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on Industrial Competition |
| By: | Javier Donna (University of Florida); Pedro Pereira (Autoridade da Concorrência); Tiago Pires (Deceased. University of North Carolina at Chapel Hill); Andre Trindade (FGV EPGE Brazilian School of Economics and Finance) |
| Abstract: | We empirically investigate the welfare of intermediaries in oligopolistic markets, where intermediaries offer additional services. We exploit the unique circumstance that, in our empirical setting, consumers can purchase from manufacturers or intermediaries. Wespecify an equilibrium model, and estimate it using product-level data. The demand includes consumers with costly search and channel-specific preferences. The supply includes two distribution channels. One features bargaining about wholesale pricesbetween manufacturers and intermediaries, and price competition among intermediaries. The other is vertically integrated. The model is used to simulate counterfactuals, where intermediaries do not offer additional services. We find that intermediaries increasewelfare. |
| Keywords: | Intermediaries, vertical markets, search frictions, bargaining, outdoor advertising |
| JEL: | L81 L42 D83 M37 |
| Date: | 2021–06 |
| URL: | http://d.repec.org/n?u=RePEc:aoz:wpaper:77&r= |
| By: | Xuelin Li; Andrew W. Lo; Richard T. Thakor |
| Abstract: | How does a firm’s market power in existing products affect its incentives to innovate? We explore this fundamental question using granular project-level and firm-level data from the pharmaceutical industry, focusing on a particular mechanism through which incumbent firms maintain their market power: “reverse payment” or “pay-for-delay” agreements to delay the market entry of competitors. We first show that when firms are unfettered in their use of “pay-for-delay” agreements, they reduce their innovation activities in response to the potential entry of direct competitors. We then examine a legal ruling that subjected these agreements to antitrust litigation, thereby reducing the incentive to enter them. After the ruling, incumbent firms increased their net innovation activities in response to competitive entry. These effects center on firms with products that are more directly affected by competition. However, at the product therapeutic area level, we find a reduction in innovation by new entrants after the ruling in response to increased competition. Overall, these results are consistent with firms having reduced incentives to innovate when they are able to maintain their market power, highlighting a specific channel through which this occurs. |
| JEL: | D42 D43 G31 K21 L41 L43 L65 O31 O32 |
| Date: | 2021–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28964&r= |
| By: | Cocioc, Paul |
| Abstract: | The article offer a critical perspective of several elements and some associated indicators used in characterizing and estimating the intensity of competition (i.e., the extent to which the mutual pressure of rivals is exerted on the market). We focus on the pricing policies of the firms and its impact and expected responses from competitors. Influences of substitutes and overall production capacity surplus are also analyzed. |
| Keywords: | competition; competitive intensity; imperfect competition; price signals; |
| JEL: | D40 D43 L11 L13 L41 |
| Date: | 2021–01–27 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:108654&r= |
| By: | Oksana Loginova (Department of Economics, University of Missouri) |
| Abstract: | The focus of this theoretical study is price competition when some firms operate their own branded website while others sell their products through an online platform, such as Amazon Marketplace. On one hand, selling through Amazon expands a firm's reach to more customers, but on the other hand, starting a website can help the firm to increase the perceived value of its product, that is, to build brand equity. In the short run the composition of firms is fixed, whereas in the long run each firm chooses between Amazon and its own website. I derive the equilibrium prices and profits, analyze the firms' behavior in the long run, and compare the equilibrium outcome with the social optimum. Comparative statics analysis reveals some interesting results. For example, I find that the number of firms that choose Amazon may go down in response to an increase in the total number of firms. A pure-strategy Nash equilibrium may not exist; I show that price dispersion among firms of the same type is more likely in less concentrated markets and/or when the increase in the perceived value of the product is relatively small. |
| Keywords: | pricing, competition, platforms, online marketplace, Amazon, brand equity |
| JEL: | C72 D43 L11 L13 M31 |
| Date: | 2021–03–21 |
| URL: | http://d.repec.org/n?u=RePEc:umc:wpaper:2109&r= |
| By: | Rosa-Branca Esteves (NIPE and Economics Department, University of Minho) |
