nep-com New Economics Papers
on Industrial Competition
Issue of 2018‒01‒15
sixteen papers chosen by
Russell Pittman
United States Department of Justice

  1. Vertical Foreclosure and Multi-Segment Competition By Jullien, Bruno; Reisinger, Markus; Rey, Patrick
  2. Input price discrimination with secret linear contracting By Ioannis N. Pinopoulos
  3. Competitive Differential Pricing By Yongmin Chen; Jianpei Li; Marius Schwartz
  4. Platform Competition: Who Benefits from Multihoming? By Belleflamme, Paul; Peitz, Martin
  5. Dynamic Pricing of New Products in Competitive Markets: A Mean-Field Game Approach By Régis Chenavaz; Corina Paraschiv; Gabriel Turinici
  6. Dynamic Pricing with Search Frictions By Daniel Garcia
  7. Strategic Effects of Investment and Private Information: The Incumbent’s Curse By Luigi Brighi; Marcello D'Amato
  8. The Dixit-Stiglitz economy with a ‘small group’ of firms: A simple and robust equilibrium markup formula By d’ASPREMONT Claude; DOS SANTOS FERREIRA Rodolphe
  9. Coordination Costs, Market Size, and the Choice of Technology By Zhou, Haiwen
  10. Joint dynamic pricing and lot-sizing under competition By LAMAS Alejandro; CHEVALIER Philippe
  11. Regulating False Disclosure By Janssen, Maarten; Roy, Santanu
  12. The Rise of Economics in Competition Policy: : A Canadian Perspective By Boyer, Marcel; Ross, Thomas W.; Winter, Ralph
  13. Asymmetric Innovation Agreements under Environmental Regulation By Naoto Aoyama; Emilson C.D. Silva
  14. Market Power and Instrument Choice in Climate Policy By Mbéa Bell; Sylvain Dessy
  15. Competition in Public Service Provision: The Role of Not-for-profit Providers By Timothy Besley; James Malcomson
  16. El estado de la manufactura avanzada: competencia entre las plataformas de la Internet industrial By Castillo, Mario

  1. By: Jullien, Bruno; Reisinger, Markus; Rey, Patrick
    Abstract: This paper analyzes a supplier's incentives to foreclose downstream entry when entrants have stronger positions in different market segments, thus bringing added value as well as competition. We first consider the case where wholesale contracts take the form of linear tariffs, and characterize the conditions under which the competition-intensifying effect dominates, thereby leading to foreclosure. We then show that foreclosure can still occur with non-linear tari¤s, even coupled with additional provisions such as resale price maintenance.
    Keywords: Foreclosure; Vertical Contracting; Customer Segments; Downstream Competition
    JEL: D43 K21 L12 L42
    Date: 2017–12–15
  2. By: Ioannis N. Pinopoulos (Department of Economics, University of Macedonia)
    Abstract: We study the welfare effects of input price discrimination when an unconstrained upstream supplier uses linear contracts that are unobservable by downstream firms. With homogeneous final goods, we show that banning input price discrimination decreases welfare. This finding is in contrast to that in the existing literature that considers observable linear contracts. When final goods are sufficiently differentiated, it is shown that banning input price discrimination increases welfare. This result is in contrast to that in the existing literature that considers unobservable two-part tariff contracts..
    Keywords: Input price discrimination; linear contracts; welfare.
    JEL: D43 L11 L42
    Date: 2018–01
  3. By: Yongmin Chen (Department of Economics, University of Colorado at Boulder); Jianpei Li; Marius Schwartz (Department of Economics, Georgetown University)
    Abstract: This paper analyzes differential versus uniform pricing across oligopoly markets that differ in costs of service. We provide necessary and sufficient conditions on general properties of demand for differential pricing to raise or lower profit, consumer surplus, and total welfare, explain why differential pricing is generally beneficial but there are exceptions, and compare the findings to oligopoly third-degree price discrimination. Our conditions nest those for monopoly differential pricing, and are derived by evaluating when each of the welfare measures is convex in marginal cost. Our results help elucidate the welfare effects of prevalent constraints on cost-based differential pricing.
    Keywords: differential pricing, price discrimination, demand curvature, cross-price elasticity, pass-through, oligopoly
    JEL: D4 L1
    Date: 2017–12–28
  4. By: Belleflamme, Paul; Peitz, Martin
    Abstract: Competition between two-sided platforms is shaped by the possibility of multihoming. If users on both sides singlehome, each platform provides users on either side exclusive access to its users on the other side. In contrast, if users on one side can multihome, platforms exert monopoly power on that side and compete on the singlehoming side. This paper explores the allocative effects of such a change from single- to multihoming. Our results challenge the conventional wisdom, according to which the possibility of multihoming hurts the side that can multihome, while benefiting the other side. This is not always true: the opposite may happen or both sides may benefit.
