nep-com New Economics Papers
on Industrial Competition
Issue of 2019‒07‒22
fourteen papers chosen by
Russell Pittman
United States Department of Justice

  1. Local Search Markets and External Competition By Legros, Patrick; Stahl, Konrad O
  2. Experimentation in Dynamic R&D Competition By Dosis, Anastasios; Muthoo, Abhinay
  3. When do co-located firms selling identical products thrive? By Bernhardt, Dan; Constantinou, Evangelos; Shadmehr, Mehdi
  4. From Good to Bad Concentration? U.S. Industries over the past 30 years By Matias Covarrubias; Germán Gutiérrez; Thomas Philippon
  5. Competition and Inequality: Aiyagari meets Bertrand and Cournot By Andrea, Colciago; Rajssa, Mechelli
  6. Workers' falling share of firms' profits By Brian Bell; Pawel Bukowski; Stephen Machin
  7. Are Price-Cost Markups Rising in the United States? A Discussion of the Evidence By Susanto Basu
  8. Zero-rating and vertical content foreclosure By Jeitschko, Thomas D.; Kim, Soo Jin; Yankelevich, Aleksandr
  9. The Shift in Global Crude Oil Market Structure: A model-based analysis of the period 2013–2017 By Berk, Istemi; Çam , Eren
  10. Study of the prospects for the development of competition in the retail electricity markets By Suyunchev, Marat (Суюнчев, Марат); Mozgovaya, Oksana (Мозговая, Оксана); Kuznetsov, Vasiliy (Кузнецов, Василий)
  11. Competition and Bank Risk the Role of Securitization and Bank Capital By Yener Altunbas; David Marques‐Ibanez; Michiel van Leuvensteijn; Tianshu Zhao
  12. A Theory on Media Bias and Elections By Junze Sun; Arthur Schram; Randolph Sloof
  13. The Ownership of Data By Sand-Zantman, Wilfried; Dosis, Anastasios
  14. A Note on Equilibrium Uniqueness in Cournot Competition with Demand Uncertainty By Stefanos Leonardos; Costis Melolidakis

  1. By: Legros, Patrick; Stahl, Konrad O
    Abstract: Increased competition tends to benefit all buyers with increasing product variety and de- creasing prices. However, if local and external market channels compete for the same class of products, increased competition from the external market crowds out local variety. Under local monopoly, local buyer surplus co-moves with external buyer surplus. Under local free entry oligopoly, buyer surplus is U-shaped. If buyer surplus in the external market is low, local surplus is better provided by local oligopoly, but moves against external surplus; if it is high, local and external surplus co-move, and local surplus is better provided by local monopoly.
    Keywords: Global Competition; Monopoly; oligopoly; search
    JEL: D83 L12 L13 L81
    Date: 2019–05
  2. By: Dosis, Anastasios (ESSEC Business School and THEMA); Muthoo, Abhinay (University of Warwick,)
    Abstract: We study a two-stage, winner-takes-all, R&D race, in which, at the outset, firms are uncertain regarding the viability of the project. Learning through experimentation introduces a bilateral (dynamic) feedback mechanism. For relatively low-value products,theequilibriumstoppingtimecoincideswiththesociallyefficientstoppingtime althoughfirmsmightexperimentexcessivelyinequilibrium;forrelativelyhigh-value products,firmsmightreduceexperimentationandstopratherprematurelyduetothe fundamental free-riding effect. Perhaps surprisingly, a decrease in the value of the product can spur experimentation.
    Keywords: Experimentation ; learning ; dynamic R&D competition ; inefficiency Jel Classification: C73 ; D83 ; O31 ; O32
    Date: 2019
  3. By: Bernhardt, Dan (University of Illinois & University of Warwick); Constantinou, Evangelos (University of Illinois); Shadmehr, Mehdi (University of Chicago and University of Calgary)
    Abstract: When consumers only see prices once they visit stores, and some consumers have time to comparison shop, co-location commits stores to compete and lower prices, which draws consumers away from isolated stores. Profits of co-located firms are a single-peaked function of the number of shoppers—co-located firms thrive when there are some shoppers, but not too many. When consumers know in advance whether they have time to shop, effects are enhanced: co-located stores may draw enough shoppers to drive the expected price paid by a non-shopper below that paid when consumers do not know if they will have time to shop
    Date: 2019
  4. By: Matias Covarrubias; Germán Gutiérrez; Thomas Philippon
    Abstract: We study the evolution of profits, investment and market shares in US industries over the past 40 years. During the 1990’s, and at low levels of initial concentration, we find evidence of efficient con- centration driven by tougher price competition, intangible investment, and increasing productivity of leaders. After 2000, however, the evidence suggests inefficient concentration, decreasing competition and increasing barriers to entry, as leaders become more entrenched and concentration is associated with lower investment, higher prices and lower productivity growth.
