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on Industrial Organization |
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Issue of 2023‒06‒12
eleven papers chosen by |
| By: | Margaret Loudermilk; Gloria Sheu; Charles Taragin |
| Abstract: | We study the welfare impacts of mergers in markets where some firms are already vertically integrated. Our model features logit Bertrand competition downstream and Nash Bargaining upstream. We numerically simulate four merger types: vertical mergers between an unintegrated retailer and an unintegrated wholesaler, downstream "horizontal" mergers between an unintegrated retailer and an integrated retailer/wholesaler, upstream "horizontal" mergers between an unintegrated wholesaler and an integrated retailer/wholesaler, and integrated mergers between two integrated retailer/wholesaler pairs. We find that mergers that have both horizontal and vertical characteristics typically harm consumers. We apply the model to the Republic/Santek merger as a real-world example. |
| Keywords: | Bargaining models; Merger simulation; Vertical markets; Vertical mergers |
| JEL: | L13 L40 L41 L42 |
| Date: | 2023–01–18 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfe:2023-05&r=ind |
| By: | Paul Belleflamme; Martin Peitz |
| Abstract: | A monopolist selling a network good to heterogeneous users is shown to become a twosided platform if it can condition prices on some user characteristics or if it cannot but induces user self-selection by offering screening contracts. This shows that the availability of sophisticated pricing instruments is essential to make a platform two-sided, not the ability to distinguish separate user groups. The use of freemium strategies (which consists of offering a base version at zero price and a premium version at a positive price) emerges as a special case of versioning. |
| Keywords: | Network goods, two-sided platforms, platform pricing, group pricing, versioning, freemium |
| JEL: | D21 D42 L12 L14 |
| Date: | 2023–03 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2020_188v2&r=ind |
| By: | Robin Mamrak (LMU Munich) |
| Abstract: | How does antitrust enforcement against patent-based monopolies affect innovation? I address this question by empirically studying the US antitrust case against Xerox, the monopolist in the market for plain-paper copiers. In 1975, Xerox was ordered to license all its copier-technology patents in the US and abroad. I show that this promoted innovation by other firms in the copier industry, measured by a disproportionate increase in patenting in technologies where Xerox patents became available for licensing. This positive effect is driven by increased innovation by Japanese competitors. They started developing smaller desktop copiers and their innovation became more diverse. |
| Keywords: | antitrust; innovation; patents; compulsory licensing; Japan; Xerox; |
| JEL: | O30 O34 L41 K21 |
| Date: | 2023–05–12 |
| URL: | http://d.repec.org/n?u=RePEc:rco:dpaper:396&r=ind |
| By: | Daniel M A Barreto (ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique); Alexis Ghersengorin (ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Victor Augias (ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | Consumer data can be used to sort consumers into different market segments, allowing a monopolist to charge different prices at each segment. We study consumer-optimal segmentations with redistributive concerns, i.e., that prioritize poorer consumers. Such segmentations are efficient but may grant additional profits to the monopolist, compared to consumer-optimal segmentations with no redistributive concerns. We characterize the markets for which this is the case and provide a procedure for constructing optimal segmentations given a strong redistributive motive. For the remaining markets, we show that the optimal segmentation is surprisingly simple: it generates one segment with a discount price and one segment with the same price that would be charged if there were no segmentation. |
| Keywords: | Third-degree price discrimination, Information design, Redistribution, Inequality, Welfare |
| Date: | 2022–11–11 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-04067226&r=ind |
| By: | Masuyama, Ryo |
| Abstract: | This study analyzes a model in which two firms, one with profiling technology and one without, compete for old and new markets. In the old market, consumers leave their personal information online, whereas, in the new market, consumers do not. When a firm with profiling technology observes consumers' personal information, it sets personalized prices for them. Additionally, consumers can conceal their personal information by paying privacy costs. We introduce heterogeneity in price sensitivities among consumers into our model. We obtain the following result. For greater heterogeneity in price sensitivities, consumer and total surpluses are maximized with no privacy cost; for lower heterogeneity, a sufficiently high privacy cost is desirable for consumers and society; for intermediate heterogeneity, while consumers prefer no privacy cost, total surplus is maximized at a sufficiently high privacy cost. Therefore, when deciding on privacy policy, authorities should consider the heterogeneity in price sensitivities. |
| Keywords: | personalized pricing; privacy; personal information; heterogeneous consumers; Hotelling model |
| JEL: | D43 L10 L13 |
| Date: | 2023–05–14 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:117316&r=ind |
| By: | Ceesay, Muhammed |
| Abstract: | When collusion is analyzed for Independent private value auctions, it is implicitly assumed that ring presence is commonly known to colluding and non-colluding bidders. We drop this assumption and analyze a simple model of a first price Independent Private Value auction with uniformly distributed values where a single bidder knows privately of the existence of collusion by others. We show that this knowledge leads him to bid shading (weakly) in the first price auction compared to what he would have bid otherwise. This in turn yields the result that the second price auction dominates the first price auction in terms of seller revenue. This contrasts results from the literature showing that under our framework, when bidding is done while the presence of colluding bidders is common knowledge, the first price auction dominates the second price auction. |
