nep-com New Economics Papers
on Industrial Competition
Issue of 2018‒04‒02
thirty papers chosen by
Russell Pittman
United States Department of Justice

  1. The Welfare Effect of Input Price Discrimination with Horizontally Differentiated Final Products By Chan KIm; Jong-Hee Hahn
  2. Search frictions and market power in negotiated price markets By Jason Allen; Robert Clark; Jean-Francois Houde
  3. Specializing in Generality: Firm Strategies When Intermediate Markets Work By Conti, Raffaele; Gambardella, Alfonso; Novelli, Elena
  4. Horizontal Mergers and Innovation By Jullien, Bruno; Lefouili, Yassine
  5. Reconciling the original Schumpeterian Model with the observed inverted-U relationship between competition and innovation By Roberto Bonfatti; Luis A. Bryce Campodonico; Luigi Pisano
  6. R&D investments and spillovers under endogenous absorptive capacity: Competitive R&D cannot take full-advantage of complementarity in absorptive capacity while cooperative R&D can By Mário Alexandre Patrício Martins da Silva
  7. Maximum-Revenue Tariffs versus Free Trade By Collie, David R.
  8. Bid rigging and entry deterrence in public procurement: Evidence from an investigation into collusion and corruption in Quebec By Robert Clark; decio Coviello; Jean-Francois Gauthier; Art Shneyerov
  9. Quantifying the Gap between Equilibrium and Optimum Under Monopolistic Competition By Kristian Behrens; Giordano Mion; Yasusada Murata; Jens Suedekum
  10. Transparency and cooperation in repeated dilemma games : A meta study By Fiala, Lenka; Suetens, Sigrid
  11. Firm Size, Concentration And The Labor Share By Lijun Zhu
  12. Collusion in mixed oligopolies and the coordinated effects of privatization By João Correia-da-Silva; Joana Pinho
  13. An Online Algorithm for Learning Buyer Behavior under Realistic Pricing Restrictions By Debjyoti Saharoy; Theja Tulabandhula
  14. Manufacturing (Co)Agglomeration in a Transition Country: Evidence from Russia By Ekaterina Aleksandrova; Kristian Behrens; Maria Kuznetsova
  15. Efficiency with Equilibrium Marginal Product Dispersion and Firm Selection By Julieta Caunedo
  16. The New Prescription Drug Paradox: Pipeline Pressure and Rising Prices By Alice M. Ellyson; Anirban Basu
  17. The Geographic Flow of Bank Funding and Access to Credit: Branch Networks and Local-Market Competition By Victor Aguirregabiria; Robert Clark; Hui Wang
  18. Foreign ownership and market power: the special case of European banks By Panayotis D. Alexakis; Ioannis G. Samantas
  19. "Industrial Organization of the Banking Industry and the Role of Banks in Industrial and Corporate Financing: Banks and Firms in Prewar Japan " (in Japanese) By Tetsuji Okazaki
  20. Banking products : You can take them with you, so why don't you? By van der Cruijsen, Carin; Diepstraten, Maaike
  21. Blockchain Disruption and Smart Contracts By Lin William Cong; Zhiguo He
  22. What drives bitcoin adoption by retailers By Nicole Jonker
  23. An Equilibrium Model of the Market for Bitcoin Mining By Julien Prat; Benjamin Walter
  24. Price Overreactions in the Cryptocurrency Market By Guglielmo Maria Caporale; Alex Plastun
  26. Einfluss von Online-Ratings auf die Preisbereitschaft von Konsumenten am Beispiel von Amazon By Steusloff, Tatjana; Krusenbaum, Lena
  27. Does managed competition constrain hospitals’ contract prices? Evidence from the Netherlands By Rudy Douven; Monique Burger; Erik Schut
  28. Digital Disintermediation and Efficiency in the Market for Ideas By Christian Peukert; Imke Reimers
  29. The Effect of Advertising Strategies for the Sale of Message Soap on the Decision Purchase in East Java By Nanik Hariyana
  30. La rideterminazione giudiziale delle sanzioni antitrust: tra discrezionalità tecnica e «metodologica» By Angelo Castaldo; Marco Grantaliano; Nicola Faraone

  1. By: Chan KIm (School of Economics, Yonsei University); Jong-Hee Hahn (School of Economics, Yonsei University)
    Abstract: We analyze the welfare effect of input price discrimination in a horizontally differentiated final-goods market. Previous studies assuming downstream firms competing with homogeneous goods have shown that input price discrimination lowers social welfare by reducing production efficiency. On the other hand, Hahn and Kim(2018) recently showed that input price discrimination can improve social welfare by increasing consumption and production efficiencies when the final-goods market is vertically or horizontally differentiated and consumers have heterogeneous preferences for the products. In contrast, this paper shows that even if the final goods are spatially differentiated, input price discrimination always reduces social welfare as long as all consumers participate and the participation constraint is binding in the middle of the consumer distribution in equilibrium. This result highlights that the welfare effect of input price discrimination in the differentiated final-goods market critically depends on the type of consumer participation constraint, which provides useful implications for competition policy towards the third-degree price discrimination in intermediate-goods markets.
