nep-com New Economics Papers
on Industrial Competition
Issue of 2013‒08‒10
eighteen papers chosen by
Russell Pittman
US Government

  1. Feedback equilibria in a dynamic renewable resource oligopoly: pre-emption, voracity and exhaustion By Luca Lambertini; Andrea Mantovani
  2. Decision time and steps of reasoning in a competitive market entry game By Florian Lindner
  3. An Evolutionary Game for the Issues of Social Investment, Environmental Compliance and Consumer Boycott By André Barreira da Silva Rocha
  4. Asymmetric Information may Protect the Commons: The Welfare Benefits of Uniformed Regulators By Ana Espinola-Arredondo; Felix Munoz-Garcia
  5. Price dispersion and efficiency By Benjamin Eden
  6. Evaluating the law of one price using micro panel data By Laurent Gobillon; François Charles Wolff; Patrice Guillotreau
  7. Do short-term laboratory experiments provide valid descriptions of long-term economic interactions? A study of Cournot markets By Normann, Hans-Theo; Requate, Till; Waichman, Israel
  8. Empirical Evaluation of the Effectiveness of Competition Policy By Koski, Heli; Pajarinen, Mika
  9. The fight against cartels: a transatlantic perspective By Emilie Dargaud; Andrea Mantovani; Carlo Reggiani
  10. Letting the Punishment Fit the Crime: Sentencing in Cartel Cases in Ireland By Gorecki, Paul K.
  11. Estimation of Loss in Consumer Surplus Resulting from Excessive Pricing of Telecommunication Services in Mexico By Marta Stryszowska
  12. Colombian bank efficiency and the role of market structure By Diana Fernández Moreno; Dairo Estrada
  13. R&D drivers and obstacles to innovation in the energy industry By Maria Teresa Costa-Campi; Néstor Duch-Brown; José García-Quevedo
  14. Mobile Handset Acquisition Models By OECD
  15. Exchange Rate Pass-through into German Import Prices – A Disaggregated Perspective By Joscha Beckmann; Ansgar Belke; Florian Verheyen
  16. Market Structure, Imperfect Tariff Pass-Through, and Household Welfare in Urban China By Han, Jun; Liu, Runjuan; Ural Marchand, Beyza; Zhang, Junsen
  17. Chinese Export Competition, Declining Exports and Adjustments at the Industry and Regional Level in Europe By Flückiger, Matthias; Ludwig, Markus
  18. Bank financing of SMEs in five Sub-Saharan African countries : the role of competition, innovation, and the government By Berg, Gunhild; Fuchs, Michael

  1. By: Luca Lambertini (University of Bologna & ENCORE); Andrea Mantovani (University of Bologna & IEB)
    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.
    Keywords: Dynamic oligopoly, renewable resources, feedback strategies
    JEL: C73 L13 Q2
    Date: 2013
  2. By: Florian Lindner
    Abstract: Entry decisions in market entry games usually depend on the belief about how many others are entering the market, the belief about the own rank in a real effort task, and subjects' risk preferences. In this paper I am able to replicate these basic results and examine two further dimensions: (i) the level of strategic sophistication, which has a positive impact on entry decisions, and (ii) the impact of time pressure, which has a (partly) negative influence on entry rates. Furthermore, when ranks are determined using a real effort task, differences in entry rates are explainable by higher competitiveness of males. Additionally, I show that individual characteristics are more important for the entry decision in more competitive environments.
    Keywords: Market entry game, Time pressure, Level-k reasoning, Risk, Competitiveness, Experiment
    JEL: C72 C91 D81
    Date: 2013–07
  3. By: André Barreira da Silva Rocha
    Abstract: I propose an evolutionary game model to study competition among a large number of firms, in which I take into account the issues of social responsibility, government monitoring of environmental compliance and consumer boycott. A large number of firms sell their homogeneous good in an almost perfect competitive market, where consumers have preferences for socially responsible firms. Firms may incur additional costs and carry out social investment and/or environmental investment. Each time interval, a firm may be called to play a competition-stage game, in which it tries to sell its good, or an audit-stage game, in which inspectors audit its degree of environmental compliance.
    Keywords: Replicator dynamics, social responsibility, boycott, investment, regulation.
    JEL: C73 M14 L51
    Date: 2013–07
  4. By: Ana Espinola-Arredondo; Felix Munoz-Garcia (School of Economic Sciences, Washington State University)
    Abstract: We examine an entry-deterrence model in the commons. We investigate in which contexts the presence of asymmetric information among the fi?rms exploiting the commons becomes welfare improving, relative to complete information, and in which settings an uninformed regulator might have incentives to assess and disseminate the available stock among potential entrants.
