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on Industrial Competition |
| By: | Michele Piccione; Ran Spiegler |
| Date: | 2010–12–21 |
| URL: | http://d.repec.org/n?u=RePEc:cla:levarc:661465000000001143&r=com |
| By: | Rabah Amir (University of Arizona and University of Luxembourg); Jim Y. Jin (University of St Andrews); Gerald Pech (American University in Bulgaria); Michael Tröge (ESCP-Europe) |
| Abstract: | This paper provides a thorough analysis of oligopolistic markets with positive demand-side network externalities and perfect compatibility. The minimal structure imposed on the model primitives is such that industry output increases in a firm's rivals' total output as well as in the expected network size. This leads to a generalized equilibrium existence treatment that includes guarantees for a nontrivial equilibrium, and some insight into possible multiplicity of equilibria. We formalize the concept of industry viability and show that it is always enhanced by having more firms in the market and/or by technological improvements. We also characterize the e¤ects of market structure on industry performance, with an emphasis on departures from standard markets. The approach relies on lattice-theoretic methods, which allow for a unified treatment of various general results in the literature on network goods. Several illustrative examples with closed-form solutions are also provided. |
| Keywords: | multi-product monopoly prices, interdependent products, pricing complements, pricing substitutes, linear demand |
| JEL: | L12 D42 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:luc:wpaper:10-15&r=com |
| By: | Alex Coad; Mercedes Teruel |
| Abstract: | Inter-firm competition has received much attention in the theoretical literature, but recent empirical work suggests that the growth rates of rival firms are uncorrelated, and that firm growth can be taken as an essentially independent process. We begin by investigating the correlations of the growth rates of competing firms (i.e. the largest and second-largest firms in the same industry) and observe that, surprisingly, the growth of these firms can be taken as independent. Nevertheless, peer-effect regressions, that take into account the simultaneous interdependence of growth rates of rival firms, are able to identify significant negative effects of rivals' growth on a firm's growth. |
| Keywords: | Competition, Firm growth, Peer effects econometrics Length 32 pages |
| JEL: | L25 |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:esi:evopap:2010-18&r=com |
| By: | Jaap H. Abbring; Jeffrey R. Campbell; Nan Yang |
| Abstract: | This paper develops a tractable model for the computational and empirical analysis of infinite-horizon oligopoly dynamics. It features aggregate demand uncertainty, sunk entry costs, stochastic idiosyncratic technological progress, and irreversible exit. We develop an algorithm for computing a symmetric Markov-perfect equilibrium quickly by finding the fixed points to a finite sequence of low-dimensional contraction mappings. If at most two heterogenous firms serve the industry, the result is the unique "natural" equilibrium in which a high profitability firm never exits leaving behind a low profitability competitor. With more than two firms, the algorithm always finds a natural equilibrium. We present a simple rule for checking ex post whether the calculated equilibrium is unique, and we illustrate the model's application by assessing how price collusion impacts consumer and total surplus in a market for a new product that requires costly development. The results confirm Fershtman and Pakes' (2000) finding that collusive pricing can increase consumer surplus by stimulating product development. A distinguishing feature of our analysis is that we are able to assess the results' robustness across hundreds of parameter values in only a few minutes on an off-the-shelf laptop computer. |
| Keywords: | Markov processes |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedhwp:wp-2010-21&r=com |
| By: | Rabah Amir (University of Luxembourg and University of Arizona); Natalia Lazzati (University of Arizona) |
| Abstract: | This paper provides a thorough analysis of oligopolistic markets with positive demand-side network externalities and perfect compatibility. The minimal structure imposed on the model primitives is such that industry output increases in a firmr's rivals' total output as well as in the expected network size. This leads to a generalized equilibrium existence treatment that includes guarantees for a nontrivial equilibrium, and some insight into possible multiplicity of equilibria. We formalize the concept of industry viability and show that it is always enhanced by having more firms in the market and/or by technological improvements. We also characterize the e¤ects of market structure on industry performance, with an emphasis on departures from standard markets. The approach relies on lattice-theoretic methods, which allow for a unified treatment of various general results in the literature on network goods. Several illustrative examples with closed-form solutions are also provided. |
