nep-com New Economics Papers
on Industrial Competition
Issue of 2020‒07‒27
28 papers chosen by
Russell Pittman
United States Department of Justice

  1. Merger Policy in Digital Markets: An Ex-Post Assessment By Argentesi, Elena; Buccirossi, Paolo; Calvano, Emilio; Duso, Tomaso; Marrazzo, Alessia; Nava, Salvatore
  2. Market Power, Competition and Innovation in digital markets: a survey By Calvano, Emilio; Polo, Michele
  3. Measuring Unilateral Effects under Data Scarcity: A Merger Case in South Africa By Ivaldi, Marc; Mncube, Liberty; Sánchez del Villar, Marina
  4. Purchasing Alliances and Product Variety By Marie-Laure ALLAIN; Rémi AVIGNON; Claire CHAMBOLLE
  5. Mergers and Innovation Portfolios By Moraga-González, José-Luis; Motchenkova, Evgenia; Nevrekar, Saish
  6. Licensing at the patent cliff and market entry By Marxen, Annabelle; Montez, João
  7. Competition on Unobserved Attributes: The Case of the Hospital Industry By Choné, Philippe; Wilner, Lionel
  8. Economising on network provision while preserving competition: the challenges of 5G mobile network sharing By Pápai, Zoltán; McLean, Aliz; Csorba, Gergely; Nagy, Péter
  9. Quality provision in hospital markets with demand inertia:The role of patient expectations By Luís Sá; Odd Rune Straume
  10. Big Tech Mergers By Motta, Massimo; Peitz, Martin
  11. The (Anti-)Competitive Effect of Intellectual Property Rights By Martin Wörter; Michael Peneder; Mark Thompson
  12. Decentralizing Cooperation through Upstream Bilateral Agreements By Jeon, Doh-Shin; Lefouili, Yassine
  14. Intellectual Property and the Organization of the Global Value Chain By Bolatto, Stefano; Naghavi, Alireza; Ottaviano, Gianmarco; Zajc Kejzar, Katja
  15. The Impact of Prices on Firm Reputation By Michael Luca; Oren Reshef
  16. Algorithmic Collusion: Supra-competitive Prices via Independent Algorithms By Hansen, Karsten; Misra, Kanishka; Pai, Mallesh
  17. Competition and Innovation: Evidence from Worldwide Corporate R&D Spenders By Michele Cincera; Ela Ince; Anabela Marques Santos
  18. On ‘Trade Induced Technical Change: The Impact of Chinese Imports on Innovation, IT and Productivity’ By Campbell, Douglas L.; Mau, Karsten
  19. Identifying Service Market Reform Priorities in Italy By Nazim Belhocine; Daniel Garcia-Macia
  20. Competition and Inequality By Andrea Colciago; Rajssa Mechelli
  21. The impact of alternative forms of bank consolidation on credit supply and financial stability By Sergio Mayordomo; Nicola Pavanini; Emanuele Tarantino
  22. COVID-19 and Digital Resilience: Evidence from Uber Eats By Manav Raj; Arun Sundararajan; Calum You
  23. Who benefits when inertia is reduced? Competition, quality and returns to skill in health care markets By Fleitas, Sebastian
  24. Identification and Estimation of Demand for Bundles By Iaria, Alessandro; WANG, Ao
  25. Credit Rationing and Pass-Through in Supply Chains: Theory and Evidence from Bangladesh By Emran, Shahe; Mookherjee, Dilip; Shilpi, Forhad; Uddin, Helal
  26. Competition, Competitiveness and Growth in Sub-Saharan Africa By Reda Cherif; Sandesh Dhungana; Xiangming Fang; Jesus R Gonzalez-Garcia; Yuanchen Yang; Mustafa Yenice; Jung Eun Yoon
  27. Successful retailer strategies in price comparison platforms By Hackl, Franz; Hoelzl-Leitner, Michael; Winter-Ebmer, Rudolf; Zulehner, Christine
  28. International Jurisdiction over Standard-Essential Patents By Horn, Henrik

  1. By: Argentesi, Elena; Buccirossi, Paolo; Calvano, Emilio; Duso, Tomaso; Marrazzo, Alessia; Nava, Salvatore
    Abstract: This paper presents a broad retrospective evaluation of mergers and merger decisions in the digital sector. We first discuss the most crucial features of digital markets such as network effects, multi-sidedness, big data, and rapid innovation that create important challenges for competition policy. We show that these features have been key determinants of the theories of harm in major merger cases in the past few years. We then analyse the characteristics of almost 300 acquisitions carried out by three major digital companies Amazon, Facebook, and Google between 2008 and 2018. We cluster target companies on their area of economic activity and show that they span a wide range of economic sectors. In most cases, their products and services appear to be complementary to those supplied by the acquirers. Moreover, target companies seem to be particularly young, being four-years-old or younger in nearly 60% of cases at the time of the acquisition. Finally, we examine two important merger cases, Facebook/Instagram and Google/Waze, providing a systematic assessment of the theories of harm considered by the UK competition authorities as well as evidence on the evolution of the market after the transactions were approved. We discuss whether the CAs performed complete and careful analyses to foresee the competitive consequences of the investigated mergers and whether a more effective merger control regime can be achieved within the current legal framework.
