nep-com New Economics Papers
on Industrial Competition
Issue of 2018‒05‒07
thirty papers chosen by
Russell Pittman
United States Department of Justice

  1. Missed Sales and the Pricing of Ancillary Goods By Gomes, Renato; Tirole, Jean
  2. Pricing and Diffusion of Durables with Network Externalities By Hattori, Keisuke; Zennyo, Yusuke
  3. A Model of Search with Price Discrimination By Fabra, Natalia
  4. IO in I-O: Size, Industrial Organization, and the Input-Output NetworkMake a Firm Structurally Important By Basile Grassi
  5. Product Line Strategy within a Vertically Differentiated Duopoly under Non-negativity Outputs Constraints By Tetsuya Shinkai; Ryoma Kitamura
  6. A cautionary note on using hotelling models in platform markets By Jeitschko, Thomas D.; Kim, Soo Jin; Yankelevich, Aleksandr
  7. Demand Shocks, Learning-by-Doing and Exclusion By Bobtcheff, Catherine; Crampes, Claude; Lefouili, Yassine
  8. Endogenous interlocking directorates By Maria Rosa, Battaggion; Vittoria, Cerasi;
  9. How to make a deal: The role of rankings and personal ties in creating trust in the mergers and acquisitions market By Valérie Boussard; Olivier Godechot; Nicolas Woloszko
  10. Winning by Losing: Evidence on the Long-Run Effects of Mergers By Malmendier, Ulrike; Moretti, Enrico; Peters, Florian
  11. Competition agency guidelines and policy initiatives regarding the application of competition law vis-à-vis intellectual property: An analysis of jurisdictional approaches and emerging directions By Anderson, Robert D.; Chen, Jianning; Müller, Anna Caroline; Novozhilkina, Daria; Pelletier, Philippe; Sen, Nivedita; Sporysheva, Nadezhda
  12. Competition in health care markets: treatment volume and quality By Boone, Jan
  13. Multimarket Contact in Health Insurance: Evidence from Medicare Advantage By Haizhen Lin; Ian M. McCarthy
  14. Competition and Equity in Health Care Markets By Luigi Siciliani; Odd Rune Straume
  15. Hospital Competition under Pay-for-Performance: Quality, Mortality and Readmissions By Domenico Lisi; Luigi Siciliani; Odd Rune Straume
  16. Does price competition damage healthcare quality? By Anne-Fleur Roos; Eddy van Doorslaer; Owen O'Donnell; Erik Schutt; Marco Varkevisser
  17. The Development of Firm Size and Innovativeness in the Pharmaceutical industry between 1989 and 2010 By Martin Backfisch
  18. A Systematic Review of Vertical Integration and Quality of Care, Efficiency, and Patient-Centered Outcomes By Rachel M. Machta; Kristin A. Maurer; David J. Jones; Michael F. Furukawa; Eugene C. Rich
  19. Managing Technical Efficiency of Public and Private Hospitals in Vietnam: Do Market-Oriented Policies Matter? By Hideaki Kitaki
  20. Market Entry, Fighting Brands and Tacit Collusion: The Case of the French Mobile Telecommunications Market By Bourreau, Marc; Sun, Yutec; Verboven, Frank
  21. Measuring Market Power in Gasoline Retailing: A Market- or Station Phenomenon? By Nguyen-Ones, Mai; Steen, Frode
  22. A duopoly of transportation network companies and traditional radio-taxi dispatch service agencies By Thorsten Heilker; Gernot Sieg
  23. Fairness concerns and risk aversion on recycle pricing strategies: Implications for environmentally friendly supply chains By He, Jianhong; Zhang, Lei; Lu, Binbin; Li, Lin
  24. Supply Function Equilibrium over a Constrained Transmission Line II: Multiple Plants and Nodal Price Derivatives By Ruddell, Keith
  25. Mobility with private information and privacy suppression By Hämäläinen, Saara; Petrikaite, Vaiva
  26. Blockchain: The birth of Decentralized Governance By Benito Arruñada; Luis Garicano
  27. Reverse privatization as a reaction to the competitive environment: Evidence from solid waste collection in Germany By Juri Demuth; Hans W. Friederiszick; Steffen Reinhold
