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Coupling Information Disclosure with a Quality Standard in R&D Contests* The Journal of Industrial Economics (IF 1.054) Pub Date : 2024-03-06 Gaoyang Cai, Qian Jiao, Jingfeng Lu, Jie Zheng
We study two‐player R&D contest design using both an information disclosure policy and a quality standard as instruments. The ability of an innovator is known only to himself. The organizer commits ex‐ante to a minimum quality standard and whether to have innovators' abilities publicly revealed before they conduct R&D activities. We find that without quality standards, fully concealing innovators'
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Price Squeezes as an Exploitative Abuse* The Journal of Industrial Economics (IF 1.054) Pub Date : 2024-03-06 Zhijun Chen
The exclusionary theory of price squeezes, commonly debated in courts and among legal scholars, faces significant challenges. This paper introduces an exploitative rationale for price squeezes. A vertically integrated firm can exploit efficiency gains from a downstream competitor, thereby earning more than the monopoly profit, and price squeezing emerges as a necessary condition for such exploitation
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Vertical Collusion to Exclude Product Improvement* The Journal of Industrial Economics (IF 1.054) Pub Date : 2024-02-29 David Gilo, Yaron Yehezkel
A manufacturer of an established product repeatedly interacts with a retailer that can sell an inferior new product thereby improving it. The manufacturer's exclusionary strategy consists of a permanently below‐cost wholesale price and “vertical collusion” with the retailer to exclude via a future reward of a reduced fixed fee. The latter tool is available only in an infinite game. Although contracts
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Collusion Between Supply Chains under Asymmetric Information* The Journal of Industrial Economics (IF 1.054) Pub Date : 2024-02-22 Yaron Yehezkel
This paper considers an infinitely repeated competition between manufacturer-retailer supply chains. In every period, retailers privately observe the demand and manufacturers pay retailers ‘information rents’. I study collusive equilibria between the supply chains that may or may not involve the retailers. I find that including forward-looking retailers in the collusive scheme may facilitate or hinder
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Managing Seller Conduct in Online Marketplaces and Platform Most‐Favored Nation Clauses* The Journal of Industrial Economics (IF 1.054) Pub Date : 2024-02-23 Frank Schlütter
This article investigates the incentive and ability of a platform to limit the extent of competition between the sellers it hosts. Absent contractual restrictions, a platform has an incentive to ensure competition between the sellers. This incentive can change with the introduction of so‐called platform most‐favored nation clauses (PMFN) that require the online sellers not to offer better conditions
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Regulating Platform Competition in Markets with Network Externalities: Will Predatory Pricing Restrictions Increase Social Welfare?* The Journal of Industrial Economics (IF 1.054) Pub Date : 2024-01-30 Ohad Atad, Yaron Yehezkel
We consider an infinitely repeated platform competition in a market with network externalities. The platform that dominated the market in the previous period becomes the incumbent in the current period. We examine the effect of an antitrust policy that prohibits both platforms (symmetric regulation), or just the incumbent (asymmetric regulation) from charging predatory prices. We show that symmetric
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Manufacturer Collusion and Resale Price Maintenance* The Journal of Industrial Economics (IF 1.054) Pub Date : 2024-01-23 Matthias Hunold, Johannes Muthers
We provide a novel theory of harm for resale price maintenance (RPM). In a model with two manufacturers and two retailers, we show that RPM facilitates manufacturer collusion when retailers have alternatives to selling a manufacturer's product. Because of the alternatives, manufacturers can only ensure that retailers sell their products by leaving sufficient retail margins. This restricts the wholesale
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User Data and Endogenous Entry in Online Markets* The Journal of Industrial Economics (IF 1.054) Pub Date : 2024-01-10 Laura Abrardi, Carlo Cambini, Raffaele Congiu, Flavio Pino
We investigate how the presence of a Data Broker (DB), who sells consumer data to downstream firms, affects firm entry and competition in a horizontally differentiated oligopoly market, in which data allow firms to price discriminate. The DB chooses the price and amount of data sold to each firm. We show that the data sale by the DB reduces excessive market entry, as the competition induced by personalized
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Positive and Negative Sorting in Team Contests* The Journal of Industrial Economics (IF 1.054) Pub Date : 2024-01-02 Qiang Fu, Zenan Wu, Hanyao Zhang, Yangfan Zhou
