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on Industrial Competition |
| By: | Giannetti, Mariassunta; Serrano-Velarde, Nicolas; Tarantino, Emanuele |
| Abstract: | Using a unique dataset with information on 20 million inter-firm transactions, we provide evidence that suppliers offer trade credit to high-bargaining-power customers to ease competition in downstream markets in which they have a large number of other clients. Differently from price discounts, trade credit targets infra-marginal units and does not lower the marginal cost of high-bargaining-power customers. As a consequence, the latter do not gain market share and the supplier can preserve profitable sales to low-bargaining-power customers. We show that empirically trade credit is not monotonically increasing in past purchases, as is consistent with our conjecture that it targets infra-marginal units. In addition, the supplier grants trade credit to high-bargaining-power-customers only when it fears the cannibalization of sales to other low-bargaining-power clients. Our results are not driven by differences in suppliers' ability to provide trade credit, customer-specific shocks, or endogenous location decisions. |
| Keywords: | Competition; input prices; Supply Chains; trade credit |
| JEL: | D2 G3 L1 |
| Date: | 2018–10 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:13228&r=com |
| By: | Aguirregabiria, Victor; Jeon, Jihye |
| Abstract: | This paper reviews recent literature on structural models of oligopoly competition where firms have biased beliefs about primitives of the model (e.g. demand, costs) or about the strategic behavior of other firms in the market. We describe different structural models that have been proposed to study this phenomenon and examine the approaches used to identify firms' beliefs. We discuss empirical results in recent studies and show that accounting for firms' biased beliefs and learning can have important implications on our measures and interpretation of market efficiency. |
| Keywords: | beliefs; dynamics; identification; learning; Oligopoly competition; Structural models |
| JEL: | D81 D83 D84 L13 |
| Date: | 2018–10 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:13255&r=com |
| By: | Abel, William; Tenreyro, Silvana; Thwaites, Gregory |
| Abstract: | We study the evolution and effects of monopsony power in the UK private sector labour market from 1998 to 2017. Using linked employee-firm micro-data, we find that: (1) Measures of monopsony have been relatively stable across the time period examined - rising prior to the crisis, before subsequently falling again. (2) There is substantial cross-sectional variation in monopsony at the industry level. (3) Higher levels of labour market concentration are associated with lower pay amongst workers not covered by a collective bargaining agreement. (4) For workers covered by a collective bargaining agreement, the association between labour market concentration and pay is greatly reduced and in most cases disappears. (5) The link between productivity and wage levels is weaker when labour markets are more concentrated. |
| Keywords: | labour markets; market power; monopsony; Unionization |
| Date: | 2018–10 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:13265&r=com |
| By: | Emons, Winand |
| Abstract: | An antitrust authority deters collusion using fines and a leniency program. It chooses the probability of an investigation. Firms pick the degree of collusion: The more they collude, the higher are profits, but so is the probability of detection. Firms thus trade-off higher profits against higher expected fines. If firms are sufficiently patient, leniency is ineffective; it may even increase collusion. Increasing the probability of an investigation at low levels does not increase deterrence. Increasing the probability of an investigation at high levels reduces collusion, yet never completely. |
| Keywords: | Antitrust; cartels; deterrence; Leniency |
| JEL: | D43 K21 K42 L40 |
| Date: | 2018–10 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:13262&r=com |
| By: | Brian McManus (University of North Carolina at Chapel Hill); Aviv Nevo (University of Pennsylvania); Zachary Nolan (Duke University); Jonathan W. Williams (University of North Carolina at Chapel Hill) |
| Abstract: | We model mixed-bundle pricing by internet service providers (ISPs) to study their incentive to steer consumers across different subscription options and influence usage decisions. Using unique panel data from an ISP, we test predictions from the model. We find that the ISP's introduction of internet usage allowances and overage charges steered internet-only consumers into bundled TV and internet subscriptions; this effect was greatest for heavy users of streaming services most similar to conventional TV. Internet usage growth –- especially in streaming video services –- was curtailed for consumers who added TV subscriptions, and it also fell for consumers who did not upgrade their internet usage allowances. We discuss the implications of these findings for antitrust and regulatory issues in the telecommunications industry. |
| Keywords: | Steering; Bundling; Nonlinear pricing; Telecommunications industry; cord-cutting; broadband |
| JEL: | L11 L13 L96 |
| Date: | 2018–10 |
| URL: | http://d.repec.org/n?u=RePEc:net:wpaper:1812&r=com |
| By: | Hong, Suting (Shanghai Tech University); Hunt, Robert M. (Federal Reserve Bank of Philadelphia); Serfes, Konstantinos (Drexel University) |
| Abstract: | We construct a two-period model of revolving credit with asymmetric information and adverse selection.In the second period, lenders exploit an informational advantage with respect to their own customers. Those rents stimulate competition for customers in the first period. The informational advantage the current lender enjoys relative to its competitors determines interest rates, credit supply, and switching behavior. We evaluate the consequences of limiting the repricing of existing balances as implemented by recent legislation. Such restrictions increase deadweight losses and reduce ex ante consumer surplus. The model suggests novel approaches to identify empirically the effects of this law. |
