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on Industrial Organization |
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Issue of 2024‒02‒26
six papers chosen by |
| By: | Dirk Bergemann; Tibor Heumann; Michael C. Wang |
| Abstract: | We analyze the welfare impact of a monopolist able to segment a multiproduct market and offer differentiated price menus within each segment. We characterize a family of extremal distributions such that all achievable welfare outcomes can be reached by selecting segments from within these distributions. This family of distributions arises as the solution to the consumer maximizing distribution of values for multigood markets. With these results, we analyze the effect of segmentation on consumer surplus and prices in both interior and extremal markets, including conditions under which there exists a segmentation benefiting all consumers. Finally, we present an efficient algorithm for computing segmentations. |
| Date: | 2024–01 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2401.12366&r=ind |
| By: | Claudia Allende; Juan Pablo Atal; Rodrigo Carril; Jose Ignacio Cuesta; Andrés González Lira |
| Abstract: | This paper examines the determinants of public procurement prices using comprehensive data on pharmaceutical purchases by the Chilean public sector. We start by estimating the extent to which different public agencies pay different prices for the same product. These buyer effects are sizable, and the difference between average prices paid by buyers at the 10th and 90th percentiles is 16%. Our main set of results is related to the role of market structure. The variation in market structure explains three times more variation in procurement prices than buyer effects. Moreover, using exogenous variation from patent expirations, we estimate that the entry of an additional vendor decreases average procurement prices by 11.7%, which is 72% of the gap between average prices paid by buyers at the 10th and 90th percentiles of the distribution of buyer effects. These results suggest that supply-side factors are key determinants of public procurement prices and that their quantitative importance may exceed that of demand-side factors previously emphasized in the literature. |
| Keywords: | Procurement, Bureaucracy, competition, pharmaceutical drugs |
| JEL: | D44 D73 H57 |
| Date: | 2023–11 |
| URL: | http://d.repec.org/n?u=RePEc:upf:upfgen:1874&r=ind |
| By: | William E. Bendinelli; Humberto F. A. J. Bettini; Alessandro V. M. Oliveira |
| Abstract: | This paper develops an econometric model of flight delays to investigate the influence of competition and dominance on the incentives of carriers to maintain on-time performance. We consider both the route and the airport levels to inspect the local and global effects of competition, with a unifying framework to test the hypotheses of 1. airport congestion internalization and 2. the market competition-quality relationship in a single econometric model. In particular, we examine the impacts of the entry of low cost carriers (LCC) on the flight delays of incumbent full service carriers in the Brazilian airline industry. The main results indicate a highly significant effect of airport congestion self-internalization in parallel with route-level quality competition. Additionally, the potential competition caused by LCC presence provokes a global effect that suggests the existence of non-price spillovers of the LCC entry to non-entered routes. |
| Date: | 2024–01 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2401.09174&r=ind |
| By: | Martimort, David; Pouyet, Jérôme |
| Abstract: | Pay-TV firms compete both downstream to attract viewers and upstream to acquire broadcasting rights. Because profits inherited from downstream competition satisfy a convexity property, allocating rights to the dominant firm maximizes the industry profit. Such an exclusive allocation of rights emerges as a robust equilibrium outcome but may fail to maximize welfare. We analyze whether a ban on resale and a ban on package bidding may improve welfare. These corrective policies have no impact on the final allocation but lead to profit redistribution along the value chain. |
| Keywords: | Broadcasting rights; Upstream and downstream competition; Exclusivity |
| JEL: | L13 L42 |
| Date: | 2024–01–23 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:129026&r=ind |
| By: | Meens-Eriksson, Sef (Department of Economics, Umeå University) |
| Abstract: | General features of waste treatment markets include comprehensive regulations and high fixed capital costs. Hence, firms operating in them have substantial local market power, which is used to mark up prices through spatial price discrimination (Granlund and Meens-Eriksson, 2023). This paper examines effects of waste treatment firms’ spatial price discrimination on Swedish municipalities’ welfare and costs of waste disposal, as well as the associated distributional implications. Results show that the Equivalent Variation is 3.3% of a municipality’s cost for residual waste disposal, on average. Further, the welfare loss disproportionately affects a small number of municipalities, with 10% accounting for 62% of consumer welfare loss. Nearly the entire loss in consumer welfare is redistributed to firms. Considering political ambitions to transform the waste management sector, an alternative scenario is simulated, involving closure of the smallest 20% of waste incineration plants. This would increase the disposal cost for about a quarter of municipalities, and the negative welfare effect within this group would be 12% of their cost of waste disposal. |
| Keywords: | Spatial price discrimination; welfare effects; equivalent variation; waste economics |
| JEL: | D43 D60 L11 L13 Q53 |
| Date: | 2024–02–03 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:umnees:1021&r=ind |
| By: | Bassma Azzamouri (CREM - Centre de recherche en économie et management - UNICAEN - Université de Caen Normandie - NU - Normandie Université - UR - Université de Rennes - CNRS - Centre National de la Recherche Scientifique, UR - Université de Rennes, EMINES School of Industrial Management [UM6P] - UM6P - Université Mohammed VI Polytechnique [Ben Guerir]); Vincent Hovelaque (CREM - Centre de recherche en économie et management - UNICAEN - Université de Caen Normandie - NU - Normandie Université - UR - Université de Rennes - CNRS - Centre National de la Recherche Scientifique, UR - Université de Rennes) |
| Abstract: | This paper presents and illustrates an original application of the redesign in the real context of a mining supply chain producing phosphate rock. One of the major challenges is to successfully produce the final products required by the customers, from raw materials whose chemical composition and availability depend on the extraction program and method. Redesign of the mining supply chain consists of considering the impact of extraction, processing, and blending stages in achieving target objectives. The proposed approach, based on a mixed integer linear programming model, allows moving from fixed production flows to dynamic ones by adopting a flexible and reactive management mode that fully satisfies customer requirements at minimum production costs. Numerical results obtained using real data, corresponding to the infrastructure and order books, illustrate (i) the flexibility, quality, and horizontal alignment ensured by our approach and (ii) the impact of the extraction method on the ability of the SC to fulfil the orders book with more efficiency. |
| Keywords: | Redesign proposal, Alternative Routings, Blending, Supply chain |
| Date: | 2024–01–11 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-04418207&r=ind |