nep-com New Economics Papers
on Industrial Competition
Issue of 2020‒06‒29
thirty papers chosen by
Russell Pittman
United States Department of Justice

  1. Platform Mergers: Lessons from a Case in the Digital TV Market By Ivaldi, Marc; Zhang, Jiekai
  2. How to Get Away with Merger: Stealth Consolidation and Its Real Effects on US Healthcare By Thomas G. Wollmann
  3. 25 Years of European Merger Control By Affeldt, Pauline; Duso, Tomaso; Szücs, Florian
  4. Merchant utilities and boundaries of the firm: vertical integration in energy-only markets By Simshauser, P.
  5. Global giants and local stars: How changes in brand ownership affect competition By Alviarez, Vanessa; Head, Keith; Mayer, Thierry
  6. Rising markups, common ownership, and technological capacities By Gibbon, Alexandra J.; Schain, Jan Philip
  7. Competition Laws and Corporate Innovation By Ross Levine; Chen Lin; Lai Wei; Wensi Xie
  8. Corrective Tax Design and Market Power By O'Connell, Martin; Smith, Kate
  9. Collusive Market Allocations By Iossa, Elisabetta; Loertscher, Simon; Marx, Leslie; Rey, Patrick
  10. Value creating mergers â?? British bank consolidation, 1885-1925 By Braggion, Fabio; Dwarkasing, Narly; Moore, Lyndon
  11. The CMA’s assessment of customer detriment in the UK retail energy market By Littlechild, S.
  12. Tacit Collusion with Consumer Preference Costs By Roig, G.
  13. Robust Pricing with Refunds By Hinnosaar, Toomas; Kawai, Keiichi
  14. Market Competition and Discrimination By Siddique, Abu; Vlassopoulos, Michael; Zenou, Yves
  15. Information design in the hold-up problem By Condorelli, Daniele; Szentes, Balázs
  16. Reveal It or Conceal It: On the Value of Second Opinions in a Low-Entry-Barriers Credence Goods Market By Bindra, Parampreet Christopher; Kerschbamer, Rudolf; Neururer, Daniel; Sutter, Matthias
  17. Product Quality and Consumer Search By Moraga-González, José-Luis; Sun, Yajie
  18. Good-Looking Prices By Bradley J. Ruffle; Arie Sherman; Zeev Shtudiner
  19. Product Innovation, Product Diversification, and Firm Growth: Evidence from Japan’s Early Industrialization By Serguey Braguinsky; Atsushi Ohyama; Tetsuji Okazaki; Chad Syverson
  20. Inventory Shock and Price-Setting By Oleksandr Talavera; Nam Vu
  21. Cross Market Competition: Theoretical Foundations By Markova, Olga (Маркова, Ольга); Morozov, Anton (Морозов, Антон)
  22. Dynamic Mergers Effects on R&D Investments and Drug Development across Research Phases in the Pharmaceutical Industry By Ralph Siebert; Zhili Tian
  23. Do British wind generators behave strategically in response to the Western Link interconnector? By Intini, Mario; Waterson, Michael
  24. What effect has the 2015 power market reform had on power prices in China? Evidence from Guangdong and Zhejiang By Xie, B-C.; Xu, J.; Pollitt, M.
