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on Industrial Competition |
| By: | Chiara Fumagalli (Università Bocconi, CSEF and CEPR); Massimo Motta (ICREA-Universitat Pompeu Fabra and Barcelona Graduate School of Economics) |
| Abstract: | This paper shows that vertical foreclosure can have a dynamic rationale. By refusing to supply an efficient downstream rival, a vertically integrated incumbent sacrifices current profits but can exclude the rival by depriving it of the critical profits it needs to be successful. In turn, monopolizing the downstream market may prevent the incumbent from losing most of its future profits because: (a) it allows the incumbent to extract more rents from an efficient upstream rival if future upstream entry cannot be discouraged; or (b) it also deters future upstream entry by weakening competition for the input and reducing the post-entry profits of the prospective upstream competitor. |
| Keywords: | Inefficient foreclosure, Refusal to supply, Scale economies, Exclusion, Monopolization |
| JEL: | K21 L41 |
| Date: | 2019–01–14 |
| URL: | http://d.repec.org/n?u=RePEc:sef:csefwp:522&r=all |
| By: | Emmanuel Dhyne; Glenn Magerman; Ayumu Ken kikkawa |
| Abstract: | This paper studies the implications of imperfect competition in firm-to-firm trade. Using a dataset on all transactions between Belgian firms, we find that firms charge higher markups if they have higher input shares among their buyers. We build a model where firms charge different markups to buyers depending on the input shares they have in each buyer. The estimated model suggests large distortions due to double marginalization: Reducing all markups in firm-to-firm also highlight the importance of accounting for endogeneities in firm-to-firm markups in predicting the effects of shock transmissions. |
| Keywords: | Competition, Firm-to-Firm Trade |
| Date: | 2019–01 |
| URL: | http://d.repec.org/n?u=RePEc:eca:wpaper:2013/280981&r=all |
| By: | Bougette, Patrice; Budzinski, Oliver; Marty, Frédéric |
| Abstract: | This article conducts a detailed analysis of the concept of economic dependence and exploitative abuse based on how their treatment in competition law and economics and their enforcement in European case law have evolved. Although the theoretical roots of these concepts lie in economic theory, these issues have been ignored or considered only scantily in the context of competition law enforcement. An effects-based approach should take these problems into account and could provide insights into how to portray the impacts of these abuses. We draw on two examples - from the agri-food industries and the digital economy - of relevant economic dependence issues. This paper highlights the existence of a paradox: although industrial organization models provide relevant tools to characterize these abuses, assess their effects, and devise remedies, it seems that they are seldom used by competition law enforcers. |
| Keywords: | exploitative abuse,abuse of economic dependence,competition law,European Commission,effects-based approach,digital economy |
| JEL: | K21 L12 L40 L42 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:tuiedp:119&r=all |
| By: | Gans, Joshua S. (University of Toronto); Leigh, Andrew (Australian National University); Schmalz, Martin (University of Michigan); Triggs, Adam (Australian National University) |
| Abstract: | Economic theory suggests that monopoly prices hurt consumers but benefit shareholders. But in a world where individuals or households can be both consumers and shareholders, the impact of market power on inequality depends in part on the relative distribution of consumption and corporate equity ownership across individuals or households. The paper calculates this distribution for the United States, using data from the Survey of Consumer Finances and the Consumer Expenditure Survey, spanning nearly three decades from 1989 to 2016. In 2016, the top 20 percent consumed approximately as much as the bottom 60 percent, but had 13 times as much corporate equity. Because ownership is more skewed than consumption, increased mark-ups increase inequality. Moreover, over time, corporate equity has become even more skewed relative to consumption. |
| Keywords: | monopoly, market power, inequality |
| JEL: | D42 D43 D61 D63 |
| Date: | 2018–12 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp12034&r=all |
| By: | Suehyun Kwon |
| Abstract: | This paper studies optimal mechanisms for selling complementary goods sequentially. The seller starts with private information, has limited commitment and offers in the first period a menu of information structures on the value of the second-period product. Fully revealing the seller type in the first period makes the second period a standard adverse selection problem, and fully revealing the buyer type in the first period makes the second period an information design problem. Among properties of equilibria, all types of seller must pool in every equilibrium if certain first-order stochastic dominance and independence conditions are satisfied. |
| Keywords: | information design, dynamic informed-principal problem, interdependent values, limited commitment, Myerson-Satterthwaite |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_7394&r=all |
| By: | Cedric Duprez (National Bank of Belgium, Economics and Research Department); Glenn Magerman (National Bank of Belgium, Economics and Research Department) |
