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on Industrial Competition |
| By: | Catilina, Eliane |
| Abstract: | This paper presents a model of information acquisition in Cournot Market with stochastic demand where the acquisition cost is endogenously determined. The novelty is to consider the possibility of cost reducing alliances to be formed in the first-stage of a two-stage acquisition game. This paper encompasses the main assumptions found in the current literature on information acquisition regarding the role of information and how it affects firms’ profits in a two stage the game. However, we argue that by adding natural assumptions regarding the choices and trade-offs between cost reduction and loss of strategic value we provide a better prediction for the outcome of information acquisition games and welfare implications. |
| Keywords: | Information acquisition; Cost Sharing Alliances; Information Asymmetry; Strong Nash Equilibrium. |
| JEL: | D43 D81 L13 |
| Date: | 2019–03–25 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:93896&r=all |
| By: | Thierry Kirat; Frédéric Marty |
| Abstract: | This paper presents the late convergence process from US economists that led them to support a strong antitrust enforcement in the late thirties despite their long standing distrust toward this legislation. The 1945 Alcoa decision crafted by Judge Hand embodied the results of this convergence. The purpose of antitrust law enforcement does not consist in promoting economic efficiency, as today’s more economic approach advocates, but in searching for a reasonable compromise aiming at preventing improper uses of economic power. This paper presents the path from which institutionalist economists, on one side, and Chicagoan neoliberals, on the other one, have converged on supporting the President F.D. Roosevelt administration towards reinvigorating antitrust law enforcement as of 1938, putting aside their initial preferences for a regulated competition model or for laissez-faire. |
| Keywords: | Antitrust,efficiency,economic power,institutional economics,Chicago School, |
| JEL: | B25 K21 L40 N42 |
| Date: | 2019–05–14 |
| URL: | http://d.repec.org/n?u=RePEc:cir:cirwor:2019s-12&r=all |
| By: | Hamamura, Jumpei; Hayakawa, Sho |
| Abstract: | In this research, we analytically explore what performance indicator is optimal in a market competition when the firm’s owner compensates the CEO based on the relative performance evaluation. The relative performance evaluation considered in previous studies compares the firm’s profit with the competitor’s profit. However, when the firm evaluates the CEO’s performance, another performance indicator is often adopted instead of profit. As a result, we show that given specific economic conditions, the owners adopt sales as a relative performance indicator to evaluate the CEO’s performance. This result has some important implications for the research on relative performance evaluation. First, it will affect future studies showing that there are different possible choices of relative performance indicators in management accounting assuming product market competition. Second, our study has an important implication for empirical research on relative performance evaluation in management accounting, in which a relative performance indicator is adopted as an independent variable. |
| Keywords: | Non-cooperative game theory; CEO compensation; Relative performance evaluation; Performance indicator; Quantity competition |
| JEL: | M41 |
| Date: | 2019–05–16 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:93921&r=all |
| By: | Berden, Carolien; Croes, R.; Kemp, R.; Mikkers, Misja (Tilburg University, Center For Economic Research); van der Noll, Rob; Shestalova, V. (Tilburg University, Center For Economic Research); Svitak, Jan (Tilburg University, Center For Economic Research) |
| Abstract: | The Dutch government introduced managed competition to the health care sec- tor in 2006. In this regulatory framework insurers compete for enrollees and providers compete for contracts with insurers. The resulting contracts are de- termined by bargaining, which outcome depends on the relative position of the provider. In this paper, we compare how commonly used market power indi- cators predict bargaining outcomes. We combine 2013 transaction data with bilateral contract data. Our empirical models explain the relative dierences in hospitals' revenues while controlling for dierences in the complexity of patients. Four indicators are used: the logit competition index (LOCI), willingness-to-pay (WTP), Elzinga-Hogarty market share and a rule-of-thumb market share. We nd that WTP and LOCI perform best empirically. |
