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on Industrial Competition |
| By: | aniko oery (Yale); Andrzej Skrzypacz (Stanford University); William Fuchs (University of California - Berkeley) |
| Abstract: | We analyze price transparency in a dynamic market with private information and correlated values. Uninformed buyers compete inter- and intra-temporarily for a good that is sold by an informed seller suering a liquidity shock. We contrast public versus pri- vate price oers and show that equilibria coincide only if oers are infrequent. All equilibria with private oers Pareto-dominate the equilibrium with public oers. If not trading by a deadline im- poses an eciency loss, public oers induce a market breakdown for some time before the deadline; in contrast, trade never stops with private oers, creating a further benet of opacity. |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed015:73&r=com |
| By: | Gilad Sorek |
| Abstract: | Consumers' uncertainty regarding their future needs generates demand for options to utilize different products. Such options are commonly sold in the form of insurance. A prime example for option demand presents in health care markets and other repair markets. This work studies two-dimensional spatial competition between medical providers who choose their geographical location and medical-care specialization (i.e. product differentiation). Consumers know their geographical address but do not know their preferred medical treatment before getting sick. Providers make location and product choices and then compete by selling options to utilize their services (i.e. health insurance). I characterize two types of equilibria: one with Min-Min differentiation that is complete assimilation and the other with Min-Intermediate differentiation, in which both providers locate at the city center and product differentiation is efficient. In the first equilibrium each consumer buys insurance for one provider only and in the second all consumers are buying insurance for both providers. I further show that under regulated locations product differentiation first increases with regulated geographic distance and then it decreases. For intermediate regulated distance consumers who reside around the city center buy insurance for both providers and those at the city ends buy insurance only for the nearby provider. |
| Keywords: | Location; Product Differentiation; Option Demand |
| JEL: | I11 I13 L1 |
| Date: | 2015–06 |
| URL: | http://d.repec.org/n?u=RePEc:abn:wpaper:auwp2015-07&r=com |
| By: | Benjamin Eden (Vanderbilt University) |
| Abstract: | I use the Prescott (1975) hotels model to explain variations in price dispersion across goods sold by supermarkets in Chicago. I extend the theory to accounts for the monopoly power of chains and for non-shoppers. The main empirical finding is that the effect of demand uncertainty on price dispersion is highly significant and quantitatively important: More than 50% of the cross sectional standard deviation of log prices is due to demand uncertainty. I also find that price dispersion measures are negatively correlated with the average price but are not negatively correlated with the revenues from selling the good (across stores and weeks) and with the number of stores that sell the good. |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed015:44&r=com |
| By: | NISHITATENO Shuhei |
| Abstract: | The question of whether incumbent firms could deter new entrants in a more concentrated market has been a major concern by both antitrust authorities and industrial economists. This study is the first attempt to analyze the relationship between the market structure and entry in the intermediate goods market, utilizing unique data on auto parts transactions between automakers and auto parts suppliers in Japan during the period 1990-2010. The results suggest that there exists a U-shaped relationship between market concentration and entry, which sees entry decreasing and then increasing as markets concentrate. This result could emanate from a significant role of multi-product and multi-customer firms. |
| Date: | 2015–07 |
| URL: | http://d.repec.org/n?u=RePEc:eti:dpaper:15081&r=com |
| By: | Yuyu Zeng (VU University Amsterdam, the Netherlands); Harold Houba (VU University Amsterdam, the Netherlands); Gerard van der Laan (VU University Amsterdam, the Netherlands) |
| Abstract: | We extend the models in ("Competition in two-sided markets" of Armstrong (2006, <I>Rand Journal of Economics</I>) by adding within-group externalities. In the monopoly and duopoly cases, positive within-group externalities reduce the price of the own group. Negative externalities have an opposite price effect. In the case of a competitive bottleneck, we show by examples that within a certain range of parameter values, a novel phenomenon arises that the platform attracts more agents from one of the groups compared with the social optimum. |
| Keywords: | Competition economics; two-sided market |
| JEL: | D4 L4 |
| URL: | http://d.repec.org/n?u=RePEc:tin:wpaper:20150080&r=com |
| By: | Luis Aguiar (European Commission - JRC - IPTS); Jorg Claussen (Copenhagen Business School); Christian Peukert (University of Zurich) |
