Industrial Organization

Hospital competition with soft budgets

by Odd Rune Straume

NIPE Working Paper 04/2012. (With Kurt R. Brekke and Luigi Siciliani)

We study the incentives for hospitals to provide quality and expend cost-reducing effort when their budgets are soft,... more We study the incentives for hospitals to provide quality and expend cost-reducing effort when their budgets are soft, i.e., the payer may cover deficits or confiscate surpluses. The basic set up is a Hotelling model with two hospitals that differ in location and face demand uncertainty, where the hospitals run deficits (surpluses) in the high (low) demand state. Softer budgets reduce cost efficiency, while the effect on quality is ambiguous. For given cost efficiency, softer budgets increase quality since parts of the expenditures may be covered by the payer. However, softer budgets reduce cost-reducing effort and the profit margin, which in turn weakens quality incentives. We also find that profit confiscation reduces quality and cost-reducing effort. First best is achieved by a strict no-bailout and no-profit-confiscation policy when the regulated price is optimally set. However, for suboptimal prices a more lenient bailout policy can be welfare improving.

Can competition reduce quality?

by Odd Rune Straume

NIPE Working Paper 05/2012. (With Kurt R. Brekke and Luigi Siciliani)

We study the effect of competition on quality in markets such as health care and long-term care, when providers choose... more We study the effect of competition on quality in markets such as health care and long-term care, when providers choose both prices and quality in a setting of spatial competition. We offer a novel mechanism whereby competition leads to lower quality. This mechanism relies on two key assumptions, namely that the providers are motivated and risk-averse. Our proposed mechanism can help explain several empirical findings of a negative effect of competition on quality.

Survivor reactions to reorganization: antecedents and consequences of procedural, interpersonal, and informational justice

by Paul Hanges

Monitoring markets & sectors: Indicators for market monitoring

by Daniel Neicu

The AGORA-MMS project contributes to the sector monitoring objective of the division Sector and Market Monitoring of... more The AGORA-MMS project contributes to the sector monitoring objective of the division Sector and Market Monitoring of the FPS Economy in Belgium by proposing and implementing several methodologies to analyze sectors from different perspectives, taking into account multiple indicators that are calculated on the basis of the rich datasets the FPS Economy has access to.

A hedonic study of network effects in the market for word processing software

by Sujoy Chakravarty

Deterministic versus Random Utility: Implied Patterns of Vertical Product Differentiation in a Multi-Product Monopoly

by Mark Lijesen

Co-authored with Christiaan Behrens, Eric Pels and Eric Verhoef

In this article we study patterns of vertical product differentiation in a multi-product monopoly using a random... more In this article we study patterns of vertical product differentiation in a multi-product monopoly using a random utility model. Prior research shows that applying such a model in a multi-product setting implies symmetric patterns of product differentiation in which all product variants of a single firm have the same characteristics. Assuming that preferences differ across consumers and allowing for unobserved demand heterogeneity, we numerically show the existence of asymmetric, fully differentiated, patterns of vertical product differentiation in which the monopolist maximises profits by setting prices and qualities. In particular, we show that the patterns of vertical product differentiation depend crucially on the level of unobserved demand heterogeneity and the observed dispersion of willingness to pay for quality. Only if unobserved demand heterogeneity is small relative to the observed dispersion, asymmetric, fully differentiated, equilibriums exist. Furthermore, we find in our model that the level of unobserved heterogeneity and the dispersion of willingness to pay for quality do not affect the relative welfare efficiency of the monopolist

A survey of the Greek defence industry

by Apostolos Rafailidis

Defence and Peace Economics, vol. 14(4), pp. 311 – 324, Aug. 2003
co-authored with Christos Kollias

Greece yearly allocates a substantial part of its national income to defence and its defence burden is the highest... more Greece yearly allocates a substantial part of its national income to defence and its defence burden is the highest among EU and NATO members. To meet the demand for military hardware it relies almost exclusively on imports, ranking among the largest conventional arms importers in the world. Despite efforts to develop a domestic defence industry, indigenous production only covers a limited proportion of Greece's demand for military equipment. The majority of weapons, including sophisticated and technologically advanced systems, are imported from the major arms producers. This paper critically surveys the Greek defence industrial base, its structure and recent performance, and assesses its future options.