    Keywords: Cost asymmetries; Entry Deterrence; Signaling; Commons; Welfare
    JEL: D62 D82 L12 Q5
  5. By: Benjamin Eden (Vanderbilt University)
    Abstract: The paper distinguishes between rigid price and flexible price versions of the Prescott (1975) “hotels” model. I focus on two dynamic models that allow for storage: The Bental and Eden (1993) model of all year round goods and the more recent Deneckere and Peck (2012) model of seasonal goods. The formulation follows the standard competitive analysis tradition with non-standard definition of markets: The set of markets that open depends on the state of demand. I show that when prices are flexible, the equilibrium outcome is efficient if the probability of becoming active depends on the aggregate state but not on the buyer's type. If prices are rigid the equilibrium outcome is in general not efficient except for the case in which there are no costs for delaying trade. The cost of delay is also relevant for price dispersion: Lower cost of delays leads to lower price dispersion.
    Keywords: Price dispersion, demand uncertainty, efficiency, sequential trade, inventories, costs of delaying trade, price rigidity
    JEL: D4 D5
    Date: 2013–08–06
  6. By: Laurent Gobillon (PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - École des Hautes Études en Sciences Sociales [EHESS] - Ecole des Ponts ParisTech - Ecole normale supérieure de Paris - ENS Paris - Institut national de la recherche agronomique (INRA), EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, INED - Institut National d'Etudes Démographiques Paris - INED); François Charles Wolff (INED - Institut National d'Etudes Démographiques Paris - INED, LEMNA - Laboratoire d'économie et de management de Nantes Atlantique - Université de Nantes : EA4272); Patrice Guillotreau (INED - Institut National d'Etudes Démographiques Paris - INED, LEMNA - Laboratoire d'économie et de management de Nantes Atlantique - Université de Nantes : EA4272)
    Abstract: This paper investigates spatial variations in product prices using an exhaustive micro dataset on fish transactions. The data record all transactions between vessels and wholesalers that occur on local fish markets in France during the year 2007. Spatial disparities in fish prices are sizable, even after fish quality, time, seller and buyer unobserved heterogeneity have been taken into account. The price difference between local fish markets can be explained to some extent by distance, but mostly by a coast effect (analogous to a border effect in the literature on the law of one price) related to separate location on the Atlantic and Mediterranean coasts. In particular, fish and crustacean prices are 34% higher on the Mediterranean coast. The law of one price is verified for almost all species when considering only local fish markets on the Atlantic coast.
    Keywords: Fish ; Commodity price ; Local markets ; Panel data
    Date: 2013–07–30
  7. By: Normann, Hans-Theo; Requate, Till; Waichman, Israel
    Abstract: One key problem regarding the external validity of laboratory experiments is their duration: while economic interactions out in the field are often lengthy processes, typical lab experiments only last for an hour or two. To address this problem for the case of both symmetric and asymmetric Cournot duopoly, we conduct internet treatments lasting more than a month. Subjects make the same number of decisions as in the short-term counterparts, but they decide once a day. We compare these treatments to corresponding standard laboratory treatments and also to short-term internet treatments lasting one hour. We do not observe differences in behavior between the short- and long-term in the symmetric treatments, and only a small difference in the asymmetric treatments. We overall conclude that behavior is not considerably different between the short- and long-term. --
    Keywords: internet experiment,Cournot oligopoly,long-term interactions,methodology,internet vs. laboratory experiment
    JEL: L13 C93 C72 D43 D21
    Date: 2013
  8. By: Koski, Heli; Pajarinen, Mika
    Abstract: This study evaluates the usefulness of different modifications of empirical models estimating the so-called Boone indicator for capturing changes in the intensity of competition. We use as “natural experiments” in this evaluation data from three cartel cases: i) international elevators and escalators cartel in various European countries during the years 1995-2004, ii) Finnish raw wood cartel during the years 1997-2004, and iii) Finnish construction cartel 1994-2002. The findings support our argument that particularly when the primary interest is to evaluate the effectiveness of a certain competition policy action, the empirical model should properly take into account a possible structural break in data due to the policy action. Furthermore, our data hint that the methodological choice of prior empirical studies to use data only from one industry at a time may lead into the false conclusions when the Boone indicator is used for evaluating the effectiveness of sector-specific competition policy actions.
