nep-com New Economics Papers
on Industrial Competition
Issue of 2019‒10‒07
29 papers chosen by
Russell Pittman
United States Department of Justice

  1. Exclusive Data, Price Manipulation and Market Leadership By Yiquan Gu; Leonardo Madio; Carlo Reggiani
  2. Market power in bilateral oligopoly markets with non-expandable infrastructures By Yukihiko Funaki; Harold Houba; Evgenia Motchenkova
  3. Misleading Advertising in Mixed Markets: Consumer-orientation and welfare outcomes By Sharma, Ajay
  4. Collusion, price dispersion, and fringe competition By de Roos, Nicolas; Smirnov, Vladimir
  5. Markups and Inequality By Corina Boar; Virgiliu Midrigan
  6. What's the Big Idea? Multi-Function Products, Firm Scope and Firm Boundaries By Mengxiao Liu; Daniel Trefler
  7. An evolutionary Cournot oligopoly model with imitators and perfect foresight best responders By Lorenzo, Cerboni Baiardi; Ahmad, Naimzada
  8. Amazon Effects in Canadian Online Retail Firm-Product-Level Data By Alex Chernoff
  9. On financial frictions and firm market power By M. Casares; L. Deidda; J. E. Galdon-Sanchez
  10. Too Much Data: Prices and Inefficiencies in Data Markets By Daron Acemoglu; Ali Makhdoumi; Azarakhsh Malekian; Asuman Ozdaglar
  11. Ten Facts on Declining Business Dynamism and Lessons from Endogenous Growth Theory By Ufuk Akcigit; Sina T. Ates
  12. Pay for Content or Pay for Marketing? An Empirical Study on Content Pricing By Xintong Han; Pu Zhao
  13. Four Facts Concerning Competition in U.S. Generic Prescription Drug Markets By Rena M. Conti; Ernst R. Berndt
  14. Disruption and Competition in the Financial Advisory Market By Antje Berndt; Sevin Yeltekin
  15. Multi-Part Tariffs and Differentiated Commodity Taxation By Anna D'Annunzio; Mohammed Mardan; Antonio Russo
  16. Risk-Sharing and Investment in Concentrated Markets By Daniel Neuhann; Michael Sockin
  17. Granular Search, Concentration and Wages By Gregor Jarosch; Isaac Sorkin; Jan Sebastian Nimczik
  18. Price Competition Online: Platforms vs. Branded Websites By Oksana Loginova
  19. Prices, Schedules, and Passenger Welfare in Multi-Service Transportation Systems By Etienne Billette de Villemeur; Annalisa Vinella
  20. The role of firm factors in demand, cost, and export market selection for Chinese footwear producers By Roberts, Mark J.; Yi Xu, Daniel; Fan, Xiaoyan; Zhang, Shengxing
  21. The impact of competition on experts' information disclosure: the case of real estate brokers By Frederic Cherbonnier; Christophe Leveque
  22. A Dynamic Theory of Lending Standards By Michael Fishman; Jonathan Parker; Ludwig Straub
  23. What Happened to U.S. Business Dynamism? By Ufuk Akcigit; Sina T. Ates
  24. Declining Dynamism, Increasing Markups and Missing Growth: The Role of the Labor Force By Michael Peters; Conor Walsh
  25. Mergers and Acquisitions with Private Equity Intermediation By Swaminathan Balasubramaniam; Armando Gomes; SangMok Lee
  26. Bidder Collusion: Accounting for All Feasible Bidders By Jean-François Richard
  27. Nonrivalry and the Economics of Data By Charles I. Jones; Christopher Tonetti
  28. Monopsony in Spatial Equilibrium By Matthew E. Kahn; Joseph Tracy
  29. Global alcohol markets: evolving consumption patterns, regulations and industrial organizations By Kym Anderson; Giulia Meloni; Jo Swinnen

  1. By: Yiquan Gu; Leonardo Madio; Carlo Reggiani
    Abstract: The unprecedented access of firms to consumer level data not only facilitates more precisely targeted individual pricing but also alters firms’ strategic incentives. We show that exclusive access to a list of consumers can provide incentives for a firm to endogenously assume the price leader’s role, and so to strategically manipulate its rival’s price. Prices and profits are non-monotonic in the length of the consumer list. For an intermediate size, price leadership entails a semi-collusive outcome, characterized by supra-competitive prices and low consumer surplus. In contrast, for short or long lists of consumers, exclusive data availability intensifies market competition.