| Keywords: | Network effects, demand-side externalities, monotone comparative statics, Cournot oligopoly, supermodularity |
| JEL: | C72 D43 L13 L14 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:luc:wpaper:10-16&r=com |
| By: | carsten Eckel; Leonardo Iacovone; Beata Javorcik; J. Peter Neary |
| Abstract: | We develop a new model of multi-product firms which invest to improve both the quality of their individual products and of their brand. Because of flexible manufacturing, products closer to firms’ core competence have lower costs, so they produce more of them, and also have higher incentives to invest in their quality. These two effects have opposite implications for the profile of prices. Mexican data provide robust confirmation of the model’s key prediction: firms in differentiated-good sectors exhibit quality-based competence (prices fall with distance from core competence), but export sales of firms in non-differentiated-good sectors exhibit the opposite. |
| Keywords: | Flexible manufacturing, multi-product firms, quality competition |
| JEL: | F12 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:oxf:wpaper:522&r=com |
| By: | W. Ross Morrow; Steven J. Skerlos |
| Abstract: | This article presents a proof of the existence of Bertrand-Nash equilibrium prices with multi-product firms and under the Logit model of demand that does not rely on restrictive assumptions on product characteristics, firm homogeneity or symmetry, product costs, or linearity of the utility function. The proof is based on conditions for the indirect utility function, fixed-point equations derived from the first-order conditions, and a direct analysis of the second-order conditions resulting in the uniqueness of profit-maximizing prices. Several subsequent results also demonstrate that price equilibrium under the Logit model of demand cannot adequately describe multi-product pricing. |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1012.5832&r=com |
| By: | Laurent Granier (Université de Lyon, Lyon, F-69003, France; CNRS, GATE Lyon St Etienne, UMR 5824, 93, chemin des Mouilles, Ecully, F-69130, France; ENS-LSH, Lyon, France) |
| Abstract: | This paper analyzes the literature concerning models of endogenous mergers. Traditional models of exogenous mergers analyze mergers as isolated phenomena. However, some empirical facts about M&A don’t seem to be explained in this literature. Models of endogenous mergers take into account all interactions created by merger decisions in an industry. By this way, they can give more reliable predictions. In order to better understand the literature, we describe it in two points. First, we investigate models caracteristics. Second, we present the main predictions obtained in the literature. |
| Keywords: | endogenous mergers, game theory, literature |
| JEL: | G L11 L12 L13 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:gat:wpaper:1029&r=com |
| By: | Nicholas Economides (Stern School of Business, NYU) |
| Abstract: | I discuss the impact of tying, bundling, and loyalty/requirement rebates on consumer surplus in the affected markets. I show that the Chicago School Theory of a single monopoly surplus that justifies tying, bundling, and loyalty/requirement rebates on the basis of efficiency typically fails. Thus, tying, bundling, and loyalty/requirement rebates can be used to extract consumer surplus and enhance profit of firms with market power. I discuss the various setups when this occurs. |
| Keywords: | tying, ties, bundling, bundled rebates, loyalty discounts, loyalty requirement rebates, single monopoly surplus, monopolization, market power, foreclosure, antitrust |
| JEL: | C72 D42 D43 K21 L12 L40 L41 L42 |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:net:wpaper:1026&r=com |
| By: | David McAdams |
| Abstract: | The standard monopoly pricing problem is re-considered when the buyer can disclose his type (e.g. age, income, experience) at some cost. In the optimal sales mechanism with costly disclosure, the seller posts a price list, including a \sticker price" available to any buyer and a schedule of discounts available to those who disclose certain types. Unambiguous welfare implications of such a pricing policy are available in the limiting case when the buyer's type is fully informative: (i) The buyer is better o and the monopolist worse o when disclosure is more costly. (ii) When discounts are suciently rare, social welfare is strictly less than if the seller could not oer discounts. |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:duk:dukeec:10-62&r=com |
| By: | Joseph A. Clougherty; Tomaso Duso |
