nep-com New Economics Papers
on Industrial Competition
Issue of 2013‒07‒15
thirty papers chosen by
Russell Pittman
US Government

  1. Does Market Size Matter? A Dynamic Model of Oligopolistic Market Structure, Featuring Costs of Creating and Maintaining a Market Position By Harry Bloch; Curtis Eaton; R Rothschild
  2. Competing for Consumer Inattention By Geoffroy de Clippel; Kfir Elias; Kareen Rozen
  3. Geographic Access Rules and Investments By Marc Bourreau; Cambini Steffen
  4. Business intelligence and multi-market competition By Billand, P.; Bravard, C.; Chakrabarti, S.; Sarangi, S.
  5. A note on networks collaboration in multi-market oligopolies By Billand, P.; Bravard, C.; Chakrabarti, S.; Sarangi, S.
  6. Competition and the Efficiency of Markets for Technology By Allain, Marie-Laure; Henry, Emeric; Kyle, Margaret
  7. Cheap talk with multiple strategically interacting audiences: An experimental study By Li X.; Peeters R.J.A.P.
  8. Bottleneck Access with Structural Regulation and Endogenous Competition By Luciano Greco; Fabio Manenti
  9. Imperfect Competition and Optimal Taxation By Andrea Colciago
  10. Ex post or ex ante? On the optimal timing of merger control By Andreea Cosnita-Langlais; Jean-Philippe Tropeano
  11. Is European M&A regulation protectionist? By AKTAS, Nihat; DE BODT, Eric; ROLL, Richard
  12. Competition policy agendas for industrializing countries By Budzinski, Oliver; Haji Ali Beigi, Maryam
  13. Quantification of Antitrust Damages By Roman Inderst; Frank Maier-Rigaud; Ulrich Schwalbe
  14. Pourquoi des politiques de concurrence ? By Marc Deschamps
  15. Patent protection under endogenous product differentiation By Arijit Mukherjee
  16. The road not taken: competition and the R&D portfolio By Igor Letina
  17. Competition and Innovation: An inverted-U relationship using Japanese industry data By YAGI Michiyuki; MANAGI Shunsuke
  18. Rivalry information acquisition and disclosure By Li X.; Peeters R.J.A.P.
  19. Production Standards, Competition and Vertical Relationship By Bouamra-Mechemache, Zohra; Jianye, Yu
  20. R&D, Within and Between Patent Competition in the Pharmaceutical Industry By Magazzini Laura; Fabio Pammolli
  21. Should competition policy in banking be amended during crises? Lessons from the EU By Hasan, Iftekhar; Marinc , Matej
  22. How bank competition influence liquidity creation By Horvath, Roman; Seidler, Jakub; Weill, Laurent
  23. Does bank competition influence the lending channel in the euro area? By Fungácová, Zuzana; Solanko, Laura; Weill, Laurent
  24. When Banks Strategically React to Regulation: Market Concentration as a Moderator for Stability By Eva Schliephake
  25. Measuring Competition using the Boone Relative Profit Difference Indicator: an application to Banking Systems in Emerging Economies By Meryem Deygun; Mohamed Shaban; Tom Weyman-Jones
  26. Card versus cash: empirical evidence of the impact of payment card interchange fees on end users’ choice of payment methods By Ardizzi, Guerino
  27. Spillover and Competitive Effects of Advertising in the Carbonated Soft Drink Market By Rigoberto A. Lopez; Yizao Liu; Chen Zhu
  28. Ex-post merger evaluation in the UK retail market for books By Aguzzoni, Luca; Argentesi, Elena; Ciari, Lorenzo; Duso, Tomaso; Tognoni, Massimo
  29. Competition, Prices and Quality in the Market for Physician Consultations By Hugh Gravelle; Anthony Scott; Peter Sivey; Jongsay Yong
  30. Reputation and Prices on the e-Market:Evidence from a Major French Platform By Jolivet, Grégory; Jullien, Bruno; Postel-Vinay, Fabien

  1. By: Harry Bloch; Curtis Eaton; R Rothschild
    Abstract: In their efforts to create a position in a market, and to maintain that position, firms make positioning investments of various sorts, in R&D, plant, advertising, and location, or more generally, in product development and maintenance. The heart of this paper is the hypothesis that the success of these positioning investments is not assured. In an environment where the success of positioning investments is stochastic, the positioning game played by firms that compete to serve a market is necessarily dynamic. We model the positioning and operating decisions of firms in an environment of this sort. When the market is large enough to support at least one active firm, the expected number of firms serving the market at a point in time is a nearly continuous function of market size, in sharp contrast to the familiar integer valued step function seen in classic models of market structure. As a result, equilibrium expected total surplus and expected consumer surplus are higher than standard non-stochastic models would <br/>suggest, especially in circumstances where the expected number of firms is small. This suggests that classic models of market structure are not always a sound guide for policy.
