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on Industrial Competition |
| By: | Emilie Dargaud (GATE CNRS) |
| Abstract: | This article analyzes the incentive to merge in a context of price competition with horizontal product differentiation. In contrast to the results obtained by Kamien and Zang (1990), we show that merged equilibria can appear in this game. Moreover monopolization of the industry occurs with a high number of firms. |
| Keywords: | Mergers, Oligopoly, Cooperative game |
| JEL: | L10 L11 L20 |
| Date: | 2005–11 |
| URL: | http://d.repec.org/n?u=RePEc:gat:wpaper:0507&r=com |
| By: | Thomas Wiseman; R. Preston McAfee |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed005:636&r=com |
| By: | Nicholas Shunda (University of Connecticut) |
| Abstract: | This study compares the procurement cost-minimizing and productive efficiency performance of the auction mechanism used by independent system operators (ISOs) in wholesale electricity auction markets in the U.S. with that of a proposed alternative. The current practice allocates energy contracts as if the auction featured a discriminatory final payment method when, in fact, the markets are uniform price auctions. The proposed alternative explicitly accounts for the market clearing price during the allocation phase. We find that the proposed alternative largely outperforms the current practice on the basis of procurement costs in the context of simple auction markets featuring both day-ahead and real-time auctions and that the procurement cost advantage of the alternative is complete when we simulate the effects of increased competition. We also find that a trade-off between the objectives of procurement cost minimization and productive efficiency emerges in our simple auction markets and persists in the face of increased competition. |
| Keywords: | strategic behavior, multi-unit auction, wholesale electricity, Bertrand competition |
| JEL: | C72 D44 L10 L94 |
| Date: | 2005–10 |
| URL: | http://d.repec.org/n?u=RePEc:uct:uconnp:2005-48&r=com |
| By: | Reiner Martin (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Moreno Roma (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Isabel Vansteenkiste (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.) |
| Abstract: | In the course of the 1990s, the EU has embarked on an ambitious regulatory reform programme for a number of European network industries, such as telecommunications, energy and transport. This paper analyses the potential benefits of successful reforms in these sectors with a focus on the price effects of regulatory reforms. Following a review of the existing empirical literature in this field, the paper discusses the evolution of the current regulatory framework for network industries in the EU. An empirical analysis of the main determinants of recent price developments in these industries provides evidence that regulatory reform measures had a substantial downward impact on prices in the four sectors under review. |
| Keywords: | Network Industries, Panel Data, Price effects, Regulatory Reforms. |
| JEL: | E30 L33 L51 L93 L94 L95 L96 |
| Date: | 2005–04 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbops:20050028&r=com |
| By: | Maria Guadalupe |
| Abstract: | This paper shows that increasing product market competition can have a direct impact on theemployment relationship and on wage inequality. I develop a simple model in which anincrease in product market competition increases returns to skill through the effect ofcompetition on the sensitivity of profits to cost reductions. I then show empirically thatrelative wages increase with competition using a large panel of United Kingdom workerswith complete work histories. I identify the impact of competition on returns to skill in thepanel, using two exogenous measures of competition provided by two quasi-naturalexperiments. Quantile regressions indicate that increased competition also raised returns tounobserved ability. |
| Keywords: | Wage Structure, Returns to Skill, Product Market Competition |
| JEL: | J31 J33 L22 D21 |
| Date: | 2005–05 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp0686&r=com |
| By: | Marcello D'Amato (Università di Salerno, CSEF and CEPR); Riccardo Martina (Università di Napoli Federico II and CSEF); Salvatore Piccolo (Università di Salerno, CSEF and Northwestern University,) |