  29. To pay or not to pay for parking at shopping malls - A rationale from the perspective of two-sided markets By Inga Molenda; Gernot Sieg
  30. The Production of Information in an Online World: Is Copy Right? By Julia Cage; nicolas Hervé; Marie-Luce Viaud

  1. By: Gomes, Renato; Tirole, Jean
    Abstract: Firms often sell a basic good as well as ancillary ones. Hold-up concerns have led to ancillary good regulations such as transparency and price caps. The hold-up narrative, however, runs counter to evidence in many retail settings where ancillary good prices are set below cost (e.g. free shipping, or limited card surcharging in countries where the "no-surcharge rule" was lifted). We argue that the key to unifying these conflicting narratives is that the seller may absorb partly or fully the ancillary good's cost so as not to miss sales on the basic good. A supplier with market power on the ancillary good market then takes advantage of cost absorption and jacks up its wholesale price. Hold-ups occur only when consumers are initially uninformed or naïve about the drip price and shopping costs are high. The price of the basic good then acts as a signal of the drip price, since a high markup on the basic good makes the firm more wary of missed sales. Regardless of whether consumers are informed, uninformed-but-rational, or naïve, mandating price transparency and banning loss-making on the ancillary good leads to (i) an efficient consumption of the ancillary good, and (ii) a reduction of its wholesale price, generating strict welfare gains.
    Keywords: add-ons; drip pricing; give-aways; hold-ups; missed sales
    JEL: D83 L10 L41
    Date: 2018–03
  2. By: Hattori, Keisuke; Zennyo, Yusuke
    Abstract: This paper considers the optimal pricing and diffusion of a durable good that exhibits positive network externalities, when consumers are heterogeneous with respect to their expectations about future network sizes. We consider the existence of naive consumers, as well as of sophisticated consumers who have fulfilled expectations about future network sizes. At the time of purchase, naive consumers presume that the current network size will continue over future periods. We find that the firm charges the sequential-diffusion pricing that makes sophisticated consumers function as early adopters, unless consumers quickly become bored with using the goods and/or unless the firm heavily discounts its future profits. In addition, we show that naive consumers may enjoy a greater surplus than do sophisticated consumers, implying that the firm benefits when more consumers are sophisticated. We also compare the profitability of three possible pricing strategies with different commitment powers: fixed, responsive, and pre-announced pricing.
    Keywords: durable good; network externalities; diffusion process; consumer naivete
    JEL: D21 D42 L12 L14
    Date: 2018–04–15
  3. By: Fabra, Natalia
    Abstract: We introduce heterogeneity in buyers' size into a model of simultaneous search. Buyers' differences in their willigness to search give rise to price discrimination, even if their valuations for the good are equal. We shed light on three related questions: (i) what is the relationship between prices and buyers' size? (ii) what are the effects of reducing search costs?, and (iii) who benefits and who is hurt by price discrimination? The answers critically depend on the elasticity of the search cost distribution. Interestingly, for normally distributed search costs, (i) there is an inverted U-shape relationship between prices and buyers' size, (ii) when search costs go down, the prices charged to small buyers do not fall as much as those charged to the large ones (and can even go up), and (iii) price discrimination benefits small and large buyers, at the expense of the medium-size buyers.
