Questions tagged [industrial-organisation]

Industrial organization is a field that builds on the theory of the firm by examining the structure of (and, therefore, the boundaries between) firms and markets. Industrial organization adds real-world complications to the perfectly competitive model, complications such as transaction costs, limited information, and barriers to entry of new firms that may be associated with imperfect competition.

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63 views

Salop (1979) model for labor markets

Can the Salop (1979) model also be applied to labor markets or is there any reason why it should not be?
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Is there a descriptive / axiomatic approach to barriers to entry? If so, who are the most prominent authors?

I have been trying to understand what makes something a barrier to entry in precise terms. I ideally would like some kind of "theory of barriers to entry." Not just examples, which are easy ...
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How is market share of a firm calculated *in practice*?

As stated in the title: How is the market share of a firm calculated in practice? By emphasizing "in practice", I'm most interested in the market share figures that show up in companies' ...
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Sequential and simultaneous price competition

Frims 1 (leader) and 2 (follower) compete in price with product differentiation • Find the equilibrium price, quantity and profit when they choose price simultaneously and sequentially. q1=100-10p1+...
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Bertrand competition with homogenous good and Hotelling's spatial model

Q. There are a 1000 costumers uniformly distributed on [0,3]. Each wants to buy 1 ice-cream. There are two firms which produce ice-cream costlessly and firm i charges p_i. Consumer's effective price ...
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What theory fits?

IO & game theory friends, I am thinking about a setup where there is many buyers and a decent number of sellers (they have pricing power). Goods and buyers' preferences are homogeneous and known. ...
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Difference between size of market and marginal cost

My question is based on a Cournot competition model with linear demand, $p=a-bQ$, but can also be applied to most competition models. I wanted to know whether there is some special interpretation of ...
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48 views

Interpreting cross-partial derivatives

Consider a duopoly setting. Firm $1$ has the following profit equation: $\pi_1(q_1,q_2,v_1)=(a+v_1-q_1-\gamma q_2)q_1 .$ Where $a>0$ is a utility parameter, $q_i\geq0$ is the quantity and $v_i\geq0$...
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57 views

What does "endogeneity of the industry structure" means?

Dong,2019,page 899 documented that: We estimate Export Market Leniency Laws as the weighted average of the passage of leniency programs in all other countries, excluding the country in which the firm ...
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Selection of functional form for utility function in theoretical model

I am starting to work on an IO model and I am puzzled in front of the choice of the appropriate utility function. Since the concept of utility is so abstract, and one cannot directly refer to ...
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Bibliography on Industrial Policy

I'm looking for an introduction to Industrial Policy, at the advanced undergraduate level, beginning graduate level. I've tried the google scholar, and unfortunately all the results I read were just ...
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Drug pricing, amount of sales and R&D costs

I've recently learned about Zolgensma drug that is currently priced at \$2.1 million (read more here) Since the biggest factor in price is probably R&D costs I wonder why won't they decrease the ...
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Profit-maximization for a monopoly

Between two countries, Richland and Poorland, with a strict ban on cross-border sales agreed with the Poorlandian government. The respective demand functions for both countries are: $Q_{poor} = 10 - ...
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Airline competition and econometrics

If I wish to understand the competitive constraints of airline A on airline B, what sort of econometric relationship should I investigate ?. Immediately what comes to mind is to look at the impact of ...
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35 views

How would a firm increase price in such a scenario?

I have the following question: If a firm with a lower marginal cost wants to increase prices in a homogenous goods industry in which demand is perfectly inelastic and supply is in excess, what should ...
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70 views

Does a competitive advantage lead to abnormal profit? [closed]

Given that organisational capital is specific and difficult to replicate it is considered a competitive advantage (see e.g. here) According to Wang (2014) competitive advantage is obtained when an ...
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Does the formation of a firm imply the creation of organisational capital?

According to Ronald Coase (The Nature of the Firm, 1937) firms are created because this reduces transaction costs compared to market transactions. Transactions are internalised because of the ...
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Two part tariff-income effects

I understand that a monopolist optimally sets a two-part tariff by pricing at marginal cost and then extracting CS as a lump sum fee. However, wouldn't the lump sum fee induce a decrease in consumer ...
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Binary-continuous choice model in empirical consumer choices

There are quite a lot empirical research based on discrete choice models, in which the consumer selects one of J alternative goods to maximize her indirect utility. The key assumption of these models ...
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Why do different product-markets record different rates of return if the assumption of competitive markets hold?

I'm a new economics student, and have become fascinated by the field of Industrial Organization. To that end, I'm reading through the Carlton and Perloff Modern Industrial Organization text book. In ...
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How to graph a monopoly that does not exhibit the properties of a contestable market?

This question is not a homework question. I am taking a course in industrial organization, and the textbook/professor have given an illustration of a monopoly that is a contestable market. However, I ...
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Sequential price setting SPNE

Firms A and B are in an oligopoly. They both face the linear market demand curve $X=A-\alpha P$, where $X$ is total market demand, and $P$ is price. Assume constant marginal costs $C_{A}$ and $C_{B}$, ...
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Prices set by firms are the same in a Salop circle. But why?

