nep-com New Economics Papers
on Industrial Competition
Issue of 2016‒06‒09
twenty papers chosen by
Russell Pittman
United States Department of Justice

  1. Scoping the Sharing Economy: Origins, Definitions, Impact and Regulatory Issues By Cristiano Codagnone; Bertin Martens
  2. Communication in Vertical Markets: Experimental Evidence By Claudia Möllers; Hans-Theo Normann; Christopher M. Snyder
  3. Energy Prices, Pass-Through, and Incidence in U.S. Manufacturing* By Sharat Ganapati; Joseph S. Shapiro; Reed Walker
  4. Information Exchanges among Firms and Their Welfare Implications iPart ‡T) : The Dual Relations between the Cournot and Bertrand Models By Yasuhiro Sakai
  5. Firm Growth by Product Innovation in the Presence of the Product Life Cycle By MURAKAMI Hiroki
  6. Optimal Licensing Contracts and Market Competition By Xia, Tian; Guan, Zhengfei
  7. Innovation and competition in Internet and mobile banking: an industrial organization perspective By Mariotto, Carlotta; Verdier, Marianne
  9. Impacts from a retail grocery acquisition: Do national and store brand prices respond differently? By Secor, William; Çakır, Metin
  10. A new approach to identify market power along agri-food supply chains – the German dairy supply chain By Grau, Aaron; Hockmann, Heinrich
  11. Private label market power: evidence from Italian dairy retailing By Tiboldo, Giulia; Lopez, Rigoberto; Hirsch, Stefan
  12. Energy Shock and Price Adjustment: National Brands vs. Private Labels of Retail Milk Products By Xun, Li; Rui, Wang
  13. Recovering Marginal Willingness to Pays from Hedonic Prices under Imperfect Competition By Huang, Ju-Chin
  14. Non-Sequential Search, Competition and Price Dispersion in Retail Electricity By Klaus Gugler; Sven Heim; Mario Liebensteiner
  15. Ownership and the Price of Residential Electricity: Evidence from the United States, 1935-1940 By Carl T. Kitchens; Taylor Jaworski
  16. Reduced Tariffs of Net Energy Metering: More Competitive Retail Rates of Electric Utilities Come Next? By Ty, Dyna; Bergstrom, John C.
  17. Spatial Competition and Welfare Ranking of Biofuel Policies By Sesmero, Juan; Balagtas, Joseph
  18. Digital Copyright Infringement in Emerging Markets: Countering Piracy through Smarter Search Engine De-listing By Kai-Lung Hui; James Kwok
  19. Does Competition Eliminate Discrimination? Evidence from the Commercial Sex Market in Singapore By Huailu Li; Kevin Lang; Kaiwen Leong
  20. Surge Pricing and Price Gouging: Public Misunderstanding as a Market Imperfection By Steven Suranovic

  1. By: Cristiano Codagnone (European Commission – JRC - IPTS); Bertin Martens (European Commission – JRC - IPTS)
    Abstract: This report selectively draws on the systematic review of a large set of data sources, which is presented elsewhere, and comprises 430 secondary sources (Codagnone, 2016). The report also provides a critical overview of key analytical, empirical, and normative dimensions of the ‘sharing economy’. It reviews both the rhetorical and controversial debates currently surrounding the topics and the available empirical evidence in order to sharpen our understanding of relevant policy and regulatory issues. The broad umbrella term 'sharing economy' is critically assessed and a typology developed that identifies the commercial 'peer to peer' sharing economy as the main focus of both controversies and policy-relevant issues. Empirical evidence of the benefits and costs of the sharing economy and its implications for sustainability and employment is very limited and inconclusive, particularly as regards the European landscape. This critical review, hence, shows that, as yet, there are no unambiguous answers to some of the fundamental questions about the ‘sharing economy’. The available research is too limited and patchy to give us a comprehensive and coherent picture. This report’s main contribution is to clear some of the conceptual and empirical fog around the ‘sharing economy’ and to identify where possible answers might be found in the future. It is suggested that the definition of sharing platforms should focus on P2P activities, as most of the policy concerns are found there. These include regulatory and consumer protection issues resulting from the informal production of services, potentially unfair competition with formal B2C service providers, and questions related to dominance and market power of P2P platform operators as commercial businesses.
    Keywords: multi-sided markets, collaborative economy, sharing economy, peer-to-peer markets
    JEL: F15
    Date: 2016–05
  2. By: Claudia Möllers; Hans-Theo Normann; Christopher M. Snyder
    Abstract: When an upstream monopolist supplies several competing downstream firms, it may fail to monopolize the market because it is unable to commit not to behave opportunistically. We build on previous experimental studies of this well-known commitment problem by introducing communication. Allowing the upstream firm to chat privately with each downstream firm reduces total offered quantity from near the Cournot level (observed in the absence of communication) halfway toward the monopoly level. Allowing all three firms to chat together openly results in complete monopolization. Downstream firms obtain such a bargaining advantage from open communication that all of the gains from monopolizing the market accrue to them. A simple structural model of Nash bargaining fits the pattern of shifting surpluses well. We conclude with a discussion of the antitrust implications of open communication in vertical markets.
