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on Industrial Competition |
| By: | Maris Goldmanis; Ali Hortacsu; Chad Syverson; Onsel Emre |
| Abstract: | While a fast-growing body of research has looked at how the advent and diffusion of e-commerce has affected prices, much less work has investigated e-commerce's impact on the number and type of producers operating in an industry. This paper theoretically and empirically takes up the question of which businesses most benefit and most suffer as consumers switch to purchasing products online. We specify a general industry model involving consumers with differing search costs buying products from heterogeneous-type producers. We interpret e-commerce as having reduced consumers' search costs. We show how such reductions reallocate market shares from an industry's low-type producers to its high-type businesses. We test the model using U.S. data for three industries in which e-commerce has arguably decreased consumers' search costs considerably: travel agencies, bookstores, and new auto dealers. Each industry exhibits the market share shifts predicted by the model. Interestingly, while the industries experienced similar changes, the specific mechanisms through which e-commerce induced them differed. For bookstores and auto dealers, industry-wide declines in small outlets reflected market-specific impacts, evidenced by the fact that more small-store exit occurred in local markets where consumers' use of e-commerce channels grew fastest. For travel agencies, on the other hand, the shifts reflected aggregate changes driven by airlines cutting agent commissions as consumers started buying tickets online. |
| JEL: | D4 L1 L8 |
| Date: | 2008–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:14166&r=com |
| By: | Harold Creusen; Arno Meijer; Gijsbert Zwart; Henry van der Wiel |
| Abstract: | In this study, we analyse changes in market power in the Dutch supermarket chain and discuss the effects on welfare. The supermarket chain includes consumers, supermarkets, buyer groups and food manufactures. We look at the theoretical background of market power. Special attention has been paid to recent theories of buyer power of retailers in the vertical chain. Theory suggests that supermarkets can enhance their buyer power by, for instance, using own private brands as an outside option in bargaining with manufacturers. Using firm-level data, indicators reveal that profit margins of both supermarkets and of manufacturers have declined between 1993 and 2005. Hence, competition on these markets seems to have become tougher and mark-ups lower over time. Furthermore, we find no significant empirical indications that supermarkets were able to use their buyer power to shift profits from manufacturers to supermarkets after 1993. Finally, all else equal, in terms of welfare consumers have benefited from fiercer competition in terms of lower prices. |
| Keywords: | Supermarket; price cost margins; buyer power; seller power; welfare |
| JEL: | D40 D61 L11 |
| Date: | 2008–04 |
| URL: | http://d.repec.org/n?u=RePEc:cpb:docmnt:163&r=com |
| By: | Reardon, Thomas; Gulati, Ashok |
| Abstract: | "A “supermarket revolution” has been underway in developing countries since the early 1990s. Supermarkets (here referring to all modern retail, which includes chain stores of various formats such as supermarkets, hypermarkets, and convenience and neighborhood stores) have now gone well beyond the initial upper- and middle-class clientele in many countries to reach the mass market. Within the food system, the effects of this trend touch not only traditional retailers, but also the wholesale, processing, and farm sectors. The supermarket revolution is a “two-edged sword.” On the one hand, it can lower food prices for consumers and create opportunities for farmers and processors to gain access to quality-differentiated food markets and raise incomes. On the other hand, it can create challenges for small retailers, farmers, and processors who are not equipped to meet the new competition and requirements from supermarkets. Developing-country governments can put in place a number of policies to help both traditional retailers and small farmers pursue “competitiveness with inclusiveness” in the era of the supermarket revolution. Some countries are already taking such steps, and their experiences offer lessons for others." from Author's text |
| Keywords: | Supermarkets, Wholesalers, Modern retail, Small farmers, Traditional retail, Supply chains, Competitiveness, Inclusiveness, |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:fpr:polbrf:2&r=com |
| By: | TAKECHI Kazutaka |
| Abstract: | This paper investigates the determinants of international strategic alliances by pharmaceutical firms. When launching drugs onto the market, there are two choices: launching the drugs directly or forming marketing alliances including licensing agreements. Because these choices affect firm revenue structure and the international supply pattern of pharmaceuticals, the impact on world welfare is significant. We examine the determinants of supply mode choice (direct launch versus alliance) by Japanese pharmaceutical companies. Our estimation results reveal that in addition to firm heterogeneity, product - and market - specific determinants of strategic alliances are important: firms with smaller scope economies prefer alliances for drugs with less market potential when intellectual property rights protection (IPP) is strong. |
