nep-ind New Economics Papers
on Industrial Organization
Issue of 2023‒07‒24
eight papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. The economics of influencers and social media stardom By Gänßle, Sophia; Budzinski, Oliver
  2. Data Portability and Competition: Can Data Portability Increase both Consumer Surplus and Profits? By Jeon, Doh-Shin; Menicucci, Domenico
  3. Stable cartel configurations: the case of multiple cartels By Khan, Abhimanyu; Peeters, Ronald
  4. Coordination in the Fight Against Collusion By Rey, Patrick; Iossa, Elisabetta; Loertscher, Simon; Leslie M. Marx,
  5. Imperfect Collusion On Surveilled Markets With Free Entry By Ludwig von Auer; Tu Anh Pham
  6. Market Segregation in the Presence of Customer Discrimination By J. Atsu Amegashie
  7. Do Hospital Mergers Reduce Waiting Times? Theory and Evidence from the English NHS By Cirulli, Vanessa; Marini, Giorgia; Marini, Marco A.; Straume, Odd Rune
  8. Market Power in the U.S. Beef Packing Industry By Bolotova, Yuliya V.

  1. By: Gänßle, Sophia; Budzinski, Oliver
    Abstract: This chapter provides an overview of the economics of influencers and social media stardom. It provides the state-of-research regarding success factors, revenue and payment models, social media platforms and ecosystems, and welfare effects. It describes the role of social media content providers within the media industries and explores the differences and similarities of this new innovative element in media markets compared to its more traditional counterparts (traditional stars and traditional media industries).
    Keywords: social media, superstars, influencer, platforms, stardom, content producers, YouTube, Instagram, TikTok, gatekeepers
    JEL: L82 Z10 L13 L15 L86 D43 D83 F23 M21 D91 L26
    Date: 2023
  2. By: Jeon, Doh-Shin; Menicucci, Domenico
    Abstract: We study how data portability aspects consumer surplus and firms profits in a two-period model with a switching cost where two rms compete under a non-negative pricing constraint. The firms can circumvent the constraint by tying another complementary free service (called "freebies") with the original service. We consider a general framework of incomplete pass-through of freebies into consumer benet, which includes the two extreme cases of no pass through and full pass through. Regarding the effect on consumer surplus, data portability involves a trade-off between intensifying competition after consumer lock-in and reducing rent dissipation before consumer lock-in. For an intermediate range of pass-through rates, data portability increases both consumer surplus and profits.
    JEL: D21 D43 L13 L15
    Date: 2023–06–27
  3. By: Khan, Abhimanyu; Peeters, Ronald
    Abstract: We develop a framework to analyse stability of cartels in differentiated Cournot oligopolies when multiple cartels may exist in the market. The consideration of formation of multiple cartels is in direct contrast to the existing literature which assumes, without further justification, that at most a single cartel may be formed, and we show that this consideration has markedly different implications for cartel stability. We define a cartel configuration to be stable if: (i) a firm in a cartel does not find it more profitable to leave the cartel and operate independently, (ii) a firm that operates independently does not find it more profitable to join an existing cartel, (iii) a firm in a cartel does not find it more profitable to join another existing cartel or form a new cartel with an independent firm, and (iv) two independent firms do not find it more profitable to form a new cartel. We show that now, when multiple cartels may exist in the market, a single cartel is never stable.
    Keywords: multiple cartels; stability; differentiated market.
    JEL: C70 D43 L13
    Date: 2023–06–26
  4. By: Rey, Patrick; Iossa, Elisabetta; Loertscher, Simon; Leslie M. Marx,
    Abstract: While antitrust authorities strive to detect, prosecute, and thereby deter collusive conduct, entities harmed by that conduct are also advised to pursue their own strategies to deter collusion. The implications of such delegation of deterrence have largely been ignored, however. In a procurement context, we find that buyers may prefer to accommodate rather than deter collusion among their suppliers. We also show that a multi-market buyer, such as a centralized procurement authority, may optimally deter collusion when multiple independent buyers would not, consistent with the view that “large” buyers are less susceptible to collusion.