| Abstract: | The strategic management literature has found it difficult to differentiate between collusive and efficiency-based synergies in horizontal merger activity. We propose a schematic to classify mergers that yields more information on merger types and merger effects, and that can, moreover, distinguish between mergers characterized largely by collusion-based synergies and mergers characterized largely by efficiency-based synergies. Crucial to the proposed measurement procedure is that it encompasses the impact of merger events not only on merging firms – as is custom – but also on non-merging competitor firms (the rivals). Employing the event-study methodology with stock-market data on samples of large horizontal mergers drawn from the US and UK (an Anglo-Saxon sub-sample) and from the European continent, we demonstrate how the proposed schematic can better clarify the nature of merger activity. <br> <br> <i>ZUSAMMENFASSUNG - Die Literatur über strategisches Management hatte bisher Schwierigkeiten, zwischen wettbewerbsschädlichen und Effizienz steigenden Synergien bei horizontalen Zusammenschlüssen zu differenzieren. Wir schlagen einen konzeptionellen Rahmen vor, um Fusionen zu klassifizieren, welcher mehr Informationen sowohl über die Fusionstypologie als auch über die Wirkung von Zusammenschlüssen entschlüsselt und welcher eine klare Abgrenzung zwischen wettbewerbsschädlichen und wettbewerbsfreundlichen Fusionen erlaubt. Fundamental für diesen konzeptionellen Rahmen ist, dass er nicht nur die Wirkung der Fusion auf die fusionierenden Unternehmen (was typisch in der Literatur ist) umfasst, sondern auch ihre Wirkung auf die Rentabilität der Wettbewerber. Wir wenden eine Ereignisstudienmethode mit Aktiendaten an, um unsere Kategorisierung empirisch umzusetzen. Im Vergleich einer Stichprobe von Fusionen in der angelsächsischen Welt (US und Großbritannien) mit Fusionen zwischen kontinentaleuropäischen Firmen zeigen wir, wie unsere Methodologie hilfreich sein kann, die Art der Fusionsaktivitäten zu identifizieren.<i> |
| Date: | 2010–10 |
| URL: | http://d.repec.org/n?u=RePEc:wzb:wzebiv:spii2010_13&r=com |
| By: | Tomaso Duso; Klaus Gugler; Florian Szücs |
| Abstract: | Based on a database of 326 merger cases scrutinized by the European Commission between 1990 and 2007, we evaluate the economic impact of the change in Euro-pean merger legislation in 2004. We first propose a general framework to assess merger policy effectiveness, which is based on standard oligopoly theory and makes use of stock market reactions as an external assessment of the merger and the merger control decisions. We then focus on four different dimensions of effec-tiveness: 1) legal certainty; 2) frequency and determinants of type I and type II er-rors; 3) rent-reversion achieved by different merger policy tools; and 4) deterrence of anti-competitive mergers. To infer the economic impact of the merger policy reform, we compare the results of our four tests before and after its introduction. Our results suggest that the policy reform seems to have been only a modest im-provement of European merger policy. <br> <br> <i>ZUSAMMENFASSUNG - Eine empirische Bewertung der in 2004 eingeführten Reform der Europäischen Fusionskontrolle - Basierend auf einer Stichprobe von 326 Fusionsfällen, welche der Europäischen Kommission zwischen Januar 1990 und Dezember 2007 vorlagen, wird in diesem Beitrag die Wirkung der in Mai 2004 eingeführten neuen Regulierung für Firmenfusionen erforscht. Zuerst wird ein allgemeiner Ansatz vorgeschlagen, um die Effektivität der Fusionskontrolle zu evaluieren, welcher auf der Oligopoltheorie beruht und Fusionen und Fusionskontrollentscheidungen anhand der Reaktionen von Aktienmärkten bewertet. Vier unterschiedliche Aspekte der Effektivität der Fusionskontrolle werden dann untersucht: 1) die Rechtssicherheit, 2) die Häufigkeit und Determinanten von Entscheidungsfehlern erster und zweier Ordnung seitens der Kommission, 3) die effektive Reduzierung der wettbewerbswidrigen Wirkungen von Fusionen, erzielt von unterschiedlichen wettbewerbspolitischen Instrumenten und 4) die Abschreckung von wettbewerbsschädigenden Fusionen. Um die Wirking der neuen Regulierung abzuschätzen, werden die Resultate der vier Tests vor und nach der Einführung der Reform verglichen. Die Ergebnisse zeigen, dass die Reform nur zu einer mäßigen Verbesserung der Europäischen Fusionskontrolle geführt hat. <i> |
| Keywords: | merger control, regulatory reform, EU Commission, event-study |
| Date: | 2010–11 |
| URL: | http://d.repec.org/n?u=RePEc:wzb:wzebiv:spii2010_16&r=com |
| By: | Philippe Askenazy; Thomas Breda; Delphine Irac |
| Abstract: | This paper exploits a unique panel of 59,000 French firms over 1990-2004 to investigate the interactions between R&D, advertising and the competitive environment. The empirical findings confirm the predictions of a dynamic model that complements results known in static frameworks. First, more competition pushes Neck and Neck firms to advertise more to attract a larger share of consumers on their products or services. Second, for a given competitive environment, quality leaders spend more in advertising in order to extract maximal rents; thus, lower costs of ads may favor R&D. |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:pse:psecon:2010-45&r=com |
| By: | Paul Conway; Richard Herd; Thomas Chalaux; Ping He; Jianxun Yu |