| Abstract: | The relationship between managerial incentives and product market competition is studied in an imperfectly competitive industry where two managerial .rms, compete by setting quantities. Owners simultaneously choose between two contractual regimes: a cost-based and a profit-based one, while privately informed managers perform an unveri.able cost-reducing activity and choose quantities. We characterize the incentive properties of alternative managerial remuneration schemes owners may use to control managers.behavior and we study the equilibrium relationship between owners’ and managers’ choices, efficiency and market competition. It is showed that a competing-contracts effect, at play under profit target, may induce firm owners not to select the constrained efficient allocation in the pre-specified set of contracts. Moreover, under profit-based schemes a pure agency effect, at play directly through information rents, drives a positive impact of competition on managerial effort. As a result an inverted-U shaped relationship between product market competition, managerial effort and agency costs obtains, thus leading to marginal costs convex with respect to a measure of competition. |
| Keywords: | generations competing contracts, cost-target, managerial firms, profit-target, product market competition, vertical hierarchies, X-inefficiency |
| JEL: | D82 L13 L22 |
| Date: | 2005–11–01 |
| URL: | http://d.repec.org/n?u=RePEc:sef:csefwp:148&r=com |
| By: | Clemens Nunes; Cleomar Gomes |
| Abstract: | This work studies the gasoline market in Brazil with emphasis given to the State of São Paulo. Our first line of research investigates whether this market presents features which favor anti-competitive actions, despite being a market with several agents involved. Our empirical analysis makes use of Panel Data Econometrics and the results corroborate the idea of a possibility of collusive behavior in the gasoline market. We go one step further and investigate whether the appearance of non exclusive (unbranded) fuel resaling firms, with no connections to any fuel distributor, is really able to bring competition to the market. For this part of the research we utilize a Multinomial Logit Model and our results show that a higher proportion of unbranded gas stations in a city truly causes more variability of prices and, therefore, bring more competition and lowers the possibility of cartel formation. |
| JEL: | D40 L11 L22 |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:anp:en2005:108&r=com |
| By: | Sergio Goldbaum; Fernando Garcia |
| Abstract: | This paper aims to investigate, using data on both the placing of automobile dealers and automobile demand and supply variables, the effects of new automobile dealers' entry in previously monopoly markets. First, we identify relevant variables which influence the existence and the number of automobile dealers in a geographical area. Then, using an adapted model from Bresnahan e Reiss (1990), we estimate the fixed costs of new auto dealers' entry in monopoly markets. We conclude that the fixed costs of entry of a second automobile dealer do not seem to be significantly higher than the fixed costs of entry of the first one. This conclusion increases the probability that the exclusivity clause present in the concession contracts does not harm the competition in the automobile Brazilian distribution market. |
| JEL: | L42 L62 L81 |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:anp:en2005:104&r=com |
| By: | Vicente Cuñat; Maria Guadalupe |
| Abstract: | This paper studies the effect of product market competition on the explicitcompensation packages that firms offer to their CEOs, executives and workers. We use a largesample of both traded and non-traded UK firms and exploit a quasi-natural experimentassociated to an increase in competition. The sudden appreciation of the pound in 1996implied different changes in competition for sectors with different degrees of openness. Ourdifference in differences estimates show that a higher level of product market competitionincreases the performance pay sensitivity of compensation schemes, in particular forexecutives. |
| Keywords: | Performance-related pay, Product market competition |
| JEL: | J32 J33 M12 J41 J49 |
| Date: | 2005–05 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp0687&r=com |
| By: | Xavier Gabaix; David Laibson; Hongyi Li |
| Date: | 2005–11–21 |
| URL: | http://d.repec.org/n?u=RePEc:cla:levrem:784828000000000656&r=com |
| By: | Sergio Aquino de Souza |
| Abstract: | This paper investigates the consequences of ignoring price heterogeneity on the estimation of markups using micro-data. I show that ignoring output price heterogeneity yields markup estimates severely biased towards one regardless of competitiveness levels. To do so, I set up an econometric model that assumes monopolistic competition and a CES demand function in a differentiated product market. This model controls for unobserved price heterogeneity and is easy to estimate since OLS is applicable. Using data from Colombian plants, the differentiated product model reveals markup estimates considerably higher than one, rejecting the hypothesis of competitive markets. |
| JEL: | L11 D21 D24 |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:anp:en2005:098&r=com |
| By: | Luiz Alberto D´Ávila de Araújo; Paulo de Melo Jorge Neto |