| Abstract: | This paper aims to understand under what market conditions, can competing symmetric fi rms employ personalized pricing as a winning strategy. A key departure of our paper from the literature is that we introduce customer heterogeneity in demand. If fi rms´data discloses only vertical information (demand heterogeneity), fi rms can only employ group pricing. This is always a winning strategy. When data discloses horizontal information (consumer preferences) and vertical information, perfect personalized pricing (PPP) becomes feasible. If data only discloses horizontal information, fi rms can only employ imperfect personalized pricing (IPP). By comparing uniform pricing (UP) with personalized pricing, we show that if the share of high demand customers in the market is greater than the share of low demand consumers, fi rms are always better off with no discrimination. More importantly, we show that if heterogeneity in purchase quantity is sufficiently high, then personalized pricing can be a winning strategy for all symmetric practice fi rms. If heterogeneity in consumer value is high and the share of high demand consumers is sufficiently low, in comparison to UP, both firms are better off under IPP. For an intermediate share of high demand consumers, firms can get higher profi ts under PPP than under UP and IPP. |
| JEL: | D43 D80 L13 L40 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:nip:nipewp:8/2021&r= |
| By: | Maarten Pieter Schinkel (University of Amsterdam); Leonard Treuren (University of Amsterdam) |
| Abstract: | Industry-wide voluntary agreements are touted as a means for corporations to take more corporate social responsibility (CSR). We study what type of joint CSR agreement induces firms to increase CSR efforts in a model of oligopolistic competition with differentiated products. Consumers have a willingness to pay for more responsibly manufactured products. Firms are driven by profit, and possibly by intrinsic motivation, to invest in costly CSR efforts. We find that cooperative agreements directly on the level of CSR reduce CSR efforts compared to competition. Such agreements throttle both for-profit and intrinsic motivations for CSR. CSR efforts only increase if agreements are permitted solely on output. Such production agreements, however, reduce total welfare in the market and raise antitrust concerns. Taking externalities into account may help to justify a production agreement under a total welfare standard, but not agreements on CSR directly. Moreover, simply requiring a higher CSR level by regulation while preserving competition always gives higher within-market welfare. |
| Keywords: | CSR, voluntary agreement, cartel, competition policy, externalities, regulation |
| JEL: | K21 L13 L40 Q01 |
| Date: | 2021–07–04 |
| URL: | http://d.repec.org/n?u=RePEc:tin:wpaper:20210063&r= |
| By: | Giammario Impullitti; Omar Licandro; Pontus Rendahl |
| Abstract: | We study the gains from trade in a model with oligopolistic competition, heterogeneous firms and innovation, and provide a formula to decompose the mechanism. The new insight we provide is that market concentration can be a welfare-relevant feature of market power above and beyond markup dispersion. Trade liberalisation increases foreign competition and reduces the number of active firms in the market, thereby increasing concentration. A more concentrated economy is more efficient due to increasing returns in production. Moreover, higher concentration produces a scale effect on firms’ incentives to innovate, which increases welfare via productivity improvements. In the calibrated version of the model we show that a trade-induced increase in concentration contributes substantially to the gains from trade, mostly via its stimulating effect on innovation. Sizeable gains also come from the reduction of the inefficiency produced by trade in identical goods; i.e. through a reduction in reciprocal dumping. Changes in markup dispersion, in contrast, have only negligible effects. |
| Keywords: | Gains from Trade, Heterogeneous Firms, Oligopoly, Innovation, Endogenous Markups, Market Concentration |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:not:notgep:2021-03&r= |
| By: | James Albrecht (Georgetown University); Xiaoming Cai (Peking University HSBC Business School); Pieter Gautier (Vrije Universiteit Amsterdam); Susan Vroman (Georgetown University) |
| Abstract: | The literature offers two foundations for competitive search equilibrium, a Nash approach and a market-maker approach. When each buyer visits only one seller (or each worker makes only one job application), the two approaches are equivalent. However, when each buyer visits multiple sellers, this equivalence can break down. Our paper analyzes competitive search equilibrium with simultaneous search using the two approaches. We consider four cases defined by (i) the surplus structure (are the goods substitutes or complements?) and (ii) the mechanism space (do sellers post fees or prices?). With fees, the two approaches yield the same constrained efficient equilibrium. With prices, the equilibrium allocation is the same using both approaches if the goods are complements, but is not constrained efficient. In the case in which only prices are posted and the goods are substitutes, the equilibrium allocations from the two approaches are different. |
