|
on Industrial Competition |
| By: | Hirata, Daisuke |
| Abstract: | This paper investigates simultaneous move capacity constrained price competition game among three firms. I find that equilibria in an asymmetric oligopoly are substantially different from those in the duopoly and symmetric oligopoly. I characterize mixed strategy equilibria and show there exist possibilities of i) the existence of a continuum of equilibria ii) the smallest firm earning the largest profit per capacity and iii) non-identical supports of equilibrium mixed strategies, all of which never arise either in the duopoly or symmetric oligopoly. In particular, the second finding sheds light on a completely new pricing incentive in Bertrand competitions. |
| Keywords: | Price Competition, Oligopoly, Capacity Constraint, Homogeneous Goods |
| JEL: | L13 C72 |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:7946&r=com |
| By: | Kikuchi, Toru |
| Abstract: | This paper considers a two-period model of market entry with homogeneous products and switching costs. It is shown that the pro-competitive effect of a foreign firm's entry (i.e., unilateral trade liberalization) emerges before the entry. Also, conditions that are conducive to a competitive environment in the second-period are shown to yield a less competitive outcome in the first-period. That is, when the marginal cost of the foreign entrant is relatively low, the first-period output of a domestic monopolist is relatively low as well. |
| Keywords: | Switching Costs; Foreign Firm's Entry |
| JEL: | F12 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:8093&r=com |
| By: | Yves Breitmoser (Institute of Microeconomics, European University Viadrina); Jonathan H.W. Tan (Nottingham University Business School, University of Nottingham); Daniel John Zizzo (School of Economics, University of East Anglia) |
| Abstract: | This paper presents an experimental study of dynamic indefinite horizon R&D races with uncertainty and multiple prizes. The theoretical predictions are highly sensitive: small parameter changes determine whether technological competition is sustained, or converges into a market structure with an entrenched leadership and lower aggregate R&D. The subjects’ strategies are far less sensitive. In most treatments, the R&D races tend to converge to entrenched leadership. Investment is highest when rivals are close. This stylized fact, and so the usefulness of neck-to-neck competition in general, is largely unrelated to rivalry concerns but can be explained using a quantal response extension of Markov perfection. |
| Keywords: | R&D race; innovation; dynamics; experiment. |
| JEL: | C72 C91 O31 |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:cdx:dpaper:2008-04&r=com |
| By: | Ernan Haruvy; Peter T. L. Popkowski Leszczyc; Octavian Carare; James C. Cox; Eric A. Greenleaf; Wolfgang Jank; Sandy Jap; Young-Hoon Park; Michael H. Rothkopf |
| Abstract: | Even though auctions are capturing an increasing share of commerce, they are typically treated in the theoretical economics literature as isolated. That is, an auction is typically treated as a single seller facing multiple buyers or as a single buyer facing multiple sellers. In this paper, we review the state of the art of competition between auctions. We consider three different types of competition: competition between auctions, competition between formats, and competition between auctioneers vying for auction traffic. We highlight the newest experimental, statistical and analytical methods in the analysis of competition between auctions. |
| Keywords: | auctions, bidding, competition, auction formats, auction houses |
| Date: | 2008–01 |
| URL: | http://d.repec.org/n?u=RePEc:exc:wpaper:2008-02&r=com |
| By: | Bruce Lyons (School of Economics and Centre for Competition Policy, University of East Anglia) |
| Abstract: | This paper provides an assessment of EC merger policy from three perspectives. First, it places the evolution of merger policy alongside the evolution of economic ideas in relation to competition and industrial organisation. Second, it highlights recent developments in the practical economic appraisal of competition in four areas: unilateral (non-coordinated) effects, particularly the appropriate use of simulation techniques and the efficiency defence; coordinated effects (collective dominance), particularly the role of the Community Courts; non-horizontal effects, particularly the need for the new guidelines; and remedies, particularly weaknesses in current practice. Third, it develops a simple bargaining approach to merger policy evaluation to draw conclusions about the trend in overall effectiveness of EC merger policy since 1989. |
| Keywords: | merger control, unilateral effects, collective dominance, remedies, merger policy |
| JEL: | C78 K21 L41 |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:ccp:wpaper:wp08-17&r=com |
| By: | Lucy Beverley (Competition Commission and Centre for Competition Policy, University of East Anglia) |
