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on Industrial Competition |
| By: | Bos, Iwan (Organisation and Strategy); Peeters, Ronald (university of otago, dunedin) |
| Abstract: | This paper analyzes price competition in a duopoly market in which products are both horizontally and vertically differentiated. Firms offer a basic and a premium product to buyers, some of whom are brand loyal. We establish the existence of a unique and symmetric Nash pricing equilibrium. Equilibrium prices are increasing in the degree of horizontal differentiation and the amount of brand loyal customers. The equilibrium price of the basic (premium) good is decreasing (increasing) in the quality difference and profits can increase in costs when this difference is high enough. If the pricing decision is taken at the product (division) level, then there is again a unique (and symmetric) Nash equilibrium. Equilibrium prices and profits are lower than in the centralized case and demand for the basic product is higher when the quality difference is sufficiently large. Welfare is unambiguously lower with decentralized pricing. |
| Keywords: | vertizontal differentiation, pricing, multiproduct oligopoly |
| JEL: | D43 L13 |
| Date: | 2019–06–20 |
| URL: | http://d.repec.org/n?u=RePEc:unm:umagsb:2019017&r=all |
| By: | Budzinski, Oliver; Gänßle, Sophia; Kunz-Kaltenhäuser, Philipp |
| Abstract: | The collective sale of football broadcasting rights constitutes a cartel, which, in the European Union, is only allowed if it complies with a number of conditions and obligations, inter alia, partial unbundling and the no-single-buyer rule. These regulations were defined with traditional TV-markets in mind. However, the landscape of audiovisual broadcasting is quickly changing with online streaming services gaining popularity and relevance. This also alters the effects of the conditions and obligations for the centralized marketing arrangements. Partial unbundling may lead to increasing instead of decreasing prices for consumers. Moreover, the combination of partial unbundling and the no-single-buyer rule forces consumers into multiple subscriptions to several streaming services, which increases transaction costs. Consequently, competition authorities need to rethink the conditions and obligations they impose on centralized marketing arrangements in football. We recommend restricting the exclusivity of (live-)broadcasting rights and mandate third-party access to program guide information to redesign the remedies. |
| Keywords: | collective sale of broadcasting rights,sports economics,antitrust,competition policy,centralized marketing,sports and media,football,online media |
| JEL: | K21 L40 L83 L82 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:tuiedp:128&r=all |
| By: | Nikolai Bazenkov (Institute of Control Sciences RAS, Moscow, Russia); Elena Glamozdina (National Research University Higher School of Economics); Maria Kuznetsova (National Research University Higher School of Economics); Marina Sandomirskaia (National Research University Higher School of Economics) |
| Abstract: | This paper considers three hypotheses about the strategic origin of price dispersion in homogeneous product online sales. The rst two are the E-equilibrium and the quantal-response equilibrium (QRE) in a pure Bertrand setting involving the boundedly rational behavior of sellers. The third introduces the share of loyal consumers into the model of competition. These hypotheses were supported by estimations on experimental lab data. We test the hypotheses on a set of real prices for 30 models of household appliances collected from the largest Russian online marketplace Market.Yandex.ru. In contrast to the previously reported experimental data, we found very limited support for any of these explanations. QRE showed the best performance on the data. For most of the products it accurately predicts central tendency, i.e. the mean and the median. However, the shape of the observed price distributions is not explained well by any of the models. These results pose new challenges for theoretical explanations of observed Internet prices. |
| Keywords: | price dispersion, Internet markets, household appliances, E-equilibrium, quantal-response equilibrium, loyal consumers, e-commerce |
| JEL: | C52 C72 D22 D43 L81 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:hig:wpaper:219/ec/2019&r=all |
| 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,the equilibrium stopping time coincides with the socially efficient stopping time although firms might experiment excessively inequilibrium; forrelatively high-value products, firms might reduce experimentation and stop rather prematurely due to the 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: | C73 D83 O31 O32 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:wrk:warwec:1214&r=all |
| By: | Nocco, Antonella; Ottaviano, Gianmarco I. P.; Salto, Matteo |
| Abstract: | After some decades of relative oblivion, the interest in the optimality properties of monopolistic competition has recently re-emerged due to the availability of an appropriate and parsimonious framework to deal with firm heterogeneity. Within this framework we show that non-separable utility, variable demand elasticity and endogenous firm heterogeneity cause the market equilibrium to err in many ways, concerning the number of products, the size and the choice of producers, the overall size of the monopolistically competitive sector. More crucially with respect to the existing literature, we also show that the extent of the errors depends on the degree of firm heterogeneity. In particular, the ine¢ ciency of the market equilibrium is largest when selection among heterogenous firms is needed most, that is, when there are relatively many firms with low productivity and relatively few firms with high productivity. |
