|
on Industrial Competition |
| By: | Stephen F. Hamilton (Department of Economics, California Polytechnic State University); Benjamin Ouvrard (Grenoble Applied Economics Laboratory) |
| Abstract: | Fair pricing standards are used in various industries, encompassing fair trade, labor practices, and state-regulated pricing. We demonstrate that fair pricing can serve as a vertical restraint by a dominant manufacturer on its retailers to fully coordinating prices in a multi-product distribution channel with fair priced and conventional goods. We identify buyer market power by the manufacturer in the upstream market as a novel role for a manufacturer to impose a vertical restraint on retailers in the downstream market, and characterize the vertical restraint that maximizes collective rents in terms of demand-side and supply-side diversion ratios. |
| Keywords: | Fair pricing; vertical restraint; buyer market power |
| JEL: | L13 L14 L42 D43 |
| Date: | 2023 |
| URL: | https://d.repec.org/n?u=RePEc:cpl:wpaper:2402 |
| By: | Martin Peitz; Susumu Sato |
| Abstract: | We propose a tractable model of asymmetric platform oligopoly with logit demand in which users from two distinct groups are subject to within-group and cross-group network effects and decide which platform to join. We characterize the equilibrium when platforms manage user access by setting participation fees for each user group. We explore the effects of platform entry, a change of incumbent platforms’ quality under free entry, and the degree of compatibility. We show how the analysis can be extended to partial user participation. |
| Keywords: | oligopoly theory, aggregative games, network effects, two-sided markets, two-sided single-homing, entry |
| JEL: | L13 L41 D43 |
| Date: | 2023–05 |
| URL: | https://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2023_428v3 |
| By: | Daron Acemoglu; Daniel Huttenlocher; Asuman Ozdaglar; James Siderius |
| Abstract: | We present a model where social media platforms offer plans that intermix entertaining content with digital advertising (“ads”). Users derive utility from entertainment and learn about their valuation for a product from ads. While some users are fully rational, others naïvely perceive digital ads as more informative than they actually are. We characterize the profit-maximizing business model of the platform and show that welfare is lower when the platform monetizes through advertising instead of subscription both for naïfs (because they are targeted by intense digital advertising, which makes them over-optimistic about product quality and over-purchase the product) and for sophisticates (because the inflated demand from naïfs increases the firm’s price). This negative welfare effect is intensified when the platform can offer mixed business models that separate the naïve and sophisticated users into different plans. Our results are robust to firm-level and platform-level competition, because digital ads soften competition between both firms and platforms. We also show how digital ad taxes can improve welfare. |
| JEL: | D43 D83 L13 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33017 |
| By: | Danhou Li (Department of Economics, National University of Singapore, Singapore); Ce Matthew Shi (Department of Economics, Chinese University of Hong Kong, Hong Kong SAR) |
| Abstract: | This paper examines theoretically and empirically the welfare effects of differential pricing for Internet traffic in a network market. We begin by analyzing a model of differential pricing by a monopolist Internet service provider (ISP), wherein charges are levied on content providers for traffic flow and on consumers for Internet access. Content providers differ in terms of their demand for Internet traffic and their value to consumers (“network effects†). Under linear demands, we show that compared to uniform pricing, differential pricing based solely on network effects is welfare-enhancing, while purely elasticity-based differential pricing reduces content provider surplus and social welfare. The welfare effects become ambiguous when both network effects and demand elasticities differ across content providers. Using a unique dataset on monthly transactions between a large ISP and major content providers in China (where ISPs legally own Internet traffic services in the form of CDN), we estimate the model and quantify the welfare effects using the demand and cost estimates. Our counterfactual analysis shows that consumer surplus and content provider surplus increase under differential pricing; however, a disproportionate share of the welfare gain is captured by several big content providers, while smaller content providers tend to become worse off. |
| Keywords: | differential pricing; Internet traffic; network industry; welfare |
| JEL: | L12 L86 L96 |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:net:wpaper:2409 |
| By: | Gregor, Leonard; Haucap, Justus |
| JEL: | L11 L13 L22 L40 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:vfsc24:302420 |
| By: | Martins, Pedro S.; Dai, Li; Duan, Wenjing |