  25. Imperfect Competition and Rents in Labor and Product Markets: The Case of the Construction Industry By Kory Kroft; Yao Luo; Magne Mogstad; Bradley Setzler
  26. On competitive nonlinear pricing By Andrea Attar; Thomas Mariotti; Francois Salanie
  27. Uncertainty, bargaining power and bargaining solutions: An empirical application By Klein, Gordon; Rebolledo, Mayra
  28. Дискурсионный анализ исследований о влиянии конкурентной политики на экономическое развитие By Morozov, Anton (Морозов, Антон); Shpakova, Anastasiya (Шпакова, Анастасия)
  29. Coopetition Against an Amazon By Ronen Gradwohl; Moshe Tennenholtz
  30. Подходы к определению оптимальных санкций за картели By Pavlova, Natalia (Павлова, Наталья)

  1. By: Ivaldi, Marc; Zhang, Jiekai
    Abstract: This paper contributes to the analysis of mergers in two-sided markets, notably those in which a platform provides its service for free on one side but obtains all its revenues from the other, as in the digital TV industry. Specifically, we assess a decision of the French competition authority which approved the merger of the broadcasting services of the TV channels involved but imposed a behavioral remedy prohibiting the merger of their respective advertising sales services. To do so, we build a structural model allowing for multi-homing of advertisers and, using a comprehensive dataset, we estimate the demand of viewers and advertisers. Our evaluation provides evidence that the remedy has been ineffective at limiting the increase in prices and amounts of advertising, due to the cross-side externalities between viewers and advertisers. Without resulting in significant positive effects on the viewers' surplus, the remedy has also drastically increased the advertisers' total cost. Nevertheless, the remedy has benefited the competitors of the merging channels. The main lesson of our analysis is that, in the process of designing competition or regulatory policy for two-sided markets, ignoring the interaction between the two sides of platforms can result in unexpected outcomes.
    Keywords: Two-sided market; platform merger; advertising; TV market; competition policy
    JEL: K21 L10 L40 L82 M37
    Date: 2020–06
  2. By: Thomas G. Wollmann
    Abstract: Most US mergers are not reported to the government on the basis of their size, which can effectively exempt them from antitrust scrutiny, thereby leading to anticompetitive behavior. This paper studies premerger notification exemptions in the US dialysis industry. Over two decades, dialysis providers attempted over 4,000 facility acquisitions, half of which were not reported to the nation’s competition authorities. I estimate the effect of premerger notification exemptions on antitrust enforcement rates, and then I estimate the impact of the resulting market structure changes on patient health outcomes. First, I find that exemptions severely limit enforcement. Most striking, proposed facility acquisitions that would result in monopoly are blocked more than 80% of the time when apart of reportable mergers but less than 2% of the time when apart of exempt ones. Second, I find that the resulting market structure changes reduce the quality of care, evidenced by higher hospitalization rates and lower survival rates.
    JEL: D4 D43 I11 K21 L0 L1 L11 L13 L4 L40
    Date: 2020–05
  3. By: Affeldt, Pauline; Duso, Tomaso; Szücs, Florian
    Abstract: We study the evolution of EC merger decisions over the first 25 years of common European merger policy. Using a novel dataset at the level of the relevant antitrust markets and containing all merger cases scrutinized by the Commission over the 1990-2014 period, we evaluate how consistently arguments related to structural market parameters â?? dominance, concentration, barriers to entry, and foreclosure â?? were applied over time and across different dimensions such as the geographic market definition and the complexity of the merger. Simple, linear probability models as usually applied in the literature overestimate on average the effects of the structural indicators. Using non-parametric machine learning techniques, we find that dominance is positively correlated with competitive concerns, especially in concentrated markets and in complex mergers. Yet, its importance has decreased over time and significantly following the 2004 merger policy reform. The Commission's competitive concerns are also correlated with concentration and the more so, the higher the entry barriers and the risks of foreclosure. These patterns are not changing over time. The role of the structural indicators in explaining competitive concerns does not change depending on the geographic market definition.
    Keywords: causal forests; Concentration; Dominance; Entry Barriers; EU Commission; foreclosure; Merger Policy
