nep-com New Economics Papers
on Industrial Competition
Issue of 2017‒03‒12
fourteen papers chosen by
Russell Pittman
United States Department of Justice

  1. Multi-Product Firms and Product Quality By Manova, Kalina; Yu, Zhihong
  2. Choosing whether to compete: Price and format competition with consumer confusion By Gaudeul, Alexia; Crosetto, Paolo
  3. Mixed Duopoly: Differential Game Approach By Koichi Futagami; Toshihiro Matsumura; Kizuku Takao
  4. Handbook of Game Theory and Industrial Organization: An Introduction By Marini, Marco A.; Corchon, Luis
  5. Licensing contracts and the number of licenses under screening By Antelo, Manel; Antonio, Sampayo
  6. Aktuelle Herausforderungen der Wettbewerbspolitik durch Marktplätze im Internet By Budzinski, Oliver
  7. Incumbents' Asymmetric Responses to Environmentally Friendly Entrants in the Automotive Industry By Uwe Cantner; Josefine Diekhof
  8. Product Market Deregulation's Winners and losers: US Railroads between 1981 and 2001 By Guido Friebel; Gerard McCullough; Laura Padilla
  9. Apprentice poaching in regional labor markets By Stockinger, Bastian; Zwick, Thomas
  10. La régulation du secteur des jeux entre Charybde et Scylla By Frédéric Marty
  11. Understanding intra-regional transport: Competition in road transportation between Malawi, Mozambique, South Africa, Zambia, and Zimbabwe By Thando Vilakazi; Anthea Paelo
  12. Mobile telephony in emerging markets By Göller, Daniel; Andersson, Kjetil; Hansen, Bkørn
  14. Competition or conflict? Beyond traditional ordo-liberalism By Dold, Malte; Krieger, Tim

  1. By: Manova, Kalina; Yu, Zhihong
    Abstract: We examine the global operations of multi-product firms. We present a flexible heterogeneous-firm trade model with either limited or strong scope for quality differentiation. Using customs data for China during 2002-2006, we empirically establish that firms allocate activity across products in line with a product hierarchy based on quality. Firms vary output quality across their products by using inputs of different quality levels. Their core competence is in varieties of superior quality that command higher prices but nevertheless generate higher sales. In markets where they offer fewer products, firms concentrate on their core varieties by dropping low-quality peripheral goods on the extensive margin and by shifting sales towards top-quality products on the intensive margin. The product quality ladder also governs firms' export dynamics, both in general and in response to the exogenous removal of MFA quotas on textiles and apparel. Our results inform the drivers and measurement of firm performance, the effects of trade reforms, and the design of development policies.
    Keywords: export prices; multi-product firms; product quality; Trade; trade reforms
    JEL: D22 F10 F12 F14 L10 L11 L15
    Date: 2017–02
  2. By: Gaudeul, Alexia; Crosetto, Paolo
    Abstract: We present results from a market experiment where firms with identical products can choose not only their price but also the format of their product. Products with different formats are difficult to compare but products with the same format are directly comparable. Savvy consumers buy the lowest priced of those products with the same format. We find that firms are unlikely to adopt the same format if there are many savvy consumers and firms can observe each other’s decisions. Increases in the number of savvy consumers then lead to higher average prices. We argue that tacit collusion is at the origin of this result. Patterns in the evolution of prices give further support to this hypothesis.
