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on Industrial Competition |
| By: | Johan N.M. Lagerlöf (Department of Economics, Copenhagen University) |
| Abstract: | The answer is no. Although naive intuition may suggest the opposite, uncertainty about costs in the homogeneous-good Bertrand model intensifies competition: it lowers price and raises total surplus (but also makes profits go up). For some economic environments, this is implied by Hansen’s (RAND, 1988) analysis of a procurement auction. However, several authors appear to have overlooked Hansen’s results. Moreover, his results are derived under two assumptions that, if relaxed, conceivably could reverse them. The contributions of the present paper are threefold. First, it clarifies the implications of Hansen’s results for the relationship between uncertainty and competition in the Bertrand model. Second, it shows that his results hold also if drastic innovations are possible. Finally, the paper assumes asymmetric cost distributions and shows, using numerical methods, that then uncertainty lowers price and raises total surplus even more than under symmetry. If the asymmetry is large enough, however, industry profits are lower under uncertainty. This is in contrast to the known results and reinforces the notion that uncertainty intensifies competition rather than softens it. |
| Keywords: | Bertrand competition, Hansen Spulber model, private information, information sharing, asymmetric firms, asymmetric auctions, boundary value method |
| JEL: | D43 D44 L13 |
| Date: | 2013–12–16 |
| URL: | http://d.repec.org/n?u=RePEc:kud:kuiedp:1408&r=com |
| By: | Edward J. Webb (Department of Economics, Copenhagen University) |
| Abstract: | Consumers are assumed to be unable to discriminate between two goods of differing qualities provided that the qualities are close enough. It is shown that in a vertically differentiated duopoly this results in multiple equilibria. Demand for each firm's good is reduced. Firms' profits may be higher or lower depending on which equilibrium is selected. |
| Keywords: | Perception, bounded rationality, vertical differentiation, oligopoly |
| JEL: | D03 D43 |
| Date: | 2014–02–01 |
| URL: | http://d.repec.org/n?u=RePEc:kud:kuiedp:1407&r=com |
| By: | Kuniavsky, Sergey |
| Abstract: | Search models are used in a variety of fields. One of those is consumer search and in it the Stahl model is one of the most popular search models. The literature in search models concentrates mainly on equilibria with a consumer reserve price. This is a simplifying condition, which narrows down severely the freedom of the consumer. For example, once the model has a finite number of sellers who select different strategies a situation may arise where reserve price may not exist. This paper addresses the possibility of equilibria without reserve price, when sellers can use asymmetric strategies. Here a condition is given which ensures existence of reserve price in all equilibria. The condition involves prices where sellers set mass points, and undercutting those prices. The condition states that if a searcher is satisfied with such price, she should be satisfied also when a small discount is offered to that price. Assuming this, it is possible to concentrate only on equilibria with reserve price, and investigate also situations where the sellers are heterogeneous, or equilibria are not symmetric. |
| JEL: | D43 D83 L13 |
| Date: | 2014–01–19 |
| URL: | http://d.repec.org/n?u=RePEc:lmu:muenec:20800&r=com |
| By: | Kuniavsky, Sergey |
| Abstract: | The Stahl model is one of the most applied consumer search models, with many applications and an empirical background. The present paper explores an extension where sellers have asymmetries, which is mostly excluded by the literature. Sellers with heterogeneous numbers of stores are introduced, reflecting a typical market structure. As in the original Stahl model, a market consists of several sellers, and consumers, where some face a cost when sequentially searching. The paper shows that no symmetric Nash equilibrium exists in the extension. Additional results suggest that smallest sellers will be the ones offering the lowest prices, in line with several real world examples provided in the paper. However, profits remain in most cases fixed per store, making a larger firm more profitable, yet with lower quantity sold. The findings suggest that on some level price dispersion will still exist, together with some level of price stickiness, both observed in reality. |
| Keywords: | Sequential Consumer Search; Oligopoly; Asymmetric NE |
| JEL: | D43 D83 L13 |
| Date: | 2014–02–11 |
| URL: | http://d.repec.org/n?u=RePEc:lmu:muenec:20799&r=com |
| By: | Luciano Fanti (Department of Economics and Management, University of Pisa, Italy); Nicola Meccheri (Department of Economics and Management, University of Pisa, Italy) |