    JEL: C70 C90 K21 L42
    Date: 2016–05
  3. By: Sharat Ganapati; Joseph S. Shapiro; Reed Walker
    Abstract: This paper studies how increases in energy input costs for production are split between consumers and producers via changes in product prices (i.e., pass-through). We show that in markets characterized by imperfect competition, marginal cost pass-through, a demand elasticity, and a price-cost markup are sufficient to characterize the relative change in welfare between producers and consumers due to a change in input costs. We find that increases in energy prices lead to higher plant-level marginal costs and output prices but lower markups. This suggests that marginal cost pass-through is incomplete, with estimates centered around 0.7. Our confidence intervals reject both zero pass-through and complete pass-through. We find heterogeneous incidence of changes in input prices across industries, with consumers bearing a smaller share of the burden than standards methods suggest.
    JEL: L11 H22 H23 Q40 Q54
    Date: 2016–01
  4. By: Yasuhiro Sakai (Faculty of Economics, Shiga University)
    Abstract: This long series of papers consist of three parts. Part I is concerned with the basic dual relations between the Cournot and Bertrand models. Part II begins to deal with the world of risk and uncertainty, with a discussion of the Cournot duopoly model with a common demand risk as a starting point. It then deals with other types of duopoly models with a common risk. Part III discusses more complicated problems such as private risks and oligopoly models. All these three parts taken together aim to carefully outline and critically evaluate the problem of information exchanges in oligopoly models, one of the most important topics in contemporary economics. The true motivation of writing such survey papers is to strive for a synthesis of the economics of imperfect competition and the economics of imperfect information. The problem at issue is how and to what extent the information exchanges among firms influence the welfare of producers, consumers and the whole society. It is seen in the paper that a definite answer to the problem really depends on the following many factors. (1) The type of competitors (Cournot-type or Bertrand-type), (2) the nature of risk (a common value or private values; demand risk or cost risk), (3) the degree and direction of physical and stochastic interdependence among firms, and (4) the number of firms. If any set of those factors is specified in a given oligopoly model, the welfare and policy implications may very systematically be derived by way of their decomposition into the following four effects. That is, (i) own variation effects, (ii) cross variation effects, (iii) own efficiency effects, and (iv) cross efficiency effect. In the real world, trade associations may be regarded as typical information exchange mechanisms. Many welfare implications obtained in the papers will shed a new light to the effectiveness and limitations of those trading groups.
    Keywords: Information exchange,oligopoly models,welfare implications,trade associations
    Date: 2016–05
  5. By: MURAKAMI Hiroki
    Abstract: In this paper, we present a model which enables us to look into the process of research and development (R&D) for product innovation in the presence of the product life cycle and the resultant firm or economic growth. Specifically, we describe R&D for product innovation as an activity to control the birth rate of a new product, which measures the probability of product innovation; derive the optimal birth rate of a new product, which determines the size of R&D expenditure; and examine the growth rate of the (representative) firm('s expected total revenue) along the optimal R&D plan. We then find that the growth rate of the firm converges to the optimal birth rate of a new product in the long run.
    Date: 2016–03
  6. By: Xia, Tian; Guan, Zhengfei
    Abstract: The U.S. strawberry industry faces serious challenges from Mexican competition. Optimal limited licensing to selected Mexican growers can help Florida strawberry industry protect the intellectual property rights of new varieties and improve its competitiveness and profits in the U.S. market. This study analyzes the mechanisms of the optimal licensing contracts offered to a few selected Mexican companies/growers.
    Keywords: licensing, market competition, strawberry, Industrial Organization, International Relations/Trade, Marketing, Q13, L14,
    Date: 2016–05–25
  7. By: Mariotto, Carlotta; Verdier, Marianne
    Abstract: Over the recent years, the development of Internet banking and mobile banking has had a considerable impact on competition in the retail banking industry. In some countries, the regulatory framework has been adapted to allow non-banks to operate in retail payments and compete with banks for deposits. Several platforms or large retailers have started to offer innovative financial products to their customers. In this paper, we survey the issues related to innovation and competition in Internet banking and mobile banking and discuss some perspectives for future research.
