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on Industrial Competition |
| By: | Makoto Yano (Institute of Economic Research, Kyoto University); Takashi Komatsubara (Institute of Economic Research, Kyoto University) |
| Abstract: | Every now and then, we observe a fierce price war in a real world market, through which competing firms end up with a Bertrand-like price competition equilibrium. Despite this, very little has been known in the existing literature as to why a price competition market is formed. We address this question in the context of a choice between engaging in price competition and holding a price leader. Focusing on a duopoly market, we demonstrate that if supply is tight relative to demand, and if the cost differential between firms is reasonably large, a price competition market is formed non-cooperatively. |
| Keywords: | Keywords: Price Competition, Price Leader, Market Organization Game |
| JEL: | D21 D43 L11 L13 |
| Date: | 2012–01 |
| URL: | http://d.repec.org/n?u=RePEc:kyo:wpaper:807&r=com |
| By: | Emilie Dargaud; Carlo Reggiani |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:man:sespap:1201&r=com |
| By: | Petra Luňáčková (Institute of Economic Studies, Charles University, Prague) |
| Abstract: | This paper presents a model which focuses on differences between the competition policy of the EU and antitrust of the U.S. It introduces three versions – Neutral, American, and European. Two-stage game model takes the authority’s perspective and describes options and behavior of antitrust officials when a firm engages in non-price vertical agreement (possibly restraint). Optimal behavior is expressed as expected income of the authority (EIA) which is a function of probability of wrong decision(s) in the course of action. It takes into account specific preferences, different types of errors, fear of those errors, and harm they might cause. Comparison shows some unnoticed features and results slightly in favor of the EU. |
| Keywords: | competition policy, antitrust, non-price vertical restraints, National Competition Authority, game form |
| JEL: | L42 L44 C79 D79 |
| Date: | 2011–12 |
| URL: | http://d.repec.org/n?u=RePEc:fau:wpaper:wp2011_38&r=com |
| By: | Gans, Joshua S. (Rotman School of Management); Persson, Lars (Research Institute of Industrial Economics (IFN)) |
| Abstract: | This paper examines the interaction between intellectual property protection and competition policy on the choice of entrepreneurs with respect to commercialization as well as the rate of innovation. We find that stronger intellectual property protection makes it more likely that entrepreneurs will commercialize by cooperating with incumbents rather than competing with them. Consequently, we demonstrate that competition policy has a clearer role in promoting a higher rate of innovation in that event. Hence, we identify one reason why the strength of the two policies may be complements from the perspective of increasing the rate of entrepreneurial innovation. |
| Keywords: | Entrepreneurs; Innovation; Commercialization; Intellectual property law; Competition law |
| JEL: | O31 |
| Date: | 2012–01–03 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:iuiwop:0895&r=com |
| By: | Avichai Snir; Daniel Levy |
| Abstract: | If producers have more information than consumers about goods’ attributes, then they may use non-price (rather than price) adjustment mechanisms and, consequently, the market may reach a new equilibrium even if prices remain sticky. We study a situation where producers adjust the quantity (per package) rather than the price in response to changes in market conditions. Although consumers should be indifferent between equivalent changes in goods' prices and quantities, empirical evidence suggests that consumers often respond differently to price changes and equivalent quantity changes. We offer a possible explanation for this puzzle by constructing and empirically testing a model in which consumers incur cognitive costs when processing goods’ price and quantity information. The model is based on evidence from cognitive psychology and explains consumers’ decision whether or not to process goods’ price and quantity information. Our findings explain why producers sometimes adjust goods’ prices and sometimes goods’ quantities. In addition, they predict variability in price adjustment costs over time and across economic conditions. |
| Date: | 2011–03 |
| URL: | http://d.repec.org/n?u=RePEc:emo:wp2003:1104&r=com |
| By: | Cristián Troncoso Valverde (Facultad de Economía y Empresa, Universidad Diego Portales) |
| Abstract: | This paper studies the incentives faced by competing auctioneers who can provide information to prospective bidders about their valuations of the objects for sale. We consider a model in which two sellers running second-price auctions compete to attract potential bidders by releasing information about valuations before bidders select trading partners. Thus, bidders' participation decisions are modeled in ex-post terms which allows us to investigate the effect of information on the composition of the set of types who visit each seller. We derive a set of necessary and su#cient conditions that supports full information provision as the unique equilibrium of the game. This result holds even if the number of bidders is restricted to two, which contrasts with the ndings of models with a single auctioneer where full information provision is never optimal. We also provide a characterization of information in terms of its strategic value to the sellers. |
| Date: | 2011–06 |
| URL: | http://d.repec.org/n?u=RePEc:ptl:wpaper:25&r=com |
| By: | Magali Chaudey (GATE Lyon Saint-Etienne - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - École Normale Supérieure de Lyon); Muriel Fadairo (GATE Lyon Saint-Etienne - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - École Normale Supérieure de Lyon); Gwennaël Solard (INSEE Paris - INSEE Paris) |
| Abstract: | Based on recent data concerning the French distribution networks in retail and services, this paper highlights several stylized facts relating to the sector-based differences in the organizational choices. Until now this issue has not been studied in the economical literature. This paper provides an analytical framework derived from the theory of contracts, and evidence for the French case. |
| Keywords: | Distribution Networks; Vertical relationships; Contract theory; Applied Econometrics |
| Date: | 2011–12–23 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-00654848&r=com |
| By: | Jun Zhou (University of Bonn, University of Tilburg) |