| Keywords: | multiple applications, competitive search, market makers, efficiency |
| JEL: | C78 D44 D83 |
| Date: | 2021–07–04 |
| URL: | http://d.repec.org/n?u=RePEc:tin:wpaper:20210060&r= |
| By: | Mateusz Mysliwski (Institute for Fiscal Studies and NHH); Fabio M. Sanches (Institute for Fiscal Studies); Daniel Silva Junior (Institute for Fiscal Studies); Sorawoot Srisuma (Institute for Fiscal Studies) |
| Abstract: | Manufacturers frequently pay fees to supermarkets when they temporarily reduce prices of their products. These funds are used by supermarkets to cover the costs of promotional campaigns and to compensate reductions in markups during promotions. Anecdotal evi-dence suggests that these fees are sizeable and have important consequences for ?rms and consumers, but little is known about them quantitatively. This paper develops a dynamic game-theoretic model where multiproduct ?rms compete in prices and pay a cost every time they lower prices. We use the model to study pricing behaviour in the UK butter and margarine market. The magnitudes of promotional fees are then structurally estimated as price adjustment costs. Our study produces two important conclusions. First, we ?nd that costs ?rms pay to lower prices are substantial and represent between 24-34% of manufacturers’ net margins. Second, our model predicts that the removal of these costs reduces persistence in prices, increases ?rms’ pro?ts but has little effect on consumer surplus. |
| Date: | 2020–07–09 |
| URL: | http://d.repec.org/n?u=RePEc:ifs:cemmap:35/20&r= |
| By: | Helmuth Cremer; Jean-Marie Lozachmeur |
| Abstract: | This paper studies a market for a medical product in which there is perfect competition among health insurers, while the good is sold by a monopolist. Individuals differ in their severity of illness and there is ex post moral hazard. We consider two regimes: one in which insurers use coinsurance rates (ad valorem reimbursements) and one in which insurers use copayments (specific reimbursements). We show that the induced equilibrium with copayments involves a lower producer price and a higher level of welfare for consumers. This results provides strong support for a reference price based reimbursement policy. |
| Keywords: | ex post moral hazard, health insurance competition, copayments, imperfect competition |
| JEL: | I11 I13 I18 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_9160&r= |
| By: | Di Foggia, Giacomo; Beccarello, Massimo |
| Abstract: | In light of the organizational dynamics of services of economic interest, the regulation of municipal solid waste management is a critical issue to deal with so as to achieve sustainability goals in the coming decades. The European circular economy targets limit the share of municipal waste in landfills to a maximum of 10% by 2035. Consequently, waste-to-energy plants may temporarily become the primary option for residual unsorted waste. The municipal waste management chain comprises two consequential stages: collection and transport, and the treatment and disposal stage, which characterizes as an oligopolistic market structure. After defining the relevant market and calculating market concentration measures, we analyze market power in the treatment and disposal of non-recyclable mixed waste, also known as residual waste. Our analyses are based on empirical data using well-known market concentration indices such as the Herfindahl–Hirschman index and concentration ratios. We report the results of three different market concentration scenarios based on alternative geographic and product market definitions. Considering only waste-to-energy as a product market, we present a situation of moderate concentration, typically involving the attention of competition authorities. On the contrary, considering both options as a single product market, no relevant evidence emerges due to the significant share of waste sent to landfills in 2019, i.e., 20.1% of the total municipal solid waste generated in Italy. Implications for future studies consist of new detailed information on the municipal waste treatment market structure in one of the leading European countries that may prompt comparative studies. Policy implications are derived from the possibility of taking cues from this paper to envisage appropriate regulatory models for an evolving sector in which market spaces are increasing. |
| Date: | 2021–07–07 |
| URL: | http://d.repec.org/n?u=RePEc:osf:socarx:fwk6d&r= |
| By: | Sukjin Han; Eric H. Schulman; Kristen Grauman; Santhosh Ramakrishnan |