| Date: | 2008–07 |
| URL: | http://d.repec.org/n?u=RePEc:eti:dpaper:08022&r=com |
| By: | Helmut Dietl (Institute for Strategy and Business Economics, University of Zurich); Markus Lang (Institute for Strategy and Business Economics, University of Zurich); Martin Lutzenberger (Institute for Strategy and Business Economics, University of Zurich); Stephan Wagner (Chair of Logistics Management, Swiss Federal Institute of Technology Zurich) |
| Abstract: | This paper analyzes competitive strategies and the impending market entry of a new player in the German Business-to-Business (B2B) parcel market. Currently there a four large service providers in the German B2B parcel market. Each of these incumbent providers operates - albeit with varying degrees of automation - with a classical multi-hub-and-spoke network. The entrant plans to enter the B2B parcel market with a completely new parcel delivery system and network. Such operations shall enable the incumbent to offer new services to potential customers and realize lower costs and prices than the established .rms. We describe the market and contrast the incumbents’ and the entrant’s strategy and operations. We develop a game-theoretic Cournot model with economies of scale and different cost functions to analyze the effect of the entrant’s market entry on competition, market shares, prices, costs and profits. We present calibrated results illustrating the impact of market entry in various scenarios. |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:iso:wpaper:0084&r=com |
| By: | Michiel Bijlsma; Viktória Kocsis; Nelli Valmari |
| Abstract: | In most European broadband Internet markets local loop unbundling is mandated under a cost-based regulated access price. We construct a model for differentiated Cournot competition between service-based and infrastructure-based firms, out of which one infrastructure-based firm (the incumbent) supplies to the service-based firms. We seek for and compare the socially optimal and the incumbent’s profit maximizing access price in two scenarios: (i) service-based firms and incumbent supply homogeneous services (partial differentiation), and (ii) all services are horizontally differentiated (uniform differentiation). We show that in both cases the incumbent never forecloses service-based firms if infrastructure-based competition is present or if services are somewhat differentiated. Under uniform differentiation the welfare optimizing access price is below marginal cost, hence the incumbent subsidizes the production of service-based firms and makes zero profit. In the case of partial differentiation, the same result obtains when both markets are concentrated. However, if markets are not concentrated, the socially optimal access fee exceeds the marginal cost. |
| Keywords: | broadband Internet market; imperfect competition; product differentiation; access regulation |
| JEL: | L13 L51 L86 L96 |
| Date: | 2008–06 |
| URL: | http://d.repec.org/n?u=RePEc:cpb:discus:106&r=com |
| By: | Herings P. Jean-Jacques; Peeters Ronald; Yang Michael (METEOR) |
| Abstract: | In this paper, we consider the competition of providers of information products against P2P networks that offer illegal versions of the information products. Depending on the generic cost factor of downloading—incorporating factors including, among other things, the degree of legal enforcement of intellectual property rights—we find that the firm may employ pricing strategies to either deter the entry of a network or to accommodate it. In the latter case, we find that the equilibrium price moves in the opposite direction of the generic cost factor of downloading. This counter-intuitive result corresponds to a very subtle form of platform competition between the firm and the network. Furthermore, profits for the firm ambiguously decrease when the generic cost factor of downloading declines, whereas total welfare unambiguously increases. This implies that it may well be welfare enhancing to relax the legal enforcements of intellectual property rights. |
| Keywords: | Strategy; |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:umamet:2008020&r=com |
| By: | Frederic Marty (Observatoire Français des Conjonctures Économiques); Arnaud Voisin (University of Nice) |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:fce:doctra:0806&r=com |
| By: | Martynova, M.; Renneboog, L.D.R. (Tilburg University, Tilburg Law and Economics Center) |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:kubtil:2008008&r=com |
| By: | Bigoni, Maria (IMT-Lucca); Fridolfsson, Sven-Olof (Research Institute of Industrial Economics (IFN)); Le Coq, Chloé (Stockholm Institute of Transition Economies); Spagnolo, Giancarlo (Stockholm Institute of Transition Economics) |
| 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 differing 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. If the ringleader is excluded from the leniency program the deterrence effect of leniency falls and prices are higher than otherwise. As for tacit collusion, under standard anti-trust enforcement or leniency programs subjects who do not communicate (do not go for explicit cartels) tend to choose weakly higher prices than where there is no anti-trust enforcement. 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: | Law Enforcement; Antitrust; Cartel Deterrence; Leniency; Experiment |
