nep-com New Economics Papers
on Industrial Competition
Issue of 2021‒09‒13
thirty-one papers chosen by
Russell Pittman
United States Department of Justice

  1. Assessing the Market Power of Digital Platforms By Prado, Tiago S.
  2. Bork's Hoax: Antitrust and the Internet Market By Alleman, James
  3. Free entry under an output-cap constraint By Hiroaki Ino; Toshihiro Matsumura
  4. Cournot-Bertrand equilibria under two-part tariff contract By Basak, Debasmita
  5. Markups and Fixed Costs in Generic and Off-Patent Pharmaceutical Markets By Sharat Ganapati; Rebecca McKibbin
  6. Co-location, good, bad or both: How does new entry of discount variety store affect local grocery business? By Evensen, Charlotte B.; Steen, Frode; Ulsaker, Simen A.
  7. Barriers to entry and the role of African multinational corporations: Entrants in intermediate industrial products (inputs into construction) By Grace Nsomba; Thando Vilakazi
  8. The impact of RAN sharing By Ivaldi, Marc; Aimene, Louise; Jeanjean, Francois; Liang, Julienne
  9. How should durable goods firms combine online and mass media advertisements to promote sales? By Fujisawa, Chieko; Kasuga, Norihiro
  10. Prices and market power in mental health care: Evidence from a major policy change in the Netherlands By Rudy Douven; Chiara Brouns; Ron Kemp
  11. Quality Differentiation and Optimal Pricing Strategy in Multi-Sided Markets By Soo Jin Kim; Pallavi Pal
  12. A Study on the Optimal Number of Mobile Carriers: Discussion of Discussion of Magic Number – three or four By Ueda, Masashi
  13. Local Concentration in the Small Business Lending Market and Its Relationship to the Deposit Market By Ken Onishi
  14. The Value of Interlocking Directorates in Vertical Contracting By Maria Rosa Battaggion; Vittoria Cerasi; Gulen Karakoc
  15. A model of international roaming regulation and competition in European mobile markets By Baranes, Edmond; Vuong, Cuong Hung
  16. Retail Markups and Discount Store Entry By Chenarides, Lauren; Gomez, Miguel I.; Richards, Timothy J.; Yonezawa, Koichi
  17. Hedging and Competition By Erasmo Giambona; Anil Kumar; Gordon M. Phillips
  18. Verkaufsförderung im Wettbewerb - eine empirische Analyse am Beispiel von Preis-Promotions im Lebensmitteleinzelhandel By Zeisberg, Matthias
  19. Profit Effects of Consumers’ Identity Management: a dynamic model By Didier Laussel; Ngo Van Long; Joana Resende
  20. Adapting Competition Law and Policy for Economic Development: Asian Illustrations By Majah-Leah Ravago; James Roumasset; Arsenio Balisacan
  21. COVID-19, Beef Price Spreads, and Market Power By Dhoubhadel, Sunil P.; Azzam, Azzeddine M.
  22. Price Change Synchronization within and between Firms By Øivind Anti Nilsen; Håvard Skuterud; Ingeborg Munthe-Kaas Webster
  23. It takes two to tango: Interlockings and Partial Equity Ownership By Maria Rosa Battaggion; Vittoria Cerasi
  24. The General Court Reverses Commission's Decision in H3G UK/Telefónica UK: Proposing a 'Fruits in a Bowl' to assess the competitive effects of mergers By Tyagi, Kalpana
  25. Pollution, partial privatization and the effect of ambient charges By Ohnishi, Kazuhiro
  26. Kill Zones? Effects of Big Tech Start-up Acquisitions on Innovation By Prado, Tiago S.
  28. Private Labels, Product Assortment, and Pricing: Insights from the U.S. Beef Market By Ma, Meilin; Siebert, Ralph
  29. Comparative analysis of existing multi-sided digital platform initiatives By Verfaillie, Bryan; Van der Wee, Marlies; Verbrugge, Sofie
  30. The Missing Middle in Product Price Distribution By Chang, Pao-Li; Yi, Xin; Yoon, Haeyeon
  31. Spectrum shortage and merger by any other name in South Africa By Howell, Bronwyn E.; Potgieter, Petrus H.

