|
on Industrial Competition |
| By: | Bischoff, Oliver; Buchwald, Achim |
| Abstract: | This paper sheds new light on the assessment of firm networks via multiple directorships in terms of corporate firm performance. Using a large sample of European listed firms in the period from 2003 to 2011 and system GMM we find a significant compensation effect on corporate firm performance for the initial negative effect of horizontal multiple directorships by product market competition. In markets with effective competition, horizontal multiple directorships turn out to be an efficient mechanism to increase firm performance and thus assure competitive advantages. By contrast, linkages between up- and downstream firms have no significant influence on financial performance, irrespective of the level of competition intensity. |
| Keywords: | Horizontal and Vertical Firm Networks,Multiple Directorships,Corporate Governance,Product Market Competition,Dynamic Panel |
| JEL: | C23 G32 G34 L14 L25 L40 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc16:145730&r=com |
| By: | Walter Ferrarese (University of Rome "Tor Vergata") |
| Abstract: | The merger paradox refers to the fact that in a symmetric static Cournot oligopoly horizontal mergers are generally unprofitable. Moreover, even in case of profitable mergers, remaining outside the merger is better than participating (free-riding issue). In this paper we tackle both issues in a model with linear inverse demand, in which we allow for multiple simoltaneous mergers from a static symmetric Cournot market. Once the mergers occur, each merged entity acquires the right of becoming the leader over the remaining firms outside the mergers (outsiders). We allow the leaders to be heterogeneous in the number of members (insiders). Our model connects and extendes Liu and Wang (2015), who are the first to explore the feature of the leadership acquisiton. They show that if a unique merged entity acquires the leadership, then there is always an incetive for such merger to occur. However, they do not tackle the free riding aspect of mergers. We obtain that the case of a unique leader is the only one in which the merged entity has always an incentive to form. We carry out a welfare analysis and show that, in our setting, despite the symmetry of firms total output can often rise and make consumers better off. Moreover, the adoption of consumers surplus only or consumer surplus plus industry profits as welfare measures does not change the set of welfare improving mergers. This suggests that the common view on horizontal mergers among symmetric firms being unambiguously welfare reducing requires, in some cases a deeper analysis, since the change in the market structure alone can be enough to increase welfare. It also suggests parsimony for the antitrust authorities in evaluating the welafre implications of mergers. |
| Keywords: | horizontal mergers, market power, merger paradox, stackelberg competition, welfare. |
| JEL: | L11 L13 L14 |
| Date: | 2017–02–10 |
| URL: | http://d.repec.org/n?u=RePEc:rtv:ceisrp:398&r=com |
| By: | Bonnet, Céline; Schain, Jan Philip |
| Abstract: | In this article, we extend the literature on merger simulation models by incorporating its potential synergy gains into structural econometric analysis. We present a three-step integrated approach. We estimate a structural demand and supply model, as in Bonnet and Dubois (2010). This model allows us to recover the marginal cost of each differentiated product. Then we estimate potential efficiency gains using the Data Envelopment Analysis approach of Bogetoft and Wang (2005), and some assumptions about exogenous cost shifters. In the last step, we simulate the new price equilibrium post merger taking into account synergy gains, and derive price and welfare effects. We use a homescan dataset of dairy dessert purchases in France, and show that for two of the three mergers considered, synergy gains could offset the upward pressure on prices post. Some mergers could then be considered as not harmful for consumers. |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:dicedp:244&r=com |
| By: | Camille Cornand; Rodolphe Dos Santos Ferreira |
| Abstract: | The paper provides a micra-founded differentiated duopoly illustration of a beauty contest, in which the weight put on the strategic vs. the fundamental motive of the pay offs is not exogenous but may be manipulated by the players. We emphasize the role of the competition component of the strategic motive as a source of conflict with the fun damental motive. This conflict, already present in an oligopolistic setting under perfect information, is only exacerbated when information is imperfect and dispersed. We show how firm owners ease such conflict by opting for sorne cooperation, thus moderating the competitive toughness displayed by their managers. By doing so, they also influence the managers' strategic concern for coordination and consequently the weight put on public relative to private information. |
| Keywords: | beauty contest, competition, cooperation, coordination, differentiated duopoly, dispersed information, public information. |
| JEL: | D43 D82 L13 L21 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:ulp:sbbeta:2017-05&r=com |
| By: | Rabah Amir; Igor V. Evstigneev |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:man:sespap:1702&r=com |
| By: | Ryuji Sano (Institute of Economic Research, Kyoto University) |
| Abstract: | This paper considers a dynamic mechanism design in which multiple objects with different consumption deadlines are allocated over time. Agents arrive over time and may have multi-unit demand. We characterize necessary and sufficient condition for periodic ex-post incentive compatibility and provide the optimal mechanism that maximizes the seller's expected revenue under regularity conditions. When complete contingent-contracts are available, the optimal mechanism can be interpreted as an "overbooking" mechanism. The seller utilizes overbooking for screening and price-discriminating advance agents. When agents demand multiple objects as complements, the seller may face a tradeoff between the last-minute price of the current object and the future profit. |