    Keywords: Antitrust; Big Data; Digital Markets; Ex-post; mergers; network effects; platforms
    JEL: K21 L4
    Date: 2019–12
  2. By: Calvano, Emilio; Polo, Michele
    Abstract: This article focuses on the economics of digital markets with particular emphasis on those features that are commonly deemed critical for Antitrust. Digital markets are often concentrated due to network effects and due to the need of large amounts of Data for production. We review papers characterizing the nature of social harms caused by market power and the role of competition FOR the market and IN the market to relief some of that harm. Special emphasis is given to the role of (i) human attention (which is monetized and is a key input in advertising markets), (ii) Data (which is the oil that powers these markets) and (iii) innovation (incentives, entry for buyout and killer acquisitions).
    Keywords: Digital Markets; Economics of attention; Innovation; killer acquisitions; network effects
    JEL: L1 L4
    Date: 2020–01
  3. By: Ivaldi, Marc; Mncube, Liberty; Sánchez del Villar, Marina
    Abstract: In this paper, we use a differentiated-products set up to assess the impact on competition of a merger between Greif and Rheem South Africa. Both parties are active in the industrial packaging products sector. The parties’ activities overlap, among others, in the production of large steel drums. Our analysis suggests that there is a low degree of substitutability between large steel drums and other products in the market. For this reason, we focus our competitive assessment on the unilateral effects of large steel drums. We rely on a limited amount of relatively high-level data to arrive to robust conclusions on the unilateral effects that the merger would induce. We study these unilateral effects using two empirical tools, the upwards pricing pressure (UPP) and the gross upwards pricing pressure index (GUPPI). These two measures are complementary in assessing the competitive harm that the merger could induce. UPP nets out the incentive to raise prices due to lower competition with the incentive to reduce prices due to lower marginal costs. GUPPI focuses on the incentive to raise prices post-merger and is linked to the market definition that competition authorities use when defining the relevant market. To our knowledge, this paper provides the first application in the African continent of such empirical analysis. We calculate these two measures following the conclusion of the Tribunal. We conclude that both UPP and GUPPI consistently signal that the merger would create strong incentives to raise prices.
    Date: 2020–07–10
  4. By: Marie-Laure ALLAIN (CREST, CNRS, Ecole Polytechnique, Institut Polytechnique de Paris); Rémi AVIGNON (CREST, Institut Polytechnique de Paris); Claire CHAMBOLLE (ALISS UR1303, INRA, Université Paris-Saclay, F-94200 Ivry-sur-Seine, France, and CREST)
    Abstract: We analyze the impact of purchasing alliances on product variety and profit sharing in a setting, in which capacity constrained retailers operate in separated markets and select their assortment in a set of differentiated products offered by heterogeneous suppliers (multinationals vs. local SMEs). Retailers may either have independent listing strategies or build a buying group, thereby committing to a joint listing strategy. This alliance may cover the whole product line (full buying group) or only the products of large suppliers (partial buying group). We show that a buying group may enhance the retailers’ buyer power and reduce the overall product variety to the detriment of consumers. Our most striking result is that partial buying groups do not protect the small suppliers from being excluded or from bearing profit losses; they may even be more profitable for retailers than full buying groups.
    Keywords: Vertical relations, buying group, purchasing alliance, buyer power, vertical foreclosure.
