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on Industrial Competition |
| By: | Jullien, Bruno; Lefouili, Yassine |
| Abstract: | We investigate the impact of a horizontal merger between two competitors on their incentives to develop new products. We show that a merger raises the incentives to innovate if and only if the merged entity's incremental gain from a second innovation is larger than the individual profit of an innovator when both firms innovate in the no-merger scenario. Applying this result to the Hotelling model, we find that a merger spurs innovation and can be beneficial to consumers if the degree of product differentiation is positive but not too high. |
| Keywords: | Merger Policy; Product Innovation; R&D Investments |
| JEL: | K21 L13 L40 |
| Date: | 2018–08 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:32923&r=com |
| By: | Smirnov, Vladimir; Wait, Andrew |
| Abstract: | We examine innovation as a market-entry timing game with complete information and observable actions. We allow for heterogenous payoffs between players, and for a leader's payoff functions to be multi-peaked and non-monotonic. Assuming that the follower's payoff is non-increasing with the time of the leader's entry, we characterize all pure-strategy subgame perfect equilibria for the two-player asymmetric model, showing that there are at most two equilibria. Firm heterogeneity allows for equilibria with different characteristics than previously examined in the literature. For example, a fi rm may wish to enter earlier blocking its rival's entry, so as to avoid an anticipated lower future payoff if it waited. A notable feature of this blocking equilibrium is that rents need not be equalized between the leader and follower. We also show that if the followers' payoffs are non-monotonic, the iterative incentives to block each other's product launch may lead to starkly inefficient early entry in a continuous version of the centipede game. |
| Keywords: | timing games; blocking entry; innovation. |
| Date: | 2018–09 |
| URL: | http://d.repec.org/n?u=RePEc:syd:wpaper:2018-05&r=com |
| By: | Karoly Miklos Kiss (Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences and University of Pannonia, Veszprem); Kinga Edocs (University of Pannonia, Veszprem) |
| Abstract: | One of the most relevant and exciting issues in the latest decades in economics had been the asymmetric information and uncertainty, and their effects on market processes and efficiency. Some studies show that markets where information problems or/and uncertainty arise tend to be “networked”, and some studies propose that use of social networks can mitigate adverse selection and moral hazard problems, but this area is still under-developed. Price discrimination is a representative situation where asymmetric information vigorously appears. The firms rarely have precise information about the types of individual customers (their important features, preferences or willingness-to-pay), but can use incentive tools and screening mechanisms. Use of signaling and screening can reduce the cost of incentive under asymmetric information. We develop a model to show that social embeddedness of buyers and some relevant features of their social network can be used for screening to mitigate the information problem in pricing decisions. |
| Keywords: | asymmetric information, nonlinear pricing, incentive contracts, social network, social embeddedness |
| JEL: | D8 L11 Z13 |
| Date: | 2018–09 |
| URL: | http://d.repec.org/n?u=RePEc:has:discpr:1824&r=com |
| By: | Miglo, Anton |
| Abstract: | Traditionally crowdfunding has been used for funding very innovative projects. Recently, however, companies have begun using crowdfunding to finance more traditional products where they compete against other sellers of similar products. One of the major platforms Indiegogo launched several projects consistent with this trend. This paper offers a model of a duopoly where firms can use crowdfunding prior to direct sales. The model is based on asymmetric information between competitors regarding the demand for the product. It provides several implications that have not yet been tested. For example we find that high-demand firms can use crowdfunding to signal their quality. |
| Keywords: | crowdfunding, asymmetric information, reward-based crowdfunding, duopoly, signalling |
| JEL: | D43 D82 G32 L11 L13 L26 M13 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:89016&r=com |
| By: | Oliver Rehbein; Santiago Carbo-Valverde |
| Abstract: | The decision to change or terminate a bank-firm relationship has been demonstrated to be crucial for firm performance following bank mergers. We find both competition and the available firm collateral to be important factors in enabling firms to switching banks, instead of dropping their bank relationships. We also provide novel evidence that firms who are able to \textit{add} a bank relationship following a merger exhibit much stronger post-merger performance. Our findings are consistent with the interpretation that bank-mergers cause a reduction in lending to most firms, leading them to search for alternative sources of finance. |
| Keywords: | bank mergers, relationship banking, competition |