| Abstract: | One of the most relevant discussions on bank regulation is the dichotomy between liberalization, with higher competition, and financial stability. To investigate this problem, the article examines competitive conditions and risk taking in Brazilian banks, and investigates their interrelationship. Competition is measured using Panzar & Rosse model and risk taking by Basel Brazilian Index. Given the relevance of the discussion between Allen & Gale, Grochulski & Kareken and Kahn a measure of concentration was used as a proxy for competition. It is shown that Brazilian banks operate in monopolist competition and that competition increases risk taking. However, competition is not significance to explain credit offer. |
| JEL: | D89 E61 G28 |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:anp:en2005:042&r=com |
| By: | Paulo de Melo Jorge Neto; Luiz Alberto D´Ávila de Araújo; David Agustín Salazar Ponce |
| Abstract: | This analysis the relationship between market structure and competitiveness in the Brazilian bank industry. First, it quantifies competitiveness by using the statistic-H proposed by Panzar & Rosse and evaluates its relationship with several concentration statistics: Herfindahl-Hirschman, Concentration Ratio, Hall-Tideman and Theil. The concentration indexes lead concentration in CR10, while the concentration of credit operations reduces in others. The conclusion is that Brazilian banks configure a monopolistic competition industry and the relationship between competitiveness and concentration is negatively significant. |
| JEL: | D49 L19 |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:anp:en2005:084&r=com |
| By: | Arthur Barrionuevo Filho; Cláudio R. Lucinda |
| Abstract: | In this paper, we aim to investigate the optimum values for the termination rate on mobile networks in Brazil. In order to do so, initially we provide an overview of the legal framework on the subject since the privatization in the beginning of the 90's, as well as a market overview of the telecommunications sector in Brazil. In the second section, we provide a theoretical background on the subject and on the approaches used for the computing these prices, from the Ramsey pricing with network externalities, as used by Ofcom in the setting of termination charges for the United Kingdom, to the ones which use a framework of imperfect competition in the mobile sector, as presented in Wright (2000). The third section carries out a simulation of these approaches for parameter values of the Brazilian case. The fourth section concludes and posits some policy conclusions |
| JEL: | L14 L51 L52 |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:anp:en2005:111&r=com |
| By: | Jaime Jordán; José Luiz Parré |
| Abstract: | The main concern of this paper is investigated if the Latin American exports is explain for monopolist competition with increasing returns or oligopoly competition with reciprocal dumping. For this propose we used gravitational equation for Latin-American exports for differentiated and homogeneous products. For our econometric estimation we used a extensive sample of exports of 26 Latin-American country's to 136 country's importers of the rest of the world. Our results of the research are the following (a) The Latin-American exports for differentiated goods is explain by monopoly competition and increasing returns with free entry market (b) for homogeneous goods the behavior of regional exports is associated a oligopoly competition with reciprocal dumping (c) The homogeneous goods, with are associated with primary raw materials are yet very important for the economic growth of the Latin-American country's. |
| JEL: | F12 F14 F10 |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:anp:en2005:072&r=com |
| By: | Simon Board |
| Keywords: | mechanism design, pricing, optimal stopping |
| JEL: | C73 D82 L12 |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed005:847&r=com |
| By: | Marina Moreira da Gama; Ricardo Machado Ruiz |
| Abstract: | The antitrust policy is built through antitrust agency's decisions that are, in Brazil, pronounced by CADE. To appraise CADE's decisions, thus, is to appraise the antitrust policy in Brazil. This implies that is necessary to know if such decisions are consistent with the antitrust theory. The purpose of this paper is to verify the theoretical consistency of CADE's decisions. To get there, 330 Counsel's votes are analyzed on the legality lifetime of 8.884/94 Law or between 1994 and 2004. The paper's conclusion is that there is a general fragility in antitrust theory's application by CADE. For example, the demand substituibility test was made in only 14% of that cases in which the consume substituibility was analyzed; and the net economic efficiency computation was made in only 5% of that cases that the economic efficiency was argued. |