    Date: 2013
  2. By: Geoffroy de Clippel (Dept. of Economics, Brown University); Kfir Elias (Tel Aviv University & University of Michigan, Ann Arbor); Kareen Rozen (Cowles Foundation, Yale University)
    Abstract: Consumers purchase multiple types of goods and services, but may be able to examine only a limited number of markets for the best price. We propose a simple model which captures these features, conveying some new insights. A firm's price can deflect or draw attention to its market, and consequently, limited attention introduces a new dimension of competition across markets. We fully characterize the resulting equilibrium, and show that the presence of partially attentive consumers improves consumer welfare as a whole. When consumers are less attentive, they are more likely to miss the best offer in each market; but the enhanced cross-market competition decreases average price paid, as leading firms try to stay under the consumers' radar.
    Keywords: Limited attention, Price competition, Multiple markets
    JEL: D03 D04
    Date: 2013–07
  3. By: Marc Bourreau; Cambini Steffen
    Abstract: We analyse competition between vertically-integrated operators who build infrastructure and provide access in different geographical areas. Under full commitment, the regulator sets socially-optimal access rates that depend on the local degree of infrastructure competition. If he can only commit to implementing a single access price, the regulator can impose a uniform access price or deregulate access in competitive areas. While uniform access pricing leads to suboptimal investment, deregulation can spur investment. Still, deregulation is not an ideal solution to the commitment problem, as it tends to involve multiple and inefficient equilibria at the wholesale level, with either too little or too much investment.
    Keywords: Next generation networks, Infrastructure investment, Geographical access regulation, Deregulation
    JEL: L51 L96
    Date: 2013–04
  4. By: Billand, P.; Bravard, C.; Chakrabarti, S.; Sarangi, S.
    Abstract: We consider a multimarket framework where a set of firms compete on two oligopolistic markets. The cost of production of each firm allows for spillovers accross markets, ensuring that output decisions for both markets have to be made jointly. Prior to competing in these markets, firms can establish links gathering business intelligence about other firms. These links have two effects. First, the quality of the good produced by the firm which forms the link increases. Second, the quality of the good of the firm which receives the link decreases. We characterize the business intelligence equilibrium networks and networks that maximize social welfare under the most interesting scenario of diseconomies of scope. We that due to externalities, the equilibrium networks may be over-connected relative to socially optimal networks creating a role for policy intervention. We also find that in some situations firms may refrain from gathering information, even if it is costlesss. Moreover, even though intelligence gathering leads to increased product quality, there exist situations where it is detrimental to both consumer welfare and social welfare.
    JEL: C70 L13 L20
    Date: 2013
  5. By: Billand, P.; Bravard, C.; Chakrabarti, S.; Sarangi, S.
    Abstract: In this note, we extend the Goyal and Joshi's model of network of collaboration in oligopoly to multi-market situations. We examine the incentive of firms to form links and the architectures of the resulting equilibrium networks of this setting. We also present some results on efficient networks.