| Abstract: | The extent of competition in product markets is an important determinant of economic growth in both developed and developing countries. This paper uses the 2008 vintage of the OECD indicators of product market regulation to assess the extent to which China’s regulatory environment is supportive of competition in markets for goods and services. The results indicate that, although competition is increasingly robust across most markets, the overall level of product market regulation is still restrictive in international comparison. These impediments to competition are likely to constrain economic growth as the Chinese economy continues to develop and becomes more sophisticated. The paper goes on to review various aspects of China’s regulatory framework and suggests a number of policy initiatives that would improve the extent to which competitive market forces are able to operate. Breaking the traditional links between state-owned enterprises and government agencies is an ongoing challenge. Reducing administrative burdens, increasing private sector involvement in network sectors and lowering barriers to foreign direct investment in services would also increase competition and enhance productivity growth going forward. Some of the reforms introduced by the Chinese government over the past two years go in this direction and should therefore help foster growth. This paper relates to the 2010 OECD Economic Review of China (www.oecd.org/eco/surveys/china).<P>Règlementation du marché des produits et concurrence en Chine<BR>L’étendue de la concurrence sur le marché des produits est un déterminant important de la croissance économique dans les pays développés et en développement. Ce papier utilise la version 2008 des indicateurs de réglementation du marché des produits de l’OCDE pour évaluer dans quelle mesure l’environnement règlementaire en Chine favorise la concurrence sur les marchés de biens et services. Les résultats indiquent que, bien que la concurrence s’intensifie sur la plupart des marchés, le niveau général de la réglementation demeure restrictif au plan international. Ces entraves à la concurrence sont susceptibles de freiner la croissance à mesure que l’économie chinoise continue de se développer et devient plus sophistiquée. Ce papier examine ensuite différents aspects du cadre règlementaire chinois, et suggère différents types de mesures qui donneraient une plus grande latitude aux forces de marché. Briser les liens traditionnels entre entreprises publiques et agences gouvernementales reste un défi. Réduire les contraintes administratives, accroître la participation du secteur privé dans les secteurs de réseau et abaisser les barrières à l’investissement direct étranger dans les services stimuleraient aussi la concurrence et les progrès de productivité. Certaines des réformes introduites par le gouvernement chinois durant les deux dernières années vont dans ce sens et devraient donc encourager la croissance. Ce document se rapporte à l’Étude économique de la Chine de l’OCDE, 2010, (www.oecd.org/eco/etudes/chine). |
| Keywords: | productivity, macroeconomic policies, China, regulatory, productivité, politique macro-économique, régulation, Chine |
| Date: | 2010–12–16 |
| URL: | http://d.repec.org/n?u=RePEc:oec:ecoaaa:823-en&r=com |
| By: | Rahkovsky, Ilya |
| Abstract: | Competition between insurance companies for employees of a firm often increases the prices and reduces the availability of high-quality health plans offered to employees. An insurance company can reduce competition by signing an exclusive contract, which guarantees that the company is the only insurance provider. The study assesses whether exclusive contracts can alleviate the negative consequences of competition. Using the nation-wide survey of employers, I find that exclusive insurers charged 39-42 less for a unit of insurance quality than non-exclusive insurers. Furthermore, I find that the pattern of insurance quality dispersion is consistent with the exclusive insurers offering more high quality plans. |
| Keywords: | health insurance; exclusive contract; subsidy; vertical restraint; signaling |
| JEL: | I11 D86 G22 L42 J32 |
| Date: | 2010–12–15 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:27473&r=com |
| By: | Laurent Granier (Université de Lyon, Lyon, F-69003, France; CNRS, GATE Lyon St Etienne, UMR 5824, 93, chemin des Mouilles, Ecully, F-69130, France; ENS-LSH, Lyon, France); Sébastien Trinquart (UNOCAM, Paris, France) |
| Abstract: | In 2009, Sanofi-Aventis, whose generic subsidiary is Winthrop, merges with the generic firm, Zentiva. This paper fills the gap in the theoretical literature concerning mergers in pharmaceutical markets. To prevent generic firms from increasing their market share, some brand-name firms produce generics themselves, called pseudo- generics. We develop a Cournot duopoly model by considering the pseudo-generics production as a mergers’ catalyst. We show that a brand-name company always has an incentive to purchase its competitor. The key insight of this paper is that the brand-name laboratory can increase its merger gain by producing pseudo-generics beforehand. In some cases, pseudo-generics would not otherwise be produced and this production is then a predatory strategy. |
| Keywords: | Mergers, Pharmaceutical Market, Predation, Pseudo-Generics |