| Keywords: | Financial contracts; Credit Card Accountability Responsibility and Disclosure Act; holdup; risk-based pricing; credit supply |
| JEL: | D14 D18 D86 G28 K12 |
| Date: | 2018–11–07 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedpwp:18-23&r=com |
| By: | Giuseppe Moscelli (University of Surrey); Hugh Gravelle (University of York); Luigi Siciliani (University of York) |
| Abstract: | We investigate the change in the effect of market structure on planned hospital quality for three high-volume treatments, using a quasi difference-in-differences approach based on the relaxation of patient constraints on hospital choice in England. We employ control functions to allow for time-varying endogeneity from unobserved patient characteristics. We find that the choice reforms reduced quality for hip and knee replacement but not for coronary bypass, This is likely due to hospitals making a larger loss on hip and knee replacements, since robustness checks rule out changes in length of stay, new competitors’ entry and hospital-level mortality as possible confounders. |
| JEL: | H51 I11 I18 L32 L33 |
| Date: | 2018–10 |
| URL: | http://d.repec.org/n?u=RePEc:sur:surrec:1118&r=com |
| By: | Kaku Attah Damoah; Giorgia Giovannetti; Marco Sanfilippo |
| Abstract: | This paper examines if and to what extent micro-level distortions affect structural transformation in a developing country by creating entry barriers. We show that while average price-cost margin trigger firm entry, a large dispersion of markups deters new firms from entering the market, thereby disrupting the process of new enterprise creation. We exploit information from the Ethiopian annual census of manufacturing establishments to estimate markups and then dispersion at sector and location-sector wide levels. Results show that higher markups dispersion significantly reduces entry rate into a market even in presence of expected positive average markups. Extension of our framework shows that market distortions caused by markup dispersion are related to a statistically significant drop in aggregate TFP and employment growth. Policies fostering competition on the other hand can reduce entry barriers created by market distortions. |
| Keywords: | Firm Entry, Markup Dispersion, African Manufacturing, Ethiopia |
| JEL: | D22 L22 O14 O25 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:frz:wpaper:wp2018_16.rdf&r=com |
| By: | Bart Bronnenberg; Jean-Pierre H. Dubé; Robert E. Sanders |
| Abstract: | We run in-store blind taste tests with a retailer’s private label food brands and the leading national brand counterparts in three large CPG categories. In a survey administered during the taste test, subjects self-report very high expectations about the quality of the private labels relative to national brands. However, they predict a relatively low probability of choosing them in a blind taste test. Surprisingly however, an overwhelming majority systematically chooses the private label in the blinded test. During the week after the intervention, the tested private label product market shares increase by 15 share points, on top of a base share of 8 share points. However, the effect diminishes to 8 share points during the second to fourth week after the test and to 2 share points during the second to fifth month after the test. Using a structural model of demand, we show these effects survive controls for point-of-purchase prices, purchase incidence, and the feedback effects of brand loyalty. We also find that the intervention increases the preference for the private label brands, and that it decreases the preference for the national brands, relative to the outside good. The findings are consistent with a treatment effect of information on demand where the memory for this information decays slowly over time. Alternative explanations to the information treatment are ruled out. |
| JEL: | L11 L15 M31 M37 |
| Date: | 2018–11 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:25214&r=com |
| By: | Bronnenberg, Bart; Dube, Jean-Pierre; Sanders, Robert |
| Abstract: | We run in-store blind taste tests with a retailer's private label food brands and the leading national brand counterparts in three large CPG categories. In a survey administered during the taste test, subjects self-report very high expectations about the quality of the private labels relative to national brands. However, they predict a relatively low probability of choosing them in a blind taste test. Surprisingly however, an overwhelming majority systematically chooses the private label in the blinded test. During the week after the intervention, the tested private label product market shares increase by 15 share points, on top of a base share of 8 share points. However, the effect diminishes to 8 share points during the second to fourth week after the test and to 2 share points during the second to fifth month after the test. Using a structural model of demand, we show these effects survive controls for point-of-purchase prices, purchase incidence, and the feedback effects of brand loyalty. We also find that the intervention increases the preference for the private label brands, and that it decreases the preference for the national brands, relative to the outside good. The findings are consistent with a treatment effect of information on demand where the memory for this information decays slowly over time. Alternative explanations to the information treatment are ruled out. |
| Keywords: | brands and branding; consumer information; market structure; private label |
| JEL: | L11 L15 M31 M37 |
| Date: | 2018–10 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:13283&r=com |