|
on Industrial Competition |
| By: | Luca Sandrini (DSEA, University of Padova) |
| Abstract: | This article analyses the licensing choices of an outside inventor who owns a patent for a superior cost-saving technology. Moreover, I show that licensing via uniform upfront fees is found to be superior to licensing via royalties, from the inventor perspectives. This is so, regardless of the number of manufacturers in the product market, as downstream competition fosters the inventor's incentives to develop a more effective cost-saving technology, raising his/her revenues from surplus extraction. Moreover, this article investigates the effect of competition on licensing outcomes and ex-post market concentration. |
| Keywords: | Innovation, Licensing, Vertical Relation, Oligopoly, Competition |
| JEL: | L13 L22 L24 |
| Date: | 2020–05 |
| URL: | http://d.repec.org/n?u=RePEc:pad:wpaper:0251&r=all |
| By: | Chiara Fumagalli; Massimo Motta; Emanuele Tarantino |
| Abstract: | We analyse the optimal policy of an antitrust authority towards the acquisitions of potential competitors in a model with financial constraints. With respect to traditional mergers, these acquisitions trigger a new trade-off. On the one hand, the acquirer may decide to shelve the project of the potential entrant. On the other hand, the acquisition may allow for the development of a project that would otherwise never reach the market. We first show that a merger policy does not need to be lenient towards acquisitions of potential competitors to take advantage of their pro-competitive effects on project development. This purpose is achieved by a policy that pushes the incumbent towards the acquisition of the potential entrants that lack the financial resources to develop the project. To this end, the implementation of this policy can be contingent to the bid formulated by the acquirer. However, we also show that, if the anticipation of a takeover relaxes the target firm's financial constraints, a more lenient merger policy, which allows for the acquisition of firms that have already committed to enter the market, may be optimal. |
| Keywords: | merger policy, digital markets, potential competition, conglomerate mergers |
| JEL: | L41 L13 K21 |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:bge:wpaper:1197&r=all |
| By: | Volker Nocke; Michael D. Whinston |
| Abstract: | Concentration-based screens for horizontal mergers, such as those employed in the US DOJ and FTC Horizontal Merger Guidelines, play a central role in merger analysis. However, the basis for these screens, in both form and level, remains unclear. We show that there is both a theoretical and an empirical basis for focusing solely on the change in the Herfindahl index, and ignoring its level, in screening mergers for whether their unilateral effects will harm consumers. We also argue, again both theoretically and empirically, that the levels at which the presumptions currently are set may be too lax, especially with regards to safe harbors. |
| Keywords: | Horizontal Merger, Oligopoly, Herfindahl Index, Market Concentration, Market Power |
| JEL: | L40 L13 D43 |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2020_190&r=all |
| By: | Dudley Cooke (University of Exeter); Ana P. Fernandes (University of Exeter); Priscila Ferreira (NIPE and University of Minho) |
| Abstract: | This paper identifies a causal link between changes in product market competition, firm reorganization and within-firm wage inequality. We exploit a unique episode of comprehensive firm entry deregulation as a quasi-natural experiment and use exceptionally detailed linked employer-employee data for the universe of private sector firms and workers. We find that following deregulation affected firms flatten their hierarchies: the number of layers is reduced and managers´spans of control increased. Dropping a hierarchy layer is accompanied by a significant reduction in wage inequality within the firm, by 10% for the average pay ratio between the top and the bottom layer, showing that there are real changes arising from firm reorganization. Overall dispersion is also reduced. We discuss mechanisms and interpretations for these changes. |
| Keywords: | Firm entry deregulation, Hierarchical layers, Internal organization, Product Market Competition, Span of control, Wage Inequality |
| JEL: | L22 L23 M12 J31 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:nip:nipewp:05/2020&r=all |
| By: | Paul Belleflamme; Martin Peitz |
| Abstract: | A monopolist sells a network good to a set of heterogeneous users who all care about total participation. We show that the provider of the network good effectively becomes a two-sided platform if it can condition prices on some user characteristics. This still holds true if the network operator cannot observe consumer characteristics but induces user self-selection when it offers screening contracts. In our setting, all incentive constraints are slack. The use of freemium strategies emerges as a special case of versioning. Here, a base version is offered at zero price and a premium version at a positive price. Overall, the paper illustrates the close link between price discrimination in the presence of a network good and pricing by a two-sided platform. |