    Keywords: bid solicitation; price discrimination; search
    Date: 2018–03
  4. By: Basile Grassi
    Abstract: Firm-level productivity shocks can help understand sector- and macroeconomic-level outcomes. Capturing the market power of these firms is important: it determines how productivity gains translate into prices and markups. In existing models, firms do not internalize the impact of their systemic size. This paper explores the alternative oligopolistic market structure. To this end, I build a tractablemulti-sector heterogeneous-firmgeneral equilibriummodel featuring oligopolistic competition and an input-output (I-O) network. By affecting price and markup, firm-level productivity shocks propagate both to the downstream and upstream sectors. Sector-level competition intensity affects the strength of these new propagation mechanisms. The structural importance of a firm is determined by the interaction of (i) the sector-level competition intensity, (ii) the firm’s sector position in the I-O network, and (iii) the firm size. In a calibration exercise, the aggregate volatility arising from independent firm-level shock is 34% of the one observed in the data. Keywords: Input-Output Network, Production Network, Shocks Propagation, Oligopoly, Imperfect Competition, IndustrialOrganization, FirmHeterogeneity,RandomGrowth,Granularity, Volatility, Micro-Origin of Aggregate Fluctuations, Business Cycle
    Date: 2018
  5. By: Tetsuya Shinkai (School of Economics, Kwansei Gakuin University); Ryoma Kitamura (Faculty of Economics, Ryukoku University)
    Abstract: We consider product line strategies of duopolistic firms supplying two vertically differentiated products with non-negativity output constraint and its expectation on rival's product line reaction. We consider a game in which there exists a heterogeneous unit production costs in high quality goods but is homogeneous in low quality product between firms. We derive equilibria for the game and characterize graphically firms' product line strategies and the realized profits of both firms through quality superiority and relative cost efficiency ratios. We also show that the efficient cost firm earns more than the inefficient firm except for the special case where both firms specialize in low quality good. We also illustrate that firms can correctly conjecture the ex ante relationship between the quality superiority of both goods and the relative cost efficiency ratios of firms on high quality good ex post in equilibrium.
    Keywords: Multi-product firm; Duopoly; Substitution of Production between products; Vertical product differentiation
    Date: 2018–05
  6. By: Jeitschko, Thomas D.; Kim, Soo Jin; Yankelevich, Aleksandr
    Abstract: We study a Hotelling framework in which customers first pay a monopoly platform to enter the market before deciding between two competing services on opposite ends of a Hotelling line. This setup is common when modeling competition in Internet content provision. We find that standard taken-for-granted solution methods under full market coverage break down, and that in the unique full-coverage equilibrium, the competing service providers set substantially lower prices. Standard methods and prices are restored by giving service providers the first move.
    Keywords: Hotelling Model,First Mover Advantage,Two-Sided Market
    JEL: D21 D43 L0
    Date: 2018
  7. By: Bobtcheff, Catherine; Crampes, Claude; Lefouili, Yassine
    Abstract: This note examines how an exogenous industry-wide demand shock, such as the one resulting from the use of governmental subsidies, affects the exclusionary potential of learning-by-doing. We develop a two-period duopoly model in which an increase in a firm's first-period output leads to a decrease in its second-period marginal cost, and apply it to two special scenarios: one in which demand and learning technologies are linear and one in which firms are infinitely impatient. In the first scenario, we establish that a positive demand shock amplifies the exclusionary effect of learning-by-doing if and only if firms are sufficiently asymmetric in their learning abilities. In the second scenario, we emphasize the key role of the demand curvature as a determinant of the effect of a demand shock on the exclusionary potential of learning-by-doing.
    Keywords: Demand shocks; learning-by-doing; market structure; exit
    JEL: D11 L13 Q4
    Date: 2018–04
  8. By: Maria Rosa, Battaggion; Vittoria, Cerasi;
    Abstract: The present paper analyzes the choice to place an executive in the board of the rival company, within a duopoly where firms with hidden marginal costs of production compete in the product market. Interlocking directorates may emerge as an equilibrium outcome whenever firms gain by exchanging information about their private costs. We show that a unilateral interlocking arises when firms have different degrees of efficiency and the direction of this interlock is affected by the degree of substitutability in the product market. Bilateral interlocking occurs only between similar firms, that is when equally inefficient firms sell substitute products or when equally efficient firms sell complement products. The equilibrium outcome is always welfare increasing for consumers.
    Keywords: Oligopoly, Firm Organization and Market Structure, Executives
    JEL: L22 M12
    Date: 2018–05–01
  9. By: Valérie Boussard (Professions, institutions, temporalités); Olivier Godechot (Observatoire sociologique du changement); Nicolas Woloszko (École normale supérieure - Cachan (ENS Cachan))
    Abstract: On the mergers and acquisitions (M&A) market, buyers and sellers resort to experts in order to secure deals. But as these experts might be prone to opportunism, firms need to find a way to build trust. We identify two trust devices: social ties and public rankings. We explore whether these personal and impersonal devices are substitutes, independent or complementary. We study the French M&A market through a mixed-method approach. We show that both previous contacts and league table rankings of firms contribute to trust and to making deals. These trust devices are all the more likely to be used if the deal is risky, especially within the sell side (more at risk). We also find that firms tend to make deals only with other firms at the same level in the rankings. Finally, we find some evidence of substitution between rankings and personal ties, especially for low-value deals.