    JEL: C70 L13 L20 D85
    Date: 2013
  6. By: Allain, Marie-Laure; Henry, Emeric; Kyle, Margaret
    Abstract: The sale of R&D projects through licensing facilitates the division of labor between research and development activities. This vertical specialization can improve the overall efficiency of the innovative process. However, these gains depend on the timing of the sale: the buyer of an R&D project should assume development at the stage at which he has an efficiency advantage. We show that in an environment where the seller is overconfident about the value of the project, she may delay the sale to the more efficient firm in order to provide verifiable information about its quality, though this delay implies higher total development costs for the project. We obtain a condition for the equilibrium timing of licensing and examine how factors such as the intensity of competition between potential buyers influence it. We show that a wide array of different explanations, based on differences in information, beliefs or risk profiles, lead to the same qualitative results. We present empirical evidence from pharmaceutical licensing contracts that is consistent with our theoretical predictions.
    Date: 2013–07
  7. By: Li X.; Peeters R.J.A.P. (GSBE)
    Abstract: We consider a cheap-talk setting that mimics the situation where an incumbent firm the sender is endowed with incentives to understate the true size of the market demand to two potential entrants the receivers. Although our experimental data reveals that senders messages convey truthful information and this is picked up by the receivers, this overcommunication relative to standard theoretical prediction does not enhance efficient entry levels and payoffs to beyond what can be achieved without any communication. The reason is that receivers fail to optimally translate the information received in their entry decision, possibly due to overcautiousness.
    Keywords: Noncooperative Games; Design of Experiments: Laboratory, Group Behavior; Asymmetric and Private Information; Mechanism Design; Search; Learning; Information and Knowledge; Communication; Belief;
    JEL: C72 C92 D82 D83
    Date: 2013
  8. By: Luciano Greco (University of Padova); Fabio Manenti (University of Padova)
    Abstract: In a simple model of network industry, where an upstream monopolist provides an essential input for downstream service supply, we analyze the competitive settings arising in the downstream market under alternative regulatory frameworks; we combine structural (i.e. vertical integration, functional/ownership separation) and conduct (discriminatory and nondiscriminatory access) regulatory remedies. Downstream firms are characterized by different levels of cost efficiency in the provision of the service. We show that the degree of heterogeneity in firmsÕ cost efficiency is critical to the determination of the amount of competition that emerges in the downstream market, and of the efficiency of the industry. We show that i) when downstream firms are significantly heterogenous, discriminatory access fees may be socially desirable and ii) vertical integration is always socially preferable.
    Keywords: Vertical Integration, Functional Separation, Ownership Separation, Regulation, Discriminatory Access Fees. JEL: L13, L22, L44
    Date: 2013–05
  9. By: Andrea Colciago
    Abstract: This paper provides optimal labor and dividend income taxation in a general equilibrium model with oligopolistic competition and endogenous firms' entry. In the long run the optimal dividend income tax corrects for inefficient entry. The dividend income tax depends on the form of competition and nature of the sunk entry costs. In particular, it is higher in market structures characterized by competition in quantities with respect to those characterized by price competition. Oligopolistic competition leads to an endogenous countercyclical price markup. As a result offsetting the distortions over the business cycle requires deviations from full tax smoothing.
    Keywords: Firms' Entry; Market Stuctures; Market Distortions; Optimal Dividend Income Tax
    JEL: E62 L13
    Date: 2013–06
  10. By: Andreea Cosnita-Langlais; Jean-Philippe Tropeano
    Abstract: We study the optimal timing of merger control by comparing the pre-and post closing enforcement. Mergers have both pro- and anticompetitive e¤ects, and the parties(the agency and the merging …rms) veri…able information on them is endogenous: it depends on the timing of the merger control, as well as on some investment in evidence production. The ex post enforcement turns out optimal whenever the costs of providing veri…able information on both e¢ ciency gains and market power are su¢ ciently low, regardless of whether the …rms know ex ante or not their true merger type.
