nep-com New Economics Papers
on Industrial Competition
Issue of 2005‒11‒12
thirty papers chosen by
Russell Pittman
US Department of Justice
  1. Price Responses to Market Entry With and Without Endogenous Product Choice By Helge Sanner
  2. Network effects and regulatory competition By Vermeulen,E.P.M.
  3. Regulatory co-opetition : transcending the regulatory competition debate By Geradin,D.; McCahery,J.A.
  4. Dynamic regulation and entry in telecommunications markets : a policy framework By Bijl,P.W.J. de; Peitz,M.
  5. Structural remedies in merger regulation in a Cournot framework By Medvedev,A.
  6. Local Competition and Impact of Entry by a Dominant Retailer By Ting Zhu; Vishal Singh; Anthony J. Dukes
  7. Regulating access to stimulate competition in postal markets? By Bijl,P.W.J. de; Damme,E. van; Larouche,P.
  8. Unbundling the local loop : one-way access and imperfect competition By Bijl,P.W.J. de; Peitz,M.
  9. A new way to measure competition By Boone,J.
  10. Screening markets for cartel detection - collusive marker in the CFD cartel-audit By Christian Lorenz
  11. Cournot competition in spatial markets. By Andrea Cosnita
  12. Effects of leniency programs on cartel stability By Motchenkova,E.
  13. Structural separation and access in telecommunications markets By Bijl,P.W.J. de
  14. Merger simulation analysis : an academic perspective By Damme,E. van; Pinkse,J.
  15. Liberalizing the Dutch electricity market 1998-2004 By Damme,E. van
  16. Media Concentration and Consumer Product Prices By Anthony J. Dukes
  17. Strategic trading of forward contracts in oligopolistic industries with non-storable commodities By Calcagno,R.; Sadrieh,A.
  18. Domestic versus Cross-Border Acquisitions: Which Impact on the Target Frims' Performance? By Bertrand, Olivier; Zitouna, Habib
  19. Strengthening Regulation in Chile: The Case of Network Industries By Luiz de Mello; Alexander Galetovic
  20. Why Did British Electricity Prices Fall after 1998? By Joanne Evans and Richard Green
  21. Merger without costs advantage By Huck,S.; Konrad,K.A.; Muller,W.
  22. Price regulation of plastic money: A critical assessment of Spanish rules By Benito Arruñada
  23. Balance of power By Boone,J.
  24. Determination of optimal penalties for antitrust violations in a dynamic setting By Motchenkova,E.
  25. The convergence of price-cost margins. By Hervé Boulhol
  26. Local loop unbundling in Europe: : experience, prospects and policy challenges By Bijl,P.W.J. de; Peitz,M.
  27. Marktstructuur en innovatie By Boone,J.; Damme,E. van
  28. Market power, innovative activity and exchange rate pass-through in the euro area By Sophocles N. Brissimis; Theodora S. Kosma
  29. Dominance and monopolization By Canoy,M.; Rey,P.; Damme,E. van
  30. CAREER CONCERNS AND COMPETITIVE PRESSURE By Fabio Feriozzi
  1. By: Helge Sanner
    Abstract: Textbook wisdom says that competition yields lower prices and higher consumer surplus than monopoly. We show in two versions of a simple location-product differentiation model with and without endogenous choice of products that these two results have to be qualified. In both models, more than half of the reasonable parameter values lead to higher prices with duopoly than with monopoly. If the product characteristics are exogenous to the firms, consumers may even be be better off with monopoly in average.