| Abstract: | Event study analysis is a branch of econometrics which attempts to measure the effects of economic events on the value of firms by examining stock market data. Providing that share prices reflect the underlying economic values of assets, changes in equity values will properly capture expected changes in the economic profitability of the firm. This paper considers the effect on stock prices of announcements relevant to Competition Commission references, using established event study methodology. |
| Keywords: | event studies, shares, share prices, Competition Commission, stock market |
| JEL: | G14 |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:ccp:wpaper:wp08-16&r=com |
| By: | Chandra, Ambarish; Collard-Wexler, Allan |
| Abstract: | In this paper we study mergers in two-sided industries. While mergers have been studied extensively in traditional industries, and there is a large and rapidly evolving literature on two-sided markets, there has been little work empirically examining mergers in these markets. We present a model that shows that mergers in two-sided markets may not necessarily lead to higher prices for either side of the market. We test our conclusions by examining a spate of mergers in the Canadian newspaper industry in the late 1990s. Specifically, we analyze prices for both circulation and advertising to try to understand the impact that these mergers had on consumer welfare. We find that greater concentration did not lead to higher prices for either newspaper subscribers or advertisers. |
| Keywords: | Mergers; Two-Sided Markets; Newspapers |
| JEL: | D43 L4 |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:7954&r=com |
| By: | Chandra, Ambarish |
| Abstract: | This paper seeks to establish the importance of targeted advertising in media markets. Using zip-code level circulation for US daily newspapers, I show that newspapers facing more competition have lower circulation prices but higher advertising prices than similar newspapers facing little or no competition. I explain this by showing that newspapers in more competitive markets are better able to segment readers according to their location and demographics. This leads to greater homogeneity in the characteristics of subscribers and raises advertisers' willingness to pay for such readers. The results imply a substantial benefit to advertisers and media firms from targeted advertising. |
| Keywords: | Targeted Advertising; Media Markets; Newspapers; Media Segmentation |
| JEL: | D4 L1 |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:7955&r=com |
| By: | Beena, S |
| Abstract: | This paper tries to address the extent, nature and impact of the recent surge in consolidation strategies especially in the form of mergers and acquisitions followed by the firms in the Indian pharmaceutical industry. The study found that many of the firms are implementing these strategies in the new context of globalisation mainly to overcome the acute competition arising out of the pro-market reforms and to strengthen their market portfolio. The study reaches the conclusion that the consolidation strategies followed by the firms enabled them to cut down the wasteful expenses to a greater extent and which resulted in better performance of the merging firms compared to the non-merging firms in this industry. |
| Keywords: | mergers; acquisitions; consolidation; pharmaceutical industry; performance |
| JEL: | L6 G34 L80 |
| Date: | 2006–06–28 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:8144&r=com |
| By: | Bigoni, Maria (IMT-Lucca); Fridolfsson, Sven-Olof (IFN); Le Coq, Chloe (SITE); Spagnolo, Giancarlo (Tor Vergata university, SITE, and CEPR) |
| Abstract: | Leniency policies and rewards for whistleblowers are being introduced in ever more fields of law enforcement, though their deterrence effects are often hard to observe, and the likely effect of changes in the specific features of these schemes can only be observed experimentally. This paper reports results from an experiment designed to examine the effects of fines, leniency programs, and reward schemes for whistleblowers on firms' decision to form cartels (cartel deterrence) and on their price choices. Our subjects play a repeated Bertrand price game with differentiated goods and uncertain duration, and we run several treatments different in the probability of cartels being caught, the level of fine, the possibility of self-reporting (and not paying a fine), the existence of a reward for reporting. We find that fines following successful investigations but without leniency have a deterrence effect (reduce the number of cartels formed) but also a pro-collusive effect (increase collusive prices in surviving cartels). Leniency programs might not be more efficient than standard antitrust enforcement, since in our experiment they do deter a significantly higher fraction of cartels from forming, but they also induce even higher prices in those cartels that are not reported, pushing average market price significantly up relative to treatments without antitrust enforcement. With rewards for whistle blowing, instead, cartels are systematically reported, which completely disrupts subjects' ability to form cartels and sustain high prices, and almost complete deterrence is achieved. We also analyze post-conviction behavior, finding that there is a strong expost deterrence (desistance) effect. Moreover post-conviction prices are on average lower than before even though the average prices within cartels are the same. Finally, we find a strong cultural effect comparing treatments in Stockholm with those in Rome, suggesting that optimal law enforcement institutions differ with culture. |