    Keywords: horizontal differentiation, input market, price discrimination, competition policy, Hotelling model JEL Classification: L11, L13
    Date: 2018–03
  2. By: Jason Allen (Bank of Canada); Robert Clark (Queen's University); Jean-Francois Houde (Cornell University and NBER)
    Abstract: We provide a framework for empirical analysis of negotiated-price markets. Using mortgage market data and a search and negotiation model, we characterize the welfare impact of search frictions and quantify the role of search costs and brand loyalty for market power. Search frictions reduce consumer surplus by $12/month/consumer, 28% of which can be associated with discrimination, 22% with ineifficient matching, and 50% with search costs. Large consumer-base banks have margins 70% higher than those with small consumer bases. The main source of this incumbency advantage is brand loyalty; however, price discrimination based on search frictions accounts for almost a third.
    Keywords: Search costs, Brand loyalty, Bargaining, Martgage markets
    JEL: L13 L41 L71 D43 D83 G21
    Date: 2018–03
  3. By: Conti, Raffaele; Gambardella, Alfonso; Novelli, Elena
    Abstract: This paper studies the relationship between two decisions shaping the organizational configuration of a firm: whether to make the upstream resources more general and deployable to more markets (vs. keeping them tailored to a few markets), and whether to trade with downstream firms as an upstream supplier of intermediate products and services (vs. directly entering downstream markets). While the literature has looked at these two decisions separately, we argue that they depend on each other. This has the important implication that they can generate organizational complementarities, inducing firms to implement them simultaneously. We are motivated in particular by the observation that an increasing number of firms invest in general upstream resources and exploit them as upstream suppliers of intermediate services or products-an organizational configuration resulting from a strategy that we refer to as specialization in generality. Interestingly, the literature following the seminal work by Penrose (1959) and Nelson (1959) has mainly highlighted the use of general upstream resources to enter new downstream markets. We identify the supply and demand conditions under which specialization in generality is instead more likely to emerge: lack of prior downstream assets, on the supply side, and a roughly equal distribution of buyers across intermediate markets (a "broad" demand), on the demand side. We test our predictions using a sample of firms in the U.S. laser industry between 1993 and 2001. A regulatory shock that increases the value of trading relative to downstream entry provides the setting for a quasi-natural experiment, which corroborates our theoretical predictions.
    Date: 2018–03
  4. By: Jullien, Bruno; Lefouili, Yassine
    Abstract: This paper discusses the effects of horizontal mergers on innovation. We rely on the existing academic literature and our own research work to present the various positive and negative effects of mergers on innovation. Our analysis shows that the overall impact of a merger on innovation may be either positive or negative and sheds light on the circumstances under which each of these scenarios is likely to arise. We derive a number of policy implications regarding the way innovation effects should be handled by competition authorities in merger control and highlight the differences with the analysis of price effects.
    Keywords: Innovation; Merger Policy; R&D Investments
    JEL: K21 L13 L40
    Date: 2018–03
  5. By: Roberto Bonfatti; Luis A. Bryce Campodonico; Luigi Pisano
    Abstract: Empirical studies have uncovered an inverted-U relationship between product-market competition and innovation. This is inconsistent with the original Schumpeterian Model, where greater competition reduces the profitability of innovation. We show that the model can predict the inverted-U if the innovators’ talent is heterogenous, and privately observable. With competition low and profitability high, talented innovators are credit constrained, since others are eager to mimic them. As competition increases, the mimickers become less eager, and talented innovators can invest more. This generates the increasing part of the relationship. With competition high, talented innovators are unconstrained, and the relationship is decreasing.