    Keywords: bank competition, bank regulation, non-banks, payment systems, Internet banking, mobile banking, platform markets
    JEL: E42 G21 L96
    Date: 2015–11–25
  8. By: Hovhannisyan, Vardges; Bozic, Marin
    Abstract: This study utilizes unique product barcode, store, and retail real estate data to calculate consistent estimates of the effects of retail market structure on food prices in the US. Our uniquely disaggregated data allow for identification strategy that corrects for the type of endogeneity that plagues many previous studies on price-concentration relationship. Empirical findings from an instrumental-variables fixed-effects model indicate that retail concentration is endogenous to price determination. Further, retail prices are found to rise with retail concentration. Importantly, ignoring endogeneity results in a severe downward bias in the estimated effects of concentration on food prices.
    Keywords: Retail concentration, retail food price, endogeneity of retail concentration, instrumental variables fixed-effects regression, Demand and Price Analysis, Food Consumption/Nutrition/Food Safety, Industrial Organization, L11,
    Date: 2016–05–25
  9. By: Secor, William; Çakır, Metin
    Abstract: We investigate the extent to which a grocery retailer merger has different effects on the prices of national and store brands. Using retail scanner data, we retrospectively analyze a food retail acquisition in a large United States city. We focus on fluid milk and ready-to-eat cereal categories, which represent a relatively homogenous and a relatively differentiated product category, respectively. We use a difference-in-difference estimation framework to obtain the causal effect of the acquisition on prices for the acquiring retailer. Our findings provide evidence that store brands in differentiated product categories could allow a retailer to improve its market power.
    Keywords: Merger and acquisition, grocery retail, store brands, market power, difference-in-difference, Agribusiness, Consumer/Household Economics, L11, L13, L22, L81,
    Date: 2016
  10. By: Grau, Aaron; Hockmann, Heinrich
    Abstract: In this paper a new approach for the estimation of oligopsony market power along a supply chain is developed. The theoretical framework relies on NEIO theory. Two subsequent markets with oligopsony power are modeled. Price equations, farm-processor and processor-retailer, are embedded in a price transmission framework. The reduced error correction representation is estimated via the Kalman-Filter to allow for time-variation in the long-run cointegration parameters. A dynamic factor model is applied to extract common factors from the time-varying coefficients and with the estimated results the processing industry’s and retail sector’s average input conjectural variations are calculated. The framework is applied to the German dairy supply chain over the time period January 2000 to March 2011. Results indicate lower levels of market imperfections on the raw milk and dairy output market.
    Keywords: market power, imperfect competition, conjectural variation, dairy industry, Demand and Price Analysis, Industrial Organization,
    Date: 2016
  11. By: Tiboldo, Giulia; Lopez, Rigoberto; Hirsch, Stefan
    Keywords: dairy sector market power, BLP model, private labels, Demand and Price Analysis, Industrial Organization, Marketing, Research Methods/ Statistical Methods,
    Date: 2016
  12. By: Xun, Li; Rui, Wang
    Abstract: This paper examines how retailers adjust prices of national brands and private labels when they are exposed to energy shocks. Empirical results from 12 U.S. fluid milk markets provide insights into the magnitude and timing of price adjustment. Asymmetric energy pass-through is validated. The pass-through rate is found to be consistently higher for national brands compared to private labels, indicating that the private labels are more insulated to energy shocks. Further results show that the speed of energy price pass-through is faster for national brands compared to private labels when the energy price increases. However, the speed is similar for the two when the energy price decrease. Overall, this paper shows that when there is a positive energy shock, the retailers adjust prices of national brands first, on average, but they are almost indifferent with the order of adjustment when there is a decrease in energy prices.
    Keywords: Energy Shock, National Brand, Private Label, Price Adjustment, Demand and Price Analysis, Industrial Organization, D4, L1, Q1, Q4,
    Date: 2016–05
  13. By: Huang, Ju-Chin
    Abstract: In this paper, hedonic price analysis under imperfect competition is studied. We demonstrate a means to simultaneously recover the price-cost markup and the marginal values of product attributes from hedonic price estimation under imperfect competition. Our theoretical results provide guidance to the empirical specification of the hedonic price model, increasing both the applicability and reliability of hedonic valuation methods. We conduct a Monte Carlo simulation to evaluate various specifications of hedonic price models under imperfect competition. An application to estimating marginal willingness to pays for characteristics of a ski resort is presented.
    Keywords: Hedonic Method, Imperfect Competition, Taxation, Price-Cost Markup, Monte Carlo Simulation, Consumer/Household Economics, Demand and Price Analysis, Environmental Economics and Policy, Q51, L10,
    Date: 2016
  14. By: Klaus Gugler (Department of Economics, Vienna University of Economics and Business); Sven Heim (ZEW Centre for European Economic Research and MaCCI Mannheim Centre for Competition and Innovation); Mario Liebensteiner (Department of Economics, Vienna University of Economics and Business)
    Abstract: We investigate the impact of consumer search and competition on pricing strategies in Germany’s electricity retail. We utilize a unique panel dataset on spatially varying search requests at major online price comparison websites to construct a direct measure of search intensity and combine this information with zip code level data on electricity tariffs between 2011 and 2014. The paper stands out by explaining price dispersion by differing pricing strategies of former incumbents and entrant firms, which are distinct in their attributable shares in informed versus uninformed consumers. Our empirical results suggest causal evidence for an inverted U-shape effect of consumer search intensity on price dispersion in a clearinghouse environment as in Stahl (1989). The dispersion is caused by opposite pricing strategies of incumbents and entrants, with incumbents initially increasing and entrants initially decreasing tariffs as a reaction to more consumer search. We also find an inverted U-shape effect of competition on price dispersion, consistent with theoretical findings by Janssen and Moraga-González (2004). Again, the effect can be explained by opposing pricing strategies of incumbents and entrants.
