nep-com New Economics Papers
on Industrial Competition
Issue of 2019‒09‒02
thirty-one papers chosen by
Russell Pittman
United States Department of Justice

  1. Patterns of Competitive Interaction By Armstrong, Mark; Vickers, John
  2. The Impact of Product Qualities on Downstream Bundling in a Distribution Channel By Angelika Endres; Joachim Heinzel
  3. Price Discrimination in the Information Age: Prices, Poaching, and Privacy with Personalized Targeted Discounts By Anderson, Simon P; Baik, Alicia; Larson, Nathan
  4. Innovation Activities and Integration through Vertical Acquisitions By Laurent Frésard; Gerard Hoberg; Gordon M. Phillips
  5. Does competition increase pass-through? By Ritz, R.
  6. Incomplete Contracts, Limited Liability, and the Optimality of Joint Ownership By Schmitz, Patrick W.
  7. Use and Abuse of Regulated Prices in Electricity Markets: "How to Regulate Regulated Prices?" By Martimort, David; Pouyet, Jérôme; Staropoli, Carine
  8. Assessing Market Power in the Italian Electricity Market: A synthetic supply approach By Rossetto, F.; Grossi, L.; Pollitt, M.
  9. Launch of a product and patents: evidence from the US cardiovascular pharmaceutical sector By Francesca Di Iorio; Maria Letizia Giorgietti
  10. Farmers, Traders, and Processors: Estimating the Welfare Loss from Double Marginalization for the Indonesian Rubber Sector By Kopp, Thomas; Sexton, Richard J.
  11. Estimating an Equilibrium Model of Horizontal Competition in Education By Bau, Natalie
  12. The Geography of Mortgage Lending in Times of FinTech By Christoph Basten; Steven Ongena
  13. The Industrial Revolution in Services By Hsieh, Chang-Tai; Rossi-Hansberg, Esteban
  14. The Effects of Competition in Consumer Credit Market By Stefan Gissler; Rodney Ramcharan; Edison Yu
  15. The Effects of Internet Book Piracy: Case of Comics By Tatsuo Tanaka
  16. Cannabis Prices on the Dark Web By Jakub Cerveny; Jan van Ours
  17. Measuring the Impact of Own and Others’ Experience on Project Costs in the U.S. Wind Generation Industry By John W. Anderson; Gordon W. Leslie; Frank A. Wolak
  18. A Structural Model for the Coevolution of Networks and Behavior By Hsieh, Chih-Sheng; König, Michael; Liu, Xiaodong
  19. Empirical analysis of unbalanced bidding on Swedish roads By Nyström, Johan; Wikström, Daniel
  20. Price discrimination and product quality under opt-in privacy regulation By Chiara Conti; Pierfrancesco Reverberi
  21. China’s Industrial Policy: an Empirical Evaluation By Panle Jia Barwick; Myrto Kalouptsidi; Nahim Bin Zahur
  22. Policy measures targeting a more integrated gas market: Impact of a merger of two trading zones on prices and arbitrage activity in France ☆ By Ekaterina Dukhanina; Olivier Massol; François Lévêque
  23. Market concentration and bank M&As: Evidence from the European sovereign debt crisis By Leledakis, George N.; Pyrgiotakis, Emmanouil G.
  24. Spatial Competition and Effectiveness of Soda Tax: Evidence from Berkeley and Philadelphia By Balagtas, Joseph V.; He, Xiaoyang
  25. Multiple Applications, Competing Mechanisms, and Market Power By Albrecht, James; Cai, Xiaoming; Gautier, Pieter A.; Vroman, Susan
  26. The impact of EU cartel policy reforms on the timing of settlements in private follow-on damages disputes: An empirical assessment of cases from 2001 to 2015 By Hans W. Friederiszick,; Linda Gratz,; Michael Rauber,
  27. Between Stabilization and Allocation in the MENA Region: Are Competition Laws Helping? By Jala Youssef; Chahir Zaki
  28. Competition, Institutions and Company-sponsored Training By Tina Hinz; Jens Mohrenweiser
  29. Reforming the Electric Power Industry in Developing Economies By Dertinger, Andrea; Hirth, Lion
  30. Innovation spillover, licensing, and ex-post privatization in international duopoly By Liu, Yi; Tan, Yu; Fang, Yu
  31. Industrial Concentration of the Brazilian Automobile Market and Positioning in the World Market By Zionam E. L. Rolim; Rafa\"el R. de Oliveira; H\'elio M. de Oliveira

  1. By: Armstrong, Mark; Vickers, John
    Abstract: We explore patterns of competitive interaction by studying mixed-strategy equilibrium pricing in oligopoly settings where consumers vary in the set of suppliers they consider for their purchase. In the case of "nested reach" we find equilibria, unlike those in existing models, in which price competition is segmented: small firms offer only low prices and large firms only offer high prices. We characterize equilibria in the three-firm case using correlation measures of competition between pairs of firms. We then contrast them with equilibria in the parallel model with capacity constraints. A theme of the analysis is how patterns of consumer consideration matter for competitive outcomes.
