nep-com New Economics Papers
on Industrial Competition
Issue of 2018‒05‒14
23 papers chosen by
Russell Pittman
United States Department of Justice

  1. Come Together: Firm Boundaries and Delegation By Laura Alfaro; Nick Bloom; Paola Conconi; Harald Fadinger; Patrick Legros; Andrew F. Newman; Raffaella Sadun; John Van Reenen
  2. Measuring the Welfare of Intermediation in Vertical Markets By Javier D. Donna; Pedro Pereira; Tiago Pires; André Trindade
  3. Pricing of Complements in the U.S. freight railroads: Cournot versus Coase By Alexandrov, Alexei; Pittman, Russell; Ukhaneva, Olga
  4. Of course Collusion Should be Prosecuted. But Maybe... Or (The case for international antitrust agreements) By Filomena Garcia; Jose Manuel Paz y Minõ; Gustavo Torrens
  5. The Effects of Process R&D in an Asymmetric Duopoly under Cournot and Supply Function Competitions By Saglam, Ismail
  6. External search strategies: The role of innovation objectives and specialization By Iferd, Younes; Plötz, Patrick
  7. The Patent-issuing Rules and Economic Growth: Are We in a "Wrong" Patent Regime? By Tetsugen Haruyama; Kaz Miyagiwa
  8. Competition effect on innovation and productivity - The Portuguese case By Anabela Santos; Michele Cincera; Paulo Neto; Maria Manuel Serrano
  9. Trade with Benefits: New Insights on Competition and Innovation By JaeBin Ahn; Hyoungmin Han; Yi Huang
  10. Sufficient Statistics for Unobserved Heterogeneity in Structural Dynamic Logit Models By Victor Aguirregabiria; Jiaying Gu; Yao Luo
  11. Price or Variety? An Evaluation of Mergers Effects in Grocery Retailing By Elena Argentesi; Paolo Buccirossi; Roberto Cervone; Tomaso Duso; Alessia Marrazzo
  12. Dynamic pricing with reference price dependence By Régis Chenavaz
  13. Consumers' Privacy Choices in the Era of Big Data By Dengler, Sebastian; Prüfer, Jens
  14. Price Competition with Geometric Brownian motion in Exchange Rate Uncertainty By Murat Erkoc; Huaqing Wang; Anas Ahmed
  15. The Impact of Product Recalls on the Secondary Market:Evidence from Dieselgate By Ater, Itai; Yosef, Nir
  16. Dinámica de inversión y competencia en generación eléctrica en un escenario de liberalización en el Perú: La importancia de los contratos de largo plazo By Arnold Rubén Rivasplata Ramírez; Raúl Lizardo García Carpio
  17. Dix ans après la libéralisation du marché européen de fret ferroviaire : quel bilan et quels enseignements pour la France By Florent Laroche
  18. Firm and Market Response to Saving Constraints: Evidence from the Kenyan Dairy Industry By Casaburi, Lorenzo; Macchiavello, Rocco
  19. Testing the Quiet Life Hypothesis in the African Banking Industry By Simplice Asongu; Nicholas Odhiambo
  20. Effects of Change in Local Content Requirement and Exchange Rate Volatility in an International Oligopoly By Tetsuya Shinkai; Takao Ohkawa; Makoto Okamura
  21. How Hard Is It to Maximise Profit? Evidence from a 19-th Century Italian State Monopoly By Carlo Ciccarelli; Gianni De Fraja; Silvia Tiezzi