This paper investigates the formation of teams in a contest. A manager sorts four workers—who differ in their productivity—into two teams. Workers on each team join forces to produce team output, and one team wins a prize; for example, a bonus package. Two sorting patterns are possible: Positive sorting requires that each team consist of players of same caliber and negative sorting the opposite. We
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Monopsony Power and Upstream Innovation* The Journal of Industrial Economics (IF 1.054) Pub Date : 2023-12-29 Álvaro Parra, Guillermo Marshall
How does a monopsonist incentivize its supplier to innovate? By decreasing the short-run profit of the supplier, the monopsonist can increase the supplier's incentive to invest in R&D by lessening the supplier's Arrow's replacement effect. The monopsonist engages in this practice despite a distortion in its trade volume with the supplier that causes inefficiency. We discuss implications for the boundaries
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Double Marginalization and Misplacement in Online Advertising* The Journal of Industrial Economics (IF 1.054) Pub Date : 2023-12-20 Alexander White, Kamal Jain, Shota Ichihashi, Byung-Cheol Kim
Internet users often surf multiple websites as a bundle to fulfill their needs and ‘pay’ for the content by viewing ads. We study how such complementary websites choose advertising policies. Two forces distort the equilibrium away from the industry optimum and the efficient outcome. First, websites place too many ads (double marginalization). Second, given the total advertising volume at equilibrium
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How Do Shoppers Respond to Noisy Signals on Price Changes? Evidence from a Field Experiment in Online Supermarket Shopping* The Journal of Industrial Economics (IF 1.054) Pub Date : 2023-12-20 Kfir Eliaz, Orli Oren-Kolbinger, Sarit Weisburd
What is the effect on the demand for both discounted and nondiscounted products, when promotional material informs shoppers that some product categories feature discounts? We address this question by conducting a field experiment on a website for online grocery shopping. We find that shoppers who had purchased in a certain food category prior to the experiment responded to noisy promotional information
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Vertical Mergers in Ecosystems with Consumer Hold-Up* The Journal of Industrial Economics (IF 1.054) Pub Date : 2023-11-29 Daniele Condorelli, Jorge Padilla, Youngji Sohn
An ecosystem comprises all downstream products that employ a certain upstream input. In many cases, final consumers make irreversible investments to join an ecosystem before downstream prices are set. By committing to buy products that use the specific ecosystem input, they are at risk of being held-up. Unable to observe future prices, consumers base their decisions on what they observe about the market
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Product Repositioning by Merging Firms* The Journal of Industrial Economics (IF 1.054) Pub Date : 2023-11-29 Enghin Atalay, Alan Sorensen, Christopher Sullivan, Wanjia Zhu
We examine merging firms' additions and removals of products for a sample of 66 mergers across a wide variety of consumer packaged goods markets. We find that mergers lead to a net reduction in the number of products offered by merging firms. Merging firms tend to both drop and add products at the periphery of their joint product portfolios, with the net effect of increasing within-firm product similarity
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Firm Competition and Cooperation with Norm-Based Preferences for Sustainability The Journal of Industrial Economics (IF 1.054) Pub Date : 2023-11-27 Roman Inderst, Eftichios S. Sartzetakis, Anastasios Xepapadeas
We analyze firms' incentives to coordinate on the introduction of a sustainable product variant when consumers' preferences for sustainability depend on the perceived social norm, which in turn is shaped by average consumption behavior. We show that such preferences could lead to multiple equilibria. If the level of competition among potential adopters is very low and adoption of the sustainable variant
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Secret Bilateral Forward Contracting* The Journal of Industrial Economics (IF 1.054) Pub Date : 2023-11-20 Geert Van Moer
I analyze secret bilateral forward contracting in a Cournot oligopoly. A secret bilateral forward contract affects the production quantities of the firms which are party to the contract but not of the outsiders. On the one hand, forward contracts facilitate for heterogeneous firms to rationalize production across facilities. On the other hand, firms also consider how forward contracting affects their
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Resale Price Maintenance in a Successive Monopoly Model* The Journal of Industrial Economics (IF 1.054) Pub Date : 2023-11-20 Markus Dertwinkel-Kalt, Christian Wey
We explain why a manufacturer may impose a minimum resale price in a successive monopoly setting. Our argument relies on the retailer having noncontractible choice variables such as the price of a substitute good and/or the retailer's service effort. Our explanation for minimum resale prices is empirically distinguishable from alternative justifications that rely, for instance, on retailer competition