    Keywords: Finance; Rankings; Networks; Trust
    JEL: G24 L14 L15
    Date: 2017–12
  10. By: Malmendier, Ulrike; Moretti, Enrico; Peters, Florian
    Abstract: We propose a novel approach to measuring returns to mergers. In a new data set of close bidding contests we use losers' post-merger performance to construct the counterfactual performance of winners had they not won the contest. Stock returns of winners and losers closely track each other over the 36 months before the merger, corroborating our approach to identification. Bidders are also very similar in terms of Tobins Q, profitability and other accounting measures. Over the three years after the merger, however, losers outperform winners by 24 percent. Commonly used methodologies such as announcement returns fail to identify acquirors' underperformance.
    Date: 2018–03
  11. By: Anderson, Robert D.; Chen, Jianning; Müller, Anna Caroline; Novozhilkina, Daria; Pelletier, Philippe; Sen, Nivedita; Sporysheva, Nadezhda
    Abstract: Competition agency guidelines, policy statements and related advocacy are an important vehicle for policy expression and the guidance of firms across the full spectrum of anti-competitive practices and market conduct. The role of guidelines and policy statements has, arguably, been particularly important in the context of the competition policy treatment of intellectual property rights, given the complexity of this area, the importance that competition agencies attach to it, and its importance for innovation, technology transfer and economic growth. As such, this important normative material also provides a useful empirical foundation for mapping relevant trends and the evolution of policy thinking over time and across jurisdictions. In this light, the paper examines the competition agency guidelines, policy statements and related initiatives regarding intellectual property (IP) of the following three sets of jurisdictions: (i) the United States, Canada, the European Union and Australia; (ii) Japan and Korea; and (iii) the BRICS economies (Brazil, China, India, Russia, and South Africa). It focuses, to the extent possible, on a common set of issues addressed in one way or another in the majority of these jurisdictions, comprising: (i) the treatment of licensing practices, including refusals to license; (ii) anti-competitive patent settlements; (iii) issues concerning standard-essential patents (SEPs); (iv) the conduct of patent assertion entities (PAEs); and (v) competition advocacy activities focused on the IP system. Additionally, while the primary focus of the paper is on competition agency guidelines, policy statements and advocacy activities relating to IP, reference is also made to enforcement and case developments where they are helpful in illustrating relevant approaches and trends. Overall, the analysis suggests, firstly, that, in contrast to the situation prevailing twenty or thirty years ago, interest in the systematic application of competition law vis-à-vis IP certainly is no longer a preoccupation of only a few traditional developed jurisdictions. Secondly, we find evidence of significant cross-jurisdictional learning processes and partial policy convergence across the jurisdictions surveyed. Thirdly, the analysis also reveals the continuing potential for coordination failures in regard to the approaches taken by national authorities in this area, for example where jurisdictions take different approaches to specific practices such as refusals to license and/or give differing weights to industrial policy as opposed to consumer welfare or other objectives in their policy applications.
    Keywords: competition agency guidelines,intellectual property,antitrust,innovation,licensing agreements,refusal to license,anti-competitive patent settlements,standard-essential patents (SEPs),patent assertion entities (PAEs),competition advocacy
    JEL: K21 L4 L41 L43 O3 O34
    Date: 2018
  12. By: Boone, Jan
    Abstract: This paper introduces a workhorse model to analyze the effects of provider and insurer competition in health care markets. The two contracting imperfections we focus on are the following: (i) whether or not a patient should be treated and (ii) treatment quality are both not contractible. We derive conditions under which the market can implement first best quality and volume with the optimal competition intensities. First best competition intensity is strictly positive in both markets. If there is under-investment in quality, provider competition should be increased. Increasing insurer competition tends to increase treatment volume. If the planner cannot make the provider market competitive enough, it is optimal to increase insurer competition beyond its first best level thereby creating over-treatment.