    Keywords: merger control, competition policy, evidence production
    JEL: L41 K21 D82
    Date: 2013
  11. By: AKTAS, Nihat; DE BODT, Eric; ROLL, Richard
  12. By: Budzinski, Oliver; Haji Ali Beigi, Maryam
    Abstract: [Introduction ...] In this chapter, we attempt to sketch a competition policy agenda for industrializing countries that meet or come close to meeting several typical characteristics. Section 2 outlines these characteristics and thus specifies the addressees of our paper. Thereafter, section 3 discusses fundamental principles of a competition policy agenda for industrializing countries, in particular a focus on a rule-based approach, the special role of guidance, fairness considerations and the spirit of competition as well as the need for setting priorities. Section 4 exemplifies more specifically what these principles imply for the actual competition policy agenda. --
    Date: 2013
  13. By: Roman Inderst; Frank Maier-Rigaud (IESEG School of Management (LEM-CNRS)); Ulrich Schwalbe (Institut für Volkswirtschaftslehre, Universität Hohenheim)
    Date: 2013–06
  14. By: Marc Deschamps
    Abstract: Le thème des fondements des politiques de concurrence est faussement élémentaire. En effet, il renvoie d’une part aux questionnements relatifs à l’utilité sociale et économique d’une politique de concurrence et, d’autre part à ceux ayant trait à la place des choix politiques. Au-delà de tous les particularismes, il est défendu dans cet article l’idée que les économistes justifient actuellement l’existence, à travers le monde, de politiques de concurrence par leurs effets soit sur la croissance, soit sur la stabilité de l’ordre social. En étudiant ces deux fondements principaux, nous tenterons de démontrer qu’il en ressort que (a) l’existence d’une politique de concurrence n’est pas une nécessité universelle, (b) il n’est pas souhaitable d’uniformiser toutes les politiques de concurrence existantes dans le monde et, (c) les politiques de concurrence (et non la justice concurrentielle) ne peuvent être automatisées ou confiées à des experts, mais doivent résulter directement ou indirectement de choix politiques. Ces conclusions offrent dès lors des pistes de réflexion différenciées notamment pour les pays développés, les pays en transition, et les pays en développement.
    Keywords: politique de concurrence, croissance, ordre sociaux, choix, règles
    JEL: K21 L40 O43
    Date: 2013–06
  15. By: Arijit Mukherjee (School of Business and Economics, Loughborough University, UK)
    Abstract: It is generally believed that a weak patent protection makes the consumers and the society better off compared to a strong patent protection by increasing the intensity of competition if the weak patent protection does not affect innovation. We show that this conclusion may not hold if the innovator can take other non-production strategies, such as product differentiation, to reduce the intensity of product-market competition. A weak patent protection may reduce consumer surplus and social welfare by inducing product differentiation by the innovator. We show that the type of product-market competition and the market demand function play important roles in this respect. Hence, there can be an argument for a strong patent protection even if it does not affect innovation.
    Keywords: Patent protection; Product differentiation; Welfare
    JEL: D21 D43 L13 O34
    Date: 2013–07
  16. By: Igor Letina
    Abstract: When firms decide to invest in R&D, they have to choose not only the amount of resources to invest, but also which research projects to develop. This paper investigates the market portfolio of research projects. Contrary to most of the literature, which focuses only on the level of investment in innovation, this model captures both the variety of research projects undertaken and the amount of duplication of research. A characterization of the equilibrium market portfolio is provided. It is shown that an increase in the number of firms increases the variety of developed projects and increases the amount of duplication of research. An increase in the intensity of competition among firms leads to an increase in the variety of developed projects and a decrease in the amount of duplication of research. A characterization of the socially optimal portfolio is provided. It is shown under which conditions the market invests suboptimally in the variety and duplication of research projects. Market underinvestment in the variety of R&D projects is demonstrated for a large class of product market models.
