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on Industrial Competition |
| By: | Emmanuel Dechenaux; Dan Kovenock |
| Abstract: | This paper contributes to the study of tacit collusion by analyzing infinitely repeated multiunit uniform price auctions in a symmetric oligopoly with capacity constrained firms. Under both the Market Clearing and Maximum Accepted Price rules of determining the uniform price, we show that when each firm sets a price-quantity pair specifying the firm's minimum acceptable price and the maximum quantity the firm is willing to sell at this price, there exists a range of discount factors for which the monopoly outcome with equal sharing is sustainable in the uniform price auction, but not in the corresponding discriminatory auction. Moreover, capacity withholding may be necessary to sustain this out-come. We extend these results to the case where firms may set bids that are arbitrary step functions of price-quantity pairs with any finite number of price steps. Surprisingly, under the Maximum Accepted Price rule, firms need employ no more than two price steps to minimize the value of the discount factor |
| Keywords: | Auction, Capacity, Collusion, Electricity Market, Supply Function |
| JEL: | D43 D44 L13 L41 L94 |
| Date: | 2005–03–01 |
| URL: | http://d.repec.org/n?u=RePEc:aub:autbar:645.05&r=com |
| By: | Sofia Villas-Boas (University of California, Berkeley) |
| Abstract: | In this paper we compare different models of vertical contracting between manufacturers and retailers in the supermarket industry. Demand estimates are used to compute price-cost margins for retailers and manufacturers under different supply models when wholesale prices are not observed. The focus is on identifying which set of margins seems to be compatible with the margins obtained from direct estimates of cost and to select the best among the non-nested competing models. The models considered are: (1) a simple linear pricing model; (2) a vertically integrated model; and (3) a variety of alternative (strategic) supply scenarios, that allow for collusion, non-linear pricing and strategic behavior with respect to private label products. Using data on yogurt sold at several stores in a large urban area of the United States, we find that wholesale prices are close to marginal cost and that retailers have pricing power in the vertical chain. This is consistent with non-linear pricing by the manufacturers or with high bargaining power of the retailers. |
| Keywords: | Vertical contracts, multiple manufacturers and retailers, non-nested tests, yogurt local market., |
| Date: | 2004–08–01 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:agrebk:1002&r=com |
| By: | Sofia Villas-Boas (University of California, Berkeley); Rebecca Hellerstein (Federal Reserve Bank of New York) |
| Abstract: | This note outlines conditions under which we can identify a vertical supply model of multiple retailers' and manufacturers' oligopoly-pricing behavior. This is an important question particularly when the researcher believes, contrary to the traditional assumption followed in the empirical literature, that retailers may not be neutral pass-through intermediaries. We show that a data-set of an industry's product prices, quantities, and input prices over time is sufficient to identify the vertical model of retailers' and manufacturers' oligopoly-pricing behavior given nonlinear demand, for homogeneous-products industries, and given multi-product firms, for differentiated-products industries. |
| Keywords: | Identification, Vertical relationships, Oligopoly models of multiple manufacturers and retailers, |
| Date: | 2004–10–01 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:agrebk:1082&r=com |
| By: | Edmar Almeida; Nanno Mulder |
| Abstract: | This paper assesses Brazil’s regulatory framework and agencies for several network industries (electricity, oil and gas, and water and sanitation). Private investment can be encouraged by tackling regulatory uncertainty in many areas. To this end, recent initiatives include a new regulatory model for the electricity sector, and new draft legislation on the role and structure of the regulatory agencies (currently in Congress). The overall approach to regulatory reform in network industries, particularly in electricity, is well thought out but the risk of regulatory failure should not be underestimated. Implementation will be the ultimate test of reform in this area. In natural gas, the dominance of Petrobras, the national oil company, throughout the industry has often been perceived as an obstacle to its development. Private investment in water and sanitation is constrained by a lack of clarity over the assignment of regulatory powers across different levels of government. These reforms are consistent with the government’s agenda for growth, focusing on meeting the challenge of improving the business environment. This Working Paper relates to the 2005 OECD Economic Survey of Brazil (www.oecd.org/eco/surveys/brazil). <p> Améliorer