| JEL: | L40 L44 K21 |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:anp:en2005:109&r=com |
| By: | Silvinha Pinto Vasconcelos; Francisco de Sousa Ramos |
| Abstract: | The cease-and-desist commitment (CCP, a mechanism equivalent to a Consent Decree in the United States) is an agreement between the Administrative Counsel of Concurrence Defense (CADE) and an anticompetitive firm, aiming to cease the investigated practice in a certain period of time. During this agreement, there is a withdraw of the lawsuit. If the firm hasn't been respected the CCP, fines and reputation sanctions can be applied. Considering that the CCP utilization is still new in Brazil as well the literature about the theme, the objective of this paper is to analyze the conditions for a firm make a CCP, in a game with incomplete information. The results indicate that: the firms should follow the CCP as bigger were the loss of reputation and fines, and smaller the infraction profits against the normal profits; the antitrust authority should offer the CCP when the benefits of this proposal were bigger than the losing of the firm; the antitrust authority should offer the CCP when there is a belief that the firm is low cost type. |
| JEL: | L51 C72 |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:anp:en2005:094&r=com |
| By: | Nauro F. Campos; Mariana Iootty |
| Abstract: | What are the determinants of firm entry and exit in Brazil? How do entry and exit rates affect productivity? This paper tries to answer these questions using panel data for about 104 Brazilian manufacturing sectors (3-digit level) for the period 1996 to 2002. Our results show that the share of exports in sectoral output is one main determinant of entry and exit rates. The results also suggest that in years of real per capita GDP decline, export propensity is associated with entry rates, while in years of GDP expansion, sectoral growth is positively associated with net entry. Finally, our results show that exit (and to a lesser extent, entry and net entry) is a very robust determinant of total factor productivity across industrial sectors in Brazil. |
| JEL: | L6 C33 O12 |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:anp:en2005:095&r=com |
| By: | Timothy H. Hannan |
| Abstract: | It is frequently claimed that high ATM surcharges actually attract customers to the banks that impose them, particularly if they operate large ATM networks. By exploiting as "natural experiments" two events associated with the lifting of surcharge bans in Iowa and in the states that neighbor Iowa, this paper seeks to test for the implications of this phenomenon as it applies to the market shares of banking institutions and to several aspects of market structure. Consistent with these implications, results of "difference-in-difference" analyses suggest that the shares of larger market participants increase, the shares of smaller market participants decrease, market concentration increases, and the number of market competitors decreases after the lifting of surcharge bans. |
| Keywords: | Automated tellers - Middle West ; Banks and banking - Middle West |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfe:2005-46&r=com |
| By: | César Mattos |
| Abstract: | This article addresses the regulatory changes proposed for the telecommunications sector in Brazil regarding interconnection and unbundling policies. We summarize these policies after the privatization of Telebras, between 1998 and 2005, to be more able to evaluate the reform proposed for 2006, which we divide in nine main topics. They are 1) the adoption of the methodology of long run incremental cost - LRIC - as a parameter for tariff setting in interconnection, 2) the complementar use of a Fully Allocated Pricing mechanism for the sake of distributing common costs, 3) the abandonment, in practice, of the price cap regime, 4) the introduction of ties among interconnection and end user tariffs, 5) the replacement of the current tariff index (the IGP-DI) by the "Índice de Atualização de Tarifas" - Tariff Updating Index" (IST), 6) the new mechanic for the calculus of the discount factor "X", 7) the introduction of the "significative market power" concept, 8) the transition to a full Bill and Keep" system and 9) the effective use of "unbundling". |
| JEL: | L51 L43 L86 |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:anp:en2005:107&r=com |
| By: | Paul Ellickson; Beresteanu Arie (Economics Duke University) |
| Keywords: | Dynamic Models, Retail Indusry, Markov perfect equilibrium, Oligopoly |
| JEL: | L81 |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed005:829&r=com |
| By: | Antonio Pérez Puente; Francisco S. Ramos |