    JEL: K21 L40
    Date: 2020–04
  4. By: Simshauser, P.
    Abstract: A central feature of electricity market reforms involved restructuring monopoly utilities. In the Generation segment, policies promoting restructuring and competition could not be faulted on the grounds of scale economies. But the partitioning of Generation from Retail received little focus. When proposals for industry restructuring emerged, multi-stage scope economies should have been of unquestionable interest but surprisingly little empirical evidence existed. Governments proceeded in the 1990s with an industrial organisation blueprint which separated Generation from Networks, and combined Retail with Distribution Networks. A second wave of industrial organisation was orchestrated by capital markets in the 2000s, splitting Retail from Distribution, and merging Retail with Generation. Many policymakers and regulators view the practice of vertical integration in a neoclassical sense; presenting risks of withholding capacity, increasing prices, raising barriers to entry, non-integrated rival foreclosure and damaging consumer welfare. But the weight of theoretical and empirical evidence points to the contrary, with transaction costs featuring prominently. In this article, a Generator and Retailer are simulated over 15 years of trade in Australia’s National Electricity Market as stand-alone businesses, and then as a merged entity. A comparison of the Sum-Of-The-Parts with the Vertical Firm reveals non-trivial transaction costs and multi-stage economies of integration – the Vertical Firm reduces costs by 17% and volatility of earnings by 83%, which produces a 26% improvement in credit quality and lifts statutory profits by 34% holding prices and volumes constant.
    Keywords: vertical integration, electricity markets, energy-only markets, transaction costs, credit ratings
    JEL: D23 D24 G34 L94
    Date: 2020–05–12
  5. By: Alviarez, Vanessa; Head, Keith; Mayer, Thierry
    Abstract: Multinational acquisitions, unlike greenfield investments, can subtract from the number of active competitors. The outcomes for consumers depend on the change in markups and whether new owners implement significant quality or productivity improvements. We assess the consequences of multinational acquisitions in beer and spirits. Rather than confining the study to an individual country, we apply recent methods with minimal data requirements to conduct a worldwide evaluation. After correcting for severe limited mobility bias, owner fixed effects contribute very little to the performance of brands. On average, foreign ownership tends to raise costs and lower appeal. Using the estimated model, we simulate the consequences of counterfactual national merger regulation. The US beer price index would be 4--7\% higher had competition authorities not forced divestitures. On the other hand, up to 30\% savings could have been obtained in Latin America by emulating the pro-competition policies of the US and EU.
    Keywords: brands; competition policy; Concentration; firm effects; frictions; Markups; mergers and acquisitions; multinationals; oligopoly
    JEL: F12 F23 F61 L13
    Date: 2020–04
  6. By: Gibbon, Alexandra J.; Schain, Jan Philip
    Abstract: This paper analyses the impact of common ownership on markups and innovation and adds to the discussion of the recently observed patterns of a long term rise in market power. We shed light on the inconclusiveness of results regarding the effects of common ownership on markups in the existing literature by exploiting industry technology classifications by the European Commission. Using a rich panel of European manufacturing firms from 2005 to 2016, we structurally infer markups and construct a measure of common ownership. Combining propensity score matching with a difference-in-differences estimator, we find an increase of firm markups by 3.1% after the first exposure tocommon ownership. While this effect is strongly pronounced in low-tech industries, we find no effect on markups in high-tech industries. In contrast, we measure a positive effect of common ownership on innovation activity in high-tech industries and no effectin low-tech industries. Both findings are consistent with recent theoretical findings in Lopéz and Vives (2019).
    Keywords: Competition,Common Ownership,Market Power,Industry Structure,Antitrust,Innovation
    JEL: L10 L41 L60 G23 G32 O34
    Date: 2020
  7. By: Ross Levine; Chen Lin; Lai Wei; Wensi Xie
    Abstract: A central debate in economics concerns the relationship between competition and innovation, with some stressing that competition discourages innovation by reducing post-innovation rents and others emphasizing that more contestable markets spur currently dominant and other firms to invest more in innovation. We examine the impact of competition laws on innovation. We create a unique firm-level dataset on patenting activities that includes over 1.4 million firm-year observations, across 68 countries, from 1991 through 2015. Using a new, comprehensive dataset on competition laws, we find that more stringent competition laws are associated with increases in firms’ number of self-generated patents and the citation-impact and explorative nature of those patents. We also conduct the first examination of the relationship between competition laws and firms’ acquisition of patents from other firms. We find that competition increases patent acquisitions but lowers the ratio of acquired to self-generated patents. The results hold when using country-industry data on 186 countries over the 1888-2015 period.