    Keywords: Bertrand-Edgeworth competition; Captive customers; Consideration sets; Mixed strategies; price dispersion
    JEL: D43 D83 L11 L13 L15
    Date: 2019–06
  2. By: Angelika Endres (Paderborn University); Joachim Heinzel (Paderborn University)
    Abstract: We study the impact of exogenous product qualities on a downstream firm’s decision to bundle and the welfare effects of downstream bundling. We consider a distribution channel with two downstream firms and two price-setting monopolistic upstream producers. One upstream firm sells its good 1 exclusively to one downstream firm and the other upstream firm sells its good 2 to both downstream firms. The downstream firms compete in prices and the two-product downstream firm has the option to bundle its goods. We find that downstream bundling aggravates the problem of double marginalization in the channel, but reduces the intensity of downstream competition. Finally, bundling is profitable for the two-product downstream firm only when the quality of good 2 exceeds the quality of good 1. However, bundling is always profitable when the production process is controlled by the downstream industry. The impact on total welfare is ambiguous and depends on the distribution of market power in the channel and the quality levels of the goods.
    Keywords: channel conflicts; double marginalization; downstream bundling; leverage theory; quality differentiation
    JEL: D21 D61 L11 L15
    Date: 2019–08
  3. By: Anderson, Simon P; Baik, Alicia; Larson, Nathan
    Abstract: We study list price competition when firms can individually target discounts (at a cost) to consumers afterwards, and we address recent regulation (such as the GDPR in Europe) that has empowered consumers to protect their privacy by allowing them to choose whether to opt in to data-gathering and targeting. In equilibrium, consumers who can be targeted receive poaching and retention discount offers from their top two firms. These offers are in mixed strategies, but final profits on such a consumer are simple and Bertrand-like. More contestable consumers receive more ads and are more likely to buy the wrong product. Poaching exceeds retention when targeting is expensive, but this reverses when targeting is cheap. Absent opt-in choice, firm list pricing resembles monopoly, as marginal consumers are lost to the lowest feasible poaching offer, not to another firm's list price. Opt-in choice reintroduces the standard margin too on those who opt out. The winners and losers when targeting is unrestricted (rather than banned) depend on the curvature of demand. For the empirically plausible case (convex but log-concave), targeting pushes up list prices, reduces profits and total welfare, and (if demand is convex enough) hurts consumers on average. Outside of this case, more convex (concave) demand tends to make targeting more advantageous to firms (consumers). We then use our model to study the welfare effects of a policy that forbids targeted advertising to consumers who have not opted in. Consumers opt in or out depending on whether expected discounts outweigh the cost of foregone privacy. For empirically relevant demand structures, allowing opt-in makes all consumers better-off.
    Keywords: competitive price discrimination; discounting; GDPR; opt-in; privacy; targeted advertising
    JEL: D43 L12 L13 M37
    Date: 2019–06
  4. By: Laurent Frésard (Universita della Svizzera italiana (USI Lugano); Swiss Finance Institute); Gerard Hoberg (University of Southern California - Marshall School of Business - Finance and Business Economics Department); Gordon M. Phillips (Dartmouth College - Tuck School of Business; National Bureau of Economic Research (NBER))
    Abstract: We examine the determinants of vertical acquisitions using product text linked to product vocabulary from the input-output tables. We find that the stage of innovation is important in understanding vertical integration. R\&D-intensive firms are less likely to become targets in vertical acquisitions. In contrast, firms with patented innovation are more likely to sell to vertically-related buyers. Firms' R&D intensity is a more important deterrent to their vertical acquisitions when the provision of innovation incentives by potential acquirers is more difficult. The role of patents in fostering vertical acquisitions is more prevalent when potential buyers face a higher risk of hold-up.