  22. Cournot tatonnement and Nash equilibrium in binary status games By Kukushkin, Nikolai S.; von Mouche, Pierre H.M.
  23. Product market competition and gender discrimination By Dudley Cooke; Ana P. Fernandes; Priscila Ferreira

  1. By: Laura Alfaro (HBS and NBER); Nick Bloom (Stanford, CEP, NBER and CEPR); Paola Conconi (UniversiteÌ Libre de Bruxelles (ECARES), CEPR and CESifo); Harald Fadinger (Mannheim and CEPR); Patrick Legros (UniversiteÌ Libre de Bruxelles (ECARES), Northeastern and CEPR); Andrew F. Newman (Boston University and CEPR); Raffaella Sadun (HBS, CEP, NBER and CEPR); John Van Reenen (MIT, CEP, NBER and CEPR)
    Abstract: Little is known theoretically, and even less empirically, about the relationship between firm boundaries and the allocation of decision rights within firms. We develop a model in which firms choose which suppliers to integrate and whether to delegate decisions to integrated suppliers. We test the predictions of the model using a novel dataset that com- bines measures of vertical integration and delegation for a large set of firms from many countries and industries. In line with the model’s predictions, we find that integration and delegation co-vary positively, and that producers are more likely to integrate sup- pliers in input sectors with greater productivity variation. Further, producers are more likely to integrate suppliers of more important inputs and to delegate decisions to them.
    Keywords: Vertical integration, decentralization, real options, supply assurance
    Date: 2018–05
  2. By: Javier D. Donna (The Ohio State University); Pedro Pereira; Tiago Pires (Department of Economics, University of North Carolina); André Trindade (FGV EPGE Brazilian School of Economics and Finance)
    Abstract: We empirically investigate the welfare implications of intermediaries in oligopolistic markets, where intermediaries offer additional services to differentiate their products from the ones of the manufacturers. Our identification strategy exploits the unique circumstance that, in the outdoors advertising industry, there are two distribution channels: consumers can purchase the product either directly from manufacturers, or through intermediaries. We specify a differentiated products’ equilibrium model, and estimate it using product-level data for the whole industry. On the demand side, the model includes consumers who engage in costly search with preferences that are specific to the distribution channel. On the supply side, the model includes two competing distribution channels. One features two layers of activity, where manufacturers and intermediaries bargain over wholesale prices, and intermediaries compete on final prices to consumers. The other is vertically integrated. The estimated model is sed to simulate counterfactual scenarios, where intermediaries do not offer additional services. We find that the presence of intermediaries increases welfare because the value of their services outweighs the additional margin charged.
    Keywords: Intermediaries, vertical markets, search frictions, bargaining, outdoor advertising
    JEL: L81 L42 D83 M37
    Date: 2018–05
  3. By: Alexandrov, Alexei; Pittman, Russell; Ukhaneva, Olga
    Abstract: Monopolists selling complementary products charge a higher price in a static equilibrium than a single multiproduct monopolist would, reducing both the industry profits and consumer surplus. However, firms could instead reach a Pareto improvement by lowering prices to the single monopolist level. We analyze administrative nationally-representative pricing data of railroad coal shipping in the U.S. We compare a coal producer that needs to ship from A to C, with the route passing through B, in two cases: (1) the same railroad owning AB and BC and (2) different railroads owning AB and BC. We do not find that price in case (2) is higher than price in case (1), suggesting that the complementary monopolist pricing inefficiency is absent in this market. For our main analysis, we use a specification consistent with the previous literature; however, our findings are robust to propensity score blocking and machine learning algorithms. Finally, we perform a difference-in-differences analysis to gauge the impact of a merger that made two routes wholly-owned (switched from case 2 to case 1), and these results are also consistent with our main findings. Our results have implications for vertical mergers, tragedy of the anticommons, mergers of firms selling complements, and royalty stacking and patent thickets.
    Keywords: pricing of complements, vertical mergers, Cournot, Coase, railroads
    JEL: D21 D22 D43 D86 L13 L14 L4 L40 L92
    Date: 2018–04–18
  4. By: Filomena Garcia (Indiana University, & UECE); Jose Manuel Paz y Minõ (Indiana University); Gustavo Torrens (Indiana University)
    Abstract: We study the incentives of competition authorities to prosecute collusive practices of domestic and foreign firms. For that purpose, we develop a model of multi-market contact between two firms that can engage in collusion in two countries. In each country, there is a competition authority with a mandate to maximize national welfare. Each competition authority decides its prosecution policy at the beginning of time and commits to it. In equilibrium, the ownership distribution of the firms (domestic versus foreign) affects prosecution policies. The country that does not own the firms prosecutes them as soon as information of collusion becomes available. On the contrary, the country that owns the firms has an incentive to protect their profits in foreign markets delaying prosecution. This strategic delay is valuable because it contains the information spreading that could trigger prosecution in the foreign country. Prosecution delays, however, are not optimal from the point of view of global welfare, something that could be solved through the integration of the competition authorities. The country of origin of the firms would nevertheless oppose integration. Finally, in a multi-industry setting, both countries delay prosecuting domestic firms, which again is not optimal from the point of view of global welfare. Moreover, in a multi-industry setting, both countries can be better off under integration.