    Keywords: competition in health care markets; insurer competition; provider competition; treatment quality; treatment volume
    JEL: I11 I13
    Date: 2018–04
  13. By: Haizhen Lin; Ian M. McCarthy
    Abstract: Many industries, including health insurance, are characterized by a handful of large firms that compete in multiple geographic markets. Such overlap across markets, defined as multimarket contact (MMC), may facilitate tacit collusion and thus reduce the intensity of competition. We examine the effects of MMC on health insurance prices and quality using comprehensive data on the Medicare Advantage (MA) market from 2008 through 2015. Our estimation strategy exploits two plausibly exogenous changes to MMC: 1) a merger-induced change in MMC due to consolidations in other markets; and 2) reimbursement policy changes in which benchmark rates were increased in a subset of markets, encouraging additional entry into those markets and therefore affecting MMC even in markets otherwise unaffected by the policy itself. Across a range of estimates and alternative measures of MMC, our results consistently support the mutual forbearance hypothesis, where we find that prices are significantly higher and quality significantly lower as MMC increases. These results suggest MMC as one potential channel through which cross-market mergers and acquisitions could soften competitiveness in local markets.
    JEL: I11 L11
    Date: 2018–04
  14. By: Luigi Siciliani (Department of Economics and Related Studies, University of York); Odd Rune Straume (Department of Economics/NIPE, University of Minho)
    Abstract: We provide a model where hospitals compete on quality under a fixed price regime to investigate (i) whether hospital competition, as measured by an increase in fixed prices or increased patient choice, increases or reduces the gap in quality between high- and low-quality hospitals, and as a result, (ii) whether competition increases or reduces (pure) health inequalities across hospitals and patient severities. The answer to the first question is generally ambiguous, but we find that the scope for competition to result in quality convergence across hospitals is larger when the marginal patient health gains from quality decrease at a faster rate. Whether competition increases health inequalities depends on the type and measure of inequality. If the patient health benefit function is not too concave in quality, health inequalities due to postcode lottery will increase (decrease) whenever competition induces quality dispersion (convergence). Competition reduces health inequalities between high- and low severity patients if patient composition effects, due to high-severity patients being more likely to exercise choice, are small. We also investigate the effect of competition on health inequalities as measured by the Gini and the Generalised Gini coefficients, and highlight differences compared to the simpler dispersion measures.
    Keywords: Hospital competition; quality; health inequalities; Gini coefficient.
    JEL: I11 I14 L13
    Date: 2018
  15. By: Domenico Lisi (Department of Economics and Business, University of Catania); Luigi Siciliani (Department of Economics and Related Studies, University of York); Odd Rune Straume (Department of Economics/NIPE, University of Minho)
    Abstract: Health outcomes, such as mortality and readmission rates, are commonly used as indicators of hospital quality and as a basis to design pay-for-performance (P4P) incentive schemes. We propose a model of hospital behaviour under P4P where patients di§er in severity and can choose hospital based on quality. We assume that risk-adjustment is not fully accounted for and that unobserved dimensions of severity remain. We show that the introduction of P4P which rewards lower mortality and/or readmission rates can weaken or strengthen hospitalsíincentive to provide quality. Since patients with higher severity have a di§erent probability of exercising patient choice when quality varies, this introduces a selection bias (patient composition e§ect) which in turn alters quality incentives. We also show that this composition e§ect increases with the degree of competition. Critically, readmission rates su§er from one additional source of selection bias through mortality rates since quality a§ects the distribution of survived patients. This implies that the scope for counterproductive e§ects of P4P is larger when Önancial rewards are linked to readmission rates rather than mortality rates. We also show that our results are robust in the presence of public reporting, and discuss welfare implications.
    Keywords: quality; pay-for-performance; health outcomes; performance indicators; heterogeneous severity; selection bias.
