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on Industrial Competition |
| By: | Huisman, K.J.M.; Kort, P.M. (Tilburg University, Center for Economic Research) |
| Abstract: | Abstract: This paper considers investment decisions within an uncertain dynamic and competitive framework. Each investment decision involves to determine the timing and the capacity level. In this way we extend the main bulk of the real options theory where the capacity level is given. We consider a monopoly setting as well as a duopoly setting. Our main results are the following. In the duopoly setting we provide a fully dynamic analysis of entry deterrence/accommodation strategies. We find that the first investor overinvests in capacity in order to delay entry of the second investor. In very uncertain economic environments the first investor always ends up being the largest firm in the market. If uncertainty is moderately present, a reduced value of waiting implies that the preemption mechanism forces the first investor to invest so soon that a large capacity cannot be afforded. Then it will eventually end up with a capacity level being lower than the second investor. |
| Keywords: | Investment under Uncertainty;Entry Deterrence/Accomodation;Duopoly;Capacity Choice |
| JEL: | E22 C73 L13 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:kubcen:2013003&r=com |
| By: | Jeffrey V. Butler; Enrica Carbone; Pierluigi Conzo; Giancarlo Spagnolo |
| Abstract: | This paper reports results from a laboratory experiment exploring the relationship between reputation and entry in procurement. We propose a procurement model with reputation and entry assigning to the entrant a reputational advantage of varying size across treatments. There is widespread concern among regulators that favoring suppliers with good past performance, a standard practice in private procurement, may hinder entry by new (smaller or foreign) firms in public procurement markets. Our results suggest that while some reputational mechanisms indeed reduce the frequency of entry, appropriately designed reputation mechanisms actually stimulate it. Since quality increases but not prices, our data also suggest that the introduction of reputation may generate large welfare gains for the buyer. |
| Keywords: | Entry, Feedback mechanisms, Governance, Incomplete contracts, Limited enforcement, Incumbency, Multidimensional competition, Participation, Past performance, Procurement, Quality, Reputation, Vendor rating. |
| JEL: | H57 L14 L15 |
| Date: | 2012–12 |
| URL: | http://d.repec.org/n?u=RePEc:usi:labsit:045&r=com |
| By: | Nicholas Li; Gee Hee Hong |
| Abstract: | We examine the extent to which vertical and horizontal market structure can together explain incomplete pass-through. We develop a model that highlights the interactions between horizontal and vertical structure and their effects on pass-through from commodity to wholesale prices and wholesale to retail prices. Using scanner data from a large U.S. retailer, we estimate product level pass-through rates for three different vertical structures: national brands, private label goods not manufactured by the retailer and private label goods manufactured by the retailer. We find that greater control of the value chain by the retailer results in higher commodity price pass-through into retail prices compared to national brands – 40% higher for private label manufactured goods and 10% higher for private label non-manufactured goods. We also find substantial effects of horizontal structure on pass-through – products and brands with higher market shares have higher retail markups and lower cost pass-through. Our results emphasize that accounting for both vertical and horizontal structure is important for understanding how market structure affects pass-through, as a reduction in double-marginalization can raise pass-through directly but can also reduce it indirectly by increasing market share. |
| Keywords: | pass-through; market structure; market power; pricing; retail; vertical integration; intra-firm; private labels; |
| JEL: | D4 E3 E31 |
| Date: | 2013–01–14 |
| URL: | http://d.repec.org/n?u=RePEc:tor:tecipa:tecipa-470&r=com |
| By: | Maarten Janssen (University of Vienna); Vladimir Karamychev (Erasmus University Rotterdam) |
| Abstract: | We analyze the effects of mergers in first-price sealed-bid auctions on bidders' equilibrium bidding functions and on revenue. We also study the incentives of bidders to merge given the private information they have. We develop two models, depending on how after-merger valuations are created. In the first, single-aspect model, the valuation of the merged firm is the maximum of the valuations of the two firms engaged in the merger. In the multi-aspect model, a bidder's valuation is the sum of two components and a merged firm chooses the maximum of each component of the two merging firms. In the first model, a merger creates incentives for bidders to shade their bids leading to lower revenue. In the second model, the non-merging firms do not shade their bids and revenue is actually higher. In both models, we show that all bidders have an incentive to merge. |
| Keywords: | Mergers; first-price sealed-bid auctions |
| JEL: | D44 D82 |
| Date: | 2013–01–10 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:uvatin:20130012&r=com |
| By: | Kara M. Reynolds |
| Abstract: | Anecdotal evidence suggests that domestic firms can use the antidumping petition process to engage in collusion and increase domestic prices. In this paper, I test whether the antidumping petition process itself can help domestic firms raise prices. I propose a method to identify whether firms in the industry experience a structural break in the level of market power held by the firms at the time that they file their antidumping petition. I then use this methodology to analyze the impact of antidumping petitions on competition levels in two industries. I find little evidence that either of these industries increased their market power following the filing of petitions for trade relief, nor even from the protection that resulted from these petitions, suggesting that the widespread belief that antidumping leads to more market power may not always hold. |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:amu:wpaper:2013-05&r=com |