    JEL: D24 D4 K0 L0
    Date: 2019–06
  5. By: Andrea, Colciago; Rajssa, Mechelli
    Abstract: This paper provides an incomplete markets model with oligopolistic competition among an endogenous number of producers. The model matches the empirical distribution of income and wealth in the United States. The interaction between oligopolistic competition and incomplete markets reconciles the increase in the profit share of income with the decrease in the labor share of income and the increase in income inequality observed over the last three decades in the United States. Welfare costs associated with an increase in market power are large and unequally distributed across households.
    Date: 2019–01
  6. By: Brian Bell; Pawel Bukowski; Stephen Machin
    Abstract: To what extent do UK companies share their profits with employees? Brian Bell, Pawel Bukowski and Stephen Machin find that rent-sharing is on a much smaller scale today than during the 1980s and 1990s - and that the decline coincides with a rise in firms' product market power alongside a fall in workers' bargaining power.
    Keywords: rent sharing, inclusive growth
    JEL: J30
    Date: 2019–07
  7. By: Susanto Basu
    Abstract: A number of recent papers have argued that US firms exert increasing market power, as measured by their markups of price over marginal cost. I review three of the main approaches to estimating economy-wide markups and show that all are based on the hypothesis of firm cost-minimization. Yet different assumptions and methods of implementation lead to quite different conclusions regarding the levels and trends of markups. I survey the literature critically, and argue that some of the startling findings of steeply-rising markups are difficult to reconcile with other evidence and with aggregate data. Existing methods cannot determine whether markups have been stable or whether they have risen modestly over the past several decades. Even relatively small increases in markups are consistent with significant changes in aggregate outcomes, such as the observed decline in labor’s share of national income.
    JEL: E23 E32 L11 L16
    Date: 2019–07
  8. By: Jeitschko, Thomas D.; Kim, Soo Jin; Yankelevich, Aleksandr
    Abstract: We study zero-rating, a practice whereby an Internet service provider (ISP) that limits retail data consumption exempts certain content from that limit. This practice is particularly controversial when an ISP zero-rates its own vertically integrated content, because the data limit and ensuing overage charges impose an additional cost on rival content. We find that zero-rating and vertical integration are complementary in improving social welfare, though potentially at the expense of lower profit to an unaffiliated content provider. Moreover, allowing content providers to pay for zero-rating via a sponsored data plan raises welfare by inducing the ISP to zero-rate more content.
    Keywords: Data Caps,Sponsored Data,Two-Sided Market,Vertical Content Foreclosure,Zero-Rating
    JEL: D43 L11 L42
    Date: 2019
  9. By: Berk, Istemi (Dokuz Eylul University); Çam , Eren (Energiewirtschaftliches Institut an der Universitaet zu Koeln (EWI))
    Abstract: The global crude oil market has gone through two important phases over the recent years. The first one was the price collapse that started in the third quarter of 2014 and continued until mid-2016. The second phase occurred in late 2016, after major producers within and outside OPEC agreed to cut production in order to adjust the ongoing fall in oil prices, which is now known as the OPEC+ agreement. This paper analyzes the effects of these recent developments on the market structure and on the behavior of major producers in the market. To this end, we develop a partial equilibrium model with a spatial structure for the global crude oil market and simulate the market for the period between 2013 and 2017 under oligopolistic, cartel and perfectly competitive market structure setups. The simulation results reveal that, although the oligopolistic market structures fit overall well to the realized market outcomes, they are not successful at explaining the low prices during 2015 and 2016, which instead are closer to estimated competitive levels. Moreover, we further suggest that from 2014 onward, the market power potential of major suppliers has shrunk considerably, supporting the view that the market has become more competitive. We also analyze the Saudi Arabia- and Russia-led OPEC+ agreement, and find that planned production cuts in 2017, particularly of Saudi Arabia (486 thousand barrels/day) and Russia (300 thousand barrels/day), were below the levels of estimated non-competitive market structure setups. This explains why the oil prices did not recover to pre-2014 levels although a temporary adjustment was observed in 2017.