    Keywords: Mergers and Acquisitions, Vertical Mergers, Vertical Integration
    JEL: G34
    Date: 2019–07
  5. By: Ritz, R.
    Abstract: How does market power affect the rate of pass-through from marginal cost to the market price? A standard intuition is that more competition makes prices more “cost-reflective” and thus raises cost pass-through. This paper shows that this intuition is sensitive to the common assumption in the literature that firms’ marginal costs are constant. If firms have even modestly increasing marginal costs, more intense competition actually reduces pass through. These results apply to the “normal” case where pass-through is less than 100%. They have implications for competition policy and environmental regulation.
    Keywords: Cost pass-through, imperfect competition, perfect competition, production technology
    JEL: D24 D41 D42 D43
    Date: 2019–08–21
  6. By: Schmitz, Patrick W.
    Abstract: The property rights approach to the theory of the firm is the most prominent application of the incomplete contracting paradigm. A central conclusion of the standard model says that joint ownership is suboptimal. In this note, we analyze a modified version of the standard model that is tailored to the organization of R&D activities, where one of the parties is wealth-constrained and protected by limited liability. It turns out that joint ownership can be optimal, since it avoids wasteful rent-seeking activities when limited liability rents are necessary to induce high effort. Our results are in line with the fact that R&D activities are often conducted in research joint ventures.
    Keywords: property rights; incomplete contracts; limited liability; rent seeking; joint ownership
    JEL: D23 D86 L24 O32
    Date: 2019
  7. By: Martimort, David; Pouyet, Jérôme; Staropoli, Carine
    Abstract: We consider the regulation of the tariffs charged by a public utility in the electricity sector. Consumers differ in terms of their demands which are private information. When regulating the firm's tariffs, the government is concerned by redistribution across consumers classes. A conflict between redistribution and screening induces production distortions even when the firm is a monopoly. Introducing competition with an unregulated fringe may improve efficiency but jeopardizes redistribution. In response, the government may now want to manipulate information about the incumbent's cost so as to restrict entry and better promote its own redistributive objective. To prevent such obstacle to entry, the government's discretion in fixing regulated tariffs of the incumbent should be restricted. This can be done by imposing floors or caps on those tariffs and/or by controlling the market share left to the competitive fringe. We highlight the determinants of such limits on discretion and unveil to what extent they depend on the government's redistributive concerns.
    Keywords: Electricity markets; government's redistributive concerns; optimal discretion; regulated tariffs
    JEL: L51 L94 L98 Q41 Q48
    Date: 2019–06
  8. By: Rossetto, F.; Grossi, L.; Pollitt, M.
    Abstract: The aim of this article is to investigate the effects of the bidding strategies of leading firms on market equilibria. The analysis focuses on the Italian wholesale electricity market from 2015 to 2018. The purpose is to assess if the observed market equilibria are the results of a competitive setting or if more competitive equilibria could have occurred. We use the methodology of synthetic supply proposed by Ciarreta et al. (2010a). This way, a new set of synthetic prices and quantities is computed. The comparison between the actual and synthetic prices allows us to assess the effects of market power on the actual equilibria. Results suggest that whilst there is a significant impact on prices, quantities seem not to be affected, due to the inelastic demand. Moreover, our findings suggest that the main impacts occurred during 2017 especially during those months where above average heating and cooling were required.
    Keywords: Electricity Wholesale Market, Market Power, Bidding Strategy, Synthetic Supply
    JEL: L94
    Date: 2019–08–21
  9. By: Francesca Di Iorio (Università di Napoli Federico II); Maria Letizia Giorgietti (Università di Milano)
    Abstract: Recent literature on the role of patents in shaping competition between incumbents and new entrants shows mixed evidence, as patents can discourage entry into markets but may also encourage potential entrants by increasing profitability from research and development. The increasing use of patents as strategic weapons motivates this investigation of the impact of innovation on competition. In a case study of US pharmaceutical cardiovascular submarkets over the period 1988-1998, we use a panel probit model to study the impact of a firm’s patents and rivals’ patents in the firm’s decision to launch new products. Our results show that the number of a firm’s lagged patents encourages the firm’s entry with new products, while rivals’ initial stock of patents discourages entry, but more recent patents promote entry by opening new technological opportunities.
