nep-com New Economics Papers
on Industrial Competition
Issue of 2018‒08‒20
33 papers chosen by
Russell Pittman
United States Department of Justice

  1. Optimal Cross-Licensing Arrangements: Collusion versus Entry Deterrence By Jay Pil Choi; Heiko Gerlach
  2. Innovation and Distribution: A General Equilibrium Model of Manufacturing and Retailing By Bronnenberg, Bart
  3. Conglomerate Mergers and Entry in Innovative Industries By Federico Etro
  4. How EU Markets Became More Competitive Than US Markets: A Study of Institutional Drift By Germán Gutiérrez; Thomas Philippon
  5. Vertical Mergers in Platform Markets By Jérôme Pouyet; Thomas Trégouët
  6. Multiproduct retailing and buyer power: The effects of product delisting on consumer shopping behavior By Jorge Florez-Acosta; Daniel Herrera-Araujo
  7. Labor Market Power By David Berger; Kyle Herkenhoff; Simon Mongey
  8. An Empirical Analysis of Competition in Print Adversiting among Paid and Free Newspapers By Geoffrey Brooke; Lydia Cheung
  9. Strategic Demand Response to Dynamic Pricing: A Lab Experiment for the Electricity Market By Atasoy, Ayse Tugba; Harmsen-van Hout, Marjolein; Madlener, Reinhard
  10. Managing Competition on a Two-Sided Platform By Paul Belleflamme; Martin Peitz
  11. A Theory of Multihoming in Rideshare Competition By Kevin A. Bryan; Joshua S. Gans
  12. Empirical Properties of Diversion Ratios By Christopher T. Conlon; Julie Holland Mortimer
  13. Has the arrival of Amazon altered the market structure for consumer electronic goods in Australia? By Yang, David
  14. Innovation clusters effects on adoption of a general purpose technology under uncertainty By Iritié, B. G. Jean Jacques
  15. Technology spillovers and outside options in a bilateral duopoly By Noriaki Matsushima; Laixun Zhao
  16. Market expansion may harm the supplier in a bilateral monopoly By Noriaki Matsushima; Laixun Zhao
  17. Price wars in a highly concentrated industry: Mobile communication voice services By John Jairo García Rendón; Diego F. Linares
  18. Platform Overthrow: uncovering the critical role of functional extension and generic technology By Maxime Thomas; Le Masson Pascal; Legrand Julien; Benoit Weil
  19. How Do Firms Build Market Share? By Doireann Fitzgerald; Anthony Priolo
  20. Revealed Growth: A Method for Bounding the Elasticity of Demand with an Application to Assessing the Antitrust Remedy in the Du Pont Decision By Wallace P. Mullin; Christopher M. Snyder
  21. Urban Distribution Centres and Competition among Logistics Providers: a Hotelling Approach By Daniele Crotti; Elena Maggi
  22. On taxes and subsidies with private eco-labeling By Ibrahima Barry; Olivier Bonroy; Paolo Garella
  23. Product Proliferation and Pricing in a Market with Positional Effects By George Deltas; Eleftherios Zacharias
  24. Design and Simulation of Coopetition as Lead Generating Mechanism By Shlegel, Maxim; Zenkevich, Nikolay
  25. Towards a Theory of Platform Dynamics By Cabral, Luís M B
  26. The Fisher Body Case and Organizational Economics By Richard N. Langlois
  27. Bribes vs. Taxes: Market Structure and Incentives By Amodio, Francesco; De Giorgi, Giacomo; Rahman, Aminur
  28. Growth through acquisition of innovations By Galina Besstremyannaya; Richard Dasher; Sergei Golovan
  29. Purchase motivations and levers to revitalize the core market store brands By Samy Belaïd; Jérôme Lacoeuilhe
  30. The Direct and Indirect Effects of Product Market Regulations in the Retail Trade Sector By Andre Jungmittag
  31. Do Corporate Environmental Contributions Justify the Public Interest Defence? By Nigar Hashimzade; Gareth Myles
  32. Intellectual Monopoly in Global Value Chains By Cédric Durand; William Milberg
  33. Social Welfare under Oligopoly: Does the Strengthening of Competition in Production Increase ConsumersÙ Well-Being? By Parenti, Mathieu; Sidorov, Alexander V.; Thisse, Jacques-Francois

  1. By: Jay Pil Choi; Heiko Gerlach
    Abstract: This paper analyzes optimal cross-licensing arrangements between incumbent firms in the presence of potential entrants. The optimal cross-licensing royalty rate trades off incentives to sustain a collusive outcome vis-a-vis incentives to deter entry with the threat of patent litigation. We show that a positive cross-licensing royalty rate, which would otherwise relax competition and sustain a collusive outcome, dulls incentives to litigate against entrants. Our analysis can shed light on the puzzling practice of royalty free cross-licensing arrangements between competing firms in the same industry as such arrangements enhance incentives to litigate against any potential entrants and can be used as entry-deterrence mechanism.