| Keywords: | Network goods, Two-sided markets, Platform pricing, Group pricing, Menu pricing |
| JEL: | D62 L12 L82 L86 |
| Date: | 2020–06 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2020_188&r=all |
| By: | Peitz, Martin |
| Abstract: | This report provides an overview on the economics of attention intermediaries. It addresses the following questions: What are the economics of attention intermediaries? For competition policy, how should markets be defined and market power of attention intermediaries be assessed? What theories of harm in merger control and abuse of dominance possibly apply to attention intermediaries? The report also touches on consumer protection policies and other regulatory issues. |
| Keywords: | attention intermediaries,platforms,market power,regulation,digital markets |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:20035&r=all |
| By: | Igor Letina; Armin Schmutzler; Regina Seibel |
| Abstract: | This paper provides a theory of strategic innovation project choice by incumbents and start-ups. We show that prohibiting killer acquisitions strictly reduces the variety of innovation projects. By contrast, we find that prohibiting other acquisitions only has a weakly negative innovation effect, and we provide conditions under which the effect is zero. Furthermore, for both killer and other acquisitions, we identify market conditions under which the innovation effect is small, so that prohibiting acquisitions to enhance competition would be justified. |
| Keywords: | Innovation, killer acquisitions, merger policy, potential competition, start-ups |
| JEL: | O31 L41 G34 |
| Date: | 2020–08 |
| URL: | http://d.repec.org/n?u=RePEc:zur:econwp:358&r=all |
| By: | Massimo Motta; Martin Peitz |
| 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 recent 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: | merger policy, digital markets, potential competition, conglomerate mergers |
| JEL: | L41 L13 K21 |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:bge:wpaper:1198&r=all |
| By: | Cesare Fracassi; Alessandro Previtero; Albert W. Sheen |
| Abstract: | We investigate the effects of private equity on product markets using price and sales data for an extensive number of consumer products. Following a buyout, target firms increase sales 50% more than matched control firms. Price increases—roughly 1% on existing products—do not drive this growth. The launch of new products and geographic expansion do. Competitors lose shelf space and marginally raise prices. Results for public vs. private targets, during and after the financial crisis, and in industries that vary in structure suggest private equity tailors strategies to the environment, eases financial constraints, and provides expertise to manage growth. |
| JEL: | G24 L11 |
| Date: | 2020–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:27435&r=all |
| By: | Yannis Kerkemezos (CPB Netherlands Bureau of Economic Policy Analysis); Bas Karreman (Erasmus University Rotterdam) |
| Abstract: | We empirically test the hypothesis that the discounts offered by firms to consumers who purchase tickets in advance increase with the intensity of competition. We develop a new measure of competition for which we use the proximity (in departure time) of a given flight to its competitors to infer the intensity of competition and estimate the impact of competition on advance purchase discounts (APDs) and the dynamic pricing of airlines by exploiting plausibly exogenous changes in the flight schedules of airlines that occur during the booking period. We find strong support for the theoretical prediction that APDs are larger when the intensity of competition is higher using a sample of airline fare quotes. Our results also suggest that airline price dispersion increases with the intensity of competition. |
| Keywords: | Dynamic pricing, advance purchase discounts, price discrimination, oligopoly, airlines |
| JEL: | D43 D22 L1 L9 |
| Date: | 2020–07–18 |
| URL: | http://d.repec.org/n?u=RePEc:tin:wpaper:20200042&r=all |
| By: | Marco Magnani (Department of Economics and Management, University of Padova, Italy and Italian Regulatory Authority for Energy, Network and the Environment (ARERA)); Fabio M. Manenti (Department of Economics and Management, University of Padova, Italy); Paola Valbonesi (Department of Economics and Management, University of Padova, Italy and Higher School of Economics, National Research University, (HSE-NRU), Moscow) |
| Abstract: | Following Shy (2002), we develop a simple model to determine consumers’ switching costs in the liberalized residential electricity market. By exploiting an original dataset on electricity prices and consumers in Italy, we use the theoretical predictions to measure consumers’ switching costs across the three main firms acting in the liberalized market. Our empirical results confirm the theoretical prediction that firms in the liberalized market are posting lower prices than the regulated one. Consumer decisions are found to be heavily affected by switching costs; our results show that the number of consumers in the regulated market negatively influences them. Switching costs appear to be particularly relevant for the incumbent firm while they are of lower magnitude for competitors – a result consistent with reputation playing a significant role in influencing customer switching. |