    Keywords: Entry, Patents, Panel data, Probit model, Submarkets
    JEL: L11 L65 C11 C23 C25
    Date: 2019–02
  10. By: Kopp, Thomas; Sexton, Richard J.
    Abstract: Reducing buyer market power over agricultural suppliers is a key strategy to improve rural livelihoods in emerging economies. This paper focuses on implications of failure of a supply chain to coordinate vertically for farm incomes, with specific application to the Indonesian rubber industry. In the Jambi province production is mainly in the hands of smallholder farmers, who sell via spot transactions to a network of traders who in turn sell in spot exchanges to rubber processors. Processing is highly concentrated, and, whereas there are large numbers of rubber traders, evidence indicates that both traders and processors exercise oligopsony power, a classic problem of double marginalization. We estimate the extent of buyer market power in farmer-trader and trader-processor interactions and derive the welfare loss from double marginalization. We then explore the nature of this market failure and quantify the extent of welfare loss and redistribution away from farmers. We conclude by asking why the market has not addressed this failure through improved vertical coordination in the supply chain and discussing policy innovations to facilitate better coordination.
    Keywords: Industrial Organization, International Development
    Date: 2019–08–28
  11. By: Bau, Natalie
    Abstract: The quality of the match between students and schools affects learning but little is known about the magnitude of these effects or how they respond to changes in market structure. I develop a quantitative equilibrium model of school competition with horizontal competition in match quality. I estimate the model using data from Pakistan, a country with high private enrollment, and (1) quantify the importance of good matches, (2) show that profit-maximizing private schools' choices of quality advantage wealthier students, increasing inequality and reducing welfare and learning, and (3) provide intuition for when interventions in the market are valuable. I find that match matters: moving a student from her worst to best match school doubles yearly average test score gains. Setting match-specific quality socially optimally in private schools would greatly reduce inequality in learning between rich and poor students while increasing learning and welfare. These positive effects are amplified when students' enrollment decisions are more responsive to quality.
    Keywords: horizontal quality in education; school competition; structural models of education markets
    JEL: I2 L1 O1
    Date: 2019–08
  12. By: Christoph Basten (University of Zurich); Steven Ongena (University of Zurich - Department of Banking and Finance; Swiss Finance Institute; KU Leuven; Centre for Economic Policy Research (CEPR))
    Abstract: We analyze how banks’ allocations of mortgage credit across regions change when an online platform enables them to offer to regions where they have no branches, staff or legacy. Unique data from an online platform with offers from different banks to each mortgage application yield three novel findings. First, banks offer more and cheaper credit to borrowers in less competitive offline markets. Second, banks offer more credit to more distant locations, where house prices appear less over-heated, and past price growth is less correlated with that in their existing portfolio. Third, over time offers become more automated, lowering operational costs.
    Keywords: Mortgage Lending, Spatial Competition, Credit Risk, Diversification, Automation of Banking, FinTech, Online Pricing
    JEL: G2 L1 R2
    Date: 2019–08
  13. By: Hsieh, Chang-Tai; Rossi-Hansberg, Esteban
    Abstract: The rise in national industry concentration in the US between 1977 and 2013 is driven by a new industrial revolution in three broad non-traded sectors: services, retail, and wholesale. Sectors where national concentration is rising have increased their share of employment, and the expansion is entirely driven by the number of local markets served by firms. Firm employment per market has either increased slightly at the MSA level, or decreased substantially at the county or establishment levels. In industries with increasing concentration, the expansion into more markets is more pronounced for the top 10\% firms, but is present for the bottom 90\% as well. These trends have not been accompanied by economy-wide concentration. Top U.S. firms are increasingly specialized in sectors with rising industry concentration, but their aggregate employment share has remained roughly stable. We argue that these facts are consistent with the availability of a new set of fixed-cost technologies that enable adopters to produce at lower marginal costs in all markets. We present a simple model of firm size and market entry to describe the menu of new technologies and trace its implications.
