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on Industrial Competition |
| By: | Peter Cramton (Economics Department, University of Maryland) |
| Abstract: | Market design plays an essential role in promoting innovation. I examine emission allowance auctions, airport slot auctions, spectrum auctions, and electricity markets, and demonstrate how the market design can encourage innovation. Improved pricing information is one source of innovation. Enhancing competition is another driver of innovation seen in all of the applications. Market design fosters innovation in other ways as well by addressing other potential market failures. |
| Keywords: | Auctions, market design, innovation |
| JEL: | D44 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:pcc:pccumd:09imd&r=com |
| By: | Salvatore Piccolo (University of Naples "Federico II", CSEF and Toulouse School of Economics,) |
| Abstract: | In a dynamic game between N retailers and a large number of suppliers, I show that inefficient contracting emerges as a mechanism to implement collusion among retailers, building on the natural ‘complementarity’ between retail and wholesale prices. When efficient collusion is not sustainable, this complementarity allows retailers to rely on inefficient input supply, entailing double marginalization and negative franchise fees, to squeeze the wedge between collusive and deviation profits. I also study the role of communication on the equilibrium outcomes of games where retailers have the initiative. It turns out that communication is indeed fundamental to strengthen cartels' sustainability, although generating efficiency losses. |
| Keywords: | Bertrand competition, double marginalization, collusion, competing hierarchies. |
| JEL: | D21 D43 L42 |
| Date: | 2009–04–24 |
| URL: | http://d.repec.org/n?u=RePEc:sef:csefwp:224&r=com |
| By: | Jos Jansen (Max Planck Institute for Research on Collective Goods) |
| Abstract: | An innovative firm chooses strategically whether to patent its process innovation or rely on secrecy. By doing so, the firm manages its rival’s beliefs about the size of the innovation, and affects the incentives in the product market. Different measures of competitive pressure in the product market have different effects on the equilibrium patenting choices of an innovative firm with unknown costs and probabilistic patent validity. Increasing the number of firms (degree of product substitutability) gives a smaller (greater) patenting incentive. Switching from Bertrand to Cournot competition gives a smaller (greater) patenting incentive if patent protection is weak (strong). |
| Keywords: | Bertrand and Cournot competition, oligopoly, product differentiation, entry, asymmetric information, strategic disclosure, stochastic patent, trade secret, process innovation, imitation |
| JEL: | D82 L13 O31 O32 |
| Date: | 2009–04 |
| URL: | http://d.repec.org/n?u=RePEc:mpg:wpaper:2009_13&r=com |
| By: | Chen, Yutian; Dubey, Pradeep; Sen, Debapriya |
| Abstract: | We show that intermediate goods can be sourced to firms on the "outside" (that do not compete in the final product market), even when there are no economies of scale or cost advantages for these firms. What drives the phenomenon is that "inside" firms, by accepting such orders, incur the disadvantage of becoming Stackelberg followers in the ensuing competition to sell the final product. Thus they have incentive to quote high provider prices to ward off future competitors, driving the latter to source outside. |
| Keywords: | Intermediate goods; outsourcing; Cournot duopoly; Stackelberg duopoly |
| JEL: | L11 L13 D43 |
| Date: | 2009–04–24 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:14899&r=com |
| By: | Anderson, Simon P; de Palma, André |
| Abstract: | Limited consumer attention limits product market competition: prices are stochastically lower the more attention is paid. Ads compete to be the lowest price with other ads from the same sector and they compete for attention with ads from other sectors: equilibrium sector ad shares under free entry follow a CES form. When a sector gets more attractive, its advertising expands: others lose ad market share but may increase in absolute terms if sufficiently attractive. The "information hump" shows highest ad levels for intermediate attention levels when there is a decent enough chance of getting the message across and also of not being undercut by a cheaper offer. The Information Age takes off when the number of sectors grows, but total ad volume reaches an upper limit. Overall, advertising is excessive, though the allocation across sectors is optimal. Nonetheless, both large sectors and small ones can be blamed for misallocation of ads in using up scarce attention. |
| Keywords: | advertising distribution; consumer attention; economics of attention; information age; information filtering; price dispersion; size distribution of firms |