  1. By: Prado, Tiago S.
    Abstract: In this conceptual paper, I propose a framework for measuring the market power of digital platforms. The rise of big technology companies that act both as intermediary platforms and providers of services and goods in several markets has heightened concerns about potential economic harms brought by the concentrated structure of the digital economy. However, the operationalization of market power in the platform economy and the procedures to define which digital platforms and markets should be targeted by pro-competitive remedies, either under a competition policy framework or under a regulatory regime, remain highly contested. I demonstrate that large technology platforms can leverage their market power across markets in the digital economy to make their end users unlikely to switch to smaller competitors, even when they offer better services. Based on this analysis, I argue that market-specific approaches, such as the commonly used Significant Market Power (SMP) framework, would have limited impact in promoting competition in digital markets. I then propose a new set of tools aimed to identify the market power of digital platforms in two-sided markets and suggest some policy alternatives to harness the potential of pro-competitive remedies in the digital economy.
    Keywords: digital platform,digital economy,market power,competition policy,regulation
    JEL: L12 L13 L41 L44 L51
    Date: 2021
  2. By: Alleman, James
    Abstract: Robert Bork's Antitrust Paradox (1978) has been justification for lack of antitrust behavior for over four decades. His test essentially asks if consumers are harmed by the pricing practices of the firm in the market in which they purchase the good or service. Even if these firms are monopoly or oligopolies in their fields with huge economic rents, if they pass this test, no action is taken against them. "Bigness is not bad." This narrow view, inter alia, ignores two- and multisided markets (MSM) where the appearance of "no harm" is addressed to only one side of the market. The correct view is to examine all the markets impacting potential harm to consumers. It illustrates the harm which is "free" to the users, but advertisers pay dearly for the ability to micro-focus on potential consumers of their products. Facebook and Google are used as examples. This advertising cost is added into the sales price of the product, resulting in consumers being harmed by the embedded advertising costs in the products or services purchased. We argue here, using Bork's own criterion - except to expand it to the other side of the market and eliminating producer's surplus - that much needed antitrust action has been ignored by this narrow criterion. This analysis indicates that antitrust action is long overdue after considering two-sided markets. In addition, we argue that his "consumer welfare" criterion is misleading and liable to deceive, thus the hoax. The Bork critique is a hoax in two ways: Bork's analysis does not include the other side of the market. The cost of advertising has to be included in the price of the products being sold in order for the firm to remain in business. So, clearly, the price of goods and services is increased by the cost of advertising, thus reducing consumers' surplus. The second flaw is Bork's definition of "consumer welfare" - it includes the economic rents of the firm - all at a cost to consumers. Enhancing the wealth (profits) of corporations in the name of efficiency was not the purpose of the antitrust laws. We address the Bork Paradox on its own terms by examining the second side of the market which harms consumers indirectly by increasing the price of the products and services they purchase. Using the corrected Bork metric - both sides of the market and no producer's surplus - the estimated loss of consumers' welfare in $60.4 and $43.7 billion respectively from Google and Facebook, respectively.
    Keywords: Advertising,Antitrust,Bork,competition,consumers' surplus,digital markets,Information and Communications Technology (ICT),internet,platform economics,monopoly,regulation,two-sided/multisided markets
    JEL: D42 D43 K21 L12 L13 L22 L51 L96
    Date: 2021
  3. By: Hiroaki Ino (School of Economics, Kwansei Gakuin University); Toshihiro Matsumura (Institute of Social Science, The University of Tokyo)
    Abstract: This study considers a peer-to-peer market with capacity-constrained suppliers. We examine a free-entry market of individual suppliers and discuss the welfare consequences of free entry. We show that the number of entries is socially optimal.
    Keywords: sharing economy, Cournot competition, excess entry theorem, private lodging businesses, capacity constraint
    JEL: D43 L13 K25
    Date: 2021–09
  4. By: Basak, Debasmita
    Abstract: We consider a vertically related market where one quantity setting and another price setting downstream firm negotiate the terms of a two-part tariff contract with an upstream input supplier. In contrast to the traditional belief, we show that when bargaining is decentralised, the price setting firm produces a higher output and earns a higher profit than the quantity setting firm. And, when bargaining is centralised, both firms produce the same output whereas the profit is higher under the price setting firm than the quantity setting firm.
