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News & Events

News Roundup: Industrial Organization Conference

By Chad Schlegel

5/1/2004 - Ever wonder why airlines systematically schedule flights to arrive late? Or why Barolo wines from Italy are so expensive? These were among the many diverse topics explored at the second annual Industrial Organization Conference held April 23-24 at Wieboldt Hall.

The conference, sponsored by the Industrial Organization Society, Kellogg School and the University of Chicago's Stigler Center, featured 300 papers presented by university faculty and students, plus government and private sector employees, from 25 countries.

Kellogg professor Jim Dana, one of the event's organizers, says the two-year-old conference has filled a void by taking into account the wider interests of industrial economics researchers. He also praised the conference for its role in fostering co-authored research between universities and providing a forum for discussion.

"The presentations generate a lot of enthusiastic comments, perhaps mostly critical," Dana said. "These comments, through face-to-face discussion, lead to new research ideas."

Each day began with a keynote address by a noted economist. At Friday's opening luncheon, Northwestern University economics professor Robert Porter spoke on methods of detecting collusion among firms. At breakfast on Saturday, Massachusetts Institute of Technology economics and management professor Paul L. Joskow spoke on the significant role of economic research in deregulation efforts in the airline, trucking and other industries over the past 25 years.

For Dana, Joskow's presentation was a highlight of the conference. "[Joskow] explored deregulation not only from a public policy perspective, but from a political economy perspective, and from a history of academic thought perspective. Research articles are simply too narrow to accomplish that."

Papers were organized by theme--including "The Curious Dynamics of Retail Gasoline Prices," "Pricing Theory" and "Antitrust Issues in Health Care"--and presented over two days. Each presentation was followed by an evaluation by a discussant and a question-and-answer period.

Among the papers presented was "How Did Location Affect the Adoption of the Commercial Internet? Global Village, Urban Density and Industrial Competition," in which Shane Greenstein (The Kellogg School), Chris Forman (Carnegie Mellon University) and Avi Goldfarb (University of Toronto Rotman School of Management) test two common, yet contradictory assumptions: that participation in the commercial internet is greater among firms located in urban rather than rural areas; and that by reducing coordination costs within and between firms, the internet has reduced the importance of location in economic activity.

By analyzing investments of various firms, they found that basic participation in the Internet is more likely in rural areas, especially where that technology results in reducing interfirm isolation. At the same time, IT-intensive companies at the forefront of internet innovation will continue to be concentrated in urban areas, where they benefit from increased access to more qualified labor and the ability to partner with similar firms, lowering development costs. They conclude that the Internet was different from other IT technologies in the past, that is will help change the comparative advantage of locations, particularly for Internet applications geared toward communicating between firms.

In another paper, entitled "The Distribution Effects of File Sharing: The Recorded Music Industry," David Blackburn (Harvard University) investigated the impact of file-swapping sites like Kazaa.com on music sales by crossing file sharing data provided by BigChampagne.com with music sales figures from Nielsen SoundScan. His findings: while swapping cuts into sales of recordings by major recording stars, it boosts sales by lesser-known artists; further, litigation by the Recording Industry Association of America has had a negligible impact on swapping activity.

The Industrial Organization Society was founded in 1972 to promote the study of competition and market power and the effect of regulatory policies in real-world markets. Next year's conference will be held next spring at Georgia Institute of Technology in Atlanta. For information go to http://www.ios.neu.edu.