| Abstract: | This paper studies how unionisation structures that differ in the degree of wage setting centralisation interplay with the strategic choice of production capacity by firms and how this affects product market outcomes. When labour markets are unionised and firms compete in quantities, they typically opt for under-capacity in order to dampen the unions’ wage claims. This is in contrast with the conventional choice of over-capacity that applies when labour markets are competitive. Moreover, the level of capacity is generally more efficient under centralised unionisation than in a decentralised structure. Relative to more general welfare outcomes, profits are always higher under decentralised unionisation, but both consumer surplus and overall welfare can be higher under a centralised structure, depending on the unions’ preference towards wages or employment. Introducing product differentiation and price competition enlarges the range of situations, in which centralised unionisation is welfare-enhancing. |
| Keywords: | unionised duopoly, unions’ structure, capacity choice, welfare |
| JEL: | J51 L13 L21 |
| Date: | 2014–04 |
| URL: | http://d.repec.org/n?u=RePEc:rim:rimwps:12_14&r=com |
| By: | Daniel W. Elfenbein; Raymond Fisman; Brian McManus |
| Abstract: | Quality certification programs help consumers to identify high-quality products or sellers in markets with information asymmetries. Using data from eBay UK’s online marketplace, we study how certification’s impact on consumer demand varies with market- and seller-level attributes, exploiting quasi-experimental variation in sellers’ certification status. The positive effects of eBay’s “top rated seller” certification are stronger for categories with relatively few other certified sellers, in more competitive markets, and for sellers with shorter records of past performance. These findings indicate certification provides its greatest value when certification is rare, the product space is crowded, and for sellers lacking established reputations. |
| JEL: | D82 L15 L25 L86 |
| Date: | 2014–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:20074&r=com |
| By: | Brent Hueth; GianCarlo Moschini (Center for Agricultural and Rural Development (CARD)) |
| Abstract: | When the threat of entry by followers includes cooperative firms, the maximum fixed cost that a profit maximizing leader can endure is endogenous. The aggressive strategy required for entry deterrence curtails the leader’s expected profit and can discourage its initial entry. In such circumstances a cooperative firm may yet be viable, despite having a cost handicap and no first-mover advantage. |
| Keywords: | cooperatives, endogenous entry, entry deterrence, nonconvexity. JEL codes: L22, P13 |
| Date: | 2014–05 |
| URL: | http://d.repec.org/n?u=RePEc:ias:fpaper:14-wp547&r=com |
| By: | Joaquin Coleff; Daniel Garcia |
| Abstract: | Abstract: We analyze the optimal provision of information in a procurement auction with horizontally differentiated goods. The buyer has private information about her preferred location on the product space and has access to a costless communication device. A seller who pays the entry cost may submit a bid comprising a location and a minimum price. We characterize the optimal information structure and show that the buyer prefers to attract only two bids. Further, additional sellers are inefficient since they reduce total and consumer surplus, gross of entrycosts. We show that the buyer will not find it optimal to send public information to all sellers. On the other hand, she may prot from setting a minimum price and that a severe hold-up problem arises if she lacks commitment to set up the rules of the auction ex-ante. |
| Date: | 2013–09–02 |
| URL: | http://d.repec.org/n?u=RePEc:col:000092:011010&r=com |
| By: | Satoh, Atsuhiro; Tanaka, Yasuhito |
| Abstract: | We analyze Bertrand and Cournot equilibria in an asymmetric oligopoly with more than two firms in which the firms produce differentiated substitutable goods and seek to maximize their relative profits instead of their absolute profits. Assuming linear demand functions and constant marginal costs we show the following results. If the marginal cost of a firm is lower (higher) than the average marginal cost over the industry, its output at the Bertrand equilibrium is larger (smaller) than that at the Cournot equilibrium, and the price of its good at the Bertrand equilibrium is lower (higher) than that at the Cournot equilibrium. |
| Keywords: | relative profit maximization, asymmetric oligopoly, Cournot and Bertrand equilibria |
| JEL: | D43 |
| Date: | 2014–05–11 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:55883&r=com |
| By: | Satoh, Atsuhiro; Tanaka, Yasuhito |
| Abstract: | We study the relation between a Cournot equilibrium and a Bertrand equilibrium in an \emph{asymmetric} duopoly with differentiated goods in which each firm maximizes its relative profit that is the difference between its profit and the profit of the rival firm. Both demand and cost functions are linear but asymmetric, that is, demand functions for the goods are asymmetric and the firms have different marginal cots. We will show that a Cournot equilibrium and a Bertrand equilibrium coincide even in an asymmetric duopoly. |