    Keywords: exclusive data, price leadership, personalized pricing, price discrimination
    JEL: D43 K21 L11 L13 L41 L86 M21 M31
    Date: 2019
  2. By: Yukihiko Funaki (Waseda University); Harold Houba (Vrije Universiteit Amsterdam); Evgenia Motchenkova (Vrije Universiteit Amsterdam)
    Abstract: We develop a novel model of price-fee competition in bilateral oligopoly markets with non-expandable infrastructures and costly transportation. The model captures a variety of real market situations and it is the continuous quantity version of the assignment game with indivisible goods on a fixed network. We define and characterize stable market outcomes. Buyers exclusively trade with the supplier with whom they achieve maximal bilateral joint welfare at prices equal to marginal costs. Maximal fees and the suppliers' market power are restricted by the buyers' credible threats to switch suppliers. Maximal fees also arise from a negotiation model that extends price competition to price-fee competition. Competition in both prices and fees necessarily emerges. It improves welfare compared to price competition, but buyers will not be better off. The minimal infrastructure achieving maximal aggregate welfare differs from the minimal network that protects buyers most.
    Keywords: Assignment Games, Infrastructure, Non-linear pricing, Market Power, Negotiations
    JEL: D43 C78 L1
    Date: 2019–09–27
  3. By: Sharma, Ajay
    Abstract: In this paper, we analyse misleading advertising competition between private firms (profit oriented) and consumer-oriented firms (concerned about consumer welfare) in the context of mixed markets. The nature of advertising in this paper is assumed to be non-rival in nature and is beneficial to all the firms in the market. We find that, both private and consumer-oriented firms incur positive expenditure on misleading advertising. Further, the profit of consumer-oriented firms is higher than that of private firms. Moreover, irrespective of whether firms are concerned about consumer welfare or not, the level of misleading advertising is socially excessive.
    Keywords: Misleading advertising, Non-rival advertising, Consumer-oriented firm, Mixed markets, Cournot competition
    JEL: D21 L1 L2 L3
    Date: 2019–09–24
  4. By: de Roos, Nicolas; Smirnov, Vladimir
    Abstract: We study the optimal behaviour of a cartel faced with fringe competition and imperfectly attentive consumers. Intertemporal price dispersion obfuscates consumer price comparison which aids the cartel through two channels: it reduces the effectiveness of free riding by the fringe; and it relaxes the cartel’s internal incentive constraints. Our theory explains the survival of a price-setting cartel in a homogeneous product market, provides a collusive rationale for sales and Edgeworth cycles, and characterises the cartel’s manipulation of its fringe rival through a double cut-off rule.
    Keywords: Collusion, fringe competition, obfuscation, price dispersion
    Date: 2019–09
  5. By: Corina Boar (New York University); Virgiliu Midrigan (New York University)
    Abstract: We study the relationship between markups, firm concentration and inequality using a model of entrepreneurial dynamics in an environment with incomplete markets and borrowing constraints. A key ingredient of the model is that markups are endogenous so that the markup a producer charges depends on the amount of competition it faces. We ask two questions. First, what fraction of the rise in income and wealth inequality is due to changes in the U.S. tax code and decline in anti-trust enforcement that led to a rise in the level and dispersion of markups? Second, what are the consequences of policies aimed at curtailing the market power of firms and reducing the level of markups? We answer these questions by studying micro-level data on income and wealth, entrepreneurial activity and product market concentration through the lens of our model.