    JEL: E23 E24 L16 L22 R12
    Date: 2019–06
  14. By: Stefan Gissler; Rodney Ramcharan; Edison Yu
    Abstract: This paper finds that banks and non-banks respond differently to increased competition in consumer credit markets. Increased competition and the greater threat of failure induces banks to specialize more in relationship business lending, and surviving banks are more profitable. However, non-banks change their credit policy when faced with more competition and expand credit to riskier borrowers at the extensive margin, resulting in higher default rates. These results show how the effects of competition depend on the form of intermediation. They also suggest that increased competition can cause credit risk to migrate outside the traditional supervisory umbrella.
    JEL: D12 G21 G23
    Date: 2019–08
  15. By: Tatsuo Tanaka (Faculty of Economics, Keio University)
    Abstract: In this study, the effects of internet book piracy in the case of the Japanese comic book market were examined using direct measurement of product level piracy ratio and a massive deletion project as a natural experiment. Total effect of the piracy is negative to the legitimate sales, but panel regression and difference-in-difference analysis consistently indicated that the effect of piracy is heterogeneous: piracy decreased the legitimate sales of ongoing comics, whereas increased the legitimate sales of completed comics. The latter result is interpreted as follows: piracy reminds consumers of past comics and stimulates sales in that market.
    Keywords: copyright, comic, piracy, Internet, DID
    JEL: D12 L82 M3 O34
    Date: 2019–08–08
  16. By: Jakub Cerveny (Medical University Vienna); Jan van Ours (Erasmus University Rotterdam)
    Abstract: This paper examines prices of cannabis sold over the anonymous internet marketplace AlphaBay. We analyze cannabis prices of 500 listings from about 140 sellers, originating from 18 countries. We find that both listing characteristics and country characteristics matter. Cannabis prices are lower if sold in larger quantities, so there is a clear quantity discount. Cannabis prices increase with perceived quality. Cannabis prices are also higher when the seller is from a country with a higher GDP per capita or higher electricity prices. The internet based cannabis market seems to be characterized by monopolistic competition where many sellers offer differentiated products with quality variation causing a dispersion of cannabis prices and sellers have some control over the cannabis prices.
    Keywords: Cannabis prices, Dark Web
    JEL: K42 D43
    Date: 2019–08–19
  17. By: John W. Anderson; Gordon W. Leslie; Frank A. Wolak
    Abstract: We investigate the relationship between accumulated experience completing wind power projects and the cost of installing wind projects in the U.S. from 2001-2015. Our modeling framework disentangles accumulated experience from input price changes, scale economies, and exogenous technical change; and accounts for both firm-specific and industry-wide accumulated experience. We find evidence consistent with cost-reducing benefits from firm-specific experience for that firm’s cost of future wind power projects, but no evidence of industry-wide learning from the experience of other participants in the industry. Further, our experience measure rapidly depreciates across time and distance, suggesting a stable industry trajectory would lower project costs.
    JEL: L94 O31 O33
    Date: 2019–07
  18. By: Hsieh, Chih-Sheng; König, Michael; Liu, Xiaodong
    Abstract: This paper introduces a structural model for the coevolution of networks and behavior. The microfoundation of our model is a network game where agents adjust actions and network links in a stochastic best-response dynamics with a utility function allowing for both strategic externalities and unobserved heterogeneity. We show the network game admits a potential function and the coevolution process converges to a unique stationary distribution characterized by a Gibbs measure. To bypass the evaluation of the intractable normalizing constant in the Gibbs measure, we adopt the Double Metropolis-Hastings algorithm to sample from the posterior distribution of the structural parameters. To illustrate the empirical relevance of our structural model, we apply it to study R&D investment and collaboration decisions in the chemicals and pharmaceutical industry and find a positive knowledge spillover effect. Finally, our structural model provides a tractable framework for a long-run key player analysis.