| JEL: | K21 K42 L13 L41 |
| Date: | 2008–04–24 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:iuiwop:0738&r=com |
| By: | Lisa R. Anderson (Department of Economics, College of William and Mary); Beth A. Freeborn (Department of Economics, College of William and Mary); Charles A. Holt (Department of Economics, University of Virginia) |
| Abstract: | We study the effect of demand structure on the ability of subjects to tacitly collude on prices by considering Bertrand substitutes and Bertrand complements. We find evidence of collusion in the complements treatment, but no such evidence in the substitutes treatment. This finding is somewhat in contrast with Potters and Suetens (2007) who observe tacit collusion in two treatments with similar underlying demand structures but with no market context. |
| Keywords: | collusion, Bertrand, experiment |
| JEL: | C9 L1 |
| Date: | 2008–07–10 |
| URL: | http://d.repec.org/n?u=RePEc:cwm:wpaper:73&r=com |
| By: | Joseph J. Doyle, Jr.; Erich Muehlegger; Krislert Samphantharak |
| Abstract: | Some gasoline markets exhibit remarkable price cycles, where price spikes are followed by a string of small price declines until the next price spike. This pattern is predicted from a model of competition driven by Edgeworth cycles, as described by Maskin and Tirole. We extend the Maskin and Tirole model and empirically test its predictions with a new dataset of daily station-level prices in 115 US cities. One innovation is that we also examine cycling within cities, which allows controls for city fixed effects. Consistent with the theory, and often in contrast with previous empirical work, we find that the least and most concentrated markets are much less likely to exhibit cycling behavior; and the areas with more independent retailers that have convenience stores are more likely to cycle. We also find that the average gasoline prices are relatively unrelated to cycling behavior. |
| JEL: | D4 L11 L70 |
| Date: | 2008–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:14162&r=com |
| By: | Degryse, H.A. (Tilburg University, Tilburg Law and Economics Center) |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:kubtil:2008001&r=com |
| By: | Ray Chaudhuri, A.; Benchekroun, H. (Tilburg University, Tilburg Law and Economics Center) |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:kubtil:2008009&r=com |
| By: | Michele Boldrin; David K Levine |
| Date: | 2008–07–10 |
| URL: | http://d.repec.org/n?u=RePEc:cla:levarc:122247000000002269&r=com |
| By: | Ray Chaudhuri, A. (Tilburg University, Tilburg Law and Economics Center) |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:kubtil:2008005&r=com |
| By: | Carletti, E.; Hartmann, P.; Ongena, S. (Tilburg University, Tilburg Law and Economics Center) |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:kubtil:2008006&r=com |
| By: | Tristan AUVRAY (LEREPS-GRES); Olivier BROSSARD (LEREPS-GRES) |
| Abstract: | We investigate the impact of banks’ ownership concentration on the effectiveness of shareholders’ market discipline. More precisely, we first assess whether the ability of the distance to default to predict banks’ financial distress is affected by the level of ownership concentration (“monitoring” hypothesis). We also assess whether banks’ future financial situation is directly affected by ownership concentration (“influence” hypothesis). Our econometric estimates are conducted on a panel of 77 European banks observed between the first quarter of 1997 and the last quarter of 2005. We find that ownership dispersion reduces the predictive power of the distance to default. The data collected come from three sources: Bankscope, Datastream and Thomson One Banker Ownership. The econometric methodology is based on simple pooled-logit estimates corrected for the clustering effect. Several tests are then conducted to assess the robustness of the results. We also recall that theoretical results do exist to explain why banks’ ownership structure can alter market discipline and the ability of market-derived indicators to predict future financial distresses. This work finally suggests that the empirical literature dealing with market discipline should not focus only on the moral hazard potentially created by bad insurance deposit design, balance sheet opacity or the safety net: the evolution of banks ownership structure might also be an important prudential issue. |
| Keywords: | market discipline; ownership concentration; banks’ risk taking |
| JEL: | G21 G32 G34 E44 E58 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:grs:wpegrs:2008-13&r=com |
| By: | Jackie Krafft; Evens Salies (Observatoire Français des Conjonctures Économiques) |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:fce:doctra:0813&r=com |
| By: | Flora Bellone (Université de Nice); Patrick Musso (CNRS); Lionel Nesta (Observatoire Français des Conjonctures Économiques); Frédéric Warzynski (Aarhus School of Business) |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:fce:doctra:0809&r=com |