| Abstract: | This paper evaluates how firms change their prices in response to cost shocks and other price changes in their environment. We first document three new facts on the heterogeneity of firm-level producer prices and their relationship to buyers and suppliers in a production network. We then develop a non-parametric framework of how producers update their prices, taking into account this production network. The framework is very general, and accounts for the heterogeneity in price changes and the production network from the stylized facts. Moreover, the framework is consistent with various price setting mechanisms, and does not impose a particular market structure or demand functional form. Exploiting rich data on producer prices and the network structure of production in Belgium, we estimate the model to evaluate the importance of both channels in the data. We find that, on average, input price pass-through is incomplete and very much below one, while firms also strongly react to other prices in their environment. This implies that firms can adjust their markups in response to both cost shocks and prices of other firms. Furthermore, firms react differently to common shocks than to idiosyncratic shocks, on average completely passing through common shocks, but much less idiosyncratic shocks |
| Keywords: | Pricing, production networks, pass-through, variable markups |
| JEL: | D21 L14 L16 |
| Date: | 2018–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbb:reswpp:201810-352&r=all |
| By: | Daniel Levy; Avichai Snir; Alex Gotler; Haipeng (Allan) Chen |
| Abstract: | We document an asymmetry in the rigidity of 9-ending prices relative to non-9-ending prices. Consumers have difficulty noticing higher prices if they are 9-ending, or noticing price-increases if the new prices are 9-ending, because 9-endings are used as a signal for low prices. Price setters respond strategically to the consumer-heuristic by setting 9-ending prices more often after price-increases than after price-decreases. 9-ending prices, therefore, remain 9-ending more often after price-increases than after price-decreases, leading to asymmetric rigidity: 9-ending prices are more rigid upward than downward. These findings hold for both transaction-prices and regular-prices, and for both inflation and no-inflation periods. |
| Date: | 2019–01 |
| URL: | http://d.repec.org/n?u=RePEc:emo:wp2003:1901&r=all |
| By: | Roberto Burguet (University of Central Florida, Orlando, FL); József Sákovics (School of Economics, University of Edinburgh) |
| Abstract: | We analyze personalized pricing by a monopsonist facing a finite number of ex ante identical, capacity constrained suppliers with privately known costs. When the distribution of costs is sufficiently smooth and regular, the buyer chooses to make the same offer to all suppliers, leading to a posted price. This price is lower than the classical monopsony price if the demand function is concave, and higher if the demand is convex. In the limit as the seller capacities tend to zero we obtain the classical monopsony price. Therefore, our model provides a decentralized micro- foundation for monopsony. |
| Keywords: | Price policy, monopsony |
| Date: | 2019–01 |
| URL: | http://d.repec.org/n?u=RePEc:cfl:wpaper:2019-01rb&r=all |
| By: | Daan Lindeman; Marius I. Ochea (Université de Cergy-Pontoise, THEMA) |
| Abstract: | We investigate the role and performance of imitative behaviour in a class of quantity- setting Cournot games. Within a framework of evolutionary competition between ra- tional, best-response and imitators players we found that the equilibrium stability de- pends on the intensity of the evolutionary pressure and on the stability of the cheapest heuristic. When the cheapest behavioural rule is the stable heuristic (i.e. imitation), the dynamics converge to a situation where most rms use this behavioural rule and all rms produce the Cournot-Nash equilibrium quantity. When the cheapest heuristic is unstable one (i.e. best-response), complicated endogenous uctuations may occur along with the co-existence of heuristics. |
| Keywords: | Competing heuristics, Imitation, Evolutionary dynamics. |
| JEL: | C72 C73 D43 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:ema:worpap:2018-15&r=all |
| By: | Thomas Grebel (Economics department - MIT - Massachusetts Institute of Technology, TU - Technische Universität Ilmenau); Lionel Nesta (OFCE - OFCE - Sciences Po) |
| Date: | 2018–12–07 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-01948361&r=all |
| By: | Andrew B. Bernard (Tuck School of Business at Dartmouth, CEP, CEPR & NBER;); Emmanuel Dhyne (National Bank of Belgium & Université de Mons); Glenn Magerman (ECARES - Université Libre de Bruxelles & National Bank of Belgium); Kalina Manova (University College London, CEPR & CEP); Andreas Moxnes (University of Oslo & CEPR) |
| Abstract: | This paper quantifies the origins of firm size heterogeneity when firms are intercon- nected in a production network. Using the universe of buyer-supplier relationships in Belgium, the paper develops a set of stylized facts that motivate a model in which firms buy inputs from upstream suppliers and sell to downstream buyers and final demand. Larger firm size can come from high production capability, more or better buyers and suppliers, and/or better matches between buyers and suppliers. Downstream factors explain the vast majority of firm size heterogeneity. Firms with higher production capability have greater market shares among their customers, but also higher input costs and fewer customers. As a result, high production capability firms have lower sales unconditionally and higher sales conditional on their input prices. Counterfactual analysis suggests that the production network accounts for more than half of firm size dispersion. Taken together, our results suggest that multiple firm attributes underpin their success or failure, and that models with only one source of firm heterogeneity fail to capture the majority of firm size dispersion. |
