nep-com New Economics Papers
on Industrial Competition
Issue of 2020‒10‒05
fifteen papers chosen by
Russell Pittman
United States Department of Justice

  1. Price Discrimination along Multiple Dimensions: New Evidence from a Regional Airline By Ambarish Chandra
  2. Private and Public IPR Protection in a Vertically Differentiated Software Duopoly By Kresimir Zigic; Jiri Strelicky; Michal Kunin
  3. The Enforcement of the Argentine Antitrust Law By Germán Coloma
  4. Price-setting mixed duopoly, subsidization and the order of firms' moves: the relevance of privatization By Ohnishi, Kazuhiro
  5. Consumer Basket Shopping and Seller Market Power in Food Retailing By Xia, Tian; Li, Xianghong
  6. Platform Design when Sellers Use Pricing Algorithms By Johnson, Justin Pappas; Rhodes, Andrew; Wildenbeest, Matthij
  7. Trust and Trustworthiness in Procurement Contracts with Retainage By Matthew J. Walker; Elena Katok; Jason Shachat
  8. Kill Zone By Sai Krishna Kamepalli; Raghuram G. Rajan; Luigi Zingales
  9. Competition, Performance and Financial Stability in the U.S. Agricultural Banking By Regmi, Madhav; Featherstone, Allen M.
  10. Online Grocery Retailing as a Tool for Price Discrimination By Kong, Xiangwen; Cakir, Metin
  11. Scarcity Pricing in the Dynamic Setting By Okhunjanov, Botir B.; McCluskey, Jill J.
  12. Processor-Retailer Markup and Pricing Decision: Insights from the U.S. Beef Market 2011-16 By Ma, Meilin; Liu, Yunjuan
  13. System-wide market and welfare effects of a U.S. sugar-sweetened beverages tax By Lee, Yunkyung; Giannakas, Konstantinos
  14. Quantifying the Welfare Effects of Laying-hen Cage Ban By Oh, Sohae; Vukina, Tomislav
  15. Durables and Lemons: Private Information and the Market for Cars By Richard Blundell; Ran Gu; Soren Leth-Petersen; Hamish Low; Costas Meghir