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Risk Aversion and Double Marginalization* The Journal of Industrial Economics (IF 1.054) Pub Date : 2023-11-20 Soheil Ghili, Matt Schmitt
In vertical markets, eliminating double marginalization with a two-part tariff may not be possible due to risk aversion. Under uncertain demand, contracts with large fixed fees expose the downstream firm to more risk than contracts that are more reliant on variable fees. In equilibrium, contracts may thus rely on variable fees, giving rise to double marginalization. Counterintuitively, however, we
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THE PRODUCTIVITY EFFECTS OF CORPORATE DIVERSIFICATION* The Journal of Industrial Economics (IF 1.054) Pub Date : 2023-11-17 Germán Bet
This paper studies the productivity effects of corporate diversification. I estimate a model that allows diversification decisions to affect future productivity. I apply the model to a panel of U.S. manufacturing firms to measure the impact of diversification on productivity. My estimates suggest that diversification plays a key role in explaining differences in productivity across productive units
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Privacy Regulation and Quality-Enhancing Innovation* The Journal of Industrial Economics (IF 1.054) Pub Date : 2023-11-16 Yassine Lefouili, Leonardo Madio, Ying Lei Toh
We analyze how a privacy regulation taking the form of a cap on information disclosure affects quality-enhancing innovation incentives by a monopolist—who derives revenues solely from disclosing user data to third parties—and consumer surplus. If the share of privacy-concerned users is sufficiently small, privacy regulation has a negative effect on innovation and may harm users. However, if the share
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Search and Competition Under Product Quality Uncertainty* The Journal of Industrial Economics (IF 1.054) Pub Date : 2023-11-15 Yongmin Chen
I review models of consumer search and competition when product quality is uncertain and differs across firms. Although firms are vertically—and possibly also horizontally—differentiated, an appropriate symmetric price equilibrium with optimal consumer search can be neatly characterized. I propose a “random-quality” framework that unifies these models and discuss their insights on the operation of
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Unobserved Worker Quality and Inter-Industry Wage Differentials* The Journal of Industrial Economics (IF 1.054) Pub Date : 2023-11-14 Suqin Ge, João Macieira
This study quantitatively assesses two alternative explanations for inter-industry wage differentials: worker heterogeneity in the form of unobserved quality and firm heterogeneity in the form of a firm's willingness to pay (WTP) for workers' productive attributes. Building on hedonic models of differentiated product demand, we develop an empirical hedonic model of labor demand and apply a two-stage
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Alcohol Prohibition and Pricing at the Pump* The Journal of Industrial Economics (IF 1.054) Pub Date : 2023-11-14 Kai Fischer
Firms often sell a transparent base product and a valuable add-on. If only some consumers are aware of the latter, the add-on's effect on the base product's price will be ambiguous. Cross-subsidization between products to bait uninformed consumers might lower, intrinsic utility from the add-on for informed consumers might raise the price. We study this trade-off in the gasoline market by exploiting
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Optimal Exit Policy with Uncertain Demand* The Journal of Industrial Economics (IF 1.054) Pub Date : 2023-11-14 Michele Bisceglia, Jorge Padilla, Joe Perkins, Salvatore Piccolo
In a framework where entrants must make sunk investment decisions with uncertain returns and have private demand information, we show that the relationship between innovation and exit value is non-monotone and features an inverted U-shaped pattern. Consumer surplus is maximised at the lowest exit value that incentivises the investment. These insights are applied to optimal merger policy. An entrant
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Vertical Contracts and Downstream Entry* The Journal of Industrial Economics (IF 1.054) Pub Date : 2023-11-14 Chrysovalantou Milliou, Emmanuel Petrakis
We study the implications of different contractual forms in a market with an incumbent upstream monopolist and free downstream entry. We show that traditional conclusions regarding the desirability of linear contracts radically change when entry in the downstream market is endogenous rather than exogenous. By triggering more entry than two-part tariffs, wholesale price contracts can generate higher
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Obfuscation and Rational Inattention* The Journal of Industrial Economics (IF 1.054) Pub Date : 2023-11-13 Aljoscha Janssen, Johannes Kasinger
We study the behavior of duopolistic firms that can obfuscate their prices before competing on price. Obfuscation affects the rational inattentive consumers' optimal information strategy, which determines the probabilistic demand. Our model advances related models by allowing consumers to update their unrestricted prior beliefs with an informative signal of any form. We show that the game may result