    JEL: K21 L4 O3
    Date: 2020–05
  8. By: O'Connell, Martin; Smith, Kate
    Abstract: We study the design of taxes aimed at limiting externalities in markets characterized by differentiated products and imperfect competition. In such settings policy must balance distortions from externalities with those associated with the exercise of market power; the optimal tax rate depends on the nature of external harms, how the degree of market power among externality generating products compares with non-taxed alternatives, and how consumers switch across these products. We apply the framework to taxation of sugar sweetened beverages. We use detailed data on the UK market for drinks to estimate consumer demand and oligopoly pricing for the differentiated products in the market. We show the welfare maximizing tax rate leads to welfare improvements over 2.5 times as large as that associated with policy that ignores distortions associated with the exercise of market power.
    Keywords: corrective tax; externality; market power; oligopoly
    JEL: D12 D43 D62 H21 H23 L13
    Date: 2020–04
  9. By: Iossa, Elisabetta; Loertscher, Simon; Marx, Leslie; Rey, Patrick
    Abstract: Collusive schemes by suppliers often take the form of allocating customers or markets among cartel members. We analyze incentives for suppliers to initiate and sustain such a collusive schemes in a repeated procurement setting. We show that, contrary to some prevailing beliefs, staggered (versus synchronized) purchasing does not make collusion more difficult to sustain or initiate. Buyer defensive measures include synchronized rather than staggered purchasing, first-price rather than second-price auctions, more aggressive or secrete reserve prices, longer contract lengths, withholding information, and avoiding observable registration procedures. Inefficiency induced by defensive measures is an often unrecognized social cost of collusive conduct.
    Keywords: Coordinated effects; sustainability and initiation of collusion; synchronized vs staggered purchasing
    JEL: D44 D82 L41
    Date: 2020–04
  10. By: Braggion, Fabio; Dwarkasing, Narly; Moore, Lyndon
    Abstract: The British banking sector had many small banks in the mid-nineteenth century. From around 1885 until the end of World War One there was a process of increasingly larger mergers between banks. By the end of the merger wave the English and Welsh market was highly concentrated, with only five major banks. News of a merger brought a persistent rise in the share prices of both the acquiring and the target bank (roughly 1% and 7%, respectively). Non-merging banks, especially those whose local market concentration rose as a result of the merger, saw their stock prices rise.
    Keywords: Banking; Great Britain; mergers and acquisitions
    JEL: G34 N23 N24
    Date: 2020–04
  11. By: Littlechild, S.
    Abstract: In 2016, the UK Competition and Markets Authority (CMA) found that “weak customer response” enabled incumbent UK energy retailers to set higher and discriminatory prices to residential customers. The CMA estimated the associated higher prices constituted a customer detriment in the range £1.4 bn to £2 bn per year. Although the CMA recommended against a price cap on most domestic energy tariffs, the size of the detriment and public concern about “rip-off energy tariffs” nonetheless led the Government to impose a price cap as from January 2019. This paper examines the CMA’s calculation of customer detriment and suggests that it is inconsistent with CMA Guidelines and unprecedented with respect to its nature, magnitude and policy impact. Alternative more realistic calculations suggest that any detriment would have been nearly an order of magnitude lower, so that a price cap was inappropriate. This raises a number of questions about the CMA’s approach.
    Keywords: retail energy markets, market power, efficient costs
    JEL: L94 L95 L51
    Date: 2020–06–02
  12. By: Roig, G.
    Abstract: When consumers have preference costs, two opposing effects need to be assessed to analyze firms' incentives to set collusive prices. On the one hand, preference costs make a deviation from collusion less attractive, as the deviating firm must offer a steeper discount to cover these preference costs. On the other hand, preference costs lock in consumers and make punishment from rivals less effective. When preference costs are low, the second effect dominates and collusion is harder to sustain than in a situation with no preference costs. The contrary happens with high enough preference costs.