    Keywords: cross-licensing arrangements, patent litigation, collusion, entry deterrence
    JEL: D43 L13 O30
    Date: 2018
  2. By: Bronnenberg, Bart
    Abstract: I propose a general equilibrium model of competition in manufacturing and retailing. Relative to the counterfactual of direct sales by manufacturers, the retail sector increases manufacturing entry and produced variety. Although double marginalization in the sales channel raises prices and hurts consumers in quantity, the retail sector increases variety and convenience, both valued positively. Pricing power in the vertical channel reflects surplus or scarcity of manufactured substitutes relative to retailer store size. Finally, the size of the retail sector is a constant fraction of the total economy across nations of differing size and wealth.
    Keywords: demand; Marketing; Retailing
    JEL: D11 D21 L13 L81 M31
    Date: 2018–07
  3. By: Federico Etro (Department of Economics, University Of Venice Cà Foscari; University of Florence; C.R.A)
    Abstract: I study a merger between producers of complement inputs facing entry of superior inputs, with investment by the incumbents in deterministic cost reduction and by the entrants in probabilistic innovation, and competition in prices. The merger is profitable by solving Cournot complementarity problems in investment and pricing, and has positive (negative) effects on R&D by the incumbents (entrants). With inelastic demand the merger harms consumers if the incumbents are efficient enough even without bundling, and always when a commitment to bundling is adopted. Instead, with a demand elastic enough, the merger increases consumer surplus even when a commitment to pure bundling is feasible.
    Keywords: Mergers, R&D, Cournot complementarity, bundling, antitrust in high-tech industries
    JEL: L1 L4
    Date: 2018
  4. By: Germán Gutiérrez; Thomas Philippon
    Abstract: Until the 1990's, US markets were more competitive than European markets. Today, European markets have lower concentration, lower excess profits, and lower regulatory barriers to entry. We document this surprising outcome and propose an explanation using a model of political support. Politicians care about consumer welfare but also enjoy retaining control over industrial policy. We show that politicians from different countries who set up a common regulator will make it more independent and more pro-competition than the national ones it replaces. Our comparative analysis of antitrust policy reveals strong support for this and other predictions of the model. European institutions are more independent than their American counterparts, and they enforce pro-competition policies more strongly than any individual country ever did. Countries with ex-ante weak institutions benefit more from the delegation of antitrust enforcement to the EU level. Our model also explains why political and lobbying expenditures have increased much more in America than in Europe, and using data across industries and across countries, we show that these expenditures explain the relative rise of concentration and market power in the US.
    JEL: D02 D41 D42 D43 D72 E25 K21 L0
    Date: 2018–06
  5. By: Jérôme Pouyet (PSE - Paris School of Economics, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique); Thomas Trégouët (THEMA - Théorie économique, modélisation et applications - UCP - Université de Cergy Pontoise - Université Paris-Seine - CNRS - Centre National de la Recherche Scientifique)
    Abstract: We analyze the competitive impact of vertical integration between a platform and a manufacturer when platforms provide operating systems for devices sold by manufacturers to customers, and, customers care about the applications developed for the operating systems. Two-sided network effects between customers and developers create strategic substitutability between manufacturers' prices. When it brings efficiency gains, vertical integration increases consumer surplus, is not profitable when network effects are strong, and, benefits the non-integrated manufacturer. When developers bear a cost to make their applications available on a platform, manufacturers boost the participation of developers by affiliating with the same platform. This creates some market power for the integrated firm and vertical integration then harms consumers, is always profitable, and, leads to foreclosure. Introducing developer fees highlights that not only the level, but also the structure of indirect network effects matter for the competitive analysis.