| Abstract: | In order to stimulate the quality of the service, ANEEL introduced penalties in the contracts with the concessionaires of public services of transmission of electric energy in the case which the transmission facilities are turned off, be for accident or for maintenance. In this sense, a variable value was instituted whose amount is discounted of the transmission revenue. The value of this parcel is not of easy determination, and ANEEL, based on observations, established a formula for calculation. High penalties can result in bad incentives to the entry of companies in the sector; otherwise, low penalties can induce to the offer of service of bad quality. By using the Theory Principal-agent, this work search to determine this formula so that the true objective is reached. in a rational way. In the present work we analyze the relationship ANEEL - Concessionaires by using the Theory Principalagent. The main conclusion of the work, besides the rising of the costs and of the analysis of the behavior of the concessionaires, refers to the fact that the values of the parameters used by the regulator can be established in smaller values than the now adopted, with larger economic efficiency. |
| JEL: | L51 L94 C72 |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:anp:en2005:112&r=com |
| By: | Nick Bloom; Mark Schankerman; John Van Reenen |
| Abstract: | Government policies to support R&D are predicated on empirical evidence of R&D"spillovers" between firms. But there are two countervailing R&D spillovers: positive effectsfrom technology spillovers and negative effects from business stealing by product marketrivals. We develop a general framework showing that technology and product marketspillovers have testable implications for a range of performance indicators, and exploit theseusing distinct measures of a firm's position in technology space and product market space.We show using panel data on U.S. firms between 1981 and 2001 that both technology andproduct market spillovers operate, but that net social returns are several times larger thanprivate returns. The spillover effects are also revealed when we analyze three high-techsectors in detail - pharmaceuticals, computer hardware and telecommunication equipment.Using the model we evaluate three R&D subsidy policies and show that the typical focus ofsupport for small and medium firms may be misplaced. |
| Keywords: | Spillovers, R&D, market value, patents |
| JEL: | O31 O32 O33 F23 |
| Date: | 2005–02 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp0675&r=com |
| By: | Caio Fonseca Ferreira; Elizabeth M. M. Q. Farina |
| Abstract: | Financial markets have become increasingly integrated throughout the world. Does this mean that local financial institutions are becoming irrelevant? We argue that due to the information asymmetries involved in credit concession and banks' role as monitors the answer is no. Motivated by empirical evidences that show a great dispersion among Brazilian banks' interest spreads, we have developed an imperfect competition model where the need to monitor loans and the heterogeneity of demand for credit create market niches in which it is possible to systematically charge higher interest rates on credit. Bank deposits do not need monitoring; thus the tendency to more intense competition. The difference in the level of competition under which these two services operate can generate an inefficient allocation of resources in the economy, particularly harming less developed areas. Volumes of loans and deposits observed in different Brazilian cities and states support the conclusions of the model. |
| JEL: | D21 D43 D61 |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:anp:en2005:083&r=com |
| By: | Martynova,Marina; Renneboog,Luc (Tilburg University, Center for Economic Research) |
| Abstract: | This paper reviews the vast academic literature on the market for corporate control. Our main focus is the cyclical wave pattern this market exhibits. From the perspective of takeover waves, we address questions such as: Why do mergers and acquisitions (M&As) occur? Does the ensuing transfer of control generate shareholder gains? What are the main profitability drivers in M&As by takeover wave? We find that the pattern of takeover activity and its profitability significantly vary across the various takeover waves. Despite such diversity, all waves have similarities: they are preceded by technological or industrial shocks, and occur in a positive economic and political environment, amidst rapid credit expansion and stock market booms. Takeovers towards the end of each wave are usually driven by non-rational, frequently selfinterested managerial decision-making. |
| Keywords: | diversification;takeover waves; mergers |
| JEL: | G34 |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:kubcen:2005107&r=com |
| By: | Andrew Sweeting |
| Keywords: | Multiple Equilibria, Coordination Games, Media |
| JEL: | L82 C72 C35 |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed005:490&r=com |