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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Exercise 6.1 Theory of IO (Jean Tirole's book)

I am trying to solve exercise 6.1 of the famous book from Jean Tirole, The Theory of Industrial of Organization. I am stuck on a part he deems "straightforward": "Suppose there are two ...
Matteo Bulgarelli's user avatar
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Calculate consumers WTP for product attributes

I have a large panel on the city level of how many cars of each {model, fueltype} combination were newly registered in each year. This panel also includes a large variety of characteristics for each ...
rösti23's user avatar
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Fake long-term deposits

Story#1 Say banks have two saving options for you: one-year option or month-by-month flex option. Say the flex option give a annualized rate of 2 percent, and the one-year option gives 5 percent (...
High GPA's user avatar
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Looking for guide to Industrial Organization numerical modeling in Python

Is there some guide or GitHub repository that shows how to program numerical version of IO models? I would like to learn how to simulate the general $n$-firm Cournot competition model, but I can ...
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Is the S-curve applicable to the development of the electronics industry?

There are a lot of biological, social, economic and technological phenomena described by the S-curve. For example a dam building. There is an obvious limitation in the number of convenient places to ...
Arseniy's user avatar
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Dynamic price competition with capacity constraints

I have a dynamic price (Bertrand) competition with 2 players with the same capacity constraints. Grim trigger strategy is to set monopoly price at t=0 or if the monopoly price was set by both players ...
Ksenia's user avatar
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Can There Be a Dominant Strategy If Both Firms Choose to Match the Lowest Price in the Market in a Bertrand Model of Competition?

In a Bertrand duopoly model where firms choose to price match ie match the lowest price in the market, any price p∈[c,Pm] (where c is cost and Pm is the monopoly price) can be a Nash. Hence, there are ...
DR109's user avatar
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Why does the Rocket Internet purposefully abandon the market of China?

I am studying a very interesting entrepreneurial case: Rocket Internet, and one thing that confuses me is that they do business outside the U.S.A. and China. “We identify and build proven Internet ...
Lerner Zhang's user avatar
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What is max here, and how did they derive the first order condition from it?

Hello. Someone sent this on a discord server that I am on, and I couldn't make heads or tails of this. I found the book it is from on studocu; solutions to Cabral's Industrial Organisations, 2nd Ed. ...
andromeda's user avatar
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Measuring Degree of Product Differentiation/Market Segmentation

In context of Hotelling location model, if firms are located at end points (maximal differentiation), then, except the customer(s) at the centre, all others have a strictly preferred seller. Suppose ...
Dayne's user avatar
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How to control for prices when they are endogenously set by hospitals?

Basically, I want to see how changes in hospital prices for a certain procedure can be used to predict quality of treatment. Problem is in my sample, the private hospitals are price makers so any ...
UNMaster's user avatar
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How to calculate the maximizing number of firms in a Cournot competition?

I am trying to figure out the answer to the following two questions with given context: 'In a scenario in which there exist multiple identical firms with a large supply of products available, each ...
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How do we choose appropriate moment conditions for GMM estimation?

In certain conditions, especially with just-identified models, the appropriate moment conditions are in some sense obvious. This is the case, for instance, when we recover parameters from the linear ...
Yashaswi Mohanty's user avatar
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What does this notation mean?

I am following an IO paper and, at some point, a function $h(\cdot)\in \mathbb{R}^2_+$ is defined as $$h(t) = \cases{\mathbb{1}(t=k)*|\mathbb{N}(0,1)|\\\mathbb{1}(t<k)*|\mathbb{N}(0,1)|}$$ where $k\...
marcvaliente's user avatar
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Modelling common incentives and strategic manipulation

There are many situations in the markets when small or larger portions of traders collude and make a strategy manipulation through communication, even they have heterogeneous endowments and ...
Oliver Queen's user avatar
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1 answer
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Why does negative derivative of AC with respect to q imply Economies of scale (Monopoly)

In the following Industrial organization exercise form Church and Ware chapter 4 exercise 2 (preliminary info: C(q) = cost function; f = fixed costs; c = marginal costs; q= quantity of goods produced)...
Adriano Pollio's user avatar
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Data on collective bargaining - trade union density at regional/sector level

Do you know any open-access dataset on collective bargaining coverage and/or trade union density at regional and/or sector level in European countries?
gregorio's user avatar
3 votes
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Two-sided market framework

I have a very basic question about the elasticity of demand/participation in the two-sided market framework, as created by Weyl (2010) and described by Jullien, Pavan, and Rysman (2021). Using the ...
bcguy's user avatar
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Which industries are widely agreed upon to require central regulation on a national basis, regardless of economic or political system?

For example, the most straightforward cases of widely accepted centrally controlled regulation on a national basis would be the nuclear power generation and nuclear fuel supply industries. Where every ...
M. Y. Zuo's user avatar
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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 ...
Stan Shunpike's user avatar
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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' ...
Herr K.'s user avatar
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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+...
micurb's user avatar
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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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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 $v_i\geq0$...
Ohad Osterreicher's user avatar
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1 answer
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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 ...
KArrow'sBest's user avatar
3 votes
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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 ...
An old man in the sea.'s user avatar
2 votes
2 answers
55 views

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 ...
ScienceSamovar's user avatar
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1 answer
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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 - ...
rudinsimons12's user avatar
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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 ...
Meera Unni's user avatar
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1 answer
51 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 ...
Meera Unni's user avatar
1 vote
1 answer
73 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 ...
sba222's user avatar
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3 votes
2 answers
118 views

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 ...
TariffMan's user avatar
3 votes
1 answer
69 views

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 ...
RandomBear's user avatar
4 votes
2 answers
81 views

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 ...
new_but_trying_to_learn's user avatar
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1 answer
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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 ...
Mistah White's user avatar
1 vote
1 answer
99 views

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 $C_{B}$, ...
George's user avatar
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1 answer
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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 ...
Jente's user avatar
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1 answer
155 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 ...
sba222's user avatar
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1 vote
1 answer
479 views

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-...
econ86's user avatar
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1 answer
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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 ...
Eliter's user avatar
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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 ...
hmhensen's user avatar
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1 vote
2 answers
406 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 ...
Andrey Gaidin's user avatar
1 vote
1 answer
50 views

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 ...
Yejin's user avatar
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3 votes
1 answer
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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)}{\...
Hal_Incandenza's user avatar
1 vote
1 answer
517 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 ...
windfreedom22's user avatar
0 votes
2 answers
319 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}...
Oleh's user avatar
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4 votes
3 answers
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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 ...
Daniel Luo's user avatar