    Keywords: Bargaining; Bertrand; Cournot; Two-part tariffs; Vertical pricing; Welfare
    JEL: L13 L2 L22
    Date: 2021–09–04
  5. By: Sharat Ganapati; Rebecca McKibbin
    Abstract: There is wide dispersion in pharmaceutical prices across countries with comparable quality standards. Under monopoly, off-patent and generic drug prices are at least four times higher in the United States than in comparable English-speaking high income countries. With five or more competitors, off-patent drug prices are similar or lower. Our analysis shows that differential US markups are largely driven by the market power of drug suppliers and not due to wholesale intermediaries or pharmacies. Furthermore, we show that the traditional mechanism of reducing market power – free entry – is limited because implied entry costs are substantially higher in the US.
    JEL: F14 I11 L44 L65
    Date: 2021–09
  6. By: Evensen, Charlotte B. (Dept. of Economics, Norwegian School of Economics and Business Administration); Steen, Frode (Dept. of Economics, Norwegian School of Economics and Business Administration); Ulsaker, Simen A. (Telenor research)
    Abstract: We analyze 69 entries and relocations by the Norwegian discount variety chain Europris during the period 2016 to 2019. We measure how its location choices affect local grocery stores’ performance, using a diff-in-diff strategy and data from a large Norwegian grocery chain. We combine detailed data on local grocery stores’ sales, traffic and travelling distance to new or relocated Europris stores. We find that entries and relocations have significant effects, suggesting an S-shaped relationship; sufficiently close entries increase local demand since more customers are attracted to the market, but, as the distance increases, the competitive effect of a new discount variety store dominates, and local grocery sales and traffic are reduced. As we move further away, the entry effect is gradually reduced to zero. We show that this empirical finding can be squared with a simple theoretical model. Our results confirm theoretical conjectures on agglomeration forces and competitive effects from local competition.
    Keywords: Retail economics; local competition effects; positive agglomeration forces; grocery markets
    JEL: L00
    Date: 2021–09–08
  7. By: Grace Nsomba; Thando Vilakazi
    Abstract: Effective competition in the Southern and East African regions requires independent rivals competing across borders and within domestic markets through innovation and effort, investment, product quality, and prices. To understand the constraints to more dynamic rivalry between firms within the region, this paper considers the obstacles to integration from the perspective of fostering the development of domestic firms with strong capabilities.
    Keywords: African multinational corporations, Competition, Regional integration, Barriers to entry
    Date: 2021
  8. By: Ivaldi, Marc; Aimene, Louise; Jeanjean, Francois; Liang, Julienne
    Abstract: In this paper, we formulate and estimate a structural model of demand to analyse the equilibrium effect of the RAN sharing by using cross-country panel data in 28 EU countries in years 2010-2020. Based on model estimates, our simulation analysis in Spain firstly provides a quantitative assessment of the impact of RAN sharing on mobile operators. We find that prices decrease for mobile operators involved in RAN sharing agreement due to cost reductions. In a competitive environment where operators compete, MNOs not involved in RAN sharing also lower their prices in a Nash equilibrium. We further evaluate the consumer welfare consequence of the presence of RAN sharing, and find that the RAN sharing enhanced the consumer surplus by generating lower prices for all mobile operators.
    Keywords: Mobile telecommunications,network sharing,competition,consumer welfare
    JEL: L40 L96 L11
    Date: 2021
  9. By: Fujisawa, Chieko; Kasuga, Norihiro
    Abstract: We develop an advertising strategy for durable goods firms applying a dual time-period model while considering three-stage game in a Cournot competition. We assume that firms employ two advertising approaches; one is online advertising, which escalates consumers' willingness to purchase goods and the other is conventional mass media advertising, including television and radio, which presents a limited 'evoked set' of goods. The term evoked set implies that consumers only consider a small group of brands prior to making a purchase. As firms understand the character of each advertisement, sales strategy is devised to target a heterogeneous consumer through advertising. Should firms only choose one type of advertisement or a combination of the two kinds of ads available? In this model we assume that firms directly consider both types of advertising. Our analysis demonstrates that online advertisement raises the total number of consumer-product matches in the competitive equilibrium. We also show that firms combine the two types of advertisement to apply the differing effects of each format. Moreover, firms increase revenue through an appropriate mix of advertising strategy, although the cost of advertising might increase. Regarding the future direction of advertising, we anticipate that the combination of both online and conventional strategies will persist, maintaining the growth of a diverse product market.