| JEL: | I11 L12 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:gat:wpaper:1027&r=com |
| By: | Pike, Chris |
| Abstract: | We analyse the relationship between the quality of a GP practice in England and the degree of competition that it faces (as indicated by the number of nearby rival GP practices). We find that those GP practices that are located close to other rival GP practices provide a higher quality of care than that provided by GP practices that lack competitors. This higher level of quality is observed firstly in an indicator of clinical quality (referrals to secondary care for conditions that are treatable within primary care), and secondly in an indicator of patient observed quality (patient satisfaction scores obtained from the national GP patient survey). The association between increased competition and higher quality is found for GP practices located within 500 metres of each other. However it would appear that the magnitude and geographic scope of the relationship are constrained by restrictions upon patient choice. As a result the findings presented here may only reflect a fraction of the potential benefits to patients from increased choice and competition. |
| Keywords: | General Practice; Primary care; Competition; Quality |
| JEL: | I11 L32 L1 |
| Date: | 2010–08–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:27613&r=com |
| By: | Georgios E. Chortareas; Claudia Girardone; Jesus Gustavo Garza-Garcia |
| Abstract: | The wave of consolidation and the rapid increase in market concentration that took place in most Latin American countries has generated concerns about the rise in banks' market power and its potential effects on consumers. This paper advances the existing literature by testing the market power (Structure-Conduct-Performance and Relative Market Power) and efficient structure (X- and scale efficiency) hypotheses for a sample of over 2,500 bank observations in nine Latin American countries over 1997-2005. We use the Data Envelopment Analysis technique to obtain reliable efficiency measures. We produce evidence supporting the efficient structure hypotheses. Finally, capital ratios and bank size seem to be among the most important factors in explaining profits for these Latin American banks. |
| Keywords: | Structure-Conduct-Performance, Efficient Structure, Banking System in Some Latin American Countries, Data Envelopment Analysis (DEA) |
| JEL: | G21 D24 |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:bdm:wpaper:2010-20&r=com |
| By: | Nicola Cetorelli; Pietro Peretto |
| Abstract: | In this paper we show that bank competition has an intrinsically ambiguous impact on capital accumulation. We further show that it is also responsible for the emergence of development traps in economies that otherwise would be characterized by unique equilibria. These results explain the conicting evidence emerging from the recent empirical studies of the e¤ects of bank competition on economic growth. We obtain them developing a dynamic, general equilibrium model of capital accumulation where banks operate in a Cournot oligopoly. More banks lead to a higher quantity of credit available to entrepreneurs, but also to diminished incentives to o¤er relationship services which contribute to improve the likelihood of success of entrepreneursprojects. This tension between credit quantity and credit quality is what leads to the ambiguous e¤ect on capital accumulation, We also show that conditioning on one key parameter resolves the theoretical ambiguity: in economies where intrinsic market uncertainty is high (low), less (more) competition leads to higher capital accumulation. |
| JEL: | G1 G2 L1 L2 O1 O4 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:duk:dukeec:10-65&r=com |
| By: | Nicholas Economides (Stern School of Business, NYU); Benjamin Hermalin (Haas School of Business, U.C. Berkeley) |
| Abstract: | Pricing of Internet access has been characterized by two properties. Parties are directly billed only by the Internet Service Provider (ISP) through which they connect to the Internet and the ISP charges them on the basis of the amount of information transmitted rather than its content. These properties define a regime known as “network neutrality.” In 2005, some large ISPs proposed that application and content providers directly pay them additional fees for accessing the ISPs’ residential clients, as well as differential fees for prioritizing certain content. We analyze the private and social incentives to introduce such fees when the network is congested and more traffic implies delays. We find that network neutrality is welfare superior to bandwidth subdivision (granting or selling priority service). We also consider the welfare properties of the various regimes that have been proposed as alternatives to network neutrality. In particular, we show that the benefit of a zero-price “slow lane” is a function of the bandwidth the regulator mandates be allocated it. Extending the analysis to consider ISPs’ incentives to invest in more bandwidth, we show that, under general conditions, their incentives are greatest when they can price discriminate; this investment incentive offsets to some degree the allocative distortion created by the introduction of price discrimination. A priori, it is ambiguous whether the offset is sufficient to justify departing from network neutrality. |