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Quantifying the Effects of Price Discrimination Under Imperfect Competition* The Journal of Industrial Economics (IF 1.054) Pub Date : 2023-11-13 Juan Sebastián Vélez-Velásquez
This article analyzes the effects of broadband carriers switching from price discrimination to uniform pricing. Broadband carriers often use third-degree price discrimination. In Colombia, broadband carriers rely on government-issued socio-economic information to segment markets. I use demand and marginal cost estimates to quantify the effects of switching from price discrimination to uniform pricing
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The Impact of Private Label Introduction on Assortment, Prices, and Profits of Retailers* The Journal of Industrial Economics (IF 1.054) Pub Date : 2023-11-12 Meilin MA, Ralph Bernd Siebert
We study how introducing private-label brands (PLs) affects retail prices and profits, accounting for assortment adjustments of national brands (NBs). We employ an event-study framework and scanner data on the US beef market. When a PL is added to the low-priced market segment, we find that retail stores further differentiate NBs from the PL and remove same-segment NBs. When a PL is added to the high-priced
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Win/Loss Data and Consumer Switching Costs: Measuring Diversion Ratios and the Impact of Mergers* The Journal of Industrial Economics (IF 1.054) Pub Date : 2023-11-10 Y. Jeff Qiu, Masayuki Sawada, Gloria Sheu
We propose an identification strategy for diversion based on win/loss data. First, we show that win/loss data from the merging firms and market shares in two periods for all firms are sufficient to identify the diversion ratios between the merging partners. Second, we show that win/loss data from the merging firms alone are sufficient for partial identification, and we construct a lower bound that
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Firm Matching in the Market for Technology: Business Stealing and Business Creation* The Journal of Industrial Economics (IF 1.054) Pub Date : 2023-10-31 Pere Arqué-Castells, Daniel F. Spulber
We propose an empirical framework for studying the prevalence of business creation and business stealing in technology transfers from the effect of technological overlap and product market overlap. We estimate the model on a new dataset that tracks interactions in the market for technology between publicly held US companies. Product market overlap has a negative effect on matching patterns that is
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Search Frictions in Many-to-one Markets* The Journal of Industrial Economics (IF 1.054) Pub Date : 2023-10-26 Menghan Xu
This article studies how search frictions affect competition and matching efficiency in many-to-one loan markets where a borrower requires support from multiple investors and coordination is desired but absent. We develop a dynamic search model and show that borrowers employ mixed strategies in quoting interest rates. More importantly, we find that in many-to-one markets, the rate dispersion caused
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Market Structure, Risk Preferences, and Forward Contracting Incentives* The Journal of Industrial Economics (IF 1.054) Pub Date : 2023-10-24 David P. Brown, David E. M. Sappington
We examine the determinants of the levels of forward contracting preferred by generators and buyers of electricity. Increased forward contracting systematically reduces the variance of a generator's profit, so a generator prefers higher levels of forward contracting as market uncertainty or its aversion to risk increases. In contrast, increased forward contracting can either increase or reduce the
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Bertrand under Uncertainty: Private and Common Costs* The Journal of Industrial Economics (IF 1.054) Pub Date : 2023-10-20 Johan N. M. Lagerlöf
Does asymmetric information about costs in a homogeneous-good Bertrand model soften competition? Earlier literature has shown that the answer (perhaps counter-intuitively) is “no,” while assuming (i) private (i.e., independent) cost draws and (ii) no drastic innovations. I first show, in a fairly general setting, that by relaxing (i) and instead allowing for sufficiently much common (interdependent)
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Holdup, Knowledge Transferability, and Productivity: Theory and Evidence from Knowledge Workers* The Journal of Industrial Economics (IF 1.054) Pub Date : 2023-10-18 Emre Ekinci, David Wehrheim
This article studies how firing costs affect the productivity of knowledge workers. We develop a holdup model in which workers are essential to knowledge transfer between firms and show that if the worker's knowledge stock is sufficiently transferable to competing firms, an increase in firing costs inhibits the firm's ability to hold up the worker and thereby leads to higher effort. We consider the
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Mediating Internal Competition for Resources* The Journal of Industrial Economics (IF 1.054) Pub Date : 2023-10-18 Suraj Prasad, Yasunari Tamada