    Date: 2019
  6. By: Mengxiao Liu; Daniel Trefler
    Abstract: Products often bundle together many functions e.g., smartphones. The firm develops the big idea (which functions to bundle) and then chooses one supplier per function. We develop a model featuring holdup in which the firm's bargaining power declines in the number of suppliers. Greater scope as measured by the number of suppliers exacerbates holdup, but this is partially offset by the appropriate choice of vertical integration or outsourcing. Our main result flows from the empirical observation that the number of functions varies across products within an industry (firm heterogeneity). We introduce the notion of an 'ideas-oriented' industry in which more productive firms have higher marginal returns to introducing a new function. We show that more productive firms will (1) have more suppliers and (2) be more likely to integrate those suppliers. We take this to the data using a neural network to predict whether or not each of 29 million PATSTAT patent applications involves new/improved functions. We merge these patents with Capital IQ data on 55,000 companies and their supplier networks. We show that in industries where patents are skewed towards new or improved functions, more productive firms have more suppliers and are more likely to integrate these suppliers.
    JEL: F1 F12 F14 L14 L15 L23 L24
    Date: 2019–09
  7. By: Lorenzo, Cerboni Baiardi; Ahmad, Naimzada
    Abstract: We consider the competition among quantity setting players in a linear evolutionary environment. To set their outputs, players adopt, alternatively, the best response rule having perfect foresight or an imitative rule. Players are allowed to change their behavior through an evolutionary mechanism according to which the rule with better performance will attract more followers. The relevant stationary state of the model describes a scenario where players produce at the Cournot-Nash level. Due to the presence of imitative behavior, we find that the number of players and implementation costs, needed to the best response exploitation, have an ambiguous role in determining the stability properties of the equilibrium and double stability thresholds can be observed. Differently, the role of the intensity of choice, representing the evolutionary propensity to switch to the most profitable rule, has a destabilizing role, in line with the common occurrence in evolutionary models. The global analysis of the model reveals that increasing values of the intensity of choice parameter determine increasing dynamic complexities for the internal attractor representing a population where both decision mechanisms coexist.
    Keywords: Imitation, heterogeneity, evolutionary game, replicator dynamics, dynamic instability, dynamical systems
    Date: 2019–05
  8. By: Alex Chernoff
    Abstract: I use firm-product-level data for Canadian online retailers to study how product scope (the average number of product categories per firm) evolved from 1999 to 2012. During this period, product scope dropped monotonically from 59 to 5 product categories. Using a theoretical model of multi-product firms, I show that this reduction can be rationalized by increased online competition. Consistent with the model, I find that the percentage of Canadian online retailers with revenues in a product category falls when expands its varieties in the category. Overall,’s expansion accounts for 37 percent of the observed reduction in product scope.
    Keywords: Firm dynamics; Service Sector
    JEL: D22 L11 L81
    Date: 2019–10
  9. By: M. Casares; L. Deidda; J. E. Galdon-Sanchez
    Abstract: We build a static general-equilibrium model with monopolistically competitive firms that borrow funds from competitive banks in an economy subject to financial frictions. These frictions are due to non verifiability of both ex post firm returns and managerial effort. Market power has opposing effects. On one side, firms' pricing over marginal cost reduces output compared to perfect competition. On the other, by increasing firms' profitability, market power reduces the impact of financial frictions. The resulting tradeoff is ambiguous. We show that, other things equal, there exists an optimal positive level of market power that maximizes welfare. Such optimal degree of market power increases with moral hazard and decreases with the efficiency of firm liquidation following bankruptcy.
    Keywords: moral hazard;Market power;liquidation;bankurptcy
    Date: 2019
  10. By: Daron Acemoglu; Ali Makhdoumi; Azarakhsh Malekian; Asuman Ozdaglar
    Abstract: When a user shares her data with an online platform, she typically reveals relevant information about other users. We model a data market in the presence of this type of externality in a setup where one or multiple platforms estimate a user’s type with data they acquire from all users and (some) users value their privacy. We demonstrate that the data externalities depress the price of data because once a user’s information is leaked by others, she has less reason to protect her data and privacy. These depressed prices lead to excessive data sharing. We characterize conditions under which shutting down data markets improves (utilitarian) welfare. Competition between platforms does not redress the problem of excessively low price for data and too much data sharing, and may further reduce welfare. We propose a scheme based on mediated data-sharing that improves efficiency.