| Abstract: | Many differentiated products have key attributes that are unstructured and thus high-dimensional (e.g., design, text). Instead of treating unstructured attributes as unobservables in economic models, quantifying them can be important to answer interesting economic questions. To propose an analytical framework for this type of products, this paper considers one of the simplest design products -- fonts -- and investigates merger and product differentiation using an original dataset from the world's largest online marketplace for fonts. We quantify font shapes by constructing embeddings from a deep convolutional neural network. Each embedding maps a font's shape onto a low-dimensional vector. In the resulting product space, designers are assumed to engage in Hotelling-type spatial competition. From the image embeddings, we construct two alternative measures that capture the degree of design differentiation. We then study the causal effects of a merger on the merging firm's creative decisions using the constructed measures in a synthetic control method. We find that the merger causes the merging firm to increase the visual variety of font design. Notably, such effects are not captured when using traditional measures for product offerings (e.g., specifications and the number of products) constructed from structured data. |
| Date: | 2021–07 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2107.02739&r= |
| By: | Oksana Loginova (Department of Economics, University of Missouri); X. Henry Wang (Department of Economics, University of Missouri); Qihong Liu (Department of Economics, University of Oklahoma) |
| Abstract: | Platforms such as Uber, Lyft and Airbnb serve two-sided markets with drivers (property owners) on one side and riders (renters) on the other side. Some agents multi-home. In the case of ride-sharing, a driver may drive for both Uber and Lyft, and a rider may use both apps and request a ride from the company that has a driver close by. In this paper, we are interested in welfare implications of multi-homing in such a market. Our model abstracts away from entry/exit by drivers and riders as well as pricing by platforms. Both drivers' and riders' surpluses are determined by the average time between a request and the actual pickup. The benchmark setting is a monopoly platform and the direct comparison is a single-homing duopoly. The former is more efficient since it has a thicker market. Next, we consider two multi-homing settings, multi-homing on the rider side and multi-homing on the driver side. Relative to single-homing duopoly, we find that multi-homing on either side improves the overall welfare. However, multi-homing drivers potentially benefit themselves at the cost of single-homing drivers. In contrast, multi-homing riders benefit themselves as well as single-homing riders, representing a more equitable distribution of gains from multi-homing. |
| Keywords: | Ride-hailing platform, two-sided markets, network externalities, multi-homing |
| JEL: | D85 L12 L13 |
| Date: | 2020–10–09 |
| URL: | http://d.repec.org/n?u=RePEc:umc:wpaper:2013&r= |
| By: | Akihiro NAKAMURA; Takanori IDA |
| Abstract: | Billions of users worldwide use digital zero-price services every day. This study proposes a market definition method for digital zero-price services, using the messenger service as an example. We employ the small but significant non-transitory increase in cost (SSNIC) test, which is an improved version of the small but significant non-transitory increase in price (SSNIP) test, and conduct conjoint analysis while considering the network effect, a characteristic of digital services. Our results show that the price elasticity of demand is 0.628 and the critical markup ratio is 1.492–1.542 when only the price effect is considered. When the direct network effect is considered, the price elasticity of demand is 1.728 and the critical markup ratio is 0.479–0.529. Furthermore, when considering a two-sided market with indirect network effects, the price elasticity of demand is 2.162 and the critical markup ratio is 0.363–0.413. Thus, the price elasticity of demand for free messenger services is higher when the network effects and two-sided markets are considered. |
| Keywords: | Freemium services, Market definition, Competitive policy, Conjoint analysis |
| JEL: | L13 L52 L41 L86 L96 |
| URL: | http://d.repec.org/n?u=RePEc:kue:epaper:e-21-002&r= |
| By: | Cremer, Helmuth; Borsenberger, Claire; Joram, Denis; Lozachmeur, Jean-Marie; Malavolti, Estelle |
| Abstract: | We study the design of environmental policy in the e-commerce sector and examine two main questions. First, what is the appropriate level of intervention along the value chain. Second, which instruments should be used at a specic level in the vertical chain? We consider a model with two retailers/producers who sell a di¤erentiated product and two parcel delivery operators. The production, retailing and delivery of these goods generates CO2 emissions. We assume that it is more expensive for the retailers and the delivery operators to use greentechnologies. We consider di¤erent scenarios reecting the type of competition and the vertical structure of the industry. In all cases the equilibria are ine¢ cient for two reasons. First, at both level of the value chain (at the production/retailing stage and the delivery stage), the levels of emissions are too large (given the output levels - the number of items produced and delivered). Second the levels of outputs are not e¢ cient because the cost of emissions is not reected by the consumer prices. We show that in the perfect competition scenario a uniform Pigouvian tax on emission, reecting the marginal social damage, is su¢ cient to correct both types of ine¢ ciencies. Under imperfect competition a Pigouvian emissions tax is also necessary, but it has to be supplemented by positive or negative taxes on the quantity of good produced and delivered. The specic design of these instruments is a¤ected by vertical integration between a retailer and a delivery operator. |
