Abstract This paper analyzes the effects of direct interconnection agreements in the Internet backbone on content quality investment for content providers (CPs). The model assumes that when the Internet service provider (ISP) has a vertical affiliation with one CP, the ISP directly interconnects the affiliated CP’s traffic to its network for free while collecting a direct interconnection fee from the unaffiliated CP. If the unaffiliated CP’s traffic is indirectly interconnected to the ISP’s network via a third party transit provider, its network quality is lower than that via a direct interconnection. For the CPs’ content quality investments, I find that the affiliated CP invests more in content when the rival indirectly interconnects, leading to a higher total level of content investment. Accordingly, there is a condition under which the ISP does not want to offer direct interconnection to the unaffiliated CP. However, consumers are not always worse off from this interconnection foreclosure. Thus, the regulation of a paid direct interconnection does not necessarily enhance welfare in terms of consumer surplus.
摘要本文分析了互联网骨干网中直接互联协议对内容提供商(CPs)内容质量投资的影响。该模型假设，当ISP (Internet service provider)与某一家CP垂直隶属时，该ISP将隶属CP的流量免费直接接入其网络，同时向非隶属CP收取直接对接费用。如果非隶属CP的流量通过第三方传输提供商间接接入该ISP的网络，其网络质量会低于直接对接。对于CPs的内容质量投资，我发现当竞争对手间接互联时，附属CP对内容的投资更多，导致内容投资的总水平更高。因此，存在一个条件，即ISP不希望向无关联的CP提供直接互连。然而，消费者并不总是因为这种互连丧失抵押品赎回权而受到损害。因此，就消费者剩余而言，对付费直接互联的监管不一定会提高福利。
{"title":"Direct Interconnection and Investment Incentives for Content Quality","authors":"S. Kim","doi":"10.2139/ssrn.2872908","DOIUrl":"https://doi.org/10.2139/ssrn.2872908","url":null,"abstract":"Abstract This paper analyzes the effects of direct interconnection agreements in the Internet backbone on content quality investment for content providers (CPs). The model assumes that when the Internet service provider (ISP) has a vertical affiliation with one CP, the ISP directly interconnects the affiliated CP’s traffic to its network for free while collecting a direct interconnection fee from the unaffiliated CP. If the unaffiliated CP’s traffic is indirectly interconnected to the ISP’s network via a third party transit provider, its network quality is lower than that via a direct interconnection. For the CPs’ content quality investments, I find that the affiliated CP invests more in content when the rival indirectly interconnects, leading to a higher total level of content investment. Accordingly, there is a condition under which the ISP does not want to offer direct interconnection to the unaffiliated CP. However, consumers are not always worse off from this interconnection foreclosure. Thus, the regulation of a paid direct interconnection does not necessarily enhance welfare in terms of consumer surplus.","PeriodicalId":45659,"journal":{"name":"Review of Network Economics","volume":"25 1","pages":"169 - 204"},"PeriodicalIF":0.7,"publicationDate":"2019-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"84616492","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
There are both market power and cost efficiency effects associated with airline mergers. Previous studies, however, have primarily focused on merger price effects, which is the net effect of these two forces. This paper attempts to decompose and measure these effects by using a model that allows us to derive proxies for market power and cost efficiency. In particular, we are interested in merger effects in markets where the merging airlines directly competed prior to their merger. We study two main mergers – Delta/Northwest and United/Continental – and find that both increase market power in markets where the merging airlines competed prior to merger. We also find evidence of marginal cost efficiencies associated with both mergers. These efficiency effects are relatively larger than the market power effects and come from different sources. In the case of the Delta/Northwest merger, efficiencies come from markets where the merging airlines competed prior to the merger, whereas in the case of United/Continental, they come from markets where the merging firms did not compete. The market power effects only stem from markets with pre-existing competition among merging airlines, perhaps due to the elimination of a competitor in those markets. These findings, thus, support the long-standing hypothesis that market power and efficiency are important in motivating horizontal mergers.