| JEL: | G21 G34 |
| Date: | 2018–09 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_044_2018&r=com |
| By: | Yang, Tingyi; Dharmasena, Senarath |
| Abstract: | Dairy alternative beverage market in the United States has been growing over the past decade. Although almond milk and soymilk are the fastest growing categories, there exist numerous other products such as coconut milk, rice milk, cashew nut milk, hazelnut milk, etc. There are well-known national brands as well as not-so-well-known private label and store brands that compete among dairy alternative beverages. These firms compete strategically for market share by differentiating their products by brand, price, advertising, promotion, positioning and merchandising. Using market level weekly purchase data from 2015 Nielsen scanner panel, price cost margins and market power of different brands is estimated assuming the presence of pure strategy Bertrand-Nash equilibrium in prices. Demand parameters are estimated using attribute space hedonic metric approach within the Barten synthetic demand model. Hedonic variables with regards to product attributes such as calorie, fat, protein, calcium and other nutrients are used to estimate demand elasticities using qualitative factor distances within the hedonic matrix of parameters associated with attributes. Preliminary analysis revealed own-price demand elasticities of soymilk, almond milk, and coconut milk at -1.13, -0.5, and 0.46. These are used to calculate price cost margins under various industry structures (such as in Nevo, 2000). |
| Keywords: | Industrial Organization, Marketing |
| Date: | 2018–01–17 |
| URL: | http://d.repec.org/n?u=RePEc:ags:saea18:266630&r=com |
| By: | Ray Chaudhuri, A. (Tilburg University, Center For Economic Research); Benchekroun, H.; Breton, Michele |
| Abstract: | We examine the profitability of horizontal mergers within nonrenewable resource industries, which account for a large proportion of merger activities worldwide. Each firm owns a private stock of the resource and uses open-loop strategies when choosing its extraction path. We analytically show that even a small merger (merger of 2 firms) is always profitable when the resource stock owned by each firm is small enough. In the case where pollution is generated by the industry's activity, we show that an environmental policy that increases the firms' production cost or reduces their selling price can deter a merger. This speeds up the industry's extraction and thereby causes emissions to occur earlier than under a laissez-faire scenario. |
| Keywords: | exhaustible resources; horizontal mergers; environmental regulation; differential games |
| JEL: | Q39 L41 Q58 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:tiu:tiucen:0900f396-d440-4db5-9102-a56c8a0d07d6&r=com |
| By: | Bantle, Melissa (Helmut Schmidt University, Hamburg); Muijs, Matthias (University of Hohenheim) |
| Abstract: | Market delineation is a fundamental tool in modern antitrust analysis. However, the definition of re- levant markets can be very difficult in practice. This preliminary draft applies a new methodology combining a simple price correlation test with hierarchical clustering -a method known from machine learning- in order to analyze the competitive situation in the German retail gasoline market. Our analysis reveals two remarkable results: At first, there is a uniform pattern across stations of the same brand regarding their maximum daily prices which confirms the claim that prices are partly set centrally. But more importantly, price reactions are also influenced by regional or local market conditions as the price setting of gasoline stations is strongly affected by commuter routes. |
| Keywords: | market definition; gasoline market; price tests; competition; k-means clustering; hierarchical clustering |
| JEL: | D22 D40 D43 L10 |
| Date: | 2018–08–29 |
| URL: | http://d.repec.org/n?u=RePEc:ris:vhsuwp:2018_180&r=com |
| By: | Zhou, Haiwen |
| Abstract: | This paper studies a general equilibrium model of economic geography in which firms engage in oligopolistic competition. This framework is conducive to analytic results. With increasing returns, oligopolistic competition leads to inter-industry trade between regions rather than intra-industry trade. The choice of appropriate technology is a channel of concentration of industries. |
| Keywords: | Oligopolistic competition, economic geography, increasing returns to scale, choice of technology, inter-industry trade |
| JEL: | F12 F20 R10 |
| Date: | 2018–09–08 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:88919&r=com |
| By: | John Van Reenen |
| Abstract: | A rich understanding of macro-economic outcomes requires taking into account the large (and increasing) differences between firms. These differences stem in large part from heterogeneous productivity rooted in managerial and technological capabilities that do not transfer easily between firms. In recent decades the differences between firms in terms of their relative sales, productivity and wages appear to have increased in the US and many other industrialized countries. Higher sales concentration and apparent increases in aggregate markups have led to the concern that product market power has risen substantially which is a potential explanation for the falling labor share of GDP, sluggish productivity growth and other indicators of declining business dynamism. I suggest that this conclusion is premature. Many of the patterns are consistent with a more nuanced view where many industries have become "winner take most/all" due to globalization and new technologies rather than a generalized weakening of competition due to relaxed anti-trust rules or rising regulation. |