| Keywords: | asymmetric duopoly, relative profit maximization, equivalence of Cournot and Bertrand equilibria |
| JEL: | D43 |
| Date: | 2014–05–11 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:55895&r=com |
| By: | Satoh, Atsuhiro; Tanaka, Yasuhito |
| Abstract: | We consider a simple model of the choice of strategic variables under relative profit maximization by firms in an asymmetric oligopoly with differentiated substitutable goods such that there are three firms, Firm 1, 2 and 3, demand functions are linear and symmetric, marginal costs are constant, there is no fixed cost, Firm 2 and 3 have the same cost function, but Firm 1 has a different cost function. In such a model we show that there are two pure strategy sub-game perfect equilibria. One is such that all firms choose the outputs as their strategic variables, and the other is such that Firm 2 and 3 choose the outputs as their strategic variables, and Firm 1 chooses the price as its strategic variable. |
| Keywords: | relative profit maximization; asymmetric oligopoly; choice of strategic variables |
| JEL: | D43 |
| Date: | 2014–05–11 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:55886&r=com |
| By: | Satoh, Atsuhiro; Tanaka, Yasuhito |
| Abstract: | We study the equilibrium with quantity setting behavior and price setting behavior of firms in duopoly under relative profit maximization with constant conjectural variations, and show mainly the following results. 1) Conjectural variations of firms are irrelevant to the equilibrium of a duopoly. 2) Quantity setting behavior and price setting behavior are equivalent with any conjectural variation of each firm. 3) Any pair of conjectural variations of firms which satisfies some relation is consistent. In particular, if firms have the same cost functions or the cost functions are linear, and both firms determine the outputs or both firms determine the prices, any conjectural variations which are common to both firms are consistent. Therefore, there are multiple consistent conjectures. |
| Keywords: | duopoly, relative profit maximization, conjectural variation, consistent conjecture |
| JEL: | D43 |
| Date: | 2014–05–11 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:55881&r=com |
| By: | Satoh, Atsuhiro; Tanaka, Yasuhito |
| Abstract: | We study the Bertrand equilibrium in duopoly in which two firms produce a homogeneous good under quadratic cost functions, and they seek to maximize the weighted sum of their absolute and relative profits. We show that there exists a range of the equilibrium price in duopolistic equilibria. This range of equilibrium price is narrower and lower than the range of the equilibrium price in duopolistic equilibria under pure absolute profit maximization, and the larger the weight on the relative profit, the narrower and lower the range of the equilibrium price. In this sense relative profit maximization by the firms is more aggressive than absolute profit maximization. |
| Keywords: | Bertrand equilibrium, quadratic cost function, relative profit maximization |
| JEL: | D43 |
| Date: | 2014–05–11 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:55893&r=com |
| By: | Tanaka, Yasuhito |
| Abstract: | We study the choice of strategic variables by firms in a duopoly in which two firms produce differentiated substitutable goods and each firm maximizes its relative profit that is the difference between its profit and the profit of the rival firm. We consider a two stage game such that in the first stage the firms choose their strategic variables and in the second stage they determine the values of their strategic variables. We show that when the firms maximize their relative profits, the choice of strategic variables is irrelevant to the outcome of the game in the sense that the equilibrium outputs, prices and profits of the firms are the same in all situations, and so any combination of strategy choice by the firms constitutes a sub-game perfect equilibrium in the two stage game. We assume that demand functions for the goods are symmetric and linear, the marginal costs of the firms are common and constant, and the fixed costs are zero. |
| Keywords: | duopoly, relative profit maximization, choice of strategic variables |
| JEL: | D43 |
| Date: | 2014–05–11 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:55891&r=com |
| By: | Tanaka, Yasuhito |
| Abstract: | In this note we investigate the relation between a Cournot equilibrium and a Bertrand equilibrium in a duopoly with differentiated goods in which each firm maximizes its relative profit that is the difference between its profit and the profit of the rival firm. We will show that when firms maximize relative profits, a Cournot equilibrium and a Bertrand equilibrium coincide, and the equilibrium outputs under relative maximization is larger than both of the equilibrium outputs at the Cournot equilibrium and the Bertrand equilibrium under absolute profit maximization. We assume that demand functions for the goods of the firms are linear, the marginal costs of the firms are constant and the fixed costs are zero. |