    JEL: L13 L42 L81
  5. By: Moraga-González, José-Luis; Motchenkova, Evgenia; Nevrekar, Saish
    Abstract: This paper studies mergers in markets where firms invest in a portfolio of research projects of different profitability and social value. The portfolio nature of the investment problem brings about novel insights on the external effects of firms' investments. The investment of a firm in one project imposes a negative business-stealing externality on the rival firms because it lowers the probability they win the innovation contest for that project; however, the investment of a firm in one project also exerts a positive business-giving externality on the rival firms because it increases the likelihood they win the contest for the alternative project. Merging firms internalize these positive and negative externalities they impose on each other. We show that when the project that is relatively more profitable for the firms is also the more appropriable, then a merger increases consumer welfare by reducing investment in the most profitable project and increasing investment in the alternative (less profitable) project. For the case of linear demand and constant marginal costs, the portfolio effect of mergers makes them consumer welfare improving. With constant elasticity of demand and constant marginal costs, a merger increases consumer welfare if the more profitable project corresponds to the market with the higher elasticity of demand. The portfolio effect of mergers may dominate the usual market power effects of mergers.
    Keywords: Horizontal mergers; innovation portfolios; R&D contests
    JEL: L13 L22 O31 O32
    Date: 2019–12
  6. By: Marxen, Annabelle; Montez, João
    Abstract: We study the incentives for a monopoly incumbent to reach an agreement allowing a generic to enter just before its patent expires, i.e., at the patent cliff, and its consumer and social welfare effects. In our model, entry by more than one entrant is unprofitable. Thus, in the absence of an agreement, the entry game has a "grab the dollar" structure, with each generic entering in each period with a low (high) probability if entry costs are high (low). In that case the incumbent can remain a monopolist for some time after patent expiry, until one or more generics finally enter. An early entry agreement guarantees a single generic enters the market immediately, and it allows the incumbent to extract the entrant's profit. It will be reached in equilibrium when entry costs are low or the entry process is short. In these instances, early entry agreements do however tend to hurt consumers. Yet, allowing for such agreements increases overall social welfare in a benchmark model of vertical differentiation, even if the expected competition on the market is reduced. The same holds in a benchmark model with captive consumers and shoppers, provided the share of captives is not too high.
    JEL: I1 L1 L4
    Date: 2020–01
  7. By: Choné, Philippe; Wilner, Lionel
    Abstract: To assess strategic interactions in industries where endogenous product characteristics are unobserved to the researcher, we propose an empirical method that brings a competition-in-utility-space framework to the data. We apply the method to the French hospital industry. The utilities offered to patients are inferred from local market shares under AKM exclusion restrictions. The hospitals' objective functions are identified thanks to the gradual introduction of stronger financial incentives over the period of study. Offering more utility to each patient entails incurring higher costs per patient, implying that utilities are mostly strategic complements. Counterfactual simulations show that stronger incentives affect market shares but have little impact on the total number of patient admissions. We quantify the resulting gains for patients and losses for hospitals.
    Keywords: Competition in utility space; Financial incentives; hospital choice; payment reform
    JEL: D22 I11 L13
    Date: 2020–01
  8. By: Pápai, Zoltán; McLean, Aliz; Csorba, Gergely; Nagy, Péter
    Abstract: The aim of the paper is to discuss the challenges in the competition assessment of 5G mobile network sharing which emerge in addition to those which were relevant under 4G networks (or below). Chapter 2 of the paper briefly discusses the main types of mobile network sharing. Chapter 3 presents our analytical framework for the competition assessment of mobile network sharing agreements, built on the approach laid out in guidelines by the European Commission and European regulators, as well as competition cases in European jurisdictions. Throughout, we focus on radio access network (RAN) sharing. Chapter 4 brings 5G into the picture. Here we discuss five special 5G technology and service characteristics which pose new challenges to the competition assessment of 5G RAN sharing agreements and should be in the focus of future research.