    Keywords: network effects,Vertical integration,two-sided markets
    Date: 2016–12
  6. By: Jorge Florez-Acosta (Universidad del Rosario - Universidad Nacional de Rosario [Santa Fe]); Daniel Herrera-Araujo (PSE - Paris School of Economics, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique)
    Abstract: This paper empirically examines the effects of product delisting on consumer shopping behavior in a context of grocery retailing by large multiproduct supermarket chains. A product is said to be delisted when a supermarket stops supplying it while it continuous being sold by competing stores. We develop a model of demand in which consumers can purchase multiple products in the same period. Consumers have heterogeneous shopping patterns: some find it optimal to concentrate purchases at a single store while others prefer sourcing several separate supermarkets. We account for this heterogeneity by introducing shopping costs, which are transaction costs of dealing with suppliers. Using scanner data on grocery purchases by French households in 2005, we estimate the parameters of the model and retrieve the distribution of shopping costs. We find a total shopping cost per store sourced of 1.79 e on average. When we simulate the delisting of a product by one supermarket, we find that customers' probability of sourcing that store decreases while the probability of sourcing competing stores increases. The reduction in demand is considerably larger when consumers have strong feelings of loyalty for the delisted brand. This suggests that retailers may be hurting themselves, and not only manufacturers, when they delist a product. However, when customers are loyal to the store, such effects are lower, suggesting that inducing store loyalty in customers (through strong private labels and loyalty programs, for example) appears to have an effect on vertical negotiations and, in particular, it enables powerful retailers to impose vertical restraints on manufacturers.
    Keywords: one-and multistop shopping,Simulated Maximum likelihood,Grocery retailing, supermarket chains, buyer power, vertical,restraints, product delisting, shopping costs, D12, L13, L22, L81
    Date: 2017–02
  7. By: David Berger (Northwestern University); Kyle Herkenhoff (University of Minnesota); Simon Mongey (Federal Reserve Bank of Minneapolis)
    Abstract: As U.S. Senator Corey A. Booker wrote in an open letter to the acting Attorney General and Acting Chairman of the FTC, ``A growing body of evidence suggests that the rise of concentration across U.S. industries has helped create a labor market in which fewer workers are able to fairly bargain with their employers to set their wages on competitive terms.''\footnote{See the article and link to Senator Booker's letter here: \citet{booker2017market}, \url{}} Similarly, \citet{furman2016beyond} calls for additional research on the affects of labor market concentration on wages and job flows. \textbf{Objective:} The aim of our project is to measure the impact of labor market power amongst employers on employment, wages, investment, and labor market flows. \textbf{Contribution:} Recent studies have focused almost exclusively on the role of product market power as measured by national sales concentration (e.g. \citet{gutierrez2016investment}, \citet{autor2017fall} and \citet{de2017rise}). Studies that have thought about input market power---a more local phenomenon when inputs are non-traded, such as labor---have focused on relatively narrow industries (for a summary of the recent theory see \citet{manning2003monopsony} and for a summary of recent empirics see Section 4.2 in \citet{alan2011imperfect}). Our contribution is to develop an identification strategy which isolates the affects of labor market power (e.g. \textit{monopsony} and \textit{oligopsony}) on employment, wages, investment, and labor market flows for a broad range of industries. We measure the impact of labor market power on wages using a novel identification strategy. The insight is to isolate firms that are in tradable sectors (e.g. textiles, manufacturing etc.) and then use within-firm variation in market power across regions after a merger. For measurement and identification of mergers, wages, and job flows, we plan to use the LEHD and LBD Census micro-data (we currently have active RDC projects with access to both datasets). By focusing on tradable sectors, we remove the role of product market power. Prices are set outside of the local labor market, and so a merger will not alter prices or product market power. However, the merger will change the number of employers who are hiring within a given region, thus altering labor market power. This allows us to pinpoint the impact of monopsony and oligopsony on the real economy. We develop a model of oligopsony in the labor market, adapting the \citet{atkeson2008pricing} model of imperfect product market competition to a general equilibrium labor market. We model a finite number of firms that hire within a given industry in a given region. The model yields several testable implications: \begin{enumerate} \item The wage bill and employment decline as labor markets become more concentrated. \item Pass-through to wages from idiosyncratic shocks to the firm decrease as labor markets become more concentrated. \end{enumerate}
    Date: 2018
  8. By: Geoffrey Brooke (School of Economics, Auckland University of Technology); Lydia Cheung (School of Economics, Auckland University of Technology)
    Abstract: This paper examines the competition in the print newspaper advertising market in New Zealand, which involves paid daily and free weekly titles. This is the first study to explore how different ownership structures across two newspaper segments affect the competitive forces in local geographic markets. We do so by constructing an original dataset of advertising rates. This has particular relevance in light of the Commerce Commission's recent rejection of the proposed NZME-Fairfax merger, and Fairfax's subsequent closure of 15 newspaper titles. We find strong evidence for competition between overlapping free weekly suburban titles. It is associated with a 11% decrease in the full tabloid page display advertising rate. We also find evidence of joint profit maximization between co-owned free weeklies and paid dailies. Our results support the Commission's decision and give crucial implication on market definition: small and large display ads in free weekly titles constitute two separate markets with dif erent clients. The large display ad market also includes advertising in paid daily titles. This market is competitive and will likely suffer if the merger were granted.