| Keywords: | network neutrality, two-sided markets, Internet, monopoly, price discrimination, regulation, congestion |
| JEL: | L1 D4 L12 L13 C63 D42 D43 |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:net:wpaper:1025&r=com |
| By: | Fabrizio Germano; Martin Meier |
| Abstract: | Within a simple model of non-localized, Hotelling-type competition among arbitrary numbers of media outlets we characterize quality and content of media under different ownership structures. Assuming advertising-sponsored, profit-maximizing outlets, we show that (i) topics sensitive to advertisers can be underreported (self-censored) by all outlets in the market, (ii) self-censorship increases with the concentration of ownership, (iii) adding outlets, while keeping the number of owners fixed, may even increase self-censorship; the latter result relies on consumers' most preferred outlets being potentially owned by the same media companies. We argue that externalities resulting from self-censorship could be empirically large. |
| Keywords: | Media economics; media consolidation; media markets; advertising and commercial media bias. |
| JEL: | L13 L82 |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:upf:upfgen:1256&r=com |
| By: | Beck, Jason; Scott, Frank; Yelowitz, Aaron |
| Abstract: | The persistence of the standard six percent real estate sales commission across markets and over time calls into question the competitiveness of the residential real estate brokerage industry. While there is anecdotal evidence that some local real estate markets are fairly concentrated, no systematic study of market structures has been conducted. We have collected primary data on the number and market shares of real estate brokers in a variety of small, medium, and large real estate markets across the U.S. for 2007 and 2009. In addition to these cross sectional data, we have also collected longitudinal data on the size distribution of firms for Louisville, KY for a nine-year period. In our cross-sectional analysis of medium and large markets, we find no evidence that market concentration might create problems for competition. We do find that small markets on average have higher HHI’s than medium and large markets. The longitudinal analysis reveals that many small brokers are in and out of the market, selling a house or two one year and selling zero houses the next year. |
| Keywords: | HHI; real estate brokerage competition; Herfindahl-Hirschman Index |
| JEL: | L85 |
| Date: | 2010–12–15 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:27531&r=com |
| By: | Ivaldi, Marc; Mccullough, Gerard |
| Abstract: | The renegotiation of regulatory contracts is known to prevent regulators from achieving the full commitment efficient outcome in dynamic contexts. However, assessing the cost of such renegotiation remains an open issue from an empirical viewpoint. To address this question, we fit a structural principal-agent model with renegotiation on a set of urban transport service contracts. The model captures two important features of the industry. First, only two types of contracts are used in practice (fixed-price and cost-plus). Second, subsidies increase over time. We compare a scenario with renegotiation and a hypothetical situation with full commitment. We conclude that the welfare gains from improving commitment would be significant but would accrue mostly to operators. |
| JEL: | L11 L13 L41 L92 |
| Date: | 2010–09–08 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:23459&r=com |
| By: | Chaton, Corinne (Laboratoire de Finance des Marchés d'Energies); Gasmi, Farid (Toulouse School of Economics (ARQADE & IDEI)); Guillerminet, Marie-Laure (Hamburg University (FNU)); Oviedo, Juan Daniel (Universidad del Rosario) |
| Abstract: | Motivated by recent policy events experienced by the European natural gas industry, this paper develops a simple model for analyzing the interaction between gas release and capacity investment programs as tools to improve the performance of imperfectly competitive markets. We consider a regional market in which a measure that has an incumbent release part of its gas to a marketer complements a program of investment in transport capacity dedicated to imports by the marketer, at a regulated transport charge, of competitively-priced gas. First, we examine the case where transport capacity is regulated while gas release is not, i.e., the volume of gas released is determined by the incumbent. We then analyze the effect of the "artifcial" duopoly created by the regulator when the latter regulates both gas release and transport capacity. Finally, using information on the French industry, we calibrate the basic demand and cost elements of the model and perform some simulations of these two scenarios. Besides allowing us to analyze the economic properties of these scenarios, a policy implication that comes out of the empirical analysis is that, when combined with network expansion investments, gas-release measures applied under regulatory control are indeed effective short-term policies for promoting gas-to-gas competition. |