    Keywords: mobile markets,network sharing,competition,competitive assessment,5G
    Date: 2019
  9. By: Luís Sá (NIPE and University of Minho); Odd Rune Straume (NIPE and Department of Economics, University of Minho and Department of Economics, University of Bergen)
    Abstract: The presence of switching costs and persistent patient preferences generates demand inertia and links current and future choices of hospital. Using a model of hospital competition with demand inertia, we investigate the effect of patient expectations (whether and how patients anticipate the future) on quality provision. We consider three types of expectations. Myopic patients choose a hospital based on current variables alone, forward-looking but naïve patients take the future into account but assume that quality remains constant, and forward-looking and rational patients foresee the evolution of quality. We rank equilibrium quality provision and show that it is higher under naïve than myopic expectations, while equilibrium quality under rational expectations may be highest or lowest. This result also holds for patient welfare, suggesting that rationality does not always benefit patients. We also show that only under rational expectations may quality be lower than in a market without inertia and switching cost reductions beneficial.
    Keywords: Hospital competition; myopic behaviour; forward-looking behaviour; rational expectations; switching costs.
    JEL: I11 I18 L13 L51
    Date: 2020
  10. By: Motta, Massimo; Peitz, Martin
    Abstract: Big tech mergers are frequently occurring events. What are the competitive effects of these mergers? With the help of a simple model we identify the acquisition of potential competitors as a pressing issue for merger control in digital industries. We also sketch a few novel theories of harm of horizontal and conglomerate mergers that are potentially relevant in digital industries. Finally, we draw some policy recommendations on how to deal with mergers in such industries.
    Keywords: Acquisitions; Antitrust; competition policy; Digital Markets; platforms
    Date: 2020–01
  11. By: Martin Wörter (KOF Swiss Economic Institute, ETH Zurich, Switzerland); Michael Peneder (Austrian Institute of Economic Research, Vienna, Austria); Mark Thompson (Austrian Institute of Technology, Vienna, Austria)
    Abstract: We test whether intellectual property rights (IPRs) foster or hinder innovation by estimating IV structural equations for a large sample of Swiss firms. We find that better appropriability conditions at the industry level raise the number of competitors. However, conditional on the given industry structure, individual firms face fewer competitors, if they actually use IPRs. The further impact of fewer competitors is to raise R&D, when initial competition is strong, but to reduce it, when initial competition is weak (“inverted U†).
    Keywords: patents, innovation, competition, simultaneous system
    JEL: O31 O32 O34 D22
    Date: 2019–03
  12. By: Jeon, Doh-Shin; Lefouili, Yassine
    Abstract: We consider an industry with n≥3 firms owning upstream inputs and interacting noncooperatively in a downstream market. Under general conditions, upstream bilateral agreements giving firms access to one another's input lead to industry profit maximization. This decentralization result applies to various upstream agreements including cross-licensing agreements among patent-holding manufacturers, interconnection agreements among telecommunication companies, interbank payments for ATM networks, and data-sharing agreements among competitors or complementors.
    Keywords: Bilateral oligopoly; upstream agreement; cooperation
    JEL: L13 L41
    Date: 2020–06
  13. By: Zoltán Pápai (Infrapont Economic Consulting); Aliz McLean (Infrapont Economic Consulting); Péter Nagy (Infrapont Economic Consulting); Gábor Szabó (Infrapont Economic Consulting); Gergely Csorba (Infrapont Economic Consulting and Center of Economics and Regional Sciences – Institute of Economics)
    Abstract: The rollout of fifth generation mobile networks is progressing around the world, but 5G looks especially expensive compared to previous generations. Network sharing between two or more mobile operators is an obvious way to attain significant cost savings, but may also raise competition concerns. This paper first distinguishes between early and mature 5G, and then discusses the expected changes mature 5G brings to the assessment of active mobile network sharing agreements from a competition policy point of view. We focus on the three main concerns where 5G may bring the most significant changes in the evaluation compared to 4G: service differentiation, cost commonality between the parties and the parties’ ability and incentives to grant access to critical inputs to downstream competitors. For each of these concerns, we show that they are not easy to substantiate and in some cases the concerns may even become less grave than under 4G.