    Keywords: Tacit Collusion; Consumer Preference Costs
    JEL: D43 L13 L12
    Date: 2020–06–05
  13. By: Hinnosaar, Toomas; Kawai, Keiichi
    Abstract: Before purchase, a buyer of an experience good learns about the product's fit using various information sources, including some of which the seller may be unaware of. The buyer, however, can conclusively learn the fit only after purchasing and trying out the product. We show that the seller can use a simple mechanism to best take advantage of the buyer's post-purchase learning to maximize his guaranteed-profit. We show that this mechanism combines a generous refund, which performs well when the buyer is relatively informed, with non-refundable random discounts, which work well when the buyer is relatively uninformed.
    Keywords: information design; mechanism design; Monopoly; Optimal Pricing; refunds; return policies; robustness
    JEL: C79 D42 D82
    Date: 2020–04
  14. By: Siddique, Abu (University of Southampton); Vlassopoulos, Michael (University of Southampton); Zenou, Yves (Monash University)
    Abstract: This paper studies the effect of competition on ethnic discrimination by carrying out a field experiment in the context of the rice market in Bangladesh. We recruit professional rice buyers (middlemen) to act as judges in a rice competition by providing a quality rating and a price quote for rice samples that we randomly associate with farmers bearing ethnic majority or minority names. First, we find that there is no ethnic difference in buyers' evaluation of rice quality. Second, we find that local buyers, who have local monopsony power, discriminate against ethnic minority farmers by quoting a lower price for their rice relative to that of ethnic majority farmers. Third, we find that wholesale buyers, who face fierce competition in the marketplace, do not price discriminate against ethnic minority farmers. A second lab-in-the-field experiment and survey information indicate that local and wholesale buyers do not have different tastes for discrimination. This suggests that market competition can eliminate the discrimination of wholesale buyers.
    Keywords: discrimination, market competition, ethnicity, rice market, Bangladesh, field experiments
    JEL: C93 J15 J43 J71 Q13 Z13
    Date: 2020–05
  15. By: Condorelli, Daniele; Szentes, Balázs
    Abstract: We analyze a bilateral trade model where the buyer chooses the distribution of her valuation for the good. The seller, after observing the buyer’s distribution but not the realized valuation, makes a take-it-or-leave-it offer. If distributions are costless, the price and the payoffs of both the buyer and the seller are shown to be 1=e in the unique equilibrium outcome. The buyer’s equilibrium distribution generates a unit-elastic demand, and trade is ex post efficient. These properties are shown to be preserved even when different distributions are differentially costly as long as the cost is monotone in the dispersion of the distribution.
    JEL: L81
    Date: 2020–02–01
  16. By: Bindra, Parampreet Christopher (University of Innsbruck); Kerschbamer, Rudolf (University of Innsbruck); Neururer, Daniel (University of Innsbruck); Sutter, Matthias (Max Planck Institute for Research on Collective Goods)
    Abstract: Credence goods markets with their asymmetric information between buyers and sellers are prone to large inefficiencies. In theory, poorly informed consumers can protect themselves from maltreatment through sellers by asking for second opinions from other sellers. Yet, empirical evidence whether this is a successful strategy is scarce. Here we present a natural field experiment in the market for computer repairs. We find that revealing a second opinion from another expert to the seller does neither increase the rate of successful repairs nor decrease the average repair price. We assess under which conditions gathering a second opinion can be valuable.
    Keywords: credence goods, expert services, second opinions, natural field experiment
    JEL: C93 D82
    Date: 2020–06
  17. By: Moraga-González, José-Luis; Sun, Yajie
    Abstract: This paper carries out a positive and normative analysis of the provision of quality in a consumer search market for differentiated products. An increase in quality shifts up the distribution of match utilities offered by firms and makes consumers pickier. The typical number of products consumers inspect before settling, however, does not necessarily increase in quality. Higher search costs may lead to less investment in quality and, correspondingly, the equilibrium price may decrease in search costs. If the equilibrium is socially inefficient, it is only because of the inadequacy of quality investment. There is a one-to-one relationship between the intensity of search and the inefficiency of the market equilibrium. The market level of quality investment is excessive (insufficient) and consumers are too (little) picky from the point of view of welfare maximization if and only if a raise in quality results in that consumers inspect a higher (lower) number of products.
