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on Industrial Competition |
| By: | Yongmin Chen (Department of Economics, University of Colorado Boulder, USA); Jianpei Li (School of International Trade and Economics, University of International Business and Economics, China); Marius Schwartz (Department of Economics, Georgetown University, USA) |
| Abstract: | This paper analyzes welfare under differential versus uniform pricing across oligopoly makes that differ in costs of service. We establish necessary and sufficient conditions on demand properties—cross/own elasticities and curvature—for differential pricing by symmetric firms to raise aggregate consumer surplus, profit, and total welfare. The analysis reveals intuitively why differential pricing is generally beneficial though not always—including why profit can fall, unlike for monopoly—and why it is more beneficial than oligopoly third-degree price discrimination. When firms have asymmetric costs, however, differential pricing can reduce profit or consumer surplus even with ‘simple’ demands such as linear. |
| Keywords: | Differential Pricing, Price Discrimination, Demand Curvature, Cross-Price Elasticity, Pass-Through, Oligopoly |
| JEL: | D43 L13 L10 |
| Date: | 2018–09–11 |
| URL: | http://d.repec.org/n?u=RePEc:geo:guwopa:gueconwpa~18-18-10&r=com |
| By: | Correia da silva, Joao; Jullien, Bruno; Lefouili, Yassine; Pinho, Joana |
| Abstract: | This paper discusses the literature on horizontal mergers between multi-sided platforms and argues that the Cournot model can provide useful insights into the welfare effects of such mergers. To illustrate those insights, we develop a simple model in which two-sided platforms offer a homogeneous service and compete à la Cournot, and derive the effects of "average-marginal-cost-preserving" mergers on consumers on both sides of the market. We conclude with a discussion of several research avenues that could be explored to understand better the impact of horizontal mergers between multi-sided platforms. |
| Keywords: | Mergers; Multi-Sided Platforms; Cournot Competition |
| JEL: | D43 L41 |
| Date: | 2018–08 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:32901&r=com |
| By: | Jay Pil Choi; Martin Peitz |
| Abstract: | This paper analyzes a mechanism through which a supplier of unknown quality can overcome its asymmetric information problem by selling via a reputable downstream firm. The supplier’s adverse-selection problem can be solved if the downstream firm has established a reputation for delivering high quality with the supplier. The supplier may enter the market by initially renting the downstream firm’s reputation. The downstream firm may optimally source its input externally, even though sourcing internally would be better in terms of productive efficiency. Since an entrant in the downstream market may lack reputation, it may suffer from a reputational barrier to entry arising from higher input costs–this constitutes a novel theory of downstream barriers to entry. |
| Keywords: | Adverse Selection, Certification Intermediary, Incumbency Advantage, Barriers to Entry, Outsourcing, Branding |
| JEL: | D4 L12 L4 L43 L51 L52 |
| Date: | 2018–09 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_042_2018&r=com |
| By: | Cabral, Luís M B |
| Abstract: | We develop a dynamic innovation model with three important features: (a) asymmetry between large and small firms ("giants" and "dwarfs"); (b) technology transfer by acquisition; and (c) the distinction between radical innovation (compete for the market) and incremental innovation (compete within the market). We provide conditions such that (a) greater asymmetry between giant and dwarfs decreases incremental innovation but increases radical innovation; and (b) allowing for technology transfer increases incremental innovation but decreases radical innovation. These results have several policy implications, including: (a) with weak markets for technology, a soft antitrust policy toward dominant firms leads to an increase in radical innovation but a decrease in incremental innovation; (b) a merger policy that restricts the acquisition of fringe firms by dominant firms leads to lower incremental innovation rates and higher radical innovation rates; © the effect of IP protection on innovation is mixed: by increasing the prize from patenting, it increases incremental innovation; but, by improving the market for technology, it reduces the rate of radical innovation. |
| Date: | 2018–08 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:13115&r=com |
| By: | Bergemann, Dirk; Bonatti, Alessandro |