| JEL: | D11 D60 I0 L13 |
| Date: | 2009–04 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:7286&r=com |
| By: | A. Arrighetti; A. Ninni |
| Abstract: | The qualifying aspect of the ongoing changes in firm growth processes seems to be the increased heterogeneity of size and a trend towards a broader fluctuation in average size. Exogenous factors (market size, demand trends, technological innovations, higher competition) determine a different impact on firms will to increase their own size, while endogenous variables play a greater role than in the past. The outcome is represented by a growth pattern that characterises some firms, but not all of them. Growth appear to be an asymmetric phenomenon, involving selectively but not casually a subgroup of firms. In the present paper it is hypothesized that growth stems from the asymmetric distribution of internalized resources (both material and immaterial), allowing some firms (regardless of the original size) to enter evolutionary paths that others don’t want or simply can’t enter. |
| Keywords: | Firm Growth, Size Distribution, Gibrat’s Law, Industrial Dynamics, Human Capital, Intangible Assets, Industrial Policy |
| JEL: | L11 L25 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:par:dipeco:2009-ep05&r=com |
| By: | Hamilton, Stephen F.; Richards, Timothy J.; Stiegert, Kyle W. |
| Abstract: | The effect of advertising on market performance has been a long-standing debate. Advertising that increases the dispersion of consumersâ valuations for advertised goods raises the market power of firms, while advertising that decreases the dispersion of consumersâ valuations leads to narrower price-cost margins and superior performance in markets for advertised goods. Numerous challenges confound the empirical identification of advertising effects on market performance. This paper proposes a simple method that relies on the revealed preferences of firms participating in generic advertising programs. Generic advertising programs provide a unique window through which to observe advertising effects on market performance, because changes in the dispersion of consumersâ valuations systematically redistributes rents among firms according to observable characteristics on producer size. We examine producer attitudes towards generic advertising in the âBeef. Itâs Whatâs for Dinnerâ campaign of the U.S. Beef Checkoff program and find the likelihood a producer favors an expansion of the advertising program increases in operating scale. This finding is consistent with advertising effects that have led to a decrease in the dispersion of consumersâ valuations for beef products and a commensurate increase in market performance. |
| Keywords: | Advertising, Oligopoly, Marketing, L1, M37, |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea09:49187&r=com |
| By: | Shi, Guanming; Chavas, Jean-Paul |
| Abstract: | This paper investigates the pricing and vertical organization of differentiated products under imperfect competition. In a multiproduct context, a Cournot model is used to examine how substitution/complementarity relationships among products and vertical structures can affect the exercise of market power. This motivates a generalization of the Herfindahl-Hirschman index (termed VHHI) capturing how market concentration and vertical structures interact to influence prices of differentiated products. The analysis is applied to pricing of soybean seeds in the US over the period 2000-2007. The analysis considers two vertical structures employed by biotech firms: vertical integration and licensing. The econometric analysis finds evidence that vertical organization has significant effects on seed prices. These effects are found to vary depending on the institutional setup and the bundling of genetic material. The empirical evidence shows that complementarity and economies of scope can reduce the effects of market concentration on prices. |
| Keywords: | Vertical structures, pricing, imperfect competition, seed, biotechnology, Demand and Price Analysis, Industrial Organization, L13, L4, L65, |
| Date: | 2009–04 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea09:49186&r=com |
| By: | Stijn Claessens |
| Abstract: | As in other sectors, competition in finance matters for allocative, productive and dynamic efficiency. Theory suggests, however, that unfettered competition is not first best given the special features of finance. I review these analytics and describe how to assess the degree of competition in markets for financial services. Existing research shows that the degree of competition greatly varies across markets, largely driven by barriers to entry and exit. I argue that changes in financial services industries require updated competition policies and institutional arrangements, but that practices still fall short. Furthermore, I show that developing countries face some specific competition challenges. |