Interpreting markups in Spanish manufacturing: the exponential model

by Lourdes Moreno

In this paper we attempt to rationalize markups in a sample of Spanish manufacturing by assuming a representative... more In this paper we attempt to rationalize markups in a sample of Spanish manufacturing by assuming a representative consumer, profit-maximizing firms and constant returns to scale. We find that the standard forms of demand (CES and linear) do not provide a good explanation of markups. In contrast, a model where the representative consumer has an exponential utilty function yields results that match data more closely

Drilling rig workers in Alberta: Folk models of economics in the oilfields

by Dan Houser

Services autour des produits: l’offre des entreprises informatiques

by Olivier Furrer

Olivier Furrer
Revue française du marketing
n° 166, 1998/1, pp. 91-105

Partant du constat de l'importance croissante des services autour des produits, cet article analyse la situation dans... more Partant du constat de l'importance croissante des services autour des produits, cet article analyse la situation dans le secteur informatique. Après avoir identifié cinq dimensions dans l'offre de services des entreprises informatiques, l'auteur met en évidence les liens entre ces services et les produits qu'ils entourent, ainsi que les liens entre ces services et les clients à qui ils sont destinés. L'auteur présente également les objectifs poursuivis par les entreprises informatiques qui offrent des services autour de leurs produits et les avantages que celles-ci cherchent à procurer à leurs clients par cette offre de services.

The Rivalry Matrix: Understanding Rivalry and Competitive Dynamics

by Olivier Furrer

Olivier Furrer and Howard Thomas
European Management Journal
Volume 18, Issue 6, December 2000, Pages 619-637

In this paper we present a framework, the rivalry matrix, outlining a range of viable approaches which businessmen,... more In this paper we present a framework, the rivalry matrix, outlining a range of viable approaches which businessmen, modelers, and consultants can use to frame problems and issues in competitive rivalry. We then discuss the rationale of each of the main modeling approaches contained in the matrix. We follow this discussion with case examples, which illustrate the processes involved in modeling competitive dynamics within each of the four cells of the rivalry matrix. We conclude with the description of a practical process for analyzing competitive dynamics.

Creatures in Captivity and Ethics

by Poppy Valentine

Prisons. Factory States. Low-Wage Workers. Child Sex Trade. Animal Abuse for: Clothing, Entertainment and Food. I... more Prisons. Factory States. Low-Wage Workers. Child Sex Trade. Animal Abuse for: Clothing, Entertainment and Food. I really could go on with other outlets of injust captivity, but this covers some major ones.

INTEGRAÇÃO INTERNACIONAL vs. INTEGRAÇÃO DOMÉSTICA: Competitividade ao longo da cadeia produtiva e estudos de caso para a indústria automobilística e calçadista no Brasil (1989-1999)

by Silverio Zebral

Trabalho originalmente produzido no âmbito do Convênio FGV/IBRE –SPO/Ministério da Fazenda. Versão disponível com introdução suprimida em razão de circulação restrita entre as partes contratantes. Elaborado em co-autoria com André Lages Lima, Aléxis Toríbio Dantas, Larry Carris Cardoso e Maristela Domingues.

O presente trabalho avalia as transformações ocorridas na estrutura industrial da economia brasileira durante o ajuste... more O presente trabalho avalia as transformações ocorridas na estrutura industrial da economia brasileira durante o ajuste decorrente da abertura comercial do início dos anos 90. Discute as principais alterações no padrão de concorrência e na competitividade ao longo da cadeia de setores selecionados, de modo a justificar a adoção de estratégias de integração internacional de etapas da cadeia produtiva em detrimento da integração doméstica. Organiza o instrumental analítico comumente utilizado para cálculo de índices de competitividade, de modo a subsidiar os estudos
de caso desenvolvidos posteriormente. Apresenta estudos de caso acerca da competitividade indústria automobilística e da indústria calçadista no período pré e pós-ajuste (1989-1999). Analisa as estratégias de integração produtiva adotadas em cada setor, com especial atenção para os resultados relacionados ao incremento da produtividade do trabalho e da desindustrialização. Por fim, apresenta um breve rol de políticas públicas ligadas à manutenção e incremento dos atuais níveis de competitividade da indústria nacional.

