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on Industrial Organization |
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Issue of 2020‒02‒24
four papers chosen by |
| By: | Nicholas Economides (Professor of Economics, NYU Stern School of Business, New York, New York 10012); John Kwoka (Neal F. Finnegan Distinguished Professor of Economics, College of Social Sciences and Humanities, Northeastern University); Thomas Philippon (Max L. Heine Professor of Finance, NYU Stern School of Business, New York, New York 10012); Hal Singer (Managing Director at Econ One, Adjunct Professor at Georgetown McDonough School of Business); Lawrence J. White (Robert Kavesh Professor of Economics, NYU Stern School of Business, New York, New York 10012) |
| Abstract: | We provide comments on the recent DOJ/FTC draft vertical merger guidelines |
| Keywords: | DOJ; FTC; Vertical Merger; Guidelines; |
| JEL: | L1 L4 L5 L9 |
| Date: | 2020–02 |
| URL: | http://d.repec.org/n?u=RePEc:net:wpaper:2004&r=all |
| By: | Janssen, Aljoscha (Singapore Management University) |
| Abstract: | This article examines the market power of branded prescription drugs faced with generic competition. Using prescription-level and matched socioeconomic panel data of the entire Swedish population between 2010 and 2016, I provide evidence for the key role of switching costs. A discontinuity surrounding patent expirations establishes that the effect is causal. Further, by comparing patients with and without medical education, I show that those without medical education experience higher brand premia. A unique feature of the Swedish market allows me to rule out patients’ inattention due to information costs as a source of market power. Therefore, switching costs and perceived quality differences are the key determinants of market power. I then estimate a dynamic oligopoly model with forward-looking firms which is used in counterfactual studies of the effect of switching costs and perceived quality differences on prices. First, an increase in the length of procurement mimics a reduction of switching costs and increases prices. While the effect of switching costs on prices in theory is ambiguous, moderate switching costs and sufficient competition for new patients increase competitive pressure. Second, if everyone acts as a medical expert and experiences fewer brand premia, prices decrease. |
| Keywords: | Switching Costs; Brand Premia; Behavioral Pricing; Pharmaceuticals |
| JEL: | D12 I11 L13 |
| Date: | 2020–02–12 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:iuiwop:1317&r=all |
| By: | Daniel Bjorkegren |
| Abstract: | This paper develops a method to analyze the effects of competition policy in a network industry. Competition has mixed effects on incentives to invest: when a network is split between competitors, each captures only a fraction of potential network effects. However, a firm may invest in components that are not shared, to attract customers to its network. I structurally estimate the utility of adopting a mobile phone from its subsequent usage, using transaction data from nearly the entire Rwandan network over 4.5 years. I simulate the equilibrium choices of consumers and network operators, and consider Rwanda’s decision to delay the introduction of competition. I show that there is a policy under which adding a competitor earlier would have reduced prices and increased incentives to invest in rural towers, increasing welfare by the equivalent of 1% of GDP. I analyze the effects of setting different interconnection rates, and reducing switching costs through number portability. |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:bro:econwp:2020-04&r=all |
| By: | Damoah,Kaku Attah |
| Abstract: | This paper investigates the impact of Ghana's World Trade Organization (WTO) accession on firm-level product and labor market imperfections. The paper exploits a rich dataset of firm-level information to estimate both markups and the degree of monopsony power enjoyed by manufacturing firms. The results indicate that price-cost margins declined while the degree of monopsony power increased in the wake of WTO accession. These diverging dynamics suggest that firms compress real wages to offset loss of market power in the product market due to increased international competition. This gives rise to an increase in the market imperfection gap, which gradually erodes the pro-competitive gains from trade. The paper contributes to the literature by identifying channels through which allocative inefficiencies and misallocation can persist even after trade liberalization. |
| Keywords: | International Trade and Trade Rules,Rural Labor Markets,Labor Markets,Common Carriers Industry,Food&Beverage Industry,Construction Industry,Business Cycles and Stabilization Policies,Plastics&Rubber Industry,Pulp&Paper Industry,Textiles, Apparel&Leather Industry,General Manufacturing,Trade Policy,Trade and Multilateral Issues,Rules of Origin |
| Date: | 2019–12–11 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:9079&r=all |