    Keywords: Search, Information, Competition, Price Dispersion, Electricity Retail
    JEL: D43 D83 L11 L13 Q40
    Date: 2016–05
  15. By: Carl T. Kitchens; Taylor Jaworski
    Abstract: In this paper, we quantify the difference between public and private prices of residential electricity immediately before and after major federal reforms in the 1930s and 1940s. Previous research found that public prices were lower in a sample of large, urban markets. Based on new data covering over 15,000 markets and nearly all electricity generated for residential consumption, we find the difference between public and private prices was small in 1935 and negligible in 1940 for typical levels of monthly consumption. These findings are consistent with a market for ownership that helped to discipline electricity prices during this period. That is, private rents were mitigated by the threat that municipalities would use public ownership to respond to constituent complaints and public rents were limited by electoral competition and the growth of private provision.
    JEL: D4 N12
    Date: 2016–05
  16. By: Ty, Dyna; Bergstrom, John C.
    Abstract: This study seeks to analyze competitiveness in electric rates in the U.S. residential sector under a market-based solar sharing network platform and/or a market-based energy trading platform. We argue that under the solar sharing or trading platform there plausibly exist social welfare gains from economics of distributed generation (DG) of renewable energy among grid-connected, photovoltaic (PV) system households. Thus, in this work, we consider a theoretical analysis framework using a model where grid-connected PV-system households are both simultaneously consumers and producers of electricity.
    Keywords: Net energy metering, Demand and Price Analysis, Industrial Organization, Production Economics, Resource /Energy Economics and Policy, L, N, O, Q, Z,
    Date: 2016
  17. By: Sesmero, Juan; Balagtas, Joseph
    Keywords: Industrial Organization, Resource /Energy Economics and Policy,
    Date: 2016
  18. By: Kai-Lung Hui (Department of Information Systems, Business Statistics, and Operations Management, Hong Kong University of Science and Technology; Institute for Emerging Market Studies, Hong Kong University of Science and Technology); James Kwok (Department of Information Systems, Business Statistics, and Operations Management, Hong Kong University of Science and Technology; Institute for Emerging Market Studies, Hong Kong University of Science and Technology)
    Abstract: Kai-Lung Hui and James Kwok, Professor and Associate Professor in HKUST’s Information Systems, Business Statistics, and Operations (ISOM) Department, examine digital copyright infringement in developing economies, and propose 3 simple-yet-effective ways to combat copyright infringement through the use of search engine de-listing policies.
    Keywords: piracy, copyright infringement, emerging markets, de-listing, de-indexing, search engines
    JEL: G28
    Date: 2016–05
  19. By: Huailu Li (Fudan University); Kevin Lang (Boston University & NBER); Kaiwen Leong (Nanyang Technological University)
    Abstract: The street sex worker market in Geylang, Singapore is a highly competitive market in which clients can search legally at negligible cost, making it ideal for testing Diamondís hypothesis regarding search and monopoly pricing. As Diamond predicts, price discrimination survives in this market. Despite an excess supply of workers, but consistent with their self-reported attitudes and beliefs, sex workers charge Caucasians (Bangladeshis) more (less), based on perceived willingness to pay, and are more (less) likely to approach and reach an agreement with them. Consistent with taste discrimination, they avoid Indians, charge more and reach an agreement with them less frequently.
    JEL: J7
  20. By: Steven Suranovic (Department of Economics/Institute for International Economic Policy, George Washington University)
    Abstract: This paper evaluates the economic and ethical effects of sudden excess demand for goods or services. The normal market response of “surge prices†or “price gouging†invokes sharp negative reactions by consumers who consider the profit seeking market response to be unethical. Public condemnation often prevents merchants from following market signals, or induces governments to intervene by implementing price ceilings. This paper argues that public misunderstanding preventing efficient and fair outcomes is the true market imperfection in these cases. The paper provides reasons for the public misunderstanding and suggests that demonstration effects would be the most effective way to induce more favorable market outcomes.
    Keywords: Surge pricing, Price Gouging, Imperfect information, Shortages
    JEL: L51 D63 D43 D80
    Date: 2016–05

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