    Keywords: Newspaper, Print, Advertising, Ownership structure, Competition, Merger
    Date: 2018–08
  9. By: Atasoy, Ayse Tugba (E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN)); Harmsen-van Hout, Marjolein (E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN)); Madlener, Reinhard (E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN))
    Abstract: Despite the efforts of restructuring power markets over the last decades, the lack of demand response in the retail electricity markets remains a significant concern. Possible demand response would help to reduce prices and volatility by better matching supply and demand through improved price signals. In this paper we develop a laboratory tool to experimentally investigate the demand response in the electricity market. The baseline treatment constitutes a two-period ‘wait-or-buy’ game with an exogenous first period, an automated supplier, and twenty subject buyers. While the seller offers a fixed number of a product in the market, consumers decide on purchasing the product immediately or waiting until the next period, taking (i) price uncertainty and (ii) inventory risk into account. This treatment captures demand response in the retail market with scarce products. We design an additional treatment by removing the inventory constraint and introducing a devaluation rule, where consumers only bear the price risk – thus mimicking the demand response in the electricity market. We find that in both retail and electricity market treatments consumers play on average the equilibrium predictions and buy strategically. However, there are systematic deviations from rationality in both settings, i.e., consumers buy too soon or wait too long.
    Keywords: Demand Response; Electricity; Dynamic Pricing; Strategic Behavior
    JEL: C92 D01 D81 M11 Q31
    Date: 2018–04
  10. By: Paul Belleflamme (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - Ecole Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique); Martin Peitz (Department of Economics and MaCCI, University of Mannheim)
    Abstract: On many two-sided platforms, users on one side not only care about user participation and usage levels on the other side, but they also care about participation and usage of fellow users on the same side. Most prominent is the degree of seller competition on a platform catering to buyers and sellers. In this paper, we address how seller competition affects platform pricing, product variety, and the number of platforms that carry trade.
    Keywords: network effects,two-sided markets,platform competition,intermediation,pricing,imperfect competition
    Date: 2018–06
  11. By: Kevin A. Bryan; Joshua S. Gans
    Abstract: We examine competition amongst ridesharing platforms where firms compete by choosing both the price of rides and the extent of idleness. Idleness means drivers who are compensated without picking up passengers, instead acting to reduce passenger wait time. We show that when consumers are the only agents who multihome, idleness falls compared with when they face a monopoly ridesharing platform. When drivers and consumers multihome, idleness further falls to zero as it involves costs for each platform that are appropriated, in part, by their rival. Interestingly, socially superior outcomes may involve monopoly or competition under various multihoming regimes, depending on the density of the city, and the relative costs of idleness versus consumer disutility of waiting.
    JEL: L13 L51
    Date: 2018–07
  12. By: Christopher T. Conlon; Julie Holland Mortimer
    Abstract: A diversion ratio, which measures the fraction of consumers that switch from one product to an alternative after a price increase, is a central calculation of interest to antitrust authorities for analyzing horizontal mergers. Two ways to measure diversion are: the ratio of estimated cross-price to own-price demand derivatives, and second-choice data. Policy-makers may be interested in either, depending on whether they are concerned about the potential for small but widespread price increases, or product discontinuations. We estimate diversion in two applications -- using observational price variation and experimental second-choice data respectively -- to illustrate the trade-offs between different empirical approaches. Using our estimates of diversion, we identify candidate products for divestiture in a hypothetical merger.
    JEL: L0 L1 L4
    Date: 2018–07
  13. By: Yang, David
    Abstract: This paper examines market impacts of the entrance of Amazon upon the Australian consumer electronics industry. This market is initially established as already volatile before market disruption by international competition. The nature of Amazon’s operations is then evaluated to significantly aid its ability to overcome market entrance barriers. Significant impacts by this entrance is projected on both consumers and retailers of consumer electronics within Australia. Changes in business model are probable if concentration of firm ratio within market is to be secured.