| Abstract: | We survey a recent and growing literature on markets for information. We offer a comprehensive view of information markets through an integrated model of consumers, information intermediaries, and firms. The model embeds a large set of applications ranging from sponsored search advertising to credit scores to information sharing among competitors. We then review a mechanism design approach to selling information in greater detail. We distinguish between ex ante sales of information (the buyer acquires an information structure) and ex post sales (the buyer pays for specific realizations). We relate this distinction to the different products that brokers, advertisers, and publishers use to trade consumer information online. We discuss the endogenous limits to the trade of information that derive from its potential adverse use for consumers. Finally we revisit the role of recommender systems and artificial intelligence systems as markets for indirect information. |
| Keywords: | information design; information markets; intermediaries; mechanism design; predictions; ratings |
| JEL: | D42 D82 D83 |
| Date: | 2018–08 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:13148&r=com |
| By: | Ying Fan (University of Michigan); Christopher Sullivan |
| Abstract: | This paper provides a theoretically founded empirical model to simultaneously investigate firm competition and estimate markups. The model nests the standard oligopoly model, but also allows for firm collusion. Different from conduct parameter models, our model is consistent with a series of theoretical models. We show that a nonparametric marginal cost function can be identified, which gives an estimate of markups. Through Monte Carlo simulations, we show that our approach works better in estimating markups than a standard oligopoly model or a conduct parameter model. |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed018:764&r=com |
| By: | Johannes Boehm (Princeton University); Jan Sonntag (Sciences Po Paris) |
| Abstract: | This paper studies the prevalence of market foreclosure using a novel dataset on U.S. and international buyer-seller relationships, and across a large range of industries. We find that relationships are more likely to break when suppliers vertically integrate with one of the buyers' competitors than when they vertically integrate with an unrelated firm. We establish causality using the prevalence of past vertical integration among related parties as an instrument. Foreclosure is more prevalent when suppliers have more market power. Furthermore, we find a substantial drop in performance among foreclosed firms. |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed018:677&r=com |
| By: | Holger Breinlich; Volker Nocke; Nicolas Schutz |
| Abstract: | In a two-country international trade model with oligopolistic competition, we study the conditions on market structure and trade costs under which a merger policy designed to benefit domestic consumers is too tough or too lenient from the viewpoint of the foreign country. We calibrate the model to match industry-level data in the U.S.\ and Canada. Our results suggest that at present levels of trade costs, merger policy is too tough in the vast majority of sectors. We also quantify the resulting externalities and study the impact of different regimes of coordinating merger policies at varying levels of trade costs. |
| Keywords: | Mergers and Acquisitions, Merger Policy, Trade Policy, Oligopoly, International Trade |
| JEL: | F12 F13 L13 L44 |
| Date: | 2018–09 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_039_2018&r=com |
| By: | Holger Breinlichy (University of Surrey, CEP and CEPR); Volker Nockez (University of Mannheim, NBER and CEPR); Nicolas Schutzx (University of Mannheim and CEPR) |
| Abstract: | In a two-country international trade model with oligopolistic competition, we study the conditions on market structure and trade costs under which a merger policy designed to bene t domestic consumers is too tough or too lenient from the viewpoint of the foreign country. We calibrate the model to match industry-level data in the U.S. and Canada. Our results suggest that at present levels of trade costs, merger policy is too tough in the vast majority of sectors. We also quantify the resulting externalities and study the impact of di erent regimes of coordinating merger policies at varying levels of trade costs. |
| JEL: | F12 F13 L13 L44 |
| Date: | 2018–08 |
| URL: | http://d.repec.org/n?u=RePEc:sur:surrec:0818&r=com |
| By: | Jaumandreu, Jordi; Lin, Shuheng |
| Abstract: | We study how firms' innovations impact prices with endogenous productivity and markup, under imperfect competition and dynamic pricing. Absent innovation, productivity plus markup changes curb price growth to half of variable inputs cost growth. Innovation's additional impact on costs is negatively correlated with markup changes. We detect two prevalent strategies. When marginal cost goes down, firms cash-in innovation by increasing the markups to enlarge profits. When marginal cost goes u firms practice countervailing pricing by decreasing markups. With no innovation aggregate manufacturing price growth had multiplied by 1.4, but innovation without cash-in strategies had multiplied it by 0.8. |
