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on Industrial Competition |
| By: | Andres, Maximilian; Bruttel, Lisa; Friedrichsen, Jana |
| JEL: | C92 D43 L41 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc21:242372&r= |
| By: | Marleen Marra (ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | This paper presents, solves, and estimates the first structural auction model with seller selection. This allows me to quantify network effects arising from endogenous bidder and seller entry into auction platforms, facilitating the estimation of theoretically ambiguous fee impacts by tracing them through the game. Relevant model primitives are identified from variation in second-highest bids and reserve prices. My estimator builds off the discrete choice literature to address the double nested fixed point characterization of the entry equilibrium. Using new wine auction data, I estimate that this platform's revenues increase up to 60% when introducing a bidder discount and simultaneously increasing seller fees. More bidders enter when the platform is populated with lower-reserve setting sellers, driving up prices. Moreover, I show that meaningful antitrust damages can be estimated in a platform setting despite this two-sidedness. |
| Keywords: | Auctions with entry,Two-sided markets,Nonparametric identification,Estimation,Nested fixed point |
| Date: | 2019–12–01 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-03393068&r= |
| By: | Takanori ADACHI; Michal FABINGER |
| Abstract: | This paper proposes a sufficient statistics approach to welfare analysis of third-degree price discrimination in differentiated oligopoly. Specifically, our sufficient conditions for price discrimination to increase or decrease aggregate output, social welfare, and con-sumer surplus simply entail a cross-market comparison of multiplications of two or three of the sufficient statistics—pass-through, conduct, and profit margin—that are functions of first-order and second-order elasticities of the firm’s demand. Notably, these results are derived under a general class of demand, and can be readily be extended to accom-modate heterogeneous firms. These features suggest that our approach has potential for conducting welfare analysis without a full specification of an oligopoly model. |
| Keywords: | Third-Degree Price Discrimination; Oligopoly; Sufficient Statistics. |
| JEL: | D43 L11 L13 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:kue:epaper:e-21-005&r= |
| By: | Yuta Yasui (School of Economics and Management, Kochi University of Technology) |
| Abstract: | Assumptions of competitive structure are often crucial for marginal cost estimation and counterfactual predictions. This paper introduces tests for price competition among multi-product rms. The tests are based on the firm's revealed preference (revealed pro t function). In contrast to other approaches based on estimated demand functions such as conduct parameter estimation, the proposed tests do not require any instrumental variables, even though the models can accommodate structural error terms. In this paper, I employ a demand structure introduced by Nocke and Schutz (2018), the discrete/continuous choice model, which nests the multinomial logit demand and CES demand functions. Any price and quantity data can be rationalized by price competition under a discrete/continuous choice model and increasing marginal costs. Adding more assumptions to the demand function, such as logit, CES, or the co-evolving and log-concave property produces some falsifiable restrictions. |
| Keywords: | revealed preference, multi-product, conduct, discrete/continuous |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:kch:wpaper:sdes-2021-14&r= |
| By: | Céline Bonnet (TSE - Toulouse School of Economics - UT1 - Université Toulouse 1 Capitole - Université Fédérale Toulouse Midi-Pyrénées - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Zohra Bouamra-Mechemache (TSE - Toulouse School of Economics - UT1 - Université Toulouse 1 Capitole - Université Fédérale Toulouse Midi-Pyrénées - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Hugo Molina (ALISS - Alimentation et sciences sociales - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement) |
| Abstract: | We develop a framework of bilateral oligopoly with a sequential two-stage game in which manufacturers engage in bilateral bargains with retailers competing on a downstream market. We show that bargaining outcomes depend on three different bargaining forces and can be interpreted in terms of "equilibrium of fear". We estimate our framework using data on soft drink purchases in France and find that retailers have a higher bargaining power than manufacturers. Using counterfactual simulations, we highlight that retail mergers always increase retailers' fear of disagreement which weakens their bargaining power vis-à-vis manufacturers and leads to higher wholesale and retail prices. |
| Keywords: | Retail mergers,Bargaining,Bilateral oligopoly,Soft drink industry |
| Date: | 2021–10–13 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-03375907&r= |
| By: | Wein, Thomas |
| JEL: | L13 L41 K21 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc21:242362&r= |
| By: | Ahnert, Toni; Martinez-Miera, David |
| JEL: | G01 G21 G28 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc21:242348&r= |
| By: | Luca Fontanelli; Mattia Guerini; Mauro Napoletano (OFCE - Observatoire français des conjonctures économiques - Sciences Po - Sciences Po) |
| Abstract: | We build a simple dynamic model to study the effects of technological learning, market selection and international competition in the determination of export flows and market shares. The model features two countries populated by firms with heterogeneous productivity levels and sales. Market selection in each country is driven by a finite pairwise Pólya urn process. We show that market selection leads either to a national or to an international monopoly in presence of a static distribution of firm productivity levels. We then incorporate firm learning and entry-exit in the model and we show that the market structure does not converge to a monopoly. In addition, we show that the extended model is able to jointly reproduce a wide ensemble of stylized facts concerning intra-industry trade, industry and firm dynamics. |
