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on Industrial Competition |
| By: | Roberto Burguet; Jozsef Sakovics |
| Abstract: | We present a model where …firms producing substitutes bid for inputs (especially labor) in a decentralized market. We show that downstream market power increases the intensity of competition for input through a new channel: local competitive foreclosure. In our model each unit of input (worker) is sold in a separate local market and …rms try not just to get it, but also to keep it from their rivals. This externality leads to …firms targeting the same units of input and the price of these is bid up. This effect mitigates the output reducing effect of downstream market power and in the limit (linear Cournot with constant returns) can even restore efficiency. As a result of coordination, there exist further equilibria, with prices above cost even with price taking suppliers –in the labor application this leads to involuntary unemployment. When, instead of targeting, fi…rms post prices, coordination no longer plays a role and we have a unique(!) equilibrium that clears the market, still internalizing the externality. Finally, we show that targeting can also result in endogenous market segmentation and price/wage differentials. |
| Keywords: | competitive foreclosure, efficiency wage, involuntary unemployment, all-win auction |
| JEL: | D43 L11 L13 |
| Date: | 2016–01–11 |
| URL: | http://d.repec.org/n?u=RePEc:edn:esedps:266&r=com |
| By: | Gabriel Garber; Márcio Issao Nakane |
| Abstract: | We study two-sided markets where there are buyers and sellers, with heterogeneous participants on each side. Buyers care about the quality of the good purchased, but sellers care only about the price they get. When there is informational asymmetry about types between the sides, the role of a platform as a certifier that guarantees a minimum quality becomes central to the transactions. We analyze first-best (perfect information) and pooling equilibria without platforms and a monopolist platform that coexists with an external pooling. We also show there is no equilibrium in a simultaneous game with two platforms. |
| Keywords: | Platforms; two-sided markets; heterogeneous agents; certification. |
| JEL: | D42 D43 D82 D85 L12 L13 L15 L81 |
| Date: | 2016–01–29 |
| URL: | http://d.repec.org/n?u=RePEc:spa:wpaper:2016wpecon2&r=com |
| By: | Pierre Andreoletti (MAPMO - Mathématiques - Analyse, Probabilités, Modélisation - Orléans - UO - Université d'Orléans - CNRS - Centre National de la Recherche Scientifique); Pierre Gazé (LEO - Laboratoire d'Economie d'Orléans - CNRS - Université d'Orléans); Maxime Menuet (LEO - Laboratoire d'Economie d'Orléans - CNRS - Université d'Orléans) |
| Abstract: | We model a specific two-sided monopoly market in which agents can switch from a side to the other. We define two periods of time. In the first period, agents buy the platform services on each side and in the second period of time, they can possibly enhance their satisfaction by going to the other face of the platform. We analyze the link between mobility, consumer’s utility, prices and profit. We show that mobility is a valuable feature which can be compared with an increase of product quality. Finally, the firm is able to capture the mobility in its monopoly’s profit. The relative size of each group then appears as a strategical variable for the firm. |
| Keywords: | externalities, side-switching, two-sided markets |
| Date: | 2016–01–06 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-01251365&r=com |
| By: | Abbring, Jaap H; Campbell, Jeffrey R; Tilly, Jan; Yang, Nan |
| Abstract: | This paper develops an econometric model of oligopoly dynamics that can be estimated very quickly from market-level observations of demand shifters and the number of producers. We show that the model has an essentially unique symmetric Markov-perfect equilibrium and provide an algorithm that calculates it quickly. We embed this algorithm in a nested fixed point estimation procedure and apply the result to U.S. local cinema markets. Estimates from County Business Patterns data point to very tough competition for film exhibition rights. Sunk costs make the industry's transition following a permanent demand shock last 10 to 15 years. |
| Keywords: | counterfactual policy analysis; demand uncertainty; dynamic oligopoly; firm entry and exit; nested fixed point estimator; sunk costs; toughness of competition |
| JEL: | C25 C73 L13 |
| Date: | 2016–01 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:11069&r=com |
| By: | Yannis Katsoulacos (Athens University of Economics and Business, Athens, Greece); Evgenia Motchenkova (VU University Amsterdam, the Netherlands); David Ulph (University of St Andrews, St Andrews, Fife, Great Britain) |