| Keywords: | Electricity Retail Markets, Liberalization in Electricity Markets, Switching Costs, Consumer Behaviour |
| JEL: | D12 L94 L98 |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:pad:wpaper:0258&r=all |
| By: | Creane, Anthony |
| Abstract: | In their seminal paper, Grossman and Shapiro (1984) assume that it is not profitable for a firm to deviate to the supercompetitive price of Salop (1979). In this paper, it is shown that this assumption is violated if, roughly, each firm reaches less than half of all consumers unless it is a duopoly. This implies that most of the simulations in Grossman and Shapiro (1984) are not actually equilibria. More importantly, this implies that for their equilibrium to exist nearly all consumers must receive at least one ad. For example, with more than four firms in the market, at least 96% of the consumers must receive at least one ad, and the percentage increases with the number of firms. |
| Keywords: | informative advertising; existence of equilibrium |
| JEL: | D83 L13 L15 |
| Date: | 2020–07–26 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:102074&r=all |
| By: | Bergantino, Angela Stefania (Management and Business Law, University of Bari Aldo Moro); Intini, Mario (Management and Business Law, University of Bari Aldo Moro); Perdiguero, Jordi (Universitat Autònoma de Barcelona) |
| Abstract: | This paper studies the daily price fixing behaviour of the Spanish fuel stations. Using a difference-in-differences approach, we show that low-cost and independent operators take advantage of needier consumers. Their prices increase on the day the unemployed workers receive their subsidy from the government, whereas, on the same day, branded companies decrease their prices. Retailers, aware of this, raise the price when they know demand increases. This phenomenon emphasises the effect of pay cycles on consumer choices and their related economic impact. Findings are also relevant for Antitrust authorities which generally focus on the activities of major brands’ stations. |
| Keywords: | retail fuel pricing ; subsidy recipients ; low-cost stations ; pay-cycles JEL codes: D12 ; H53 ; L11 ; L22 ; L40 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:wrk:warwec:1288&r=all |
| By: | Chiara Fumagalli; Massimo Motta; Martin Peitz |
| Abstract: | In response to the severe economic crisis triggered by Covid-19, state aid and a relaxation of competition rules, including merger control, have been proposed as policyoptions. We argue that there is a clear role for state aid in sectors experiencing a temporary shock, whereas state aid in sectors affected by a permanent long-term shock is more problematic. We also argue that merger control should not be relaxed and that in particular any merger proposal invoking the failing firm defence requires close scrutiny. |
| Keywords: | competition policy, state aid, merger control, Covid-19, failing firm defence |
| JEL: | L52 L53 K21 H25 |
| Date: | 2020–06 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2020_184&r=all |
| By: | Alfaro, Martin (University of Alberta, Department of Economics); Lander, David (Peking University) |
| Abstract: | When should we expect a trade shock to create pro competitive effects? In this paper, we investigate this in setups with firm heterogeneity and a linear demand with horizontal product differentiation. Our main finding is that the characterization of marginal entrants completely determines whether pro-competitive effects arise across standard settings of monopolistic competition (i.e., a la Krugman, Melitz, and Chaney/short-run Melitz) and Cournot (with free and restricted entry). This result holds independently of the assumptions on the rest of the firms, and is particularly stark in Cournot, where marginal entrants comprise merely one firm (the last entrant). We also provide conditions on marginal entrants across market structures that lead to pro-competitive, anti competitive, or null effects following a unilateral trade liberalization. |
| Keywords: | marginal entrants; imperfect competition; import competition; export opportunities |
| JEL: | D43 F10 F12 L13 |
| Date: | 2020–07–19 |
| URL: | http://d.repec.org/n?u=RePEc:ris:albaec:2020_011&r=all |
| By: | Condorelli, Daniele (University of Warwick); Szentes, Balazs (London School of Economics) |
| Abstract: | We characterize equilibria of oligopolistic markets where identical firms with constant marginal cost compete a’ la Cournot. For given maximal willingness to pay and maximal total demand, we first identify all combinations of quilibrium consumer and producer surplus that can arise from arbitrary demand functions. Then, as a further restriction, we fix the average willingness to pay above marginal cost (i.e., first best surplus) and identify all possible triples of consumer surplus, producer surplus and deadweight loss. |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:wrk:warwec:1292&r=all |
