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on Industrial Competition |
| By: | Enghin Atalay; Alan Sorensen; Christopher Sullivan; Wanjia Zhu |
| Abstract: | This paper investigates firms’ post-merger product repositioning. We compile information on conglomerate firms’ additions and removals of products for a sample of 61 mergers and acquisitions across a wide variety of consumer packaged goods markets. We find that mergers lead to a net reduction in the number of products offered by the merging firms, and the products that are dropped tend to be particularly dissimilar to the firms’ existing products. These results are consistent with theories of the firm that emphasize core competencies linked to particular segments of the product market. |
| Date: | 2020–09–16 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedpwp:88726&r=all |
| By: | Viswanathan, Madhu; Narasimhan, Om; John, George |
| Abstract: | We empirically investigate the impact of category captaincy, an arrangement where the retailer works exclusively with a manufacturer to manage both the manufacturer’s and his rivals’ products. Using a unique data set that contains information on category captaincy as well as SKU-store-level sales and price across 24 retail chains and eight local markets in the United States for a frozen food category, we quantify the impact of captaincy on prices, assortments, profits, and consumer welfare. Interestingly, our estimates suggest that captaincy can lead to welfare gains for consumers, which argues against a purely negative view of captaincy by policy makers. |
| Keywords: | moment inequalities; category management; structural models; retail; category captaincy |
| JEL: | L81 R14 J01 |
| Date: | 2020–10–19 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:107034&r=all |
| By: | Germán Gutiérrez; Thomas Philippon |
| Abstract: | We measure the evolution of dominant firms in the U.S. economy since 1960, and globally since 1990. Contrary to common wisdom, dominant firms have not become larger, have not become more productive, and their contribution to aggregate productivity growth has fallen by more than one third since 2000. |
| JEL: | D24 L11 O40 |
| Date: | 2020–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:27985&r=all |
| By: | Miguel A. Fonseca (Department of Economics, University of Exeter and NIPE, Universidade do Minho); Ricardo Gonçalves (Universidade Católica Portuguesa, Católica Porto Business School and CEGE); Joana Pinho (Universidade Católica Portuguesa, Católica Porto Business School and CEGE); Giovanni Tabacco |
| Abstract: | We explore the consequences to contract design if firm shareholders are intent on their managers engaging in price exing activities under different legal regimes. We show that in fine-only legal regimes, optimal contracts must have a fixed wage. In contrast,in fine-plus-prosecution legal regimes optimal contracts must be high-powered,involving a variable component. We test these predictions in a laboratory experiment. We observe contract choices of firm owners, for a given legal regime, as well as the likelihood of managers forming explicit cartels and coordinating on prices in an indefinitely repeated Bertrand oligopoly, taking contract and legal regime as given. The data show that prosecuting managers leads to lower collusion, but high-powered contracts do not incentivize cartel formation or price coordination effectively, irrespective of legal regime. Nevertheless, high-powered contracts were most frequently chosen by firm owners, often with collusive intents. |
| Keywords: | Straight Bonds; cartel formation, antitrust, managerial compensation, experiment. |
| JEL: | L44 C90 L13 C70 |
| Date: | 2020–10 |
| URL: | http://d.repec.org/n?u=RePEc:cap:wpaper:022020&r=all |
| By: | Montinaro, Marta; Pal, Rupayan; Scrimitore, Marcella |
| Abstract: | In a context of product innovation, we study two-part tariff licensing between a patentee and a potential rival which compete in a differentiated product market characterized by network externalities. The latter are shown to crucially affect the relative profitability of Cournot vs. Bertrand when a per unit royalty is applied. By contrast, we find that Cournot yields higher profits than Bertrand under ad valorem royalties, regardless of the strength of network effects. |
| Keywords: | Production Economics |
| Date: | 2020–11–05 |
| URL: | http://d.repec.org/n?u=RePEc:ags:feemff:307305&r=all |
| By: | Loukas Balafoutas (University of Innsbruck, Austria); Helena Fornwagner (University of Regensburg, Germany); Rudolf Kerschbamer (University of Innsbruck, Austria); Matthias Sutter (University of Innsbruck, Austria; Max Planck Institute for Research on Collective Goods, IZA Bonn and CESifo Munich, Germany; University of Cologne, Germany); Maryna Tverdostup (University of Innsbruck, Austria) |