| Keywords: | Production Networks, productivity, firm size heterogeneity |
| JEL: | F10 F12 F16 |
| URL: | http://d.repec.org/n?u=RePEc:nbb:reswpp:201901-362&r=all |
| By: | Matej Bajgar; Giuseppe Berlingieri; Sara Calligaris; Chiara Criscuolo; Jonathan Timmis |
| Abstract: | This report presents new evidence on industry concentration trends in Europe and in North America. It uses two novel data sources: representative firm-level concentration measures from the OECD MultiProd project, and business-group-level concentration measures using matched Orbis-Worldscope-Zephyr data. Based on the MultiProd data, it finds that between 2001 and 2012 the average industry across 10 European economies saw a 2-3-percentage-point increase in the share of the 10% largest companies in industry sales. Using the Orbis-Worldscope-Zephyr data, it documents a clear increase in industry concentration in Europe as well as in North America between 2000 and 2014 of the order of 4-8 percentage points for the average industry. Over the period, about 3 out of 4 (2-digit) industries in each region saw their concentration increase. The increase is observed for both manufacturing and non-financial services and is not driven by digital-intensive sectors. |
| Keywords: | business dynamics, Industry concentration, measurement |
| JEL: | D4 L11 L25 |
| Date: | 2019–01–21 |
| URL: | http://d.repec.org/n?u=RePEc:oec:ecoaac:18-en&r=all |
| By: | Hagiu, Andrei; Jullien, Bruno; Wright, Julian |
| Abstract: | We explore conditions under which a multiproduct firm can profitably turn itself into a platform by "hosting rivals", i.e. by inviting rivals to sell products or services on top of its core product. Hosting eliminates the additional shopping costs to consumers of buying a specialist rival's competing version of the multiproduct firm's non-core product. On the one hand, this makes it easier for the rival to compete on the non-core product. On the other hand, hosting turns the rival from a pure competitor into a complementor: the value added by its product now helps raise consumer demand for the multi-product firm's core product. As a result, hosting can be both unilaterally profitable for the multi-product firm and jointly profitable for both firms. |
| JEL: | D4 L1 L5 |
| Date: | 2018–11 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:33123&r=all |
| By: | Frieden, Rob |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:itsb18:190344&r=all |
| By: | Chou, Yuntsai |
| Keywords: | data network effect,essential data,algorithm audit,data cooperatives,data portability |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:itsb18:190372&r=all |
| By: | Cherry, Barbara A. |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:itsb18:190361&r=all |
| By: | Martin F. Hellwig (Max Planck Institute for Research on Collective Goods) |
| Abstract: | Reforms of financial regulation after the crisis of 2007-2009 raise the question of what is the relation between financial regulators and competition authorities. Should competition authorities play a role in financial regulation? Should they co-operate with financial regulators? Or should they keep at a distance? The paper gives an overview over some of the issues that are involved in the discussion. Drawing on the experience of the network industries, the first part of the paper discusses the relation between competition authorities and sector-specific regulators more generally. Whereas competition policy involves the application of legal norms involving prohibitions that are formulated in abstract terms, sector-specific regulation involves authorities actually prescribing desired modes of behavior. The ongoing nature of relations makes regulators more prone to capture than competition authorities. In the financial sector, the potential for capture is particularly great because everyone is tempted by the idea that banks should fund their pet projects. Following an overview over the evolution of regulation and competition in the financial industry, the paper discusses various issues that are relevant for competition policy: Technological and regulatory barriers to entry, distortions of competition by explicit or implicit government guarantees, distortions of competition by bailouts making for artificial barriers to exit. Guarantees and bailouts in particular pose special challenges for merger control and for state aid control. |
| Keywords: | Financial Regulation, Competition Policy, Government Guarantees, Bank Bailouts, State Aid Control |
| JEL: | G28 K21 K23 L40 L50 |
| Date: | 2018–07 |
| URL: | http://d.repec.org/n?u=RePEc:mpg:wpaper:2018_07&r=all |
| By: | Sharat Ganapati (Walsh School of Foreign Service and Department of Economics, Georgetown University); Rebecca McKibbin (School of Economics, University of Sydney) |
| Abstract: | Pharmaceutical prices are widely dispersed across countries with comparable quality standards. We study two elements of this dispersion; non-tariff barriers and buyer bargaining power. Under monopoly, generic drug prices are 3-4 times higher in the United States. With 6 or more competitors, generic drug prices are similar across countries. Motivated by this, we use a bargaining model to examine two policy solutions to reduce drug prices. First, we remove non-tariff barriers to increase the number of competitors through a reciprocal approval arrangement and market entry. Second, we explore the US government's unexploited purchasing power to negotiate drug prices. Regarding Medicaid, the first measure can reduce total expenditures by 8% and the second by 18%. There is very little additional savings from doing both procedures in tandem. |