    Keywords: competition, competition policy, Boone indicator, cartels
    JEL: D43 K21 L4 L41
    Date: 2013–08–01
  9. By: Emilie Dargaud (University of Lyon & CNRS, GATE); Andrea Mantovani (University of Bologna & IEB); Carlo Reggiani (University of Manchester)
    Abstract: The fight against cartels is a priority for antitrust authorities on both sides of the Atlantic. What differs between the EU and the US is not the basic toolkit for achieving deterrence, but to whom it is targeted. In the EU, pecuniary sanctions against the firm are the only instruments available to the Commission, while in the US criminal sanctions are also widely employed. The aim of this paper is to compare two different types of fines levied on managerial firms when they collude. We consider a profit based fine as opposed to a delegation based fine, with the latter targeting the manager in a more direct way. Under the assumption of revenue equivalence, we find that the delegation based fine, although distortive, is more effective in deterring cartels than the profit based one. When evaluating social welfare, a trade-off between deterrence and output distortion can arise. However, if the antitrust authority focuses on consumer surplus, then the delegation based fine is to be preferred.
    Keywords: Cartel policy, managerial firms, collusion
    JEL: K21 L44 K42 L21
    Date: 2013
  10. By: Gorecki, Paul K.
    Keywords: Ireland/qec
    Date: 2013–05
  11. By: Marta Stryszowska
    Abstract: The present study evaluates the loss in consumer surplus caused by the low degree of competition in the Mexican telecommunication sector which results in relatively high prices, and also leads to lower levels of consumption across the range of telecommunication services. Econometric techniques are used in order to estimate the prices for telecommunication services and the corresponding numbers of subscriptions to telecommunication services that would have been observed in Mexico if there had been more competition in the Mexican telecommunication sector. The estimation relies on cross-country panel data from OECD countries. Estimates are undertaken for mobile and fixed telecommunication services and broadband services. The consumer harm in Mexico is estimated at USD 129.2 billion, or an average of USD 25.8 billion per year in terms of purchasing power parity over the period 2005-09. The latter amount is equivalent to 1.8% of Mexican GDP per year.<BR>Cette étude consiste en une évaluation de la perte de surplus du consommateur due à la faible concurrence dans le secteur des télécommunications au Mexique, qui se traduit par des prix relativement élevés, et qui entraine également une baisse des niveaux de consommation de toute la gamme des services de télécommunications. Elle a recours à des techniques économétriques pour estimer les prix des services de télécommunications et le nombre des abonnements à ces services qui auraient été souscrits au Mexique si le secteur national des télécommunications avait été soumis à une concurrence plus rude. Ses estimations ont été établies sur la base de données de panel internationales émanant des pays de l’OCDE, et concernent les services de télécommunications fixes et mobiles, ainsi que les services à haut débit. Les atteintes au consommateur au Mexique sont estimées à 129.2 milliards USD, soit une moyenne de 25.8 milliards USD par an en termes de parités de pouvoir d’achat sur la période allant de 2005 à 2009. Ce deuxième montant équivaut à 1.8 % du PIB du Mexique par an.
    Date: 2012–01–27
  12. By: Diana Fernández Moreno; Dairo Estrada
    Abstract: Colombia’s financial system has undertaken major changes during the last decade, with new regulatory regimes being implemented, as well as a significant expansion of financial services. Nevertheless, the recent literature has yet to analyze this new epoch for banking institutions under an efficiency framework. Taking into account the availability of new information and the methodological advances of recent years, our purpose is to study the evolution of bank efficiency during the past few years, as well as to evaluate the influence of some market structure variables on the latter. We find evidence, both under SFA and Order-m, supporting an increase in efficiency over time. Moreover, relating the latter with market structure variables suggests that there is a positive relationship between market power and efficiency; this occurs due to product differentiation, which allows banks to gain in efficiency provided they don’t set excessive credit prices. Nonetheless, there is an open debate concerning the behavior of banks with the highest market shares, since the negative relation between market concentration and efficiency advocates for a "quiet life form", where banks don’t have incentives to fully minimize costs. Additional to these results, we provide evidence of potential impacts that mergers and credit specialization may have on efficiency.
    Keywords: Bank Efficiency, Concentration, Market Power, Stochastic Frontier Analysis, Order-m. Classification JEL: C14, D40, D61, G21
  13. By: Maria Teresa Costa-Campi (University of Barcelona & IEB); Néstor Duch-Brown (University of Barcelona & IEB); José García-Quevedo (University of Barcelona & IEB)
    Abstract: The energy industry is facing substantial challenges that require innovation to be fostered. Nevertheless, levels of R&D investment and innovation remain quite low in comparison with other sectors. In this paper we analyse the main drivers of R&D investment and obstacles to innovation in the energy industry. We examine, firstly, whether the stated R&D objectives pursued by firms play a role in their R&D effort. Secondly, we analyse the effects of financial, knowledge and market barriers on the innovation outcomes of the firms. We rely on data from the Technological Innovation Panel (PITEC) for Spanish firms for the period 2003-2010. We use a structural model with three equations corresponding to the decision to carry out R&D or not, the R&D effort and the production of innovations. The results of the econometric estimations show, first, that R&D intensity is positively related to process innovation. Second, the main barriers that hamper innovation in the energy industry are related to market factors while financial and knowledge obstacles are not significant.