    Keywords: Durable goods,Online media advertising,mass media advertising,targeting,media strategy
    JEL: D15 D43 L13 D82
    Date: 2021
  10. By: Rudy Douven (CPB Netherlands Bureau for Economic Policy Analysis); Chiara Brouns (Menzis); Ron Kemp (ACM, EUR)
    Abstract: In the Dutch health care system of managed competition, insurers and mental health providers negotiate on prices for mental health services. Contract prices are capped by a regulator who sets a maximum price for each mental health service. In 2013, the majority of the contract prices equaled these maximum prices. We study price setting after a major policy change in 2014. In 2014, mental health care providers had to negotiate prices with each individual health insurer separately, instead of with all insurers collectively as in 2013. Moreover, after a cost-price revision, the regulator increased in 2014 maximum prices by about 10%. Insurers and mental health providers reacted to this policy change by setting most contract prices below the new maximum prices. We find that in 2014 mental health providers with more market power, i.e. a higher willingness to pay measure, contracted significantly higher prices. Some insurers negotiated significantly lower prices than other insurers but these differences are unrelated to an insurers’ market share.
    JEL: I11 I18 L11
    Date: 2020–05
  11. By: Soo Jin Kim; Pallavi Pal
    Abstract: This paper analyzes the generalized quality differentiation model in multi-sided markets with positive externalities, which leads to new insights into the optimal pricing structure of the firm. We find that quality differentiation for users on one side affects not only the side involving differentiation but also the other side due to cross-side network externalities, thereby affecting the pricing structure of multi-sided firms. In addition, quality differentiation affects the strategic relationships among all the choice variables for the platform, enabling the platform to strategically use quality differentiation to raise its profits.
    Keywords: multi-sided market, quality differentiation, platform business strategies
    JEL: D43 L11 L42
    Date: 2021
  12. By: Ueda, Masashi
    Abstract: In recent years, mergers between communications companies have been progressing especially in mobile carriers' market. Regulatory authorities are worried about increasing consolidations and less competition, and have decided to impose conditions on the mergers or even disapprove them. In many cases, just before the generation change, the competitively inferior operators sell their business and exit the market because of the cost of acquiring spectrum. The concern of the regulators is cases such as Ireland and Austria, where ARPU rose because the competitive environment became milder due to mergers between MNOs. On the other hand, in Germany, where measures to promote competition after the merger (reallocating part of the new company's spectrum to other companies, leasing out 20% to 30% of its capacity, etc.) were effective, ARPU did not increase. On the other hand, when a window for new spectrum acquisition opens, new entrants may join the market. In the fifth generation (5G), Dish in the US, 1&1 Drillisch in Germany, and Rakuten in Japan took advantage of the opportunity to enter the market. In the case of Drillisch and Rakuten, they acquired spectrum and/or licenses in 2019 with the expectation of migrating existing customers from MVNOs to MNOs. (...)
    Date: 2021
  13. By: Ken Onishi
    Abstract: This note analyzes competition and concentration in the small business lending market using data obtained from Community Reinvestment Act (CRA) disclosures and data on local branches from the Federal Deposit Insurance Corporation's (FDIC) Summary of Deposits (SOD). In 1963, the Supreme Court defined the product market for commercial banking.
    Date: 2021–08–24
  14. By: Maria Rosa Battaggion; Vittoria Cerasi; Gulen Karakoc
    Abstract: This study analyzes the choice to interlock between two competing companies when their privately known marginal costs are correlated. The two rivals are organized into different business models: one delegates its production to a subcontractor, while the other is vertically integrated and carries its production in-house. By accepting the interlock, the hosting company discloses its marginal cost to the rival. The two companies decide ex-ante whether to commit to interlock. In a Perfect Bayesian Equilibrium, the vertically separated company gains more from interlocking than the rival because it saves on internal agency costs and gains market power, otherwise unbalanced toward the competitor. Interestingly, we show the following: for high cost correlation allowing a unilateral interlock benefits consumers. Hence, our results provide reasons for approving horizontal interlocking in markets where companies have asymmetric business models, and the interlocking company outsources its production.
    Keywords: Interlocking directorates; Agency costs; Vertical hierarchy.
    JEL: D43 D82 D83 L2
    Date: 2021–09
  15. By: Baranes, Edmond; Vuong, Cuong Hung
    Abstract: This paper investigates the impacts of the current roaming rules on domestic competition and welfare. We consider a model for two countries in which each country has two operators that compete in the retail market for access services and also in the wholesale market for roaming. We first derive equilibrium prices in the two markets when operators are not subjected to regulatory restrictions. We then introduce Roaming Like At Home (RLAH) obligation and show how retail tariffs and wholesale roaming charges can be sensitive to this regulatory regime. Since introducing a fair use clause in roaming regulation can be a tool to avoid permanent roaming, we study different cases depending on whether RLAH is acompagnied by a fair use safeguard or not. We emphazise the most interesting results, considering the role played by cost and demand asymmetries between operators and countries.