    Keywords: Product differentiation; Hotelling; Price and Welfare Effects of Market Entry
    JEL: L12 L13 L41 D43
    Date: 2005–11
    URL: http://d.repec.org/n?u=RePEc:pot:vwldis:81&r=com
  2. By: Vermeulen,E.P.M. (TILEC (Tilburg Law and Economics Center))
    Date: 2005
    URL: http://d.repec.org/n?u=RePEc:dgr:kubtil:200528&r=com
  3. By: Geradin,D.; McCahery,J.A. (TILEC (Tilburg Law and Economics Center))
    Date: 2005
    URL: http://d.repec.org/n?u=RePEc:dgr:kubtil:200520&r=com
  4. By: Bijl,P.W.J. de; Peitz,M. (TILEC (Tilburg Law and Economics Center))
    Date: 2004
    URL: http://d.repec.org/n?u=RePEc:dgr:kubtil:200410&r=com
  5. By: Medvedev,A. (TILEC (Tilburg Law and Economics Center))
    JEL: D43 K21 L51
    Date: 2004
    URL: http://d.repec.org/n?u=RePEc:dgr:kubtil:200406&r=com
  6. By: Ting Zhu (Carnegie Mellon University); Vishal Singh (Carnegie Mellon University); Anthony J. Dukes (School of Economics and Management, University of Aarhus)
    Abstract: This paper analyzes the competition between two spatially differentiated multi-product retailers who encounter entry from a dominant discount retailer. Our primary objective is to determine how entry affects the pricing and relative profits of the incumbent stores and the role played by the location of the entrant. The new entrant has partial overlap in product assortment with the incumbents and is assumed to have lower procurement costs for the common goods. Consumers are heterogeneous in their location, economic status (shopping costs and valuations), as well as purchase basket or the types of products demanded. Results show that in the post entry equilibrium, the prices for the products not offered by the discounter are higher than the pre entry prices. More interestingly, contrary to the conventional wisdom we find that the store that is closer to the new entrant is better off compared to the incumbent located further away. The intuition for these results is that the discounter with its low price draws away the poor consumers – the price sensitive segment – out of the market for the items it carries. This in turn softens price competition between the incumbents for these items. Furthermore, the new entrant’s unique product offering attracts more consumers to visit the location it occupies, which introduces positive demand externalities to the neighboring retailer, leading to an increase in sales for the non-competing products. We provide empirical evidence for our results and discuss implications for retailers facing competition from large discount stores.
    Keywords: entry; retail competition; agglomeration
    JEL: L13 L81 M31
    Date: 2005–05
    URL: http://d.repec.org/n?u=RePEc:kud:kuieci:2005-05&r=com
  7. By: Bijl,P.W.J. de; Damme,E. van; Larouche,P. (TILEC (Tilburg Law and Economics Center))
    Date: 2005
    URL: http://d.repec.org/n?u=RePEc:dgr:kubtil:200526&r=com
  8. By: Bijl,P.W.J. de; Peitz,M. (TILEC (Tilburg Law and Economics Center))
    Date: 2004
    URL: http://d.repec.org/n?u=RePEc:dgr:kubtil:200425&r=com
  9. By: Boone,J. (TILEC (Tilburg Law and Economics Center))
    Keywords: competition;measurement;profit;firms
    JEL: D43 L13
    Date: 2004
    URL: http://d.repec.org/n?u=RePEc:dgr:kubtil:200404&r=com
  10. By: Christian Lorenz (Institute of Public Economics, Muenster University)
    Abstract: Coordination Failure Diagnostics (CFD) is a model that analyses real market processes with the help of time pattern analysis and investigates whether they operate efficiently (See www.wiwi.uni-muenster.de/cfd). The CFD cartel-audit should enable the detection of cartels via characteristic market process patterns. This is based on the assumption that existing cartels cause failures in the observed process patterns. The CFD cartel-audit attempts to draw conclusions from these process patterns in order to find hidden cartels and to engage antitrust agencies into additional more detailed audits.
    Keywords: cartel, cement, collusive marker, market screening, price fixing
    JEL: L13 L41 L61 D43
    Date: 2005–11–09
    URL: http://d.repec.org/n?u=RePEc:wpa:wuwpio:0511003&r=com
  11. By: Andrea Cosnita (EUREQua)
    Abstract: We study location equilibria for Cournot oligopolies selling complementary goods. For a single-store triopoly, we prove that the circular market also yields partial diamentrical dispersion besides total agglomeration. We turn to multi-plant duopolies and in contrast to other contributions on the topic, we allow firms to sell more than one product. We confirm the intuition that total agglomeration of outlets is always an equilibrium, whatever the market shape. However, the circular case also exhibits intra-firm agglomeration and inter-firm equal distance dispersion. This is a pattern never before obtained, entirely due to the assumption of intra-firm product complementarity.