| By: | Jong-Hee Hahn (Yonsei Univ); So Hye Yoon (Yonsei Univ) |
| Abstract: | We show that tying can be profitable in two-sided markets even if below-cost or negative pricing is allowed. With the coexistence of two consumer groups (one treating tying and tied goods as perfect complements and the other as independent products), a tying-good monopolist may face difficulties in extracting rent and wish to use tying to directly capture the large advertising revenue created in the comple- mentary segment. Such tying normally reduces consumer surplus and total welfare. Our theory of tying can be applied to the practice of self-preferencing or requiring pre-installation as in the Google Android and Shopping cases. |
| Keywords: | Tying, Bundling, Leverage theory, Two-sided markets, Negative prices, Platform envelopment, Self-preferencing, Raising rivals' Â’costs |
| JEL: | D4 L1 L4 |
| Date: | 2020–08 |
| URL: | http://d.repec.org/n?u=RePEc:yon:wpaper:2020rwp-177&r=all |
| By: | Guglielmo Barone (University of Padua); Fabiano Schivardi (Luiss University); Enrico Sette (Bank of Italy) |
| Abstract: | We study the e ects on loan rates of a quasi-experimental change in the Italian leg- islation which forbids interlocking directorates between banks. We use a di erence- in-di erences approach and exploit multiple banking relationships to control for unobserved heterogeneity. We find that the reform decreased rates charged by pre- viously interlocked banks to common customers by between 10-30 basis points. The e ect is stronger if the firm had a weaker bargaining power vis-a-vis the interlocked banks. Consistent with the assumption that interlocking directorates facilitate col- lusion, interest rates on loans from interlocked banks become more dispersed after the reform. |
| Keywords: | Interlocking directorates, competition, banking |
| JEL: | G21 G34 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:lui:lleewp:20155&r=all |
| By: | Enrique Andreu (Compass Lexecon); Damien Neven (Graduate Institute of International and Development Studies, Geneva, CEPR and Compass Lexecon); Salvatore Piccolo (Università di Bergamo, Compass Lexecon and CSEF) |
| Abstract: | We propose a simple agency framework in which although competing producers always find it optimal to share information about their list (undiscounted) prices, consumers are not necessarily harmed by these agreements. In particular, when sales are delegated to self-interested parties (such as salesmen or retailers), we find that expected discounts are higher with than without information sharing if and only if agency costs are sufficiently low. This shows that agreements according to which firms disclose list prices to their competitors should be presumed neither as anti-competitive nor as pro-competitive. |
| Keywords: | Agency Costs, Consumer Welfare, Information Sharing, List Prices |
| JEL: | L42 L50 L81 |
| Date: | 2020–07–27 |
| URL: | http://d.repec.org/n?u=RePEc:sef:csefwp:573&r=all |
| By: | Eleftheria Triviza |
| Abstract: | This article analyses how consumers' habit formation affects firms' pricing policies. We consider both sophisticated consumers, who realize that their current consumption will affect future consumption, and naive consumers, who do not. The optimal contract for sophisticated consumers is a two-part tariff. The main result is that under naive habit formation, the optimal pricing pattern is a three-part tariff; namely a fixed fee, with some units priced below cost --- and after their end --- pricing above marginal cost. This holds both under symmetric and asymmetric information. |
| Keywords: | three-part tariff, nonlinear pricing, naivete, habit formation |
| JEL: | L11 D11 D42 D82 |
| Date: | 2019–06 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2019_098v1&r=all |
| By: | Amedeo Piolatto (Autonomous University of Barcelona (UAB), Barcelona Graduate School of Economics (BGSE), Barcelona Economics Institute (IEB) and MOVE) |
| Abstract: | Anonymous information platforms (e.g. Airbnb) provide information about experience goods while keeping agents' identity hidden until the transaction is completed. In doing so, they generate heterogeneity in the information levels across consumers. In this paper, I show that such platforms induce a weak increase of offline prices and that only low-valuation goods are cheaper online than offline. Platforms always lead to an increase in profits. In terms of consumer welfare, the platform equilibrium is Pareto superior for low-and high-valuation goods, while for intermediate ranges some buyers benefit while others lose from the presence of the platform. |
| Keywords: | Anonymous information platforms, experience goods, mismatch costs, Spokes model, horizontal competition |
| JEL: | D02 D21 D43 D61 D83 L11 L13 L15 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:ieb:wpaper:doc2020-08&r=all |
| By: | Aghion, Philippe; Bergeaud, Antonin; Boppart, Timo; Klenow, Peter J.; Li, Huiyu |