| Keywords: | relative profit maximization, duopoly, Cournot and Bertrand equilibria |
| JEL: | D43 |
| Date: | 2014–05–11 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:55890&r=com |
| By: | Tanaka, Yasuhito |
| Abstract: | We study the Stackelberg equilibrium in a symmetric duopoly with differentiated goods in which each firm maximizes its relative profit that is the difference between its profit and the profit of the rival firm. We show that the equilibrium output and price of the good of the leader and those of the follower are equal, that is, the role of leader or follower is irrelevant to the equilibrium, and the equilibrium outputs and prices do not change between the case where the firms are quantity setting firms and the case where the firms are price setting firms. We assume that demand functions are linear and symmetric, the marginal costs of the firms are common and constant, and the fixed costs are zero. |
| Keywords: | differentiated duopoly, relative profit maximization, Stackelberg model, irrelevance of leadership |
| JEL: | D43 |
| Date: | 2014–05–11 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:55887&r=com |
| By: | Linda Cohen (Department of Economics, University of California-Irvine); Amihai Glazer (Department of Economics, University of California-Irvine) |
| Abstract: | This paper presents a mechanism inducing costly research and innovation in the absence of intellectual property rights. The mechanism relies on forward contracting between the provider of the innovation and firms or individuals that benefit from the pecuniary effects of the innovation, rather than from its direct use. Applied to innovation as a non-discrete public good, the mechanism resolves time consistency, agency, and free-riding problems, and provides an incentive for ex post efficient pricing. |
| Keywords: | Innovation; Public goods; Mechanism design; Patents; Forward contracts |
| Date: | 2014–04 |
| URL: | http://d.repec.org/n?u=RePEc:irv:wpaper:131405&r=com |
| By: | Professor Bronwyn Hall |
| Abstract: | � Abstract A surprisingly small number of innovative firms use the patent system. In the UK, the share of firms patenting among those reporting that they have innovated is about 4%. Survey data from the same firms support the idea that they do not consider patents or other forms of registered IP as important as informal IP for protecting inventions. We show that there are a number of explanations for these findings: most firms are SMEs, many innovations are new to the firm, but not to the market, and many sectors are not patent active. We find evidence pointing to a positive association between patenting and innovative performance measured as turnover due to innovation, but not between patenting and subsequent employment growth. The analysis relies on a new integrated dataset for the UK that combines a range of data sources into a panel at the enterprise level. |
| Date: | 2013–05 |
| URL: | http://d.repec.org/n?u=RePEc:nsr:niesrd:11449&r=com |
| By: | ZHANG Hong-yong |
| Abstract: | This study empirically analyzes the effect of agglomeration economies on firm-level product innovation (new products), using Chinese firm-level data from 1998 to 2007. In terms of new product introduction and new product output, Chinese firms benefit from urbanization economies (as measured by the number of workers in other industries in the same city and by the diversity of industries in the same city). Conversely, there were no positive effects of localization economies (as measured by the number of other workers working for neighboring firms in the same industry and in the same city). These results suggest that, in China, urbanization economies play an important role in fostering product innovation by urban size and diversity. |
| Date: | 2014–05 |
| URL: | http://d.repec.org/n?u=RePEc:eti:dpaper:14022&r=com |
| By: | Hyo Won Lee (Yonsei University); Yun Jeong Choi (Yonsei University) |
| Abstract: | The corporate leniency program has played an important role in detecting cartels that damages consumer welfare and competition. This study investigates the impacts of Korea¡¯s leniency revision in 2005 on cartel stability by using a Poisson regression. The estimation results show that the new leniency program increases the detection rate and decreases the formation rate, confirming the validity of the theoretical model of Miller(2008). Therefore, the effectiveness of the full leniency to the first applicants under the new leniency program provides some policy implication on the revision direction of the leniency program. |
| Keywords: | Collusion, Corporate Leniency Program, Poisson regression, Cartel duration |
| JEL: | C72 D43 K21 L41 |
| Date: | 2014–04 |
| URL: | http://d.repec.org/n?u=RePEc:yon:wpaper:2014rwp-65&r=com |