We consider a model of internal competition, where projects developed by agents with different preferences compete for resources in an organization. Allowing a manager—who has moderate preferences—to control the allocation of resources has benefits when preferences are not too diverse. In particular, the manager acts as a mediator, forcing agents to compromise when competing projects succeed, thus
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How Do Start-up Acquisitions Affect the Direction of Innovation?* The Journal of Industrial Economics (IF 1.054) Pub Date : 2023-10-16 Esmée S. R. Dijk, José L. Moraga-González, Evgenia Motchenkova
A start-up engages in an investment portfolio problem by choosing how much to invest in a “non-rival” project and a “rival” project that threatens an incumbent. Anticipating its acquisition, the start-up distorts its investment portfolio in order to raise acquisition rents. This may improve or worsen the direction of innovation and consumer surplus. The bigger the difference in social surplus appropriability
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Information Generation in Vertically Differentiated Markets* The Journal of Industrial Economics (IF 1.054) Pub Date : 2023-10-16 Andrea Canidio, Thomas Gall
In a model of vertical competition two firms draw costly public signals that are informative about the quality of their products and then competitively set prices. When each firm generates information independently from the other, there will be overinvestment (underinvestment) in information generation if the market share of the quality follower in the subsequent market equilibrium is high (low). Moreover
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Agency Frictions and Procurement: New Evidence from U.S. Electricity Restructuring* The Journal of Industrial Economics (IF 1.054) Pub Date : 2023-10-12 Jose Miguel Abito, Jin Soo Han, Jean-François Houde, Arthur A. van Benthem
This article presents new quantitative evidence of the sources of efficiency benefits from deregulation. We estimate the heterogeneous effects of plant divestitures on fuel procurement costs during the restructuring of the U.S. electricity industry. Guided by economic theory, we focus on three mechanisms and find that restructuring reduced fuel procurement costs for firms that (i) were not subject
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Experts, Information, Reviews, and Coordination: Evidence on How Prizes Affect Sales* The Journal of Industrial Economics (IF 1.054) Pub Date : 2023-10-12 Nicolas Lagios, Pierre-Guillaume Méon
Exploiting the award process, we implement a regression discontinuity design to estimate the effect of winning France's main literary prize, the Goncourt. It increases sales, especially for books that sold fewer copies before the announcement, the number of reviews on Amazon, and the probability of them being negative. The effect is partly driven by an increase in word of mouth. Those findings are
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Seller Compound Search for Bidders* The Journal of Industrial Economics (IF 1.054) Pub Date : 2023-10-10 Joosung Lee, Daniel Z. Li
This article studies a seller's compound search for bidders by a deadline. We show that the optimal search outcomes can be implemented by a sequence of second-price auctions, characterized by declining reserve prices and increasing search intensities (sample sizes) over time. The monotonicity results are robust in both cases of short-lived and long-lived bidders. Furthermore, a seller with short-lived
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Platform Oligopoly with Endogenous Homing: Implications for Mergers and Free Entry* The Journal of Industrial Economics (IF 1.054) Pub Date : 2023-10-09 Takanori Adachi, Susumu Sato, Mark J. Tremblay
Consumer multi-homing is critical for competition policy regarding digital platforms. To assess the role of multi-homing, we embed endogenous homing into a model of oligopolistic competition between two-sided platforms and apply it to mergers and free entry. We find that the required merger-specific cost reduction is larger if consumers benefit more from multi-homing and that the equilibrium level
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Wholesale Pricing with Asymmetric Information about a Private Label* The Journal of Industrial Economics (IF 1.054) Pub Date : 2023-10-06 Johannes Paha
A monopolistic manufacturer produces a branded good that is sold to final consumers by a monopolistic retailer who also sells a private label. The costs of the private label are unobserved by the manufacturer, which affects the terms of the contract offered by the manufacturer to the retailer. Given the revelation principle, the manufacturer distorts the quantity of the branded product downwards to
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Advance Selling in the Wake of Entry* The Journal of Industrial Economics (IF 1.054) Pub Date : 2023-10-03 Nadia Ceschi, Marc Möller
This article provides a tractable model of inter-temporal price-discrimination by heterogeneous firms, imperative for our understanding of advance purchase markets in the wake of entry. The pricing schedule of an industry leader, whose product is more likely to match consumers' preferences, differs systematically from a newcomer's pricing. By diverting competition to a stage where consumers face uncertainty