    Keywords: International roaming,mobile telecommunications,roaming like at home,fair use policy,interconnection
    JEL: L13 L51 L96
    Date: 2021
  16. By: Chenarides, Lauren; Gomez, Miguel I.; Richards, Timothy J.; Yonezawa, Koichi
    Keywords: Marketing, Agribusiness, Production Economics
    Date: 2021–08
  17. By: Erasmo Giambona; Anil Kumar; Gordon M. Phillips
    Abstract: We study how risk management through hedging impacts firms and competition among firms in the life insurance industry - an industry with over 7 Trillion in assets and over 1,000 private and public firms. We show that firms that are likely to face costly external finance increase hedging after staggered state-level financial reform that reduces the costs of hedging. Post reform impacted firms have lower risk and fewer negative income shocks. Product market competition is also impacted. Firms that previously are more likely to face costly external finance, lower price, increase policy sales and increase their market share post reform. The results are consistent with hedging allowing firms that face potential costly financial distress to decrease risk and become more competitive.
    JEL: D0 D22 D43 G22 G28 G31 G32 G33
    Date: 2021–09
  18. By: Zeisberg, Matthias
    Keywords: Sales Promotion,Price Promotion,Food Retailing,Price Competition,Trade Marketing,Pricing Strategies
    JEL: M31
    Date: 2021
  19. By: Didier Laussel; Ngo Van Long; Joana Resende
    Abstract: We consider a non-durable good monopoly that collects data on its customers in order to profile them and subsequently practice price discrimination on returning customers. The monopolist’s price discrimination scheme is leaky, in the sense that an endogenous fraction of consumers chooses to incur a privacy cost to become "active", i.e., to be able to conceal their identity when they return in the following periods. We characterize the Markov Perfect Equilibrium of the game. We find that, regardless of the accuracy of data on their customers, managers adjust their pricing and market expansion strategies to the presence of active customers in the following way: (i) reduce the pace at which introductory price falls over time, and (ii) strategically guarantee that market expansion is incomplete. The equilibrium number of passive customers in the market is found to be increasing in the level of the privacy cost. Investigating the impact of customers’ identity management on profits, we find that the monopoly profit is a U-shaped function of the privacy cost whatever the degree of the monopolist’s information accuracy. Still, the profit effects of consumers’ identity management choices are shown to depend on the monopolist’s profiling capabilities. Two customer profiling structures are compared. In the case of full information acquisition (FIA), the firm can practice personalized pricing on returning passive customers, while in the case of purchase history information (PHI), it has only enough information for group pricing. We show that in the FIA case, the monopoly equilibrium profit is globally an increasing function of the privacy cost while in the PHI case, it is almost always a globally decreasing function of it. Nous considérons un monopole de biens non durables qui collecte des données sur ses clients afin de les profiler et pratique ensuite une discrimination par les prix sur les clients qui reviennent. Le système de discrimination par les prix du monopoleur est fuyant, en ce sens qu'une fraction endogène de consommateurs choisit d'encourir un coût d’anonymisation pour devenir « actif », c'est-à-dire pour pouvoir dissimuler son identité à son retour dans les périodes suivantes. Nous caractérisons l'équilibre parfait de Markov du jeu. Nous constatons que, quelle que soit l'exactitude des données sur leurs clients, les gestionnaires ajustent leurs stratégies de tarification et d'expansion du marché à la présence de clients actifs de la manière suivante : (i) réduire le rythme auquel le prix de lancement baisse au fil du temps, et (ii) garantir stratégiquement que l'expansion du marché est incomplète. On constate que le nombre d'équilibre de clients passifs sur le marché est une fonction croissante du coût d’anonymisation. En étudiant l'impact de la gestion de l'identité des clients sur les profits, nous constatons que le profit du monopole est une fonction en forme de U du coût d’anonymisation, quel que soit le degré d'exactitude des informations du monopoleur. Pourtant, les effets sur le profit des choix de gestion de l'identité des consommateurs dépendent des capacités de profilage du monopoleur. Deux structures de profilage des clients sont comparées. Dans le cas de l'acquisition d'informations complètes (FIA), l'entreprise peut pratiquer une tarification personnalisée sur les clients passifs, tandis que dans le cas des informations sur l'historique des achats (PHI), elle ne dispose que d'informations suffisantes pour la tarification de groupe. Nous montrons que dans le cas FIA, le profit d'équilibre de monopole est globalement une fonction croissante du coût d’anonymisation alors que dans le cas PHI, il en est presque toujours une fonction globalement décroissante.