Trying to calculate the prices charged by each firm, I don't understand why the solution argues that all firms set the same price. If I use the assumption that they are the same, I can figure out the ...
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107 views

What is the latest thinking on the economic calculation problem? [closed]

Eric Posner and Glen Weyl write in the epilogue of Radical Markets (2018) that they “remain confident that for at least a few generations markets – Radical Markets, that is – will remain the best ...
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Quasi-concavity of profit function

I'm doing a simple exercise from my textbook: suppose the revenue function is $R(p)=p^{1-\epsilon}$ with $\epsilon > 0$. Suppose the cost function is convex. Show that the profit function is quasi-...
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1answer
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Who is working right now? (coronoavirus)

Is there any research, graphs, or any formal (non-opinion) information on where I can get information on what people are working right now? I want to know, who is still collecting a paycheck. I am a ...
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43 views

Statistical distribution of firms by revenue in competitive market

I would like to produce a simple distribution of competitive market firms based on their revenues. I know the number of firms in the market n, the total market ...
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2answers
212 views

Definition of covered market

I do Industrial Organization course, and I've seen the phrase "market is covered" several times in my lecture slides, however, I'm struggling to find the formal definition of "covered market" and the ...
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What happens to consumer surplus and profits as firms get more information in Hotelling's duopoly model?

In the Duopoly on the line [0,1] with customers uniformly distributed, with firm A on the 0 side and firm B on 1's side, we know that if the firms have no information about the customer, there will be ...
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Interpretation of $\frac{\partial }{\partial p_1}Q_1(p_1, p_2)/\frac{\partial}{\partial p_2} Q_1(p_1, p_2)$

I am interested in an economic interpretation for the ratio of partial derivatives of a demand function $Q_1(p_1, p_2)$, which is \begin{equation} t=\frac{\frac{\partial}{\partial p_1}Q_1(p_1, p_2)}{\...
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271 views

Economic Profit and the Return on Invested Capital

In my finance classes, I always learned that the a firm earning an "economic profit" is one for which its return on invested capital (ROIC) is greater than it's opportunity cost of capital (usually ...
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2answers
216 views

Quasi concavity of utility function

I am looking for a method to prove that the following function is quasi-concave in $\alpha$ (or find conditions under which it is true): $ \pi=F(-k)(f(0)^2-f(h(1-\alpha))^2)+ \frac{1}{2}-\frac{1}{2}...
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Books friendly to self-studying Industrial Organization

I'm currently an undergraduate freshman looking for resources to self-read Industrial Organization. I've read Varian's undergraduate book cover-to-cover and have a decent understanding of basic game ...
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How to go from demand elasticities to a demand function? (merger simulation)

I am reading this paper: https://econpapers.repec.org/article/oupjleorg/v_3a10_3ay_3a1994_3ai_3a2_3ap_3a407-26.htm (Werden and Froeb 1994) about merger simulation. The paper is above my level, so I'...
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Are there examples of strategies where a combination of third degree pricing and two-part tariffs are used together?

Of course, I am only interested in instances where the combination of the two strategies ultimately lead to higher profits than if the monopolistic firm had used only one.
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Has contest theory ever been used to design real-world contests?

Contest theory, very much like auction theory, studies how people act in a contest and the properties of such a competition. There is a large literature that investigates different aspects of the ...
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114 views

Sequential Price Competition for Perfect Complements

There are two goods, $1$ and $2$ produced by two firms at zero marginal costs. The goods are perfect complements. The demand for each goods is: $Q_1=Q_2=a-(p_1+p_2)$. The prices are set sequentially, ...
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2answers
422 views

Bertrand Duopoly Equilibrium for Discrete Prices

There are two identical firms, $1$ and $2$, with zero marginal costs. They produce homogenous product, which is demanded by a unit mass of identical consumers, each of which has inelastic unit demand ...
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42 views

The world's largest companies

There are several criteria (or key figures) to list the world's "largest" companies, giving quite different lists: revenue (in \$) profit (in \$) assets (in \$) market capitalization (in \$) number ...
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Industrial Economics Help

I am wondering if I have found q for all 3 firms correctly before I move on. I feel like I am doing something completely wrong, but can't seem to figure out what I truly need to do. (Sorry for the ...
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Industrial Economics

I am currently struggling trying to find the short-run equilibrium price, output per firm, and profit per firm if $190$ firms supply the market. I am given $p=102-1/2Q$ and $C(q)=5q-6q^2+3q^3$. ...
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Are there any studies, academic papers or articles that defy "common" knowledge", i.e that patents give an incentive for R&D to private business?

In Economic Growth and particularly dynamic optimization. My professor taught us that an intertemporal allocation is a dynamic optimum(Pareto Optimum) only if(necessary condition) at any given ...
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Stackelberg Oligopoly 3 firms [closed]

Imagine that there are 3 firms in a monopolistic market, F1, F2 and F3. Firms 1 and 2 are incumbent firms and act simultaneously whereas Firm 3 observes the actions of both firms before deciding ...
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Stackelberg with 3 firms

I'm currently trying to solve the following problem: Stackelberg with 3 firms Imagine there are three firms on a monopolistically competitive market. The marginal cost of produc- tion in each ...
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Tourist Natives Model

Every night, all 60 inhabitants of a tiny village visit one of the village’s taverns (not necessarily the same tavern) and an average of 75 strangers do the same. Both the villagers and the strangers ...
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1answer
74 views

Understanding agents selecting among markets

Let's say an entrepreneur can choose between starting a business in a competitive market with zero economic profit, and starting a business in a market that is not perfectly competitive with positive ...
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Are modern conglomerate mergers better or worse for economic competition?

Modern conglomerate mergers differ from those from decades ago as, even though they takeover smaller companies, they have a more narrow focus on related business and, in order to be successful, have ...
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138 views

3rd Degree Price Discrimination

I came across a True/False question in my economics problem set: Is the following statement true or false? "A monopolist can practice third-degree price discrimination in the two markets it ...
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What is an Economic Sector?

I am of the understanding that an Economy is broken down as follows: Traditional; Command; Market; Mixed. Each Economy being made up of Sectors, which in turn, are made up of Industries. Simply put,...
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What is the difference between personal consumption expenditure price and PCE quantity?

What is the difference between these two things? How is PCE price different from PCE quantity? Also, I am confused about the difference between PCE quantity and measure of real output. For example, ...