| By: | Ben Mermelstein; Volker Nocke; Mark A. Satterthwaite; Michael D. Whinston |
| Abstract: | We study optimal merger policy in a dynamic model in which the presence of scale economies implies that firms can reduce costs through either internal investment in building capital or through mergers. The model, which we solve computationally, allows firms to invest or propose mergers according to the relative profitability of these strategies. An antitrust authority is able to block mergers at some cost. We examine the optimal policy when the antitrust authority can commit to a policy rule and when it cannot commit, and consider both consumer value and aggregate value as possible objectives of the antitrust authority. We find that optimal policy can differ substantially from what would be best considering only welfare in the period the merger is proposed. We also find that the ability to commit can lead to a significant welfare improvement. In general, antitrust policy can greatly affect firms' optimal investment behavior, and firms' investment behavior can in turn greatly affect the antitrust authority's optimal policy. |
| JEL: | L40 L41 |
| Date: | 2014–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:20051&r=com |
| By: | Cosnita-Langlais, Andreea (University Paris Ouest Nanterre La Défense); Sørgard, Lars (Dept. of Economics, Norwegian School of Economics and Business Administration) |
| Abstract: | This paper deals with the enforcement of merger policy, and aims to study how merger emedies affect the deterrence accomplished by controlling mergers. We determine the optimal frequency of investigations launched by the agency, and identify situations where the introduction of remedies can lead to a lower welfare. We find that the potential for remedies can make it less likely that the worst mergers are deterred. Even if the worst mergers are deterred, the potential for remedies can lead to more mergers with a negative impact to be proposed, and eventually to more decision errors by the antitrust authorities. |
| Keywords: | Merger control; merger remedies; enforcement; deterrence. |
| JEL: | K21 L41 |
| Date: | 2014–03–25 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:nhheco:2014_007&r=com |
| By: | Franz Hackl; Michael E. Kummer; Rudolf Winter-Ebmer; Christine Zulehner |
| Abstract: | We analyze the interaction between market structure and market performance and how it varies over the product cycle. To account for the potential endogeneity in this relation, we use an instrumental variable approach. We combine data from the largest Austrian online market for price comparisons with retail data on wholesale prices provided by a major hardware producer for consumer electronics. Our results show that instrumenting is important for estimating the empirical effect of competition on the markup of the price leader. One more firm in the market is associated with a reduction of the price leader’s markup which is equivalent to competition between existing firms for an additional three weeks in the product life cycle. Our results support search theoretic models and contradict models of monopolistic competition. Moreover our results support the existence of price dynamics over the product cycle. They also highlight the substitutability between newly innovated and old expiring technologies and how it varies with respect to competitors’ and own brand innovations. |
| Keywords: | Retailing, Product Life cycle, Market Structure, Market Performance, Markup, Price Dispersion |
| JEL: | L11 L13 L81 D43 |
| Date: | 2014–01 |
| URL: | http://d.repec.org/n?u=RePEc:jku:econwp:2014_04&r=com |
| By: | Xavier Fageda (Faculty of Economics, University of Barcelona) |
| Abstract: | This paper estimates a frequency equation to explain the determinants of network airline service levels at their hub airports. Drawing on European data for 2002-2013, we find that network airlines reduce frequencies when the share of low-cost airlines increases both on the route and at the hub airport. On the contrary, frequency choices of network airlines are not affected by competition from low-cost airlines operating in nearby secondary airports. We also find some evidence that mergers in Europe may result in a re-organization of the route structure in favor of the hubs of the larger airline. |
| Keywords: | hub airports, competition, network airlines, low-cost airlines JEL classification: |
| Date: | 2014–05 |
| URL: | http://d.repec.org/n?u=RePEc:ira:wpaper:201414&r=com |
| By: | Daniel Bennett; Wesley Yin |