| Abstract: | Colluding firms often exchange private information and make transfers within the cartels based on the information. Estimating the impact of such collusive practices — known as the “lysine strategy profile(LSP)” — on cartel duration is difficult because of endogeneity and omitted variable bias. I use firms ’linguistic differences as an instrumental variable for the LSP in 135 cartels discovered by the European Commission since 1980. The incidence of the LSP is not significantly related to cartel duration. After correction for selectivity in the decision to use the LSP, statistical tests are consistent with a theoretic prediction that the LSP increases cartel duration. |
| Keywords: | the lysine strategy profile, post-agreement information exchange, within-cartel transfers, monitoring, verification and promotion of compliance, cartel duration, endogenous covariates |
| JEL: | D43 K21 K42 L13 |
| Date: | 2012–01 |
| URL: | http://d.repec.org/n?u=RePEc:trf:wpaper:369&r=com |
| By: | Andrea Pozzi (EIEF) |
| Abstract: | I study the impact of e-commerce on competition in retail markets. Using scanner data from a large chain that markets grocery online and through traditional stores, I illustrate that selling online reduces the barrier of geographic differentiation and allows stealing business from competitors. Between 60% and 70% of the sales made online by the chain are stolen from other grocers, the rest coming from self cannibalization. I show that small stores are suffering the largest losses from this reallocation of market shares, as they were more heavily relying on geographic differentiation to survive the competitive pressure of big-box stores. |
| JEL: | D22 L21 L81 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:eie:wpaper:1114&r=com |
| By: | Franz R. Hahn (WIFO) |
| Abstract: | Stylised facts suggest that there is some "spatial structure" in the dynamics of cross-border lending of Austrian regional banks that seems to be closely related to the eastward enlargement of the European Union. This short paper provides evidence that a stark space-related dependency of competition has been at work governing the cross-border lending behaviour of the Austrian regional banks since 1995. |
| Keywords: | spatial econometric analysis, cross-border bank lending, institutions |
| Date: | 2012–01–10 |
| URL: | http://d.repec.org/n?u=RePEc:wfo:wpaper:y:2012:i:418&r=com |
| By: | T. BECK; O. DE JONGHE; G. SCHEPENS |
| Abstract: | This paper documents a large cross-country variation in the relationship between bank competition and stability and explores market, regulatory and institutional features that can explain this heterogeneity. Combining insights from the competition-stability and regulation-stability literatures, we develop a unied framework to assess how regulation, supervision and other institutional factors may make it more likely that the data favor the charter-value paradigm or the risk-shifting paradigm. We show that an increase in competition will have a larger impact on banks’ risk taking incentives in countries with stricter activity restrictions, more homogenous market structures, more generous deposit insurance and more effective systems of credit information sharing. |
| Keywords: | Competition, Stability, Banking, Herding, Deposit Insurance, Information Sharing, Risk Shifting |
| JEL: | G21 G28 L51 |
| Date: | 2011–08 |
| URL: | http://d.repec.org/n?u=RePEc:rug:rugwps:11/732&r=com |
| By: | Gianni De Nicoló; Marcella Lucchetta |
| Abstract: | We study versions of a general equilibrium banking model with moral hazard under either constant or increasing returns to scale of the intermediation technology used by banks to screen and/or monitor borrowers. If the intermediation technology exhibits increasing returns to scale, or it is relatively efficient, then perfect competition is optimal and supports the lowest feasible level of bank risk. Conversely, if the intermediation technology exhibits constant returns to scale, or is relatively inefficient, then imperfect competition and intermediate levels of bank risks are optimal. These results are empirically relevant and carry significant implications for financial policy. |
| Keywords: | Banks , Competition , Economic models , Financial stability , |
| Date: | 2011–12–16 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:11/295&r=com |
| By: | E. BRUYLAND; W. DE MAESENEIRE |
| Abstract: | We examine the impact of distressed acquisitions on acquirer volatility and default risk for a worldwide sample of distressed firms using several risk measures. We find that, on average, absolute levels of historical and implied volatility do not change following a distressed acquisition. However, distressed acquisitions generate a significant increase in relative total, systematic and idiosyncratic volatility and default risk, hence risk rises for both shareholders and bondholders. In particular, we show that high market-to-book acquirers, frequent acquirers, low-risk acquirers, higher acquisition premia and deals closed during bull markets are associated with higher levels of post-acquisition risk. Interestingly, high-risk acquirers experience a significant reduction in volatility and default risk. Consequently, risk changes cannot exclusively be explained by transferring risk from distressed target to acquirer. Our results suggest that bidder pre-acquisition levels of performance and risk and market conditions affect the type of distressed acquisitions and consequently the risk effects in such transactions. |
| Keywords: | Distressed acquisitions; M&A; Default risk; Volatility; Risk factors |
| Date: | 2011–09 |
| URL: | http://d.repec.org/n?u=RePEc:rug:rugwps:11/742&r=com |
| By: | Francesco Di Comite; Jean-François Thisse; Hylke Vandenbussche |
| Abstract: | The pattern of trade observed from firm-product-country data calls for a new generation of models. To address the unexplained variation in the data, we propose a new model of monopolistic competition where varieties enter preferences non-symmetrically, capturing both horizontal and vertical differentiation in an unprecedented way. Together with a variable elasticity of substitution, competition effects, varying markups and prices across countries, this results in a tractable model whose predictions differ from existing ones. Using the population of Belgian exporters, our model succeeds in explaining the hitherto unexplained variation. The implications call for a re-thinking of earlier results and measurement practices. |
| Keywords: | Heterogeneous firms - Horizontal differentiation - Vertical differentiation - Monopolistic competition - non symmetric varieties |
| JEL: | D43 F12 F14 L16 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:lic:licosd:30011&r=com |