    Keywords: Innovation, competition, R&D portfolio, market structure
    JEL: L13 L22 O31
    Date: 2013–07
  17. By: YAGI Michiyuki; MANAGI Shunsuke
    Abstract: This study replicates a model of Aghion et al. ("Competition and Innovation: An inverted-u relationship," <i>Quarterly Journal of Economics</i> 2005; 120(2):701-728), which suggests that an inverted-U relationship exists between competition and innovation. We apply patent data and a competition measure based on Japanese firm-level and industry-average data from 1964 to 2006. In a constant slope model using a full dataset, we find the same inverted-U relationship as did Aghion-Bloom-Blundell-Griffith-Howitt (ABBGH). In decade and industry fixed-effects slope models, we find the inverted-U relationship to be fragile.
    Date: 2013–07
  18. By: Li X.; Peeters R.J.A.P. (GSBE)
    Abstract: In the recent past there have been numerous scandals around bad practices in the food industry. Although it can be easily rationalized why these bad practices have not been reported by the inflictors themselves, it is more difficult to understand why the non-inflicting competitors did not report their rivals conspicuous acts. In this paper we study these competitors incentives to acquire and to disclose information on the quality of their rivals products and how regulatory intervention may enhance information disclosure. Our model involves two firms that compete in prices within a differentiated product market, where the quality of one of the firms is publicly known while that of the other firm is unknown. Before the firms set their prices, the former firm has the possibility to acquire information on the quality of the latter firms product, and, if decided to do so, subsequently, the possibility to credibly reveal this information to the public. We find that low quality levels can be disclosed in a substitute market, but should not be expected to be disclosed in a complement market. Policies that mandate acquisition or disclosure may enhance disclosure of low quality levels, but fail to be welfare enhancing.
    Keywords: Market Structure and Pricing: Oligopoly and Other Forms of Market Imperfection; Information and Product Quality; Standardization and Compatibility; Enterprise Policy;
    JEL: L15 L53 D43
    Date: 2013
  19. By: Bouamra-Mechemache, Zohra; Jianye, Yu
    Abstract: This paper investigates the collective choice of production standards by farmer and pro- cessor groups within a vertical food supply chain, taking into account their competition behaviors. In a context in which raising standards cannot translate into a direct price premium to consumers, we develop a general model to analyze the strategic motive of us- ing standards to limit supply and shift rents among farmers and processors in the vertical chain. We find that such a motive depends on farmers’ cost structure, final demand char- acteristics, and processors’ competition patterns. In particular, farmers prefer a stringent standard when the standard involves creating greater diseconomies of scale in production and when the demand for the final product is inelastic. However, processors only prefer a stringent standard in the presence of oligopsony competition.
    Keywords: Production standards, Vertical relationship, Imperfect competition, Technology choice
    JEL: L13 Q13
    Date: 2013–04
  20. By: Magazzini Laura (Department of Economics, University of Verona); Fabio Pammolli (IMT Lucca Institute for Advanced Studies Author-Name: Massimo Riccaboni; IMT Lucca Institute for Advanced Studies)
    Abstract: : We analyse the consequences of the increasing complexity of R&D on within- and between-patent competition in the pharmaceutical industry. The intensity of competition is measured by jointly considering the timing from market launch to patent expiry, the strength of between-patent competition as well as competition introduced by generic producers. A simple model is proposed that predicts the shrinking of product lifetimes in the presence of correlated parallel R&D projects and market portfolios. The model is tested using data on pharmaceutical products sold in Europe and in the US. Based on our model we are able to estimate the impact of R&D complexity and relatedness among R&D portfolios on the value of innovative drugs.
    Keywords: Patent value, innovation, R&D competition, Pharmaceutical industry.
    JEL: D23 D83 O34 O31 L13
    Date: 2013–07
  21. By: Hasan, Iftekhar (Fordham University and Bank of Finland); Marinc , Matej (University of Ljubljana and ACLE)
    Abstract: This article investigates the nexus of competition and stability in European banking. It analyzes the European legal framework for competition policy in banking and several cases that pertain to anti-cartel policy, merger policy, and state-aid control. It discusses whether and how competition policy should be amended in order to preserve the stability of the banking system during crises. The article argues for increased cooperation between prudential regulators and competition authorities, as well as an enhanced framework for bank regulation, supervision, and resolution that could mitigate the need to change competition policy in crisis times.