| Abstract: | This study examines the effect of chain store entry on drug quality and prices in the retail pharmacy market in Hyderabad, India. In contrast to prevailing mom-and-pop pharmacies, chains exploit scale economies to offer high-quality drugs at lower cost. With a unique data set and a natural experiment methodology, we show that chain entry leads to a relative 5 percent improvement in drug quality and a 2 percent decrease in prices at incumbent retailers. These changes do not depend on the socioeconomic status of consumers, suggesting that chain entry improves consumer welfare throughout the market. Despite the likely role of asymmetric information in this market, we show that consumers partially infer these quality improvements. Our findings suggest that in markets with asymmetric information, organizational technologies such as chains may play an important role translating greater demand into higher quality. |
| JEL: | I1 L15 O1 |
| Date: | 2014–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:20091&r=com |
| By: | Meersman, Hilde (University of Antwerp); Strandenes, Siri Pettersen (Dept. of Economics, Norwegian School of Economics and Business Administration); Van de Voorde, Eddy (University of Antwerp) |
| Abstract: | Price level and price transparency are input to shippers’ choice of supply chain and transport mode. In this paper, we analyse current port pricing structures in the light of the pricing literature and consider opportunities for improvement. We present a detailed overview of pricing criteria, who sets prices and who ultimately foots the bill for port-of-call charges, cargo-handling fees and congestion charges. Current port pricing practice is based on a rather linear structure and fails to incorporate modern pricing tools such as price differentiation or revenue management. Consequently, ports apply neither profit maximising pricing nor pricing designed to exploit available capacity more efficiently. |
| Keywords: | Infrastructure pricing; pricing models; seaports. |
| JEL: | D49 R48 |
| Date: | 2014–04–10 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:nhheco:2014_014&r=com |
| By: | Osborne, Theresa; Pachon, Maria Claudia; Araya, Gonzalo Enrique |
| Abstract: | In Central America, like many other developing regions, high transport costs are cited as an impediment to trade and economic growth. Prices for road freight transport -- a key mode of transport comprising a significant share of total transport costs for intra- and extra-regional trade, are particularly high. Averaging 17 cents per ton-kilometer on main trading routes, these rates stand out even relative to other inefficient developing country markets (e.g., central and west Africa). However, the policy and other factors associated with increased prices have not been well understood. This paper uses data from a survey of trucking companies operating on the region's main trade corridors to analyze the determinants of firms'costs of providing service, as well as the effect of market structure and competition on prices. The analysis finds that whereas improved cost efficiencies could reduce prices by 3 cents per ton-kilometer, increased competition on national routes -- those entirely within a nation's borders -- would reduce prices by significantly more. Although there are many trucking companies, including small and somewhat informal operators, the degree of competition varies by route because of domestic restraints on competition and the prohibition on international competition on national routes. The paper shows empirically that imperfect competition accounts for at least 35 percent of mean prices on national routes. In addition, a lack of competition is likely to explain the persistence of an inefficient market structure, as well as a lack of innovation to reduce costs and enhance the quality of service. |
| Keywords: | Transport Economics Policy&Planning,Markets and Market Access,Economic Theory&Research,Roads&Highways,Airports and Air Services |
| Date: | 2014–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:6844&r=com |
| By: | Matthew Chesnes; Weijia (Daisy) Dai; Ginger Zhe Jin |
| Abstract: | Increased competition from the Internet has raised a concern of product quality for online prescription drugs. The Food and Drug Administration (FDA) prohibits the importation of unapproved drugs into the US and the National Association of Boards of Pharmacy (NABP) emphasizes their illegality and cites examples of unsafe drugs from rogue pharmacies. An investigation by the Department of Justice (DOJ) revealed that Google was allowing unapproved Canadian pharmacies to advertise on their search engine and target US consumers. Because of heightened concern to protect consumers, Google agreed to ban non-NABP-certified pharmacies from their sponsored search listings in February 2010 and settled with the DOJ in August 2011. We study how the ban on non-NABP-certified pharmacies from sponsored search listings affects consumer search on the Internet. Using click-through data from comScore, we find that non-NABP-certified pharmacies receive fewer clicks after the ban, and this effect is heterogeneous. In particular, pharmacies not certified by the NABP, but certified by other sources (other-certified sites), experience a reduction in total clicks, and some of their lost paid clicks are replaced by organic clicks. These effects do not change significantly after the DOJ settlement. In contrast, pharmacies not certified by any of the four major certification agencies suffer a greater reduction in both paid and organic clicks, and the reduction was exacerbated after the DOJ settlement. These results suggest that the ban has increased the search cost for other-certified sites, but at least some consumers overcome the search cost by switching from paid to organic links. In addition to search cost, the ban may have increased concerns for uncertified sites and discouraged consumers from reaching them via both paid and organic links. |