    Keywords: Amazon Inc. Market Structure Consumer Electronics Australia Market Entrance Market disruptor
    JEL: F23 F3 G1
    Date: 2018–07–14
  14. By: Iritié, B. G. Jean Jacques
    Abstract: This paper analyzes the effect of innovation clusters on the adoption of a gen- eral purpose technology (GPT) and on firms R&D investment levels in im- perfect information situation. To do this, we developed a theoretical model of vertical relation, described as a four-step game between an upstream firm providing innovative GPT and an innovative downstream associated sector, integrator of this technology. The downstream sector ignores the quality of the GPT and we model the innovation cluster as a coordination mode of firms, improving the probability of the downstream firm to receive information about the quality of the GPT technology. Then, we determine firms equilibria (prices and technological qualities) and we showed that the effect of innovation clus- ters on the choice of qualities, the adoption behavior, levels of investment in R&D as well as that social welfare depends on the quality of R&D activities carried out before the establishment of the cluster and a threshold effect or cluster critical mass; if the critical mass in terms of information sharing and interaction is not reached, the cluster may have negative effects. In other words, the consensual idea of expected positive effects of innovation clusters must be put into perspective.
    Keywords: innovation clusters,general purpose technology,technology adoption,technology complementarity,uncertainty,critical mass
    JEL: C02 D82 D83 L15 O3
    Date: 2017
  15. By: Noriaki Matsushima; Laixun Zhao
    Abstract: This paper examines the role of outside options in a downstream duopoly with exclusive vertical relations as in the Japanese automobile industry. In our setup, the downstream firms have outside options, and two upstream firms with exclusive relations can engage in cost reducing investments. More interestingly, each upstream firm can choose whether to voluntarily generate technology spillovers to its rival. We show that better outside options of the downstream firms can induce voluntary technology spillovers in the upstream level, increasing the profits of all firms on the vertical chain.
    Date: 2018–08
  16. By: Noriaki Matsushima; Laixun Zhao
    Abstract: We consider a bilateral monopoly with a supplier and a buyer. Their trading terms are determined through negotiations, but affected by the buyer's efforts to search for outside suppliers. We find surprisingly that a market expansion may harm the supplier.
    Date: 2018–08
  17. By: John Jairo García Rendón; Diego F. Linares
    Abstract: This work focuses on the main variables that explain the prices of the voice services established by mobile service providers in Colombia. This will be done by analyzing different variables that characterize this sector, like, historical prices stablished by all operators, all the investments made in network development, market sharing and all the existing regulatory measures. We develop a model for data panels in the period between 2005 and 2011, which makes evident the existing interdependence amongst the different companies when setting rates. It is also evident the leadership of one of the competitors and the existing price war between providers.
    Keywords: Telecommunications, price wars, Investment, Regulation, Colombia
    JEL: D43 C23
    Date: 2018–07–30
  18. By: Maxime Thomas (CGS i3 - Centre de Gestion Scientifique i3 - MINES ParisTech - École nationale supérieure des mines de Paris - PSL - PSL Research University - CNRS - Centre National de la Recherche Scientifique); Le Masson Pascal (CGS i3 - Centre de Gestion Scientifique i3 - MINES ParisTech - École nationale supérieure des mines de Paris - PSL - PSL Research University - CNRS - Centre National de la Recherche Scientifique); Legrand Julien (CGS i3 - Centre de Gestion Scientifique i3 - MINES ParisTech - École nationale supérieure des mines de Paris - PSL - PSL Research University - CNRS - Centre National de la Recherche Scientifique); Benoit Weil (CGS i3 - Centre de Gestion Scientifique i3 - MINES ParisTech - École nationale supérieure des mines de Paris - PSL - PSL Research University - CNRS - Centre National de la Recherche Scientifique)
    Abstract: Can a platform leader be challenged and loose its architectural control over its innovation ecosystem? The question seems absurd since theoretical works on modularity and multi-sided markets depict platform competitive landscapes as controlled by a hegemonic platform leader. However, platform history chronicles several cases of leadership shifts for the benefit of firms formerly providing complementary innovations. We coined these situations " platform overthrows ". To bridge the gap between classical optimization models and empirical evidences of platform overthrow, we rely on a design-theory-based model (Legrand et al. 2017) of platform dynamics to generate testable hypothesis. We then test them with a sample of 22 empirical cases of attempts of platform overthrow. Our results indicate that platform overthrows are always built by a challenger that introduces a new functional range in the ecosystem. However, the efforts of the challenger can be ruined if the technology of the platform leader is easily adaptable to the new functional range. Otherwise, the challenger can overthrow its platform leader if it succeeds in designing a technology that can address both the former and the new functions. We conclude by highlighting how studying both technological and functional evolutions can provide a thorough understanding of platform ecosystem dynamics.