{"title":"Market Power and Marginal Cost Effects in Competing Markets: Evidence from Airline Mergers","authors":"B. L. Huubinh, Yimga Jules","doi":"10.1515/RNE-2018-0024","DOIUrl":"https://doi.org/10.1515/RNE-2018-0024","url":null,"abstract":"There are both market power and cost efficiency effects associated with airline mergers. Previous studies, however, have primarily focused on merger price effects, which is the net effect of these two forces. This paper attempts to decompose and measure these effects by using a model that allows us to derive proxies for market power and cost efficiency. In particular, we are interested in merger effects in markets where the merging airlines directly competed prior to their merger. We study two main mergers – Delta/Northwest and United/Continental – and find that both increase market power in markets where the merging airlines competed prior to merger. We also find evidence of marginal cost efficiencies associated with both mergers. These efficiency effects are relatively larger than the market power effects and come from different sources. In the case of the Delta/Northwest merger, efficiencies come from markets where the merging airlines competed prior to the merger, whereas in the case of United/Continental, they come from markets where the merging firms did not compete. The market power effects only stem from markets with pre-existing competition among merging airlines, perhaps due to the elimination of a competitor in those markets. These findings, thus, support the long-standing hypothesis that market power and efficiency are important in motivating horizontal mergers.","PeriodicalId":45659,"journal":{"name":"Review of Network Economics","volume":"5 1","pages":"63-108"},"PeriodicalIF":0.7,"publicationDate":"2019-06-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"76188331","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract The paper extends the tourist test proposed by Rochet and Tirole (2011) to the situation of emerging countries which are characterized by informality (tax evasion through cash payments). We introduce a government which faces a cost associated to cash (resources to fight against crime minus seigniorage) and tax evasion in the base model. The main idea is that merchants benefit from tax evasion since they do not provide a receipt in cash transactions and thus pocket a fraction of the VAT. In the presence of informality, the tax benefit of cash reduces the merchants’ net operating benefit of accepting card sales. The tourist test aims to determine a maximum interchange fee (the fee that the acquirer pays to the issuer whenever a card transaction is done) which makes the merchant indifferent between accepting cash or card. In this new environment, the tourist test threshold now internalizes this tax benefit of accepting cash. We assess the socially optimal interchange fees in this new model setup derived from three different social maximization functions.
摘要本文将Rochet and Tirole(2011)提出的旅游者检验扩展到以非正式性(通过现金支付逃税)为特征的新兴国家的情况。在基本模型中，我们引入了一个政府，它面临与现金(打击犯罪的资源减去铸币税)和逃税相关的成本。主要的想法是，商家从逃税中获利，因为他们在现金交易中不提供收据，从而将一小部分增值税收入囊中。在非正式性存在的情况下，现金的税收优惠降低了商家接受卡销售的净经营效益。游客测试的目的是确定一个最大的交换费(每当卡交易完成时，收款人向发卡机构支付的费用)，这使得商家在接受现金或卡之间无所谓。在这种新环境下，旅游测试门槛现在内化了接受现金的税收优惠。我们在这个由三个不同的社会最大化函数推导的新模型中评估了社会最优交换费。
{"title":"Merchant Card Acceptance: An Extension of the Tourist Test for Developing Countries","authors":"José Aurazo, J. L. Vásquez","doi":"10.1515/rne-2019-0030","DOIUrl":"https://doi.org/10.1515/rne-2019-0030","url":null,"abstract":"Abstract The paper extends the tourist test proposed by Rochet and Tirole (2011) to the situation of emerging countries which are characterized by informality (tax evasion through cash payments). We introduce a government which faces a cost associated to cash (resources to fight against crime minus seigniorage) and tax evasion in the base model. The main idea is that merchants benefit from tax evasion since they do not provide a receipt in cash transactions and thus pocket a fraction of the VAT. In the presence of informality, the tax benefit of cash reduces the merchants’ net operating benefit of accepting card sales. The tourist test aims to determine a maximum interchange fee (the fee that the acquirer pays to the issuer whenever a card transaction is done) which makes the merchant indifferent between accepting cash or card. In this new environment, the tourist test threshold now internalizes this tax benefit of accepting cash. We assess the socially optimal interchange fees in this new model setup derived from three different social maximization functions.","PeriodicalId":45659,"journal":{"name":"Review of Network Economics","volume":"31 1","pages":"109 - 139"},"PeriodicalIF":0.7,"publicationDate":"2019-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"73442431","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The main purpose of this study is to evaluate factors affecting passenger rail demand, with special attention to the effects of structural reform/regulation and competition. In order to do this, we use data obtained from 30 OECD countries for the 24 years from 1990 to 2013. As structural reform/regulation and competition variables, we take the OECD’s five kinds of regulatory indices: (i) overall, (ii) entry, (iii) public ownership, (iv) vertical integration, and (v) market structure; and for competition variables, we take (vi) rail passenger-freight ratio, (vii) rail share, and (viii) high-speed train ratio. As estimation methods, both the fixed effect model and the Hausman-Taylor estimation model are used. The major findings are as follows. First, competition as competitiveness (i.e. the share of rail, passenger over freight ratio) increases passenger demand. And the existence of high-speed trains increases passenger demand. Second, overall, entry regulation, and market structure have no significant effect on demand. Third, public ownership affects passenger demand positively. Last, vertical integration reduces passenger demand.