    Keywords: R&D, innovation, energy, barriers, regulation
    JEL: Q40 O31
    Date: 2013
  14. By: OECD
    Abstract: This report examines the relationship between the prices for mobile communication services and some of the most popular handsets used to access these services, focusing on smartphones. The objective is to better understand different business models and how they may affect comparisons of prices. It looks at the question of how the different models for handset acquisition in different countries, and across different operators in these countries, may affect comparisons of service prices. As benchmarking of mobile communication prices provides an important indicator that is used to inform policy makers, regulators, industry and consumers, this paper examines the challenges for such price comparisons associated with handset discounts bundled with mobile communication plans.
    Date: 2013–07–02
  15. By: Joscha Beckmann; Ansgar Belke; Florian Verheyen
    Abstract: This study analyzes the exchange rate pass-through into German import prices based on disaggregated data taken on a monthly basis between 1995 and 2012. Our main contribution is twofold: firstly, we employ various time-series techniques to analyze data for different product categories, and also cointegration techniques to carefully distinguish between shortrun and long-run pass-through coefficients. Secondly, in a panel data approach we estimate time-varying pass-through coefficients and explain their development with regard to various macroeconomic factors. Our results show that long-run pass-through is only partly observable and incomplete, while short-run passthrough shows a more unique character, although heterogeneity across product groups does exist. We are also able to identify several macroeconomic factors which determine changes in the degree of pass-through, which is especially relevant for policymakers.
    Keywords: Exchange rate pass-through; Germany; cointegration; time-varying coefficient model
    JEL: E31 F10 F14
    Date: 2013–07
  16. By: Han, Jun (Nankai University); Liu, Runjuan (University of Alberta, Alberta School of Business); Ural Marchand, Beyza (University of Alberta, Department of Economics); Zhang, Junsen (Chinese University of Hong Kong)
    Abstract: This paper investigates the Chinese tariff pass-through mechanism. We estimate how market structure, specifically the size of the private sector, affects the transmission of prices from the border to consumers by using household survey data from urban China. Our results suggest that changes in trade policy are not perfectly transmitted to the consumers and imperfections in the local market partially isolate households from the effects of trade policies. Incorporating the price changes of tradable and nontradable goods, we investigate how trade liberalization affects household welfare through changes in the cost of consumption. Our results show that trade liberalization, particularly China’s WTO accession, brings welfare gains to almost every household across the per capita expenditure spectrum, and that the distributional effect is strongly pro-poor.
    Keywords: Market Structure; Trade Liberalization; Pass-Through; Welfare
    JEL: D31 D40 F14 O12
    Date: 2013–07–01
  17. By: Flückiger, Matthias; Ludwig, Markus
    Abstract: We analyze how a set of 22 European countries are affected by increased Chinese export competition between 1995 and 2008. Employing product level data, we document a reduction in the export volume of European countries due to increased Chinese export competition. This alteration in the export sector induces changes within the manufacturing industries, especially a decline in employment. The analysis using more aggregated, regional level data, shows that the industry sector as whole declines resulting, amongst others, in an increased unemployment rate. The importance of Chinese export competition for Europe is attributable to its high export intensity.
    Keywords: China, Export Competition, Industry Labor Decline
    JEL: F14 F16
    Date: 2013–08
  18. By: Berg, Gunhild; Fuchs, Michael
    Abstract: This paper provides an overview of the state of access to bank financing for SMEs in five Sub-Saharan African countries and analyzes the drivers behind banks'involvement with SMEs. The paper builds on data collected through five in-depth studies in Kenya, Nigeria, Rwanda, South Africa, and Tanzania between 2010 and 2012. The paper shows that the share of SME lending in the overall loan portfolios of banks varies between 5 and 20 percent. Reasons for this finding vary, but key contributing factors are the structure and size of the economy and the extent of Government borrowing, the degree of innovation mainly as introduced by foreign entrants to financial sectors, and the state of the financial sector infrastructure and enabling environment.
    Keywords: Access to Finance,Banks&Banking Reform,Debt Markets,Financial Intermediation,Environmental Economics&Policies
    Date: 2013–08–01

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