nep-ind New Economics Papers
on Industrial Organization
Issue of 2023‒05‒29
six papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Robust Stackelberg Equilibria By Jiarui Gan; Minbiao Han; Jibang Wu; Haifeng Xu
  2. Theories of market selection: a survey By Luca Fontanelli
  3. Search Theory of Imperfect Competition with Decreasing Returns to Scale By Guido Menzio
  4. E-commerce and parcel delivery: environmental policy with greens consumers By Claire Borsenberger; Helmuth Cremer; Denis Joram; Jean-Marie Lozachmeur; Estelle Malavolti
  5. Enjoying a quiet life even during a great recession? Evidence from the Greek olive oil industry By Keramidou, Ioanna; Mimis, Angelos
  6. Is Power to Gas always Beneficial ? The Implications of Ownership Structure By Camille Megy; Olivier Massol

  1. By: Jiarui Gan; Minbiao Han; Jibang Wu; Haifeng Xu
    Abstract: This paper provides a systematic study of the robust Stackelberg equilibrium (RSE), which naturally generalizes the widely adopted solution concept of the strong Stackelberg equilibrium (SSE). The RSE accounts for any possible up-to-$\delta$ suboptimal follower responses in Stackelberg games and is adopted to improve the robustness of the leader's strategy. While a few variants of robust Stackelberg equilibrium have been considered in previous literature, the RSE solution concept we consider is importantly different -- in some sense, it relaxes previously studied robust Stackelberg strategies and is applicable to much broader sources of uncertainties. We provide a thorough investigation of several fundamental properties of RSE, including its utility guarantees, algorithmics, and learnability. We first show that the RSE we defined always exists and thus is well-defined. Then we characterize how the leader's utility in RSE changes with the robustness level considered. On the algorithmic side, we show that, in sharp contrast to the tractability of computing an SSE, it is NP-hard to obtain a fully polynomial approximation scheme (FPTAS) for any constant robustness level. Nevertheless, we develop a quasi-polynomial approximation scheme (QPTAS) for RSE. Finally, we examine the learnability of the RSE in a natural learning scenario, where both players' utilities are not known in advance, and provide almost tight sample complexity results on learning the RSE. As a corollary of this result, we also obtain an algorithm for learning SSE, which strictly improves a key result of Bai et al. in terms of both utility guarantee and computational efficiency.
    Date: 2023–04
    URL: http://d.repec.org/n?u=RePEc:arx:papers:2304.14990&r=ind
  2. By: Luca Fontanelli
    Abstract: We provide a survey of the main mechanisms of market selection used in economics. We gather them in three theoretical paradigms (rational equilibrium, Simonesque and evolutionary), that we try to reconcile in terms of underlying laws of selection. We show that the three paradigms have been converging in their focus on firm heterogeneity and increasing returns. These selec- tion mechanisms are however fostered by theories which differ in terms of sources of increasing returns, generating mechanisms of firm heterogeneity, firm rationality and emphasis on equilibrium states vis-a-vis out-of-equilibrium dynamics. Our discussion suggests that the convergence between the three theoretical paradigms is taking place in the direction of research, which is aimed at the replication of empirical patterns related to firm heterogeneity, rather than in the theory underlying selection mechanisms.
    Keywords: Selection; competition; monopolistic competition; quasi-replicator; Gibrat's Law.
    Date: 2023–05–15
    URL: http://d.repec.org/n?u=RePEc:ssa:lemwps:2023/22&r=ind
  3. By: Guido Menzio
    Abstract: I study a version of the search-theoretic model of imperfect competition by Burdett and Judd (1983) in which sellers face a strictly increasing rather than a constant marginal cost of production. The equilibrium exists and is unique, and its structure depends on the extent of search frictions. If search frictions are large enough, the price distribution is non-degenerate and atomless. If search frictions are neither too large nor too small, the price distribution is non-degenerate with an atom at the lowest price. If search frictions are small enough, the price distribution is degenerate. The equilibrium is efficient if and only if the price distribution is degenerate and, hence, if and only if search frictions are small enough. In contrast, in Burdett and Judd (1983), the equilibrium price distribution is always non-degenerate and atomless and the equilibrium is always efficient. As in Burdett and Judd (1983), the equilibrium goes from monopolistic to competitive as search frictions decline.
    JEL: D43 D83 J31
    Date: 2023–04
    URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:31174&r=ind
  4. By: Claire Borsenberger (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Helmuth Cremer (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Denis Joram (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Jean-Marie Lozachmeur (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Estelle Malavolti (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)
    Date: 2023–05–04
    URL: http://d.repec.org/n?u=RePEc:hal:wpaper:hal-04088352&r=ind
  5. By: Keramidou, Ioanna; Mimis, Angelos
    Abstract: The research investigates the link between market concentration and efficiency by analyzing the Greek olive oil industry data from 2006 to 2014. Unlike previous research on this issue, which focused on the impact of overall company efficiency on market power, we study the association between the three types of firm efficiency (profit, technical, and scale) and market concentration. Our theoretical framework and research assumptions were not predefined but were generated by modelling the data from the Greek oil olive sector through data mining techniques. The predicted causal relationships constructed in the preceding stage were investigated using partial least squares path modeling (PLS-PM) regression. The results show a significant negative relationship between market concentration and technical and profit efficiency. The paucity of completion resulted in prolonged firm inefficiencies, demonstrating that Greek enterprises, even during a severe recession, refrained from rigorous efforts to enhance technical and profit efficiency as they would in a competitive market, preferring instead to live a quiet life (QL). This study has several policy implications for regulators and policymakers, such as extending antitrust rules, which may enhance company efficiency and competitiveness.
    Keywords: Efficiency, industrial concentration, Quiet life hypothesis, Greece, Partial least squares path modeling, Bayesian network
    JEL: L13 L25 L44 L5 L52 L6 L66
    Date: 2023–04–20
    URL: http://d.repec.org/n?u=RePEc:pra:mprapa:117159&r=ind
  6. By: Camille Megy (CentraleSupélec, IFPEN - IFP Energies nouvelles - IFPEN - IFP Energies nouvelles, IFP School); Olivier Massol (IFPEN - IFP Energies nouvelles - IFPEN - IFP Energies nouvelles, IFP School, CentraleSupélec, City University London)
    Abstract: Power-to-gas (PtG), a technology that converts electricity into hydrogen, is expected to become a core component of future low-carbon energy systems. While its economics and performance as a sector coupling technique have been well studied in the context of perfectly competitive energy markets, the distortions caused by the presence of large strategic players with a multi-market presence have received little attention. In this paper, we examine them by specifying a partial equilibrium model that provides a stylized representation of the interactions among the natural gas, electricity, and hydrogen markets. Using that model, we compare several possible ownership organizations for PtG to investigate how imperfect competition affects its operations. Evidence gained from these market simulations show that the effects of PtG vary with the multi-market profile of its operator. Producers of fossil-based hydrogen tend to make little use of PtG, whereas renewable power producers use it more to increase the electricity prices. Although PtG operations are profitable and can be welfare-enhancing, the social gain is either very tiny or negative when PtG is strategically operated in conjunction with variable renewable generation. In that case, PtG also raises environmental concerns as it stimulates the use of polluting thermoelectric generation.
    Keywords: Power-to-Gas, Sector Coupling, Hydrogen, Renewable Energy Sources, Multi-Market Oligopoly, Mixed Complementarity Problem
    Date: 2023–02–01
    URL: http://d.repec.org/n?u=RePEc:hal:wpaper:hal-04087442&r=ind

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