| Keywords: | Almost-All-Inclusive-Ring, Informational Structures |
| JEL: | D44 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:esprep:270874&r=ind |
| By: | Lafond, François; Astudillo-Estévez, Pablo; Bacilieri, Andrea; Borsos, András |
| Abstract: | Are standard production network properties similar across all available datasets, and if not, why? We provide benchmark results from two administrative datasets (Ecuador and Hungary), which are exceptional in that there is no reporting threshold. We compare these networks to a leading commercial dataset (FactSet) and published results on national firm-level production networks. Administrative datasets with no reporting thresholds have remarkably similar quantitative properties, while a number of important properties are biased in datasets with missing data. |
| Keywords: | Production networks, input-output analysis, firm-level data. |
| JEL: | C80 D57 L14 |
| Date: | 2023–05 |
| URL: | http://d.repec.org/n?u=RePEc:amz:wpaper:2023-08&r=ind |
| By: | Jonathan Dingel; Joshua D. Gottlieb; Maya Lozinski; Pauline Mourot |
| Abstract: | We measure the importance of increasing returns to scale and trade in medical services. Using Medicare claims data, we document that “imported” medical care—services produced by a medical provider in a different region—constitute about one-fifth of US healthcare consumption. Larger regions specialize in producing less common procedures, which are traded more. These patterns reflect economies of scale: larger regions produce higher-quality services because they serve more patients. Because of increasing returns and trade costs, policies to improve access to care face a proximity-concentration tradeoff. Production subsidies and travel subsidies can impose contrasting spillovers on neighboring regions. |
| Keywords: | Market-size effects; Trade in services; Medicare claims data; Healthcare access |
| JEL: | F14 I11 F12 R12 |
| Date: | 2023–04–04 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedmoi:95935&r=ind |
| By: | Gunnarsson, Emma (Research Institute of Industrial Economics (IFN)); Kärnä, Anders (Research Institute of Industrial Economics (IFN)); Olsson, Martin (Research Institute of Industrial Economics (IFN)); Persson, Lars (Research Institute of Industrial Economics (IFN)) |
| Abstract: | We study the heterogeneity of family firms using registry data on all private firms in Sweden. We restrict our sample to firms with at least one employee, and we define a family firm as a firm where two or more individuals among the owners or the board of directors are related. We focus on the heterogeneity in ownership, employee, and firm characteristics among family firms. We provide several new facts about family firms. The number of family members in family firms varies, consisting predominantly of two relatives, but a substantial share feature four or more. The share of multigenerational family firms has increased over time as has the share of women as owners and CEOs. Family firms employ more old and young workers, have a more compressed wage structure with a lower mean, and have a less compressed tenure distribution with a higher mean. The family firm age distribution is less compressed with a higher mean, and their location distribution is more equally distributed among metropolitan, urban, and rural areas. |
| Keywords: | Family Firms; Firm Organization; Employee Characteristics |
| JEL: | D22 D24 L25 L60 M11 M50 |
| Date: | 2023–05–16 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:iuiwop:1461&r=ind |
| By: | Sergi Basco; Giulia Felice; Bruno Merlevede; Martí Mestieri |
| Abstract: | This paper empirically examines the effects of financial crises on the organization of production of multinational enterprises. We construct a panel of European multinational networks from 2003 through 2015. We use as a financial shock the increase in risk premia between August 2007 and July 2012 and build a multinational-specific shock based on the network structure before the shock. Multinationals facing a larger financial shock perform worse in terms of revenue, employment, and growth in the number of affiliates. Lower growth in the number of affiliates operates through a negative effect on domestic and foreign affiliates, and is concentrated in affiliates in a vertical relationship with the parent. These effects built up slowly over time. Negative effects are driven by multinationals with initially more leveraged parents, who reduce relatively more the number of foreign affiliates. These findings lend support to the hypothesis of financial frictions shaping multinational activity. |
| JEL: | F14 F23 F44 L22 L23 |
| Date: | 2023–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:31216&r=ind |
| By: | Fernando Leibovici; David Wiczer |
| Abstract: | This paper studies the role of credit constraints in accounting for the dynamics of firm exit during the Great Recession. We present novel firm-level evidence on the role of credit constraints on exit behavior during the Great Recession. Firms in financial distress, with tighter access to credit, are more likely to default than firms with more access to credit. This difference widened substantially in the Great Recession while, in contrast, default rates did not vary much by size, age, or productivity. We identify conditions under which standard models of firms subject to financial frictions can be consistent with these facts. |
| Keywords: | firm exit; credit constraints; financial distress; Great Recession; financial frictions |
| JEL: | E32 G01 G33 L25 |
| Date: | 2023–05 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedlwp:96160&r=ind |