    Date: 2018–07–02
  19. By: Doireann Fitzgerald; Anthony Priolo
    Abstract: The question of how firms build market share matters for firm dynamics, business cycles, international trade, and industrial organization. Using Nielsen Retail Scanner data for the United States, we document that in the consumer food industry, brands experience substantial growth in market share in the first four years after successful entry into a regional market. However, markups are flat with respect to brand tenure. This finding is at odds with a large literature on customer markets which argues that firms acquire customers by temporarily offering low markups, and later raise markups once customers are locked in. However, it is consistent with a literature which emphasizes the importance of marketing and advertising activities for building market share.
    JEL: E3 L11 M3
    Date: 2018–07
  20. By: Wallace P. Mullin; Christopher M. Snyder
    Abstract: We propose a method for bounding the demand elasticity in growing, homogeneous-product markets that requires only minimal data—market price and quantity over a time span as short as two periods. Reminiscent of revealed-preference arguments using choices over time to bound the shape of indifference curves, we use shifts in the equilibrium over time to bound the shape of the demand curve under the assumption that growing demand curves do not cross. We apply the method to assess the effectiveness of the antitrust remedy in the 1952 Du Pont decision, ordering the incumbent manufacturers to license their patents for commercial plastics. Commentators have suggested that the incumbents may have preserved the monopoly outcome by gaming the licensing contracts. The upper bounds on demand elasticities that we compute are significantly less than 1 in many post-remedy years. Such inelastic demand is inconsistent with monopoly, suggesting the remedy may have been effective.
    JEL: C18 D22 L40 L65
    Date: 2018–06
  21. By: Daniele Crotti; Elena Maggi
    Abstract: In recent years several European municipalities have paired market-based measures with urban distribution centres (UDC) in order to reduce CO2 emissions and make more sustainable urban freight ‡ows. However, UDCs may add reloading costs and extra delivery times which have relevant impact on both urban supply chains and the competition among traditional and UDC-based logistics service providers in terms of service quality and freight rates. By using a duopolistic Hotelling framework, we show that market-based measures and subsidies might be substitutes to enhance the demand for UDC-based providers but public funding can be reduced by improving the quality of UDC services. These results can enlarge the scope for investments in UDC value-adding services in order to decrease private crowding-out effects in the long run.
    Keywords: Community/Rural/Urban Development
    Date: 2017–04–12
  22. By: Ibrahima Barry (GAEL - Laboratoire d'Economie Appliquée de Grenoble - UPMF - Université Pierre Mendès France - Grenoble 2 - INRA - Institut National de la Recherche Agronomique); Olivier Bonroy (GAEL - Laboratoire d'Economie Appliquée de Grenoble - UPMF - Université Pierre Mendès France - Grenoble 2 - INRA - Institut National de la Recherche Agronomique); Paolo Garella (Università degli Studi di Milano-Bicocca [Milano])
    Abstract: Taxes and subsidies on products embodying environmental qualities often coexist with certified private labels---like Ecocert, Scientific Certification System, or OEKO-TEX. Their interaction is yet quite unexplored. We analyze a duopoly where consumers value an environmental quality, with an externality. A certifier sets the quality standard for a label. The fee for granting the label is either set by the certifier (certifier power), or in a noncooperative bidding game (firm power). Taxes and subsidies then affect the fee, depending upon how this is set, and the standard. This channel can produce distorted or even reversed effects. If firm power exists, for instance, a subsidy to the labeled good ends up decreasing the environmental quality and welfare. Conversely, absence of firm power nullifies the effects of ad valorem taxing the unlabeled "dirty" product. Only a per unit tax has similar, but always worsening, effects.
    Date: 2018–07–20
  23. By: George Deltas; Eleftherios Zacharias
    Abstract: We provide an explanation for product versioning that is not driven by differential costs or consumer preference heterogeneity, and investigate its implications. Consumers care whether a product they own is better than that owned by others, and whether others own a better product than them. These positional effects can induce a firm to offer products of different quality, with the high quality product becoming more exclusive as these effects strengthen. Consumers with no positional preferences become worse off when the broader market acquires them, except following the introduction of the second product, when some such consumers become better off. Positional preference also reduce total consumer surplus holding the number of products fixed; however, they increase consumer surplus if they lead the firm to introduce a second product of sufficiently high quality. We discuss empirical implications of the theory.
