simulations show that when both firms use a learning algorithm, the outcome is not an equilibrium when alternative price setting rules are available. In fact, simpler price setting rules as for example meeting competition clauses yield higher payoffs compared to Q-learning algorithms.
    Keywords: pricing algorithms, algorithmic collusion, reinforcement learning
    JEL: D43 D83 L13 L49
    Date: 2023
  2. By: Dertwinkel-Kalt, Markus; Wey, Christian
    Abstract: We present a model to explain why a manufacturer may impose a minimum resale price (min RPM) in a successive monopoly setting. Our argument relies on the retailer having non-contractible choice variables, which could represent the price of a substitute good and/or the effort the retailer exerts for service provision or advertising. Our explanation for a min RPM is empirically distinguishable from alternative justifications for a min RPM that rely, for instance, on retailer competition and service free riding among retailers. Whether a min RPM benefits or harms consumers depends on-as we show-why a min RPM is implemented: if the goal is to soften competition with the substitute product, it tends to harm consumers, and if the goal is to secure service provision, it tends to benefit consumers.
    Keywords: Resale Price Maintenance, Vertical Restraints, Cost Pass-Through, Retailing
    JEL: L12 L41 D42 K21
    Date: 2023
  3. By: Cyrille Schwellnus; Antton Haramboure; Lea Samek
    Abstract: Widespread supply disruptions in the wake of the COVID-19 pandemic and the Russian Federation’s large-scale aggression against Ukraine have raised concerns among policy makers that globalised value chains expose domestic production to shocks from abroad. This paper uses new indicators of global value chain dependencies and exogenous pandemic shocks to econometrically estimate the effects of supply disruptions abroad on domestic output. The results suggest that the adverse effects of supply disruptions are particularly large when concentration of supplying countries and supplying firms is high. Counterfactual simulations of the econometric model suggest that diversification of suppliers would have sizeable benefits in terms of shielding domestic production against country-specific supply shocks, with partial onshoring of production having only small additional benefits. Technological innovation that reduces foreign dependencies, such as the substitution of renewable energies for fossil fuels, can have similar benefits as diversification.
    Keywords: global value chains, international trade, resiliance
    JEL: F14 F68 L52
    Date: 2023–02–21
  4. By: Robert Parham
    Abstract: This work analyzes data on all public US firms in the 50 year period 1970-2019, and presents 18 stylized facts of their scale, income, growth, return, investment, and dynamism. Special attention is given to (i) identifying distributional forms; and (ii) scale effects -- systematic difference between firms based on their scale of operations. Notable findings are that the Difference-of-Log-Normals (DLN) distribution has a central role in describing firm data, scale-dependent heteroskedasticity is rampant, and small firms are systematically different from large firms.
    Date: 2023–02
  5. By: Mayer, Fabian; Bofinger, Peter
    Abstract: We investigate monopolistic tendencies and the intensity of currency competition on the crypto market in the light of Hayek's "Denationalization of money". Interestingly, Hayek never considered differentiation and specialization by innovative private currencies could lead lasting currency competition instead of network effects. We argue that competition between private currencies could run on different functions of money, especially the function as a store of value and that as a means of exchange, which partly explains the differences in the set-up of private currencies that Hayek demanded and that of cryptocurrencies. Drawing on a large sample of 101 cryptocurrencies and a time frame from 2016 to 2022, we empirically examine the evolution and degree of competition on the crypto market, also taking changes in general crypto market structure into account. We find that competition is strong for unpegged cryptocurrencies that mostly compete as a speculative store of value. Competition is also strong for stablecoins when competing as a stable store of value. Competition is much less pronounced for the function as a means of exchange and network effects and monopolistic tendencies are more likely to be present on this sub-market.
    Keywords: Hayek, Cryptocurrencies, Functions of Money, Currency Competition, NetworkEffects, Monopol
    JEL: B25 D40 E42 E50 E51 L11
    Date: 2023
  6. By: Antoine Dechezleprêtre; Luis Díaz; Milenko Fadic; Guy Lalanne
    Abstract: The automotive sector is important across OECD countries in terms of value-added and R&D, but is also heavily affected by the green and the digital transformations. This paper offers a novel and holistic view of the automotive sector and its surrounding ecosystem based on a combination of Inter-Country Input-Output (ICIO) tables, patent data, mergers and acquisitions (M&A) transactions, cross-country micro-distributed data and firm-level balance sheet data. It identifies the boundaries of this industrial ecosystem including connected sectors (e.g. upstream and downstream) as well as knowledge and technology providers (e.g. universities or the digital industry). The paper documents emerging trends at the geographical and technological levels and provides a comprehensive assessment of the ecosystem’s changing microstructure, with a growing role of young and digital-intensive companies. Finally, it provides recommendations for effective public policies to support the automotive ecosystem, with a focus on innovation, competition and the growth of young firms.
    Keywords: automotive, autonomous vehicles, decarbonisation, industrial ecosystems, industrial policy
    JEL: L62 O25 L50 O38 Q58
    Date: 2023–03–01
  7. By: Karin Gourdon; Laurent Daniel; Takuya Adachi; Emilie Berger
    Abstract: Accurate measurement of shipbuilding capacity is critical to inform market stakeholders of excess capacity issues. This report presents several approaches to improve the estimates of shipbuilding capacity. It shows how the use of average production would allow for smoothening the proxy of capacity in the yard-by-yard production approach. It discusses how firm level indicators, such as productivity, can also be considered. An analysis of productivity developments for a sample of shipbuilding firms shows that their productivity evolves in function of the market situation which, therefore, should be taken into account in the proxies of capacity based on yard production. Finally, the report studies how mergers and acquisitions of shipbuilding firms may impact capacity.
    Keywords: capacity, mergers and acquisitions, productivity, shipbuiding
    Date: 2023–02–16

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