|
on Industrial Competition |
| By: | Emanuele Bacchiega; Olivier Bonroy; Emmanuel Petrakis |
| Abstract: | In a two-tier industry with bottleneck upstream and two downstream firms producing vertically differentiated goods, we identify conditions under which the upstream supplier chooses exclusive or non-exclusive negotiations, or an English auction to sell its essential input. Auctioning off a two-part tariff contract is optimal for the supplier when its bar- gaining power is low and the final goods are not too differentiated. Otherwise, the supplier enters into exclusive or non-exclusive negotiations with the downstream firm(s). Finally, in contrast to previous findings, an auction is never welfare superior to negotiations. |
| JEL: | D43 L13 L14 |
| Date: | 2020–04 |
| URL: | http://d.repec.org/n?u=RePEc:bol:bodewp:wp1145&r=all |
| By: | Simon Finster (Nuffield College and Department of Economics, University of Oxford) |
| Abstract: | We study equilibria in Product-Mix, sequential, and simultaneous auctions, which are used to sell differentiated, indivisible goods. A flexible bidder with unit demand, interested in buying any of the goods, competes against several inflexible bidders, each interested in only one specific good. For first-price and second-price payments, we obtain theoretical results on equilibrium bidding, and compare efficiency, revenue, and bidder surplus numerically. Differences in outcomes between Product-Mix and sequential auctions are small for a range of value distributions. The simultaneous auction performs worst in all dimensions, and differences in performance vary substantially with the degree of competition the flexible bidder faces. |
| Keywords: | multi-unit auctions, asymmetric auctions, market power, menu auctions, sequential auctions, simultaneous auctions |
| JEL: | C72 D44 D47 D61 D82 |
| Date: | 2020–03–24 |
| URL: | http://d.repec.org/n?u=RePEc:nuf:econwp:2003&r=all |
| By: | Shekhar, Shiva |
| Abstract: | This article studies competition between different types of ad-funded platforms attracting consumers with free services. Consumers often find advertisements a nuisance on such platforms. We study how under a competitive setting platforms balance the tension between attracting consumers and rent extraction from the advertising side. We propose a flexible yet simple model that studies competition between standard platforms and social media platforms (with same-side network effects). We find that an increase in either positive same-side network effects or an increase in consumer disutility from advertisements leads to a reduction in the number of ads on that platform. When competing platforms merge, consumer side network effects do not impact prices and the number of ads is higher. In a setting where consumers present a negative (congestion) externality on each other, competition fails to protect consumer welfare and behaves erratically. Finally, we present a few extensions and discuss some policy implications. |
| Keywords: | Social media platforms, platforms, two-sided markets, same side network effects, cross side network effects, advertising. |
| JEL: | K21 L13 L82 L86 |
| Date: | 2020–03 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:99364&r=all |
| By: | Chen, Jiaqi; Lee, Sang-Ho |
| Abstract: | This paper investigates strategic choices between duopolistic firms’ R&D investments and government’s output subsidies in an endogenous timing game with research spillovers. We show that a simultaneous-move game among three players appears at equilibrium if the spillovers are very low while government leadership with both firms’ simultaneous-move game appears otherwise. We also show that government followership appears unless the spillovers are low or high, while both the government leadership and followership outcomes are socially desirable at quilibrium. However, a single firm’s leadership equilibrium appears if the spillovers are high, but it causes a welfare loss. |
| Keywords: | Endogenous timing game; Research spillovers, R&D investments; Output subsidies; |
| JEL: | H21 L13 |
| Date: | 2020–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:99503&r=all |
| By: | Sander Heinsalu |
| Abstract: | The optimal price of each firm falls in the search cost of consumers, in the limit to the monopoly price, despite the exit of lower-value consumers in response to costlier search. Exit means that fewer inframarginal consumers remain. The decrease in marginal buyers is smaller, because part of demand is composed of customers coming from rival firms. These buyers can be held up and are not marginal. Higher search cost reduces the fraction of incoming switchers among buyers, which decreases the hold-up motive, thus the price. |
| Date: | 2020–04 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2004.01238&r=all |
| By: | Benjamin Radoc (Philippine Competition Commission and Department of Economics, Ateneo de Manila University); Philip Amadeus Libre (Asian Development Bank (Consultant)); Shanti Aubren Prado (World Bank Group (Consultant)) |