    JEL: L15 D18 D43
    Date: 2016
  3. By: Koichi Futagami (Graduate School of Economics, Osaka University); Toshihiro Matsumura (Institute of Social Science, The University of Tokyo); Kizuku Takao (Department of Economics, Aomori Public University)
    Abstract: Previous studies in differential games reveal that intertemporal strategic behaviors have an important role for various economic problems. However, most of their analyses are limited to cases where objective functions are identical among agents. In this paper, we characterize the open-loop Nash equilibrium and the Markov perfect Nash equilibrium of a mixed duopoly game where a fully or partially state-owned firm and a fully private firm compete in the quantities of homogeneous goods with sticky prices. We show that in the Markov perfect Nash equilibrium, an increase in the governments f share-holdings of the state-owned firm has a non-monotonic effect on the price, and in a wide range of parameter spaces, it increases the price. These results are derived from the interaction of an asymmetric structure of agents f objectives and inter-temporal strategic behaviors, which are in sharp contrast with those in the open-loop Nash equilibrium. We provide new implications for privatizationpolicies in the presence of dynamic interactions, against the static analyses.
    Keywords: Mixed Duopoly, Open-loop Nash equilibrium, Markov Perfect Nash equilibrium
    JEL: C73 D43 L32
    Date: 2017–03
  4. By: Marini, Marco A.; Corchon, Luis
    Abstract: We introduce here the volume Handbook of Game Theory and Industrial Organization, by L. C. Corchón and M. A. Marini (ed.), Edward Elgar, Cheltenam, UK and Northampton, MA, by describing its main aim and its basic structure.
    Keywords: Industrial Organization, Game Theory.
    JEL: C0 C7 C72 D2 D21 D22 D23 D24 D4 D42 D43 D44 D47 D8 I0 L1 L11 L15 L4 L44 L6 L7
    Date: 2016–12–15
  5. By: Antelo, Manel; Antonio, Sampayo
    Abstract: This paper examines the licensing of an innovation—by a patent holder to one or more users—when the innovation’s value (high or low) is known, after the contract is signed, by each user. In this setup, we analyze the patent holder’s joint decision concerning the number of licenses and the type of contracts. Our first main finding is that, depending on how uncertain is the efficiency of users exploiting the innovation, both shut-down contracts and screening contracts can emerge in equilibrium. Second, shut-down contracts amount to fixed fees under exclusive licensing but are two-part contracts under non-exclusive licensing. Third, there is distorted production at the bottom of the innovation value’s distribution under exclusive licensing as well as distortion at both the bottom and the top of that distribution under non-exclusive licensing. Fourth, asymmetric information favors the latter (i.e., issuing multiple licenses) except when the patent holder uses a screening contract, since then the need to distort production at both the bottom and the top renders non-exclusive licensing less profitable. Our final result is that the number of licenses issued by the patent holder is more likely to maximize aggregate surplus under asymmetric information than under symmetric information.
    Keywords: exclusive and non-exclusive licensing, symmetric and asymmetric information, screening, fixed-fee and two-part contracts, welfare analysis
    JEL: D43 D82 L24
    Date: 2017–03–02
  6. By: Budzinski, Oliver
    Keywords: competition policy,internet economy,e-commerce,platform economics,economics of privacy,big data,personalized data,antitrust,Google,Amazon,Facebook
    JEL: L40 K21 L81 L82 L86 L13
    Date: 2016
  7. By: Uwe Cantner (School of Economics and Business Administration, Friedrich-Schiller-University Jena); Josefine Diekhof (DFG-GRK-1411 "The Economics of Innovative Change", PhD program of the Max Planck Institute of Economics & Friedrich-Schiller University Jena)
    Abstract: In the context of technological change, the influence of innovative entrants on incumbents is considered a major driving force. Using global patent data, we analyze this influence for the case of the transition from combustion engine vehicles towards alternative technology vehicles (ATVs). Entrants play a key role in developing ATV-related patents, whereas automotive incumbents are considered as being less motivated in pursuing this new technology. Our results indicate that entrants' ATV-related knowledge accumulation stimulates incumbents' ATV-related research. Domestic entrants had a positive effect on the large incumbent majority that exhibited low ATV patent stocks whereas incumbents with high ATV patent stocks reacted with decreasing patenting; which is assumed to be a sign of R&D outsourcing or strategic acquisitions. Entrants in foreign countries yielded increasing incumbent responses along increasing incumbents' ATV patent stocks; which is in line with previously found competitive reactions to entry. Further, younger entrants, pre-entry patent- inexperienced entrants, and entrant leaders with greater technological relevance were more influential than their counterparts (old, experienced, and less technological relevant). This suggests that not only diversifying but also new establishments have an effect on incumbents. As technological leading and inexperienced entrants showed a stronger effect on incumbents but were outnumbered by their counterparts, it underpins that entrants with important characteristics and not the pure number of entrants drive these effects on incumbents.
