Industrial organisation

Net neutrality: Goals and challenges

Joshua Gans, 11 June 2014

Netflix recently agreed to pay Comcast for faster access to Comcast’s customers, intensifying the debate over ‘net neutrality’ – the principle that internet service providers should treat all data equally. This column argues that without net neutrality regulation, ISPs can capture the benefits of higher-quality content, thereby discouraging innovation from content providers. To be effective, net-neutrality regulation must prevent content-based price discrimination on both sides of the market.

(Mis)measuring prices in an era of globalisation

David Byrne, Brian Kovak, Ryan Michaels, 3 April 2014

When the law of one price is violated it can be difficult to determine a product’s contribution to the CPI. Does a low price competitor discount also on quality, or are market frictions at play? This column examines key product characteristics to separately identify these effects. Chinese firms discount both on price and quality, while Taiwanese firms use their productivity advantage to dynamically take advantage of market frictions.

CompNet’s new firm-level data base

Filippo di Mauro, 11 March 2014

Policies aimed at enhancing firm productivity may greatly benefit from firm-level evidence. Unfortunately, micro-founded data, particularly of cross-country nature, remain largely unavailable. This column presents a new firm-level database built by a research network of the EU system of central banks (CompNet). This data base allows investigating how firm size and labour costs interact at different levels of productivity. This new cross-country data base, and its potential to expand, could be of great policy value.

Russian volatility: Obstacle to firm survival and diversification

Alvaro González, Leonardo Iacovone, Hari Subhash, 12 February 2014

Growth in Russia comes from few natural-resource-linked sectors and to a few firms; the economy is currently less diversified than it was during the Soviet times. This column presents evidence that the emergence of new firms is not the binding constraint on diversification: it is the poor survival odds of new firms, created by long, deep Russian economic slumps. More competition would help to drive out less efficient, older firms, and create space for young and efficient ones to survive and thrive.

Switching costs and competition

Fernando Luco, 10 February 2014

Switching costs impede competition by making it costly for consumers to switch among products. This column studies the Chilean retirement investment market in order to identify the different causes of switching costs. The results indicate that most of consumer inertia is explained by the cost of analysing product information. This suggests that policymakers concerned about switching costs should focus their efforts on improving consumers’ access to information in order to minimise price distortions and increase consumer welfare.

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