le cadre réglementaire des industries de réseau au Brésil: le cas de l'électricité, du pétrole et du gaz, et de l'eau et de l'assainissement <p> Cet article évalue le cadre réglementaire ainsi que les agences régulatrices pour plusieurs industries de réseau (électricité, pétrole et gaz, eau et assainissement). L’investissement privé pourrait être encouragé en réduisant l’incertitude réglementaire dans plusieurs domaines. A ce propos, des initiatives récentes incluent un nouveau modèle réglementaire pour le secteur de l’électricité et un projet de loi sur le rôle et la structure des agences régulatrices (actuellement au Congrès). L’approche générale retenue en ce qui concerne la réforme de la réglementation dans les industries de réseau, notamment dans le secteur de l’électricité, est judicieuse, mais le risque de défaillance de la réglementation ne doit pas être sous-estimé. C’est au stade de sa mise en œuvre que la réforme dans ce domaine sera mise à l’épreuve. Pour ce qui est du gaz naturel, la position dominante de la société pétrolière nationale Petrobras dans l’ensemble du secteur a souvent été perçue comme un obstacle au développement de celui-ci. L’investissement privé dans les secteurs de l’eau et de l’assainissement se heurte à un manque de clarté dans la répartition des pouvoirs de réglementation entre les différents niveaux d’administration. Ces réformes se situent dans la lignée du programme de croissance du gouvernement, en mettant l’accent sur l’amélioration de l’environnement des entreprises. Ce document de travail se rapporte à l'Étude économique de l'OCDE du Brésil, 2005 (www.oecd.org/eco/etudes/bresil). |
| Keywords: | Brazil; regulation; regulatory agencies; economics of regulation; electricity; oil; gas; pipelines; water utilities; sanitation; Government Policy (Energy) |
| JEL: | K23 L51 L94 L95 O54 Q48 |
| Date: | 2005–04–08 |
| URL: | http://d.repec.org/n?u=RePEc:oed:oecdec:425&r=com |
| By: | Russell Pittman (Antitrust Division, US Department of Justice); Sergei Guriev (New Economic School); Guido Friebel (University of Toulouse); Anna Tomova (University of Zilina); Elizaveta Cheviakhova (Boston College) |
| Abstract: | Railways restructuring takes place under very different circumstances and with very different goals in Western Europe, Central and Eastern Europe, and Russia. Observed improvements in productivity associated with vertical access and vertical separation in Western Europe are not certain to be replicated following similar restructuring in transition economies, especially if one takes account of the much higher shadow price on government subsidies in the latter. This paper describes in detail the current and proposed reforms in the railways of Central and Eastern Europe and Russia, analyzes the likely outcomes of reforms in the special economic, regulatory, and legal environments of these countries, and presents an alternative proposal for restructuring in Russia. |
| Keywords: | railway, restructuring, Russia, Central and Eastern Europe, transition, vertical separation |
| JEL: | L |
| Date: | 2005–04–20 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpio:0504021&r=com |
| By: | Walter Distaso (Department of Economics, University of Exeter, UK); Paolo Lupi (Autorita per le garanzie nelle comunicazioni - AGCOM, Italy); Fabio M. Manenti (Dip. Scienze Economiche 'M. Fanno', Universita di Padova, Italy) |
| Abstract: | Broadband access provides users with high speed, always-on connectivity to the Internet. Due to its superiority, broadband is seen as the way for consumers and firms to exploit the great potentials of new applications. This has generated a policy debate on how to stimulate adoption of broadband technology. One of the most disputed issues is about competition policies: these may be intended to promote competition in the Digital Subscriber Line (DSL) segment of the market (intra- platform competition), or to stimulate entry into the market for alternative platforms such as cable access or fiber optics (inter- platform competition). Using a model of oligopoly competition between differentiated products, our paper explicitly studies the effect of inter and intra platform competition on the diffusion of broadband access. The implications of the model are then tested using data from 14 European countries. The econometric evidence confirms the results of the theoretical model and indicates that while inter-platform competition drives broadband adoption, competition in the market for DSL services does not play a significant role. The results also confirm that lower unbundling prices stimulate broadband uptake. |
| Keywords: | Broadband, inter-platform and intra-platform competition, local loop unbundling |
| JEL: | L86 L96 |
| Date: | 2005–04–18 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpio:0504019&r=com |
| By: | Roberto Roson (Università Ca’ Foscari di Venezia) |
