nep-ind New Economics Papers
on Industrial Organization
Issue of 2023‒11‒20
eight papers chosen by
Kwang Soo Cheong, Johns Hopkins University

  1. Revenue sharing at music streaming platforms By Gustavo Berganti\~nos; Juan D. Moreno-Ternero
  2. Self-preferencing, Quality Provision, and Welfare in Mobile Application Markets By Xuan Teng
  3. Spatial multiproduct competition. By Moez Kilani; André de Palma
  4. Industrial Policy and the Great Divergence By Réka Juhász; Claudia Steinwender
  5. An Economic View of Corporate Social Impact By Hunt Allcott; Giovanni Montanari; Bora Ozaltun; Brandon Tan
  6. The Economics of Copyright in the Digital Age By Christian Peukert; Margaritha Windisch
  7. Unified Merger List in the Container Shipping Industry from 1966: A Structural Estimation of the Transition of Importance of a Firm's Age, Tonnage Capacity, and Geographical Proximity on Merger Decision By Suguru Otani; Takuma Matsuda
  8. An Experimental Analysis of Quality Misperception in Food Labels By Francisco Scott

  1. By: Gustavo Berganti\~nos; Juan D. Moreno-Ternero
    Abstract: We study the problem of sharing the revenues raised from subscriptions to music streaming platforms among content providers. We provide direct, axiomatic and game-theoretical foundations for two focal (and somewhat polar) methods widely used in practice: pro-rata and user-centric. The former rewards artists proportionally to their number of total streams. With the latter, each user's subscription fee is proportionally divided among the artists streamed by that user. We also provide foundations for a family of methods compromising among the previous two, which addresses the rising concern in the music industry to explore new streaming models that better align the interests of artists, fans and streaming services.
    Date: 2023–10
  2. By: Xuan Teng (LMU Munich)
    Abstract: Platforms often display their products ahead of third-party products in search. Is this due to consumers preferring platform-owned products or platforms engaging in self-preferencing by biasing search towards their own products? What are the welfare implications? I develop a structural model of mobile application markets to identify self-preferencing and quantify its welfare effects, taking into account third-party developers' quality adjustment. A new dataset on app downloads, prices, characteristics, and search rankings is used to estimate the model. Estimates indicate self-preferencing. Simulations show higher consumer welfare and third-party profits without self-preferencing.
    Keywords: competition policy; platform design; consumer search; endogenous product choice;
    JEL: D12 D83 L13 L86
    Date: 2023–10–23
  3. By: Moez Kilani; André de Palma
    Abstract: We analyze spatial competition on a circle between firms that have multiple outlets and face quadratic transport costs. The equilibrium is a two-stage Nash game: first, firms decide on their locations and then set their prices. We are able to solve analytically simple multi-outlet cases, but for the general case, we require an algorithm to enumerate all non-isomorphic configurations. While price equilibria are explicit and unique, solving the full two-stage game requires numerical methods. In the location game, we consider two scenarios: either firms cannot jump one outlet over a competitors’ outlet, or firms have the flexibility to locate outlets anywhere on the circle. The solution involves a balance between cannibalization, market protection, and spatial monopoly power. We compare prices, profits, and transport costs for all possible configurations. With flexible locations, the firms’ market areas are contiguous. In this case, surprisingly, each firm acts as a spatial monopoly. If regulations enforce that each firm must set the same price for its outlets, head-to-head competition prevails, leading to decreased profits for the firms but to a better-off situation for consumers.
    Keywords: Spatial competition, circle, multi-product oligopoly, price-location equilibria, coin change problem.
    JEL: L13 R32 R53
    Date: 2023
  4. By: Réka Juhász; Claudia Steinwender
    Abstract: We discuss recent work evaluating the role of the government in shaping the economy during the long 19th century, a practice we refer to as industrial policy. We show that states deployed a vast variety of different policies aimed at, primarily, but not exclusively, fostering industrialization. We discuss the thin, but growing literature that evaluates the economic effects of these policies. We highlight some fruitful avenues for future study.
    Keywords: industrial policy, first wave of globalization, industrialization, infant industry protection, technology policy, transport infrastructure, telegraph, 19th century
    JEL: L50 N10 N40 N60
    Date: 2023
  5. By: Hunt Allcott; Giovanni Montanari; Bora Ozaltun; Brandon Tan