| Keywords: | Innovation; marginal cost; markup; price indices |
| JEL: | D43 L11 L16 O31 |
| Date: | 2018–08 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:13146&r=com |
| By: | Simshauser, P |
| Abstract: | In Australia, as with Great Britain, governments have shown rising concern with the health of competitive residential electricity markets. A core concern is the practice of price discrimination and the rising dispersion of prices. The State of Queensland implemented Full Retail Contestability in 2007, but held a regulated price cap in place until 2016, when it finally deregulated its residential electricity market. Almost simultaneously, the two jurisdictions that pioneered retail price deregulation, Great Britain and Victoria, were questioning their prior policy decision. Queensland makes for a fascinating case study because Southeast Queensland comprises a fully deregulated retail market while Regional Queensland is a regulated monopoly – with common input costs across both zones. Consequently, a regulated monopoly with a uniform tariff and 640,000 customers forms a very large control group, which can be directly compared to the competitive market of more than 1.3 million customers – making such analysis globally unique. Analysis of Queensland market conditions concludes the policy is welfare enhancing. To be clear, rising electricity prices are a problem, but price discrimination is not. The deregulated competitive market is, perhaps unsurprisingly, better at regulating the overall average tariff and consumer welfare has been enhanced by $184 million per annum – with some consumer segments very materially better off. However, certain modes of failure remain, viz. an inter-consumer misallocation problem and lack of transparency vis-à-vis the anchoring of discounts – known as the “discounts off what?” problem. Resolving the inter-consumer misallocation problem is relatively straight forward via ensuring energy retailers (voluntarily) move vulnerable customers onto a Benchmark-equivalent or suitably discounted tariff. Due to the non-linearity of tariffs and the rising mix of discrete metered loads, the latter can be best solved by producing a weighted average of Standing Offers, and using this as the benchmark. |
| Keywords: | Price discrimination, electricity prices, jawboning |
| JEL: | D4 L5 L9 Q4 |
| Date: | 2018–09–10 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:1849&r=com |
| By: | Matthew J. Higgins; Xin Yan; Chirantan Chatterjee |
| Abstract: | The FDA maintains post-approval safety surveillance programs to monitor the safety of drugs. As adverse events are reported, the FDA may choose to intervene and change the safety labeling associated with a drug. We provide causal evidence of the impact that these regulatory interventions have on aggregate demand for pharmaceuticals. We find that aggregate demand declines by 16.9 percent within two years of a relabeling event. After accounting for substitution patterns by physicians along with competitor actions, aggregate demand declines by 5.1 percent. Critically, this decline represents consumers that leave the market. The overall effect appears to be driven by ‘high-intensity’ markets or those with significant relabeling activity. Results control for the level of advertising and are robust to variation across types of relabeling, market sizes, levels of competition and degrees of cross-molecular substitution. |
| JEL: | I18 L51 L65 |
| Date: | 2018–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:24957&r=com |
| By: | Valtiala, Juho P.; Rezitis, Anthony N. |
| Abstract: | This study examined whether processors and retailers have market power in the Finnish dairy chain. Both the dairy processing and the retail sector are highly concentrated in Finland, and market imperfections in the chain are not well known. The results indicate that the retailers have market power over the consumers in the retail market but the processing market is competitive. According to the results, the retailers employ full mark-up in the retail market. It is emphasised that market power in the Finnish dairy chain should be further studied with different approaches to gain more evidence for market power. |
| Keywords: | Industrial Organization |
| Date: | 2017–08–28 |
| URL: | http://d.repec.org/n?u=RePEc:ags:eaae17:261419&r=com |
| By: | Jung, Jinho; Sesmero, Juan Pablo; Balagtas, Joseph V. |
| Keywords: | Industrial Organization, Resource/Energy Economics and Policy, Land Economics/Use |
| Date: | 2017–07–03 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea17:258544&r=com |