    Keywords: Consumers’ Identity Management,Anonymization,Intertemporal Price Discrimination,Monopoly,Information Structures, gestion de l'identité des consommateurs,Anonymisation,Discrimination des prix,Monopole,Structures d'informations
    JEL: C73 D42 L12 L15
    Date: 2021–08–30
  20. By: Majah-Leah Ravago (Economics, Ateneo de Manila, Philippines); James Roumasset (Economics, University of Hawai?i at M?noa); Arsenio Balisacan (Philippine Competition Commission, Quezon City, Philippines)
    Abstract: Do the needs of countries in different economic environments and at various stages of development warrant different policies? In the pursuit of economic development and consumer welfare, competition policy should curb rent-seeking and promote market efficiency without interfering with the extra-market institutions for the dynamic promotion of specialization, innovation, and investment coordination. This requires the coordination of competition policy with other economic roles of government including trade, industrial, and infrastructure policies. We investigate the impact of adoption of competition law on long-term economic growth using cross-country data from 1975-2015. Countries may choose to adopt–or not adopt–competition law depending on their circumstances, including level of economic development, institutions, and geography. Considering endogeneity and self-selection, we employ an endogenous switching regression allowing for the interdependence of economic growth and adoption of competition law. Our analysis shows that adoption increased the growth rates in adopting countries but would have decreased growth in non-adopting countries. This suggest that countries should not be pressured to prematurely adopt competition law but a limited international or regional agreement such as harmonization of policies may instead be pursued. In addition to correcting the abuses of anti-competitive behavior, competition policy should be designed to promote innovation and productivity growth and be well-coordinated with trade and domestic policies. We review these arguments focusing on Asian countries. The cases of Korea, Thailand, and the Philippines capture the characteristics of the law and authorities at various stages of maturity.
    Keywords: Competition policy; antitrust; economic development; economic growth; Asia
    JEL: L40 L51 L52 K21 O57 O53
    Date: 2021–06
  21. By: Dhoubhadel, Sunil P.; Azzam, Azzeddine M.
    Keywords: Agribusiness, Marketing, Agricultural and Food Policy
    Date: 2021–08
  22. By: Øivind Anti Nilsen; Håvard Skuterud; Ingeborg Munthe-Kaas Webster
    Abstract: This paper provides evidence on price rigidity at the product- and firm-level in Norway. A strong within-firm synchronization is found supporting the theory of economies of scope in menu costs. The industry synchronization effects are found to be small suggesting that firms either have some monopoly power, or that a firm’s costs of changing their own prices may be larger than the benefit of responding to their competitors’ price changes. These findings have potentially important implications for the micro-foundations of macroeconomic models, and thus the policy advice derived from such models.
    Keywords: price setting, monthly micro data, selection effects
    JEL: E31 D43 C35
    Date: 2021
  23. By: Maria Rosa Battaggion; Vittoria Cerasi
    Abstract: We study the relation between the acquisition of a partial equity ownership and interlocking directorates among rival companies. Partial equity ownership between rivals in the product market is convenient, even in the case of passive participation, since, by internalizing competition, it raises the profits of both companies. The price of the acquisition, however, is affected by the marginal cost of the target company. When this cost is private information, the bidder has to elicit the true value of the equity stake from the target through a proper design of the offer in the context of asymmetric information. One possible alternative is for the bidder to propose an interlocking directorate to observe the private cost: to achieve this goal, the bidder has to convince the target to host one of his executives on the board. We build a novel framework to analyze the choice to interlock together with the acquisition of a minority equity stake and study when the two events are observed at the equilibrium. We suggest that interlocking directorates may be ancillary to a minority acquisition when the value of the target is private information.
    Keywords: Interlocking Directorates; Partial Equity Ownership; Information; Oligopoly.