    Keywords: Multi-market Collusion, Antitrust Policy, Strategic Prosecution, International Antitrust Agreements
    JEL: F23 F53 L41 K21
    Date: 2018–05
  5. By: Saglam, Ismail
    Abstract: In this paper we attempt to explore the welfare effects of (process) R&D in an asymmetric duopoly with a homogeneous product under Cournot and supply function competitions. To this aim, we consider a two-stage perfect-information game where the duopolists compete in stage one in R&D investments and in stage two either in quantities or in supply functions. Calculating the (subgame-perfect Nash) equilibrium of this game numerically for a wide range of initial cost parameters and comparing it to the equilibrium with no R&D, we show that R&D has a positive effect on the welfares of consumers and the society as a whole. While its effect on the profits of the duopolists is also positive under the Cournot competition, it becomes negative under the supply function competition. This latter negative effect is caused by the duopolists' more aggressively investing in R&D under the supply function competition, increasing the industry output, and consequently decreasing the product price, to a harmful level for themselves. Moreover, we show that R&D always widens up the efficiency gap between the duopolists under the supply function competition, while narrowing it down under the Cournot competition.
    Keywords: Duopoly; Cournot competition; supply function competition; process R&D
    JEL: D43 L13
    Date: 2018–04–26
  6. By: Iferd, Younes; Plötz, Patrick
    Abstract: Firms are increasingly competing in an open innovation environment. Search strategies for external knowledge therefore become decisive for firms' success. Existing research distinguishes between breadth (diversity) and depth (intensity) with which firms deal with external knowledge sources. However, relatively little is known about how mangers can selectively strengthen one of these dimensions. We argue conceptually that the effect of breadth and depth of a research strategy on the innovation performance depends on (1) the type of innovation objectives (explorative vs. exploitative innovation objectives) and (2) the nature of the firm's orientation in drawing on external knowledge (science-based or market-based orientation). We test these hypotheses empirically for a sample of 1,434 manufacturing firms in Germany. Our results show that explorative innovation objectives strengthen the effect of breadth on innovation performance while exploitive objectives increase the depth. Moreover, we find that market-driven strategy favours breadth while science-driven strategy is more prevalent for depth search strategy.
    Keywords: open innovation,exploitative/explorative search strategies,market/science-driven strategies
    Date: 2018
  7. By: Tetsugen Haruyama (The Graduate School of Economics, Kobe University); Kaz Miyagiwa (Department of Economics, Florida International University)
    Abstract: Probably, yes.
    Date: 2018–05
  8. By: Anabela Santos (Université Libre de Bruxelles, iCite); Michele Cincera (Université Libre de Bruxelles, iCite and ECARES); Paulo Neto (Universidade de Évora – Departamento de Economia, UMPP, CEFAGE-UÉ and CIEO-UALG); Maria Manuel Serrano (Universidade de Évora – Departamento de Sociologia, UMPP and SOCIUS-CSG/ISEG-UL)
    Abstract: The aim of the present paper is to assess the effect of competition on innovation (patent applications) and on productivity (Total Factor Productivity and Labour Productivity), using data from 654 Portuguese firms, according to 208 NACE 4-digits sectors, and over the period 2007 to 2015. For this purpose, two different methodological approaches were used, a Poisson regression model for the patent function and a log-log fixed effect model for the productivity function. The results reveal that, on average, competition has a negative, U-shaped form effect on innovation in the short term, and a positive effect in the medium-long term. Nevertheless, the model focusing only on manufacturing sectors shows some differences from the model considering all economic activities, namely a linear positive effect of competition on innovation. Concerning the effect of competition on productivity, a positive effect on Total Factor Productivity emerged from the analysis, while for labour productivity a negative one prevails.
