Review of Industrial Organization

We investigate whether the cost pass-through in the European retail gasoline market is the same regardless of whether cost changes are driven by exchange rate fluctuations or driven by fluctuations in the dollar spot price of gasoline. We find that the two cost pass-through rates are not the same: we find that the latter exceeds the former. The effect is quantitatively small, but robust and statistically significant. This pattern is not due to a lower persistence of exchange rate changes, refinery supply contracts, or economic fluctuations. The lower variability of exchange rates relative to that of oil prices explains a portion of the response gap. A possible explanation for the remaining gap is that consumers draw a direct link between the crude oil and retail gasoline prices, which affects their price expectations and their search intensity, and thus the retailers’ pass-through. Because pass-through is sometimes used to assess market competitiveness and contributes to the forecast of the Consumer Price Index, it is important to recognize that the source of variation in the underlying costs may have an effect on the assessment of market conduct and inflation.

This paper aims to estimate the effect of imposing a reserve price in repeated auctions of homogeneous items. I model the behavior of impatient bidders who search for the best auction outcome over time. The model is used to develop estimating equations for the bidders’ valuations, and to evaluate the effect of reserve prices on bids and revenue. Using data collected from surplus auctions of personal computer processors, I find economically significant gains from imposing a reserve price. The revenue-maximizing reserve price improves revenue by about 23% for a large subsample of the auctions in the data.

This paper is motivated by the large fine the EuropeanCommission imposed on Volkswagen in January 1998 forobstructing sales to foreigners. The first partdiscusses the competitive framework in which the carsector operates, especially the exclusive dealershipsystem. This is followed by a detailed examination ofthe degree of price-differentiation across nationalmarkets by 24 major manufacturers. The evidencereveals VW and Audi not to be special cases. Thisfinding implies that the Commission should reconsiderits own block exemption if it wants to establisha more competitive car market along the principles ofthe Common Market.

The Telecommunications Act of 1996 removes state-level legal and regulatory barriers to entry that previously have proscribed facilities-based interchange carriers from entering intraLATA toll markets. Traditionally, these markets have provided excess profits that local exchange companies ostensibly have used to subsidize local telephone rates. Elimination of these entry barriers, then, raises concern that the resulting intensification of competition will force unwanted local residential rate increases. In this paper, we critically examine the local-rate-increase question both theoretically and empirically. Our analysis finds no evidence that intraLATA toll competition will adversely affect local rates.

A multiproduct incumbent firm faces the threat of entry from another multiproduct (generalist) firm or from single-product (specialist) firms. Assuming that the incumbent offers higher quality products than its rivals, we inquire whether the possibility of bundling by the incumbent is more effective in deterring entry in one setting or the other, and explore how the quality difference affects the comparison. For instance, for relatively high-quality differences the generalist is more vulnerable to bundling than are the specialists; but bundling is a credible action for the incumbent more often against specialists than against the generalist.

This paper estimates the effect of a sugar-factory privatization policy on sugar beet acreages in Turkey. It finds that sugar beet acreages decreased by more than 15% due to the 2018 privatization of several sugar factories. Farmers decreased their contracted acreages in the middle of 2018, after the privatization announcement but before the actual transfer of the institutions. Production continued to decrease in the following years for the farms that were in the “catchment area” of the privatized factory group. However, for the farms that were in the area of the factories in which privatization was subsequently canceled, the negative effect of the announcement vanished. The results show that privatization policies can significantly affect markets even before the transfer of the institutions to the private sector.

This article investigates the relationship between some aspects of market dynamics and economic development in subsequent time periods. Different approaches to test a turbulence-growth hypothesis are compared using data on entries and exits in West Germany. Analyses on the levels of industries and regions come to contradicting results. The discussion of these contradictions leads to two main conclusions: (1) only interregional analysis provides a proper test of the turbulence-growth hypothesis, and (2) such an analysis on the level of regions must account for the industrial structure within the regions. In the regional context, a positive relation between entry rate and economic development can only be found for start-ups in manufacturing.