    JEL: D62 D83 L86
    Date: 2019–09
  11. By: Ufuk Akcigit; Sina T. Ates
    Abstract: In this paper, we review the literature on declining business dynamism and its implications in the United States and propose a unifying theory to analyze the symptoms and the potential causes of this decline. We first highlight 10 pronounced stylized facts related to declining business dynamism documented in the literature and discuss some of the existing attempts to explain them. We then describe a theoretical framework of endogenous markups, innovation, and competition that can potentially speak to all of these facts jointly. We next explore some theoretical predictions of this framework, which are shaped by two interacting forces: a composition effect that determines the market concentration and an incentive effect that determines how firms respond to a given concentration in the economy. The results highlight that a decline in knowledge diffusion between frontier and laggard firms could be a significant driver of empirical trends observed in the data. This study emphasizes the potential of growth theory for the analysis of factors behind declining business dynamism and the need for further investigation in this direction.
    Keywords: business dynamism, market concentration, markups, competition, knowledge diffusion, innovation, patenting
    JEL: E22 K20 L10 L41 O33 O34
    Date: 2019
  12. By: Xintong Han (Concordia University, Department of Economics, 1455 Boulevard de Maisonneuve O, Montreal, QC H3G 1M8, Canada.); Pu Zhao (Boston University, Questrom School of Business, 595 Commonwealth Avenue, Boston, MA 02215, USA.)
    Abstract: In this paper, we use unique data from a popular Chinese content provision platform to examine three issues: first, content providers’ pricing strategies when each follower needs to pay an annual fee for access to content; second, content providers’ trade-offs between traffic and referral marketing expenses; and third, the effect of a platform policy on the welfare of content providers and their followers. We use a structural model for a content provider’s pricing and referral marketing decisions. The model estimates highlight the link between the referral effectiveness and potential revenue loss. Our counterfactual analysis shows vast difference in communities’ reactions towards increased platform commissions and potential homogeneity of content provision as well as huge demand loss beyond certain commission thresholds.
    Keywords: content pricing, referral marketing, platform policy, structural estimation
    JEL: L12 L14 L25 L51
    Date: 2019–09
  13. By: Rena M. Conti; Ernst R. Berndt
    Abstract: We establish four facts concerning competition among U.S. generic drug suppliers, using IQVIA’s National Sales Perspective™ 2004Q4 – 2016Q3 data. We define a unique product market (“molform”), consisting of the combination of a molecule active ingredient and a route of administration formulation, aggregated over different dosages and strengths. We find: (i) supply exhibits substantial churning in entrants and exits; (ii) volume-weighted use concentrates in older generic molform cohorts; (iii) the extent of competition is greatest for the oldest molform cohorts and is smallest for the youngest molform cohorts. With a median of one competitor, the extent of competition in the youngest molform cohort is very limited; and (iv) supplier-molform annual revenues are typically small, are largest for relatively young drugs, but are heavily right skewed. These four facts provide an empirical platform on which to construct and empirically evaluate hypotheses regarding generic drug market structure, performance, and possible policy reforms.
    JEL: I10 L10 L65
    Date: 2019–08
  14. By: Antje Berndt (Australian National University); Sevin Yeltekin (Carnegie Mellon University)
    Abstract: We propose a model of entry and competition in the financial advisory market. Firms are heterogeneous with regard to the level of customization they offer to their clients. Customization measures advisors’ capacity to tailor their services, including the frequency of human interactions, towards individual clients’ needs. Low-customization firms such as robo advisors specialize in fully automated portfolio investing, whereas high-customization firms offer a higher level of human touch and provide more comprehensive and tailored wealth management services. Our model is able to generate stylized market features which we document, including high levels of concentration and low market participation in the absence of innovation and better price-quality tradeoffs and higher market participation when innovators enter. We use our framework to discuss the welfare implications of new digital technologies emerging and new entrants—such as RoboAdvisors—disrupting the market.
    Date: 2019
  15. By: Anna D'Annunzio; Mohammed Mardan; Antonio Russo
    Abstract: We study commodity taxation in markets where firms, such as Internet Service Providers, energy suppliers and payment card platforms, adopt multi-part tariffs. We show that ad valorem taxes can correct underprovision and hence increase welfare, provided the government applies differentiated tax rates to the usage and access parts of the tariff. We obtain this result in different settings, including vertically interlinked markets, markets where firms adopt menus of tariffs to screen consumers and where they compete with multi-part tariffs. Our results suggest that exempting these markets from taxation may be inefficient.