    Keywords: Complementary products, multi-store competition, spatial Cournot model.
    JEL: D43 L13 R32
    Date: 2005–10
    URL: http://d.repec.org/n?u=RePEc:mse:wpsorb:v05061&r=com
  12. By: Motchenkova,E. (TILEC (Tilburg Law and Economics Center))
    Date: 2004
    URL: http://d.repec.org/n?u=RePEc:dgr:kubtil:200420&r=com
  13. By: Bijl,P.W.J. de (TILEC (Tilburg Law and Economics Center))
    Date: 2004
    URL: http://d.repec.org/n?u=RePEc:dgr:kubtil:200411&r=com
  14. By: Damme,E. van; Pinkse,J. (TILEC (Tilburg Law and Economics Center))
    Date: 2005
    URL: http://d.repec.org/n?u=RePEc:dgr:kubtil:200513&r=com
  15. By: Damme,E. van (TILEC (Tilburg Law and Economics Center))
    Date: 2005
    URL: http://d.repec.org/n?u=RePEc:dgr:kubtil:200509&r=com
  16. By: Anthony J. Dukes (School of Economics and Management, University of Aarhus)
    Abstract: We examine the interaction of commercial media and retail producers of well-known consumer products when advertising is used to differentiate brands. In particular, we address how competition in the media market affects choices of advertising and program quality. The results suggest counter-intuitively that advertisers may actually prefer media markets with less competition for audiences. Product differentiation through advertising is more effective when media markets are less competitive, leading to higher prices for advertised products. As a result, media concentration may lead to higher profits for advertising firms if the additional revenue exceeds the higher advertising costs associated with media concentration.
    JEL: L13 L82 M37
    Date: 2005–05
    URL: http://d.repec.org/n?u=RePEc:kud:kuieci:2005-06&r=com
  17. By: Calcagno,R.; Sadrieh,A. (TILEC (Tilburg Law and Economics Center))
    JEL: D43 L13
    Date: 2004
    URL: http://d.repec.org/n?u=RePEc:dgr:kubtil:200405&r=com
  18. By: Bertrand, Olivier (University of Toulouse); Zitouna, Habib (Ècole Supérieure des Sciences Èconomiques et Commerciales de Tunis (Tunisia))
    Abstract: This paper investigates the effects of horizontal acquisitions on the performance of target firms in the 1990's. Using French manufacturing firm-level data, we examine two main indicators of performance: the profit and the productive efficieny. We distinguish domestic from cross-in-difference estimation techniques associated to a matching propensity score procedure. We find that M&A do not increase the profit of French target firms. These results suggest that firms probably redistribute efficiency gains at the upstream and/or downstream production stage. There is no evidence of an increase in market power. In addition, the consequences of domestic and cross-border M&A significantly differ. Efficiency gains are stronger for cross-border M&A. This conclusion is however true only for extra-Europan Union operations. The achievement in the European economic integrtion certainly explains the absence of difference between European and domestic acquisitions. Finally, our results cast some doubt on the frequent discrimination attitude towards foreign takeovers and the fears of their impact on firms' performance and the hos country's welfare.