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Price Commitments in Standard Setting under Asymmetric Information* The Journal of Industrial Economics (IF 1.054) Pub Date : 2023-10-02 Jan Boone, Florian Schuett, Emanuele Tarantino
Standards may create market power for the holders of standard essential patents (SEPs). To address these concerns, the literature advocates price commitments, whereby SEP holders commit to the maximum royalty they would charge were their technology included in the standard. We consider a setting in which a technology implementer holds private information about profitability. In this setting, price
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Timing Assumptions and Efficiency: Empirical Evidence in a Production Function Context The Journal of Industrial Economics (IF 1.054) Pub Date : 2023-09-14 Daniel A. Ackerberg
Recent work estimating production functions has often used methodologies proposed in two literatures: (1) “proxy variable” estimation techniques (Olley, S. and Pakes, A., 1996, Econometrica, 64, pp. 1263–1295), and (2) “dynamic panel” estimation techniques. I illustrate how timing and information set assumptions are key to both, and how these assumptions can be strengthened (or weakened) almost continuously
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Competition and Strategic Budget Choices in the Motion Picture Industry* The Journal of Industrial Economics (IF 1.054) Pub Date : 2023-09-13 Sebastiano Delre, Petros G. Sekeris
In this article, we study the effect of differentiation on firms' optimal investments in advertising and product quality in the specific context of the motion picture industry. To guide our empirical analysis, we develop a stylized model uncovering that competition in advertising is the highest for intermediate levels of horizontal differentiation, while product quality increases monotonically in differentiation
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Pricing and Product Positioning with Relative Consumer Preferences* The Journal of Industrial Economics (IF 1.054) Pub Date : 2023-09-07 Roman Inderst, Martin Obradovits
Frequent price promotions force consumers to continuously reassess their preferences over product offerings. When this leads consumers to exhibit a bias of “relative thinking”, such as may be triggered by a focus only on the most salient product attribute, we show in a model of sales (Varian, H. R., 1980, American Economic Review, 70(4), pp. 651–659) that this profoundly alters firms' pricing and product-positioning
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Shopping for Information: Implications of Consumer Learning for Optimal Pricing and Product Design* The Journal of Industrial Economics (IF 1.054) Pub Date : 2023-09-01 Marilyn Pease
I study a seller's pricing problem where consumers perform costly product research about value before purchase. They buy the product when sufficiently optimistic about value and cease research when sufficiently pessimistic. I find that the seller encourages product research when prior belief about value is high, even though he could sell immediately for a high price. The prior affects both expected
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Royalty Stacking and Validity Challenges: The Inverse Cournot Effect* The Journal of Industrial Economics (IF 1.054) Pub Date : 2023-09-01 Gerard Llobet, Jorge Padilla
This paper shows that the well-known royalty-stacking problem is not robust to considering licensors with patents of heterogeneous strength due to the Inverse Cournot effect. The incentives for a downstream producer to challenge a weak patent in court increase when the total royalty rate is lower. The Inverse Cournot effect generates a moderation force in the royalty rate of strong patent holders forcing
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Taxation and Durable Goods Monopoly* The Journal of Industrial Economics (IF 1.054) Pub Date : 2023-08-19 Changhyun Kwak, Jihong Lee
This paper studies the role of taxation in durable good markets with dynamic monopolies. By conditioning the marginal tax rate on the volume of trade, the regulator can provide incentives for the monopolist to accelerate trade. When marginal cost pricing generates a loss for the monopolist, strategic delay cannot be avoided under regulatory budget constraint and the effects of tax policy depend on
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Profitability of Noisy Certification in the Presence of Loss Averse Buyers* The Journal of Industrial Economics (IF 1.054) Pub Date : 2023-08-17 Seung Huh, Dmitry A. Shapiro, Sung H. Ham
We study how the inaccuracy of a costly certification technology affects a monopolistic seller's profitability. We compare three scenarios: no certification, a 100% accurate certification, and a 50% accurate certification that produces accurate evaluations half the time. The noisy certification environment is never the most profitable and, depending on the buyers' loss aversion, can be the least profitable
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Local Energy Markets* The Journal of Industrial Economics (IF 1.054) Pub Date : 2023-08-17 Pio Baake, Sebastian Schwenen, Christian von Hirschhausen