    Keywords: commodity taxation, multi-part tariffs, price discrimination
    JEL: D42 D61 H21
    Date: 2019
  16. By: Daniel Neuhann (UT Austin, McCombs School of Business); Michael Sockin (University of Texas at Austin)
    Abstract: We study investment and risk sharing in complete markets when agents internalize their impact on asset prices. Quantity shading of state-contingent claims by buyers and sellers generates excess exposure to idiosyncratic risk and low asset pledgeability. This depresses investment, the risk-free rate, and aggregate productivity. Rents from market power distort and misalign agents' marginal valuations of state-contingent returns, rendering risk-sharing constrained inefficient and \emph{as if} markets were competitive but incomplete. When there is limited commitment, sellers face borrowing constraints that limit their ability to strategically restrict supply, thereby reallocating market power to buyers. When markets are decentralized, agents distort investment to capture arbitrage profits by acting as pass-through intermediaries.
    Date: 2019
  17. By: Gregor Jarosch (Princeton University); Isaac Sorkin (Stanford University); Jan Sebastian Nimczik (Humboldt University Berlin)
    Abstract: This paper develops an approach to measuring labor market power that builds on the structure of a canonical search model. We relax the common assumption of a continuum of firms and assume that firms can commit not to compete with their own future job openings. This granular extension yields a micro-founded concentration index similar to the Herfindahl and a structural mapping between the index and labor market outcomes. Empirically, we define labor markets based on worker flows and then use our framework to quantify the consequences of market power in the Austrian labor market.
    Date: 2019
  18. By: Oksana Loginova (Department of Economics, University of Missouri)
    Abstract: The focus of this theoretical study is price competition when some firms operate their own branded websites while others sell their products through an online platform, such as Amazon Marketplace. On one hand, selling through Amazon expands a firm's reach to more customers, but on the other, starting a website can help the firm to increase the perceived value of its product, that is, to build brand equity. In the short run the composition of firms is fixed, whereas in the long run each firm chooses between Amazon and its own website. I derive the equilibrium prices and profits, analyze the firms' behavior in the long run, and compare the equilibrium outcome with the social optimum. Comparative statics analysis reveals some interesting results. For example, I find that the number of firms that choose Amazon may go down in response to an increase in the total number of firms. A pure-strategy Nash equilibrium may not exist; I show that price dispersion among the firms of the same type is more likely in less concentrated markets and/or when the increase in the perceived value of the product is relatively small.
    Keywords: pricing, competition, platforms, online marketplace, Amazon, brand equity
    JEL: C72 D43 L11 L13 M31
    Date: 2019–09–20
  19. By: Etienne Billette de Villemeur; Annalisa Vinella
    Abstract: We consider a multi-service transportation system in which passengers are heterogeneous along two dimensions, namely ideal departure time and value of time, leading to both horizontal and vertical differentiation. We investigate the behavior of passengers, and assess how service pricing and scheduling affect their travel choices and welfare. We show that this depends, first, on whether passengers are uninformed or informed about the timetable of services, supplied at different prices, upon arrival at the station. Besides, given the information passengers hold, it also depends on their (individual-specific) value of time. The market segmentation results accordingly, and is found to be finer, in general, when passengers are informed. Our analysis offers policy-makers a scientifically founded tool to make sensible decisions, based on the exact identification of those who would gain and those who would lose from policy changes. The analysis further highlights the potential benefits of information, and points to the importance of facilitating information accessibility to passengers.