    Keywords: Relative consumption, status effects, positional externalities, Veblen goods
    JEL: L11 D11 D42
    Date: 2018
  24. By: Shlegel, Maxim; Zenkevich, Nikolay
    Abstract: This paper considers coopetition as form of interaction between companies and agents. As the method to analyse coopetition internet-based platform is used and modeled. The most important part of the research is simulation of lead-generation internet-based platform. As a result, potential industrial impact that can be caused by a lead generating internet platformbased coopetition among companies, which operate in one industry.
    Keywords: coopetition, internet-based platform, lead generation, agent-based simulation,
    Date: 2017
  25. By: Cabral, Luís M B
    Abstract: I introduce a dynamic framework to analyze platforms. The (single) platform owner sets prices at the beginning of each period. Agents (buyers, sellers, readers, consumers, merchants, etc) make platform membership decisions occasionally. I show that optimal platform pricing addresses two externalities: across sides and across time periods. This results in optimal prices which depend on platform size in a non-trivial way. By means of numerical simulations, I examine the determinants of equilibrium platform size, showing that the stationary distribution of platform size may be bi-modal, that is, with some probability the platform remains very low or takes very long to increase in size. I also contrast the dynamics of proprietary vs non-proprietary (i.e., zero-priced) platforms; and consider the specific case of asymmetric platforms (one side cares about the other but not vice-versa).
    Date: 2018–07
  26. By: Richard N. Langlois (University of Connecticut)
    Abstract: In 1919, General Motors acquired a non-controlling equity interest in the Fisher Body Company and signed a ten-year contract stipulating the terms under which Fisher would be the exclusive supplier of car bodies to GM. In 1926, GM acquired the remaining equity in Fisher Body. In 1978, Benjamin Klein, Robert Crawford, and Armen Alchian used the GM acquisition of Fisher Body as an illustration of the asset-specificity or “holdup” theory of vertical integration. Their paper became widely influential, and the Fisher case quickly developed into an omnipresent meme in the economics of organization. In the year 2000, however, the meme suddenly exploded into a cause célèbre. No fewer than five papers appeared attacking both the theory and the history in the Klein et al. account – including a paper by Nobel Laureate Ronald Coase, who entered into an often-contentious debate with Klein. This paper tells the story of the Fisher Body acquisition and of the academic controversy it spawned. The controversy has lessons – including some surprising and ironic lessons – for the economic history of the American automobile industry, for the economics of organization, and for the conduct of inquiry in economics.
    Keywords: transaction costs, vertical integration, asset specificity, automobile industry
    JEL: B2 D23 D86 L14 L24 L62 N62
    Date: 2018–07
  27. By: Amodio, Francesco; De Giorgi, Giacomo; Rahman, Aminur
    Abstract: Firms in developing countries often avoid paying taxes by making informal payments to tax officials. These bribes may raise the cost of operating a business, and the price charged to consumers. To decrease these costs, we designed a feedback incentive scheme for business tax inspectors that rewards them according to the anonymous evaluation submitted by inspected firms. We show theoretically that feedback incentives decrease the equilibrium bribe amount, but make firms with more inelastic demand more attractive for inspectors. A tilted scheme that attaches higher weights to the evaluation of smaller firms limits the scope for targeting and decreases the bribe amount to a lesser extent. We evaluate both schemes in a field experiment in the Kyrgyz Republic and find evidence that is consistent with the model predictions. By decreasing bribes, our intervention reduces the average cost for firms and the price they charge to consumers. Since fewer firms substitute bribes for taxes, tax revenues increase. Our study highlights the role of firm heterogeneity and market structure in shaping the relationship between firms and tax inspectors, and provides clear evidence of pass-through of bribes to consumers.
    Keywords: business tax; demand elasticity; incentives; market structure
    JEL: D22 D40 H26 H71 O12
    Date: 2018–07
  28. By: Galina Besstremyannaya (Centre for Economic and Financial Research at New Economic School); Richard Dasher (Stanford University); Sergei Golovan (New Economic School)
    Abstract: The paper develops a growth model with acquisition of endogenous innovations. The model builds on the microeconomic evidence about acquisitions in the technology economy: acquirers are innovative firms, which regard acquisitions as a complementary strategy to their R&D investment. Targets are small firms and leaders on the markets for their products. Acquirers are capable of implementing a higher quality improvement of the products of the targets. The model includes the government, which collects corporate profit tax and redistributes it to provide subsidies for innovations and acquisitions. We quantify the model using the 2000-2016 financial data for Japanese firms, matched with their patents. The estimates prove the model's predictions about a positive effect of acquisitions on growth. The impact of acquisitions on the R&D intensity is related to the type of complementarity between innovation and acquisition strategies. The effect of subsidies towards the acquisitions is linked to the parameters of the cost function and reflects the association between the costs of acquisitions and R&D.