| Keywords: | Law of One Price, Competition, Bargaining, Pharmaceuticals, Non-Tariff Barriers, Healthcare Economics, International Trade |
| JEL: | I11 F14 L44 |
| Date: | 2019–01–10 |
| URL: | http://d.repec.org/n?u=RePEc:geo:guwopa:gueconwpa~18-18-23&r=all |
| By: | Moritz, Karl-Heinz; Stadtmann, Georg; Stadtmann, Tobias |
| Abstract: | We describe the development of the market for mobile payments in Denmark. In the first step, we explain the two main competing products as well as their underlying technologies. In the second step, we also analyze the competition within the Danish market from debit card companies and the competition which stems from outside of the banking industry (Apple Pay). Based on our analysis, we derive some managerial as well as policy implications. |
| Keywords: | FinTech,First-Mover Advantage,Open versus closed platforms,two sided markets,diffusion,market entry |
| JEL: | B52 G21 L86 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:euvwdp:406&r=all |
| By: | Birg, Laura |
| Abstract: | I study the effect of reference pricing on competition by parallel imports, in particular the market share of parallel imports and the number of parallel traders. First, I analyze the effect of reference pricing on competition by parallel imports in a vertical differentiation model with a locally sourced version and a parallel import offered by n identical parallel traders. Second, I explore the effect of reference pricing on competition by parallel imports using a dataset with prescription drugs with competition from parallel imports. Both model and estimation results suggest that the introduction of reference pricing inreases the market share of the parallel import and the number of parallel traders, while a decrease in the reference price decreases the market share of the parallel import and the number of parallel traders. |
| Keywords: | reference pricing,parallel imports,pharmaceutical regulation |
| JEL: | F12 I11 I18 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:cegedp:362&r=all |
| By: | Birg, Laura |
| Abstract: | In this paper, I study the effect of a change in the mandatory manufacturer rebate on wholesale prices for pharmaceuticals on competition by parallel imports. First, I analyze the effect of a manufacturer rebate on competition by parallel imports in a two-country model. An increase in the manufacturer rebate increases the market share of parallel imports. Second, I exploit a policy reform in Germany in 2010 that increased the manufacturer rebate by 10 percentage points. Using a data set with prescription drugs with competition from parallel imports, I estimate the effect of the change in the manufacturer rebate on competition by parallel imports. Estimation results suggest that an increase in the manufacturer rebate has increased the market share of parallel imports. |
| Keywords: | parallel imports,manufacturer rebate,pharmaceuticals,regulation |
| JEL: | F12 I11 I18 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:cegedp:363&r=all |
| By: | Lee, Junwon; Ji, Sung Wook |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:itsb18:190380&r=all |
| By: | Jordan, Scott |
| Abstract: | Zero-rating and associated throttling practices by broadband Internet access service providers are widely debated. We evaluate three types of such practices. We find that sponsored data programs are likely in the public interest if and only if the price charged is reasonable and not unreasonably discriminatory. In contrast, we find that zero-rating and throttling of video streaming is not in the public interest, because it constitutes application-specific throttling and is not reasonable network management. We also find that free mobile Internet access to specific edge providers is likely not in the public interest, because it likely unreasonably interferes with or disadvantages end-users or edge providers. |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:itsb18:190360&r=all |
| By: | Lee, Sangwon; Lee, Seonmi; Joo, Hye Min |
| Abstract: | Employing fixed effects regression models, this study examines influential factors of OTT video market growth in 50 countries. The results suggest that Netflix market entry, OTT market concentration, traditional pay TV market size, mobile broadband infrastructure, and income contribute to the market growth of OTT video services. The country-level analysis also demonstrates that traditional pay TV subscription markets and OTT markets are growing together initially in many countries. However, the finding also reveals the negative association between OTT revenue growth rate and subscription revenue growth rate of traditional pay TV service, which implies that OTT video services can potentially substituting for traditional pay services such as cable TV and IPTV in the long-term. |
| Keywords: | Over-the-Top video,Market growth,Netflix effect,OTT-pay TV platform competition,Mobile broadband infrastructure |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:itsb18:190420&r=all |
| By: | Lionel Nesta (OFCE - OFCE - Sciences Po); Stefano Schiavo (Università di Trento) |
| Keywords: | threshold models,policy mix,Directed technical change,environmental policies |
| Date: | 2019–01–07 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-01948345&r=all |