    Keywords: Competition, Innovation, Productivity.
    JEL: L10 O31 D24
    Date: 2018–05
  9. By: JaeBin Ahn (International Monetary Fund); Hyoungmin Han (The Graduate Institute of International and Development Studies, Geneva); Yi Huang (The Graduate Institute of International and Development Studies, Geneva)
    Abstract: This paper examines how Korea’s import and export linkages with China affect the innovation outcomes of Korean manufacturing firms. Using our automated algorithm, we match Korean patent data to KIS-Value firm data from 1996 to 2015. We find that rising import and export with China lead to more patent applications by Korean manufacturing firms, with the positive impact particularly driven by large or public firms compared to SMEs or private firms. Most importantly, all of these results hold only in those sectors with higher quality products than Chinese products, shedding lights on reconciling recent empirical studies that found conflicting evidence on ’Schumpeterian force’ and ’escaping competition.’
    Keywords: Competition, Innovation, China Shock, Schumpeterian Force, Escaping Competition
    JEL: F14 F16 O34
    Date: 2018–05
  10. By: Victor Aguirregabiria; Jiaying Gu; Yao Luo
    Abstract: We study the identification and estimation of structural parameters in dynamic panel data logit models where decisions are forward-looking and the joint distribution of unobserved heterogeneity and observable state variables is nonparametric, i.e., fixed-effects model. We consider models with two endogenous state variables: the lagged decision variable, and the time duration in the last choice. This class of models includes as particular cases important economic applications such as models of market entry-exit, occupational choice, machine replacement, inventory and investment decisions, or dynamic demand of differentiated products. The identification of structural parameters requires a sufficient statistic that controls for unobserved heterogeneity not only in current utility but also in the continuation value of the forward-looking decision problem. We obtain the minimal sufficient statistic and prove identification of some structural parameters using a conditional likelihood approach. We apply this estimator to a machine replacement model.
    Keywords: Panel data discrete choice models; Dynamic structural models; Fixed effects; Unobserved heterogeneity; Structural state dependence; Identification; Sufficient statistic.
    JEL: C23 C25 C41 C51 C61
    Date: 2018–05–10
  11. By: Elena Argentesi; Paolo Buccirossi; Roberto Cervone; Tomaso Duso; Alessia Marrazzo
    Abstract: Assortment decisions are key strategic instruments for firms responding to local market conditions. We assess this claim by studying the effect of a national merger between two large Dutch supermarket chains on prices and on the depth as well as composition of assortment. We adopt a difference-in-differences strategy that exploits local variation in the merger’s effects, controlling for selection on observables when defining our control group through a matching procedure. We show that the local change in competitive conditions due to the merger did not affect individual products’ prices but it led the merging parties to reposition their assortment and increase average category prices. While the low-variety and low-price target’s stores reduced the depth of their assortment when in direct competition with the acquirer’s stores, the latter increased their product variety. By analyzing the effect of the merger on category prices, we find that the target most likely dropped high priced products, while the acquirer added more of them. Thus, the merging firms reposition their product offerings in order to avoid cannibalization and lessen local competition. Further, we show that other dimensions of heterogeneity, such as market concentration, whether a divestiture was imposed by the Dutch competition authority, and the re-branding strategy of the target stores, are important for explaining the post-merger dynamics. A simple theoretical model of local-market variety competition explains most of our findings.
    Keywords: Variety, assortment, mergers, ex-post evaluation, retail sector, supermarkets, grocery
    JEL: L1 L41 L66 L81 D22 K21 C23
    Date: 2018
  12. By: Régis Chenavaz (LTCI - Laboratoire Traitement et Communication de l'Information - Télécom ParisTech - Institut Mines-Télécom [Paris] - CNRS - Centre National de la Recherche Scientifique, GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - ECM - Ecole Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique - AMU - Aix Marseille Université - EHESS - École des hautes études en sciences sociales)
    Abstract: A firm that accounts for consumer behavior sets the selling price of a product considering the reference price of consumers. In the literature, a reference price is usually modeled as depending on past selling prices. That is, past selling prices implicitly constrain the current selling price of a product. In this article, the author explicitly measures this constraint with an optimal control framework. He works on the structural properties of a general demand function, which depends on both selling and reference prices. Analytical results prove the following claims. Adjusting reference prices effects increase the price elasticity of demand, the demand function becoming flatter. Thus, the reference price effect weakens the market power of the firm. Also, the reference price effect constitutes a main driver of the dynamics of the selling price. But contrary to intuition, selling price dynamics does not systematically imitate reference price dynamics.