    Keywords: Innovation, Competition, Schumpeterian Model of Growth, Asymmetric Information
    Date: 2018
  6. By: Mário Alexandre Patrício Martins da Silva (Faculdade de Economia do Porto)
    Abstract: We show that the setting up of general conditions on complementarity in absorptive capacity gives rise to different, if not opposite Nash equilibrium outcomes to those found when absorptive capacity is assumed to be determined only by the similarity of R&D orientations. Firms that cooperate in R&D can take full advantage of complementarity in R&D by adopting firm-specific R&D paths, which appears to contradict Kamien and Zang’s (2000) findings, and so would contradict Weithaus’ (2005) predictions. Oddly, firms competing in R&D cannot gain the most from the potential of complementarity in knowledge by not choosing firm-specific R&D approaches in equilibrium under even milder conditions, which is contrary to another prediction of the Kamien and Zang’s and Weithaus’ models.
    Keywords: Absorptive capacity, complementarities, R&D, knowledge spillovers
    JEL: O33
    Date: 2017–11
  7. By: Collie, David R. (Cardiff Business School)
    Abstract: Welfare with the maximum-revenue tariff is compared to free-trade welfare under perfect competition in the case of a large country able to affect its terms of trade; under Cournot duopoly with differentiated products; and under Bertrand duopoly with differentiated products. Under perfect competition, assuming linear demand and supply, welfare with the maximum-revenue tariff will be higher than free-trade welfare if the country has sufficient market power. Under Cournot duopoly and Bertrand duopoly, assuming linear demands and constant marginal costs, welfare with the maximum-revenue tariff is always higher than free-trade welfare.
    Keywords: Maximum-Revenue Tariff; Free Trade; Perfect Competition; Cournot Oligopoly; Bertrand Oligopoly
    JEL: F12 F13 F13
    Date: 2018–03
  8. By: Robert Clark (Queen's University); decio Coviello (HEC Montreal); Jean-Francois Gauthier (Boston College); Art Shneyerov (Concordia University)
    Abstract: We study the impact of an investigation into collusion and corruption to learn about the organization of cartels in public procurement auctions. Our focus is on Montreal’s asphalt industry, where there have been allegations of bid rigging, market segmentation, complementary bidding and bribes to bureaucrats, and where, in 2009, a police investigation was launched. We collect procurement data and use a difference-in-difference approach to compare outcomes before and after the investigation in Montreal and in Quebec City, where there have been no allegations of collusion or corruption. We find that entry and participation increased, and that the price of procurement decreased. We then decompose the price decrease to quantify the importance of two aspects of cartel organization, coordination and entry deterrence, for collusive pricing. We find that the latter explains only a small part of the decrease.
    Keywords: Collusion, Corruption, Bid rigging, Entry deterrence
    JEL: L22 L74 D44 H57
    Date: 2018–02
  9. By: Kristian Behrens (National Research University Higher School of Economics); Giordano Mion (University of Sussex); Yasusada Murata (National Research University Higher School of Economics); Jens Suedekum (Heinrich-Heine-Universitat Dusseldorf)
    Abstract: Equilibria and optima generally differ in imperfectly competitive markets. While this is well understood theoretically, it is unclear how large the welfare distortions are in the aggregate economy. Do they matter quantitatively? To answer this question, we develop a multi-sector monopolistic competition model with endogenous firm entry and selection, productivity, and markups. Using French and British data, we quantify the gap between the equilibrium and optimal allocations. In our preferred specification, inefficiencies in the labor allocation and entry between sectors, as well as inefficient selection and output per firm within sectors, generate welfare losses of about 6–10% of GDP.
    Keywords: monopolistic competition; welfare distortions; equilibrium versus optimum; inefficient entry and selection; inter- and intra-sectoral allocations
    JEL: D43 D50 L13
    Date: 2018
  10. By: Fiala, Lenka (Tilburg University, School of Economics and Management); Suetens, Sigrid (Tilburg University, School of Economics and Management)
    Abstract: We use data from experiments on finitely repeated dilemma games with fixed matching to investigate the effect of different types of information on cooperation. The data come from 71 studies using the voluntary contributions paradigm, covering 122 data points, and from 18 studies on decision-making in oligopoly, covering another 50 data points. We find similar effects in the two sets of experimental games. We find that transparency about what everyone in a group earns reduces contributions to the public good, as well as the degree of collusion in oligopoly markets. In contrast, transparency about choices tends to lead to an increase in contributions and collusion, although the size of this effect varies somewhat between the two settings. Our results are potentially useful for policy making, because they provide guidance on the type of information to target in order to stimulate or limit cooperation.
