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on Industrial Organization |
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Issue of 2013‒05‒22
ten papers chosen by |
| By: | Antonella Nocco; Gianmarco I. P. Ottaviano; Matteo Salto |
| Abstract: | After some decades of relative oblivion, the interest in the optimality properties of monopolistic competition has recently re-emerged due to the availability of an appropriate and parsimonious framework to deal with firm heterogeneity. Within this framework we show that non-separable utility, variable demand elasticity and endogenous firm heterogeneity cause the market equilibrium to err in many ways, concerning the number of products, the size and the choice of producers, the overall size of the monopolistically competitive sector. More crucially with respect to the existing literature, we also show that the extent of the errors depends on the degree of firm heterogeneity. In particular, the inefficiency of the market equilibrium seems to be largest when selection among heterogeneous firms is needed most, that is, when there are relatively many firms with low productivity and relatively few firms with high productivity. |
| Keywords: | monopolistic competition, product diversity, heterogeneity, selection, welfare |
| JEL: | D4 D6 F1 L0 L1 |
| Date: | 2013–04 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp1206&r=ind |
| By: | Maria Alipranti (University of Crete); Emmanuel Petrakis (Department of Economics, University of Crete, Greece) |
| Abstract: | The present paper compares the Cournot and Bertrand equilibrium outcomes and social welfare in vertically related markets with upstream monopolistic market structure, where the trade between the upstream monopolist and the downstream firms is conducted via two-part tariffs contracts. We show that the equilibrium quantities, the profits of the downstream firms, the consumers' surplus and the social welfare are always higher under Cournot final market competition than under Bertrand final market competition. On the contrary the equilibrium profits of the upstream monopolist under Bertrand market competition always exceed those obtained under Cournot market competition. |
| Keywords: | Vertical relations, Betrand, Cournot, Two-part tariffs |
| JEL: | L13 L22 D43 |
| Date: | 2012–08–29 |
| URL: | http://d.repec.org/n?u=RePEc:crt:wpaper:1305&r=ind |
| By: | Maria Alipranti (University of Crete); Emmanuel Petrakis (Department of Economics, University of Crete, Greece) |
| Abstract: | The present paper investigates the firms' incentives to invest in comparative advertising in a spatially differentiated duopoly market characterized by network externalities. We show that for a wide range of locations, determined by the interaction between the transportation cost, the network effects and the effectiveness of advertising, firms have incentives to invest in comparative advertising with their investment levels to be positively related to the transportation cost and negatively related to the network effects. Further, comparing the equilibrium results of our model with the benchmark case without advertising activities and the case without network externalities, we show that the firms' location distance increases in the presence of network externalities, while it decreases in the presence of comparative advertising. |
| Keywords: | Comparative Advertising, Network Effects, Location |
| JEL: | L13 D43 M37 |
| Date: | 2012–08–29 |
| URL: | http://d.repec.org/n?u=RePEc:crt:wpaper:1306&r=ind |
| By: | Chia-Hui Chen; Junichiro Ishida |
| Abstract: | Auctions are a popular and prevalent form of trading mechanism, despite the restriction that the seller cannot price-discriminate among potential buyers. To understand why this is the case, we consider an auction-like environment in which a seller with an indivisible object negotiates with two asymmetric buyers to determine who obtains the object and at what price. The trading process resembles the Dutch auction, except that the seller is allowed to offer different prices to different buyers. We show that when the seller can commit to a price path in advance, the optimal outcome can generally be implemented. When the seller lacks such commitment power, however, there instead exists an equilibrium in which the seller's expected payoff is driven down to the second-price auction level. Our analysis suggests that having the discretion to price discriminate is not necessarily beneficial for the seller, and even harmful under plausible conditions, which could explain the pervasive use of auctions in practice. |
| Date: | 2013–05 |
| URL: | http://d.repec.org/n?u=RePEc:dpr:wpaper:0873&r=ind |
| By: | Alberto Galasso; Mark Schankerman |
| Abstract: | Cumulative innovation is central to economic growth. Do patent rights facilitate or impede such follow-on innovation? This paper studies the effect of removing patent protection through court invalidation on the subsequent research related to the focal patent, as measured by later citations. We exploit random allocation of judges at the U.S. Court of Appeal for the Federal Circuit to control for the endogeneity of patent invalidation. We find that patent invalidation leads to a 50 percent increase in subsequent citations to the focal patent, on average, but the impact is highly heterogeneous. Patent rights appear to block follow-on innovation only in the technology fields of computers, electronics and medical instruments. Moreover, the effect is entirely driven by invalidation of patents owned by large patentees that triggers entry of small innovators, suggesting that patents may impede the 'democratization' of innovation. |
| Keywords: | patent rights, cumulative innovation, economics of innovation |
| JEL: | O33 O34 K41 |
| Date: | 2013–04 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp1205&r=ind |
| By: | Christian Jaag |
| Abstract: | The financing of universal service in network industries has traditionally relied on granting the universal service provider (USP) a reserved area. Liberalization policies promoting competitive entry put the traditional universal service at risk. Consequently, there is an increased interest in knowing the cost of the universal service obligation (USO) and an intensive policy debate about its financing. This paper explores the complementary roles of price regulation and universal service regulation in network industries. It analyzes compensation for the universal service provider by public finances and a USO fund. As long as the USP enjoys market power, also price regulation may serve as a means to finance universal services. This implies allowing for price increases to compensate for the net cost of the USO. It releases competing operators or the general budget from contributing to the financing of the USO but results in distorted pricing and reduced overall welfare due to inefficient entry. Generally, the analysis shows that current practices of costing and financing universal services may result in unintended market distortions. The paper quantifies these effects and demonstrates how such distortions can be avoided. |