    Keywords: Environmental Economics, Technological Change, Industry Dynamics, Entrepreneurship, Transport Industry, Electric Vehicle
    JEL: Q55 O3 Q52 R49 L91 L26 O31
    Date: 2017–03–10
  8. By: Guido Friebel (Goethe University Frankfurt, CEPR and IZA); Gerard McCullough (University of Minnesota); Laura Padilla (Universidad Loyola Andalucía)
    Abstract: To properly account for labor effects of deregulation, one needs data sets that account for workers and firm heterogeneity. We investigate a comprehensive data set on US railroads. It contains detailed finance, output, employment and wage information for six different skill groups. We identify the effect of product market strategies and mergers on employment and earnings of workers. Railroads have downsized and they have restructured the composition of their human resources. The majority of employee groups have benefitted in terms of compensation. Low-skilled workers blue collars and administrative staff have been the main losers following deregulation, in terms of employment. The main winners are managers and locomotive drivers. The right-to-manage model we use has a good fit, except for executives, which indicates relevance of other types of personnel practices, for instance incentive contracts.
    Keywords: matched worker/firm data, downsizing, rent-sharing, panel data, right-to-manage model
    JEL: C23 J21 J30 L43
    Date: 2016–04
  9. By: Stockinger, Bastian; Zwick, Thomas
    Abstract: A number of studies have found that firms provide less training if they are located in regions with strong labor market competition. This finding is usually interpreted as evidence of a higher risk of poaching in these regions. Yet, there is no direct evidence that regional competition is positively correlated with poaching. Building on a recently established approach to ex-post identify poaching of apprenticeship completers, our paper is the first to directly investigate the correlation between regional labor market competition and poaching. Using German adminis-trative data, we find that competition indeed increases training establishments' probability of becoming poaching victims. However, poaching victims do not change their apprenticeship training activity in reaction to past poaching. Instead, our findings indicate that the lower training activity in competitive regions can be attributed to lower retention rates, a less adverse selection, and lower labor and hiring costs of apprenticeship completers hired from rivals.
    Keywords: poaching,firm-sponsored training,apprenticeship,regional labor markets,labor market competition
    JEL: J24 M51 M53 R23
    Date: 2017
  10. By: Frédéric Marty (Université Côte d'Azur, France; GREDEG CNRS)
    Abstract: La libéralisation du secteur des jeux de hasard et d'argent initiée en France par la loi du 12 mai 2010 a essentiellement répondu à des contraintes extérieures émanant du développement d'offres illégales en lignes et des règles de concurrence de l'Union européenne. Dans un contexte marqué par des critiques du cadre régulatoire actuel, émanant de la Cour des comptes et de l'Assemblée Nationale, il s'agit de développer une analyse du cadre régulatoire applicable au secteur.
    Keywords: régulation, jeux de hasard et d’argent, concurrence, défaillance de marché
    JEL: K21 L41 D43 D20
    Date: 2017–03
  11. By: Thando Vilakazi; Anthea Paelo
    Abstract: Efficient transport links are critical to enhancing the integration of markets in Southern Africa. This paper assesses the structure of markets, competition, and prices and costs of road transportation between urban hubs in Malawi, Mozambique, South Africa, Zambia, and Zimbabwe. Key findings are that certain routes, such as that between Lusaka and Johannesburg, have become more competitive over time and relative to benchmarks due to the availability of loads in each direction, improved efficiencies, and greater competitive rivalry between trucking firms from different countries. However, border delays and control of access to loads by large brokers continue to negatively affect competition and efficiency.