    JEL: I12 I18
    Date: 2018
  16. By: Anne-Fleur Roos (ESHPM, Erasmus University Rotterdam); Eddy van Doorslaer (ESHPM, Erasmus University Rotterdam); Owen O'Donnell (Erasmus University Rotterdam, University of Macedonia); Erik Schutt (ESHPM, Erasmus University Rotterdam); Marco Varkevisser (ESHPM, Erasmus University Rotterdam)
    Abstract: One of the reasons why regulators are hesitant about permitting price competition in healthcare markets is that it may damage quality when information is poor. Evidence on whether this fear is well-founded is scarce. We provide evidence using a reform that permitted Dutch health insurers and hospitals to freely negotiate prices for elective procedures. Unlike previous research that has relied on indicators of the quality of urgent treatments, we take advantage of the plausible absence of selection bias in our setting to identify the effect on quality of non-acute hip replacements. Using administrative data on all admissions to Dutch hospitals, we find no evidence that increased exposure to price competition reduces quality measured by readmission rates, despite the lack of publicly available information on this outcome. In fact, there is evidence of a temporary, positive impact on quality. Our estimated null effect over the full post-liberalization period is robust.
    Keywords: Healthcare; hospital; competition; quality; contracting
    JEL: I11 L14 L15
    Date: 2018–04–25
  17. By: Martin Backfisch (DHBW CAS)
    Abstract: Within the last decades, there have been many technological and regulatory changes in the pharmaceutical industry. Some of these developments facilitate the innovative activities of large firms, while others foster small firms. It is therefore surprising that the implications of these changes in the pharmaceutical industry have not often been studied empirically. We contribute to the question of firm size and innovativeness in the pharmaceutical industry in presenting a brief review of the literature on innovative activities with a focus on the relation of different firm sizes in the pharmaceutical industry and present own empirical findings. Our results with project data from a broad range of firms show that the innovative activities of small firms measured by the share of their projects on all research projects have been rising strongly between 1989 and 2010. Further, the share of small firms on new drugs has been constantly increasing in this period. On the other hand, project success rates are lowest for small firms, while the rate of projects already discontinued in the preclinical phase is highest for them. We discuss these results and find that the reasons behind these developments are crucial to understand the innovative performance of the industry within the last 20 years.
    Keywords: pharmaceutical R&D; drug development; success rates; firm size
    JEL: O32 L65
    Date: 2018
  18. By: Rachel M. Machta; Kristin A. Maurer; David J. Jones; Michael F. Furukawa; Eugene C. Rich
    Abstract: Recent evidence suggests the trend toward vertical integration will likely continue as providers respond to changing payment models and market factors.
    Keywords: delivery system, health system, hospital–physician affiliations, vertical integration
    JEL: I
  19. By: Hideaki Kitaki
    Abstract: This study examined how ownership and the degree of competition in the market were related to pure technical efficiency, using micro-level hospital data from six regions in Vietnam that were collected by an original survey. According to the results, the provincial hospitals have significantly higher efficiency than the district hospitals, while the private hospitals have significantly lower efficiency than the district hospitals. Moreover, the number of competing hospitals has a statistically significant negative correlation with the efficiency of the hospitals, and so does the number of competing private hospitals. On the other hand, the degree of concentration in the market has no significant correlation with efficiency. Those results may imply that competition raises problems with resource allocation among the hospitals in Vietnam.
    Keywords: technical efficiency, ownership, competition, DEA, bootstrap method
    Date: 2018–03
  20. By: Bourreau, Marc; Sun, Yutec; Verboven, Frank
    Abstract: We study a major new entry in the French mobile telecommunications market, followed by the introduction of fighting brands by the three incumbent firms. Using an empirical oligopoly model with differentiated products, we show that the incumbents' launch of the fighting brands can be rationalized only as a breakdown of tacit collusion. In the absence of entry the incumbents successfully colluded on restricting their product variety to avoid cannibalization; the new entry of the low-end competition made such semi-collusion more difficult to sustain because of increased business stealing incentives. Consumers gained considerably from the added variety of the new entrant and the fighting brands, and to a lesser extent from the incumbents' price response to the entry.