| Abstract: | A model of two-sided market (for credit cards) is introduced and discussed. In this model, agents can join none, one, or more than one platform (multihoming), depending on access prices and the choices made by agents on the opposite market side. Although emerging multihoming patterns are, clearly, one aspect of equilibrium in a two-sided market, this issue has not yet been thoroughly addressed in the literature. This paper provides a general theoretical framework, in which homing partitions are conceived as one aspect of market equilibrium, rather than being set ex-ante, through ad-hoc assumptions. The emergence of a specific equilibrium partition is a consequence of: (1) the structure of costs and benefits, (2) the degree and type of heterogeneity among agents, (3) the intensity of platform competition. |
| Keywords: | Two-sided markets, Network externalities, Standards, Platforms, Multihoming |
| JEL: | D85 L10 L15 L89 |
| Date: | 2005–01 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2005.20&r=com |
| By: | Solange Berstein; Rodrigo Fuentes |
| Abstract: | The effects of monetary policy depend significantly on the capacity of the Central Bank to affect market interest rates by managing liquidity. Therefore, it comes out as an important issue to determine the degree of flexibility of lending and deposit rates to changes in policy rates. In this sense, there is a vast literature that explores sluggishness on bank interest rates. In terms of deposit interest rates a larger rigidity has been associated to higher levels of concentration on the banking industry. Besides, the market discipline hypothesis would imply differences on the response of banks’ deposit rates according to their characteristics. This paper analyzes deposit interest rate sluggishness for the Chilean banking industry and its relation with market concentration and bank characteristics. The results support the fact that higher concentration imply more rigidity and that bank characteristics such as solvency, size and loan risk would also make a difference in the speed of adjustment. |
| Date: | 2005–03 |
| URL: | http://d.repec.org/n?u=RePEc:chb:bcchwp:311&r=com |
| By: | Maria Maher; Jay Shaffer |
| Abstract: | This paper examines the strength of product market competition and economic performance in Canada and discusses way in which the institutional framework governing competition policy could be improved. Competitive forces are comparatively strong and administrative and economic regulations inhibiting competition are amongst the lowest in the OECD countries. However, Canada’s regulated conduct doctrine exempts anti competitive behaviour when required by regulation, and thus significant parts of the economy remain shielded from the competition law. This is a particular problem with provincial government regulation. Restrictions on internal trade also continue to exist, and implementation of the Agreement on Internal Trade is less effective than it could be. More attention needs to be focussed on removing those regulations that restrain competition, particularly in professional services. In network industries, competition has largely been absent in the electricity sector. While it is widely recognised that reforms are necessary, those undertaken in the past have mainly been aimed at bringing in private sector investment, while avoiding full competition in generation and in retail markets. Canada has more significant restrictions on foreign ownership than almost any other OECD country, notably in airlines, telecommunications and broadcasting, and their removal could improve performance in these sectors. <p> Concurrence sur les marchés de produits et performance économique au Canada <p> Ce document examine la puissance de la concurrence dans les marchés de produits et de la performance économique au Canada. Il envisage aussi les moyens par lesquels pourrait être amélioré le cadre institutionnel qui gouverne les politiques de la concurrence. La vigueur des forces concurrentielles est comparativement élevée au Canada et les régulations inhibant la concurrence sont parmi les plus faibles de la zone de l’OCDE. Cependant, le code canadien de conduite réglementé exonère les comportements anticoncurrentiels lorsqu’ils sont couverts par une réglementation, de sorte que certains pans importants de l’économie restent non couverts par le droit de la concurrence. Ce problème est particulièrement aigu dans le cas des réglementations sous autorités provinciales. Des restrictions continuent de limiter les échanges provinciaux, et la mise en œuvre de l’Accord sur le commerce intérieur est moins effective qu’elle pourrait l’être. Il conviendrait de chercher plus activement à supprimer les réglementations qui freinent la concurrence dans les professions libérales. Dans les industries de réseaux, la concurrence a été pratiquement absente dans le secteur de l’électricité. S’il existe un large consensus sur la nécessité de réformes, celles qui ont été entreprises par le passé ont eu pour objectif principal d’encourager l’investissement du secteur privé, tout en évitant l’ouverture intégrale à la concurrence de secteurs comme la production d’électricité et la vente au détail. Le Canada connaît aussi un plus grand nombre de restrictions significatives concernant les intérêts étrangers que presque tous les autres pays de l’OCDE, notamment dans les domaines du transport aérien, des télécommunications et de la télédiffusion. Leur élimination pourrait stimuler les performances dans ces secteurs. |