    Date: 2017
  11. By: Lijun Zhu (Washington University in St. Louis)
    Abstract: The labor share has been declining for the last 20 to 25 years in U.S. This paper investigates the effect of industrial concentration on the decline of labor share, and quantify this effect. We document two empirical facts. First, there is a positive and significant correlation between the increase in concentration, measured as share of sales by large firms in a sector, and decrease in sectoral labor share from 1997 to 2012. Second, in average, the labor share for large firms is lower than small firms within the same sector. We propose the following explanation: large firms have lower labor share since they use more capital intensive technologies, which is supported by firm level data which reveals that capital-labor ratio is positively and significantly correlated with firm size, measured as sales, assets, and/or employees.; Mergers & Acquisitions, due to weakening of Anti-trust laws since 1980s, transfers market share from small to large firms, increases concentration ratio, and decreases labor share. A firm dynamics model that features merger and acquisition is developed. Production technologies are endogenized, with more productive firms choosing more capital intensive technology. Our quantitative exercise shows that the proposed mechanism explains 30-40% of the decrease in labor share from 1997 to 2012.
    Date: 2017
  12. By: João Correia-da-Silva (CEF.UP and Faculdade de Economia, Universidade do Porto.); Joana Pinho (CEF.UP and Faculdade de Economia, Universidade do Porto.)
    Abstract: We study the sustainability of collusion in mixed oligopolies where private and public firms only differ in their objective: private firms maximize profits, while public firms maximize total surplus. If marginal costs are increasing, public firms do not supply the entire market, leaving room for private firms to produce and possibly cooperate by restricting output. The presence of public firms makes collusion among private firms harder to sustain, and maybe even unprofitable. As the number of private firms increases, collusion may become easier or harder to sustain. Privatization makes collusion easier to sustain, and is socially detrimental whenever firms are able to collude after privatization (which is always the case if they are sufficiently patient). Coordinated effects thus reverse the traditional result according to which privatization is socially desirable if there are many firms in the industry.
    Keywords: Collusion; Mixed oligopoly; Privatization; Coordinated effects
    JEL: D43 H44 L13 L41
    Date: 2017–07
  13. By: Debjyoti Saharoy; Theja Tulabandhula
    Abstract: We propose a new efficient online algorithm to learn the parameters governing the purchasing behavior of a utility maximizing buyer, who responds to prices, in a repeated interaction setting. The key feature of our algorithm is that it can learn even non-linear buyer utility while working with arbitrary price constraints that the seller may impose. This overcomes a major shortcoming of previous approaches, which use unrealistic prices to learn these parameters making them unsuitable in practice.
    Date: 2018–03
  14. By: Ekaterina Aleksandrova (National Research University Higher School of Economics); Kristian Behrens (National Research University Higher School of Economics); Maria Kuznetsova (National Research University Higher School of Economics)
    Abstract: We document geographic concentration patterns of Russian manufacturing using microgeographic data. About 42–52% of 4-digit and 63–75% of 3-digit industries are localized, with a higher share in the European part than in the Asian part. About 70% of 3-digit industry pairs are coagglomerated, especially those with stronger buyer-supplier links, more knowledge sharing, and lower transport costs. Pairs with a more similar workforce are, however, less coagglomerated, which points to impediments in labor mobility between regions and firms. Overall, the agglomeration forces are fairly similar to those operating in developed countries, with transportation likely to be a key driver.
    Keywords: agglomeration; coagglomeration; determinants of geographic concentration; manufacturing industries; Russia.
    JEL: R12
    Date: 2018
  15. By: Julieta Caunedo (Cornell University)
    Abstract: Disparities in revenue productivity for narrowly defined industries is ubiquitous in firm-level data. Whereas often times such a heterogeneity is a symptom of factor misallocation, it is also possible that part of it is induced by firms' optimal decisions under technology and information constraints. To date, there is limited understanding of the implications of the observed revenue product heterogeneity for efficiency in frameworks where both sources for dispersion coexist. This paper fills the gap. Market distortions that generate inefficient factor accumulation may feed back into the equilibrium distribution of revenue productivity, and hence, empirical measures of allocative efficiency. Understanding such interaction is key for policy design. In this paper, I focus on the study of market distortions generated by firms' market power and I generate endogenous revenue product dispersion through either heterogeneous market power, non-convex production technologies, or information frictions. I characterize the market decentralization of efficient outcomes via policies that do not require firm-level information. Most importantly, I show that the welfare gains for a wide class of models when implementing these optimal policies follows a common pattern: welfare gains are proportional to the change in average revenue product and the number of operating units in the market.
