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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16
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1answer
248 views

Does merger control really affect market structure?

Pretty much since 1976 (the passage of Hart-Scott-Rodino Act) US antitrust authorities have been reviewing mergers, challenging only 1.8 per cent of the total number of above-threshold notifications (...
11
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3answers
661 views

Collusion and number of firms

How would you answer the following question? You work for a CEO of a large firm. He says to you, "In my experience collusion is less likely to be sustained as the number of firms in the market ...
11
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4answers
991 views

Should Costs of Travel to Buy Goods be Regarded as Transaction Costs?

Within the approach of New Institutional Economics associated with Oliver Williamson and others, emphasis is placed on transaction costs as a key factor in explaining why different forms of economic ...
11
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3answers
2k views

Under what conditions is a monopoly undesirable?

First of all, I realize that "undesirable" is an ambiguous term. So, to clarify, when is a monopoly undesirable under the following metrics? Pareto efficiency Reduces consumer surplus Social Welfare (...
10
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3answers
3k views

Why do low-budget films charge the same amount at the box office as super-high budget films?

In most occurrences, lower production costs translate into lower sales costs. Obviously there are other factors that influence price, including perceived value (affected by advertising), monopolies, ...
10
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1answer
289 views

Price dispersion in online retail

There are a number of online booksellers that are popular in India right now. The prices they charge for the same book often differ by as much as 10% (See this price comparison site to check http://...
8
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1answer
95 views

Competition and welfare - empirical evidence

Consider the following claims: less competitive markets deliver worse outcomes for consumers, less competitive markets deliver lower social welfare, less competitive markets deliver higher prices/...
8
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1answer
287 views

Identification with BBL

In the last few years, the estimator proposed by Bajari, Benkard, and Levin ('07) for dynamic games has been gaining popularity. It is relatively straight forward and is one of the only viable options ...
7
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4answers
1k views

Can destruction be profitable?

We often see news that some company destroys items they couldn't sell in time. Also we can see news of supermarkets destroying food just because it's not fresh although it's perfectly edible. If ...
7
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4answers
15k views

Nash equilibrium of a Bertrand game with different marginal costs

Consider the following game of Bertrand (price competition): There are two players, $1$ and $2$. Each has a publicly known marginal cost, $c_i$. A strategy is a price, $p_i\in\mathbb{R}$. Player $i$'...
7
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1answer
675 views

How successful will OPEC's predatory dumping strategy be?

Since the fracking industry in the US has started to grow rapidly, I have heard increasing reports that OPEC is attempting some form of predatory dumping in the hopes of making the fracking industry ...
7
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2answers
115 views

Identification of switching costs from price shocks

What, if anything, can we learn about customer switching costs by looking at price, revenue, profit, and quantity responses of producers to cost shocks? For example, we can define the profit equation ...
7
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0answers
235 views

Has any progress been made on the Pacman Conjecture on Finite Time Horizons?

The Pacman conjecture states that the optimal strategy for monopolistic durable goods manufacturers is to set price high and slowly drop it (i.e. eating their way down the demand curve). Empirically ...
6
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2answers
48 views

Literature on the effects of third-party certification on industrial dynamics?

Is there any comprehensive theoretical studies on how third-party certification adoption may affect industrial performance/dynamics of an industry?
6
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1answer
284 views

Labour markets and supply-side policies: too much stress put on the WS push factors?

In reading several macro textbooks, it seems that most of the supply-side policies tend to be focused on the labour supply side (wage setting curve), instead on the firm/labour demand side(price ...
5
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3answers
249 views

Collusion model with imperfect public monitoring

It is well known that consumers' intertemporal incentives may play a key role on the potential of firms to sustain collusion. To my knowledge, most previous efforts studying the topic have assumed ...
5
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1answer
5k views

What is the difference between Herfindahl Index and the Concentration Ratio

I was recently reading about the Herfindahl Index and from what I've learned so far, is that HHI is preferred over the Concentration Ratio. However, I didn't quite understand the reasoning that lead ...
5
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1answer
162 views

Monopolistic and Bertrand (Nash) Competition

Can we view the monopolistic competition equilibrium (a la Dixit-Stigliz) as the limit case of a Bertrand competition with an infinite number of firms providing differentiated products, where the ...
5
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2answers
570 views

Oligopolistic producers and retail price wars

Consider an industry with few producers selling differentiated products. The products must be sold through retailers of whom also there are a few and who therefore possess some degree of market power. ...
4
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3answers
462 views

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 ...
4
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1answer
117 views

Lemma 2 in Tirole and Maskin's Dynamic Oligpoly I (1988)

The full paper can be found here: http://www.dklevine.com/archive/refs4397.pdf. I refer here to the Lemma 2 in page 557. My doubt is regarding the first statement of the proof: "Because reaction ...
4
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2answers
65 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 ...
4
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1answer
42 views

Stylized Facts: Price Dispersion

I'm looking for as many empirical "stylized facts" about price dispersion (in products markets) in the idea of Burdett and Judd (1983) as possible. For example, how high is the variance of price ...
4
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0answers
39 views

Are there any economic studies of License-On-Transfer agreements?

