nep-ind New Economics Papers
on Industrial Organization
Issue of 2023‒07‒10
seven papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Markups and inflation during the COVID-19 pandemic By Olga Bilyk; Timothy Grieder; Mikael Khan
  2. Quantifying industrial strategies across nine OECD countries By Chiara Criscuolo; Luis Díaz; Guy Lalanne; Louise Guillouet; Charles-Édouard van de Put; Camilla Weder; Hadas Zazon Deutsch
  3. Information provision in hybrid platforms By Marco Magnani; Federico Navarra
  4. Licensing a product innovation from an external innovator to a Stackelberg duopoly By Antelo, Manel; Bru, Lluís
  5. Pharmaceutical Pricing and R&D as a Global Public Good By H. E. Frech, III; Mark V. Pauly; William S. Comanor; Joseph R. Martinez
  6. Screening for Collusion in Wholesale Electricity Markets: A Review of the Literature By Brown, David P.; Eckert, Andrew; Silveira, Douglas
  7. Chinese Insurance Markets: Developments and Prospects By Hanming Fang; Xian Xu

  1. By: Olga Bilyk; Timothy Grieder; Mikael Khan
    Abstract: We find that prices and costs for consumer-oriented firms moved roughly one-for-one during the COVID-19 pandemic. This means firms fully passed rising costs through to the prices they charged. However, our results are suggestive, given data limitations and the uncertainty associated with estimating markups.
    Keywords: Firm dynamics; Inflation and prices
    JEL: D2 D4 E2 E3 L1
    Date: 2023–06
    URL: http://d.repec.org/n?u=RePEc:bca:bocsan:23-8&r=ind
  2. By: Chiara Criscuolo; Luis Díaz; Guy Lalanne; Louise Guillouet; Charles-Édouard van de Put; Camilla Weder; Hadas Zazon Deutsch
    Abstract: Industrial policy has resurfaced prominently in academic and policy discussions in the wake of major shocks and long-term trends. However, quantifying industrial strategies across countries remains difficult. The ‘Quantifying Industrial Strategies’ (QuIS) project measures industrial policy expenditures by gathering and harmonising publicly available data, based on a new methodology. This report summarises the composition of industrial strategies in the first nine participating countries in terms of expenditures, priorities, and policy instruments for the period 2019-21. The report finds that industrial policies are sizeable, with 1.5% of GDP in grants and tax expenditures, and with an important heterogeneity across countries in terms of strategic priorities; industrial strategies mainly rely on sectoral instruments, representing on average 29% of grants and tax expenditures; and green instruments are important and rose significantly in six out of nine countries between 2019 and 2021.
    Date: 2023–06–19
    URL: http://d.repec.org/n?u=RePEc:oec:stiaac:150-en&r=ind
  3. By: Marco Magnani (University of Padova and ARERA); Federico Navarra (University of Padova)
    Abstract: We study the incentives of a monopolistic hybrid platform in sharing its superior market information with the third-party seller hosted on its marketplace. After observing platform information-sharing policy, the seller competes in prices with the platform over a horizontally differentiated good. Despite platform duality, an equilibrium in which the platform shares information with the seller occurs. We highlight how the platform has incentives to share information either for relaxing price-competition or for increasing the volume of transactions. Platform incentives to share information are strongest for intermediate degrees of product differentiation. Information provision results in consumer surplus extraction such that the total welfare is reduced. Although entering as a seller and providing market information is profitable, when analysing platform entry as the acquisition of one of the sellers we may observe equilibria in which the platform either sticks to agency or does not provide information since this would increase the entry cost.
    Keywords: hybrid platforms, information provision, data sharing, vertical integration.
    Date: 2023–05
    URL: http://d.repec.org/n?u=RePEc:pad:wpaper:0301&r=ind
  4. By: Antelo, Manel; Bru, Lluís
    Abstract: We study the licensing of a product innovation from an external innovator in a duopoly of firms that compete sequentially with each other through quantities or prices. We find that the innovation is only licensed to a single firm, regardless of market competition. However, both the licensee and contractual terms under quantity competition differ from those under price competition. In the first case, the innovation is licensed to the market-leading firm through a non-distorting contract, and in the second case, to the market-following firm by means of a two-part tariff (distorting) contract involving a per-unit royalty.