    Keywords: efficiency; quality investment; sequential search; super- and sub-modular match value distributions
    JEL: D43 D83 L13
    Date: 2020–04
  18. By: Bradley J. Ruffle (Department of Economics, McMaster University, Canada; Rimini Centre for Economic Analysis); Arie Sherman (Department of Economics and Management, Ruppin Academic Center, Israel); Zeev Shtudiner (Department of Economics and Business Administration, Ariel University, Israel)
    Abstract: We design a field experiment to test for price discrimination at seemingly highly competitive Israeli produce markets. We trained 90 buyers and sent them to produce markets across Israel. After verifying a product’s posted price, they asked for a discount on a one-kilogram or one-unit purchase. Vendors employ third-degree price discrimination: women are offered larger and more frequent discounts than men, and the more attractive the female buyer, the larger and more frequent the discount offered. Male buyers do not benefit from this beauty discount. No other buyer characteristic is a significant predictor of the likelihood or size of a discount. To understand our findings, we provide a more nuanced view of these markets that includes search costs and considerable vendor price-setting discretion.
    Keywords: experimental economics, beauty, price discrimination, negotiation, price discounts, search costs
    JEL: C91 D01
    Date: 2020–06
  19. By: Serguey Braguinsky; Atsushi Ohyama; Tetsuji Okazaki; Chad Syverson
    Abstract: We explore how firms grow by adding products. In contrast to most earlier work on the topic, our conceptual and empirical framework allows for separate treatment of product innovation (vertical differentiation) and diversification (horizontal differentiation). The market context is Japan’s cotton spinning industry at the turn of the last century. We find that introducing innovative products outside of the previously feasible is a key to firm growth. It provides opportunities to capture high-end vertically differentiated product markets when successful while also facilitating the firm’s growth through horizontal expansion in product space. However, this process involves a high degree of uncertainty, so firms tend to introduce innovative products on experimental basis. In long-term outcomes, the right tail of the firm size distribution becomes dominated by firms that were able to expand in both directions: moving first into technologically challenging vertically differentiated products, and then later applying their newly acquired high-end technical competence to horizontal expansion of their product portfolios.
    Date: 2020–06
  20. By: Oleksandr Talavera (University of Birmingham); Nam Vu (University of Birmingham)
    Abstract: This paper studies the impact of inventory shock on price-setting behaviour. Our analysis exploits a natural experiment involving the 2011 Thailand flood, which affected the production facilities of Western Digital (WD), the world’s largest hard drive producer. This natural disaster shock affected inventory and product availability—and, consequently, the pricing for U.S. hard drive sellers. The prices of WD and non-WD hard disk drives (HDD) increased within one month after the shock. Pricing of solid-state drives (SSD), the closest substitute for HDD products, was also affected, though with smaller responses. However, there is little evidence of changes in the price-setting of final goods (desktops or laptops) or complementary components (processors or motherboards). This suggests that the shock transmission is delayed and/or absorbed in production networks.
    Keywords: supply shock, inventory, price stickiness, hard drive, natural disaster
    JEL: G30 J10 J33
    Date: 2020–06
  21. By: Markova, Olga (Маркова, Ольга) (The Russian Presidential Academy of National Economy and Public Administration); Morozov, Anton (Морозов, Антон) (The Russian Presidential Academy of National Economy and Public Administration)
    Abstract: The widespread adoption of digital technology has led to a change in business models: network effects are beginning to have a significant impact on the functioning of many companies and markets. The paper considers basic and advanced models of market functioning with cross network effects. It turns out that when modeling competition in markets with cross-network effects, key factors are played by factors such as price structure, demand characteristics, and the possibility of multiple addressing.