| By: | Hunold, Matthias; Kesler, Reinhold; Laitenberger, Ulrich |
| Abstract: | We investigate whether online travel agents (OTAs) assign hotels worse positions in their search results if these set lower hotel prices at other OTAs or on their own websites. We formally characterize how an OTA can use such a strategy to reduce price differentiation across distribution channels. Our empirical analysis shows that the position of a hotel in the search results of OTAs is better when the prices charged by the hotel on other channels are higher. This is consistent with the hypothesis that OTAs alter their search results to discipline hotels for aggressive prices on competing channels, and by this reduce search quality for consumers. |
| Keywords: | consumer protection,free-riding,hotel booking,online travel agents,ranking,search bias |
| JEL: | D40 L42 L81 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:dicedp:300&r=com |
| By: | Grau, Aaron Stephan Alexander; Hockmann, Heinrich |
| Abstract: | The paper develops a new approach for the estimation of oligopsony power on two vertically integrated markets. The two subsequent markets with oligopsony power are structurally modelled. Deduced price equations are embedded in a VECM, transformed and estimated via the Kalman-Filter to allow for time-variation in the cointegration parameters. A dynamic factor model extracts common factors from the time-varying coefficients and thereby allows identification of buyers’ market power on both markets. The framework is applied to the German dairy supply chain. Results indicate lower levels of market imperfections on the raw milk and higher levels on the dairy output market. |
| Keywords: | Industrial Organization |
| Date: | 2017–08–28 |
| URL: | http://d.repec.org/n?u=RePEc:ags:eaae17:261277&r=com |
| By: | Wang, Xiangrui; Mittelhammer, Ron C.; Marsh, Thomas L.; McCluskey, Jill J. |
| Keywords: | Industrial Organization, Agribusiness, Agricultural and Food Policy |
| Date: | 2017–07–03 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea17:258388&r=com |
| By: | He, Xi |
| Keywords: | Agricultural and Food Policy, Demand and Price Analysis, Marketing |
| Date: | 2017–07–03 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea17:258428&r=com |
| By: | Bruno, Ellen M.; Sexton, Richard J. |
| Keywords: | Resource/Energy Economics and Policy, Demand and Price Analysis, Land Economics/Use |
| Date: | 2017–07–06 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea17:258434&r=com |
| By: | Pozo, Veronica F.; Bejan, Vladimir; Bachmeier, Lance |
| Keywords: | Demand and Price Analysis, Agricultural and Food Policy, Research Methods/Statistical Methods |
| Date: | 2017–06–30 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea17:258232&r=com |
| By: | Meloyan, Artak; Bakhtavoryan, Rafael |
| Keywords: | Demand and Price Analysis, Marketing, Agribusiness |
| Date: | 2017–06–30 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea17:258226&r=com |
| By: | DeLay, Nathan D.; Chouinard, Hayley H.; Walters, Cory G.; Wandschneider, Philip R. |
| Keywords: | Agricultural and Food Policy, Agricultural Finance, Industrial Organization |
| Date: | 2017–07–03 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea17:258357&r=com |
| By: | Bittmann, Thomas; Loy, Jens-Peter; Anders, Sven |
| Abstract: | The objective of this paper is to model and estimate the effect of product differentiation on retail pass-through of cost shocks. We use a model with common and idiosyncratic costs and apply it to Canadian market prices for ready to eat soups. We measure product differentiation with a distance vector adding a spatial dimension to the approach. We find that more differentiated products show higher prices, lower cost pass-through of common price shocks, higher cost pass-through of idiosyncratic cost shocks, and a more sluggish price adjustment. |
| Keywords: | Agricultural and Food Policy, Marketing |
| Date: | 2017–08–28 |
| URL: | http://d.repec.org/n?u=RePEc:ags:eaae17:261145&r=com |
| By: | Hirsch, Stefan; Mishra, Ashok K.; Finger, Robert |
| Keywords: | Industrial Organization, Agribusiness, Research Methods/Statistical Methods |
| Date: | 2017–07–03 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea17:258467&r=com |
| By: | Xia, Tian; Li, Xianghong |
| Keywords: | Industrial Organization, Marketing, Agricultural and Food Policy |
| Date: | 2017–07–03 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea17:258423&r=com |
| By: | Ogundeji, A.; Mare, F.A. |