    Keywords: Product innovation, licensing, Stackelberg duopoly, quantity competition, price competition
    JEL: D43 D45
    Date: 2023
    URL: http://d.repec.org/n?u=RePEc:pra:mprapa:117542&r=ind
  5. By: H. E. Frech, III; Mark V. Pauly; William S. Comanor; Joseph R. Martinez
    Abstract: In his Labor Day address, President Biden stated that the U.S. “has the highest drug prices in the world, and there is no reason for it.” For new branded drugs, the first part of that statement is supported by a recent RAND Report (Mulcahy et. al. 2021) which found U.S. average prices are 2.3 times those present in both the 32 OECD countries overall and in the UK separately. In this research, we consider the second part of that statement, and identify the economic factors that suggest some “reasons for it.” Viewing pharmaceutical markets through the lens of the theories of global public goods and alliances, as developed by Olson and Zeckhauser (1966), we explain the observed pricing differences along with their implications the for the global supply of innovative new drugs. Similar views were advanced in two U.S. government reports (CEA 2018, 2020), and also by Goldman and Lakdawala (2018). We develop these ideas further and implement them empirically. A commonly held theory presumes that drug companies in the U.S set prices for patented drugs at profit- maximizing levels that fund and incentivize substantial research and development efforts. In contrast, in the rest of the world (ROW), national authorities set prices minimally above marginal costs of production, allowing few revenues remaining to support R&D (CEA Report 2018; Blumenthal 2018; Hooper and Henderson 2022). The ROW countries are then considered to be fully free riding on U.S. research efforts. We examine this argument both theoretically and empirically, and find it wanting. We apply global public good theory to examine the pricing of branded drugs. To this end, we describe the optimal global contribution, as supported by the Lindahl pricing model, and show theoretically that existing independently determined contributions and thereby aggregate R&D levels are likely sub-optimal. Then we implement the model by calculating the contribution to the global public good as represented by short-term profits or quasi-rents received from sales of all branded drugs. These calculations are derived from pricing data contained in the RAND Report along with two market-based estimates of marginal costs. We find that, while ROW contributions are less than those found in the United States, they are more than minimal, and do not approach zero for most countries. When we regress these positive contributions on a country’s size of GDP along with various controls, we find that GDP size alone is a powerful determinant of national contributions. It remains economically and statistically significant without regard to the controls introduced. In addition, we estimate how large are the contributions of ROW countries to the global public good. We offer reasons why US pharmaceutical prices and contributions per capita are nevertheless higher than those found in all ROW countries. We also suggest actions aimed to promote R&D efforts that are closer to the global optimum.
    JEL: I1
    Date: 2023–05
    URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:31272&r=ind
  6. By: Brown, David P. (University of Alberta, Department of Economics); Eckert, Andrew (University of Alberta, Department of Economics); Silveira, Douglas (University of Alberta, Department of Economics)
    Abstract: Wholesale electricity markets have several features that increase the likelihood of collusion, including frequent interaction, multimarket contact, and a high degree of information transparency. As a result, screening techniques for detecting collusive agreements are desired. In this paper, we survey the existing literature on collusive screens and collusion in electricity markets. We discuss key features of non-competitive behaviour to be reflected in screens and suggest directions for improved screening in this industry. In particular, there is considerable potential to include machine learning and data mining techniques in screens in the electricity sector due to recent improvements in these methods.
    Keywords: Screening Methods; Collusion; Electricity Markets
    JEL: L13 L40 L94 Q40
    Date: 2023–06–13
    URL: http://d.repec.org/n?u=RePEc:ris:albaec:2023_007&r=ind
  7. By: Hanming Fang; Xian Xu
    Abstract: In this chapter, we review the development of the insurance industry in China. We provide a comprehensive discussion of its regulatory framework, major insurance segments, market structure, InsurTech, social insurance and the prospects for the future development.
    JEL: G22 G28 H55 L11 O16
    Date: 2023–05
    URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:31292&r=ind

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