{"title":"The Impact of Structural Reforms and Regulations on the Demand Side in the Railway Industry","authors":"Mizutani Fumitoshi","doi":"10.1515/RNE-2019-0006","DOIUrl":"https://doi.org/10.1515/RNE-2019-0006","url":null,"abstract":"The main purpose of this study is to evaluate factors affecting passenger rail demand, with special attention to the effects of structural reform/regulation and competition. In order to do this, we use data obtained from 30 OECD countries for the 24 years from 1990 to 2013. As structural reform/regulation and competition variables, we take the OECD’s five kinds of regulatory indices: (i) overall, (ii) entry, (iii) public ownership, (iv) vertical integration, and (v) market structure; and for competition variables, we take (vi) rail passenger-freight ratio, (vii) rail share, and (viii) high-speed train ratio. As estimation methods, both the fixed effect model and the Hausman-Taylor estimation model are used. The major findings are as follows. First, competition as competitiveness (i.e. the share of rail, passenger over freight ratio) increases passenger demand. And the existence of high-speed trains increases passenger demand. Second, overall, entry regulation, and market structure have no significant effect on demand. Third, public ownership affects passenger demand positively. Last, vertical integration reduces passenger demand.","PeriodicalId":45659,"journal":{"name":"Review of Network Economics","volume":"8 1","pages":"1-33"},"PeriodicalIF":0.7,"publicationDate":"2019-03-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"79400562","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract This study investigates the role of aligning tariff adjustments and quality incentives in a Price cap regulatory regime. According to theory costs and quality are positively related. If additional resources are needed to improve service quality, a high cost high quality utility could be at a disadvantage when tariffs are adjusted by an X-factor that does not include quality. The regulator of the electricity distribution sector of Brazil has set up a public ranking of utilities according to quality compliance at the same time that a quality component is added to the X-factor, in 2013. We develop a stochastic cost frontier integrating all components of the X-factor to rank the utilities based on this integrated efficiency. Comparing this rank with the regulator’s public rank we argue that the resulting differences highlight the importance of using the same factors to rank and adjust tariffs in the sector. Otherwise, incentives would be misplaced with respect to factors used in cost adjustments. In addition, our findings reveal that the utilities’ cost behavior with respect to quality depends on the volume of energy delivered. We believe these results could be considered by the regulator when setting incentives and considering factors to adjust tariffs.
{"title":"Aligning Quality Incentives and Tariff Adjustments: The Case of the Brazilian Electricity Distribution Sector","authors":"M. L. Corton, Michelle A. Phillips, A. Zimmermann","doi":"10.1515/rne-2019-0044","DOIUrl":"https://doi.org/10.1515/rne-2019-0044","url":null,"abstract":"Abstract This study investigates the role of aligning tariff adjustments and quality incentives in a Price cap regulatory regime. According to theory costs and quality are positively related. If additional resources are needed to improve service quality, a high cost high quality utility could be at a disadvantage when tariffs are adjusted by an X-factor that does not include quality. The regulator of the electricity distribution sector of Brazil has set up a public ranking of utilities according to quality compliance at the same time that a quality component is added to the X-factor, in 2013. We develop a stochastic cost frontier integrating all components of the X-factor to rank the utilities based on this integrated efficiency. Comparing this rank with the regulator’s public rank we argue that the resulting differences highlight the importance of using the same factors to rank and adjust tariffs in the sector. Otherwise, incentives would be misplaced with respect to factors used in cost adjustments. In addition, our findings reveal that the utilities’ cost behavior with respect to quality depends on the volume of energy delivered. We believe these results could be considered by the regulator when setting incentives and considering factors to adjust tariffs.","PeriodicalId":45659,"journal":{"name":"Review of Network Economics","volume":"13 1","pages":"35 - 62"},"PeriodicalIF":0.7,"publicationDate":"2019-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"90589461","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract Considering the US railroad industry, which is characterized by seven integrated firms that provide freight services on tracks they own and maintain, this paper provides a structural model that allows to evaluate the potential effects of opening the rail network to new firms on prices and investment incentives. In particular, we propose a framework for analyzing the tension between static efficiency (pricing behavior) and dynamic efficiency (investment behavior). The investment behavior is rendered endogenous by means of a dynamic model where the current investment depends on the expected future profits. We then use a forward simulation procedure to analyze the effect of an open-access market structure where a new firm uses the network of one of the biggest railroad firm. Under a simple access charge equaled to the marginal cost of access, investment in network infrastructure decreases by 10% per year, leading to a significant decrease in network quality over time. Under this setting, despite the increase of price competition, the decrease in network quality leads to a fall in consumer welfare. Other types of (more evolved) access charges might even allow to relax the tension between static efficiency and dynamic efficiency, allowing more price competition while preserving investment incentives. This topic deserves further research and is beyond the scope of this paper.