    Date: 2017
  16. By: Alice M. Ellyson; Anirban Basu
    Abstract: Economic literature has extensively studied how prices for incumbent pharmaceutical drugs respond to generic competition after entry. However, less attention has been paid to pricing behavior in anticipation of brand-to-brand competition. We contribute to this gap in the literature by both developing a model of pricing strategies for incumbent drug manufacturers under tiered-insurance anticipating branded competition. Our model predicts rising prices for incumbent drugs for a range of elasticities as the likelihood of entry increases from competitors with horizontally-differentiated products. Using the insulin market as a natural experiment, we exploit exogenous variation in a potential entrant's completion of clinical trials to identify the effect of drug pipeline pressure on the prices of incumbent drugs. Results suggest that pipeline pressure significantly increases the prices of incumbent drugs. We expect that similar pricing effects will be prevalent with potential biosimilar entry.
    JEL: I11 I13 I18 K23 L11 L13
    Date: 2018–03
  17. By: Victor Aguirregabiria (University of Toronto and CEPR); Robert Clark (Queen's University); Hui Wang (Peking University)
    Abstract: This paper studies the integration of deposit and loan markets, which may be constrained by the geographic dispersion of depositors, borrowers, and banks. This dispersion results in problems of asymmetric information, monitoring and transaction costs, which in turn may prevent deposits from flowing from areas of low demand for loans to areas of high demand. We provide systematic evidence on the extent to which deposits and loans are geographically imbalanced, and develop a methodology for investigating the contribution of (i) branch networks, (ii) local market power, and (iii) economies of scope to this imbalance using data at the bank-county-year level from the US banking industry for 1998-2010. Our results are based on the construction of an index which measures the geographic imbalance of deposits and loans, and the estimation of a structural model of bank oligopoly competition for deposits and loans in multiple geographic markets. The estimated model shows that a bank's total deposits have a significant effect on the bank's market shares in loan markets. We also find evidence of significant economies of scope between deposits and loans at the local level. Counterfactual experiments show that multi-state branch networks contribute significantly to the geographic flow of credit but benefit especially larger/richer counties. Local market power has a very substantial negative effect on the flow of credit to smaller/poorer counties.
    Keywords: Geographic flow of bank funds, Access to credit, Bank oligopoly competition, Branch networks, Economies of scope between deposits and loans
    JEL: L13 L51 G21
    Date: 2017–11
  18. By: Panayotis D. Alexakis (National and Kapodistrian University of Athens); Ioannis G. Samantas (National and Kapodistrian University of Athens)
    Abstract: The paper examines the nexus of foreign ownership and market power in 26 European banking sectors, for the period 1997-2013. The sample comprises 11,761 bank-year estimates of marginal cost and market power, which are then matched with data on the foreign ownership status and presence across all host countries. The analysis reports strong evidence over the significant effect of well-capitalised foreign-owned banks on their monopolistic conduct. There is also a weaker indication that foreign presence leads to higher margins in large-sized foreign banks in fast-growing economies and markets of stricter regulation on capital, in which foreign penetration lies above 14% of the host banking industry.
    Keywords: Market power; European banks; foreign banking; semiparametric modeling
    JEL: C14 D40 G2 L40
    Date: 2018–02
  19. By: Tetsuji Okazaki (Faculty of Economics, University of Tokyo)
    Abstract: This paper selectively surveys the literature on the financial history of prewar Japan, focusing on the role of banks in industrial and corporate financing and the characteristics of the industrial organization in the banking sector, and adds some supplementary analyses. The banking sector in prewar Japan is characterized by the multilayered structure and the close relationship between banks and non-financial firms, called “organ bank†relationship. Whereas the organ bank relationship enabled related firms with lower profitability and smaller internal fund to borrow money more easily, it tended to hurt the profitability of banks and stability of the banking system. In the 1920s, when the banking system became unstable, a large wave of bank exits through mergers and closures occurred. Over this exit wave, the organ bank relationship waned through selection of unsound banks and change in the governance structure of banks. Meanwhile, this bank exit wave changed the fund allocation in local financial markets, which in turn affected the local industries.