| Abstract: | Local labour market concentration may influence firms' employment responses to minimum wages. We evaluate this hypothesis using comprehensive 1998-2007 data on China's manufacturing sector and about 1, 400 hand-collected county-level minimum wages. We find that, consistently with monopsony views, the negative effects of minimum wages on employment are reduced when labour market concentration is higher. We also find positive employment effects of minimum wages, but only in some specifications and in highly concentrated labour markets (representing a relatively small share of employment). Firms' training provision is also harmed less by minimum wages in more concentrated local markets. Our findings highlight the heterogeneity of policy impacts across local labour markets. |
| Keywords: | Minimum wages, labour market concentration, employment, monopsony, training |
| JEL: | J31 J38 J42 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:glodps:1504 |
| By: | José Ignacio Heresi (Facultad de Economía y Negocios, Universidad Alberto Hurtado, Santiago Chile.); Yassine Lefouili (Toulouse School of Economics, University of Toulouse Capitole, 1, Esplanade de l'Université, 31080 Toulouse, Cedex 06, France.) |
| Abstract: | We study how an app store's decision about its ad-valorem fee affects the business models chosen by app developers. We derive optimal choices for the app store and their effects on industry profits, consumers, and total welfare. Surprisingly, the platform's optimal ad-valorem fee may be lower than the socially optimal one. Our findings provide insights into recent antitrust disputes and regulatory debates. |
| Keywords: | business model, ad-valorem fee, platform, app store. |
| JEL: | D21 L21 L40 L50 |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:net:wpaper:2404 |
| By: | Hoang Le; Ricardo Marto |
| Abstract: | Growth in the digital advertising market has allowed big tech companies to better target consumer tastes, potentially increasing firms’ market power. |
| Keywords: | digital (directed) advertising |
| Date: | 2024–10–04 |
| URL: | https://d.repec.org/n?u=RePEc:fip:l00001:98970 |
| By: | Schmal, W. Benedikt |
| JEL: | D43 L13 L17 L86 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:vfsc24:302342 |
| By: | Bernardo Caldarola; Luca Fontanelli |
| Abstract: | Recent empirical evidence finds positive associations between digitalisation and industry concentration. However, ICT may not be all alike. We investigate the effect of the purchase of cloud services on the long run size growth rate of French firms. Our findings suggest that cloud services positively impact firm growth rates, with smaller firms experiencing more significant benefits compared to larger firms. This evidence suggests that the diffusion of cloud technologies may help mitigate concentration in the era of the digital transition by favouring the digitalisation and growth of smaller firms, especially when the cloud services provided are more advanced. |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2409.17035 |
| By: | Margherita Comola (Université Paris-Saclay (RITM) and Paris School of Economics); Agnieszka Rusinowska (CES, CNRS - University Paris 1 Panthéon-Sorbonne and Paris School of Economics); Marie Claire Villeval (CNRS, Université Lumière Lyon 2, Université Jean-Monnet Saint-Etienne, emlyon business school, GATE, 69007, Lyon, France; IZA, Bonn, Germany) |
| Abstract: | We experimentally investigate how players with opposing views compete for influence through strategic targeting in networks. We varied the network structure, the relative influence of the opponent, and the heterogeneity of the nodes’initial opinions. Although most players adopted a best-response strategy based on their relative influence, we also observed behaviors deviating from this strategy, such as the tendency to target central nodes and avoid nodes targeted by the opponent. Targeting is also affected by affinity and opposition biases, the strength of which depends on the distribution of initial opinions. |
| Keywords: | Network; Influence; Targeting; Competition; Laboratory Experiment |
| JEL: | C91 D85 D91 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:gat:wpaper:2411 |
| By: | Pittman, Russell |
| Abstract: | How to protect “captive shippers” from monopolistic abuses by a railway? In an “open access” system, it’s straightforward: provide infrastructure access to a competing train operating company. In a system without open access – as in, for example, the United States, Canada, Mexico, and Brazil – it’s not so straightforward. For freight shippers lacking economic intramodal or intramodal shipping alternatives, regulators and policymakers have focused on regulatory alternatives in two broad categories: 1) direct regulation of rates, and 2) imposed, regulated competition from a second railway (for example, interswitching or trackage rights). We argue that, despite disadvantages familiar to every Economics 101 student, direct regulation of rates has proven to be the superior alternative, and we discuss alternative mechanisms currently under debate. |
| Keywords: | freight railways, regulation, captive shippers, Canada, Mexico |
| JEL: | L51 L92 L98 |
| Date: | 2024–10–04 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:122284 |