Technical Efficiency in CTT - Correios de Portugal

by Ricardo Goulão Santos

With Alberto A. Pimenta e Sérgio Chilra Lagoa (1999), in Crew, Michael e Kleindorfer, Paul ed. Current Directions in Postal Reform, Kluwer Academic Publishers.

The Demand for Direct Mail in Portugal

by Ricardo Goulão Santos

With Sérgio Chilra Lagoa (2000), in Crew, Michael e Kleindorfer, Paul ed. Future Directions in Postal Reform, Kluwer Academic Publishers.

Assessing the Cost of the Portuguese Postal Network: Practical Cost Evaluation of a USO and Other Applications

by Ricardo Goulão Santos

With Alberto A. Pimenta and Sofia Beatriz Henriques (2006), in Crew, Michael e Kleindorfer, Paul ed. Progress toward Liberalization of the Postal and Delivery Sector, Springer.

Rent-seeking in a unionised monopoly

by Odd Rune Straume

Economics of Governance, 3, 117-134, 2002.

A unionised monopoly firm, benefitting from some kind of anticompetitive regulation, and its corresponding trade union... more A unionised monopoly firm, benefitting from some kind of anticompetitive regulation, and its corresponding trade union have a common interest in spending resources to protect the monopoly rents created by the regulation. In the present paper, a situation in which the unionised monopoly is challenged by a consumer organisation fighting for deregulation is analysed as a standard Tullock rent-seeking contest. With unequal sharing of monopoly rents, the free-riding incentives among the rent-defending players turn out to be overwhelming, in the sense that the unique Nash equilibrium is characterised by zero effort contribution by the player with the lower valuation of the contested prize. This implies that being “strong”, in terms of bargaining strength, is not necessarily an advantage for neither player in a unionised monopoly that is threatened by deregulation.

Union collusion and intra-industry trade

by Odd Rune Straume

International Journal of Industrial Organization, 20, 631-652, 2002.

This paper analyses the scope for collusive behaviour within the context of an international duopoly supergame in... more This paper analyses the scope for collusive behaviour within the context of an international duopoly supergame in which both firms and monopoly labour unions interact strategically. We find that the presence of unions, implying an endogenisation of production costs, dramatically alters the incentives for inter-firm collusion. There are, however, strong incentives for the unions to collude, raising the wage above the equilibrium level of the one-shot game. We propose two candidates for a Nash equilibrium of the supergame, in both of which the unions collude. The main result of the paper is that the presence of unions could actually promote intra-industry trade as an equilibrium outcome of the infinitely repeated game.

International mergers and trade liberalisation: implications for unionised labour

by Odd Rune Straume

International Journal of Industrial Organization, 21, 717-735, 2003.

An international oligopoly model with unionised and non-unionised firms is constructed to make predictions about the... more An international oligopoly model with unionised and non-unionised firms is constructed to make predictions about the pattern of international mergers. Applying the method of endogenous merger formation developed by Horn and Persson [International Journal of Industrial Organisation 19 (2001) 1213] we find that the equilibrium market structure is highly dependent on the level of trade costs. The model is further utilised to analyse the implications of trade liberalisation for unionised labour. A main finding is that, for sufficiently high levels of trade costs, unionised workers may benefit from a merger between non-unionised firms, whereas low levels of trade costs make unionised firms highly ‘vulnerable’ to an international merger, which could be detrimental to the union’s ability to capture oligopoly rents.

Bilateral monopolies and location choice

by Odd Rune Straume

Regional Science and Urban Economics, 34, 275-288, 2004. (With Kurt R. Brekke)

We analyse how equilibrium locations in location-price games à la Hotelling are affected when firms acquire inputs... more We analyse how equilibrium locations in location-price games à la Hotelling are affected when firms acquire inputs through bilateral monopoly relations with suppliers. Assuming a duopoly downstream market with input price bargaining, we find that the presence of input suppliers changes the locational incentives of downstream firms in several ways, compared with the case of exogenous production costs. Bargaining induces downstream firms to locate further apart, despite the fact that input prices increase with the distance between the firms. Furthermore, the downstream firm facing the stronger input supplier has a strategic advantage and locates closer to the market centre.