    Date: 2016–10
  20. By: van der Cruijsen, Carin; Diepstraten, Maaike (Tilburg University, School of Economics and Management)
    Abstract: Policymakers around the world call for more competition in the banking sector. One prerequisite to achieving this is customer mobility. Despite its policy relevance, surprisingly little is known about consumers’ bank switching behaviour. We show that the principal reasons to stay at one’s bank are a good bank-customer relationship, practical barriers, and the perception that there is not much benefit in switching. Moreover, we find that the reported propensity to switch varies across banking products. For the main current and savings accounts, this propensity is most strongly related to the bank-customer relationship, while for mortgage loans it is especially linked to switching experience. These findings have important implications for antitrust policy; they provide an argument against using a cluster-based legal standard for the analysis of competition and in favour of a disaggregated approach. Regarding the effectiveness of hypothetical policy initiatives to lower switching barriers, we find that the reported switching propensity with current accounts is higher in the case of account number portability, while more knowledge of the existing switching service has no significant effect. Lastly, scenario analysis shows that a policy of allowing new foreign banks to enter the savings market is less promising for enhancing mobility than a policy that increases the number of domestic players.
    Date: 2017
  21. By: Lin William Cong; Zhiguo He
    Abstract: Blockchain technology features decentralized consensus as well as tamper-proof and algorithmic executions, and consequently enlarges the contracting space through smart contracts. Meanwhile, the process of generating decentralized consensus, which involves information distribution, necessarily alters the informational environment. We analyze how decentralization improves consensus effectiveness, and how the quintessential features of blockchain reshape industrial organization and the landscape of competition. Smart contracts can mitigate information asymmetry and deliver higher social welfare and consumer surplus through enhanced entry and competition, yet blockchains may also encourage collusion due to the irreducible distribution of information, especially in consensus generation. In general, blockchains can sustain market equilibria with a larger range of economic outcomes. We further discuss anti-trust policy implications targeted to blockchain applications, such as separating consensus record-keepers from users.
    JEL: D4 D8 G2 L13 L4 O3
    Date: 2018–03
  22. By: Nicole Jonker
    Abstract: Decentralised issued crypto "currencies", like bitcoin, have the potential to drastically change the existing retail payment system and even the monetary system. Insights into the factors that influence their adoption are therefore crucial. Using a large representative sample of retailers that sell their products online, we find that acceptance of crypto payments is currently modest (2%), but there is substantial interest among retailers to adopt crypto payments in the near future. Consumer demand, net transactional benefits and perceived adoption effort influence adoption intention and actual acceptance by retailers. Regarding non-financial factors, our findings suggest that service providers who act as intermediaries between retailers, their customers, and providers of payment instruments play a crucial role as facilitators of competition and innovation in the online retail payments market by lowering such barriers. The most serious barrier for crypto acceptance seems to be a lack of consumer demand. Information from consumers indicate that those who possess cryptos, don't use it for online payments. It seems therefore unlikely that the adoption of cryptos by retailers will increase substantially, making it highly unlikely that cryptos like bitcoin will drastically change the existing retail payment system.
    Keywords: bitcoin; cryptocurrency; technology adoption; two-sided markets; retailers; network externalities; cost; facilitating conditions
    JEL: D22 E42 G20 O33
    Date: 2018–02
  23. By: Julien Prat; Benjamin Walter
    Abstract: We propose a model which uses the Bitcoin/US dollar exchange rate to predict the computing power of the Bitcoin network. We show that free entry places an upper-bound on mining revenues and we devise a structural framework to measure its value. Calibrating the model’s parameters allows us to accurately forecast the evolution of the network computing power over time. We establish the accuracy of the model through out-of-sample tests and investigation of the entry rule.
    Keywords: Bitcoin, blockchain, miners, industry dynamics
    JEL: D41 L10
    Date: 2018
  24. By: Guglielmo Maria Caporale; Alex Plastun
    Abstract: This paper examines price overreactions in the case of the following cryptocurrencies: BitCoin, LiteCoin, Ripple and Dash. A number of parametric (t-test, ANOVA, regression analysis with dummy variables) and non-parametric (Mann–Whitney U test) tests confirm the presence of price patterns after overreactions: the next-day price changes in both directions are bigger than after “normal” days. A trading robot approach is then used to establish whether these statistical anomalies can be exploited to generate profits. The results suggest that a strategy based on counter-movements after overreactions is not profitable, whilst one based on inertia appears to be profitable but produces outcomes not statistically different from the random ones. Therefore the overreactions detected in the cryptocurrency market do not give rise to exploitable profit opportunities (possibly because of transaction costs) and cannot be seen as evidence against the Efficient Market Hypothesis (EMH).