| Keywords: | Anti-trust; Collusion; Experiment; Leniency |
| JEL: | K21 L13 L41 |
| Date: | 2008–03–27 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:hastef:0698&r=com |
| By: | Morten Hviid (School of Law and Centre for Competition Policy, University of East Anglia); Andrei Medvedev (Centre for Competition Policy, University of East Anglia) |
| Abstract: | To date the experience of the incidence of private actions for damages in antitrust cases has differed markedly across jurisdictions. The procedural rules surrounding private litigation may account for some of these differences. This paper explores the effect of rules concerning contribution among multiple defendants who are joint and severally liable for a cartel infringement. The no-contribution rule is shown to lead to higher levels of aggregate damages and more information revelation to the private plaintiff. However, the no-contribution rule also has the potential to neuter any public leniency programme, thereby possibly reducing the number of cartels detected. |
| Keywords: | cartels, leniency, private damages |
| JEL: | K21 K42 L40 |
| Date: | 2008–02 |
| URL: | http://d.repec.org/n?u=RePEc:ccp:wpaper:wp08-03&r=com |
| By: | Laura Malaguzzi Valeri (Economic and Social Research Institute (ESRI)) |
| Abstract: | This study analyzes the effects of additional interconnection on welfare and competition in the Irish electricity market. I simulate the wholesale electricity markets of Great Britain and the island of Ireland for 2005. I find that in order for the two markets to be integrated in 2005, additional interconnection would have to be large. However, the amount of interconnection decreases for high costs of carbon, since this causes the markets to become more similar. Irish consumers obtain most of the welfare gains of interconnection. As the amount of interconnection increases, there are also positive effects on competition in Ireland, the less competitive of the two markets. Finally, it is unlikely that private investors will pay for the construction of the interconnector since they are unable to extract all its welfare benefits. |
| Keywords: | interconnection, electricity, Ireland |
| JEL: | L94 Q40 |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:esr:wpaper:wp232&r=com |
| By: | Rod Tyers; Lucy Rees |
| Abstract: | The retreat from public ownership of service firms and industries has left behind numerous private monopolies and oligopolies supervised by regulatory agencies. Services industries in government and private ownership generate two-thirds of Australia’s value added and employ three quarters of its workforce. This study offers an economy-wide approach that represents monopoly and oligopoly behaviour explicitly. It examines the implications of oligopoly rents for factor markets and the real exchange rate, the extent of sectoral interactions and the potential economy wide gains from tighter price cap regulation, with the results confirming the merit of an economy-wide approach. External shocks, like the present “China boom”, are also simulated. Such positive shocks are shown to expand the potential for oligopoly rents and therefore to raise the bar for regulatory agencies. Moreover, less than tight price caps are shown to exacerbate entry-exit hysteresis in boom and bust cycles. |
| JEL: | C68 D43 D58 L13 L43 L51 L80 |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:acb:camaaa:2008-05&r=com |
| By: | Paul Conway; Richard Herd |
| Abstract: | Competition in product markets has been found to be an important determinant of economic performance in developed and developing countries. This paper uses the OECD's indicators of product market regulation (PMR) to assess the extent to which India's regulatory environment is supportive of competition in markets for goods and services. The results indicate that although liberalisation has improved the regulatory environment to international best practices in a few areas, the overall stance of product market regulation is still relatively restrictive. The regulatory environment is also found to vary markedly across the 21 Indian states for which the PMR indicators are estimated. The paper goes on to review various aspects of product market regulation in India and suggest a number of policy initiatives that would improve the degree to which competitive market forces are able to operate. This working Paper relates to the 2007 Economic Survey of India (www.oecd.org/eco/surveys/india). <P>Améliorer la réglementation des marchés de produits en inde : comparaison internationale et situation dans les différents États <BR>On sait aujourd'hui que la