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on Industrial Competition |
| By: | Jean J. Gabszewicz (CORE, Université Catholique de Louvain, Belgique); Skerdilajda Zanaj (CREA, Université de Luxembourg) |
| Abstract: | In this paper, we extend the concept of stability to vertical collusive agreements, involving downstream and upstream firms, using a setup of successive Cournot oligopolies. We show that a stable vertical agreement always exists: the unanimous vertical agreement involving all downstream and upstream firms. Thus, stable vertical collusive agreements exist even for market structures in which horizontal cartels would be unstable. We also show that there are economies for which the unanimous agreement is not the only stable one. |
| Keywords: | collusion, stability, vertical agreement. |
| JEL: | D43 L13 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:luc:wpaper:13-12&r=com |
| By: | Billette de Villemeur, Etienne; Ruble, Richard; Versaevel, Bruno |
| Abstract: | We show that the standard analysis of vertical relationships transposes directly to investment dynamics. Thus, when a firm undertaking a project requires an outside supplier (e.g., an equipment manufacturer) to provide it with a discrete input to serve a growing but uncertain demand, and if the supplier has market power, investment occurs too late from an industry standpoint. The distortion in firm decisions is characterized by a Lerner-type index. Despite the underlying investment option, greater volatility can result in a lower value for both firms. We examine several contractual alternatives to induce efficient timing, a novel vertical restraint being for the upstream to sell a call option on the input. We also extend the model to allow for downstream duopoly. When downstream firms are engaged in a preemption race, the upstream firm sells the input to the first investor at a discount such that the race to preempt exactly offsets the vertical distortion, and this leader invests at the optimal time. These results are illustrated with a case study drawn from the pharmaceutical industry. |
| Keywords: | Irreversible investment; Preemption; Real options; Vertical relations |
| JEL: | C73 D43 D92 L13 |
| Date: | 2013–06–19 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:47804&r=com |
| By: | L. Lambertini; A. Mantovani |
| Abstract: | We extend Fujiwara’s (2008) model to describe a differential oligopoly game of resource extraction under static, linear feedback and nonlinear feedback strategies, generalising his result that steady state feedback outputs are lower than monopoly and static oligopoly equilibrium outputs for any number of firms. Additionally, we show that (i) feedback rules entail resource exhaustion for a finite number of firms; and (ii) feedback strategies are more aggressive than static ones as long as the resource stock is large enough, in accordance with the acquired view based on the traditional pre-emption argument associated with feedback information. |
| JEL: | C73 L13 Q2 |
| Date: | 2013–06 |
| URL: | http://d.repec.org/n?u=RePEc:bol:bodewp:wp890&r=com |
| By: | Mikhail, Bendikov; Georgiy, Kolesnik |
| Abstract: | The effect of competition among self-regulatory organizations (SRO) on the efficiency of the corresponding goods and services markets is considered. It is shown that under certain conditions the competition among SRO worsens the quality of the goods and services and leads to decrease in consumers’ welfare. Moreover, the distinctive feature of the competition among SRO in comparison with other types of regulator competition is that even introduction of alternative government control does not improve the situation. The proposals are formulated for self-regulatory markets’ structure and conditions change in order to reduce negative effects of SRO competition. |
| Keywords: | self-regulation, state control, market, regulatory competition, welfare, mathematical model, hierarchical system, non-cooperative game |
| JEL: | C72 L22 L44 L51 |
| Date: | 2013–06–24 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:47812&r=com |
| By: | E. Marrocu; S. Usai; R. Paci |
| Abstract: | Building on previous literature providing extensive evidence on flows of knowledge generated by inter-firm agreements, in this paper we aim to analyse how the occurrence of such collaborations is driven by the multi-dimensional proximity among participants and by their position within firms’ network. More specifically, we assess how the likelihood that two firms set up a partnership is influenced by their bilateral geographical, technological, organizational, institutional and social proximity and by their position within networks in terms of centrality and closeness. Our analysis is based on agreements in the form of joint ventures or strategic alliances, announced over the period 2005-2012, in which at least one partner is localised in Italy. We consider the full range of economic activities and this allow us to offer a general scenario and to specifically investigate the role of technological relatedness across different sectors. The econometric analysis, based on the logistic framework for rare events, yielded three noteworthy results. First, all the five dimensions of proximity jointly exert a positive and relevant effect in determining the probability of inter-firm knowledge exchanges, signalling that they are complementary rather than substitute channels. Second, the higher impact on probability is due to the technological proximity, followed by the geographical one, while the other proximities (social, institutional and organizational) have a limited effect. Third, we find evidence on the positive role played by networks, through preferential attachment and transitivity effects, in enhancing the probability of inter-firm agreements. |