    Keywords: travel demand, service scheduling, market segmentation, targeted policy-making, impact of information
    JEL: D01 L91 L98
    Date: 2019
  20. By: Roberts, Mark J.; Yi Xu, Daniel; Fan, Xiaoyan; Zhang, Shengxing
    Abstract: In this article, we use micro data on both trade and production for a sample of large Chinese manufacturing firms in the footwear industry from 2002 to 2006 to estimate an empirical model of export demand, pricing, and market participation by destination market. We use the model to construct indexes of firm-level demand, marginal cost, and fixed cost. The empirical results indicate substantial firm heterogeneity in all three dimension with demand being the most dispersed. The firm-specific demand and marginal cost components account for over 30% of market share variation, 40% of sales variation, and over 50% of price variation among exporters. The fixed cost index is the primary factor explaining differences in the pattern of destination markets across firms. The estimates are used to analyse the supply reallocation following the removal of the quota on Chinese footwear exports to the EU. This led to a rapid restructuring of export supply sources on both the intensive and extensive margins in favour of firms with high demand and low fixed costs indexes, with marginal cost differences not being important.
    Keywords: demand; export market selection
    JEL: F14 L25
    Date: 2018–10–01
  21. By: Frederic Cherbonnier; Christophe Leveque
    Abstract: We analyze how competition can counter the tendency of experts to pass biased information to their customers, by using data from an online company that connects real estate brokers with clients who want to sell their housings. Different counterfactuals allow us to show that more competition or lower opportunity to collude induce brokers to raise their initial price estimation by about 5 percent. A similar but lesser impact is observed on listing price and selling price, but no significant effect is observed on the time to sell, which suggests that the manipulation of information observed in the absence of competition is detrimental to the client. Increasing competition among agents also changes the way they respond to, and sometimes align with, price preferences expressed by their customers.
    Keywords: Agency Theory; bargaining; Competition; Information Asymmetry; residential brokerage
    JEL: R3
    Date: 2019–01–01
  22. By: Michael Fishman (Northwestern University); Jonathan Parker (MIT); Ludwig Straub (Harvard)
    Abstract: We develop a dynamic model of credit markets in which both lending standards and the quality composition of the borrower pool are endogenous. Borrowers can be of high or low quality, and each lender privately decides on its lending standard. Lending standards are dynamic strategic complements: tighter screening worsens the future pool of borrowers, increasing the incentive to screen in the future. The market exhibits two steady states, one with loose and one with tight lending standards. Lending standards can inefficiently amplify and propagate temporary deteriorations in fundamentals. We discuss policies that improve on market outcomes, and pitfalls to avoid.
    Date: 2019
  23. By: Ufuk Akcigit; Sina T. Ates
    Abstract: In the past several decades, the U.S. economy has witnessed a number of striking trends that indicate a rising market concentration and a slowdown in business dynamism. In this paper, we make an attempt to understand potential common forces behind these empirical regularities through the lens of a micro-founded general equilibrium model of endogenous firm dynamics. Importantly, the theoretical model captures the strategic behavior between competing firms, its effect on their innovation decisions, and the resulting “best versus the rest” dynamics. We focus on multiple potential mechanisms that can potentially drive the observed changes and use the calibrated model to assess the relative importance of these channels with particular attention to the implied transitional dynamics. Our results highlight the dominant role of a decline in the intensity of knowledge diffusion from the frontier firms to the laggard ones in explaining the observed shifts. We conclude by presenting new evidence that corroborates a declining knowledge diffusion in the economy. We document a higher concentration of patenting in the hands of firms with the largest stock and a changing nature of patents, especially in the post-2000 period, which suggests a heavy use of intellectual property protection by market leaders to limit the diffusion of knowledge. These findings present a potential avenue for future research on the drivers of declining knowledge diffusion.
    Keywords: business dynamism, market concentration, competition, knowledge diffusion, step-by-step innovations, transitional dynamics
    JEL: E22 E25 L12 O31 O33 O34
    Date: 2019
  24. By: Michael Peters (Yale University); Conor Walsh (Yale University)
    Abstract: A growing body of empirical research highlights substantial changes in the US economy during the last three decades. Business dynamism – namely job reallocation, firm entry and creative destruction – is declining. Market power, as measured by markups and industry concentration, seems to be on the rise. Aggregate productivity growth is sluggish. We show that declines in the rate of growth of the labor force can qualitatively account for all of these features in a standard model of firm-dynamics. Despite its richness we can characterize the link between population growth and dynamism, markups and growth analytically. When we calibrate the model to the universe of U.S. Census data, the labor force channel can explain a large fraction of the aggregate trends.