| Keywords: | Pigouvian rule; emission taxes; output taxes; E-commerce, delivery operators; vertical integration |
| JEL: | H21 L42 L87 |
| Date: | 2021–07–03 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:125780&r= |
| By: | Laura Marcela Capera Romero (Tilburg University) |
| Abstract: | Interest rate caps, also called usury ceilings, are a widely used policy tool to protect consumers from excessive charges by loan providers. However, they are often cited as a barrier for the advancement of financial inclusion, as they may reduce the incentives to provide loans to lower-income borrowers and and to invest in branching networks, particularly in remote and isolated locations. In this paper, I exploit a change in the usury ceiling applied to micro-loans in Colombia to understand the effects of this policy across geographic markets. To quantify the welfare implications of this policy, I structurally estimate a demand and supply model that incorporates the changes in size and composition of the potential market caused by this policy change, in a context where the distribution of branching networks has a crucial role in the optimal pricing strategies of loan providers. I find that the policy generated an increase in consumer surplus at the national level that is explained by greater credit availability for riskier borrowers and the expansion of branching networks in areas that were previously under-served. A counterfactual exercise reveals that the welfare gains associated to this policy depend greatly on additional investment in branching networks, as the opening of new branches in some locations is needed to compensate the consumer welfare loss associated with the subsequent increase in interest rates after the relaxation of the ceiling. |
| Keywords: | Microfinance institutions, price ceilings, consumer welfare |
| JEL: | L11 D43 D61 G21 G28 |
| Date: | 2021–06–28 |
| URL: | http://d.repec.org/n?u=RePEc:tin:wpaper:20210055&r= |
| By: | Boris Knapp |
| Abstract: | User-generated reviews like those found on Amazon, Yelp, and similar platforms have become an important source of information for most consumers nowadays. It is therefore tempting for firms to manipulate reviews in order to increase demand for their products - but not all consumers are aware of this. We show that in a simple model with fake reviews and naive consumers the unique equilibrium is characterised by partial pooling, where fake reviews blend in with real ones and are persuasive. Policies that reduce the share of naive consumers have opposing effects on the two consumer groups: naives benefit, while sophisticates are harmed. A policy maker concerned with aggregate consumer welfare is thus facing a non-trivial problem. We further show that when real reviews are written strategically, they are not always truthful. Given sufficiently favourable market conditions, the equilibrium where all real reviewers are strategic is outcome equivalent to one where all consumers are sophisticates. In the context of online platforms, where the boundary between consumers and reviewers is fluid, this equivalence result has important practical implications. |
| JEL: | C72 D82 L15 |
| Date: | 2102–07 |
| URL: | http://d.repec.org/n?u=RePEc:vie:viennp:2102&r= |
| By: | Wyatt Brooks; Joseph P. Kaboski; Illenin O. Kondo; Yao Amber Li; Wei Qian |
| Abstract: | In this paper we study whether or not transportation infrastructure disrupts local monopsony power in labor markets using an expansion of the national highway system in India. Using panel data on manufacturing firms, we find that monopsony power in labor markets is reduced among firms near newly constructed highways relative to firms that remain far from highways. We estimate that the highways reduce labor markdowns significantly. We use changes in the composition of inputs to identify these effects separately from the reduction of output markups that occurs simultaneously. The impacts of highway construction are therefore pro-competitive in both output and input markets, and act to increase the share of income that labor receives by 1.8--2.3 percentage points. |
| JEL: | J0 J42 O1 O18 |
| Date: | 2021–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28977&r= |
| By: | Kaiying Lin; Beibei Wang; Pengcheng You |