    Keywords: Multinational Firms; Foreign Direct Investment; Mergers and Acquisitions; Take-Overs; Firms' Performance
    JEL: F23 L10 L20
    Date: 2005–10–24
    URL: http://d.repec.org/n?u=RePEc:hhs:iuiwop:0647&r=com
  19. By: Luiz de Mello; Alexander Galetovic
    Abstract: Chile’s regulatory framework is working reasonably well. The country’s structural reforms since the 1980s, with the privatisation of utilities and deregulation of product and labour markets, have improved resource allocation and increased the population’s access to basic services, while calling for a comprehensive upgrading of regulatory institutions. At the same time, public-private partnerships (PPPs) are contributing to closing Chile’s infrastructure deficit, particularly in transport. The recurrent cuts in shipments of natural gas from Argentina since 2004 have put additional strain on regulation in the electricity sector to encourage investment in generation and ensure the security of supply. This paper reviews regulatory reform in three network industries (electricity, gas and telecoms), where further liberalisation, particularly in electricity retailing, and improvements in the regulation of telecoms would do much to further improve the business climate. The governance of public-private partnerships can be improved by increasing transparency and accountability in the concession process. In doing so, the government’s exposure to contingent liabilities can be contained. This Working Paper relates to the 2005 OECD Economic Survey of Chile (www.oecd.org/eco/surveys/chile). <P>Renforcer la réglementation au Chili Le cadre de la règlementation chilienne fonctionne assez bien. Les réformes structurelles depuis les années 80, avec la privatisation des services et la réglementation des marchés des produits et du travail, ont amélioré l'allocation des ressources et augmenté l'accès de la population aux services de base, en même temps que modernisé les institutions de réglementation. Parallèlement, les partenariats public-privé ont contribué à réduire le déficit d'infrastructure du Chili, particulièrement dans les transports. Les coupures récurrentes dans les exportations de gaz naturel de l'Argentine depuis 2004 ont ajouté une contrainte sur la réglementation du secteur d'électricité, qui a encouragé l'investissement dans la production et garanti la sécurité de l'offre. Ce document passe en revue les réformes de la réglementation dans trois industries de réseau (électricité, gaz et télécommunication), dans lesquelles plus de libéralisation, particulièrement concernant la vente de détail de l'électricité, et des progrès dans la réglementation des télécommunications, amélioreraient grandement le climat des affaires. La gouvernance des partenariats public-privé peut-être améliorée en augmentant la transparence et la responsabilité du processus de concession. En faisant ainsi le gouvernement évite de s'exposer à d'éventuels passifs. Ce Document de travail se rapporte à l'Étude économique de l'OCDE du Chili, 2005 (www.oecd.org/eco/etudes/chili).
    Keywords: telecommunications, télécommunications, network industries, réglementation, industrie de réseau, regulations, electricity, gas, électricité, gaz, Chile, Chili
    JEL: D4 H4 K2
    Date: 2005–10–27
    URL: http://d.repec.org/n?u=RePEc:oec:ecoaaa:455-en&r=com
  20. By: Joanne Evans and Richard Green
    Abstract: In an attempt to reduce high electricity prices in England and Wales, the government and regulator forced the largest generators to divest some plant in the late 1990s, and introduced New Electricity Trading Arrangements in March 2001. We use a supply function model to simulate prices from April 1997 to March 2004, and find no change in the relationship between our simulations and actual prices over this period. This implies that while the reduction in concentration has had a significant impact on short-term wholesale electricity prices, the switch from a centralised to a decentralised market has not.
    Keywords: Electricity, market power, concentration, market rules
    JEL: L94
    Date: 2005–07
    URL: http://d.repec.org/n?u=RePEc:bir:birmec:05-13&r=com
  21. By: Huck,S.; Konrad,K.A.; Muller,W. (TILEC (Tilburg Law and Economics Center))
    Date: 2005
    URL: http://d.repec.org/n?u=RePEc:dgr:kubtil:200519&r=com
  22. By: Benito Arruñada
    Abstract: Recent decisions by the Spanish national competition authority (TDC) mandate payment systems to include only two costs when setting their domestic multilateral interchange fees (MIF): a fixed processing cost and a variable cost for the risk of fraud. This artificial lowering of MIFs will not lower consumer prices, because of uncompetitive retailing; but it will however lead to higher cardholders’ fees and, likely, new prices for point of sale terminals, delaying the development of the immature Spanish card market. Also, to the extent that increased cardholders’ fees do not offset the fall in MIFs revenue, the task of issuing new cards will be underpaid relatively to the task of acquiring new merchants, causing an imbalance between the two sides of the networks. Moreover, the pricing scheme arising from the decisions will cause unbundling and underprovision of those services whose costs are excluded. Indeed, the payment guarantee and the free funding period will tend to be removed from the package of services currently provided, to be either provided by third parties, by issuers for a separate fee, or not provided at all, especially to smaller and medium-sized merchants. Transaction services will also suffer the consequences that the TDC precludes pricing them in variable terms.