| Keywords: | hospital competition; market power; bargaining |
| JEL: | I11 L44 L13 D22 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:tiu:tiucen:5302ab6a-9099-4b5d-9874-8045cd12ab86&r=all |
| By: | Victor Aguirregabiria; Robert Clark; Hui Wang |
| Abstract: | Geographic dispersion of depositors, borrowers, and banks may prevent funding from flowing to areas of high loan demand, limiting credit access. We provide evidence of geographic imbalance of deposits and loans, and develop a methodology for investigating the contribution to this imbalance of (i) branch networks, (ii) market power, and (iii) scope economies, using US bank-county-year level data. Results are based on a novel measure of deposits and loans imbalance, and estimation of a structural model of bank competition that admits interconnections across locations and between deposit and loan markets, thereby permitting counterfactuals highlighting the role of the three factors. |
| Keywords: | Geographic flow of credit; Access to credit; Bank oligopoly competition; Branch networks; Economies of scope between deposits and loans |
| JEL: | L13 L51 G21 |
| Date: | 2019–05–16 |
| URL: | http://d.repec.org/n?u=RePEc:tor:tecipa:tecipa-639&r=all |
| By: | Waterson, Michael (University of Warwick); Xie, Jian (University of Warwick) |
| Abstract: | We investigate the London bus market, a large market with regular procurement of bus services, for possible collusion using a wide variety of techniques, making use of the data at our disposal. There is little evidence of collusion in bidding for contracts apparent from our data, despite some features of the market that might lead to collusive behaviour. |
| Keywords: | Cartel behaviour ; Procurement ; Detecting Cartels ; Bus market |
| JEL: | D44 L41 L92 D22 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:wrk:warwec:1195&r=all |
| By: | Igor Rhuan Ataíde Monteiro (FACE-UFG); Sabrina Faria de Queiroz (FACE-UFG); Cláudia Regina Rosal Carvalho (FACE-UFG); Flávia Rezende Campos (FACE-UFG) |
| Abstract: | The present work has aims to analyzing the evolution of the concentration of the Brazilian fuel distribution market in the period from 2000 to 2014 as a way to highlight the impact of deregulation in the 1990s. Firstly, it is proposed to study the concepts of economic theory relevant to work. Afterwards, we conducted a historical study of the formation of the Brazilian fuel distribution market since its inception, as well as merger and acquisition processes from the 1990s until 2016. We then have studies related to the Brazilian distribution market. For the analysis, the concentration indexes C4 and C8 were calculated to identify the concentration and comparison of the indices in order to measure the relative weight of the companies in the market. The results show that the immediate impact of deregulation was a great increase of competition in the market, but still with the existence of large dominant companies. Over time the concentration increased because of the strategies taken by the companies, resulting in a few companies being responsible for on average 70% of the total volume traded in the general market |
| Keywords: | Concentration; Fuel Distribution; Mergers; Aquisitions |
| Date: | 2018–12 |
| URL: | http://d.repec.org/n?u=RePEc:ufb:wpaper:075&r=all |
| By: | Blázquez de Paz, Mario (the Norwegian University of Science and Technology, Trondheim) |
| Abstract: | Zonal pricing electricity markets operate sequentially. First, the suppliers compete in a spot market. Second, to alleviate the congestion in the transmission line, in a redispatch market, the suppliers in the importing node are called into operation to increase their production, and the suppliers in the exporting node are compensated to reduce their production. I characterize the equilibrium in a zonal market when the competition is imperfect and the spot and redispatch markets operate sequentially. I also work out the equilibrium when the transmission line is taken into account in the spot market, i.e., it is not necessary to introduce a redispatch market to alleviate the congestion in the transmission line. I find that the consumers' welfare and suppliers' profits depend crucially on the type of redispatch design implemented by the auctioneer, and that could introduce long term investment distortions. |
| Keywords: | Electricity auctions; Redispatch design; Transmission constraint; Zonal pricing electricity markets |
| JEL: | D43 D44 L13 L94 |