concurrence sur les marchés de produits est un déterminant important de la performance économique des pays développés et en développement. Utilisant les indicateurs de réglementation des marchés de produits (RMP) mis au point par l'OCDE, la présente note examine dans quelle mesure les dispositions en vigueur en Inde permettent à la concurrence de s'exercer sur les marchés de biens et de services. Il ressort de cette analyse que, bien que l'environnement réglementaire ait été aligné sur les meilleures pratiques internationales dans quelques domaines grâce à des mesures de libéralisation, la réglementation des marchés de produits demeure relativement restrictive dans l'ensemble. Par ailleurs, la situation est très variable suivant les 21 États de la Fédération pour lesquels les indicateurs de RMP sont estimés. Après un examen de différents aspects de la réglementation des marchés de produits en Inde, un certain nombre d'initiatives sont proposées dans le but de faciliter le jeu des mécanismes concurrentiels du marché. Ce document de travail se rapporte à l'Étude économique de l'Inde 2007 (www.oecd.org/eco/etudes/inde). |
| Keywords: | product market regulation, competition, concurrence, indicators, indicateurs, réglementation des marchés de produits |
| JEL: | K2 L5 O1 |
| Date: | 2008–03–28 |
| URL: | http://d.repec.org/n?u=RePEc:oec:ecoaaa:599-en&r=com |
| By: | Oystein Foros (Norwegian School of Economics and Business Administration); Frode Steen (Norwegian School of Economics and Business Administration) |
| Abstract: | This paper examines Norwegian gasoline pump prices using daily station-specific observations from March 2003 to March 2006. Whereas studies that have analysed similar price cyclees in other countriees find support for the Edgeworth cycle theory (Maskin and Tirole, 1988), we demonstrate that Norwegian gasoline price cycles involve a form of coordinated behavior. We also show that gasline prices follow a fixed weekly pattern, with prices increasing significantly every Monday at noon, and that gasoline companies appear to use the recommended retail price as a coordination device with a fixed link between the retail and recommended prices. Moreover, the weekly pattern changed in April 2004; whereas Thursday had been the high-price day, Monday now became the high-price day. The price-cost margin also increased significantly after the weekly pattern changed in April 2004. |
| Keywords: | gasoline prices, coordinated behavior |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:ccp:wpaper:wp08-20&r=com |
| By: | Chenghuan Sean Chu; Phillip Leslie; Alan Sorensen |
| Abstract: | In principle, a multiproduct firm can set separate prices for all possible bundled combinations of its products (i.e., "mixed bundling"). However, this is impractical for firms with more than a few products, because the number of prices increases exponentially with the number of products. In this study we show that simple pricing strategies are often nearly optimal -- i.e., with surprisingly few prices a firm can obtain 99% of the profit that would be earned by mixed bundling. Specifically, we show that bundle-size pricing -- setting prices that depend only on the size of bundle purchased -- tends to be more profitable than offering the individual products priced separately, and tends to closely approximate the profits from mixed bundling. These findings are based on an array of numerical experiments covering a broad range of demand and cost scenarios, as well as an empirical analysis of the pricing problem for an 8-product firm (a theater company). |
| JEL: | D4 L0 L11 |
| Date: | 2008–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:13916&r=com |
| By: | Maria Bigoni (University of Padova) |
| Abstract: | I report results of an experiment designed to study the relation between the process of information search and learning in a Cournot oligopoly, with limited a priori information. Different theories of learning have been applied to this setting, each yielding a specific market outcome in the long run, and postulating specific informational requirements. By allowing players to choose the information they wish to acquire, and controlling for these choices, I study the features of the learning model actually followed by the subjects, and the relation between the information they gather and the market behavior they adopt. According to my results, learning appears to be a composite process, in which different components coexist. Belief learning seems to be the leading element, as subjects try to form expectations about their opponents' future actions and to best reply to them. When subjects also look at the strategies individually adopted by their competitors, though, they tend to imitate the most successful behavior, which makes markets more competitive. Finally, reinforcement learning also plays a nonnegligible role, as subjects tend to favor strategies that have yielded higher profits in the past. I show that these different elements may be usefully incorporated into a more sophisticated learning model, shaped after self tuning EWA learning model. |