    Keywords: Double Metropolis-Hastings algorithm; Key players; network interactions; R&D collaboration networks; stochastic best-response dynamics; strategic network formation; Unobserved heterogeneity
    JEL: C11 C31 C63 C73 L22
    Date: 2019–08
  19. By: Nyström, Johan (Swedish National Road & Transport Research Institute (VTI)); Wikström, Daniel (Swedish National Road & Transport Research Institute (VTI))
    Abstract: Based on anecdotal evidence, claims are made that unbalanced bidding is a major problem in the construction industry. This concept refers to a sealed price auction setting with asymmetric information and unit prices, where information rents are extracted. Theoretical literature has shown that it is rational for an informed contractor to skew unit prices. However, empirical studies on the magnitude of the problem are lacking. As the first quantitative study based on European data, it is shown that unbalanced bidding exists, but in small magnitudes. The result is in line with earlier studies from the US.
    Keywords: Unbalanced bidding; Asymmetric information; Information rent
    JEL: D22 D82 D86 H57 L92
    Date: 2019–08–23
  20. By: Chiara Conti (Department of Computer, Control and Management Engineering Antonio Ruberti (DIAG), University of Rome La Sapienza, Rome, Italy); Pierfrancesco Reverberi (Department of Computer, Control and Management Engineering Antonio Ruberti (DIAG), University of Rome La Sapienza, Rome, Italy)
    Abstract: We study how privacy regulation limiting the scope for price discrimination by a monopolist who sells online affects product quality and consumer surplus. We consider an opt-in regime where consumers may share personal data or not, in line with the recent EU GDPR. If consumers share data, they gain an additional benefit from buying related to the complementarity between information and quality, and they pay personalized prices instead of a uniform price. We find that, if the complementarity is strong enough, then product quality is higher with than without the opt-in regime. We also find that the opt-in regime has conflicting effects on consumers with different attitudes towards privacy, and that an increase in quality is a necessary condition for improving total consumer surplus. Overall, this study contributes to the debate on privacy protection by stressing the importance of analysing the relation between personal information and product quality.
    Keywords: Privacy regulation ; Opt-in regime ; Price discrimination ; Product quality
    Date: 2019
  21. By: Panle Jia Barwick; Myrto Kalouptsidi; Nahim Bin Zahur
    Abstract: Despite the historic prevalence of industrial policy and its current popularity, few empirical studies directly evaluate its welfare consequences. This paper examines an important industrial policy in China in the 2000s, aiming to propel the country's shipbuilding industry to the largest globally. Using comprehensive data on shipyards worldwide and a dynamic model of firm entry, exit, investment, and production, we find that the scale of the policy was massive and boosted China's domestic investment, entry, and world market share dramatically. On the other hand, it created sizable distortions and led to increased industry fragmentation and idleness. The effectiveness of different policy instruments is mixed: production and investment subsidies can be justified by market share considerations, but entry subsidies are wasteful. Finally, the distortions could have been significantly reduced by implementing counter-cyclical policies and by targeting subsidies towards more productive firms.
    JEL: L1 L5 L6 O2
    Date: 2019–07
  22. By: Ekaterina Dukhanina (CERNA i3 - Centre d'économie industrielle i3 - MINES ParisTech - École nationale supérieure des mines de Paris - PSL - PSL Research University - CNRS - Centre National de la Recherche Scientifique); Olivier Massol (IFPEN - IFP Energies nouvelles - IFPEN - IFP Energies nouvelles, IFP School, Department of Economics, University College London - UCL - University College of London [London], City University of London); François Lévêque (CERNA i3 - Centre d'économie industrielle i3 - MINES ParisTech - École nationale supérieure des mines de Paris - PSL - PSL Research University - CNRS - Centre National de la Recherche Scientifique)
    Abstract: Under way to a European integrated energy market, policymakers need to find efficient measures aimed at increasing liquidity in local natural gas markets. The paper answers the question whether a merger of gas trading zones contributes to the development of liquid trading activities through a more efficient allocation and pricing of natural gas and an increased competition between market players. We analyse the effects of a policy decision to merge two gas trading zones in France on the observed degree of spatial market integration and the efficiency of the spatial arbitrage activity between the northern and southern French gas markets. An extended parity bounds model confirms a positive impact of the zone merger on the market's spatial equilibrium and indicates the causes of remaining market inefficiencies. The model offers a tool for the assessment of the efficiency of policy decisions in the context of policy initiatives to create an integrated and liquid natural gas market in Europe.