    Keywords: Dynamic pricing, Optimal control, behavioral pricing, reference price dependence,behavioral pricing,reference price dependence,optimal control
    Date: 2016–09
  13. By: Dengler, Sebastian (Tilburg University, TILEC); Prüfer, Jens (Tilburg University, TILEC)
    Abstract: Recent progress in information technologies provides sellers with detailed knowledge about consumers' preferences, approaching perfect price discrimination in the limit. We construct a model where consumers with less strategic sophistication than the seller's pricing algorithm face a trade-off when buying. They choose between a direct, transaction cost-free sales channel and a privacy-protecting, but costly, anonymous channel. We show that the anonymous channel is used even in the absence of an explicit taste for privacy if consumers are not too strategically sophisticated. This provides a micro-foundation for consumers' privacy choices. Some consumers benefit but others suffer from their anonymization.
    Keywords: privacy; big data; perfect price discrimination; level-k thinking
    JEL: L11 D11 D83 D01 L86
    Date: 2018
  14. By: Murat Erkoc; Huaqing Wang; Anas Ahmed
    Abstract: We analyze an operational policy for a multinational manufacturer to hedge against exchange rate uncertainties and competition. We consider a single product and single period. Because of long-lead times, the capacity investment must done before the selling season begins when the exchange rate between the two countries is uncertain. we consider a duopoly competition in the foreign country. We model the exchange rate as a random variable. We investigate the impact of competition and exchange rate on optimal capacities and optimal prices. We show how competition can impact the decision of the home manufacturer to enter the foreign market.
    Date: 2018–04
  15. By: Ater, Itai; Yosef, Nir
    Abstract: We examine the effects of Volkswagen's emissions scandal (`Dieselgate`) on the secondary car market in Israel. Using administrative data on all car transactions in Israel, we measure the scandal's effect on the number and the composition of transactions involving used vehicles made by the Volkswagen Group. We also use data from the leading classified ad website and measure the effect of the scandal on the resale price of used Volkswagen vehicles. According to our findings, the Volkswagen emissions scandal had a statistically significant negative effect on the number of transactions involving vehicles made by Volkswagen (nearly -18.0%) and on their resale price (nearly -6.0%). We also find that the reduction in the number of transactions was driven mostly by private sellers and that non-private sellers barely shied away from the market. We discuss potential explanations for these findings.
    Keywords: Durable goods; Product recall; Secondary market; Vehicles
    JEL: D12 D80 L14 L62
    Date: 2018–04
  16. By: Arnold Rubén Rivasplata Ramírez (Departamento de Economía de la Pontificia Universidad Católica del Perú); Raúl Lizardo García Carpio
    Abstract: Se analiza el comportamiento de los grupos de generación eléctrica que toman decisiones sobre inversión y producción, en un escenario de mercado liberalizado introduciendo contratos de largo plazo, en un contexto donde hay alto nivel de concentración de mercado. Para ello, se emplea un modelo determinístico dinámico de competencia imperfecta (con estrategias open loop) que se resuelve utilizando un sistema de ecuaciones complementarias mediante el software GAMS, a fin de proveer simulaciones que muestren los impactos de las diferentes estructuras de mercado (monopolio, oligopolio con franja competitiva, oligopolio (Cournot) y competencia perfecta) sobre las decisiones de inversión y producción, asumiendo la existencia de dos bloques horarios (base y pico) y considerando la existencia de dos tecnologías a utilizarse para el despacho eléctrico (hidráulica y térmica) con datos del año base 2011 para un horizonte temporal de 10 años. Los resultados muestran que a pesar de que en los diferentes escenarios de análisis puedan existir indicios de poder de mercado, existe un efecto positivo importante sobre la inversión en capacidad, la producción por tecnología, y precios por bloque de horario. Para un mercado oligopólico con franja competitiva, se observa que contratando el 70% de energía hidráulica y el 66% de energía térmica en el año base, la inversión en capacidad con tecnología hidráulica incrementa en 7,18% (sobreinversión) y con tecnología térmica disminuye en 2,27% (subinversión); mientras que la producción, con tecnología hidráulica incrementa en 3,67%, mientras que bajo tecnología térmica, 4,58%. El precio en hora base disminuye en 9,83% y en hora pico, 4,45%. JEL Classification-JEL: C61 , C73 , L13
    Keywords: Decisiones de inversión , Equilibrio de Nash , Juegos dinámicos , Mercado eléctrico , Oligopolio , Optimización , Poder de Mercado , Teoría de juegos
    Date: 2018
  17. By: Florent Laroche (LAET - Laboratoire Aménagement Économie Transports - UL2 - Université Lumière - Lyon 2 - ENTPE - École Nationale des Travaux Publics de l'État - CNRS - Centre National de la Recherche Scientifique)
    Abstract: L’année 2017 marque les dix ans de deux chocs économiques qui ont, chacun à leur manière, profondément impacté le secteur du fret ferroviaire. Le premier marque l’entrée en vigueur de la directive 2004/51 le 1er janvier 2007 ouvrant officiellement l’ensemble du marché européen à la concurrence. Le second s’est manifesté à partir du 9 août 2007 en entraînant l’économie mondiale dans une récession sévère à la suite du scandale des subprimes aux Etats-Unis. Une décennie plus tard, où en est le marché du fret ferroviaire européen ? La crise économique a-t-elle balayé un secteur déjà réputé moribond avant 2007 ?
    Keywords: marché unique,Europe,Fret ferroviaire,concurrence
    Date: 2018
  18. By: Casaburi, Lorenzo (University of Zurich); Macchiavello, Rocco (London School of Economics)
    Abstract: Despite extensive evidence that preferences are often time-inconsistent, there is only scarce field evidence of willingness to pay for commitment. Infrequent payments may naturally provide commitment for lumpy expenses. Multiple experiments in the Kenyan dairy sector show that: i) farmers are willing to incur sizable costs to receive infrequent payments and demand for commitment is an important driver of this preference; ii) poor contract enforcement, however, limits competition among buyers in the supply of infrequent payments; iii) in such a market, the effects of price increases on sales depend on both buyer credibility and payment frequency. Infrequent payments are common in many goods and labor markets, but they may not be competitively offered when contracts are not enforceable.
    Keywords: Saving Constraints; Commitment; Agricultural Markets; Contract Enforcement; Interlinked Transactions. JEL Classification: O12, O16, D90, Q13.
    Date: 2018
  19. By: Simplice Asongu (Yaoundé/Cameroun); Nicholas Odhiambo (Pretoria, South Africa)
    Abstract: The Quiet Life Hypothesis (QLH) is the pursuit of less efficiency by firms. In this study, we assess if powerful banks in the African banking industry are increasing financial access. The QLH is therefore consistent with the pursuit of financial intermediation inefficiency by large banks. To investigate the hypothesis, we first estimate the Lerner index. Then, using Two Stage Least Squares, we assess the effect of the Lerner index on financial access proxied by loan price and loan quantity. The empirical evidence is based on a panel of 162 banks from 42 African countries for the period 2001-2011. The findings support the QLH, although quiet life is driven by the below-median Lerner index sub-sample. Policy implications are discussed.