    Keywords: competitive bottleneck; multihoming; network effects; platform competition; Two-sided markets
    JEL: D43 L13 L86
    Date: 2017–11
  5. By: Régis Chenavaz (LTCI - Laboratoire Traitement et Communication de l'Information - Télécom ParisTech - Institut Mines-Télécom [Paris] - CNRS - Centre National de la Recherche Scientifique); Corina Paraschiv (GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC - HEC Paris - Ecole des Hautes Etudes Commerciales - CNRS - Centre National de la Recherche Scientifique, IUF - Institut Universitaire de France - M.E.N.E.S.R. - Ministère de l'Éducation nationale, de l’Enseignement supérieur et de la Recherche); Gabriel Turinici (CEREMADE - CEntre de REcherches en MAthématiques de la DEcision - Université Paris-Dauphine - CNRS - Centre National de la Recherche Scientifique, IUF - Institut Universitaire de France - M.E.N.E.S.R. - Ministère de l'Éducation nationale, de l’Enseignement supérieur et de la Recherche)
    Abstract: Dynamic pricing of new products has been extensively studied in monopolistic and oligopolistic markets. But, the optimal control and differential game tools used to investigate the pricing behavior on markets with a finite number of firms are not well-suited to model competitive markets with an infinity of firms. Using a mean-field games approach, this paper examines dynamic pricing policies in competitive markets, where no firm exerts market power. The theoretical setting is based on a diffusion modeì a la Bass. We prove both the existence and the uniqueness of a mean-field game equilibrium, and we investigate mean tendencies and firms dispersion in the market. Numerical simulations show that the competitive market splits into two separate groups of firms depending on their production experience. The two groups differ in price and profit. Thus, high prices and profits do not have to signal anticompetitive practices, stimulating the debate on market regulation.
    Keywords: competitive markets,mean-field games,Dynamic pricing,new products diffusion
    Date: 2017–09–25
  6. By: Daniel Garcia
    Abstract: We study markets for perishable goods with search frictions. Sellers have a single unit of a good and post prices in every period. Buyers engage in costly search to observe prices and match values. In equilibrium trade starts endogenously and the volume of trade increases over time. Under mild conditions, prices decrease at increasing rates over time. We derive the gains from trade in equilibrium as well as their distribution, and fully characterize the equilibrium for a class of demand functions in markets with evenly matched buyers and sellers. We finally discuss implications for market design, including cancellation policies.
    Keywords: consumer search, dynamic pricing, sharing economy
    JEL: D11 D83 L13
    Date: 2017
  7. By: Luigi Brighi; Marcello D'Amato
    Abstract: We study a two-period entry model where the incumbent, privately informed about his cost of production, makes a long run investment choice along with a pricing decision. Investment is costreducing and its effects are assumed to differ across incumbent’s types, as a result investment plays a double role as a commitment variable and, along with price, as a signal. We ask whether and how investment decisions allow the incumbent to limit entry into the market. We find that the incumbent will never undertake strategic investment to deter profitable entry, because when incumbent’s costs are private information the signaling role of investment cancels out its value of commitment.
    Keywords: Entry deterrence, commitment, limit pricing, multiple signaling
    JEL: D58 L51
    Date: 2017–12
  8. By: d’ASPREMONT Claude (CORE, Université catholique de Louvain); DOS SANTOS FERREIRA Rodolphe (Université de Strasbourg)
    Abstract: In a general version of Dixit-Stiglitz two-sector economy, we present three variants of the concept of oligopolistic equilibrium in price-quantity pairs (d’Aspremont and Dos Santos Ferreira, 2016) integrating income feedback effects in three different way
    JEL: D43 D51 F12 L13
    Date: 2017–11–27
  9. By: Zhou, Haiwen
    Abstract: Impact of coordination costs and market size on a firm’s choice of technology is studied in a general equilibrium model in which firms engage in oligopolistic competition. A firm establishes an organizational hierarchy to coordinate its production. First, it is shown that an increase in market size leads a firm to choose a more specialized technology. Second, surprisingly, a robust result is that an increase in the level of coordination efficiency leads a firm to choose a less specialized technology.