| Keywords: | Canada; market structure; competition; productivity and growth; antitrust law; regulatory policies; network industries |
| JEL: | K21 K23 L11 L16 L40 L43 O51 |
| Date: | 2005–03–30 |
| URL: | http://d.repec.org/n?u=RePEc:oed:oecdec:421&r=com |
| By: | Maria Maher; Michael Wise |
| Abstract: | This paper assesses what role product market competition and reforms may have played in the performance of the Dutch economy over the past decade, and discusses what further product market reforms might contribute to enhancing growth. In general, competitive pressures appear to be relatively strong in the Netherlands, particularly in the traded goods sector. Competition in product markets has been strengthened through the creation of a competition authority (NMa) and the Competition, Deregulation and Legislative Quality project (MDW). A planned reduction in the administrative burden will also help to strengthen competition, by reducing barriers to business start-ups and the expansion of small businesses, as well as lowering business costs. However, competitive pressures and productivity growth are weaker in the Dutch services sector. Planning restrictions are inhibiting competition and productivity growth in the retail sector and there is considerable scope to eliminate practices that restrict competition in professional services, even though both are relatively liberalised in the Netherlands. Reforms in electricity, gas and telecoms are recent and market power on the part of incumbent firms remains a concern. Competitive pressures in these industries could be increased by enhancing the powers of the regulators and eliminating barriers to entry. <p> Concurrence sur les marchés de produits et performances économiques aux Pays-Bas <p> Ce document évalue le rôle que la concurrence sur les marchés de produits et les réformes ont pu jouer dans les performances de l’économie néerlandaise cette dernière décennie et débat sur l’action qui pourrait être menée pour améliorer la croissance. D’une façon générale, les pressions concurrentielles paraissent relativement fortes aux Pays-Bas en particulier dans les secteurs des biens échangés. La concurrence sur les marchés de produits a été renforcée grâce à la mise en place d’une autorité de la concurrence (la NMa) et au projet "Concurrence, déréglementation et qualité de la réglementation" (MDW). L’allégement prévu des charges administratives contribuera également à renforcer la concurrence en réduisant les obstacles à la création d’entreprises et à l’expansion des petites entreprises, tout en diminuant les coûts des activités industrielles ou commerciales. Toutefois, la concurrence et la productivité du travail sont plus faibles dans le secteur des services. Les règles d’urbanisme entravent la concurrence et la croissance de la productivité dans le commerce de détail et de vastes possibilités s’offrent d’éliminer les pratiques qui restreignent la concurrence dans les services professionnels, même si ces activités sont relativement libéralisées aux Pays-Bas. Les réformes dans les secteurs de l’électricité, du gaz et des télécommunications sont récentes et le pouvoir de marché des opérateurs historiques demeure problématique. La concurrence dans ces secteurs pourrait être intensifier, en augmentant les prérogatives des autorités de régulation et en éliminant les barrières à l’entrée. |
| Keywords: | Netherlands; market structure; competition; productivity and growth; antitrust law; regulatory policies; network industries |
| JEL: | K21 K23 L11 L16 L40 L43 O51 |
| Date: | 2005–03–31 |
| URL: | http://d.repec.org/n?u=RePEc:oed:oecdec:422&r=com |
| By: | Maria Guadalupe (Columbia University, CEPR and IZA Bonn) |
| Abstract: | This paper shows that increasing product market competition can have a direct impact on the employment relationship and on wage inequality. I develop a simple model in which an increase in product market competition increases returns to skill through the effect of competition on the sensitivity of profits to cost reductions. I then show empirically that relative wages increase with competition using a large panel of United Kingdom workers with complete work histories. I identify the impact of competition on returns to skill in the panel, using two exogenous measures of competition provided by two quasi-natural experiments. Quantile regressions indicate that increased competition also raised returns to unobserved ability. |
| Keywords: | wage structure, returns to skill, product market competition |
| JEL: | J31 J33 L22 D21 |
| Date: | 2005–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp1556&r=com |