  1. By: Ambarish Chandra
    Abstract: I examine the case of a firm that practices both second-degree and third-degree price discrimination. I present a model showing conditions under which the premium for higher quality can either rise or fall as the firm implements group pricing. I then use new data from a regional airline to estimate how the two kinds of price discrimination interact, and how each is affected by changes in competition. I establish three key results, all new to the literature. First, in different markets, the two kinds of price discrimination can either offset or reinforce each other, in a manner that fits the model's predictions. Second, inter-temporal differences in prices are purely driven by price discrimination, rather than by scarcity pricing. Third, competition increases the extent of both kinds of price discrimination.
    Keywords: Price Discrimination; Airlines; Advance Purchases; Competition
    JEL: L1 L9
    Date: 2020–09–17
  2. By: Kresimir Zigic; Jiri Strelicky; Michal Kunin
    Abstract: We study the interaction between public and private intellectual property rights (IPR) protection in a duopoly in which software developers offer a product variety of differing quality and compete for heterogeneous users, who have an option to buy a legal version, possibly use an illegal copy, or not buy a product at all. Illegal usage implies violation of IPR and is punishable. A developer may use private IPR protection for his software if the level of piracy is high. An important intermediate step in our analysis addresses firms’ pricing strategies and the analysis of the impact of both private and public IPR protection on these strategies (with monopoly serving as a benchmark case). Last but not least, we make some comparisons with an analogous model based on horizontal product differentiation.
    Keywords: vertically differentiated duopoly; software piracy; Bertrand competition; copyright protection; private and public intellectual property rights protection;
    JEL: D43 L11 L21 O25 O34
    Date: 2020–09
  3. By: Germán Coloma
    Abstract: This paper analyzes the basic characteristics of antitrust law in Argentina, and the way in which it has been enforced in several important cases. We begin with a section that introduces the evolution of the law, followed by another section about the basic economic and legal principles underlying that law. The rest of the paper describes the enforcement of the Argentine competition statutes, in a number of cases that involve collusive practices, exclusionary practices, vertical restraints, abuses of dominance, and mergers.
    Keywords: Antitrust law, competition, Argentina
    JEL: K21 L40
    Date: 2020–09
  4. By: Ohnishi, Kazuhiro
    Abstract: This paper first examines a price-setting mixed duopoly game with production subsidies where a public firm acts as a leader against a private firm. Second, the paper examines a price-setting duopoly game with production subsidies where the public firm remains a leader after privatization. Third, the paper compares the equilibrium values for private leadership with those for public leadership.
    Keywords: Price competition; Subsidy; Privatization; Mixed Stackelberg duopoly; Privatized Stackelberg duopoly
    JEL: C72 D21 L32
    Date: 2020–09–10
  5. By: Xia, Tian; Li, Xianghong
    Keywords: Marketing, Industrial Organization, Demand and Price Analysis
    Date: 2020–07
  6. By: Johnson, Justin Pappas; Rhodes, Andrew; Wildenbeest, Matthij
    Abstract: Using both economic theory and Artificial Intelligence (AI) pricing algorithms, we investigate the ability of a platform to design its marketplace to promote competition, improve consumer surplus, and even raise its own profits. We allow sellers to use Q-learning algorithms (a common reinforcement-learning technique from the computer-science literature) to devise pricing strategies in a setting with repeated interactions, and consider the effect of steering policies that reward firms that cut prices with additional exposure to consumers. Overall, the evidence from our experiments suggests that platform design decisions can meaningfully benefit consumers even when algorithmic collusion might otherwise emerge but that achieving these gains may require more than the simplest steering policies when algorithms value the future highly. We also find that policies that raise consumer surplus can raise the profits of the platform, depending on the platform’s revenue model. Finally, we document several learning challenges faced by the algorithms.
    Date: 2020–09–08
  7. By: Matthew J. Walker (Durham University Business School); Elena Katok (Naveen Jindal School of Management, University of Texas at Dallas); Jason Shachat (Durham University Business School)
    Abstract: When product quality is unverifiable by third parties, enforceable contracts that condition price upon quality are not feasible. If higher quality is also costly to deliver, moral hazard by sellers flourishes, particularly when procurement is via a competitive auction process. Retainage is a contractual mechanism that presents a solution to the third-party unverifiability problem, by setting aside a portion of the purchase price. After delivery, the buyer has sole discretion over the amount of retainage money that is released to the seller. While generally a feasible contract form to implement, retainage introduces a moral hazard for the buyer. We use laboratory experiments to investigate how and when retainage might be successfully used to facilitate trust and trustworthiness in procurement contracts. We observe that retainage induces a significant improvement in product quality when there are some trustworthy buyers in the population, consistent with a model of fair payment norms that we develop. This improvement is realized at the cost of increased buyer-seller profit inequalities. We also observe that at high levels of retainage, there is a welfaredecreasing market unraveling in which sellers do not bid on contracts. Our results imply that retainage incentives can mitigate the tension between competition and cooperation arising from reverse auctions, but only at appropriate levels of retainage
    Keywords: trust, procurement, reverse auction, retainage, moral hazard
    JEL: C92 L15 D86
    Date: 2020
  8. By: Sai Krishna Kamepalli (University of Chicago - Booth School of Business); Raghuram G. Rajan (University of Chicago - Booth School of Business and International Monetary Fund (IMF)); Luigi Zingales (University of Chicago - Booth School of Business)
    Abstract: We study why high-priced acquisitions of entrants by an incumbent do not necessarily stimulate more innovation and entry in an industry (like that of digital platforms) where customers face switching costs and enjoy network externalities. The prospect of an acquisition by the incumbent platform undermines early adoption by customers, reducing prospective payoffs to new entrants. This creates a Òkill zoneÓ in the space of startups, as described by venture capitalists, where new ventures are not worth funding. Evidence from changes in investment in startups by venture capitalists after major acquisitions by Facebook and Google suggests this is more than a mere theoretical possibility.
    Date: 2020
  9. By: Regmi, Madhav; Featherstone, Allen M.
    Keywords: Agricultural Finance, Industrial Organization, Risk and Uncertainty
    Date: 2020–07
  10. By: Kong, Xiangwen; Cakir, Metin
    Keywords: Marketing, Agribusiness, Industrial Organization
    Date: 2020–07
  11. By: Okhunjanov, Botir B.; McCluskey, Jill J.
    Keywords: Industrial Organization, Demand and Price Analysis, Marketing
    Date: 2020–07
  12. By: Ma, Meilin; Liu, Yunjuan
    Keywords: Industrial Organization, Agribusiness, Marketing
    Date: 2020–07
  13. By: Lee, Yunkyung; Giannakas, Konstantinos
    Keywords: Agricultural and Food Policy, Industrial Organization, Agribusiness
    Date: 2020–07
  14. By: Oh, Sohae; Vukina, Tomislav
    Keywords: Demand and Price Analysis, Agricultural and Food Policy, Institutional and Behavioral Economics
    Date: 2020–07
  15. By: Richard Blundell (University College London); Ran Gu (University of Essex); Soren Leth-Petersen (University of Copenhagen); Hamish Low (University of Oxford); Costas Meghir (Cowles Foundation, Yale University, NBER, IZA, CEPR, and Institute for Fiscal Studies)
    Abstract: We specify an equilibrium model of car ownership with private information where individuals sell and purchase new and second-hand cars over their life-cycle. This private information introduces a transaction cost, distorts the market and reduces the value of a car as a savings instrument. We estimate the model using Danish linked registry data on car ownership, income and wealth. The transaction cost, which we term the lemons penalty, is estimated to be 18% of the price in the first year of ownership, declining with the length of ownership. It leads to large reductions in the turnover of cars and in the probability of downgrading in the event of an adverse income shock. The size of the lemons penalty declines when uncertainty in the economy increases, as in recessions: large income shocks induce individuals to sell their cars, even if of good quality, and this reduces the lemons problem.
    Keywords: Lemons penalty, Car market, Income uncertainty, Estimated life-cycle equilibrium model
    JEL: D82 E21
    Date: 2019–09

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