| Abstract: | Credence goods markets – like for health care or repair services – with their informational asymmetries between sellers and customers are prone to fraudulent behavior of sellers and resulting market inefficiencies. We present the first model that considers both diagnostic uncertainty of sellers and the effects of insurance coverage of consumers in a unified framework. We test the model’s predictions in a laboratory experiment. Both in theory and in the experiment diagnostic uncertainty decreases the rate of efficient service provision and leads to less trade. In theory, insurance also decreases the rate of efficient service provision, but at the same time it also increases the volume of trade, leading to an ambiguous net effect on welfare. In the experiment, the net effect of insurance coverage on efficiency turns out to be positive. We also uncover an important interaction effect: if consumers are insured, experts invest less in diagnostic precision. We discuss policy implications of our results. |
| Keywords: | Credence goods, diagnostic uncertainty, insurance coverage, welfare, model, experiment |
| JEL: | C91 C72 D82 G22 |
| Date: | 2020–11 |
| URL: | http://d.repec.org/n?u=RePEc:ajk:ajkdps:038&r=all |
| By: | Key, Peter; Steinberg, Richard |
| Abstract: | We examine competition between two Internet Service Providers (ISPs), where the first ISP provides basic Internet service, while the second ISP provides Internet service plus content, i.e., enhanced service , where the first ISP can partner with a Content Provider to provide the same content as the second ISP. When such a partnering arrangement occurs, the Content Provider pays the first ISP a transfer price for delivering the content. Users have heterogeneous preferences, and each in general faces three options: (1) buy basic Internet service from the first ISP; (2) buy enhanced service from the second ISP; or (3) buy enhanced service jointly from the first ISP and the Content Provider. We derive results on the existence and uniqueness of a Nash equilibrium, and provide closed-form expressions for the prices, user masses, and profits of the two ISPs and the Content Provider. When the first ISP has the ability to choose the transfer price, then when congestion is linear in the load, it is never optimal for the first ISP to set a negative transfer price in the hope of attracting more revenue from additional customers desiring enhanced service. Conversely, when congestion is sufficiently super-linear, the optimal strategy for the first ISP is either to set a negative transfer price (subsidizing the Content Provider) or to set a high transfer price that shuts the Content Provider out of the market. |
| Keywords: | communication networks; competition; content provider; optimal pricing; Nash equilibrium; profit |
| JEL: | R14 J01 |
| Date: | 2020–10–01 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:107008&r=all |
| By: | Rod Crompton; Midesh Sing; Vernon Filter; Nonhlanhla Msimango |
| Abstract: | The South African liquid fuels industry is a significant part of the economy. Historically, government policy focused on import substitution industrialization to support industry margins. This approach is called into question by the 2006 shift from net exports to imports and by inflated downstream regulated margins. This study focuses on the regulated petrol price. Import parity pricing regulation has not kept pace with market changes. A policy shift in 1998 towards market-related pricing has not materialized. |
| Keywords: | petrol price, South Africa, Deregulation, Regulatory, Accounting |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:unu:wpaper:wp-2020-140&r=all |
| By: | Stephan Puehringer (Institute for Comprehensive Analysis of the Economy, Johannes Kepler University Linz, Austria); Georg Wolfmayr (Institute for European Ethnology, University of Vienna, Austria); Carina Altreiter (Institute of Sociology and Social Research, Vienna University of Economics and Business, Austria); Claudius Graebner (Institute for Socio-Economics, University of Duisburg-Essen, Germany; Institute for Comprehensive Analysis of the Economy, Johannes Kepler University Linz, Austria); Ana Rogojanu (Institute for European Ethnology, University of Vienna, Austria) |
| Abstract: | Competition is at the core of economics, being both a central concept of economic reasoning and a main prerequisite for economic action. Yet, the attempt of a clear definition of competition is challenging as the concept of competition has been used in different historical and disciplinary contexts. This paper provides an analytical and historical comparison between conceptions of competition from economics, sociology and anthropology. Our interdisciplinary review and systematisation show how different conceptions of competition are bound up with different ways to theorize the relation between an “economic realm†and a “social realm†. By focusing on the scope and normative implications of these concepts, we aim to develop a better understanding of competitization, i.e. the expansion of competitive modes of regulation and practices. |
| Keywords: | competition, interdisciplinarity, competitization, ‘economic’ and ‘social’ realm |
| Date: | 2020–10 |
| URL: | http://d.repec.org/n?u=RePEc:ico:wpaper:117&r=all |