Berlin IO Day

Program (PDF, 84.91 KB)

Hospital Competition and Quality: Evidence from the Entry of the High Speed Train in South Korea (with Hyesung Yoo and Song Yao)
Maria Ana Vitorino, INSEAD
This paper leverages the entry of a high-speed train (HST) system in South Korea as a quasi-experiment to establish the causal effect of competition among hospitals on consumer welfare and health care quality. We implement a difference-in-differences research design that exploits the differential effect of the HST entry on hospitals based on their distance to train stations. Our results show that hospitals located closer to train stations experience lower mortality rates after the introduction of the HST, thus suggesting that increased accessibility resulted in improved clinical outcomes. To formally evaluate the impact of competition on quality, we estimate a demand model of hospital choice wherein patients evaluate the tradeoff between hospital quality and travel costs when selecting from different hospitals. The model results reveal that patients living closer to HST stations experienced positive gains in welfare as a result of the entry of the HST. Further, we show that the expansion of patients’ consideration sets not only resulted in improved health outcomes due to better patient sorting, but also prompted increased competition among hospitals to increase their quality, which in turn also had a significant impact on health outcomes.

Start-up Acquisitions and the Entrant’s and Incumbent’s Innovation Portfolios (with Esmée S.R. Dijk and Evgenia Motchenkova)
José-Luis Moraga-González, Vrije Universiteit Amsterdam
Abstract:   An entrant and an incumbent engage in an investment portfolio problem where each chooses how to allocate its research funds across a rival market, where they compete with one another, and a non-rival market, where they do not interact. Allowing for acquisitions distorts both players’ incentives to allocate funding across their rival and non-rival projects. We show conditions under which the incumbent, anticipating the rents that accrue from the monopolization of the rival market, moves R&D resources from other markets to the rival market. This “incumbency for buyout effect” lowers the expected rents the entrant obtains from the contestable market, which gives it incentives to move its investment portfolio away from the rival market. We show that this strategic effect dominates the usual “innovation for buyout effect” when the entrant’s bargaining power is below a threshold. Allowing for acquisitions may improve the direction of innovation of each of the players as well as consumer surplus. Because precisely the shift of resources towards and away from non-rival projects causes the welfare gains and losses, using the traditional definition-of-the-market approach to assess the impact of acquisitions should be reconsidered.
Paper is accessible here: https://cepr.org/publications/dp18309

Influencer Cartels (with Toomas Hinnosaar)
Marit Hinnosaar, University of Nottingham
Abstract:  Influencer marketing is a large and growing but mostly unregulated industry. The majority of influencers are not paid based on their marketing campaigns' success. Instead, their prices are based on engagement (number of likes and comments). This gives incentives for fraudulent behavior: for inflating engagement. We study influencer cartels, where groups of influencers collude to increase engagement to improve their market outcomes. Our theoretical model shows that such cartels mitigate the free-rider problem and may increase or decrease welfare depending on the quality of induced engagement. We use a novel dataset of Instagram influencer cartels and confirm that the cartels increase engagement as intended. Importantly, we show that engagement from general cartels is lower quality, whereas engagement from topic-specific cartels may be as good as natural engagement. Therefore topic-specific cartels may sometimes be welfare-improving, whereas typical general cartels hurt everyone.

The Incentive and Welfare Effects of the European Unitary Patent (with Alexis Stevenson and Tuomas Takalo)
Otto Toivanen, Aalto University
Abstract:   The harmonization of the European patent (EP) system through the upcoming Unitary Patent (UP) is one of the largest recent changes in a major intellectual policy regime. Using a model of patent renewals and data for chemical patents granted in 2000 by the European Patent Office, we find that i) the average European patent (EP) is worth AC230K; ii) essentially all inventors would have used UP had it been available; iii) private value of patents increases by 7% on average with the largest contributions coming from increased patent length and reduced fees and very little from improved quality of inventions and expanded territorial scope of patent protection; iv) private value of patents is 54-57% and consumer surplus 43-46% of total welfare; v) total welfare increases only 0-2% as consumer surplus is reduced 2-9%. There are large differences between countries in the changes induced by UP.

Adopting a Stance or Taking a Stand? Shaping Product Demand via Corporate Political Positions (with Justin P. Johnson and Aharon Cohen Mohliver)
David P. Myatt, London Business School

This time the local organizer is David Ronayne from the European School of Management and Technology (ESMT Berlin).
Special thanks!

The Berlin IO Day is a one-day workshop sponsored by the Berlin Centre for Consumer Policies (BCCP) and the Vereinigung der Freunde e.V. (VdF) des DIW Berlin and supported by the Berlin's leading academic institutions, including DIW Berlin, ESMT Berlin, Freie Universität Berlin, Humboldt-Universität zu Berlin, and Technische Universität Berlin which takes place twice a year, in the Fall and in the Spring.

For each Berlin IO Day, we will invite four or five speakers to present their recent work on a variety of IO topics, followed by a general discussion. The aim is to create an international forum for high quality research in Industrial Organization in the heart of Berlin, one of Europe's most vibrant and intellectually lively cities.

Organizers:

• Tomaso Duso, Jo Seldeslachts, Hannes Ullrich (DIW Berlin)
• Özlem Bedre-Defolie, Michał Grajek, David Ronayne, Stefan Wagner (ESMT Berlin)
• Andreas Asseyer (Freie Universität Berlin)
• Daniel Klapper, Anja Schöttner, Sebastian Schweighofer-Kodritsch, Roland Strausz (Humboldt-Universität zu Berlin)
• Radosveta Ivanova-Stenzel (Technische Universität Berlin)