A recent entry at GitHub's blog caught my attention: https://github.com/LOT. The "network" claims to provide protection from patent trolls by entering into an agreement automatically granting all ...
3
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1answer
64 views

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)}{\...
3
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2answers
72 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 ...
3
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1answer
132 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 ...
3
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1answer
261 views

Math in Melitz and Ottaviano (2008)

I am reading Melitz and Ottaviano (2008), but I find it hard to understand some math in the model. The preference is given by : , which implies a demand function: Then the paper says the "inverse ...
3
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1answer
71 views

Firm Sizes over the business cycle

There has been a lot of evidence about the firm size distribution (as measured in employment) being Pareto (see for example Luttmer 2007), but what are the properties of this distribution over the ...
3
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1answer
52 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 ...
3
votes
1answer
136 views

Game Theory (continuous strategies, pure strategy)

So I have this Game Theory problem, and I have a solution, but at a certain point I assume the symmetry of the problem to finally get my answer. I'd like to be able to avoid using symmetry, though, ...
3
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1answer
45 views

Survival Rates of Firms

Jovanovic (1982) cites Du Rietz (1975) as a source for Survival Rates of smaller firms are smaller than for larger firms It's his doctoral thesis, and using Swedish data. Is there any recent ...
3
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1answer
50 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 ...
3
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1answer
73 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 ...
3
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3answers
2k views

Long Run Equilibrium of Oligopolies

The long run equilibrium of a perfectly competitive market is well established. My question is - are the concepts of a long run equilibrium in a perfect competition extendable (analogous or otherwise) ...
3
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2answers
57 views

Can the cyclicality of the real wage be used as a measure for the degree of competiveness in the labour market?

When reading the answers to this question of mine, I'm left wondering if cyclicality of real wages can be seen as an indicator for the nature and degree of competition in the labour market. In ...
3
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0answers
45 views

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 ...
3
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0answers
21 views

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 ...
3
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0answers
81 views

Firm Dynamic Optimization Problem

A firm has received an order at time $0$ for $M$ units of product to be delivered by time $T$. It seeks a production schedule for filling this order at minimum cost. Let $x(t)$ denote inventory ...
2
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1answer
73 views

Limit of this sequence // broadness of inputs

Let there be a unit measure of inputs. Define by $C_i = \left[\int_0^i c(i)^{1-\alpha}\right]^\frac{1}{1-\alpha}$ a cost index of using up to $i$ as input. I discretize $c(i)$ by $c_0, \dots c_i, \...
2
votes
1answer
57 views

Directed search with privately informed buyers and capacities

My question seems to be a basic one and there should be a rather well-known reference in the (IO or labor) search literature. I will upvote (and comment on) any relevant answer and I will accept an ...
2
votes
2answers
49 views

Is it possible to tell anything about market structure if I have annual price data of the industries?

I have three goods: beer carp (fish) museum ticket Is it possible to tell anything about market structure if I have annual price data of the industries? Here's the time-series plot on a single graph:...
2
votes
1answer
242 views

Textbook for industrial organization without calculus

I'm planning to teach an undergraduate course in industrial organization. Calculus is not a prerequisite. I also want to avoid doing too much game theory in it so as to not be duplicative of a similar ...
2
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1answer
163 views

Articles about the economics of non-compete contracts

Today I read in a non-scientific article that Amazon requires some physical workers to sign non-compete agreements. I used to think that the idea behind allowing non-compete clauses in contracts is to ...
2
votes
1answer
184 views

Clarification about demand elasticity and monopoly

I am having a difficulty understanding certain things about elasticity and would like to clarify them. What I understand. Elasticity is the percent change in quantity due to a percent change in price,...
2
votes
1answer
258 views

Block pricing for different products

How is a block price decided when there are many products to be sold? For example the buffet in various restaurants or combos in McDonalds or KFC (like the bucket buddy). Can somebody point me to ...
2
votes
2answers
3k views

In which market structures does the producer employ price discrimination?

I was recently reading up on the Price Discrimination, first second and third degree. Although the author has laid out the concept neatly, there are no connections established between this concept and ...
2
votes
1answer
228 views

Kimball (1995) Specification of Final Good Production

Kimball (1995) defines production of the final good ($Y$) with intermediate goods $y_l$ in his equation (1) as $$ 1 = \int_0^1 G\left(\frac{y_l}{Y}\right) dl $$ with $G(1) = 1$, $G'(x) > 0$ and $...
2
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2answers
47 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 ...
2
votes
2answers
366 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 ...