| Abstract: | Competition authorities around the world have adopted leniency programs creating incentives for cartel members to come forward and provide information sufficient for cartel prosecution. We conducted a laboratory experiment simulating an infinitely repeated 4-player Bertrand game with homogeneous goods. The experiment allowed us to determine the effect of detection rate, penalty discount, and penalty rate on cartel formation and leniency application. Similar to past studies, we find that imposing a leniency program effectively deters cartel formation. However, surviving cartels quickly learn to cooperate. Leniency application is dependent on the immunity incentive (full penalty discount) and the risk of cartel detection, but not on the penalty rate. |
| Keywords: | antitrust, cartel, experiment, leniency program |
| JEL: | K21 L13 L44 |
| Date: | 2020–03 |
| URL: | http://d.repec.org/n?u=RePEc:agy:dpaper:202003&r=all |
| By: | Philippe Aghion; Roland Bénabou; Ralf Martin; Alexandra Roulet |
| Abstract: | This paper investigates the joint effect of consumers' environmental concerns and product-market competition on firms' decisions whether to innovate “clean” or “dirty”. We first develop a step-by-step innovation model to capture the basic intuition that socially responsible consumers induce firms to escape competition by pursuing greener innovations. To test and quantify the theory, we bring together patent data, survey data on environmental values, and competition measures. Using a panel of 8,562 firms from the automobile sector that patented in 42 countries between 1998 and 2012, we indeed find that greater exposure to environmental attitudes has a significant positive effect on the probability for a firm to innovate in the clean direction, and all the more so the higher the degree of product market competition. Results suggest that the combination of historically realistic increases in prosocial attitudes and product market competition can have the same effect on green innovation as major increase in fuel prices. |
| JEL: | D21 D22 D62 D64 H23 O3 O31 |
| Date: | 2020–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:26921&r=all |
| By: | Marco Bonomo; Carlos Carvalho; Oleksiy Kryvtsov; Sigal Ribon; Rodolfo Rigato |
| Abstract: | Standard theories of price adjustment are based on the problem of a single-product firm, and therefore they may not be well suited to analyze price dynamics in the economy with multiproduct firms. To guide new theory, we study a unique dataset with comprehensive coverage of daily prices in large multi-product food retailers in Israel. We find that a typical retail store synchronizes its regular price changes around occasional “peak" days when, once or twice a month, it reprices around 10% of its products. To assess the implications of partial price synchronization for inflation dynamics, we develop a new price-setting model in which a firm sells a continuum of products and faces economies of scope in price adjustment. The model generates the partial synchronization pattern with peaks of re-pricing activity observed in the data. We show analytically and numerically that synchronization of price changes attenuates the average price response to a monetary shock; however, only high degrees of synchronization can materially strengthen monetary non-neutrality. Hence, the synchronization of price changes observed in the data is consistent with considerable aggregate price flexibility. |
| Keywords: | Inflation and prices; Market structure and pricing; Monetary Policy |
| JEL: | D21 D22 E31 E52 L11 |
| Date: | 2020–04 |
| URL: | http://d.repec.org/n?u=RePEc:bca:bocawp:20-12&r=all |
| By: | S. Nageeb Ali; Ayal Chen-Zion; Erik Lillethun |
| Abstract: | Information is replicable in that it can be simultaneously consumed and sold to others. We study how resale affects a decentralized market for information. We show that even if the initial seller is an informational monopolist, she captures non-trivial rents from at most a single buyer: her payoffs converge to 0 as soon as a single buyer has bought information. By contrast, if the seller can also sell valueless tokens, there exists a ``prepay equilibrium'' where payment is extracted from all buyers before the information good is released. By exploiting resale possibilities, this prepay equilibrium gives the seller as high a payoff as she would achieve if resale were prohibited. |
| Date: | 2020–04 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2004.01788&r=all |
| By: | Budzinski, Oliver; Gänßle, Sophia; Lindstädt-Dreusicke, Nadine |
| Abstract: | The world of audiovisual online markets is rapidly changing. Not long ago, it was dominated by linear television, transmitted terrestrially, through cable networks or via satel-lite. Recently, streaming services like Netflix, YouTube, Amazon Prime and others have emerged as new suppliers of audiovisual content. In this quickly changing industry, compe-tition interrelations between such different formats like traditional TV, videos on YouTube, and streaming via Netflix are subject to controversy. In particular, doubt is cast on services like YouTube exerting competitive pressure on services like Netflix and traditional TV. Based upon a survey with almost 3,000 participants, we provide an empirical analysis of consump-tion behavior of audiovisual contents. Using descriptive and analytical statistics, including multiple equation models, we show that there are specific areas within audiovisual content markets where YouTube exerts considerable competitive pressure on both Netflix and classic TV, for instance, through prime time video entertainment. However, our analysis yields dif-ferentiated results as we also identify areas where competition intensity between different service types appear to be low, for instance, through daytime and regarding the intention to shorten waiting time. |