    Keywords: mobile telecommunication markets, network sharing, competition policy, competitive assessment, 5G
    JEL: K21 L13 L41
    Date: 2020–07
  14. By: Bolatto, Stefano; Naghavi, Alireza; Ottaviano, Gianmarco; Zajc Kejzar, Katja
    Abstract: This paper introduces the concept of intangible assets in a property rights model of sequential supply chains. Firms transmit knowledge to their suppliers to facilitate input customization. Yet, to avoid knowledge dissipation, they must protect the transmitted intangibles, the cost of which depends on the knowledge intensity of inputs and the quality of institutions protecting intellectual property rights (IPR) in supplier locations. When input knowledge intensity increases (decreases) downstream and suppliers' investments are complements, the probability of integrating a randomly selected input is decreasing (increasing) in IPR quality and increasing (decreasing) in the relative knowledge intensity of downstream inputs. Opposite but weaker predictions hold when suppliers' investments are substitutes. Comprehensive trade and FDI data on Slovenian firms' value chains provide evidence in support of our model's predictions. They also suggest that, in line with our model, better institutions may have very different effects on firm organization depending on whether they improve the protection of tangible or intangible assets.
    Keywords: Appropriability; firm organization; intangible assets; Intellectual Property; Outsourcing; sequential production; Stage complementarity; Upstreamness; vertical integration
    JEL: D23 F12 F14 F21 F23 L22 L23 L24 O34
    Date: 2019–12
  15. By: Michael Luca; Oren Reshef
    Abstract: While a business's reputation can impact its pricing, prices can also impact its reputation. To explore the impact of prices on reputation, we investigate daily data on menu prices and online ratings from a large rating and ordering platform. We find that a price increase of 1% leads to a decrease of 3%-5% in the average rating. Consistent with this, the overall distribution of ratings for cheaper restaurants is similar to that of more expensive restaurants. Finally, these effects don't seem to be driven by consumer retaliation against price changes, but by changes in absolute price levels.
    JEL: D4 D8 L0
    Date: 2020–06
  16. By: Hansen, Karsten; Misra, Kanishka; Pai, Mallesh
    Abstract: Motivated by their increasing prevalence, we study outcomes when competing sellers use machine learning algorithms to run real-time dynamic price experiments. These algorithms are often misspecified, ignoring the effect of factors outside their control, e.g. competitors' prices. We show that the long-run prices depend on the informational value (or signal to noise ratio) of price experiments: if low, the long-run prices are consistent with the static Nash equilibrium of the corresponding full information setting. However, if high, the long-run prices are supra-competitive---the full information joint-monopoly outcome is possible. We show this occurs via a novel channel: competitors' algorithms' prices end up running correlated experiments. Therefore, sellers' misspecified models overestimate own price sensitivity, resulting in higher prices. We discuss the implications on competition policy.
    Keywords: algorithmic pricing; bandit algorithms; Collusion; Misspecified models
    Date: 2020–01
  17. By: Michele Cincera; Ela Ince; Anabela Marques Santos
    Abstract: The paper aims at assessing the effect of competition of firm-level innovation. The sample is composed of the world top corporate R&D spender listed in the EU-2017 industrial R&D Scoreboard, and the analysis covers the years spanning 2007 to 2016. We use an industry-year-indicator, the inverse of the Lerner index, to measure the competition level R&D expenditures are used as a proxy for innovation. Model is estimated using two-stage least squares, to control for potential endogeneity of the competition indicator. Results confirm the existence of an inverted-U relationship between competition and innovation. Further analysis is undertaken splitting the overall firm sample into services and manufacturing sectors according to technology and knowledge intensities. We validate the inverted-U shaped relationship between competition and innovation for the firms in medium-high-tech and high-tech manufacturing sectors whereas we do not observe the impact for the firms in medium-low and low-tech manufacturing sectors nor service sectors.
    Keywords: Competition, Innovation, Manufacturing, Services.
    Date: 2019–07
  18. By: Campbell, Douglas L.; Mau, Karsten (RS: GSBE other - not theme-related research, Macro, International & Labour Economics)
    Abstract: Bloom, Draca, and Van Reenen (2016) find that Chinese import competition induced a rise in patenting, IT adoption, and TFP by up to 30% of the total increase in Europe in the late 1990s and early 2000s. We uncover several coding errors in an important robustness check of their patent results. When corrected, we find no statistically significant relationship between Chinese competition and patents. Other specifications in the original paper use a problematic log(1+patents) transformation. This normalization induces bias given low average patent counts for firms in China-competing sectors, and rapidly declining patents across the sample.