    Date: 2019
  25. By: Swaminathan Balasubramaniam (Washington University in St. Louis); Armando Gomes (Washington University in St. Louis); SangMok Lee (Washington University in St. Louis)
    Abstract: We build a search model of mergers and acquisitions (M&A) with private equity (PE) intermediation. The model comprises three concurrently operating markets: corporate-corporate, corporate-PE, and inter-PE secondary buyout (SBO). PE intermediaries search for investment opportunities, hold an inventory of rms, add operational value through better governance, and exit by selling their entire portfolio. PE funds can enhance M&A market efficiency by alleviating search frictions and providing greater liquidity through SBOs, resulting in complementarities among PE funds. A calibration result shows PE funds' values are higher by 26% due to SBOs and increasing in the number of funds.
    Date: 2019
  26. By: Jean-François Richard
    Abstract: The Idaho Department of Lands (IDL) sells timber from state lands bymeans of ascending bid auction. In our empirical analysis of all IDL scaleauctions from 2004 through 2015, accounting for all auction-specific feasiblebidders, we find significant evidence of bidder collusion. Given the complexityof the empirical model and the absence of analytic results, we apply the methodof simulated moments to estimate the parameters and Monte Carlo simulationsto produce standard deviations of the estimates. The loss to Idaho from thebidder collusion is estimated to be approximately $43 million over this timeperiod.
    Date: 2019–01
  27. By: Charles I. Jones; Christopher Tonetti
    Abstract: Data is nonrival: a person's location history, medical records, and driving data can be used by any number of firms simultaneously. Nonrivalry leads to increasing returns and implies an important role for market structure and property rights. Who should own data? What restrictions should apply to the use of data? We show that in equilibrium, firms may not adequately respect the privacy of consumers. But nonrivalry leads to other consequences that are less obvious. Because of nonrivalry, there may be large social gains to data being used broadly across firms, even in the presence of privacy considerations. Fearing creative destruction, firms may choose to hoard data they own, leading to the inefficient use of nonrival data. Instead, giving the data property rights to consumers can generate allocations that are close to optimal. Consumers balance their concerns for privacy against the economic gains that come from selling data to all interested parties.
    JEL: E0 O4
    Date: 2019–09
  28. By: Matthew E. Kahn; Joseph Tracy
    Abstract: An emerging labor economics literature studies the consequences of firms exercising market power in local labor markets. These monopsony models have implications for trends in earnings inequality. The extent of this market power is likely to vary across local labor markets. In choosing what market to live and work in, workers tradeoff wages, rents and local amenities. Building on the Rosen/Roback spatial equilibrium model, we investigate how the existence of local monopsony power affects the cross-sectional spatial distribution of wages and rents across cities. We find an employment-weighted elasticity of land prices to concentration of –0.034—similar to Rinz (2018) reported elasticity of compensation to concentration. This finding has implications for who bears the economic incidence of labor market power. We present two extensions of the model focusing on the role of migration costs and worker skill heterogeneity.
    JEL: J3 R23
    Date: 2019–09
  29. By: Kym Anderson; Giulia Meloni; Jo Swinnen
    Abstract: For millennia alcoholic drinks have played an important role in food security and health (both positive and negative), but consumption patterns of beer, wine and spirits have altered substantially over the past two centuries. So too have their production technologies and industrial organization. Globalization and economic growth have contributed to considerable convergence in national alcohol consumption patterns. The industrial revolution contributed to excess consumption by stimulating demand and lowering the cost of alcohol. It also led to concentration in some alcohol industries, expecially brewing. In recent years the emergence of craft producers has countered firm concentration and the homogenization of alcoholic beverages. Meanwhile, governments have intervened extensively in alcohol markets to reduce excessive consumption, raise taxes, protect domestic industries and/or ensure competition. These regulations have contributed to, and been affected by, evolving patterns of consumption and changing structures of alcohol industries.
    Keywords: Globalization of preferences, Convergence of national beverage consumption mix, Alcohol and health, Restrictions on alcohol consumption and production, Beverage firm concentration
    Date: 2018–02

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