    Keywords: banking; competition policy; financial crisis
    JEL: G21 G28 K21 L40
    Date: 2013–05–19
  22. By: Horvath, Roman (BOFIT); Seidler, Jakub (BOFIT); Weill, Laurent (BOFIT)
    Abstract: This paper evaluates the effect of bank competition on liquidity creation by banks. Thus, we contribute to the literature on both bank competition and the determinants of liquidity creation by banks. To explore this relationship, we conduct dynamic GMM panel estimations on a dataset of Czech banks from 2002 to 2010. We find that enhanced competition reduces liquidity creation, a finding we observe under different specifications, including alternative measures of liquidity creation. We explain this finding in terms of the impact of increased bank competition on the financial fragility of banks, which leads banks to reduce their lending and deposit activities. The evidence suggests that pro-competitive policies in the banking industry can reduce liquidity provision by banks.
    Keywords: bank competition; liquidity creation
    JEL: G21
    Date: 2013–06–19
  23. By: Fungácová, Zuzana (BOFIT); Solanko, Laura (BOFIT); Weill, Laurent (BOFIT)
    Abstract: This paper examines how bank competition influences the bank lending channel in the Euro area countries. Using a large panel of banks from 12 euro area countries over the period 2002-2010 we analyze the reaction of loan supply to monetary policy actions depending on the degree of bank competition. We find that the effect of monetary policy on bank lending is dependent on bank competition: the transmission of monetary policy through the bank lending channel is less pronounced for banks with extensive market power. Further investigation shows that banks with less market power were more sensitive to monetary policy only before the financial crisis. These results suggest that the bank market power has a significant impact on monetary policy effectiveness. Therefore, wide variations in the level of bank market power may lead to asymmetric effects of a single monetary policy.
    Keywords: bank competition; bank lending channel; monetary policy; euro area
    JEL: E52 G21
    Date: 2013–06–25
  24. By: Eva Schliephake (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg)
    Abstract: Minimum capital requirement regulation forces banks to refund a substantial amount of their investments with equity. This creates a buffer against losses, but also increases the cost of funding. If higher refunding costs translate into higher loan interest rates, then borrowers are likely to become more risky, which may destabilize the lending bank. This paper argues that, in addition to the buffer and cost effect of capital regulation, there is a strategic effect. A binding capital requirement regulation restricts the lending capacity of banks, and therefore reduces the intensity of loan interest rate competition and increases the banks' price setting power as shown in Schliephake and Kirstein (2013). This paper discusses the impact of this indirect effect from capital regulation on the stability of the banking sector. It is shown that the enhanced price setting power can reverse the net effect that capital requirements have under perfect competition.
    Keywords: Capital Requirement Regulation, Competition; Financial Stabilityt
    JEL: G21 K23 L13
    Date: 2013–06
  25. By: Meryem Deygun (University of Leicester School of Management, UK); Mohamed Shaban (University of Leicester School of Management, UK); Tom Weyman-Jones (School of Business and Economics, Loughborough University, UK)
    Abstract: This paper suggests an operational method for implementing the theoretical relative prot dierence test for intensity of competition due to Boone (2008). We use polynomial quantile regressions for which integral areas and their standard errors can easily be computed and compared using Wald tests. An empirical example is presented which applies the test to a panel data sample of banks in dierent emerging economies. The results indicate that the trend towards more intense competition amongst emerging economy banks continued during the period of the nancial upheaval in 2005-2008, and that India and China among others were leading this process.