| Keywords: | monopolistic competition; product diversity; firm heterogene-ity; selection; welfare |
| JEL: | J1 L81 |
| Date: | 2017–07–20 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:83567&r=all |
| By: | Dennis, Patrick (University of Virginia); Gerardi, Kristopher S. (Federal Reserve Bank of Atlanta); Schenone, Carola (University of Virginia) |
| Abstract: | Institutional investors often own significant equity in firms that compete in the same product market. These "common owners" may have an incentive to coordinate the actions of firms that would otherwise be competing rivals, leading to anti-competitive pricing. This paper uses data on airline ticket prices to test whether common owners induce anti-competitive pricing behavior. We find little evidence to support such a hypothesis, and show that the positive relationship between average ticket prices and a commonly used measure of common ownership previously documented in the literature is generated by the endogenous market share component, rather than the ownership component, of the measure. |
| Keywords: | common ownership; airline prices; institutional ownership; competition |
| JEL: | G33 G34 G38 L11 L41 |
| Date: | 2019–07–01 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedawp:2019-15&r=all |
| By: | Ryan Hawthorne; Lukasz Grzybowski |
| Abstract: | We test for the distributional effects of regulation and entry in the mobile telecommunications sector in a highly unequal country, South Africa. Using six waves of a consumer survey of over 134,000 individuals between 2009-2014, we estimate a discrete-choice model allowing for individual-specific price-responsiveness and preferences for network operators. Next, we use a demand and supply equilibrium framework to simulate prices and the distribution of welfare without entry and mobile termination rate regulation. We find that regulation benefits consumers significantly more than entry does, and that high-income consumers and city-dwellers benefit more in terms of increased consumer surplus. |
| Keywords: | mobile telecommunications, competition, entry, discrete choice, inequality |
| JEL: | L13 L40 L50 L96 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_7703&r=all |
| By: | Bos, Iwan (Organisation and Strategy) |
| Abstract: | We discuss German and French competition policy in relation to the Hierarchical and Coordinated free market models. It is shown that both policies initially fitted well to the Hierarchical model, but over time transformed to a system primarily compatible with the Coordinated free market philosophy. We furthermore argue that this transformation is not (yet) complete in the sense that both the German and the French government can still intervene directly in competition cases concerning market structure. |
| Date: | 2019–06–20 |
| URL: | http://d.repec.org/n?u=RePEc:unm:umagsb:2019018&r=all |
| By: | Lamoreaux, N. |
| Abstract: | This essay sets recent expressions of alarm about the monopoly power of technology giants like Google and Amazon in the long history of Americans’ response to big business. It argues that we cannot understand that history unless we realize that Americans have always been concerned about the political and economic dangers of bigness, not just the threat of high prices. The problem policy makers faced after the rise of Standard Oil was how to protect society against those dangers without punishing firms that grew large because they were innovative. The antitrust regime put in place in the early twentieth century managed this balancing act by focusing on large firms’ conduct toward competitors and banning practices that were anticompetitive or exclusionary. Maintaining this balance was difficult, however, and it gave way over time—first to a preoccupation with market power during the post-World War II period, and then to a fixation on consumer welfare in the late twentieth century. Refocusing policy on large firms’ conduct would do much to address current fears about bigness without penalizing firms whose market power comes from innovation. |
| Date: | 2019–07–03 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:1963&r=all |
| By: | Arthur Charpentier (CREM - Centre de recherche en économie et management - UNICAEN - Université de Caen Normandie - NU - Normandie Université - UR1 - Université de Rennes 1 - UNIV-RENNES - Université de Rennes - CNRS - Centre National de la Recherche Scientifique, UQAM - Département de mathématiques [Montréal] - UQAM - Université du Québec à Montréal); Alfred Galichon (CIMS - Courant Institute of Mathematical Sciences [New York] - New York University [New York]); Lucas Vernet (Sciences Po - Sciences Po, Banque de France - Banque de France - Banque de France) |