    JEL: F14 F13 L25 L60
    Date: 2020–07–09
  19. By: Nazim Belhocine; Daniel Garcia-Macia
    Abstract: Italy’s labor productivity in market services has declined since 2000, underperforming manufacturing and peer European countries, especially in strongly regulated sectors. A model of monopolistic competition is used to identify which service sectors would benefit more from removing entry and/or exit barriers. Using Italian firm-level data, the paper finds that sectors with high markups, such as professional services, would primarily benefit from removing entry barriers. Sectors with a large mass of unproductive firms, such as retail, would instead benefit from removing exit barriers. Policy recommendations to improve efficiency are outlined in relation to the sectoral priorities identified in the data.
    Keywords: Total factor productivity;Price indexes;Unemployment;Development;Labor productivity;service market reform,firm entry/exit barriers,markups,productivity.,WP,exit barrier,entry barrier,markup,regulated profession,market service
    Date: 2020–02–21
  20. By: Andrea Colciago; Rajssa Mechelli
    Abstract: This paper links the debate on the decrease in competitiveness and business dynamism with that on rising inequality. We build a framework with entry, imperfect competition, heterogeneous households, and incomplete markets. Recent trends in markups, factors' share, and business dynamism are explained through an increase in barriers to entry for new firms, which restrict competition. Those trends account for 11% to 22% of the increase in income inequality observed between 1989 and 2007 and for 10% of the increase in wealth inequality. Just 16% of the population experiences a welfare gain during the transition from a high to a low competition environment. These are either the wealthy, or agents with low productivity relative to their asset holdings.
    Keywords: inequality; entry; oligopoly; markups; incomplete markets
    JEL: E2 L1
    Date: 2020–06
  21. By: Sergio Mayordomo (Banco de España); Nicola Pavanini (Tilburg University and CEPR); Emanuele Tarantino (LUISS, EIEF and CEPR)
    Abstract: Between 2009 and 2011, the Spanish banking system underwent a restructuring process based on consolidation of savings banks. The program’s design allows us to study how alternative forms of consolidation affect credit supply and financial stability. Compared to bank business groups, we find that bank mergers’ market power produces a contraction in credit supply, higher interest rates, but also a reduction in non-performing loans. We then estimate a structural model of credit demand and supply. We show that short-run welfare gains from improved financial stability outweigh losses from reduced credit supply, while small long-run cost efficiencies generate large welfare increases.
    Keywords: bank consolidation, mergers, business groups, credit supply, financial stability, welfare
    JEL: G21 G28 G32 G34
    Date: 2020–07
  22. By: Manav Raj; Arun Sundararajan; Calum You
    Abstract: We analyze how digital platforms can increase the survival rate of firms during a crisis by providing continuity in access to customers. Using order-level data from Uber Technologies, we study how the COVID-19 pandemic and the ensuing shutdown of businesses in the United States affected independent, small business restaurant supply and demand on the Uber Eats platform. We find evidence that small restaurants experience significant increases in total activity, orders per day, and orders per hour following the closure of the dine-in channel, and that these increases may be due to both demand-side and supply-side shocks. We document an increase in the intensity of competitive effects following the shock, showing that growth in the number of providers on a platform induces both market expansion and heightened inter-provider competition. Our findings underscore the critical role that digital will play in creating business resilience in the post-COVID economy, and provide new managerial insight into how supply-side and demand-side factors shape business performance on a platform.
    Date: 2020–06
  23. By: Fleitas, Sebastian
    Abstract: Increased competition creates incentives for health-care providers to improve quality by incorporating better inputs, like higher-skill physicians. However, because the supply of high-skill physicians is relatively inelastic in the short run, increases in competition may lead only to increases in returns to skill. I leverage a reform in Uruguay that increased competition among completely vertically integrated providers by reducing lock-in of consumers. Using administrative data on wages and hours and a measure of physicians' skills based on test scores from medical school, I show that increased competition increased the returns to skill without strong evidence of an increase in quality.