| Keywords: | Information, Learning, Imitation, Collusion |
| JEL: | L13 C92 C72 |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:pad:wpaper:0072&r=com |
| By: | Damiani, Mirella; Pompei, Fabrizio |
| Abstract: | Comparisons by countries and by sectors of mergers and acquisitions have usually been performed in separate fields of research. A first group of studies, focusing on international comparisons, has explored the role of corporate governance systems, investor protection laws and other countries’ regulatory institutions as the main determinants of takeovers around the world. A second group of contributions has attributed a central role to variations in industry composition, documenting that, in each country, mergers occur in waves and within each wave clustering by industry is observed. This paper aims to integrate both perspectives and to make comparisons by countries and by sectors, thus exploring the role of various driving forces on takeover activities. It also intends to consider the specific influence that technological regimes and their innovation patterns may exert in reallocating assets and moving capital among sectors. This will be done by examining the European experience of the last few years (2002-2005). We found that even in countries where transfer of control is a frequent phenomenon, mergers are less frequent in those sectors where innovation is a cumulative process and where takeovers may be a threat to the continuity of accumulation of innovative capabilities. |
| Keywords: | Mergers and Acquisitions; Corporate Governance; Technological Regimes |
| JEL: | O30 G34 L60 |
| Date: | 2008–04–11 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:8226&r=com |
| By: | Kjell Erik Lommerud (Department of Economics, University of Bergen, Norway); Frode Meland (Department of Economics, University of Bergen, Norway); Odd Rune Straume (Universidade do Minho - NIPE and University of Bergen (Health Economics Bergen, Department of Economics), Norway) |
| Abstract: | Many policy makers seem to prefer domestic alternatives to cross-broder mergers. Can such sentiments make sense? We contruct a model where cross-border mergers drive down union-set wages, where domestic mergers have larger non-labour cost synergies than international ones, and where policy evaluators care more about workers than capital owners. Apparently, the stage is set for national champion policies to be sensible. However, we also introduce the possibility of capital flight in the sense that a domestic firm can physically move its production out of the country. Restrictive cross-border merger policies can then seriously backfire, since they do not necessarily bring about a domestic merger - but capital flight instead. |
| Keywords: | Cross-border merger, national champions, greenfield FDI, trade unions |
| JEL: | F16 F21 J51 L13 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:nip:nipewp:10/2008&r=com |
| By: | Katja Görlitz; Joel Stiebale |
| Abstract: | Using a large panel data set of German manufacturing establishments, this paper investigates the impact of competition on training incidence as well as on the number of trained workers. According to theory, one would expect a negative relationship between product market competition and firms’ incentives to invest in employees’ general skills (Gersbach and Schmutzler 2006). In our empirical analysis, product market competition is approximated by various measures of competition such as the Herfindahl Index, the number of firms at the 3-digit industry level and the price cost margin. After controlling for unobserved heterogeneity across industries and establishments, there is no significant effect of competition on training. This result is robust towards different samples, model specifications and estimation techniques. |
| Keywords: | Training, human capital, product market competition |
| JEL: | J24 L22 D43 C23 |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:rwi:repape:0041&r=com |
| By: | Heyman, Fredrik (Research Institute of Industrial Economics (IFN)); Svaleryd, Helena (Research Institute of Industrial Economics (IFN)); Vlachos, Jonas (Stockholm University) |
| Abstract: | Theories of taste-based discrimination predict that competitive pressures will drive discriminatory behavior out of the market. Using detailed matched employer-employee data, we analyze how firm takeovers and product market competition are related to the gender composition of the firm’s workforce and the gender wage gap. Using a difference-in-difference framework and dealing with several endogeneity concerns, we find that the share of female employees increases as a result of an ownership change, in particular when product market competition is weak. Further, increased competition reduces the gender wage gap, especially among highly educated employees. While the estimated wage effect is quite small, the results support the main theoretical predictions. |
| Keywords: | Discrimination; Competition; Takeovers; Wages |
| JEL: | J20 J31 J70 |
| Date: | 2008–02–21 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:iuiwop:0734&r=com |