| Abstract: | The large difference between the producer price of a beef carcass and the retail prices of individual beef cuts raised concerns among producers. Producers believe that they were carrying all the risk and that retailers fixed their prices, irrespective of the market price at that stage. This study examines the price transmission mechanisms in the Bloemfontein beef market using the producer price and retail prices at four retail outlets collected over a period of 3 years. It further estimates the causality links between the producer and retail prices. The traditional (Engle-Granger) and standardized (Enders & Siklos) Augmented Dickey- Fuller procedures were used to test for co-integration and asymmetry in price transmission. Four competing models, namely, Engle-Granger, Threshold Autoregressive , Momentum Threshold Autoregressive, and Momentum Consistent TAR models were applied. The following results were found: asymmetric price transmission between producer and retail prices, the results on the flow of market information indicated that a flow of market information did exist in the markets of three of the four retailers. The price transmission relationship of two of the retailers are beneficial to the consumers, as the marketing margin declined over time, while the relationship of the other two retailers are detrimental to consumers. |
| Keywords: | Demand and Price Analysis, International Relations/Trade, Livestock Production/Industries |
| Date: | 2018–07 |
| URL: | http://d.repec.org/n?u=RePEc:ags:iaae18:275930&r=com |
| By: | Fan, Linlin |
| Keywords: | Agricultural and Food Policy, Marketing, Industrial Organization |
| Date: | 2017–07–03 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea17:258404&r=com |
| By: | Cai, Xiaowei; Volpe, Richard J.; Schroeter, Christiane; Mancino, Lisa |
| Keywords: | Industrial Organization, Agricultural and Food Policy, Marketing |
| Date: | 2017–07–03 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea17:258471&r=com |
| By: | Volpe, Richard J.; Cho, Clare |
| Keywords: | Agribusiness, Industrial Organization, Agricultural and Food Policy |
| Date: | 2017–07–03 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea17:258546&r=com |
| By: | Walter Steingress |
| Abstract: | This paper develops a theoretical framework to infer the nature of fixed costs from the relationship between entry patterns in international markets and destination market size. If fixed costs are at the firm level, firms take advantage of an intrafirm spillover by expanding firm-level product range (scope). Few firms enter with many products and dominate international trade. If fixed costs are at the product level, an interfirm spillover reduces the fixed costs to export for all firms producing the product. Using cross-country data on firm and product, I find empirical evidence consistent with product-level costs. More firms than products enter in larger markets, offering their consumers lower prices and a greater variety of goods within the product category. |
| Keywords: | Firm dynamics, International topics, Trade Integration |
| JEL: | F12 F14 F23 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:bca:bocawp:18-43&r=com |
| By: | Cho, Clare; Volpe, Richard J. |
| Keywords: | Industrial Organization, Marketing, Food Consumption/Nutrition/Food Safety |
| Date: | 2017–07–03 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea17:258517&r=com |
| By: | Regmi, Madhav; Featherstone, Allen M.; Cowley, Cortney A.; Taylor, Mykel R. |
| Keywords: | Agricultural Finance, Production Economics, Productivity Analysis |
| Date: | 2017–07–03 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea17:258422&r=com |
| By: | Néstor Bruno |
| Abstract: | Uno de los primeros casos internacionales de regulación de las telecomunicaciones que buscó que los operadores establecidos (incumbentes) compartieran sus economías de alcance y de red con sus competidores fue el que tuvo lugar en los Estados Unidos a través de la denominada Telecomm Act (1996), y de la posterior actuación de la Comisión Federal de Comunicaciones (FCC) de ese país. El paradigma detrás de ese esquema es la creencia que la reducción de barreas de entrada implicará una afluencia de competidores a la industria, los que al no tener que hundir costos en la construcción de nuevas redes podrán ocuparse de generar competencia por el market share, y solo cuando lo obtengan, construirán las mismas, aumentando la capacidad del mercado, y cambiando la configuración del mismo. El presente trabajo reconcilia la evidencia empírica del proyecto implementado por la FCC con un modelo conceptual de competencia en la industria de las telecomunicaciones que es diferente al que tuvo el regulador estadounidense entre 1996 y 2005. Se demuestra así que la concentración de la industria se mantiene elevada a pesar de las medidas que pretenden introducir competencia utilizando la red del operador incumbente, debido a la existencia de costos hundidos endógenos en la industria, que pueden provocar además distorsiones en los precios y en las decisiones de inversión. |
| Date: | 2018–08 |
| URL: | http://d.repec.org/n?u=RePEc:cem:doctra:645&r=com |