    JEL: D4 G3 L2
    Date: 2021–07
  24. By: Tyagi, Kalpana
    Abstract: The General Court recently annulled the Commission's 2016 H3G UK/Telefónica UK prohibition decision. Commission's failure to meet the Court's newly-found higher threshold demonstrating that the merger would lead to 'significant impediment to effective competition' (SIEC), and that H3G UK was an 'important competitive force' were central to the decision. Considering that on the one hand, the Court's decision is welcome as it reflects that even telecom mergers - that are heavily grounded in economics and econometric simulations - are subject to legal review; then on the other, it also reflects a 'gap'- an evident need to appreciate that economics and econometric simulations, need clear and demonstrable definitions for application by Commission and the courts, as the case may be. This article, using an inter-disciplinary methodology with insights from competition law and economics & business strategy, tries to address this gap, and in the process respectfully highlights how the absence of such a 'vocabulary' and 'structure' led to a decision by the General Court that is good in spirit, but deplorably mistaken in reasoning. Potential remedies that could have alleviated competition concerns, while preserving merger specific efficiencies are also discussed.
    Keywords: H3G UK/Telefónica UK,significant impediment to effective competition,important competitive force,Efficiencies,Merger Remedies,4-to-3 Mobile telecom mergers
    Date: 2021
  25. By: Ohnishi, Kazuhiro
    Abstract: This paper examines a mixed Cournot duopoly model comprising a private firm and a partially privatized public firm to reassess the effect of an increase in ambient charges, and demonstrates that the result of this study is about the same as that obtained from private Cournot duopoly competition.
    Keywords: ambient charge; Cournot duopoly; environmental regulation; partial privatization; pollution
    JEL: C72 D21 L33 Q58
    Date: 2021–02–27
  26. By: Prado, Tiago S.
    Abstract: This paper investigates short-term effects of big tech start-up acquisitions on innovation empirically. Innovation research has found a strong positive, causal relationship between VC investment and innovation. Using this insight, we can explore the repercussions of big tech start-up acquisitions on innovation by examining their effects on venture capital (VC) activity. We analyze a very large set of observations of more than 32,000 venture capital deals in more than 170 different segments of the tech industry and almost 400 tech start-up acquisitions made worldwide between 2010 and 2020 by Google, Facebook, Amazon, Apple, and Microsoft. Our results suggest a positive, causal impact of big tech start-up acquisitions on venture capital activity, challenging claims about the creation of "kill zones" for start-ups after acquisitions are made by the big techs. For example, after controlling for other factors that may impact VC activity, like initial public offerings (IPOs) and other mergers and acquisitions (M&As), we found an average increase of 30.7% in the total amount of VC funding towards U.S. based start-ups of the same industry segment in the four quarters following a big tech start-up acquisition. For deals targeting European start-ups, we found an increase of 32.1% in the VC funding in in the first quarter after a big tech start-up acquisition. Finally, our findings show that such positive effects, when existent, persist for a few months only, and so do not seem to have lasting impacts on the innovation incentives in the the start-up ecossystem. Our empirical findings should inform current competition policy discussions on imposing restrictions to acquistions of start-ups by the big techs.
    Keywords: kill zone,platform,big tech,venture capital,innovation
    JEL: G11 G24 G32 G34 L41 L44
    Date: 2021
  27. By: Badruddoza, Syed; McCluskey, Jill J.
    Keywords: Agribusiness, Agricultural and Food Policy, Production Economics
    Date: 2021–08
  28. By: Ma, Meilin; Siebert, Ralph
    Keywords: Agribusiness, Marketing, Food Consumption/Nutrition/Food Safety
    Date: 2021–08
  29. By: Verfaillie, Bryan; Van der Wee, Marlies; Verbrugge, Sofie
    Abstract: Digital platforms are omnipresent in our society. For example, streaming movies via Netflix, interacting with friends through social media, or using Deliveroo to order your meal. Digital platforms and digital marketplaces caused a big impact on the value creation process within different application domains. Actual digital ecosystems have appeared and the value propositions of traditional players within different domains got challenged by new and more integrated offers. Within this setting, also smaller-scale initiatives try to find their position. Local initiatives such as energy management platforms to link residents with (renewable) energy suppliers, or community platforms to link neighbours and city or village initiatives, especially in "online-only" times are appearing fast. Although the number of both successful and failed cases is constantly growing, systematic understanding of the reasons behind this, is still lacking. This paper wants to add to this understanding by analysing digital platform initiatives from different points of view. The overall research question tackled in this paper is to determine critical characteristics that can impact the success of the digital, multi-sided platform business model. To achieve this, a conceptual framework that allows to analyse and compare platforms is presented. The framework is then applied on different existing platform solutions, in a broad range of application domains, to identify specific design choices and compare the different platforms. Overall, more general insights in the role of network effects, pricing strategy, and other key features that impact the risk of failure, are obtained. The analyses indicate that positive network effects are predominantly present which is important for the growth of the user base. Pricing schemes indicate that general customers do not want to spend a lot of money to use a platform. Therefore, they usually can use it for free. Advertisers play a crucial role in the revenue stream for a platform but too much ads can irritate the end user. Platforms also tend to use third parties for services which reduces the time to market and lowers the investment risk. Platforms immediately benefit from other technological advantages like scalability. Due to the low homing-costs for users, there is room for competition in each domain but of course platforms try to differentiate their offer from their competitors.