| Keywords: | firm differences, concentration, market power, policy |
| JEL: | L2 M2 O14 O32 O33 |
| Date: | 2018–09 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp1576&r=com |
| By: | Frédéric Marty (Université Côte d'Azur, France; GREDEG CNRS) |
| Abstract: | Cette contribution s'interroge sur les effets potentiels du développement de l'intelligence artificielles sur des enjeux d'économie industrielle et de droit et d'économie de la concurrence dans le domaine de l'économie numérique. Elle s'attache successivement à la possibilité de voir des ententes initiées ou consolidées par des algorithmes de prix et aux enjeux liés à une segmentation de plus en plus fine des consommateurs sur les plateformes en ligne. Elle interroge enfin des questions liées à la confiance dans les transactions et à la réputation numérique. |
| Keywords: | algorithmes, intelligence artificielle, collusion tacite, discrimination, information |
| JEL: | K21 L13 L41 |
| Date: | 2018–09 |
| URL: | http://d.repec.org/n?u=RePEc:gre:wpaper:2018-21&r=com |
| By: | Wilhelm Kohler; Marcel Smolka |
| Abstract: | This paper develops and applies a test of the property rights theory of the firm in the context of global input sourcing. We use the model by Pol Antràs and Elhanan Helpman, “Global Sourcing," Journal of Political Economy, 112:3 (2004), 552-80, to derive a new prediction regarding how the productivity of a firm affects its choice between vertical integration and outsourcing and how this effect depends on the relative input intensity of the production process. The prediction we derive hinges on less restrictive assumptions than industry-level predictions available in existing literature and survives in more realistic versions of the model featuring multiple suppliers and partial vertical integration. We present robust firm-level evidence from Spain showing that, in line with our prediction, the effect of productivity works more strongly in favor of vertical integration, and against outsourcing, in more headquarter-intensive industries. |
| Keywords: | global sourcing, incomplete contracts, property rights theory, firm productivity |
| JEL: | F12 F19 F23 L22 L23 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_7214&r=com |
| By: | Pauline Affeldt; Tomaso Duso; Florian Szücs |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwddc:dd95&r=com |
| By: | Manconi, Alberto (Tilburg University, Center For Economic Research); Neretina, Ekaterina (Tilburg University, Center For Economic Research); Renneboog, Luc (Tilburg University, Center For Economic Research) |
| Abstract: | We develop a new measure of underwriter bargaining power and a novel empirical approach, based on underwriters’ comparative ability to place bonds. When an issuer has few “outside options” to take her bond to the market, the underwriter enjoys a stronger bargaining power over her. The key feature of our approach is that bargaining power varies for a given underwriter at a given point in time across different issuers, allowing us to separate the effects of bargaining power from those of reputation and certification with a fixed effects strategy. Using our measure, we document that powerful underwriters are able to extract rents at the expense of bond issuers. For issues with the highest underwriter bargaining power, fees and bond offering yields increase by a combined cost of USD 1.5 million, or about 7% of the average costs for the issuer. We rule out alternative mechanisms based on issuer-underwriter “loyalty”. Our findings suggest that lack of competition increases underwriter bargaining power, resulting in material costs for corporate bond issuers. |
| Keywords: | Bargaining power; corporate bonds; underwriting |
| JEL: | G32 G24 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:tiu:tiucen:a8d5e030-7462-4573-a975-987c2a6c42d6&r=com |
| By: | Yonezawa, Koichi; Gomez, Miguel I.; Richards, Timothy J. |
| Keywords: | Industrial Org./Supply Chain Management, Food and Agricultural Marketing, Agribusiness Economics and Management |
| Date: | 2018–06–20 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea18:274204&r=com |
| By: | Kumse, Kaittisak; Suzuki, Nobuhiro; Sato, Takeshi |
| Keywords: | Industrial Org./Supply Chain Management, Food and Agricultural Policy Analysis, Demand and Price Analysis |
| Date: | 2018–06–20 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea18:274198&r=com |
| By: | Ma, Meilin; Saitone, Tina L.; Volpe, Richard J.; Sexton, Richard J.; Saksena, Michelle |
| Keywords: | Industrial Org./Supply Chain Management, Food and Agricultural Policy Analysis, Demand and Price Analysis |
| Date: | 2018–06–20 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea18:274205&r=com |