    Keywords: cryptocurrency market, Bitcoin, overreaction, momentum, abnormal returns, contrarian strategy, trading strategy, trading robot
    JEL: G12 G17 C63
    Date: 2018
  25. By: Mário Alexandre Patrício Martins da Silva (Faculdade de Economia da Universidade do Porto)
    Abstract: In this paper, we explain the analytics of a particular type of mechanism of Open Innovation (OI), namely the management of non-pecuniary exchange of information, and address the relationship between Intellectual Property Rights (IPRs), particularly patent rights, and OI using a static game-theoretic setting of Research and Development competition. We show that, surprisingly perhaps, a rise in the strength of patent protection induces the free sharing and dissemination of technological information and other contributions to the OI development of innovations. Conversely, a fall in the strength of the patent system induces the exercise of traditional IPRs by innovative firms to protect their intellectual assets.
    Keywords: Open innovation; IPRs; knowledge spillovers; R&D
    JEL: O33
    Date: 2017–11
  26. By: Steusloff, Tatjana (Department of Economics of the Duesseldorf University of Applied Sciences); Krusenbaum, Lena
    Abstract: Der steigende Umsatz im Online-Handel lässt eine zunehmende Bereitschaft von Konsumenten erkennen, Produkte online zu erwerben. Wird eine Kaufentscheidung online getroffen, dann liegt eine Informationsasymmetrie zugunsten des Verkäufers vor. Daher sind für die Konsumenten Informationen zu den gewünschten Kaufobjekten von hoher Bedeutung, um die Produktqualität beurteilen zu können. Neben den Produktinformationen des Händlers beeinflussen die Kaufentscheidung der Konsumenten zunehmend von Käufern verfasste Online-Rezensionen (OR). Diese werden von potentiellen Käufern oft als sehr glaubwürdig wahrgenommen, da sie von einem tatsächlichen Konsumenten verfasst wurden. In dieser Studie wurde die Wirkung dieser Rezensionen auf die Zahlungsbereitschaft von Käufern bei Amazon untersucht. Die Ergebnisse legen den Schluss nahe, dass vom Konsumenten als positiv wahrgenommene Online-Rezensionen einen signifikant positiven Einfluss auf die Zahlungsbereitschaft haben, negativ wahrgenommene ORs diese jedoch tendenziell senken. Beeinflusst die OR die Qualitätswahrnehmung positiv, so erhöht sich tendenziell die maximale Preisbereitschaft von potenziellen Käufern. Die Erkenntnisse dieser Studie sind für alle Unternehmen relevant, die ihre Produkte bei Amazon verkaufen. Sie können mit diesem Wissen u.a. ihr Rezensionssystem optimieren und ihre Preispolitik so ausrichten, dass Umsätze optimiert werden können.
    Abstract: Increasing online sales indicate a rising willingness of consumers to buy their products online. For a purchase decision made online there often exists an information asymmetry in favor of the seller. Therefore, in-formation about the desired purchase object are of high importance for the potential consumers in order to assess product quality. In particular, consumer-written online reviews (OR) increasingly influence the online purchase decision, since they are written by actual consumers and thus perceived as very credible. In this study, the effect of these reviews on Amazon consumers’ willingness to pay (WTP) was analyzed. Results indicate an increased willingness to pay if consumers perceive ORs positively, whereas negative reviews tend to lower the WTP. If OR influences the quality perception positively, the maximum willingness to pay of potential buyers tends to increase. The findings of this study are relevant to all companies that sell their products on Amazon. With this knowledge, they can tailor their pricing policy to optimize sales.
    Keywords: Online-Rezensionen, Amazon, Preisbereitschaft, Kaufentscheidung, Online Ratings, Willingness-to-pay, Purchase Decision
    JEL: L1 G1
  27. By: Rudy Douven (CPB Netherlands Bureau for Economic Policy Analysis); Monique Burger; Erik Schut
    Abstract: In the Dutch health care system health insurers negotiate with hospitals about the pricing of hospital products in a managed competition framework. In this paper, we study these contract prices that became for the first time publicly available in 2016. The data show substantive price variation between hospitals for the same products, and within a hospital for the same product across insurers. About 27% of the contract prices for a hospital product is 20% higher or lower than the average contract price in the market. For about half of the products the highest and lowest contract price across hospitals differ by a factor three or more. Moreover, hospital product prices do not follow a consistent ranking across hospitals, suggesting substantial cross subsidization between hospital products. Potential explanations for the large and seemingly random price variation are: (i) different cost pricing methods used by hospitals, (ii) uncertainty due to frequent changes in the hospital payment system; (iii) price adjustments related to negotiated lumpsum payments, and (iv) differences in hospital and insurer market power. Several policy options are discussed to reduce variation and increase transparency of hospital prices.