| Keywords: | dynamic mechanism design, optimal auction, overbooking, price discrimination, revenue management |
| JEL: | D82 D44 |
| Date: | 2017–02 |
| URL: | http://d.repec.org/n?u=RePEc:kyo:wpaper:963&r=com |
| By: | Jeroen Hinloopen (CPB Netherlands Bureau for Economic Policy Analysis and University of Amsterdam, The Netherlands); Grega Smrkolj (Newcastle University, Geat-Britain); Florian Wagener (University of Amsterdam, The Netherlands) |
| Abstract: | We present a continuous-time generalization of the seminal R&D model of d'Aspremont and Jacquemin (The American Economic Review 78(5): 1133–1137, 1988) to examine the trade-off between the benefits of allowing firms to cooperate in R&D and the corresponding increased potential for product market collusion. We consider all trajectories that are candidates for an optimal solution as well as initial marginal cost levels that exceed the choke price. Firms that collude develop further a wider range of initial technologies, pursue innovations more quickly, and are less likely to abandon a technology. Product market collusion could thus yield higher total surplus. |
| Keywords: | Antitrust policy; Bifurcations; Collusion; R&D cooperatives; Spillovers |
| JEL: | D43 D92 L13 L41 O31 O38 |
| Date: | 2017–02–10 |
| URL: | http://d.repec.org/n?u=RePEc:tin:wpaper:20170020&r=com |
| By: | Ugur, Mehmet; Trushin, Eshref; Solomon, Edna |
| Abstract: | Existing evidence on the relationship between R&D intensity and firm survival is varied and often conflicting. We argue that this may be due to overlooking R&D scale effects and complementarity between R&D intensity and market concentration. Drawing on Schumpeterian models of competition and innovation, we address these issues by developing a formal model of firm survival and using a panel dataset of 37,930 of R&D-active UK firms over 1998–2012. We report the following findings: (i) the relationship between R&D intensity and firm survival follows an inverted-U pattern that reflects diminishing scale effects; (ii) R&D intensity and market concentration are complements in that R&D-active firms have longer survival time if they are in more concentrated industries; and (iii) creative destruction as proxied by median R&D intensity in the industry and the premium on business lending have negative effects on firm survival. Other findings concerning age, size, productivity, relative growth, Pavitt technology classes and the macroeconomic environment are in line with the existing literature. The results are strongly or moderately robust to different samples, stepwise estimations, and controls for frailty and left truncation |
| Keywords: | R&D; Innovation; Firm dynamics; Survival analysis |
| Date: | 2016–05–10 |
| URL: | http://d.repec.org/n?u=RePEc:gpe:wpaper:15510&r=com |
| By: | Joshua S. Gans (University of Toronto); Avi Goldfarb (University of Toronto); Mara Lederman (University of Toronto) |
| Abstract: | Hirshman's Exit, Voice, and Loyalty highlights the role of "voice" in disciplining firms for low quality. We develop a formal model of voice as a relational contact between firms and consumers and show that voice is more likely to emerge in concentrated markets. We test this model using data on tweets to major U.S. airlines. We find that tweet volume increases when quality - measured by on-time performance - deteriorates, especially when the airline operates a large shared\ of the flights in a market. We also find that airlines are more likely to respond to tweets from consumers in such markets. |
| Keywords: | exit voice and loyalty, complaints, airlines, Twitter, social media |
| JEL: | L10 D40 L86 |
| Date: | 2017–02 |
| URL: | http://d.repec.org/n?u=RePEc:hka:wpaper:2017-009&r=com |
| By: | Peukert, Christian; Aguiar, Luis; Claussen, Jörg |
| 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. |
| JEL: | L82 K42 L11 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc16:145490&r=com |
| By: | Franck, Jens-Uwe; Peitz, Martin |
| Abstract: | The focus of cartel damages law is on the recovery of the cartel overcharge. Parties other than purchasers are often neglected, not only as a matter of judicial practice, but also due to legal restrictions. We argue that a narrow concept of standing - which excludes parties that supply either the cartel or the firms that purchase from the cartel with complementary product components - falls short of achieving effective antitrust enforcement and corrective justice in the best possible way. We provide a framework with two complementary products and show that under neither competition nor cartelization do the allocation and the distribution of surpluses depend on the market organization in place. Thus, we argue that prima facie producers of complements should be treated alike, regardless of whether they purchase from the cartel or supply the cartel or the cartel's customers. Moreover, based on various factors that determine the enforcement effect of antitrust damage claims and their role as an instrument to achieve corrective justice, we show that a broad concept of standing is, indeed, the preferable legal solution. While its implementation required a change of the position by the U.S. federal courts, we submit that it would amount to a consistent completion of the legal framework within the EU. |
| Keywords: | cartel damages,antitrust standing,pass-on,suppliers,complementary goods |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:17009&r=com |
| By: | Liangliang Jiang (Lingnan University); Ross Levine (Haas School of Business, University of California, Berkeley); Chen Lin (Faculty of Business and Economics, University of Hong Kong) |