| Abstract: | This article presents a set of tools for the modeling of a spatial allocation problem in a large geographic market and gives examples of applications. In our settings, the market is described by a network that maps the cost of travel between each pair of adjacent locations. Two types of agents are located at the nodes of this network. The buyers choose the most competitive sellers depending on their prices and the cost to reach them. Their utility is assumed additive in both these quantities. Each seller, taking as given other sellers prices, sets her own price to have a demand equal to the one we observed. We give a linear programming formulation for the equilibrium conditions. After formally introducing our model we apply it on two examples: prices offered by petrol stations and quality of services provided by maternity wards. These examples illustrate the applicability of our model to aggregate demand, rank prices and estimate cost structure over the network. We insist on the possibility of applications to large scale data sets using modern linear programming solvers such as Gurobi. In addition to this paper we released a R toolbox to implement our results and an online tutorial (http://optimalnetwork.github.io) . |
| Date: | 2019–07–04 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-02173210&r=all |
| By: | Neuberger, Doris; Reifner, Udo |
| Abstract: | Usury is a frequent occurrence in consumer credit markets and particularly affects low-income households. Systemic usury exploits poverty by shifting usury into additional products and leveraging usury gains by stringing together individual loan agreements. This paper reviews the economic rationale for usury legislation and on this basis evaluates the European Consumer Credit Directive 2008/48/EC. Systemic usury is a market failure. The most powerful explanations for such failure in consumer credit markets are monopoly power, where the consumer is locked in a bilateral credit relationship, discrimination through risk-based pricing, and negative externalities, where the least solvent borrowers are cross-subsidized by the more solvent ones. Incomplete information of consumers cannot explain systemic usury in credit markets, because even fully informed consumers would be discriminated and trapped into a situation of bilateral monopoly. However, the European Consumer Credit Directive is primarily based on the model of incomplete information, which it seeks to correct by informational duties. As a consequence, usurious practices and products are implicitly acknowledged as legal, which has eroded the national combat against usury. Therefore, this Directive is not effective and must be reformed. |
| Keywords: | discrimination,Consumer Credit Directive,incomplete information,payment protection insurance,overindebtedness,monopoly power,responsible lending,risk-based pricing,usury |
| JEL: | D14 D18 D42 D62 D63 G21 G28 K22 K33 L12 L14 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:roswps:161&r=all |
| By: | Gorecki, Paul |
| Abstract: | In 2019 the Department with responsibility for household waste (HHW) policy in Ireland will commence a review of its 2012 Policy. That review – as anticipated in the 2012 Policy – will rely on the research and analysis of the Competition and Consumer Protection Commission (CCPC) on the state of competition in the HHW sector and on its policy guidance/recommendations. The CCPC’s 2018 study draws attention to a number of shortcomings in the HHW sector’s performance. It recommends a national economic regulator, not the appropriate market design (i.e. the status quo, side-by-side competition, which is evolving into a series of geographic unregulated monopolies; competitive tendering; and/or price control). Market design is delegated to the regulator. The description and analysis of the CCPC concerning the HHW sector should be relied upon by the Department in its review. There is, however, no need for a national economic regulator and all the associated costs, which no doubt will be passed onto households. Competitive tendering administered by local authorities with advice from the Office of Government Procurement, the CCPC and others, is the preferred market design and regulatory structure. |
| Keywords: | household waste collection; competitive tendering; side-by-side competition; competition for the market; competition in the market; Competition and Consumer Protection Commission. |
| JEL: | D44 L10 L40 |
| Date: | 2019–07–10 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:95000&r=all |
| By: | firano, zakaria; filali Adib, fatine |
| Abstract: | From the Nineties, the Moroccan banking system knew several reforms which contributed to the liberalization and the deregulation of banks. The objective is to arrive to a banking sector resilient, competitive, developed and making it possible to increase the surplus of the borrowers and the depositors. Although the relation between competition and financial stability is discussed, this paper proposes to formulate a new explanation of this relation while being based on the trilogy: competition, concentration and stability (CCS). Initially we develop the model of Panzar and Rose (1982,1987) to measure the competition of the dynamic banking system since 1993. Then, a data model of panel was estimated, highlighting the nonlinear relation between financial stability and banking competition. The checking of this relation made it possible to propose a new design concerning the relation between financial stability and competition. Indeed, the results obtained with through an optimization model affirm that this relation is cyclic, in the direction where, a stronger competition supports financial stability in situation of strong impact strength, on the other hand, in a situation of financial instability, more competition worsens the situation of the banking system. |
| Keywords: | financial stability, competition, concentration and banking system. |
| JEL: | D4 G2 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:95167&r=all |