    Keywords: Entry; fighting brand; Mobile telecommunications; product variety; semi-collusion
    JEL: L13 L96
    Date: 2018–04
  21. By: Nguyen-Ones, Mai; Steen, Frode
    Abstract: Applying detailed consecutive daily micro data at the gasoline station level from Sweden we estimate a structural model to uncover the degree of competition in the gasoline retail market. We find that retailers do exercise market power, but despite the high upstream concentration, the market power is very limited on the downstream level. The degree of market power varies with both the distance to the nearest station and the local density of gasoline stations. A higher level of service tends to raise a seller's market power; self-service stations have close to no market power. Contractual form and brand identity also seem to matter. We find a clear result: local station characteristics significantly affect the degree of market power. Our results indicate that local differences in station characteristics can more than offset the average market power found for the whole market.
    Keywords: Gasoline markets; local market competition; market power; markup estimation
    JEL: D22 L13 L25 L81
    Date: 2018–04
  22. By: Thorsten Heilker (Institute of Transport Economics, Muenster); Gernot Sieg (Institute of Transport Economics, Muenster)
    Abstract: Transportation network companies commonly enter the market for taxi ride intermediation and alter the market outcome. Compared to cooperatively organized radio-taxi dispatch service agencies, transportation network companies run larger fleets and serve more customers with lower fares, when the fixed costs of the dispatch office are relatively small. The same holds for private dispatch firms, when the fixed costs of a taxicab are not too small. These results are shown in a two-stage duopoly of fare and fleet size competition with fare- and waiting-time-dependent demand.
    Keywords: digitization, regulatory capture, taxi dispatch market, transportation network companies
    JEL: L91 R41 D43 L22
    Date: 2017–11
  23. By: He, Jianhong; Zhang, Lei; Lu, Binbin; Li, Lin
    Abstract: This paper studies the pricing strategy in the closed-loop supply chain with Nash bargaining when considering fairness concerns and risk aversion. Mainly, the authors argue that behavioral factors (i.e., fairness concern and risk aversion) should be introduced into pricing process. They consider three different pricing models: the first is that both manufacturer and retailer have fairness concern; the second is both manufacturer and retailer have risk aversion and the final is manufacturer has risk aversion but retailer has both risk aversion and fair concern. Then the authors analyze the model with game theory. The results showthat fairness and risk aversion change the optimal pricing strategy, which affects the expected profits of retailers and manufacturers. The impact of the two (relatively irrational) behavioral factors on wholesale price and retail price of new products, as well as the recycle price and recycle transfer price of the waste products are not the same. For new products, wholesale price is the most affected by the behavioral factors, and the sales price as the second. For the waste recycling products, the transfer price is the most affected by the behavioral factors, and recycle price as the second. When facing the fairness and risk aversion retailer, retailers' fairness concern is good for both manufacturers and retailers. This innovative model for pricing strategy adds implications for sustainability in supply chain operations.
    Keywords: closed-loop supply chain,irrational behavior education,fairness concerns,risk aversion,pricing strategy
    JEL: D4 L11
    Date: 2018
  24. By: Ruddell, Keith (Research Institute of Industrial Economics (IFN))
    Abstract: Market power in electricity wholesale markets arises when generators have incentives to mark up their offers above the cost of production. I model a transmission network with a single line. I derive optimality conditions for supply functions for generators who supply energy at both ends of the line, and also for generators who hold financial derivatives on the locational prices. These financial derivatives include contracts for differences as well as financial transmission rights. One way that generators can manipulate prices in their favor is by inducing congestion in the network. I find that dispersed ownership and financial transmission rights are both effective ways to reduce strategic congestion of the line. I also fid that certain portfolios of contracts for differences can lead to multiple supply function equilibria.
    Keywords: Supply function equilibrium; Electricity markets; Market power; Financial transmission rights
    JEL: C62 D43 L13 L94
    Date: 2018–04–20
  25. By: Hämäläinen, Saara; Petrikaite, Vaiva
    Abstract: We consider a problem of matching guests with suitable hosts in a dynamic, directed search market in which a visitor's private taste and plans are subject to change. Guests learn about hosts by visiting them personally, which reveals whether the destination merits a repeat visit. Hosts prefer to target guests with high willingness to pay but, assuming full privacy, cannot tell whether they should rely on previous visitors or hold a sale to attract new visitors. We find that guests' private learning reduces matching frictions by sustaining longer visits to particularly fitting destinations. The strength of this effect depends on competition intensity. We also discover that a ban of tracking and targeting technologies may reduce consumer surplus. Specifically, access to visitor data enables their earlier hosts to respond more rapidly to demand changes, which can intensify competition and put downward pressure on prices.