| Abstract: | Did regulatory reforms that lowered barriers to competition increase or decrease the quality of information that banks disclose to the public? By integrating the gravity model of investment with the state-specific process of bank deregulation that occurred in the United States from the 1980s through the 1990s, we develop a bank-specific, time-varying measure of deregulation-induced competition. We find that an intensification of competition reduced abnormal accruals of loan loss provisions and the frequency with which banks restate financial statements. The results suggest that competition reduces bank opacity, potentially enhancing the ability of markets to monitor banks. |
| JEL: | G21 G28 G34 G38 |
| Date: | 2016–04 |
| URL: | http://d.repec.org/n?u=RePEc:hkm:wpaper:052016&r=com |
| By: | Houyuan Jiang (Cambridge Judge Business School, University of Cambridge); Zhan Pang (College of Business, City University of Hong Kong); Sergei Savin (The Wharton School, University of Pennsylvania) |
| Abstract: | Performance-based compensation is gaining popularity as a mechanism for incentivizing providers of health-care services to improve the quality of patient care. This paper investigates the effects of introducing performance-based incentives in a competitive healthcare market. In particular, we consider a market in which a payer (e.g. a government agency) applies a compensation contract to competing healthcare service providers in order to achieve a certain level of patient access to care, as measured by the expected time patients have to wait to receive care. In our model, we use M/M/1 queueing dynamics to describe patient service processes and assume that patient demand for care delivered by a particular provider is increasing in the level of access to care the provider ensures and decreasing in the levels of access to care at competing providers. Our analysis indicates that the presence of competition between providers may signi cantly alter the intended effect of performance-based incentives. In particular, we show that the joint effect of incentives and competition depends on two factors: 1) the aggressiveness of patient access targets that the payer imposes on providers, and 2) patient sensitivity to the level of access to care. When the payer uses a "soft" approach to performance-based compensation by incentivizing but not requiring that providers reach an access-level target, the incentives and competition can produce opposing effects on patient access to care when aggressive service-level targets are used in the presence of access-sensitive patients or when moderate service-level targets are introduced in environments where patients a exhibit low degree of sensitivity to the level of access to care. In particular, we show that while moderate service-level targets can lead to an improvement in patient access to care when applied to a monopolistic provider, competition in settings with access-insensitive patients may diminish or even reverse this improvement. Under the "strict" approach to performance-based compensation, when the payer designs performance incentives to minimize the cost of imposing a common access-level target on all providers, the impact of competition on the level of incentivization required is also influenced by the patient population type: for access-sensitive patients, competitive pressure lowers the level of incentivization required to achieve a particular level of patient access to care, while for patients with low access sensitivity the effect of competition is to increase the incentivization level required. At the same time, the reduction in payers' costs resulting from the presence of competition is more pronounced in environments with access-insensitive patients. |
| Keywords: | healthcare competition, waiting time target, performance-based incentives |
| Date: | 2017–01 |
| URL: | http://d.repec.org/n?u=RePEc:jbs:wpaper:201701&r=com |
| By: | Cory Capps; Dennis W. Carlton; Guy David |
| Abstract: | Nonprofit hospitals receive favorable tax treatment in exchange for providing socially beneficial activities. Extending this rationale would suggest that, insofar as suppression of competition would allow nonprofits to cross-subsidize care for needy populations, nonprofit hospital mergers should be evaluated differently than mergers of for-profit hospitals. However, this rationale rests upon the premise that nonprofit hospitals with greater market power provide more care to the needy. In this paper, we develop a theoretical model showing that the welfare implications of an antitrust policy that favors nonprofit hospitals depends on the link between market power and charity care provision. To test the link, we use three measures of charity care—two dollar-denominated and one based on service volume—to study charity care provision by for-profit and non-profit hospitals under different competition conditions. Using detailed California data from 2001 to 2011, we find no evidence that nonprofit hospitals are more likely than for-profit hospitals to provide more charity care, or to offer more unprofitable services, when competition falls. Overall, while some courts have given deference to defendants’ nonprofit status, our study finds no empirical evidence that such hospitals provide greater charity care as they have greater market power. |
| JEL: | I11 L22 L31 |
| Date: | 2017–02 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:23131&r=com |
| By: | Nicholas Ryan |
| Abstract: | India, seeking to reduce electricity shortages, set up a new power market, in which transmission constraints sharply limit trade between regions. I use confidential bidding data to estimate the costs of power supply and simulate market outcomes with more transmission capacity. I find that the returns to building transmission hinge on market conduct. Under a competitive model of supply, transmission investments roughly breakeven. Under a strategic model, the same transmission expansion increases market surplus by 19 percent, enough to justify the investment, because low-cost sellers increase supply in response to a more integrated grid. |
| JEL: | L13 L94 O13 |
| Date: | 2017–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:23106&r=com |