    Keywords: Crude Oil Market Structure; 2014 Oil Price Decline; OPEC+ Agreement; Market Simulation Model; DROPS
    JEL: C63 D43 Q31 Q41
    Date: 2019–07–15
  10. By: Suyunchev, Marat (Суюнчев, Марат) (The Russian Presidential Academy of National Economy and Public Administration); Mozgovaya, Oksana (Мозговая, Оксана) (The Russian Presidential Academy of National Economy and Public Administration); Kuznetsov, Vasiliy (Кузнецов, Василий) (The Russian Presidential Academy of National Economy and Public Administration)
    Abstract: This paper abstracts the results of research scientific work «The outlook of Retail electricity markets competition promotion», which studies the current situation of Retail electricity markets competition in Russian Federation and identifies the major setbacks to retail energy sales competition. The analysis of the foreign practice of Retail electricity markets competition promotion highlights the conditions that make possible the competition development. Based on the research findings proposals are made for expansion the number of Retail electricity markets participants, their obligations and responsibilities optimization to promote the competition on Retail electricity markets in Russian Federation.
    Date: 2019–07
  11. By: Yener Altunbas; David Marques‐Ibanez; Michiel van Leuvensteijn; Tianshu Zhao
    Abstract: We examine how bank competition in the run-up to the 2007–2009 crisis affects banks’ systemic risk during the crisis. We then investigate whether this effect is influenced by two key bank characteristics: securitization and bank capital. Using a sample of the largest listed banks from 15 countries, we find that greater market power at the bank level and higher competition at the industry level lead to higher realized systemic risk. The results suggest that the use of securitization exacerbates the effects of market power on the systemic dimension of bank risk, while capitalization partially mitigates its impact.
    Date: 2019–07–02
  12. By: Junze Sun (Amsterdam School of Economics); Arthur Schram (Amsterdam School of Economics); Randolph Sloof (Amsterdam School of Economics)
    Abstract: We develop a tractable theory to study the impact of biased media on election outcomes, voter turnout and welfare. News released by media allows voters to infer the relative appeal of the two candidates, and the closeness of elections. In large elections, the former determines the election outcome, whereas the latter drives voter turnout. With a single media outlet, a rise in media bias affects the election outcome in a non-monotonic way, and reduces voter welfare by decreasing the probability of electing the efficient candidate and increasing aggregate turnout costs. Introducing extra media outlets can systematically shift the election outcome and voter turnout in either direction, but it weakly improves voter welfare. The impact of other ways to strengthen media competition – such as increased polarization and prevention of collusion – critically depends on whether media have commitment power; if not, they can worsen information transmission and voter welfare.
    Keywords: media bias, voting, Poisson games, media competition, commitment
    JEL: D72 D82 D83
    Date: 2019–07–16
  13. By: Sand-Zantman, Wilfried; Dosis, Anastasios
    Abstract: We study the effects of property rights over the use of data on market outcomes. For this, we consider a model in which a monopolistic firm offers a service to a set of heterogeneous users. Usage generates valuable data but data extraction entails a privacy cost to users. We show that both the firm and users prefer the users (the firm) to own the rights for low (high) values of data. We further discuss the robustness of our results by allowing more contracting possibilities to the data owner. We show that the main trade-off between the two ownership regimes is robust to these extensions.
    Keywords: Ownership; Data; Imperfect Competition; Privacy
    JEL: D82 D83 D86 L12 L19 L49
    Date: 2019–07–17
  14. By: Stefanos Leonardos; Costis Melolidakis
    Abstract: We revisit the linear Cournot model with uncertain demand that is studied in Lagerl\"of (2006)* and provide sufficient conditions for the uniqueness of an equilibrium that complement the existing results. We show that if the distribution of the demand intercept has the decreasing mean residual demand (DMRD) or the increasing generalized failure rate (IGFR) property, then uniqueness of equilibrium is guaranteed. The DMRD condition implies log-concavity of the expected profits per unit of output without additional assumptions on the existence or the shape of the density of the demand intercept and hence, answers in the affirmative the conjecture of Lagerl\"of (2006) that such conditions may not be necessary. *Johan Lagerl\"of, Equilibrium uniqueness in a Cournot model with demand uncertainty. The B.E. Journal in Theoretical Economics, Vol. 6: Iss 1. (Topics), Article 19:1--6, 2006.
    Date: 2019–06

This nep-com issue is ©2019 by Russell Pittman. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.