    Keywords: Digital Platforms,Multi-Sided Platforms,Network Effects,Pricing,Multi-Homing Cost
    Date: 2021
  30. By: Chang, Pao-Li (School of Economics, Singapore Management University); Yi, Xin (School of Economics, Singapore Management University); Yoon, Haeyeon (School of Economics, University of Bristol)
    Abstract: The IO literature has typically studied the supply-side factors that determine the price structure of products/services competing in a market. This paper pro-poses that the demand-side demographics could play an important role in shaping the product price structure. In particular, we document a “missing middle” phe-nomenon in both the income and the product price distributions in the U.S., based on the IPUMS ACS dataset (2005–2017) and the Nielsen Retail Scanner Data (2006–2017), for a large set of goods sold in the U.S. at the national, state, or commuting-zone level. We show that the lagged population share of the middle-income class has a positive impact on the market share (in quantity) of middle-priced varieties (and respectively so for the low/high income and price group), after controlling for product category and state (or commuting zone) fixed effects. The impacts are further stronger in commuting zones of higher population density. We then evaluate the cost-of-living implications of the observed missing-middle phe-nomenon, taking into account product entry, exit, and pro-competitive price effects of continuing products, in a framework that allows for non-homothetic preferences across income groups with respective to the price groups. We find that ignoring the non-homothetic demand structure and the missing-middle phenomenon under-states the rise in the cost of living for the period 2006–2017. The downward bias is sizable (as large as 2 percentage points out of 11–13% increase in the cost of living for the period), and particularly noticeable for the middle-income households.
    Keywords: missing middle; price and income distribution; demand demographics; cost of living; entry/exit
    JEL: D12 D31 D61 J11 L11
    Date: 2021–06–07
  31. By: Howell, Bronwyn E.; Potgieter, Petrus H.
    Abstract: Radio spectrum is a key input for mobile operators and the structure of the industry is strongly related to and influenced by the ownership of spectrum licenses. Spectrum is usually allocated for a limited duration and may or may not be tradable which further complicates the interaction between spectrum ownership and the retail market for mobile services. The adoption of a new constitutional system in 1996 in South Africa created the opportunity for importing a fresh set of recommendeded institutions and policies for telecommunications. This eventually included an independent telecommunications regulator (ICASA), the budget for which nevertheless comes form the responsible Minister. ICASA announced an auction of spectrum in the 2.6 GHz and 3.5 GHz bands in May 2010 and issued a tender for the design of the auction, but this was postponed several times and finally abandoned (Song, 2011). The same thing happened again in 2016 (Paelo & Robb, 2020). Late in 2020, the regulator again announced an auction, due to take place during 2021 but by the beginning of the year, two of the four national operators had already announced that they would go to court to stop the auction. A shortage of spectrum (or, inefficient assignment of it) is blamed for South Africa's relatively slow LTE speeds, among other things. The response of operators has been to innovate using roaming and network sharing agreements. By historical accidents, the country has two wireless networks in addition to the four licences mobile operators. The paper looks at how the de facto industry structure has been determined by spectrum holdings and sharing arrangements and asks how spectrum management could be improved. We observe that although the number of mobile operators has effectively aeen reduced to 3 (a number which would raise concern in some circles) there exist a variety of arrangements between the 3 and also other spectrum and network operator. The smallest of the 3 mobile operators is still not able to offer a nationwide mobile service without a roaming agreement but at the same time the two larger operators depend critically on spectrum and roaming agreements themselves, mainly with the two physical data network operators that function as wholesale providers.
    Keywords: Spectrum auction,network sharing,South Africa,ICASA
    Date: 2021

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