| Keywords: | networks, joint ventures, proximities, knowledge flows, strategic alliances |
| JEL: | R12 O33 O31 L14 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:cns:cnscwp:201399&r=com |
| By: | Bergès, Fabian; Hassan, Daniel; Monier-Dilhan, Sylvette |
| JEL: | D12 L81 Q13 |
| Date: | 2013–05 |
| URL: | http://d.repec.org/n?u=RePEc:ner:toulou:http://neeo.univ-tlse1.fr/3489/&r=com |
| By: | Chaton, Corinne; Durand-Viel, Laure |
| Abstract: | Real assets are usually valued by computing the stream of profits they can bring to a price-taking firm in a liquid market. This method ignores market fundamentals by assuming that all the relevant information is included in the spot price. Our article analyses the bias resulting from such an approach when the market is imperfectly competitive. We propose a stylised two-period model of the natural gas market with no uncertainty, focusing on strategic interactions between two types of oligopolistic players—pure traders and suppliers with downstream customers—who have access to storage. We show that the true value of storage capacity is not the same for traders and for suppliers. Comparing the latter value with the traditional price-taking valuation reveals a systematic bias that tends to induce underinvestment. |
| Keywords: | Assets (accounting); profit; gas industry; spot prices; suppliers; natural gas; |
| JEL: | L16 G14 G12 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:ner:dauphi:urn:hdl:123456789/11439&r=com |
| By: | Baraldi, Anna Laura; Cantabene, Claudia; Perani, Giulio |
| Abstract: | Starting from the failure of the R&D-patents traditional relationship, when time-series and/or within industry dimensions are included in the empirical analysis, the present work tries to contribute to the empirical literature in two directions. Firstly, it perform a Granger causality test on the theoretical presumption of a reverse patents→R&D link as an explanation of the failure of the traditional relationship. Second, assuming the reverse patents-R&D causality, we test and interpret the lag structure of such a relationship as showing the effective patent life which firms expect in the two Schumpeterian patterns of innovations they belong to. To the light of the effective patent life, we offer a further explanation of innovation persistence which overturns the findings of the existing literature on persistence. |
| Keywords: | R&D, patents, innovation persistence, Granger causality |
| JEL: | C2 O3 O30 |
| Date: | 2013–05–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:47684&r=com |
| By: | L. Aguzzoni; E. Argentesi; L. Ciari; T. Duso; M. Tognoni |
| Abstract: | This paper empirically evaluates the price effects of the merger of two major book retail chains in the UK: Waterstone’s and Ottakar’s. We employ differences-in-differences techniques and use a rich dataset containing monthly scanner data information on a sample of 200 books sold in 60 stores in 50 different local markets for a period of four years around the merger. Since retail mergers may have either local or national effects (or both) according to the level at which retail chains set prices, we undertake an ex-post assessment of the impact of the merger at both levels. At the local level, we compare the changes in the average price charged before and after the merger in the shops located in overlap areas –i.e. areas where both chains were present before the merger– and in non-overlap areas –i.e. areas where only one chain was present before the merger. At the national level, we employ two distinct control groups to evaluate the merger, namely the competitors and the top-selling titles. We find that the merger did not result in an increase in prices either at the local or at the national level. We also perform heterogeneous treatment effects estimations in order to assess whether the effect of the merger differs along various dimensions of heterogeneity that are present in our data. |
| JEL: | K21 L24 L44 D22 O32 |
| Date: | 2013–06 |
| URL: | http://d.repec.org/n?u=RePEc:bol:bodewp:wp889&r=com |
| By: | von der Fehr, Nils-Henrik M. (Dept. of Economics, University of Oslo) |
| Abstract: | The European Commission is introducing new regulations on submission and publication of data in electricity markets (SPDEM) and on wholesale energy market integrity and transparency (REMIT). I discuss issues relevant for undertaking an evaluation such regulations. I argue that, for market performance, more information is not always better; indeed, more information may undermine market performance by facilitating behaviour that is either not cost efficient or aims at exercising market power or establishing and maintaining collusion. Moreover, ensuring rational economic behaviour and an efficient and competitive market outcome does not require general access to information at a very detailed level or with a high degree of immediacy. I conclude that to achieve the aims of efficiently functioning wholesale electricity markets, fair and non-discriminatory access to data and a coherent and consistent view of the European wholesale electricity market, it does not seem advisable to go quite so far with respect to immediacy and detail as intended by the new regulations. |
| Keywords: | electricity; market performance; information; transparency; regulation |
| JEL: | D40 D80 K21 L10 L40 L51 L94 |
| Date: | 2013–05–22 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:osloec:2013_013&r=com |