    Keywords: innovation, endogenous growth, acquisition, social planner, patents
    JEL: O11 O38 O40 O53
    Date: 2018–08
  29. By: Samy Belaïd (Ecole de Management de Normandie); Jérôme Lacoeuilhe (IRG - Institut de Recherche en Gestion - UPEM - Université Paris-Est Marne-la-Vallée - UPEC UP12 - Université Paris-Est Créteil Val-de-Marne - Paris 12)
    Date: 2018
  30. By: Andre Jungmittag (European Commission - JRC)
    Abstract: The reduction of regulatory restrictions is arguably the most strongly advocated policy for improving economic performance in EU countries, particularly in many service activities, where regulatory barriers to competition are still widespread. This technical report considers the direct and indirect effects of product market regulations (PMR) applying to the retail trade sectors in the EU countries. Retail and wholesale trade are one of the largest service sectors in the EU. The functioning of the retail market affects the whole economy, because of its size and also because of its linkages with other sectors of the economy. It is also important for consumers, who spend 30% of their consumption expenditures in retail shops. This technical report is divided into two parts. The first part provides a review of the theoretical literature on the relationships between anti-competitive PMR and economic performance in the directly affected sector as well as in upstream and downstream linked sectors. We also discuss special features of the retail trade, which are relevant to understand the indirect impacts of this sector's PMR on upstream manufacturing sectors. The second part of the report provides an exploratory data analysis of the development of retail trade PMR as well of their direct and indirect effects on economic performance. Direct effects on economic performance comprise the impact on the market structure, labour productivity and ICT investment in the retail trade sectors of the EU countries. Since food items represent – with 40% to 60% ‒ the largest part of retail turnover, the analysis of the indirect effects focuses on the impact on consumer prices for food, food demand of private households and employment in the food sector. We find evidence for negative direct and indirect effects of retail trade regulations in the investigated areas. However, further research is needed to check the robustness of the findings and to employ more elaborated statistical analyses for the 28 EU countries. This will only be feasible if more internationally comparable data on retail trade PMR will become available.
    Keywords: Retail trade, food sector, product market regulation, upstream links, downstream links, exploratory data analysis
    Date: 2018–07
  31. By: Nigar Hashimzade (Durham University and CESifo); Gareth Myles (University of Adelaide, Institute for Fiscal Studies, and CESifo)
    Abstract: Corporations make significant direct contributions to environmental improvement and also indirect contributions, through expenditure on process and product innovation. Environmental protection is a public good and so may be under-supplied in a competitive environment. European law requires competition authorities to consider public interest arguments. The public interest defence for allowing a cartel to operate is based on the argument that the additional profitability induces cartel members to make greater environmental contributions that more than offset the welfare loss due to non-competitive pricing. We explore profit-seeking motivations for the corporate environmental expenditures, leaving aside corporate social responsibility concerns. Two motives are considered: environmental improvement leading to reduced production costs, and publicized environmental expenditures boosting brand image. Allowing the operational firms to form a cartel and raise prices above Nash equilibrium levels always reduces environmental quality and consumer welfare. As a consequence, we find no support for the public interest defence.
    Date: 2018–06
  32. By: Cédric Durand (CEPN - Centre d'Economie de l'Université Paris Nord - UP13 - Université Paris 13 - USPC - Université Sorbonne Paris Cité - CNRS - Centre National de la Recherche Scientifique); William Milberg
    Date: 2018–07–27
  33. By: Parenti, Mathieu; Sidorov, Alexander V.; Thisse, Jacques-Francois
    Abstract: In Contributions to game theory and management, vol. X. Collected papers presented on the Tenth International Conference Game Theory and Management / Editors Leon A. Petrosyan, Nikolay A. Zenkevich. Ó SPb.: Saint Petersburg State University, 2017. Ó 404 p.
    Keywords: Cournot competition, Bertrand competition, free entry, Lerner index, indirect utility,
    Date: 2017

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