    Keywords: Credit cards, payment systems, regulation, interchange fees
    JEL: K21 K23 L14 L41
    Date: 2005–10
    URL: http://d.repec.org/n?u=RePEc:upf:upfgen:899&r=com
  23. By: Boone,J. (TILEC (Tilburg Law and Economics Center))
    Date: 2004
    URL: http://d.repec.org/n?u=RePEc:dgr:kubtil:200421&r=com
  24. By: Motchenkova,E. (TILEC (Tilburg Law and Economics Center))
    Date: 2004
    URL: http://d.repec.org/n?u=RePEc:dgr:kubtil:200419&r=com
  25. By: Hervé Boulhol (IXIS-CIB et TEAM)
    Abstract: This paper gives estimates of sectoral markup trends in thirteen OECD countries over the last three decades. It concludes with a slight, albeit heterogeneous, increase in price-cost margins (PCMs) overall, contrary to the generally expected effect of increased competition. More strikingly, it estabishes a clear pattern of PCM convergence both across countries and sectors. This convergence means that high margins have shrunk and low margins grown. These movements seem to be linked to the decline in the labour share. They point to a need to search for factors counterbalancing the pro-competitive effect on markups.
    Keywords: Markup, price-cost margin, pro-competitive effect, wage bargaining, labour share.
    JEL: L11 L13 L60 J40 F02
    Date: 2005–09
    URL: http://d.repec.org/n?u=RePEc:mse:wpsorb:bla05056&r=com
  26. By: Bijl,P.W.J. de; Peitz,M. (TILEC (Tilburg Law and Economics Center))
    Date: 2005
    URL: http://d.repec.org/n?u=RePEc:dgr:kubtil:200508&r=com
  27. By: Boone,J.; Damme,E. van (TILEC (Tilburg Law and Economics Center))
    Date: 2004
    URL: http://d.repec.org/n?u=RePEc:dgr:kubtil:200418&r=com
  28. By: Sophocles N. Brissimis (Bank of Greece and University of Piraeus. Address: 21 E.Venizelos Ave., 10250 Athens, Greece.); Theodora S. Kosma (Corresponding author: Athens University of Economics and Business (AUEB), 76 Patission Street, 10434 Athens, Greece.)
    Abstract: This paper examines exchange rate pass-through in the euro area by accounting for the impact of exchange rate changes on exporting firms’ market power, cost structure and competitiveness. An international oligopoly model where exporting firms simultaneously decide on their pricing and innovation strategies is used as the basis for the econometric analysis. The estimations are carried out on data for manufacturing imports of three large euro area countries (Germany, France, Netherlands) from three major non-euro area import suppliers (US, Japan, UK). The results show that exporting firms’ price and innovation decisions in each source country are jointly determined and that total pass-through to euro area import prices is low. There are also indications that other factors, such as interactions with domestic producers, may be important for the determination of pass-through. Finally, euro area import prices are found to be sticky in local currency in the short run.
    Keywords: Exchange rate pass-through; market power; innovative activity; multivariate cointegration; euro exchange rate.
    JEL: C32 F39 L13 O31
    Date: 2005–10
    URL: http://d.repec.org/n?u=RePEc:ecb:ecbwps:20050531&r=com
  29. By: Canoy,M.; Rey,P.; Damme,E. van (TILEC (Tilburg Law and Economics Center))
    Date: 2004
    URL: http://d.repec.org/n?u=RePEc:dgr:kubtil:200422&r=com
  30. By: Fabio Feriozzi
    Abstract: In a duopoly model I study the effects of increased competitive pressure on the implicit incentives provided by career concerns. By building a good reputation, managers are able to capture on the labor market part of the profits that they produce in excess with respect to less talented managers. Increased competition, then, has an ambiguous effect: it raises the reputational concern to the extent that it makes to hire a good manager more valuable. The threat of a hostile takeover is then introduced and it is shown to reduce managerial salary while having a potentially negative effect on ex ante incentives. In particular, it is argued that if alternative governance systems are already available, the threat of a hostile takeover can be harmful.
    Date: 2005–11
    URL: http://d.repec.org/n?u=RePEc:cte:werepe:we056029&r=com
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