| Keywords: | Natural gas, Gas release, Regulation, Competition |
| JEL: | L51 L95 |
| Date: | 2010–11 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:23579&r=com |
| By: | Miguel A. López-Morell (Universidad de Murcia); Jos M. O'Kean (Departamento de Economía, Universidad Pablo de Olavide & IE Business School) |
| Abstract: | The aim of this article is to analyse the strategies employed by the Rothschilds until 1940 to limit competition in the non ferrous international market. We will study how they opted for rigid demand products of highly concentrated supply which were favourable to market control (mercury, nickel, lead and copper and sulphur) by assuming administrative monopolies (mercury from Spanish Almadn Mines) or through control of the leading businesses of the respective markets (Le Nickel, Pearroya and Rio Tinto). We will also analyse how the family was able to gain worldwide monopolies, or if not, how they promoted collusive oligopolies with the competition in any number of forms in their quest to maintain profitability and to flee from any competition. |
| Keywords: | International Raw material markets, Cartels, Rothschild, mining, Non-ferrous metals. |
| JEL: | N50 D43 L13 L72 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:pab:wpaper:10.17&r=com |
| By: | Matías Tapia |
| Abstract: | This paper develops a one-to-one matching model to analyze how different education funding regimes affect incentives and equilibrium allocations in competitive markets served by heterogeneous private providers. The main result is that alternative funding schemes change the relative incentives faced by schools with different productivities, dramatically altering equilibrium allocations and outcomes. The paper also explicitly characterizes equilibrium in markets served by for-profit and non-profit schools, an analysis that has not been made in previous literature. The basic version of the model is calibrated using data from Chile´s education market and used to simulate the impact of alternative policy scenarios. |
| Keywords: | Education funding, school competition, heterogeneous firms, for-profit and non-profit firms. |
| JEL: | I21 I22 L33 D40 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:ioe:doctra:387&r=com |
| By: | Benjamin Edelman (Harvard Business School, Negotiation, Organizations & Markets Unit); Sonia Jaffe (Department of Economics, Harvard University); Scott Duke Kominers (Harvard Business School) |
| Abstract: | We examine the profitability and implications of online discount vouchers, a new marketing tool that offers consumers large discounts when they prepay for participating merchants' goods and services. Within a model of repeat experience good purchase, we examine two mechanisms by which a discount voucher service can benefit affiliated merchants: price discrimination and advertising. For vouchers to provide successful price discrimination, the valuations of consumers who have access to vouchers must systematically differ from - and be lower than - those of consumers who do not have access to vouchers. Offering vouchers is more profitable for merchants which are patient or relatively unknown, and for merchants with low marginal costs. Extensions to our model accommodate the possibilities of multiple voucher purchases and merchant price re-optimization. |
| Keywords: | voucher discounts, Groupon, experience goods, repeat purchase. |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:hbs:wpaper:11-063&r=com |
| By: | Hiroyuki Taguchi; Taichi Yanagawa; Masashi Harita (Policy Research Institute) |
| Abstract: | This paper provides empirical evidence on the effects of mergers and acquisitions (M&A) on employment in Japan. It contributes to the literature by capturing dynamic employment impacts of various types of M&A using the latest micro data of firms’ financial statements. Our main findings are: the dynamic effect of “firm acquisitions” on a target firm’s employment proved to be significantly positive mainly in the manufacturing sector, while the dynamic effect of “mergers” on a remaining firm’s employment turned out to be significantly negative mainly in the non-manufacturing sector. The switching pattern from negative impact to positive impact on a target firm’s employment in the dynamic post-acquisition process appeared more clearly in the domestic acquisition case than in the cross-border acquisition case for the manufacturing sector. We speculate that the dynamic positive employment effect of firm acquisitions reflects the efficiency’ gains by a firm’s management improvements in the post-acquisition process, whereas the dynamic negative employment effect of mergers implies organizational rationalization in the post-merger process. |
| Keywords: | M&A, firm acquisitions, mergers, dynamic employment effects |
| JEL: | D21 M51 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:eab:microe:2457&r=com |