    JEL: I00 I11 L11 L51
    Date: 2018–03
  28. By: Christian Peukert; Imke Reimers
    Abstract: Digital technology has allowed inventors to circumvent traditional intermediaries and directly reach consumers, which may affect licensing outcomes and efficiency in the market for ideas. We study these impacts theoretically and empirically in the book publishing industry, where the number of new books available to consumers has almost doubled after the advent of digital self- publishing platforms. Using data on over 90,000 license deals between authors and publishers from 2002 to 2015, we identify disintermediation-related changes in this market from quasi-experimental variation across product types over time. Consistent with digital self-publishing improving an author’s bargaining position, we find that authors get substantially more favorable license deals. We further show that ex-ante license fees reflect ex-post demand more accurately. This is consistent with additional entry generating more information about a product type’s realized appeal. In markets in which product appeal is difficult to predict, such improvements in the information environment can have large impacts on efficiency and welfare.
    Keywords: disintermediation, innovation, book publishing, natural experiment
    JEL: D22 D83
    Date: 2018
  29. By: Nanik Hariyana (Faculty of Economic & Bussiness University of Jember, Indonesia Author-2-Name: Raden Andi Sularso Author-2-Workplace-Name: Faculty of Economic & Bussiness University of Jember, Indonesia Author-3-Name: Diana Sulianti K Tobing Author-3-Workplace-Name: Faculty of Economic & Bussiness University of Jember, Indonesia Author-4-Name: Imam Suroso Author-4-Workplace-Name: Faculty of Economic & Bussiness University of Jember, Indonesia)
    Abstract: Objective – The purpose of this study is to determine the effect of advertising of FMCG products on the decision to purchase those products, and brand loyalty, in East Java. Methodology/Technique –This study examines the effect of television advertising on the decision to purchase and brand loyalty with respect to FMCG products. The study uses purposive sampling to gather information in the district of East Java, with a sample of 140 respondents. The study also uses SEM (Structural Equation Modelling) to measure the results. Findings – The SEM analysis shows that product advertising has a significant effect on the decision to purchase and brand loyalty on FMCG products in East Java, which tends to increase at a rate of 5% alpha. Novelty – This study examines the purchasing power of people in the district of East Java.
    Keywords: Strategy; Advertising; Messages; Advertising Products; Lux Soap; Purchasing Decisions.
    JEL: M3 M31
    Date: 2018–02–23
  30. By: Angelo Castaldo (Università Sapienza di Roma - Dipartimento di Studi Giuridici, Filosofici ed Economici); Marco Grantaliano; Nicola Faraone
    Abstract: Da una disamina ad ampio spettro della casistica antitrust italiana in tema di intese e abuso di posizione dominante è emersa un’elevata propensione del giudice amministrativo nazionale a rideterminare (nel 52% dei casi) l’importo delle sanzioni pecuniarie comminate dall’Autorità Garante della Concorrenza e del Mercato (AGCM). Tale considerazione sembra confermata, in ottica comparativa, dal basso tasso di ricorsi accolti (10%) presso la Corte di Giustizia dell’Unione Europea in tema di contenzioso antitrust. Da tale evidenza emergono alcuni quesiti. Il Giudice, quando esercita il suo sindacato di merito, si attiene alla stessa metodologia su cui si basa l’Autorità ? Modificando la sanzione, incide sulla funzione deterrente della stessa. Quindi: emerge un rischio di inficiare la capacità deterrente della sanzione? Su tale sfondo, il presente lavoro indaga le modalità con cui il giudice amministrativo italiano motiva e lega, nel dispositivo, l’accolto con l’effettiva rideterminazione eseguita. L’analisi sui casi parte da un dataset composto da n. 524 sanzioni AGCM comminate per abuso di posizione dominante e intese nel periodo 2000-2015. Per analizzare l’approccio implementato dal giudice amministrativo si sono vagliati tutti i casi (n. 119) di procedimenti con sanzioni rideterminate a seguito di ricorso giurisdizionale. Le risultanze dell’analisi condotta portano a ritenere fondato il timore che l’opera del Giudice possa occasionalmente, tramite l’attività di ridetermina, incidere sull’efficienza ed efficacia complessiva dell’apparato sanzionatorio antitrust. Tale rischio, andatosi attenuando nel tempo, può derivare da una incertezza metodologica alla base del calcolo della sanzione. Incertezza che si ritiene tanto più ampia quanto maggiore è il distacco logico dalla tecnica tracciata nelle guidelines.
    Keywords: Sanzioni antitrus, Vaglio giurisdizionale, Linee guida Antitrust.
    JEL: K21 K23 K41
    Date: 2018–03

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