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on Industrial Organization |
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Issue of 2024‒03‒25
six papers chosen by |
| By: | Shawn Berry |
| Abstract: | Price perception by consumers represents a challenge to the ability of a business to correctly and profitably price and sell their products or services in a given market and any new target market. Complicating the perception of prices is the dynamics of price and income elasticity and the heterogeneity of consumer preferences. This article proposes a novel metric that conceptualizes elasticity as a means of generally quantifying the potential for price perception problems in a market using an elegant and non-utility based identity. The results suggest that given known price and income elasticity values, a business can anticipate pricing perception problems in advance and address the potential for the damaging distortion of their value proposition. Further, the business can use this insight to correctly choose a strategic pricing approach.. |
| Date: | 2024–02 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2402.05152&r=ind |
| By: | Johannes Johnen; Robin Ng |
| Abstract: | Evidence suggests lower prices lead to better ratings, but better ratings induce firms to charge higher prices in the future. We model that consumers are only willing to make the effort to rate a seller if this seller provides a sufficient value-for-money. Using this model, we explore how firms use prices to impact their own ratings. We show that firms harvest ratings: they offer lower prices in early periods to trigger consumers to leave a good rating in order to earn larger profits in the future. Because especially low-quality firms harvest ratings, harvesting makes ratings less-informative about quality. Based on this mechanism, (i) we argue that rating harvesting causes rating inflation; (ii) we show that a marketplace that facilitates ratings (e.g. through reminders, one-click ratings etc.) may get more ratings, but also less-informative ratings; (iii) a marketplace that screens the quality of sellers makes ratings less-informative if the screening is insufficient. Counter to the conventional wisdom that consumers benefit from ratings via the information they transmit, we show that consumers prefer somewhat, but never fully informative ratings. Nonetheless consumers prefer more-informative ratings than average sellers. We apply these results to characterise when a two-sided platform wants to facilitate ratings, and argue that efforts of major platforms to facilitate ratings did not just lead to less-informative ratings, but also shifted surplus from consumers to sellers. |
| Keywords: | Rating and reviews, digital economy, reputation |
| JEL: | D21 D83 L10 |
| Date: | 2024–02 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2024_509&r=ind |
| By: | Elisabetta Iossa; Simon Loertscher; Leslie M. Marx; Patrick Rey (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement) |
| 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: | Reserves, Sustainability and initiation of collusion, Coordinated effects |
| Date: | 2024–02 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-04459042&r=ind |
| By: | Federico M. Accursi, Raúl Bajo-Buenestado |
| Keywords: | Cooperatives, Pass-through to prices; Market power; Firm conduct; Retail fuel market. |
| JEL: | D22 H22 H32 L21 L29 P13 |
| Date: | 2024–02 |
| URL: | http://d.repec.org/n?u=RePEc:nva:unnvaa:wp02-2024&r=ind |
| By: | Zongxia Liang; Xiaodong Luo |
| Abstract: | We study a reinsurance Stackelberg game in which both the insurer and the reinsurer adopt the mean-variance (abbr. MV) criterion in their decision-making and the reinsurance is irreversible. We apply a unified singular control framework where irreversible reinsurance contracts can be signed in both discrete and continuous times. The results theoretically illustrate that, rather than continuous-time contracts or a bunch of discrete-time contracts, a single once-for-all reinsurance contract is preferred. Moreover, the Stackelberg game turns out to be centering on the signing time of the single contract. The insurer signs the contract if the premium rate is lower than a time-dependent threshold and the reinsurer designs a premium that triggers the signing of the contract at his preferred time. Further, we find that reinsurance preference, discount and reversion have a decreasing dominance in the reinsurer's decision-making, which is not seen for the insurer. |
| Date: | 2024–02 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2402.11580&r=ind |
| By: | Hancke, Robert; Mathei, Laurenz |
| Abstract: | This article examines the responses and strategies developed by business, unions, and governments to the electric turn in the industry in Germany and France, Europe’s main car-producing countries. We concentrate on the role of history and institutions in the determination of adjustment paths. Since institutions reflect specific histories, the electric transition in the industry can take on different forms in different countries. In both countries, governments play a supportive role, leading in France, and following in Germany. The strong works councils in German car companies are reluctant to engage in a rapid transition that would devalue the assets of the workforce and endanger past investments in internal combustion-related technology. Trade unions, in contrast, who organise the workforce in the wider industry, are in favour of a faster transition as it will secure future employment. The French EV industry, in contrast, is now a booming sector, after several decades of deep restructuring with massive employment losses. Its key short-term problem is to train enough workers to staff the rapidly expanding car battery industry. Lacking a deeply rooted training system like the German one, the industry has a relatively free hand in selecting and preparing its future workforce. |
| Keywords: | T&F deal |
| JEL: | J1 |
| Date: | 2024–02–19 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:122000&r=ind |