| Abstract: | This paper investigates the efficiency loss in social cost caused by strategic bidding behavior of individual participants in a supply-demand balancing market, and proposes a mechanism to fully recover equilibrium social optimum via subsidization and taxation. We characterize the competition among supply-side firms to meet given inelastic demand, with linear supply function bidding and the proposed efficiency recovery mechanism. We show that the Nash equilibrium of such a game exists under mild conditions, and more importantly, it achieves the underlying efficient supply dispatch and the market clearing price that reflects the truthful system marginal production cost. Further, the mechanism can be tuned to guarantee self-sufficiency, i.e., taxes collected counterbalance subsidies needed. Extensive numerical case studies are run to validate the equilibrium analysis, and we employ individual net profit and a modified version of Lerner index as two metrics to evaluate the impact of the mechanism on market outcomes by varying its tuning parameter and firm heterogeneity. |
| Date: | 2021–06 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2106.11120&r= |
| By: | Alina Garnham (Department of Economics and The Water Institute, University of Waterloo, Canada); Derek Stacey (Department of Economics, University of Waterloo, Canada) |
| Abstract: | In this paper, we study how the emergence of Uber in a large North American city affects the market price of taxicab licenses. A taxicab license provides a claim to a stream of dividends in the form of rents generated by operating the taxicab or leasing the license. The introduction of Uber undoubtedly affects the anticipated stream of dividends because Uber drivers capture part of the farebox revenue that might otherwise go to the owners/drivers of licensed taxicabs. At the same time, the launch of Uber's innovative technology-driven approach to the provision of ride-hailing services can be viewed as a partial obsolescence of the traditional taxicab approach. The economic incentives facing market participants may therefore change as Uber gains momentum in the ride-hailing market, which could further affect the market value of licensed taxicabs. Using transaction-level data, we apply a theory of asset pricing to the secondary market for Toronto taxicab licenses to explore these potential price ef- fects. We learn that both the farebox and innovation effects contribute to the overall decline in market value. The farebox effect explains approximately 60% of the price decline; the innovation effect can account for the rest. |
| JEL: | G12 |
| Date: | 2021–07 |
| URL: | http://d.repec.org/n?u=RePEc:wat:wpaper:21001&r= |
| By: | Drilo, Boris; Stojcic, Nebojsa; Vizek, Maruska |
| Abstract: | We explore how improvements in digital infrastructure contribute to digital transformation of the Croatian economy. More specifically, we investigate under what conditions improvements in broadband speed are conductive for firm entry in digitally intensive sectors at the local level (cities and municipalities; LGUs) during the period 2014–2017. The results of the benchmark random effects panel data model suggest a 10 percent increase in broadband speed increases the number of new digitally intensive firms by 0.68. Two-way interactions between explanatory variables suggest improvements in broadband infrastructure yield the greatest number of new firm entries in densely populated LGUs, and in LGUs with a higher quality of human capital and greater public investment in physical infrastructure. Using the spatial Durbin panel method, we find improvements in broadband infrastructure exhibit positive firm entry effects both within and between cities and municipalities. |
| Keywords: | firm entry; digitally intensive sectors; broadband speed; digital transformation; Croatia; spatial spillovers |
| JEL: | D22 L26 M13 O33 |
| Date: | 2021–07 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:108717&r= |
| By: | Moshe Babaioff; Nicole Immorlica; Yingkai Li; Brendan Lucier |
| Abstract: | A common assumption in auction theory is that the information available to the agents is given exogenously and that the auctioneer has full control over the market. In practice, agents might be able to acquire information about their competitors before the auction (by exerting some costly effort), and might be able to resell acquired items in an aftermarket. The auctioneer has no control over those aspects, yet their existence influences agents' strategic behavior and the overall equilibrium welfare can strictly decrease as a result. We show that if an auction is smooth (e.g., first-price auction, all-pay auction), then the corresponding price of anarchy bound due to smoothness continues to hold in any environment with (a) information acquisition on opponents' valuations, and/or (b) an aftermarket satisfying two mild conditions (voluntary participation and weak budget balance). We also consider the special case with two ex ante symmetric bidders, where the first-price auction is known to be efficient in isolation. We show that information acquisition can lead to efficiency loss in this environment, but aftermarkets do not: any equilibrium of a first-price or all-pay auction combined with an aftermarket is still efficient. |
| Date: | 2021–07 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2107.05853&r= |