    Keywords: Collusion; Cartel; Auction; Procurement; Reserves; Sustainability and initiation of collusion; Coordinated effects
    JEL: D44 D82 H57 L41
    Date: 2023–06–05
  5. By: Ludwig von Auer; Tu Anh Pham
    Abstract: Surveys of cartel proceedings reveal that illegal cartels usually (1) attempt to minimize the risk of detection, (2) achieve merely imperfect levels of collusion, (3) compete against some fringe firms, and (4) adjust to market entries and exits. By contrast, existing oligopoly models of collusive behavior consider only some of the four listed stylized facts and, thus, run the risk of missing important interdependencies between them. Therefore, the present paper develops a general quantity leadership model that simultaneously accommodates all four stylized facts. Within this model, an imperfectly colluding group of firms competes against independent fringe rivals. The market is surveilled by an antitrust authority that has three different policy instruments at its disposal: Ensuring free market access, obstructing collusion, and discouraging collusion through law enforcement. The results of the model indicate that the latter two instruments are rather ineffective.
    Keywords: antitrust, fringe, oligopoly, stability, sustainability
    JEL: L0 L1
    Date: 2023
  6. By: J. Atsu Amegashie
    Abstract: I consider a market with two firms, a minority group of customers, and a bigoted (racist, ethnocentric, xenophobic, or sexist) majority group of customers. There exists a Nash equilibrium with full segregation in which a low-price firm serves only the minority and a high-price firm serves only the majority. There is also a partial-integration equilibrium in which a high-price firm serves only the majority while a low-price firm serves both the minority and majority. Paradoxically, if the minority group is sufficiently big and the majority is sufficiently prejudiced, then both equilibria hold in the sense that the high-price firm does not lose customers, although its competitor charges a lower price. If the firms can price discriminate, none of these equilibria will hold. The partial integration equilibrium depends on how the prejudice of the majority is modelled.
    Keywords: customer discrimination, majority, markets, minority, segregation
    JEL: J15
    Date: 2023
  7. By: Cirulli, Vanessa; Marini, Giorgia; Marini, Marco A.; Straume, Odd Rune
    Abstract: We analyse – theoretically and empirically – the effect of hospital mergers on waiting times in healthcare markets where prices are fixed. Using a spatial modelling framework where patients choose provider based on travelling distance and waiting times, we show that the effect is theoretically ambiguous. In the presence of cost synergies, the scope for lower waiting times as a result of the merger is larger if the hospitals are more profit-oriented. This result is arguably confirmed by our empirical analysis, which is based on a conditional flexible difference-indifferences methodology applied to a long panel of data on hospital mergers in the English NHS, where we find that the effects of a merger on waiting times crucially rely on a legal status that can reasonably be linked to the degree of profit-orientation. Whereas hospital mergers involving Foundation Trusts tend to reduce waiting times, the corresponding effect of mergers involving hospitals without this legal status tends to go in the opposite direction
    Keywords: Health Economics and Policy, Productivity Analysis, Public Economics
    Date: 2023–07–04
  8. By: Bolotova, Yuliya V.
    Abstract: This case study is motivated by recent developments in the U.S. beef packing industry involving allegations of an illegal exercise of buyer and seller market power by the four largest beef packers in the country in the markets for fed cattle and beef products, respectively. In 2019, fed cattle producers and beef buyers filed class action antitrust lawsuits against these companies alleging that they engaged in an unlawful conspiracy with the purpose of decreasing fed cattle prices and increasing wholesale and retail prices of beef as early as January 2015 and thus violated Section 1 of the Sherman Act. The case study focuses on applications of economic models that may explain conduct and performance of the beef packing industry using the perspectives of plaintiffs and defendants in the on-going cattle and beef antitrust litigation. The case study also introduces a basic empirical analysis of beef production, beef values, and marketing margins in the beef supply chain based on publicly available data reported by the U.S. Department of Agriculture. The intended audiences are undergraduate and graduate students, as well as extension and outreach communities. The teaching note1 summarizes student learning objectives and teaching strategies, and also includes multiple-choice questions, as well as suggested answers and guidance to analytical, discussion, and multiple-choice questions.
    Keywords: Demand and Price Analysis, Livestock Production/Industries
    Date: 2023–07

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