| Abstract: | Growth has fallen in the U.S., while firm concentration and profits have risen. Meanwhile, labor's share of national income is down, mostly due to the rising market share of low labor share firms. We propose a theory for these trends in which the driving force is falling firm-level costs of spanning multiple markets, perhaps due to accelerating IT advances. In response, the most efficient firms (with higher markups) spread into new markets, thereby generating a temporary burst of growth. Because their efficiency is difficult to imitate, less efficient firms find markets more difficult to enter profitably and therefore innovate less. Eventually, due to greater competition from efficient firms, within-firm markups actually fall. Despite the increase in the aggregate markup and rents, firm incentives to innovate decline --- lowering the long run growth rate. |
| Keywords: | Concentration; labor's income share; Markups; productivity slowdown; rents |
| JEL: | O31 O47 O51 |
| Date: | 2019–11 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:14094&r=all |
| By: | Maximilian Andres (University of Potsdam); Lisa Bruttel (University of Potsdam); Jana Friedrichsen (HU Berlin, WZB Berlin Social Science Center, DIW Berlin) |
| Abstract: | Numerous studies investigate which sanctioning institutions prevent cartel formation but little is known as to how these sanctions work. We contribute to understanding the inner workings of cartels by studying experimentally the effect of sanctioning institutions on firms’ communication. Using machine learning to organize the chat communication into topics, we find that firms are significantly less likely to communicate explicitly about price fixing when sanctioning institutions are present. At the same time, average prices are lower when communication is less explicit. A mediation analysis suggests that sanctions are effective in hindering cartel formation not only because they introduce a risk of being fined but also by reducing the prevalence of explicit price communication. |
| Keywords: | cartel, collusion, communication, machine learning, experiment |
| JEL: | C92 D43 L41 |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:pot:cepadp:19&r=all |
| By: | Rebolledo, Mayra |
| Abstract: | Market concentration has been suggested as an enhancer of bargaining power imbalances for vertical commercial relationships. However, the empirical literature has not yet explored in which way this market concentration, as a result of -for instance- a M&A operations, could affect the negotiations with agents in vertical related markets; in particular, in frictional multiproduct commercial relationships, in which uncertainty may play a role of such negotiations. The present work proposes an explanation to this matter, by analyzing the strategic incentives and uncertainties that arise in this kind of commercial relationships from the announcement of an horizontal M&A operation, and the way these expectations could influence the bargaining power redistribution among players after the operation; opening the discussion on a dynamic analysis of bargaining outcomes. |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:cawmdp:116&r=all |
| By: | Botteon Costa, Raone; Ferman, Bruno; Monte, Daniel |
| Abstract: | A recurrent policy question in the airline industry is whether baggage should be priced independently from airline tickets. We show that this policy has ambiguous welfare implications, depending on the cost of carrying luggage and on the market power of the firm. The intuition is simple: there is a trade-off between over-consumption caused by the non-existence of a baggage price against under- consumption caused by firm markups in the case of a separate price for baggages. The commonly used argument that the price of travelling without luggage might drop under a two price-system does not hold in our model. |
| Keywords: | baggage fees, screening, two part tariff, welfare |
| JEL: | D82 D83 L15 M3 |
| Date: | 2020–07–15 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:101864&r=all |
| By: | Craig Garthwaite; Christopher Ody; Amanda Starc |
| Abstract: | High and increasing hospital prices have led to calls for price regulation. If prices are high because of consolidation, regulating prices could enhance welfare. However, high prices could also reflect increased willingness to pay by privately insured consumers for clinical and non-clinical quality. If so, regulating prices could reduce quality. We present a model of strategic quality choice where hospitals make quality investments to increase private revenue. We confirm the model's predictions across numerous quality measures including patient satisfaction, hospital processes, risk adjusted mortality, the revealed preferences of current Medicare patients, technology adoption, physician quality, and ED wait times. |
| JEL: | I11 |
| Date: | 2020–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:27440&r=all |
| By: | Jens-Uwe Franck; Dimitrios Linardatos |