In current power markets, the bulk of electricity is sold wholesale and transported to consumers via long-distance transmission lines. Recently, decentralized local energy markets have evolved, often as isolated networks based on solar generation. We analyze strategic pricing, investment, and welfare in local energy markets. We show that local energy markets yield competitive equilibrium prices and
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Missing Price Information and Its Impact on Equilibrium Price Dispersion: Evidence From Gasoline Signboards* The Journal of Industrial Economics (IF 1.054) Pub Date : 2023-08-12 Michael D. Noel, Hongjie Qiang
This article seeks to quantify the importance of price information in reducing consumer search costs and equilibrium price dispersion in a competitive setting. It exploits a natural experiment in the retail gasoline industry in which stations post the prices of only certain grades of gasoline on large street-side signboards, and not others, except where required by law. Differential-by-grade signboard
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Cursed Consumers and the Effectiveness of Consumer Protection Policies* The Journal of Industrial Economics (IF 1.054) Pub Date : 2023-07-27 Alessandro Ispano, Peter Schwardmann
We model firms' quality disclosure and pricing in the presence of cursed consumers, who fail to be sufficiently skeptical about undisclosed quality. We show that cursed consumers are exploited in duopoly if firms are vertically differentiated, if there are few cursed consumers, and if average product quality is high. Three common consumer protection policies that work under monopoly, that is, mandatory
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Bid Coordination in Sponsored Search Auctions: Detection Methodology and Empirical Analysis* The Journal of Industrial Economics (IF 1.054) Pub Date : 2023-07-22 Francesco Decarolis, Maris Goldmanis, Antonio Penta, Ksenia Shakhgildyan
Bid delegation to specialized intermediaries is common in internet ad auctions. When the same intermediary bids for competing advertisers, its incentive to coordinate client bids might alter the functioning of the auctions. This study develops a methodology to detect bid coordination and presents a strategy to estimate a bound on the search engine revenue losses imposed by bid coordination. When the
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Platform Investment and price parity clauses* The Journal of Industrial Economics (IF 1.054) Pub Date : 2023-07-05 Chengsi Wang, Julian Wright
Platforms use price parity clauses to prevent sellers setting lower prices when selling through other channels. They claim these restraints are needed so platforms have incentives to invest in providing search services—without them, consumers would search on the platform but then switch to buy in a cheaper channel. In a model incorporating these effects, we find that wide price parity clauses lead
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A Structural Empirical Model of R&D, Firm Heterogeneity, and Industry Evolution* The Journal of Industrial Economics (IF 1.054) Pub Date : 2023-07-05 Yanyou Chen, Daniel Yi Xu
This article develops and estimates an industry equilibrium model of the Korean electric motor industry from 1991 to 1996. Plant-level decisions on R&D, physical capital investment, entry, and exit are integrated in a dynamic setting with knowledge spillovers. We apply the novel approximation of oblivious equilibrium to estimate the R&D cost, magnitude of knowledge spillovers, adjustment costs of physical
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Third-Degree Price Discrimination in Oligopoly when Markets are Covered* The Journal of Industrial Economics (IF 1.054) Pub Date : 2023-07-04 Markus Dertwinkel-Kalt, Christian Wey
We analyze oligopolistic third-degree price discrimination relative to uniform pricing when markets are covered. Pricing equilibria are critically determined by supply-side features such as the number of firms and their marginal cost differences. It follows that each firm's Lerner index under uniform pricing is equal to the weighted harmonic mean of the firm's relative margins under discriminatory
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Mixed Oligopoly and Market Power Mitigation: Evidence from the Colombian Wholesale Electricity Market* The Journal of Industrial Economics (IF 1.054) Pub Date : 2023-07-04 Carlos Suarez
Using information on price bids in wholesale electricity pools and empirical techniques described in the literature on electricity markets, this study identifies the market power mitigation effect of public firms in the Colombian market. The results suggest that while private firms exercise less market power than is predicted by a profit-maximization model, there are marked differences between private
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Industry Structure, Segmentation, and Quality Competition in the U.S. Hotel Industry* The Journal of Industrial Economics (IF 1.054) Pub Date : 2023-07-03 R. Andrew Butters, Thomas N. Hubbard
We examine how quality competition affects the relationship between market size and industry structure at the product level using evidence from the U.S. hotel industry. Starting in the early 1980s, quality competition for business travelers became more based on variable and less on fixed costs, and became less scale intensive. Since then, market size increases have been met by more, but smaller, hotels