| Date: | 2019–05–20 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:iuiwop:1278&r=all |
| By: | Gentry, Matthew; Stroup, Caleb |
| Abstract: | We estimate the degree of uncertainty faced by potential bidders in takeover auctions and quantify how it affects prices in auctions and negotiations. The high degree of uncertainty revealed by our structural estimation encourages entry in auctions but reduces a target’s bargaining power in negotiations. In the aggregate, auctions and negotiations produce similar prices, even though auctions are preferred in takeover markets with high uncertainty, while the reverse is true for negotiations. Firm characteristics predict pre-entry uncertainty and thus are informative about the relative performance of auctions and negotiations for individual targets. |
| JEL: | G0 |
| Date: | 2018–11–13 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:90604&r=all |
| By: | Francisco Gomez Martinez (BI Norwegian Business School); Sander Onderstal (University of Amsterdam); Maarten Pieter Schinkel (University of Amsterdam) |
| Abstract: | Competition has been argued to erode socially responsible behavior in markets, suggesting that allowing cartel agreements among firms may promote public interest objectives. We test this idea in a laboratory experiment. Participants playing the role of firms choose between offering a ‘fair’ and an ‘unfair’ good to a consumer participant. When the unfair good is traded, a negative externality is imposed on a third party. We vary whether or not the firms are allowed to coordinate on the type of good they sell. We find that the opportunity to coordinate has no significant impact on the fraction of fair goods traded on the market, but polarizes: more of the same good, fair or unfair, is offered. Consumer surplus and profit are, on average, not affected. Irrespective of whether coordination between firms is allowed, participants are more likely to trade the fair good, the stronger their third-party preferences are. These findings suggest that both consumer and managerial values are more important drivers of socially responsible behavior than opportunities for firms to coordinate their CSR activities. We highlight implications for competition policy, where cartels may be exempted on CSR grounds. |
| Keywords: | Collusion, Corporate social responsibility, Public interest, Laboratory experiment, Competition policy |
| JEL: | L41 C92 M14 |
| Date: | 2019–05–06 |
| URL: | http://d.repec.org/n?u=RePEc:tin:wpaper:20190034&r=all |
| By: | Andrea Mantovani; Claudio Piga; Carlo Reggiani |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:man:sespap:1909&r=all |
| By: | Nikhil Garg; Hamid Nazerzadeh |
| Abstract: | Uber and Lyft ride-hailing marketplaces use dynamic pricing, often called surge, to balance the supply of available drivers with the demand for rides. We study pricing mechanisms for such marketplaces from the perspective of drivers, presenting the theoretical foundation that has informed the design of Uber's new additive driver surge mechanism. We present a dynamic stochastic model to capture the impact of surge pricing on driver earnings and their strategies to maximize such earnings. In this setting, some time periods (surge) are more valuable than others (non-surge), and so trips of different time lengths vary in the opportunity cost they impose on drivers. First, we show that multiplicative surge, historically the standard on ride-hailing platforms, is not incentive compatible in a dynamic setting. We then propose a structured, incentive-compatible pricing mechanism. This closed-form mechanism has a simple form, and is well-approximated by Uber's new additive surge mechanism. |
| Date: | 2019–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1905.07544&r=all |
| By: | John Asker; C. Scott Hemphill |
| Abstract: | In this paper we examine exclusion accomplished by a coalition of firms—frequently, a coalition of suppliers and customers—that share the benefits of exclusion. As a particular historical example, we study the Canadian sugar industry of the 1880s, which was controlled by a complex coalition of refiners and wholesalers. We assess the incentives and conduct of the parties as revealed in the records of a House of Commons inquiry into anticompetitive practices in the industry. Drawing upon this example, we identify and evaluate several doctrinal approaches to establishing antitrust liability for anticompetitive exclusionary coalitions. |
| JEL: | D43 K21 L40 L41 L42 N81 |
| Date: | 2019–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:25856&r=all |