{"title":"The Static-Dynamic Efficiency Trade-off in the US Rail Freight Industry: Assessment of an Open Access Policy","authors":"Daniel Coublucq, M. Ivaldi, G. Mccullough","doi":"10.1515/rne-2018-0009","DOIUrl":"https://doi.org/10.1515/rne-2018-0009","url":null,"abstract":"Abstract Considering the US railroad industry, which is characterized by seven integrated firms that provide freight services on tracks they own and maintain, this paper provides a structural model that allows to evaluate the potential effects of opening the rail network to new firms on prices and investment incentives. In particular, we propose a framework for analyzing the tension between static efficiency (pricing behavior) and dynamic efficiency (investment behavior). The investment behavior is rendered endogenous by means of a dynamic model where the current investment depends on the expected future profits. We then use a forward simulation procedure to analyze the effect of an open-access market structure where a new firm uses the network of one of the biggest railroad firm. Under a simple access charge equaled to the marginal cost of access, investment in network infrastructure decreases by 10% per year, leading to a significant decrease in network quality over time. Under this setting, despite the increase of price competition, the decrease in network quality leads to a fall in consumer welfare. Other types of (more evolved) access charges might even allow to relax the tension between static efficiency and dynamic efficiency, allowing more price competition while preserving investment incentives. This topic deserves further research and is beyond the scope of this paper.","PeriodicalId":45659,"journal":{"name":"Review of Network Economics","volume":"44 1","pages":"267 - 301"},"PeriodicalIF":0.7,"publicationDate":"2018-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"78669132","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Sophia Gaenssle, Oliver Budzinski, Daria O. Astakhova
Abstract This paper empirically examines factors influencing box office success of international movies in Russia between 2012 and 2016. It adds to existing research on national movie markets, by highlighting the relevance of differences in culture, institutions, language, and consumption habits for movie success. Three groups of success factors are distinguished: distribution related (e.g. budget, franchise), brand and star effects (e.g. top actors or directors), and evaluation sources (e.g. critics and audience rating). We add novel region-specific variables like seasonality, time span between the world and local release, attendance of international stars at Russian movie premieres, and title adaptation to Russian culture. The results indicate that budget, franchise, employment of popular actors and directors, electronic word of mouth and audience ratings exert a significantly positive influence on Russian box office success. However, we find significantly negative effects for international critics and, interestingly, the adaption of movie titles. The main contributions of our study are (i) success factors vary between countries with different cultures, (ii) region-specific factors matter, and consequently (iii) results from one market (e.g. the US) cannot easily be generalised.
{"title":"Conquering the Box Office: Factors Influencing Success of International Movies in Russia","authors":"Sophia Gaenssle, Oliver Budzinski, Daria O. Astakhova","doi":"10.1515/rne-2019-0017","DOIUrl":"https://doi.org/10.1515/rne-2019-0017","url":null,"abstract":"Abstract This paper empirically examines factors influencing box office success of international movies in Russia between 2012 and 2016. It adds to existing research on national movie markets, by highlighting the relevance of differences in culture, institutions, language, and consumption habits for movie success. Three groups of success factors are distinguished: distribution related (e.g. budget, franchise), brand and star effects (e.g. top actors or directors), and evaluation sources (e.g. critics and audience rating). We add novel region-specific variables like seasonality, time span between the world and local release, attendance of international stars at Russian movie premieres, and title adaptation to Russian culture. The results indicate that budget, franchise, employment of popular actors and directors, electronic word of mouth and audience ratings exert a significantly positive influence on Russian box office success. However, we find significantly negative effects for international critics and, interestingly, the adaption of movie titles. The main contributions of our study are (i) success factors vary between countries with different cultures, (ii) region-specific factors matter, and consequently (iii) results from one market (e.g. the US) cannot easily be generalised.","PeriodicalId":45659,"journal":{"name":"Review of Network Economics","volume":"8 1","pages":"245 - 266"},"PeriodicalIF":0.7,"publicationDate":"2018-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"81547497","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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