| JEL: | D83 I18 K32 L81 |
| Date: | 2014–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:20088&r=com |
| By: | Lester, Benjamin (Federal Reserve Bank of Philadelphia); Visschers, Ludo (University of Edinburgh); Wolthoff, Ronald (University of Toronto) |
| Abstract: | In a market in which sellers compete by posting mechanisms, we allow for a general meeting technology and show that its properties crucially affect the mechanism that sellers select in equilibrium. In general, it is optimal for sellers to post an auction without a reserve price but with a fee, paid by all buyers who meet with the seller. However, we define a novel condition on meeting technologies, which we call invariance, and show that meeting fees are equal to zero if and only if this condition is satisfied. Finally, we discuss how invariance is related to other properties of meeting technologies identified in the literature. |
| Keywords: | Search frictions; Matching function; Meeting technology; Competing mechanisms; |
| JEL: | C78 D44 D83 |
| Date: | 2014–04–23 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedpwp:14-15&r=com |
| By: | David Bardey |
| Abstract: | Resumen Este trabajo revisa la literatura que trata del funcionamiento de la competencia en el sector de la salud cuando este está organizado alrededor de una managed care competition. Se abordan en una primera parte los problemas de asimetría de información que caracterizan los mercados de aseguramiento en salud y aquellos en los cuales intervienen los prestadores de salud. La segunda parte se focaliza en los aspectos de organización industrial del sector salud, como los de competencia monopolística para el mercado de los médicos, el oligopolio bilateral que forman aseguradores y prestadores y los posibles aspectos de mercados de dos lados. Este documento concluye con algunas recomendaciones de política para el sistema de salud colombiano. En particular se contempla la posibilidad de introducir, al margen, una competencia en primas entre EPS para que la competencia entre ellas sea más efectiva. En el contexto actual, el canal de transmisión de las ganancias de eficiencia que generan las EPS está obstruido. Por ende, la competencia en primas permitiría una mejor transmisión de estas eficiencias. |
| Keywords: | Mercados de salud, política de la competencia y asimetrías de información |
| JEL: | I11 I18 L10 L13 |
| Date: | 2014–02–07 |
| URL: | http://d.repec.org/n?u=RePEc:col:000089:011002&r=com |
| By: | Ayadi, Mohamed; Mattoussi, Wided |
| Abstract: | In this paper, we examine the pattern of spatial concentration of manufacturing industries observed in Tunisia and explore the factors driving firms. choices of location at the provincial level. We consider specialization and competition indicators as the |
| Keywords: | industrial concentration, concentration index, competition index, Tunisia |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:unu:wpaper:wp2014-072&r=com |
| By: | Matias Busso; Sebastian Galiani |
| Abstract: | This paper provides the first experimental evidence on the effect of increased competition on the prices and quality of goods. We rely on an intervention that randomized the entry of 61 retail firms (grocery stores) into 72 local markets in the context of a conditional cash transfer program that serves the poor in the Dominican Republic. Six months after the intervention, product prices in the treated districts had decreased by about 6%, while product quality and service quality had not changed. Using a theoretical model, we arrive at the conclusion that the poor segments of the population in these markets care the most about prices and much less about quality. Our results are also informative to the design of social policies. They suggest that policymakers should pay attention to supply conditions even when the policies in question will only affect the demand side of the market. |
| JEL: | D4 I3 L1 |
| Date: | 2014–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:20054&r=com |
| By: | David Encaoua (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris 1 - Panthéon-Sorbonne, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris) |
| Abstract: | Book's Review:Louis Kaplow, Competition Policy and Price Fixing, Princeton University Press, Princeton and Oxford, 2013 |
| Keywords: | collusive behavior: economic and legal approaches |
| Date: | 2014–04 |
| URL: | http://d.repec.org/n?u=RePEc:hal:cesptp:halshs-00989261&r=com |