| Abstract: | Taking down copyright-infringing websites is a way to reduce consumption of pirated media content and increase licensed consumption. We analyze the consequences of the shutdown of the most popular German video streaming website - kino.to - in June 2011. Using individual-level clickstream data, we find that the shutdown led to significant but short-lived declines in piracy levels. The existence of alternative sources of unlicensed consumption, coupled with the rapid emergence of new platforms, led the streaming piracy market to quickly recover from the intervention and to limited substitution into licensed consumption. Our results therefore present evidence of a high elasticity of supply in the online movie piracy market, together with relatively low switching costs for users of copyright infringing platforms. The fact that the post-shutdown market structure was much more fragmented - and therefore more resistant to future interventions - further questions the effectiveness of the intervention. |
| Keywords: | Anti-Piracy Intervention, Copyright, Movie Industry, Natural Experiment |
| JEL: | K42 L82 O34 O38 |
| Date: | 2015–01 |
| URL: | http://d.repec.org/n?u=RePEc:ipt:decwpa:2015-01&r=com |
| By: | Gregory S. Crawford |
| Abstract: | Television is the dominant entertainment medium for hundreds of millions. This chapter surveys the economic forces that determine the production and consumption of this content. It presents recent trends in television and online video markets, both in the US and internationally, and describes the state of theoretical and empirical research on these industries. A number of distinct themes emerge, including the growing importance of the pay-television sector, the role played by content providers (channels), distributors, and negotiations between them in determining market outcomes, and concerns about the effects of market power throughout this vertical structure. It also covers important but unsettled topics including the purpose for and effects of both the old (Public Service Broadcasters) and the new (online video markets). Open theoretical and empirical research questions are highlighted throughout. |
| Keywords: | Economics, television, online video, public service broadcasting, advertising, pay television, bundling, bargaining, market power, net neutrality, foreclosure, policy |
| JEL: | L82 L86 L32 M37 C72 D40 L40 L50 |
| Date: | 2015–06 |
| URL: | http://d.repec.org/n?u=RePEc:zur:econwp:197&r=com |
| By: | Luis Aguiar (European Commission - JRC - IPTS); Joel Waldfogel (University of Minnesota - Carlson School of Management) |
| Abstract: | We explore the consequence of quality unpredictability for the welfare benefit of new products, using recent developments in recorded music as our context. Digitization has expanded consumption opportunities by giving consumers access to the "long tail" of existing products, rather than simply the popular products that a retailer might stock with limited shelf space. While this is clearly beneficial to consumers, the benefits are somewhat limited: given the substitutability among differentiated products, the incremental benefit of obscure products - even lots of them - can be small. But digitization has also reduced the cost of bringing new products to market, giving rise to a different sort of long tail, in production. If the appeal of new products is unpredictable at the time of investment, as is the case for cultural products as well as many others, then creating new products can have substantial welfare benefits. Technological change in the recorded music industry tripled the number of new products between 2000 and 2008. We quantify the effects of new music on welfare using an explicit structural model of demand and entry with potentially unpredictable product quality. Based on plausible forecasting models of expected appeal, a tripling of the choice set according to expected quality adds more than fifteen times as much consumer surplus as the usual long-tail benefits from a tripling of the choice set according to realized quality. |
| Keywords: | music, Welfare, Entry, Digitization, Recorded Music |
| JEL: | D60 L13 L82 O33 |
| Date: | 2015–02 |
| URL: | http://d.repec.org/n?u=RePEc:ipt:decwpa:2015-02&r=com |
| By: | Tianshu Sun; Susan Feng Lu; Ginger Zhe Jin |
| Abstract: | Shortage is common in many markets, such as those for human organs or blood, but the problem is often difficult to solve through price adjustment, given safety and ethical concerns. In this paper, we investigate whether market designers can use non-price methods to address shortage. Specifically, we study two methods that are used to alleviate shortage in the market for human blood. The first method is informing existing donors of a current shortage via a mobile message and encouraging them to donate voluntarily. The second method is asking the patient’s family or friends to donate in a family replacement (FR) program at the time of shortage. We are interested in both the short-run and long-run effects of these methods on blood supply. Using 447,357 individual donation records across 8 years from a large Chinese blood bank, we show that both methods are effective in addressing blood shortage in the short run but have different implications for total blood supply in the long run. Specifically, we find that a shortage message leads to significantly more donations among existing donors within the first six months but has no effect afterwards. In comparison, a family replacement program has a small positive effect in encouraging existing donors (who donated before the FR) to donate more blood voluntarily after their FR donation, but discourages no-history donors (whose first donation is the FR) from donating in the long run. We compare the effect and efficiency of these methods and discuss their applications under different scenarios to alleviate shortage. |
| JEL: | D83 I18 |
| Date: | 2015–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:21312&r=com |