    Date: 2020–03
  22. By: Ralph Siebert; Zhili Tian
    Abstract: Pharmaceutical firms spend increasing amounts in mergers and acquisitions (M&As), which raises the question of whether sufficient investment is left after mergers to further develop firms’ internal drug development capability. We evaluate the effects of M&As on firms’ post-merger R&D investments and drug development capabilities across drug development phases. This study builds on a novel database that enables us to evaluate the post-merger effect at the research project level and across development phases. A further novel feature of the study is allowing measurement errors to enter firms’ R&D investments. Our study adopts a structural equation modeling approach, which is appropriate for evaluating a system of equations through which we examine the direct and indirect merger effects on R&D capabilities across development phases. We find that M&As have a strong effect on firms’ drug development at the late development phases through economies of scope. At the early development phases, M&As serve to replenish firms’ drug pipelines. The study shows that M&As have a direct and negative effect on firms’ R&D investments. However, the overall effect on R&D investments accounting for enhanced post-merger R&D capabilities and product approvals turns out to be positive. M&As can be an effective instrument for firms to acquire drug development knowledge and technology in late stages of the development process (Phases 3 clinical testing and regulatory filing). Our study provide empirical evidence that investments in M&As in late stage of drug development help firms’ growth and increase firms revenue.
    Keywords: drug development phases, dynamics, innovation management, merger and acquisition, pharmaceutical drug development, R&D capabilities
    JEL: L11 L13 L52 O31 O32 O38
    Date: 2020
  23. By: Intini, Mario (University of Bari Aldo Moro); Waterson, Michael (University of Warwick)
    Abstract: In Britain, the key source of renewable generation is wind, most abundant on the west coast of Scotland, where there is relatively little demand. For this reason, an interconnector, the Western Link, was built to take electricity closer to demand. When the Link is operating, payments by National Grid to constrain wind farms not to produce will be lower, we may predict, since fewer or less restrictive constraints need be imposed. But the Link has not been working consistently. We empirically estimate the link’s value. Focusing on the three most recent episodes of outage, starting on 4th May 2018 up to 25th September 2019, our essential approach is to treat these outages as a natural experiment using hourly data. Our results reveal that the Link had an important role in costs saved and price constrained and MWh curtailed reductions. We estimate a cost-saving of almost £30m. However, the saving appears to drop over time, so we investigate wind farms’ behavior. We find that wind farms behave strategically since the accuracy of wind forecasting depends on the relevant prices impacting their earnings
    Keywords: Interconnector, Electricity Market, Wind forecasting, Wind Generators, Pricing Strategies JEL Classification: D22 ; D47 ; H54 ; L22 ; Q41 ; Q47
    Date: 2020
  24. By: Xie, B-C.; Xu, J.; Pollitt, M.
    Abstract: This paper presents an analysis of the impact of the recent power market reform process in China – following the No.9 Document of March 2015 – on the industrial price of electricity. We do this by picking a typical power price for a medium sized industrial customer in two of China’s leading reform provinces: Guangdong and Zhejiang. We find that power market reform, which is characterised by the introduction of wholesale electricity markets, has substantially reduced prices. Our detailed analysis shows that these price falls have come from a number of different sources: falls in the prices paid to generators, reductions in grid charges and falls in government taxes and additional charges. We show that the regulated price falls by 26.4% in Guangdong and by 26.9% in Zhejiang. The market price falls even further by 27.7% in Guangdong and 30.4% in Zhejiang. We conclude that while the impact of the power markets is significant, the associated changes to network charges and other government determined components of the price are more significant.
    Keywords: Chinese power market reform, electricity prices, No.9 Document
    JEL: L94
    Date: 2020–05–21
  25. By: Kory Kroft; Yao Luo; Magne Mogstad; Bradley Setzler
    Abstract: We quantify the importance of imperfect competition in the U.S. construction industry by estimating the size of rents earned by American firms and workers. To obtain a comprehensive measure of the total rents and to understand its sources, we take into account that rents may arise both due to markdown of wages and markup of prices. Our analyses combine the universe of U.S. business and worker tax records with newly collected records from U.S. procurement auctions. We first examine how firms respond to a plausibly exogenous shift in product demand through a difference-in-differences design that compares first-time procurement auction winners to the firms that lose, both before and after the auction. Motivated and guided by these estimates, we next develop, identify, and estimate a model where construction firms compete with one another for projects in the product market and for workers in the labor market. We find that American construction firms have significant wage- and price-setting power. This imperfect competition generates a considerable amount of rents, two-thirds of which is captured by the firms.