| Keywords: | video-on-demand,streaming markets,media economics,cultural economics,commercial television,multiple equation models,competition,consumption behavior |
| JEL: | L82 L86 Z10 M21 L13 L40 L51 C39 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:tuiedp:137&r=all |
| By: | Mpho Rapapali; Witness Simbanegavi |
| Abstract: | This paper uses the Boone indicator and the Panzar-Rosse H-statistic to assess competition in the South African banking sector. Results point to substantial exercise of market power by South African banks. More precisely, we find evidence of ‘monopoly’ or ‘cartel’ tendency when using either the Boone indicator or the Panzar-Rosse approaches. The results are robust to different model specifications. We thus conclude that over the period 2008–2018, the nature of conduct by South African banks was ‘monopoly’ in the sense that banks’ market shares or revenues are little affected by the behaviour or actions of other banks. Given the role of banks in the transmission of monetary policy, and for economic growth more generally, the weak competition in the sector may have negatively affected the efficacy of monetary policy during this period, and may partly explain South Africa’s weak economic growth performance post the GFC. |
| Date: | 2020–03–30 |
| URL: | http://d.repec.org/n?u=RePEc:rbz:wpaper:9819&r=all |
| By: | Filippo De Marco; Silvio Petriconi |
| Abstract: | We show that competition adversely affects the "specialness" of bank lending. In particular, we observe that the positive abnormal return on the borrowing firm's stock after the announcement of a bank loan is reduced in US states that deregulate interstate branching.The negative effect of competition on the value of bank loans is present only for ex-ante opaque firms (i.e., firms with few tangible assets and bank-dependent borrowers) and for banks that presumably rely more on "soft" information (i.e., small banks).Moreover, we find that the probability of a covenant violation in a syndicated deal and charge-off rates on small business loans are higher in deregulated states. Our results suggest that competition decreases loan quality because it reduces banks' incentives to invest in information. |
| Keywords: | asymmetric information; competition; bank deregulation; loan announcement returns |
| JEL: | G21 G28 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:baf:cbafwp:cbafwp19130&r=all |
| By: | Vijay V. Vazirani; Mihalis Yannakakis |
| Abstract: | In 1979, Hylland and Zeckhauser \cite{hylland} gave a simple and general scheme for implementing a one-sided matching market using the power of a pricing mechanism. Their method has nice properties -- it is incentive compatible in the large and produces an allocation that is Pareto optimal -- and hence it provides an attractive, off-the-shelf method for running an application involving such a market. With matching markets becoming ever more prevalant and impactful, it is imperative to finally settle the computational complexity of this scheme. We present the following partial resolution: 1. A combinatorial, strongly polynomial time algorithm for the special case of $0/1$ utilities. 2. An example that has only irrational equilibria, hence proving that this problem is not in PPAD. Furthermore, its equilibria are disconnected, hence showing that the problem does not admit a convex programming formulation. 3. A proof of membership of the problem in the class FIXP. We leave open the (difficult) question of determining if the problem is FIXP-hard. Settling the status of the special case when utilities are in the set $\{0, {\frac 1 2}, 1 \}$ appears to be even more difficult. |
| Date: | 2020–04 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2004.01348&r=all |
| By: | NAKAMURA Tsuyoshi; OHASHI Hiroshi |
| Abstract: | This paper empirically examines the role of imports in the assessment of domestic mergers. It constructs and estimates a structural model of demand and supply to describe Japan's copper tube, taking an explicit account of cross-border transactions. Obtained simulation results show that the merger would have raised domestic price significantly, implying that import pressure was not as significant as was considered at the time of the merger. |
| Date: | 2020–02 |
| URL: | http://d.repec.org/n?u=RePEc:eti:dpaper:20013&r=all |
| By: | Richard Blundell (University College London and Institute for Fiscal Studies); Ran Gu (University of Essex and Institute for Fiscal Studies); Soren Leth-Petersen (University of Copenhagen, CEBI and CEPR); Hamish Low (University of Oxford and Institute for Fiscal Studies); Costas Meghir (Yale University, NBER, IZA, CEPR and the Institute for Fiscal Studies) |