    Abstract: The growing discussions of impact investing and stakeholder capitalism have increased interest in measuring companies' social impact. We conceptualize corporate social impact as the welfare loss that would be caused by a firm's exit. To illustrate, we quantify the social impacts of 74 firms in 12 industries using a new survey measuring consumer and worker substitution patterns combined with models of product and labor markets. We find that consumer surplus is the primary component of social impact (dwarfing profits, worker surplus, and externalities), suggesting that consumer impacts deserve more attention from impact investors. Existing ESG and social impact ratings are essentially unrelated to our economically grounded measures.
    JEL: D6 J23 L13 L62 L66 L71 L81 L93 M14 Q54
    Date: 2023–10
  6. By: Christian Peukert; Margaritha Windisch
    Abstract: Intellectual property rights are fundamental to how economies organize innovation and steer the diffusion of knowledge. Copyright law, in particular, has developed constantly to keep up with emerging technologies and the interests of creators, consumers, and intermediaries of the different creative industries. We provide a synthesis of the literature on the law and economics of copyright in the digital age, with a particular focus on the available empirical evidence. First, we discuss the legal foundations of the copyright system and developments of length and scope throughout the era of digitization. Second, we review the literature on technological change with its opportunities and challenges for the stakeholders involved. We give special attention to empirical evidence on online copyright enforcement, changes in the supply of works due to digital technology, and the importance of creative re-use and new licensing and business models. We then set out avenues for further research identifying critical gaps in the literature regarding the scope of empirical copyright research, the effects of technology that enables algorithmic licensing, and copyright issues related to software, data and artificial intelligence.
    Keywords: copyright, digitization, technology, enforcement, licensing, business models, evidence
    JEL: K11 L82 L86
    Date: 2023
  7. By: Suguru Otani; Takuma Matsuda
    Abstract: We construct a novel unified merger list in the global container shipping industry between 1966 (the beginning of the industry) and 2022. Combining the list with proprietary data, we construct a structural matching model to describe the historical transition of the importance of a firm's age, size, and geographical proximity on merger decisions. We find that, as a positive factor, a firm's size is more important than a firm's age by 9.974 times as a merger incentive between 1991 and 2005. However, between 2006 and 2022, as a negative factor, a firm's size is more important than a firm's age by 0.026-0.630 times, that is, a firm's size works as a disincentive. We also find that the distance between buyer and seller firms works as a disincentive for the whole period, but the importance has dwindled to economic insignificance in recent years. In counterfactual simulations, we observe that the prohibition of mergers between firms in the same country would affect the merger configuration of not only the firms involved in prohibited mergers but also those involved in permitted mergers.
    Date: 2023–10
  8. By: Francisco Scott
    Abstract: The size and distribution of surplus in markets where credence quality attributes of food (e.g., organic, non-GMO) are conveyed through some informational mechanism (typically labels) crucially depend on 1) how information changes consumers’ perception of quality and 2) producers’ strategic choice of quality provision in response to changes in consumers’ perception of quality. This paper examines the hypothesis that consumers’ misperception of quality information can provide incentives to sellers to increase quality and offset the lower quality that exists in markets where firms imperfectly compete in quality and prices. Using previously derived theoretical predictions of a two-stage game in which firms sequentially choose qualities—which are misperceived by consumers—to then simultaneously choose prices, I conduct a laboratory experiment that emulates changes in consumers’ perception of quality and examines their effects on producers’ provision of quality and market surplus. My results indicate that total surplus increases mainly with overvaluation of the high-quality product, confirming theoretical predictions. But contrary to the theory, I find that low-quality sellers try to compete by raising their quality levels too much when low quality is overvalued, dampening their quality-adjusted prices. As a result, welfare approaches first-best only when the high-quality product produced by the market leader is overvalued. These results highlight the importance of examining the market structure when designing informational policies.
    Keywords: agriculture; consumer behavior; Food industry and trade
    JEL: C9 Q18
    Date: 2023–10–19

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