    Keywords: Changing tastes; directed search; Experience Goods; mobility; Privacy suppression; private information
    JEL: D82 D83 L11
    Date: 2018–04
  26. By: Benito Arruñada; Luis Garicano
    Abstract: By allowing networks to split, decentralized blockchain platforms protect members against hold up, but hinder coordination, given that adaptation decisions are ultimately decentralized. The current solutions to improve coordination, based on “premining” cryptocoins, taxing members and incentivizing developers, are insufficient. For blockchain to fulfill its promise and outcompete centralized firms, it needs to develop new forms of “soft” decentralized governance (anarchic, aristocratic, democratic, and autocratic) that allow networks to avoid bad equilibria.
    Keywords: blockchain, Platforms, Networks, hold-up, Coordination, relational capital, incomplete contracts, decentralized governance
    JEL: D23 L12 L22 L86
    Date: 2018–04
  27. By: Juri Demuth (E.CA Economics); Hans W. Friederiszick (ESMT European School of Management and Technology and E.CA Economics); Steffen Reinhold (E.CA Economics)
    Abstract: After earlier waves of privatization, local governments have increasingly taken back control of local service provisions in some sectors and countries and, instead, started providing those services themselves (reverse privatization). Using a unique panel data set on the mode of service provision for solid waste collection for German municipalities covering the years 2003, 2009, and 2015, we investigate motives for reverse privatization. Our results show that, in deciding whether to insource or not, municipalities react to the cost advantages of private suppliers as well as to the competitive environment, with more switching to insourcing in concentrated markets. Furthermore, we find local contagion effects, that is, insourcing is more likely if municipalities close by also provide services themselves, whether in horizontally or vertically-related markets. Implications for competition law enforcement are discussed.
    Keywords: Local privatization, state-owned enterprises, competition law enforcement, mergers, logit regression
    Date: 2018–04–23
    Date: 2018
  29. By: Inga Molenda (Institute of Transport Economics, Muenster); Gernot Sieg (Institute of Transport Economics, Muenster)
    Abstract: A shopping mall is a meeting platform for retailers and their customers, and may therefore subsidize one particular market side. We consider suburban malls as competitive bottlenecks, because shops are mainly opened up by retail chains which operate in many malls, but whose customers visit only one suburban mall, so as to save transport costs. If the consumer-to-shop externality is larger than the shop-to-consumer externality, parking is subsidized. If customers generate high revenue, the mall operator will generally refrain from charging an entry fee, and offer free parking to its visitors. This result is shown in a model with variety-loving consumers and two competing malls at the end point of a Hotelling line on which their potential visitors, and thus the retailers’ customers, are located.
    JEL: L91 R41
    Date: 2017–11
  30. By: Julia Cage (Département d'économie); nicolas Hervé (Institut national de l'audiovisuel); Marie-Luce Viaud (Institut national de l'audiovisuel)
    Abstract: This paper documents the extent of copying and estimates the returns to originality in online news production. We build a unique dataset combining all the online content produced by French news media (newspaper, television, radio, pure online media, and a news agency) during the year 2013 with new micro audience data. We develop a topic detection algorithm that identi_es each news event, we trace the timeline of each story and study news propagation. We unravel new evidence on online news production. First, we show that one quarter of the news stories are reproduced online in less than 4 minutes. Second, we _nd that only 32.6% of the online content is original. Third, we show that reputation e_ects partly counterbalance the negative impact of plagiarism on newsgathering incentives. By using media-level daily audience and article-level social media statistics (Facebook and Twitter shares), we _nd that original content represents between 54 and 62% of online news consumption. Reputation mechanisms actually appear to solve about 30 to 40% of the copyright violation problem.
    Keywords: internet; information spreading; copyright; investigative journalism; social media
    Date: 2018–01

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