| Abstract: | We specify an equilibrium model of car ownership with private information where individuals sell and purchase new and second-hand cars over their life-cycle. Private information induces a transaction cost and distorts the market reducing the value of a car as a savings instrument. We estimate the model using data on car ownership in Denmark, linked to register data. The lemons penalty is estimated to be 18% of the price in the first year of ownership, declining with the length of ownership. It leads to large reductions in the turnover of cars and in the probability of downgrading at job loss. |
| Keywords: | Lemons penalty, car market, estimated life-cycle equilibrium model |
| JEL: | D82 E21 |
| Date: | 2019–12–06 |
| URL: | http://d.repec.org/n?u=RePEc:nuf:econwp:1910&r=all |
| By: | Kayak, Murat |
| Abstract: | Innovation is a prominent phenomenon that enables a firm to gain a competitive advantage against its rivals. However, this does not mean that being innovative allows a firm to perform better. Although innovation has been investigated in the literature, the types of innovations still remain esoteric. As discussed, there are different types of innovations. Different kinds of innovation require different kinds of a business model and may have varying impacts on consumer product decisions. First, this study seeks to highlight the distinction between sustaining and disruptive innovations. Second, this study offers a conceptual framework for the antecedents of sustaining innovations. Theoretical and practical implications are discussed in the light of observations. |
| Date: | 2020–04–08 |
| URL: | http://d.repec.org/n?u=RePEc:osf:osfxxx:n3me5&r=all |
| By: | WATANABE Mariko |
| Abstract: | This study investigates whether subsidies to state-owned enterprises (SOEs) in China's steel industry are distorting competitive neutrality. The Subsidy and Countervailing Measures Agreement of the World Trade Organizations defines ''specific'' and ''harmful'' subsidies as being subject to discipline, because they distort the allocation of resources. During the recession in the steel industry between 2008 to 2015, China produced excessively and exported aggressively at a lower price. This study hypothesizes that subsidies given by local governments to specific SOEs with undefined conditions softened the budget constraints of these SOEs and that the market equilibrium price would have been lower had no subsidy been provided. Using data from the financial statements of listed steel and iron firms and other relevant sources, I find that firms with operating deficits received subsidies that were large enough to compensate for their deficits. This preferential treatment of these specific SOEs induced them to engage in price cutting behavior, harming competitiveness in the market. |
| Date: | 2020–02 |
| URL: | http://d.repec.org/n?u=RePEc:eti:dpaper:20014&r=all |
| By: | Mathew Heim |
| Abstract: | This Policy Contribution considers whether European competition law could be applied more directly to state owned enterprises that create an unlevel playing field in Europe due to the support they receive from their home governments. This issue is now a priority for many Member States and the European Commission given the impact on European economic autonomy. Competition law may not be the appropriate tool for addressing the granting of illegal... |
| Date: | 2019–12 |
| URL: | http://d.repec.org/n?u=RePEc:bre:polcon:33780&r=all |
| By: | Anne Albert-Cromarias (CleRMa - Clermont Recherche Management - Clermont Auvergne - École Supérieure de Commerce (ESC) - Clermont-Ferrand - UCA - Université Clermont Auvergne); Catherine dos Santos (CleRMa - Clermont Recherche Management - Clermont Auvergne - École Supérieure de Commerce (ESC) - Clermont-Ferrand - UCA - Université Clermont Auvergne) |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-02513403&r=all |
| By: | Rodriguez Castelan,Carlos; Lopez-Calva,Luis-Felipe; Barriga Cabanillas,Oscar Eduardo |
| Abstract: | Although market concentration is one of the main impediments to productivity growth globally, data constraints have limited its analysis to developed countries or cross-country studies based on definitions of market concentration across nations and industries. This paper takes advantage of a database that is unusual by developing-country standards by means of leveraging the richness of five rounds of the Mexican Manufacturing Census between 1994 and 2014. The data allow estimation of the effects of local industry concentration on productivity. The main results show that a decline by 10 points in the Herfindahl-Hirschman index (on a 0-100 scale), a measure of market concentration, explains an increase by 1 percent in the total factor productivity of revenue. Local industry concentration also has heterogeneous effects on productivity across industries, while its impact on productivity varies by level of exposure to international markets. The results here show that the effect of greater exposure to trade offsets and, in most cases, reverses the negative effects of local concentration on productivity. These results are robust to specifications based on the estimation of firm productivity using the panels of establishment data from the 2009 and 2014 rounds of the economic census, to controlling for a proxy of markups, and to the use of alternate indicators of local industry concentration. |
| Date: | 2020–04–09 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:9210&r=all |