| Keywords: | Financial sector , Emerging markets , Financial institutions , Competition , Capital markets , Securities markets , Securities regulations , Economic models , Cross country analysis , |
| Date: | 2009–03–18 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:09/45&r=com |
| By: | L. Lambertini |
| Date: | 2008–10 |
| URL: | http://d.repec.org/n?u=RePEc:bol:bodewp:648&r=com |
| By: | Anita Wölfl; Isabelle Wanner; Tomasz Kozluk; Giuseppe Nicoletti |
| Abstract: | This paper describes patterns and developments of regulation that potentially affect product market competition in OECD countries over the past decade. It uses the 2008 update and revision of the OECD indicators of product market regulation (PMR) that integrate to a larger extent than in the past information on sector-specific regulation and adapt a simpler and more transparent aggregation technique. The results show that OECD countries have extensively liberalised product markets over the past ten years and – as a consequence - convergence of regulation across OECD countries can be observed. However, reforms appear to have slowed in the most recent period (2003-2008) as compared with the earlier period (1998- 2003). Easing of product market regulation appears to have been driven to a considerable extent by reforms in sector-specific regulation, notably as regards the gas, electricity and telecommunications markets. Countries appear also to have followed consistent reform approaches. However, scope for further reform remains, especially as regards controls of governments over businesses, and as regards certain sectors such as professional services and retail trade.<P>Dix ans de réformes sur le marché des produits dans les pays de l’OCDE : Un aperçu sur la base d’un indicateur RMP révisé<BR>Ce papier décrit les évolutions observées en matière de réglementation potentiellement entravant le jeu de la concurrence sur les marchés de produits des pays de l'OCDE au cours des dix dernières années. On utilise une version actualisée et révisée des indicateurs de réglementation des marchés de produits (RMP) qui intègre dans des proportions plus vastes que par le passé des informations sur les réglementations sectorielles et utilise une technique d'agrégation plus simple et transparente. D'après les résultats, les pays de l’OCDE ont considérablement libéralisé leurs marchés de produits depuis dix ans et – par conséquence – la convergence des réglementations peut être observée. Cependant, le rythme des réformes semble avoir ralenti ces dernières années (de 2003 à 2008) par rapport à la période précédente (de 1998 à 2003). Sur l’ensemble de la période, les réformes de la réglementation semblent avoir reposé considérablement sur la réforme des réglementations sectorielles, notamment dans les marchés du gaz, de l’électricité et des télécommunications. Les pays semblent avoir également introduit des réformes d'une façon cohérente. Cependant, il existe encore des marges de manœuvre considérables, notamment en termes du contrôle exercé par l'État, et dans quelques secteurs, tels que les services professionnels et le commerce de détail. |
| Keywords: | indicators of product market regulation, indicateurs de réglementation des marchés de produits |
| JEL: | K2 L5 |
| Date: | 2009–04–23 |
| URL: | http://d.repec.org/n?u=RePEc:oec:ecoaaa:695-en&r=com |
| By: | Sen, Debapriya |
| Abstract: | This paper proposes a theory of sharecropping on the basis of price behavior in agriculture and imperfectly competitive nature of rural product markets. We consider a contractual setting between one landlord and one tenant with seasonal variation of price, where the tenant receives a low price for his output while the landlord can sell his output at a higher price by incurring a cost of storage. We consider two different classes of contracts: (i) tenancy contracts and (ii) crop-buying contracts. It is shown that sharecropping is the optimal form within tenancy contracts and it also dominates crop-buying contracts provided the price variation is not too large. Then we consider interlinked contracts that have both tenancy and crop-buying elements and show that there are multiple optimal interlinked contracts. Finally, proposing an equilibrium refinement that incorporates imperfect competition in the rural product market, it is shown that the unique contract that is robust to this refinement results in sharecropping. |
| Keywords: | Sharecropping; price variation; imperfect competition; tenancy contracts; crop-buying contracts; interlinkage; the epsilon-agent |
| JEL: | D23 J43 O17 D02 Q15 O12 |
| Date: | 2009–04–24 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:14898&r=com |