| By: | Avsar, Veysel |
| Abstract: | Utilizing four-dimensional (firm-product-destination-year) Brazilian firm-level export data, the paper shows that antidumping (AD) duties result in a significant and dramatic increase in the unit values of the products that firms export to duty-imposing countries. Furthermore, it examines the effect of potential (retaliatory) AD duties on the unit price of the firms'shipments. The findings suggest that AD activities in Brazil lead Brazilian exporting firms to increase their unit export prices for the named industries'products to decrease the dumping margin and avoid the threat of retaliation by the target countries. |
| Keywords: | Markets and Market Access,Water and Industry,Access to Markets,Free Trade,E-Business |
| Date: | 2013–01–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:6313&r=com |
| By: | Schmidt, Klaus M.; Spann, Martin; Zeithammer, Robert |
| Abstract: | Pay What You Want (PWYW) can be an attractive marketing strategy to price discriminate between fair-minded and selfish customers, to fully penetrate a market without giving away the product for free, and to undercut competitors that use posted prices. We report on laboratory experiments that identify causal factors determining the willingness of buyers to pay voluntarily under PWYW. Furthermore, to see how competition affects the viability of PWYW, we implement markets in which a PWYW seller competes with a traditional seller. Finally, we endogenize the market structure and let sellers choose their pricing strategy. The experimental results show that outcome-based social preferences and strategic considerations to keep the seller in the market can explain why and how much buyers pay voluntarily to a PWYW seller. We find that PWYW can be viable in isolation, but it is less successful as a competitive strategy because it does not drive traditional posted-price sellers out of the market. Instead, the existence of a posted-price competitor reduces buyers’ payments and prevents the PWYW seller from fully penetrating the market. If given the choice, the majority of sellers opt for setting a posted price rather than a PWYW pricing. We discuss the implications of these results for the use of PWYW as a marketing strategy. |
| Keywords: | customer-driven pricing mechanisms; pay what you want; revenue management; price discrimination; social preferences |
| Date: | 2012–12 |
| URL: | http://d.repec.org/n?u=RePEc:trf:wpaper:393&r=com |
| By: | Gärtner, Dennis L.; Zhou, Jun |
| Abstract: | This paper studies cartels’ strategic behavior in delaying leniency applications, a take-up decision that has been ignored in the previous literature. Using European Commission decisions issued over a 16-year span, we show, contrary to common beliefs and the existing literature, that conspirators often apply for leniency long after a cartel collapses. We estimate hazard and probit models to study the determinants of leniency-application delays. Statistical tests find that delays are symmetrically affected by antitrust policies and macroeconomic fluctuations. Our results shed light on the design of enforcement programs against cartels and other forms of conspiracy. |
| Keywords: | corporate leniency program; cartel; leniency application delays |
| JEL: | D43 K21 K42 L13 |
| Date: | 2012–12 |
| URL: | http://d.repec.org/n?u=RePEc:trf:wpaper:395&r=com |
| By: | Hu, Luke; Wolfstetter, Elmar G. |
| Abstract: | Inspired by some spectrum auctions, we consider a stylized license auction with incumbents and one entrant. Whereas the entrant values only the bundle of several units (synergy), incumbents are subject to non-increasing demand. The seller proactively encourages entry and restricts incumbent bidders. In this framework, an English clock auction gives rise to an exposure problem that distorts efficiency and impairs revenue. We consider three remedies: a (constrained) Vickrey package auction, an English clock auction with exit option that allows the entrant to annul his bid, and an English clock auction with exit and entry option that lifts the bidding restriction if entry failed. |
| Keywords: | Auctions; package auctions; combinatorial clock auctions; spectrum auction; bundling; synergies |
| JEL: | D21 D43 D44 D45 G34 |
| Date: | 2012–12 |
| URL: | http://d.repec.org/n?u=RePEc:trf:wpaper:394&r=com |
| By: | Gaudiny, Germain; Saavedra Valenzuela, Claudia |
| Abstract: | We study the implementation of reasonably efficient operator margin squeeze tests by National Regulatory Authorities in European telecommunications markets. We provide a theoretical framework in which we show how regulatory authorities deal with the asymmetries between the entrants and the incumbent by adjusting the equally efficient operator margin squeeze test used in competition policy. Using this framework, we build a benchmark of implementation choices by inspecting authorities' guidelines, market analyses and decisions. We find that some implementation choices are very similar across the authorities' decisions, whereas some others are dealt with quite heterogeneously. -- |
| Keywords: | Margin squeeze,Imputation test,Regulation,Telecommunications |
| JEL: | L51 L96 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:itse12:67955&r=com |
| By: | Torben Klarl (University of Augsburg, Department of Economics) |