    Date: 2017
  12. By: Göller, Daniel; Andersson, Kjetil; Hansen, Bkørn
    Abstract: Rapidly increasing sales of multi-SIM phones, mobile penetration rates above 100% and reported customer behavior all point to the fact that a significant share of mobile customers in emerging markets tend to use more than one SIM card. A primary motive for this is to avoid making expensive off-net calls. We add a segment of flexible prepaid customers, who choose to "multi-sim" in equilibrium to the seminal model of competing telephone networks a la Laffont, Rey and Tirole (1998b). In equilibrium, the networks choose to set a very high prepaid off-net price to achieve segmentation. This incentive prevails, even if termination rates are set to marginal costs.
    JEL: D43 L13 L96
    Date: 2016
  13. By: Farhad Daruwala; Frank T. Denton; Dean C. Mountain
    Abstract: We consider optional TOU (time-of-use) pricing for residential consumers as an alternative to a single TOU or flat rate structure offered by a publicly regulated electricity supplier. A general equilibrium model is developed and used to explore and quantify the effects of optional pricing on welfare, consumption, and production costs. The model assumes that households can be classified into internally homogeneous groups with differing utility functions, incomes, demand elasticities, and committed consumption requirements. Substitution for electricity among TOU periods and between electricity and other goods is allowed for in the model on the demand side, and differing TOU-specific marginal costs on the supply side. The supplier in the model offers to each household a menu of possible rate sets obtained by maximizing a collective welfare function subject to three types of restriction: Pareto efficiency (no household is worse off under the proposed pricing scheme than under the current pricing scheme); incentive compatibility (every household weakly prefers its set of rates to the sets chosen by other households); breakeven supplier revenue (aggregate revenue must equal aggregate cost). The model is calibrated realistically with three household groups and three distinct TOU costing periods, and used in a series of simulation experiments, including experiments with alternative demand elasticities and marginal cost parameters. The use of optional pricing is shown to increase overall consumer welfare and reduce average production cost. However, the distribution of welfare effects can be uneven, with the highest income group dominating the market to the relative disadvantage of the lowest group. To deal with that situation an alternative strategy with a targeted rate structure for the lowest income group is proposed, corresponding to a modified version of the model specified in which some incentive compatibility restrictions are relaxed. Simulations show that the strategy can be effective in bringing about a more equitable distribution of welfare gains while still maintaining optional TOU pricing.
    JEL: D11 D12 D82 Q41 D58 D61 L94
    Date: 2017–02
  14. By: Dold, Malte; Krieger, Tim
    Abstract: According to the traditional ordo-liberal view of the Freiburg School, the central role of the state in economic affairs is to set up rules that create a competitive order within which private actors have sufficient incentives to coordinate their economic affairs efficiently. Underlying this view is the implicit assumption that, given the right institutional framework, competition within markets is mainly characterized by peaceful and conflict-free rivalry between actors that leads to an optimal allocation of resources. In such a setting, competition may be described as a "record-type" game. This view, however, ignores the possibility that competition itself may very well trigger conflict rather than having an appeasing effect. In this case, competition appears to be a "struggle-type" game in which competitors invest in conflict activities that are not efficiency enhancing but rather resource wasting. Against this background, ordo-liberalism has yet to provide a clear-cut distinction between competition and conflict. In addition, it fails to identify - in a normative way - which institutional and regulatory framework could hamper conflict sensitivity of economic competition, given the harmful effect of conflict on the security of property rights. Our contribution investigates how the ordo-liberal research program needs to be extended when introducing conflict.
    Keywords: ordo-liberalism,Freiburg School,conflict economics,competition
    JEL: B25 D02 D4 D63 D74
    Date: 2017

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