    Keywords: Competition; inertia; Quality; Returns to skill
    JEL: I13 I18 J31 J44 L15
    Date: 2020–01
  24. By: Iaria, Alessandro; WANG, Ao
    Abstract: We present novel identification and estimation results for a mixed logit model of demand for bundles with endogenous prices given bundle-level market shares. Our approach hinges on an affine relationship between the utilities of single products and of bundles, on an essential real analytic property of the mixed logit model, and on the existence of exogenous cost shifters. We propose a new demand inverse in the presence of complementarity that enables to concentrate out of the likelihood function the (potentially numerous) market-product specific average utilities, substantially alleviating the challenge of dimensionality inherent in estimation. To illustrate the use of our methods, we estimate demand and supply in the US ready-to-eat cereal industry, where the proposed MLE reduces the numerical search from approximately 12000 to 130 parameters. Our estimates suggest that ignoring Hicksian complementarity among different products often purchased in bundles may result in misleading demand estimates and counterfactuals.
    Date: 2020–01
  25. By: Emran, Shahe; Mookherjee, Dilip; Shilpi, Forhad; Uddin, Helal
    Abstract: We extend standard models of price pass-through in an imperfectly competitive supply chain to incorporate rationing of trade credit. Credit rationing reverses predictions concerning effects of raw material import prices on pass-through to wholesale prices, and effects of regulations of intermediaries. To test these we study the effects of a policy in Bangladesh's edible oils supply chain during 2011-12 banning a layer of financing intermediaries. Evidence from a difference-in-difference estimation rejects the standard model. We find that the regulatory effort to reduce market power of financing intermediaries ended up raising consumer prices by restricting access to credit of downstream traders.
    Keywords: Bangladesh; Credit rationing; Edible Oils; intermediary; market power; Pass-Through; Supply Chain
    JEL: L13 O12 Q13
    Date: 2020–01
  26. By: Reda Cherif; Sandesh Dhungana; Xiangming Fang; Jesus R Gonzalez-Garcia; Yuanchen Yang; Mustafa Yenice; Jung Eun Yoon
    Abstract: Does greater product market competition improve external competitiveness and growth? This paper examines this question by using country-and firm-level data for a sample of 39 sub-Saharan African countries over 2000–17, as well as other emerging market economies and developing countries, and finds that an improvement in domestic competition is associated with a signficant increase in real GDP per capita growth rate, achieved mainly through an improvement in export competitiveness and productivity growth. Price levels, including of essential items, are also generally lowered with an increase in competition. Moreover, at the firm-level, evidence shows that greater competition—proxied through a decline in corporate market power—is associated with an increase in firm’s investment and the labor’s share in output. These effects are more pronounced in the manufacturing sector and among domestic firms compared to foreign firms.
    Keywords: Economic integration;Trade policy;Global competitiveness;Total factor productivity;International trade agreements;Markups,Market Power,Competition,Sub-Saharan Africa,WP,sub-Saharan African country,markup,sub-Saharan,effect of competition,emerge market economy
    Date: 2020–02–14
  27. By: Hackl, Franz; Hoelzl-Leitner, Michael; Winter-Ebmer, Rudolf; Zulehner, Christine
    Abstract: The choice of an appropriate e-commerce strategy for the listing in price comparison platforms (eBay, Amazon, price search engines) is crucial for the survival of online stores in B2C e-commerce business. We use a comprehensive data set from the Austrian price search engine to identify successful e-commerce strategies with regard to these listing decisions. An e-commerce strategy is a set of choices including listing, availability, and decisions on the price path and shipping cost. We apply cluster analysis to identify the different strategies that have been used by online retailers. Using various success measures such as revenue, clicks, market share, and the survival of firms we present causal evidence on the effectiveness of different e-commerce strategies.
    Keywords: business strategies; E-commerce; online trade; Retailing
    JEL: L10 L81
    Date: 2020–01
  28. By: Horn, Henrik
    Abstract: Standards often require the use of patented technologies. Holders of standard-essential patents (SEPs) typically commit to make their patents available on "fair, reasonable and non-discriminatory" (FRAND) terms. National competition authorities increasingly intervene against perceived FRAND violations. But which competition authority should regulate SEPs that affect more than one country? The paper uses a very simple economic framework to assess the impact of three main legal bases for allocating jurisdiction: territoriality, nationality, and cross-border effects. The findings are negative: neither base will implement a jointly efficient outcome, and the relative performance of the bases depends on the particular circumstances at hand.
    Keywords: Default rules; international jurisdiction; Standard-essential patents
    JEL: F15 K21 K33 L40 O38
    Date: 2020–01

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