| Abstract: | In the recent last years, in particular in the aftermath of the global financial and economic crisis, many countries initiated economic recovery plans with a major focus on stimulating green entrepreneurial activities to revive economic growth. Further, the recovery plans intend to improve a country's awareness for a direct orientation towards (strong) sustainability and green growth. Before discussing strategies towards green growth, in this paper we propose a novel framework to increase our understanding of the interplay of process R&D activities, the strategic price and environmental quality setting of heterogeneous entrepreneurs in a market where consumers feel up to paying for environmental quality improvement of a vertically differentiated good. In the paper we decompose an entrepreneur's incentive conducting process R&D in four parts. In particular we show that an entrepreneur's incentive of conducting own process R&D is reduced due to the existence of knowledge-spillovers. Moreover, due to the strategic complementarities, both in prices as well as in environmental quality, a strategic effect reinforces the negative consequences of the spillover-effect. We show that the externalities in the model require corrections based upon a mixture of fiscal policies and a process R&D subvention scheme establishing a first-best solution. We further thoroughly discuss the implementation of a second-best solution and derive environmental policy implications. |
| Keywords: | Technological change, Process R&D, Green consumerism, Vertical differentiation, Emission tax, Environmental quality, Environmental policy |
| JEL: | Q55 Q58 O31 O33 D43 L13 L15 |
| Date: | 2013–01 |
| URL: | http://d.repec.org/n?u=RePEc:aug:augsbe:0321&r=com |
| By: | Maria Dementyeva (VU University Amsterdam); Paul R. Koster (VU University Amsterdam); Erik T. Verhoef (VU University Amsterdam) |
| Abstract: | Accident externalities are among the most important external costs of road transport. We study the regulation of these when insurance companies have market power. Using analytical models, we compare a public-welfare maximizing monopoly with a private profit-maximizing monopoly, and markets where two or more firms compete. A central mechanism in the analysis is the accident externality that individual drivers impose on one another via their presence on the road. Insurance companies will internalize some of these externalities, depending on their degree of market power. We derive optimal insurance premiums, and "manipulable" taxes that take into account the response of the firm to the tax rule applied by the government. Furthermore, we study the taxation of road users under different assumptions on the market structure. We illustrate our analytical results with numerical examples, in order to better understand the determinants of the relative performance of different market structures. |
| Keywords: | accident externalities; traffic regulation; safety; second-best; market power |
| JEL: | D43 D62 R41 R48 |
| Date: | 2013–01–18 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:uvatin:20130019&r=com |
| By: | Tiziana D’Alfonso (Department of Computer, Control and Management Engineering, Universita' degli Studi di Roma "La Sapienza"); Cinzia Daraio (Department of Computer, Control and Management Engineering, Universita' degli Studi di Roma "La Sapienza"); Alberto Nastasi (Department of Computer, Control and Management Engineering, Universita' degli Studi di Roma "La Sapienza") |
| Abstract: | This paper provides new empirical evidence on the efficiency of Italian airports. Analysing data on 2010 trough conditional e?ciency measures, we find that competition affects mostly the frontier of best performers, whilst airports that are lagging behind are less influenced by it. By applying a novel two stage approach, we show that competition has an inverse U-shape impact. Finally, the bi-modal shape of the distribution of pure efficiency indicates the existence of two differently managed groups of airports. |
| Keywords: | Italian airports; competition; DEA; conditional efficiency; two stage analysis |
| Date: | 2013–01 |
| URL: | http://d.repec.org/n?u=RePEc:aeg:report:2013-01&r=com |
| By: | Slivko, Olga |
| Abstract: | This article analyzes how the perceived effectiveness of intellectual property protection and competitive pressure affect firms' innovation strategy choices, concretely, whether to abstain from innovation, to introduce products that are known in the market but new to the firm (imitation) or to introduce market novelties (innovation). Using a sample of 1253 German firms from manufacturing and services sectors I show that the perceived effectiveness of patent protection positively affects firms' propensity to imitate and to innovate. Having a small or a medium number of competitors positively affects firms' propensity to imitate and to innovate as compared to being a monopolist or having a large number of competitors. However, this effect varies with the perceived patent protection effectiveness. If the perceived patent protection effectiveness is low or medium, both innovation and imitation are enhanced, whereas if it is high, only innovation is enhanced. -- |
| Keywords: | Innovation,imitation,competitive pressure,intellectual property protection |
| JEL: | C35 L13 O31 O34 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:12089&r=com |
| By: | Eugene N. White |
| Abstract: | Improved information technology and higher volume should drive orders to be concentrated in one market, lowering the costs of transactions. However, the opposite occurred during the bull market of the 1920s when rapid technological change spawned a flood of new issues. This paper employs newly recovered data for 1900-1933 on the volume and seat prices of regional exchanges to examine how these rivals successfully competed with the NYSE, leading to its relative decline at the zenith of the market. The history of U.S. exchanges reveals that the tendency towards concentration of trading is periodically reversed when new industries, whose technologies are risky and unfamiliar, are more easily accommodated by existing or new rivals to the dominant exchange |
| JEL: | G18 N21 N22 |
| Date: | 2013–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:18712&r=com |