| Abstract: | This paper develops a model of the birth and death of cartels in the presence of enforcement activities by a Competition Authority (CA). We distinguish three sets of interventions: (a) detecting, prosecuting and penalizing cartels; (b) actions that aim to stop cartel activity in the short-term, immediately following successful prosecution; (c) actions that aim to prevent the re-emergence of prosecuted cartels in the longer term. The last two intervention activities have not been analyzed in the existing literature. In addition we take account of the structure and toughness of penalties. In this framework the enforcement activity of a CA causes industries in which cartels form to oscillate between periods of competitive pricing and periods of cartel pricing. We determine the impact of CA activity on deterred, impeded, and suffered harm. We derive measures of both the total and the marginal effects on welfare resulting from competition authority interventions and show how these break down into measures of the Direct Effect of interventions (i.e. the effect due to cartel activity being impeded) and two Indirect/Behavioral Effects – on Deterrence and Pricing. Finally, we calibrate the model and estimate the fraction of the harm that CAs remove as well as the magnitude of total and marginal welfare effects of anti-cartel interventions. |
| Keywords: | Antitrust Enforcement, Antitrust Law, Cartel, Oligopoly, Repeated Games |
| JEL: | L4 K21 D43 C73 |
| Date: | 2016–01–07 |
| URL: | http://d.repec.org/n?u=RePEc:tin:wpaper:20160002&r=com |
| By: | David P. Byrne (University of Melbourne); Nicolas de Roos (University of Sydney) |
| Abstract: | This paper develops novel direct tests for search behavior in retail gasoline markets. We exploit a unique market-level dataset that allows us to directly measure search intensity with daily web traffic data from a gasoline price reporting website and perfectly measure daily changes in price levels and dispersion. Our simple yet powerful tests provide strong evidence of both cross-sectional and intertemporal price search behavior. |
| Keywords: | search, price dispersion, retail gasoline |
| JEL: | D8 L8 |
| Date: | 2015–03 |
| URL: | http://d.repec.org/n?u=RePEc:mlb:wpaper:1197&r=com |
| By: | Alex Dickson (Department of Economics, University of Strathclyde); Ian A. MacKenzie (School of Economics, The University of Queensland) |
| Abstract: | Markets for pollution have become a popular regulatory instrument. Yet these markets are often highly concentrated, which may lead to strategic behavior by all participants. In this article we investigate the implications of strategic trade in pollution permits. The permit market is developed as a strategic market game, where all firms are allowed to behave strategically and their roles as buyers or sellers of permits are determined endogenously with price-mediated trade. In a second stage, firms transact on a product market and we allow for a variety of market structures. Our framework establishes the endogenous determination of equilibrium price, market structure, and levels of exchange in the permit market. |
| Keywords: | Pollution market, Market power, Strategic market game |
| JEL: | C72 D43 D51 L13 Q53 |
| Date: | 2016–01–29 |
| URL: | http://d.repec.org/n?u=RePEc:qld:uq2004:554&r=com |
| By: | Larbi Alaoui (Universitat Pompeu Fabra and Barcelona Graduate School of Economics); Fabrizio Germano (Universitat Pompeu Fabra and Barcelona Graduate School of Economics) |
| Abstract: | We develop a theory of news coverage in environments of information abundance that include both new and traditional news media, from online and print newspapers to radio and television. News consumers are time-constrained and browse through news items that are available across competing outlets, choosing which outlets to access and which stories to read or skip. Media firms are aware of consumers’ preferences and constraints, and decide on rankings of news items that maximize their profits. We find that the news consumed in equilibrium is highly sensitive to the details of the environment. We show that even when readers and outlets are rational and unbiased, readers may consume more than they would like to, and the news items they consume may be significantly different from the ones they prefer. Important news items may be crowded out. Next, we derive implications on diverse aspects of current media, including a rationale for tabloid news, a rationale for why readers prefer like-minded news, and how advertising can contribute to crowding out news. We also analyze methods for restoring reader-efficient standards and discuss the political economy implications of the theory. |
| Keywords: | news markets,time constrained consumers,digital media,news coverage,public media |
| Date: | 2015–12 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-01251522&r=com |
| By: | Xavier Freixas; Kebin Ma |
| Abstract: | This paper re-examines the classical issue of the possible trade-offs between banking competition and financial stability by highlighting different types of risk and the role of leverage. We show that competition can affect portfolio risk, insolvency risk, liquidity risk, and systemic risk differently. The effect depends crucially on a bank’s type of funding (retail deposits vs. wholesale debts) and whether leverage is exogenous or endogenous. In particular, we argue that while competition might increase financial stability in a classical originate-to-hold banking industry, the opposite can be true for an originate-to-distribute banking industry with a large fraction of market short-term funding. |
| Keywords: | banking competition, financial stability, leverage |
| JEL: | G21 G28 |
| Date: | 2015–10 |
| URL: | http://d.repec.org/n?u=RePEc:bge:wpaper:874&r=com |