    Keywords: Market integration,Merger of market zones,Spatial equilibrium,Natural gas
    Date: 2019–09
  23. By: Leledakis, George N.; Pyrgiotakis, Emmanouil G.
    Abstract: Using a sample of 312 bank M&As announced between 1998 and 2016 in the EU-27 countries, this paper investigates the impact of market concentration and the European sovereign debt crisis on the way investors react to these corporate events. In Western European countries, we find results which contrast the conventional wisdom that acquiring banks lose around the merger announcement date. In fact, since 2009, acquiring banks shareholders gain approximately $34 million around the announcement, a $56 million improvement compared to the pre-crisis period. These documented shareholder gains are also accompanied by significant improvements in post-merger profitability. Markedly, we link this superior performance of the post-2008 acquirers with the degree of market concentration in the Western European region. Finally, results for the Eastern European countries indicate that the crisis did not have a significant impact on the quality of bank M&As in the region.
    Keywords: European sovereign debt crisis; bank mergers and acquisitions; market concentration; event study
    JEL: G01 G14 G15 G21 G34
    Date: 2019–08–26
  24. By: Balagtas, Joseph V.; He, Xiaoyang
    Keywords: Agricultural and Food Policy
    Date: 2019–06–25
  25. By: Albrecht, James; Cai, Xiaoming; Gautier, Pieter A.; Vroman, Susan
    Abstract: We consider a labor market with search frictions in which workers make multiple applications and firms can post and commit to general mechanisms that may be conditioned both on the number of applications received and on the number of offers received by its candidate. When the contract space includes application fees, there exists a continuum of equilibria of which only one is socially efficient. In the inefficient equilibria, firms have market power that arises from the fact that the value of a worker's application portfolio depends on what other firms offer, which allows individual firms to free ride and offer workers less than their marginal contribution. Finally, by allowing for general mechanisms, we are able to examine the sources of inefficiency in the multiple applications literature.
    Keywords: competing mechanisms; directed search; efficiency; market power; multiple applications
    JEL: C78 D44 D83
    Date: 2019–08
  26. By: Hans W. Friederiszick, (ESMT European School of Management and Technology and E.CA Economics); Linda Gratz, (E.CA Economics); Michael Rauber, (E.CA Economics)
    Abstract: Private cartel damages litigation is on the rise in Europe since early 2000. This development has been initiated by the European courts and was supported by various policy initiatives of the European Commission, which found its culmination in the implementation of the EU Directive on Antitrust Damages end of 2016. This paper explores the impact of this reform process on effective compensation of damaged parties of cartel infringements. For that purpose we analyse all European cartel cases with a decision date between 2001 and 2015, for which we analyse litigation activity and speed. Overall, we find a substantial reduction of the time until first settlement (increase in litigation speed) together with a persisting high share of cases being litigated (high litigation activity). This supports the view that the reform not only increased the claimant’s expectation about the amount of damages being awarded, but also resulted in an alignment in the expectations of claimants and defendants in the final damages amount, i.e. the European Commission succeeded in reaching its objective to clarify and harmonize legal concepts across Europe.
    Keywords: Cartels, private damages, competition law
    Date: 2019–08–26
  27. By: Jala Youssef (World Bank, Cairo Office); Chahir Zaki (Department of Economics and Director of the French Section, Faculty of Economics and Political Science, Cairo University)
    Abstract: In the 1990s, many MENA countries relied on adjustment and stabilization programs offered by international organizations. Surprisingly, these programs implicitly implied an orientation towards a market economy structure without an explicit adoption of competition laws. This in turn raises questions on the extent to which these programs help adjusting structural and allocation issues in the beneficiaries’ economies or rather only focuses on adjusting macroeconomic imbalances. To our knowledge, there is no study assessing the macroeconomic outcomes of competition laws in the latter. Against this backdrop, our main objective is to empirically assess the impact of competition laws in the MENA region on economic growth. Our contribution is threefold: first, we create indices to assess the effectiveness of MENA countries competition laws using Youssef and Zaki (2019) methodology. Second, we disentangle the effect of competition laws on growth by distinguishing between the structural and the cyclical components of GDP growth. Third, we control for the endogeneity of the competition law adoption. Our main findings show that in general, the overall assessment of MENA countries competition legislations seems to be broadly average with the Maltese and the Algerian legislations the best performers among the group while the Iraqi and the Yemeni legislations are the weakest. Advocacy seems to be an area of weakness. As per the effect of competition policy rules on economic growth in MENA countries, competition measures exert a positive and statistically significant effect on the growth of the trend component of GDP, while its effects on the cyclical component is rather insignificant.