    Date: 2013–06
  26. By: Ardizzi, Guerino
    Abstract: Interchange fees in card payments are a mechanism to balance costs and revenues between banks for the joint provision of payment services. However, such fees represent a relevant input cost used as a reference price for the final fee charged to the merchants, who may be reluctant to accept cards and induce the cardholder to withdraw cash. In this paper, we empirically verify for the first time the effect of the interchange fee on the decision to withdraw cash and compare it with that of paying with payment cards, considering a balanced panel data set of Italian issuing banks. Finally, results show that there is a positive correlation between the cash usage and the level of the interchange fees. Accordingly, regulation of the multilateral interchange fee level may be an effective tool in reducing cash payments at the point of sale, although there is no clear evidence that a zero interchange fee rate (or a close-to-zero rate) would be optimal.
    Keywords: MIF, interchange fee, payment card, ATM, POS, cash
    JEL: E4 E41 E42 E5 E51 G21 L14
    Date: 2013–05–29
  27. By: Rigoberto A. Lopez (University of Connecticut); Yizao Liu (University of Connecticut); Chen Zhu (University of Connecticut)
    Abstract: This paper examines the spillover effects of television advertising on brand-level consumer demand for carbonated soft drinks (CSDs) and the competition consequences for manufacturers’ and private label CSDs. Using a random coefficients logit model (BLP) with household purchasing and advertising viewing data from five U.S. cities, we find that although brand advertising is important in increasing demand as previous work confirms, company advertising spillovers are nearly as important. Not surprisingly, advertising by competitors undermines demand for a particular manufacturer’s CSD brand but, surprisingly, there are positive spillover effects on the demand for private label brands. Further results show that eliminating all television advertising for CSDs would lower both brand and aggregate market shares (including private labels) as consumers migrate to other beverages. However, the dominant strategy is for leading companies to advertise to avoid losing revenues when competitors advertise or to increase revenues when they do not.
    Keywords: advertising, demand, competition, consumer behavior, sodas, carbonated soft drinks
    JEL: D12 L66 Q18 I18
    Date: 2013–02
  28. By: Aguzzoni, Luca; Argentesi, Elena; Ciari, Lorenzo; Duso, Tomaso; Tognoni, Massimo
    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. --
    Keywords: Mergers,Ex-post Evaluation,Book market,Retail sector
    JEL: K21 L24 L44 D22 O32
    Date: 2013
  29. By: Hugh Gravelle (Centre for Health Economics, The University of York); Anthony Scott (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne); Peter Sivey (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne); Jongsay Yong (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne)
    Abstract: Prices for consultations with General Practitioners (GPs) in Australia are unregulated, and patients pay the difference between the price set by the GP and a fixed reimbursement from the national tax-funded Medicare insurance scheme. We construct a Vickrey-Salop model of GP price and quality competition and test its predictions using a dataset with individual GP level data on prices, the proportion of patients who are charged no out-of-pocket fee, average consultation length, and characteristics of the GPs, their practices and their local areas. We measure the competition to which the GP is exposed by the distance to other GPs and allow for the endogeneity of GP location decisions with measures of area characteristics and area fixed-effects. Within areas, GPs with more distant competitors charge higher prices and a smaller proportion of their patients make no out-of-pocket payment. GPs with more distant competitors also have shorter consultations, though the effect is small and statistically insignificant.
    Keywords: Competition, prices, quality, doctors
    JEL: I11 L1
    Date: 2013–06
  30. By: Jolivet, Grégory (University of Bristol); Jullien, Bruno (TSE,IDEI); Postel-Vinay, Fabien (University of Bristol and Sciences Po)
    Abstract: The broad aim of this paper is to gain some insight into the quantitative importance of reputation in e-commerce. We use an exhaustive data set from one of France’s largest e-commerce platforms,, to estimate a statistical causal effect of a seller’s reputation (and size) on transaction prices for a uniquely large range of product categories (books, CDs, video games or DVDs), product conditions (used or new) and seller types (individual or professional sellers). We go beyond the results currently available in the empirical literature by tackling the issue of seller unobserved heterogeneity and the weak exogeneity of reputation (and size) in price equations. Our results show large-scale empirical evidence of a significant, positive and strong effect of seller reputation on prices
    Date: 2013–07

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