    Keywords: Financial access; Bank performance; Africa
    JEL: D40 G20 G29 L10 O55
    Date: 2018–01
  20. By: Tetsuya Shinkai (School of Economics, Kwansei Gakuin University); Takao Ohkawa (Faculty of Economics, Ritsumeikan University); Makoto Okamura (Faculty of Economics, Gakushuin University)
    Abstract: This paper investigates the changes in local content requirement (LCR) and exchange rate volatility on an international oligopolistic market in a foreign country that accepts n affiliates firms through FDI from a home country. The subordinate firms are forced to procure a proportion of their intermediate products from the foreign firms under the LCR of the foreign government. We derive a Cournot equilibrium of the oligopolistic foreign market, in which affiliate firms compete with the foreign firms under foreign exchange rate uncertainty for when the number of affiliates, n, is either exogenous or endogenous. In the former case, we show the affiliates aggressively expand their outputs and the ex-post expected profits of the affiliates decrease but their ex-ante certainty equivalent of expected profits increases with the volatility of the exchange rate when the relative risk aversion coefficient is not high at equilibrium. In the latter case, we show LCR tightening from the foreign government always accelerates the exit of the affiliates from the foreign market and if the extent of the relative risk aversion of the international firms is not high, the entry of affiliates onto the foreign market can be urged as the risk of exchange rate increases.
    Keywords: risk aversion, exchange rate volatility, local content requirements, FDI, and Cournot oligopoly
    JEL: G32 L13 L12
    Date: 2018–05
  21. By: Carlo Ciccarelli (DEF & CEIS,University of Rome "Tor Vergata"); Gianni De Fraja (DEF & CEIS,University of Rome "Tor Vergata", Nottingham School of Economics, CEPR); Silvia Tiezzi (Università di Siena)
    Abstract: In this paper we study the ability of the 19-th century Italian government to choose profit maximising prices for a multiproduct monopolist. We use very detailed historical data on the tobacco consumption in 62 Italian provinces from 1871 to 1888 to estimate a differentiated product demand system. The demand conditions and the legal environment of the period made this market as close to a textbook monopoly as is practically possible. The government’s stated aim for this industry was profit maximisation: since at the time tobacco revenues constituted between 10 and 15 percent of the revenues for the cash-strapped government, the stated aim was very likely the true one. Cost data for the nine products suggest that the government was not wide off the mark: the tobacco prices were “not far” from those dictated by the standard monopoly formulae for profit maximisation with interdependent demand functions.
    Keywords: Demand for Tobacco, Multiproduct monopoly profit maximisation, 19-th century Italy, QAI demand system, Habit formation
    JEL: L12 L66 I18 N33
    Date: 2018–05–08
  22. By: Kukushkin, Nikolai S.; von Mouche, Pierre H.M.
    Abstract: We study a rather simplified game model of competition for status. Each player chooses a scalar variable (say, the level of conspicuous consumption), and then those who chose the highest level obtain the "high" status, while everybody else remains with the "low" status. Each player strictly prefers the high status, but they also have intrinsic preferences over their choices. The set of all feasible choices may be continuous or discrete, whereas the strategy sets of different players can only differ in their upper and lower bounds. The resulting strategic game with discontinuous utilities does not satisfy the assumptions of any general theorem known as of today. Nonetheless, the existence of a (pure strategy) Nash equilibrium, as well as the "finite best response improvement property," are established.
    Keywords: status game; Cournot tatonnement; Nash equilibrium
    JEL: C72
    Date: 2018–01–28
  23. By: Dudley Cooke (University of Exeter); Ana P. Fernandes (University of Exeter); Priscila Ferreira (University of Minho, NIMA)
    Abstract: This paper presents novel empirical evidence for the prediction from Becker’s (1957) famous theory, that competition will drive discrimination out of the market. We use a comprehensive firm entry deregulation reform in Portugal as a quasi-natural experiment to study the effect of increased product market competition on gender discrimination. We use employer-employee data for the universe of private sector firms and workers, and exploit the staggered implementation of the reform across municipalities for identification. Increased competition following the deregulation reduces the gender pay gap for medium- and high-skill workers but not for the low-skilled. The gender pay gap is also reduced for workers in managerial positions, except for the CEO. We also find that the share of females in managerial positions increased in affected municipalities. Existing evidence has shown that gender discrimination reduces output; our findings suggest that deregulation can contribute to reduce inefficiencies arising from gender discrimination.
    Keywords: Deregulation, Discrimination, Entry, Gender Pay Gap, Product Market Competition, Wage Structure.
    JEL: J16 J31 J71
    Date: 2018–05

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