    Date: 2019–08–21
  28. By: Tina Hinz (Friedrich-Alexander University Erlangen-Nürnberg); Jens Mohrenweiser (Bournemouth University)
    Abstract: The new training literature argues that imperfect labour markets (i.e. less competition) lead to an increasing productivity-wage wedge. We show that this relation does not hold for all institutional and market environments. We use representative establishment panel data for Germany and apply a control function approach for estimating the production function to correct for endogeneity in input factors. We show that the skill-productivity gradient responds stronger to increases in product market competition and labour market density than the skill-wage gradient. This leads to an increasing productivity-wage wedge in more competitive environments. Similarly, works councils have a stronger effect on the skill-productivity than on the skill-wage gradient while both gradients are similar in the presence of union wage bargaining. Our results call for a more nuanced interpretation of the exposition of the new training literature to understand company-sponsored training across institutional and market environments.
    Keywords: training, productivity, wages, wage compression
    JEL: J24 M53 R23
    Date: 2019–06
  29. By: Dertinger, Andrea; Hirth, Lion
    Abstract: Since the 1990s, many developing countries have restructured their electric power industry. Policies such as break-ing up, commercializing and privatizing utilities, allowing for independent power producers, installing independent regulators, and introducing competitive wholesale markets were meant to improve the industry’s efficiency and service quality. We exploit more than 30 years of data from over 100 countries to investigate the impact of power sector reforms on efficiency (represented by network losses) and access to electricity (represented by connection rates and residential power consumption). Crucially, reforms are likely to be endogenous with respect to sector performance: a crisis in electricity supply might well trigger reform efforts. We deal with endogeneity using reform activity in neighboring countries as an instrument. Our results suggest that reforms strongly and positively impact electricity access. According to our preferred specification, a full reform program would increase connection rates by 20 percentage points and per capita consumption by 62 percent: these are large effects that are stable across a range of robustness checks. Moreover, the effect of improving access is largest in South Asian countries. In con-trast to previous studies, we do not find robust evidence to support the theory that reforms reduce network losses.
    Date: 2019
  30. By: Liu, Yi; Tan, Yu; Fang, Yu
    Abstract: This paper studies the impact of innovation spillover and licensing on optimal ex-post privatization policies by involving an exogenous R&D activity in a partial-equilibrium international duopoly setting. By assuming a domestic public firm is relatively inefficient compared to its foreign private rival, we characterize and discuss optimal privatization policies under both foreign private and domestic public innovation. The theoretical results suggest that foreign private (domestic public) innovation, including both spillover and licensing, reduces (increases) the optimal degree of ex-post privatization. In addition, innovation spillover and licensing have the same impact direction on privatization policies. The numerical evidence supports these theoretical findings.
    Keywords: Spillover, Licensing, Ex-post Privatization, International Duopoly
    JEL: F13 H4 L13 L24 L33
    Date: 2019–08–09
  31. By: Zionam E. L. Rolim; Rafa\"el R. de Oliveira; H\'elio M. de Oliveira
    Abstract: This paper surveys the evolution of industrial concentration of the Brazilian automotive market as well as its positioning in the worldmarket. Data available by OICA (International Organization of Motor Vehicle Manufacturers) were used to better understand the characteristics of the Brazilian market on the world stage. A cluster analysis algorithm (by the k-means technique) ranks Brazil with a concentration profile in a group of countries like US and South Korea, in contrast to countries such as Germany, Canada and Japan, or even France and Italy. It is rather usual to characterize the market structure through industrial concentration indices: we revisit CR ratios (concentration ratios), HHI (Herfindahl-Hirschman index), B (Rosenbluth index), and CCI (Horvath comprehensive concentration index). Data of Anfavea-Brazil (Associacao Nacional dos Fabricantes de Veiculos Automotores) were used to estimate these indices in the period 2012-2018 for the national automobile industry. The values obtained indicate that by 1998 the automotive sector was behaving as an oligopoly-differentiated. However, the values of more recent periods (particularly CR4) strongly indicate that the sector is currently moderately concentrated and is changing for a quasi-devolved market.
    Date: 2019–08

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