Journal of Applied Econometrics contains a selection of papers presented at the 15th (EC) 2 conference on 'The Econometrics of Industrial Organization' held in Marseille, France, from 16 to 18 December 2004.
(EC) 2 stands for European Conference of the Econom(etr)ics Community. The (EC) 2 conference series was established in 1990. The meetings are small-scale conferences, organized around a particular theme, and take place over 2 days.
The main purpose of (EC) 2 conferences is to provide a forum where European researchers in quantitative economics and econometrics can meet to discuss the results and progress of their most recent research. In particular, the intention of the (EC) 2 conferences is to promote and foster interaction between the junior participants and the senior invited researchers. The Programme Chair for this meeting was Alvaro Escribano, with Michel Lubrano acting as Local Organizer.
The theme of this conference and this Special Issue is 'The Econometrics of Industrial Organization' (IO). The novelty of the 2004 meeting was to bring together people doing applied IO with econometricians. This led to exchanges on these fundamental issues from leading researchers working in the field of micro-econometrics and on empirical aspects of competition issues in different markets (retail, automobile, electricity, advertising, newspapers, transport, etc.) and broad issues like efficiency measures or the analysis of R&D decisions of firms. The range of topics covered by the papers presented in both the plenary and poster sessions reflected this breadth.
It is important to emphasize that this Special Issue is by no means a proceedings volume. Many more papers were presented during the conference than those that were accepted for publication after a reviewing process. The Editors first of all chose papers on the basis of the importance of their contribution and the proximity to the theme of the conference. The papers that are collected here have all undergone a rigorous reviewing and revision process. Note that the ordering of the papers in this Special Issue is made so as to reflect these groupings and their intersection as far as possible.
The first paper, by Jerry Hausman and Ephraim Leibtag, analyses the welfare impact of new retail outlets using a framework developed to analyse the introduction of new goods in a differentiated market (the spread of non-traditional retail outlets). Non-traditional retail outlets, including supercentres (like Wal-Mart), warehouse club stores and mass merchandisers, have recently grown in popularity. Consumers gain directly from the availability of new outlets ('new goods') as they provide more choice in a geographic market and, in the studied scenario, also lower prices. There are additional, indirect gains because competition increases and existing outlets respond by lowering their prices. The direct effect is estimated to be very large, approximately 20% compensating variation, and the indirect effect is an additional 5%. As it turns out, the effect shows up and the welfare effects are even larger than one would probably have expected. Compensating variation estimates are lower when households have a random willingness to pay for quality, but the reduction is only minor. The authors find that lower-income households tend to shop more at these low-priced outlets and their compensating variation from supercentres is higher than for higher-income households.