| Abstract: | As of January 2020, Section 58a of the German Payment Services Supervisory Act (PSSA) provides a right for payment service providers and e-money issuers to access technical infrastructure that contributes to mobile and internet-based payment services. This right of access is intended to promote technological innovation and competition in the consumers’ interests in having a wide choice among payment services, including competing solutions for mobile and internet-based payments. The provision has been dubbed ‘Lex Apple Pay’ as it seems to have been saliently motivated by the objective to give payment service providers the right of direct access to the NFC interfaces of Apple’s mobile devices. In enacting Section 58a PSSA, the German legislature has rushed forwards, overtaking the EU Commission’s ongoing competition investigation into Apple Pay as well as the pending reform of the German Competition Act, which is aimed precisely at operators of technological platforms, which enjoy a gatekeeper position. This article explores the scope of application and the statutory requirements of this right of access as well as available defences and possible legal barriers. We point out that, to restore a level playing field in the internal market, the natural option would be to further harmonize EU payment services regulation, including the availability of a right of access to technical infrastructure for mobile and internet-based payment services and e-money issuers. |
| Keywords: | ‘Lex Apple Pay’; Technology platforms; Antitrust; Payment Services Regulation; Mobile Payment; Access to NFC interfaces; Wallet Apps; Internal Market Regulation |
| JEL: | K21 K22 |
| Date: | 2020–06 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2020_173v2&r=all |
| By: | Alfaro, Martin (University of Alberta, Department of Economics); Warzynski, Frederic (Aarhus University) |
| Abstract: | This paper studies the impact of better export access on the domestic economy of small countries, where firms of all sizes commonly export due to the limited size of the home market. We propose and estimate a model where small firms, characterized as in monopolistic competition, coexist with large granular firms making quality investments. In our framework, better export access benefits large firms by expanding their sales volume and, hence, reducing their average quality costs. Simultaneously, they are adversely affected by increased domestic competition following entry by small firms. Estimating the model for several Danish industries shows that, while some large firms benefit from better export access, others are severely hurt by the tougher competition at home. In some cases, the latter effect is so pronounced that domestic market share is reallocated towards small firms and total industry profits decrease. |
| Keywords: | large firms; small firms; quality; export access; small economy; Denmark |
| JEL: | F12 F14 L11 |
| Date: | 2020–07–19 |
| URL: | http://d.repec.org/n?u=RePEc:ris:albaec:2020_010&r=all |
| By: | Chen, J.; Elliott, M.; Koh, A. |
| Abstract: | The past twenty years have witnessed the emergence of internet conglomerates fueled by acquisitions. We build a simple theoretical model to study this. Following Wernerfelt (1984) we endow firms with scarce competencies which drive their competitiveness across markets. Firms can merge to combine their competencies, spin-off new firms by partitioning their competencies, or procure unassigned competencies. We study stable industry structures in which none of these deviations are profitable. We find an upper and lower bound on the size of the largest firm, and show that as markets value more of the same competencies abrupt increases in these bounds occur. |
| Date: | 2020–07–20 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:2069&r=all |
| By: | Daniel Nepelski (European Commission - JRC) |
| Abstract: | Recognizing the fact that the support of the public sector of research and innovation lays the foundations for new technologies, industries and markets, this report presents the Market Creation Potential Indicator and applies it to the innovations coming out of the EC-funded FP research projects. This way, it contributes to the creation of a toolset to measure and assess the market creating effects of public R&I policies. |
| Keywords: | Research and innovation policy, market creating innovation, Framework Programme, European Commission, Europe |
| Date: | 2020–06 |
| URL: | http://d.repec.org/n?u=RePEc:ipt:iptwpa:jrc121066&r=all |
| By: | Shelegia, Sandro; Wilson, Christopher |
| Abstract: | To better understand temporary price reductions or 'sales', this paper presents a generalized 'clearinghouse' framework of advertised sales and explores some example applications. By viewing the fi rms as competing in utility and amending the conventional tie-break rule, we allow for multiple dimensions of fi rm heterogeneity in complex market environments. Moreover, we i) provide original insights into the number and types of fi rms that use sales, ii)offer new results on how fi rm heterogeneityaffects market outcomes, iii) extend a common empirical 'cleaning' procedure, and iv) analyze a family of activities in sales markets, including persuasive advertising and obfuscation. |
| Keywords: | advertising; Clearinghouse; Heterogeneity; price dispersion; Sales |
| JEL: | D43 L13 M3 |
| Date: | 2019–11 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:14113&r=all |