    JEL: D44 J31 J42 L11
    Date: 2020–06
  26. By: Andrea Attar (TSE - Toulouse School of Economics - EHESS - École des hautes études en sciences sociales - INRA - Institut National de la Recherche Agronomique - CNRS - Centre National de la Recherche Scientifique - UT1 - Université Toulouse 1 Capitole); Thomas Mariotti (TSE - Toulouse School of Economics - EHESS - École des hautes études en sciences sociales - INRA - Institut National de la Recherche Agronomique - CNRS - Centre National de la Recherche Scientifique - UT1 - Université Toulouse 1 Capitole); Francois Salanie (TSE - Toulouse School of Economics - EHESS - École des hautes études en sciences sociales - INRA - Institut National de la Recherche Agronomique - CNRS - Centre National de la Recherche Scientifique - UT1 - Université Toulouse 1 Capitole)
    Abstract: We study a discriminatory limit-order book in which market makers compete in nonlinear tariffs to serve a privately informed insider. Our model allows for general nonparametric specifications of preferences and arbitrary discrete distributions for the insider's private information. Adverse selection severely restricts equilibrium outcomes: in any pure-strategy equilibrium with convex tariffs, pricing must be linear and at most one type can trade, leading to an extreme form of market breakdown. As a result, such equilibria exist only under exceptional circumstances that we fully characterize. These results are strikingly different from those of existing analyses that postulate a continuum of types. The two approaches can be reconciled when we consider epsilon-equilibria of games with a large number of market makers or a large number of types.
    Keywords: adverse selection,competing mechanism,limit-order book
    Date: 2019
  27. By: Klein, Gordon; Rebolledo, Mayra
    Abstract: We compare the traditional model for structurally estimating bargaining power solutions assuming certainty on the disagreement payoffs against a model assuming evenly distributed bargaining power and uncertainty on disagreement profits. We find substantial differences in the distribution of the rent resulted from each of these models and it was hinted how the assumptions may have a role on the identification of the rent's distribution
    Date: 2020
  28. By: Morozov, Anton (Морозов, Антон) (The Russian Presidential Academy of National Economy and Public Administration); Shpakova, Anastasiya (Шпакова, Анастасия) (The Russian Presidential Academy of National Economy and Public Administration)
    Abstract: The paper analyzes studies in the field of assessing the impact of competition policy on economic development. The aim of the work is to identify the fundamental beliefs of the authors regarding such categories as competition, the universality of economic laws, the role of the state in the development and support of the market mechanism, the relationship between innovative development and market competition. The research methodology is based on the use of discourse analysis in relation to articles on this topic in world economic science.
    Date: 2020–03
  29. By: Ronen Gradwohl; Moshe Tennenholtz
    Abstract: This paper studies cooperative data-sharing between competitors vying to predict a consumer's tastes. We design optimal data-sharing schemes both for when they compete only with each other, and for when they additionally compete with an Amazon---a company with more, better data. In both cases we show that participants benefit from such coopetition. We then apply the insights from our optimal schemes to more general settings.
    Date: 2020–05
  30. By: Pavlova, Natalia (Павлова, Наталья) (The Russian Presidential Academy of National Economy and Public Administration)
    Abstract: Against the background of a high level of cartelization of the Russian economy, the question arises of assessing the existing system of sanctions for cartels and its compliance with the criteria of optimality. The work demonstrated that the problem of the insufficiency of fines imposed to ensure optimal deterrence of character not only for Russia, but also for other countries. This creates the basis for the use of other forms of sanctions, in particular, the ban on certain activities and imprisonment. The article assesses some initiatives of the antimonopoly body to tighten criminal sanctions for cartels.
    Date: 2020–03

This nep-com issue is ©2020 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.