| Keywords: | Universal service obligation, Postal sector, Net cost, Price regulation |
| JEL: | L51 |
| Date: | 2013–04 |
| URL: | http://d.repec.org/n?u=RePEc:chc:wpaper:0039&r=ind |
| By: | Andra Leurdijk (TNO); Ottilie Nieuwenhuis (TNO); Mijke Slot (TNO) |
| Abstract: | This report offers an in-depth analysis of the major economic developments in the music industry. It looks at music companies, and covers the production and distribution of recorded music, including online distribution, and the competition which these companies face from other online music providers. It also looks at the organisation of live performances and the exploitation of music copyright, though data on how these activities contribute to revenues in the sector are less systematically available. The analysis integrates data from this project’s statistical report and includes a database of the major music publishing companies plus two company case studies (EMI and Spotify). The report is divided into six chapters. Following the introduction in Chapter 1, Chapter 2 introduces the sector and its main economic and technological features. Chapter 3 analyses the value network of the music industry, identifying the transformations taking place in the value network and business model as a result of the on-going digitization process. Chapter 5 identifies the main regulatory issues affecting the economic position of the EU music publishing industry. Finally, Chapter 6 weighs the strengths and weaknesses of the European music publishing industry against the opportunities and threats posed by digitization and the internet. The study is based on a review and synthesis of the available literature and reports and on official (Eurostat) and unofficial (trade organisations and consultancies) data on the music publishing industry. |
| Keywords: | media industries, content industries, newspaper publishing |
| Date: | 2012–06 |
| URL: | http://d.repec.org/n?u=RePEc:ipt:iptwpa:jrc69881&r=ind |
| By: | Andra Leurdijk (TNO); Silvain de Munck (TNO); Tijs van den Broek (TNO); Arjanna van der Plas (TNO); Walter Manshanden (TNO); Elmer Rietveld (TNO) |
| Abstract: | This report offers a quantitative statistical approach to the Media and Content Industries (MCI). It is based on official data sources and complemented with data from non-official data sources. The current OECD definition of the MCI sector is discussed, as regards the limitations of the definition itself and of its operationalization. The approach taken in the collection of data, and also problems with data availability, are dealt with. The official data sources consulted include Eurostat data for EU Member States, the OECD and national statistical offices. In addition, the report draws on a number of non-official sources which complement official statistics and contribute to a better analysis and understanding of the economic profile of the MCI sector, particularly when describing new developments not (yet) covered by official statistics. Data from non-official sources to describe some emerging trends regarding the effect of ICT on the MCI are also provided. The study contains an economic profile of the Media and Content Industries for the individual EU Member States and for the US, Japan, India and China. |
| Keywords: | Media, ICT, Digital shift, EU policies, Copyright |
| JEL: | L1 L5 L82 |
| Date: | 2012–06 |
| URL: | http://d.repec.org/n?u=RePEc:ipt:iptwpa:jrc69435&r=ind |
| By: | Sophie De Vinck (SMIT IBBT); Sven Lindmark (SMIT IBBT) |
| Abstract: | This report offers an in-depth analysis of the major economic developments of the film industry. The object of analysis is feature films, encompassing their production as well as distribution through and exhibition across different channels. It reviews the economic characteristics of the film industry, some of which it shares with other media and content industries. The report includes a database of 10 EU and 10 non-EU companies plus two company case studies (Netflix and Universciné). The report is divided into four major parts. Following an introduction (Chapter 1), Chapter 2 introduces the sector and its main economic, cultural, technological and regulatory features. Chapter 3 analyses the value network of the European film industry in a global perspective, identifying specific strengths and weaknesses across different parts of the value network (production, distribution and exhibition). Chapter 4 analyses how the film industry and its value network are being transformed as a result of the ongoing digitalisation process. Chapter 5 concludes the report by confronting the strengths and weaknesses of the European film industry and the opportunities and challenges posed by digitalisation. The study is based on a review and synthesis of the available literature and reports and on official (Eurostat) and unofficial (trade organisations and consultancies) data on the cinema industry. |
| Keywords: | Media, ICT, Digital shift, EU policies, Copyright |
| JEL: | L1 L5 L82 |
| Date: | 2012–06 |
| URL: | http://d.repec.org/n?u=RePEc:ipt:iptwpa:jrc69525&r=ind |
| By: | Andra Leurdijk, (TNO); Ottilie Nieuwenhuis (TNO) |
| Abstract: | This report offers an in-depth analysis of the major economic developments in the music industry. It looks at music companies, and covers the production and distribution of recorded music, including online distribution, and the competition which these companies face from other online music providers. It also looks at the organisation of live performances and the exploitation of music copyright, though data on how these activities contribute to revenues in the sector are less systematically available. The analysis integrates data from this project’s statistical report and includes a database of the major music publishing companies plus two company case studies (EMI and Spotify). The report is divided into six chapters. Following the introduction in Chapter 1, Chapter 2 introduces the sector and its main economic and technological features. Chapter 3 analyses the value network of the music industry, identifying the transformations taking place in the value network and business model as a result of the on-going digitization process. Chapter 5 identifies the main regulatory issues affecting the economic position of the EU music publishing industry. Finally, Chapter 6 weighs the strengths and weaknesses of the European music publishing industry against the opportunities and threats posed by digitization and the internet. The study is based on a review and synthesis of the available literature and reports and on official (Eurostat) and unofficial (trade organisations and consultancies) data on the music publishing industry. |
| Keywords: | media industries, content industries, music industry, digitalisation, copyright, business model. |
| Date: | 2013–01 |
| URL: | http://d.repec.org/n?u=RePEc:ipt:iptwpa:jrc69816&r=ind |