    Keywords: Division of labor, coordination efficiency, technology choice, hierarchy, market size
    JEL: D43 L13 O14
    Date: 2017–12–05
  10. By: LAMAS Alejandro (NEOMA Business School); CHEVALIER Philippe (CORE, Université catholique de Louvain)
    Abstract: We study the joint dynamic pricing and lot-sizing problem when firms operate in a competitive environ-ment. Bearing in mind that a dynamic pricing strategy is successful when customers understand it, we assume each firm selects prices from a discrete set. T
    Keywords: production, dynamic pricing, competition, lot-sizing, joint production/marketing decisions
    Date: 2017–08–31
  11. By: Janssen, Maarten; Roy, Santanu
    Abstract: Firms communicate private information about product quality through a combination of pricing and disclosure where disclosure may be deliberately false. In a competitive setting, we examine the effect of regulation penalizing false disclosure. Stronger regulation reduces the reliance on price signaling, thereby lowering market power and consumption distortions; however, it often creates incentives for excessive disclosure. Regulation is suboptimal unless disclosure itself is inexpensive and even in the latter case, only strong regulation is welfare improving. Weak regulation is always worse than no regulation. Even high quality firms suffer due to regulation.
    Keywords: Regulation; Asymmetric Information; Disclosure; Lying; Signaling; Product Quality; Price Competition
    JEL: D43 D82 L13 L15
    Date: 2017–11
  12. By: Boyer, Marcel; Ross, Thomas W.; Winter, Ralph
    Abstract: Competition policy in Canada and elsewhere has changed remarkably over the last fifty years – in large measure due to advances in economics. In this article we trace the impact of developments in industrial organization on the three central areas of competition policy: cartels, single firm conduct and mergers. We focus on Canadian competition policy, but draw comparisons with developments in the United States and Europe.
    JEL: K21 L40 L41
    Date: 2017–12
  13. By: Naoto Aoyama; Emilson C.D. Silva
    Abstract: In a domestic market, a duopoly produces a homogeneous final good, pollution, pollution abatement and R&D. One of the firms (foreign) has superior technology. The government regulates the duopoly by levying a pollution tax to maximize domestic welfare. We consider the potential implementation of three innovation agreements: cooperative research joint venture (RJV), non-cooperative RJV and licensing. In the cooperative (non-cooperative) RJV, the firms (do not) internalize R&D spillovers. We show that, for the domestic firm, the cooperative RJV dominates and licensing is the least desirable alternative. Although licensing is dominant for the foreign firm, it is not implementable. Both RJVs are implementable. While the non-cooperative RJV is more likely the greater the degrees of asymmetry (in terms of efficiency and R&D spillover rates) between the firms, the cooperative RJV is more likely the lower the degrees of asymmetry. Implementation of both types of RJVs improve the competitiveness of the domestic firm and welfare. A subsidy policy that induces the foreign firm to accept a feasible cooperative RJV when it strictly prefers a feasible non-cooperative RJV is always welfare improving.
    Keywords: environmental regulation, innovation, research joint ventures, licensing
    JEL: D43 D62 F23 L13 L24 L51 Q55 Q58
    Date: 2018
  14. By: Mbéa Bell; Sylvain Dessy
    Abstract: This paper compares a clean energy standard (CES) and a carbon tax (CT), using theory and quantitative experiments. A two-stage duopolistic competition in the electricity sector between a polluting plant and its non-polluting rival anchors the model underlying these experiments. The CT induces both plants to contribute to clean electricity, whereas the CES only incentivizes the non-polluting plant. Ultimately, what matters for the ranking of these instruments is the size of the pre-existing competitive gap between the two rival plants. When this gap is sufficiently small, the CES becomes the more cost-effective instrument, irrespective of the pre-specified emissions reduction target.
    Keywords: Electricity, Cost-effectiveness, Duopoly, Innovation, Quantitative analysis.
    JEL: H20 H32 L13 L51
    Date: 2017
  15. By: Timothy Besley; James Malcomson
    Abstract: With public services such as health and education, it is not straightforward for consumers to assess the quality of provision. Many such services are provided by monopoly not-for-profit providers and there is concern that for-profit providers may increase profit at the expense of quality. This paper explores whether entry by for-profit providers is good for consumers despite the problem of unobserved quality. The model generates three key policy-relevant insights. First, by developing a novel approach to competition between different organizational forms, it frames the relevant trade-offs precisely. Second, it shows the value of keeping an incumbent not-for-profit as an active provider. Third, it characterizes the optimal payment (or voucher value) to an entrant for each consumer who switches in a way that can be applied empirically.
    Keywords: public services, competition, not-for-profit providers
    JEL: H11 H44 L21 L31
    Date: 2017
  16. By: Castillo, Mario
    Abstract: En este documento se presenta una descripción de la situación de la manufactura avanzada, se propone un modelo de análisis de la Internet Industrial y se evalúan tres hipótesis en torno al ecosistema de la manufactura avanzada: la primera, la híper convergencia entre la manufactura y los servicios; la segunda, la mayor fragmentación de la cadena de valor de la Internet Industrial; y la tercera, la competencia de las nuevas plataformas de Internet Industrial.
    Date: 2017–12–27

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