| Keywords: | international trade,industrial dynamics,firm dynamics,market selection,Pólya urn |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-03370650&r= |
| By: | Thiago Christiano Silva; Sergio Rubens Stancato de Souza; Solange Maria Guerra |
| Abstract: | This paper investigates how COVID-19 affected the local market power of Brazilian credit markets. We first propose a novel methodology to estimate bank market power at the local level. We design a data-intensive method for computing a local Lerner index by developing heuristics to allocate national-level bank inputs, products, and costs to each branch locality using data from many sources. We then explore the exogenous variation in COVID-19 prevalence across Brazilian localities to analyze how the pandemic influenced local market power through the effective price and marginal cost channels. Despite reducing the economic activity substantially in more affected localities, COVID-19 did not significantly impact the effective price channel: bank branches offset the decrease in credit income by reducing credit concessions. However, bank branches more affected by COVID-19 experienced increased marginal costs as they could not rapidly adjust their cost factors in response to the decrease in credit concessions. Consequently, COVID-19 reduced banks’ local market power via the marginal cost channel. However, banks that spent more in IT before the COVID-19 outbreak suffered less replacing more easily local borrowers with remote ones. We then design a bank-specific measure of exposure to COVID-19 to examine how the pandemic affected different banks within the same locality. Banks more exposed to COVID-19 increased their local market power mainly via the effective price channel, which operated through a negative supply shock and not increased credit income. The paper provides new insights as to how crises can affect local market power in non-trivial ways. |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:bcb:wpaper:558&r= |
| By: | Vanessa Alviarez (Sauder - Sauder School of Business [British Columbia] - UBC - University of British Columbia); Keith Head (Sauder - Sauder School of Business [British Columbia] - UBC - University of British Columbia); Thierry Mayer (ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | We assess the consequences for consumers in 76 countries of multinational acquisitions in beer and spirits. Outcomes depend on how changes in ownership affect markups versus efficiency. We find that owner fixed effects contribute very little to the performance of brands. On average, foreign ownership tends to raise costs and lower appeal. Using the estimated model, we simulate the consequences of counterfactual national merger regulation. The US beer price index would have been 4–7% higher without divestitures. Up to 30% savings could have been obtained in Latin America by emulating the pro-competition policies of the US and EU. |
| Date: | 2020–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-03389199&r= |
| By: | Charles Angelucci; Julia Cage (ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique); Michael Sinkinson |
| Abstract: | News media operate in two-sided markets, offering bundles of content to readers as well as selling readers' attention to advertisers. Technological innovations in content delivery, such as the advent of broadcast television or of the Internet, affect both sides of the market, threatening the basic economic model of print news operations. We examine how the entry of television affected local newspapers as well as consumer media diets in the United States. We develop a model of print media and show that entry of national television news could adversely affect the provision of local news. We construct a novel dataset of U.S. newspapers' economic performance and content choices from 1944 to 1964. Our empirical strategy exploits quasi-random variation in the timing of the entry of television in different markets. We show that the entry of television was a negative shock for newspapers, particularly evening newspapers, in both the readership and advertising markets. Further, we find a drop in the total quantity of news printed, in particular original reporting, raising concerns about the provision of local news. |
| Date: | 2020–02–01 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-03393063&r= |
| By: | Simone Boccaletti; Vittoria Cerasi |
| Abstract: | This study examines the choice of individual companies to adapt productive assets (PAs) to specific production. To soften competition, companies may modify their assets to increase product differentiation. However, this decision alters the liquidation value of the assets in the case of bankruptcy for the presence of redeployment costs (larger for specialized assets) faced by potential buyers. We determine the equilibrium level of specialization of PAs, pointing to a novel trade-off between product market differentiation and the resale value of PAs. We find that industry entry and redeployment costs, together with the number of potential bidders in the second-hand market of PAs are important factors in explaining the degree of product differentiation. |
| Keywords: | Asset Specificity; Horizontal Differentiation; Bankruptcy; Second-hand market of productive assets. |
| JEL: | G32 G33 L11 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:mib:wpaper:483&r= |
| By: | Willi Semmler; Giovanni Di Bartolomeo; Behnaz Minooei Fard; Joao Paulo Braga |
| Abstract: | Governments attempt to provide the energy sector with incentives to replace old technologies with new ones based on renewable energy as the most effective way to combat climate change. Yet in the energy sector prevail fossil fuel incumbents that inhibit renewable energy entrants. Our paper provides a game-theoretic stylization of competition between those two types of firms. Incumbents set prices and entrants respond with quantity adjustments. In the context of a dynamic limit pricing model, we study the entry dynamics in a market in which the dominant firms (fossil fuel energy suppliers) face the entry of a group of competitive fringe firms (renewable energy suppliers) when the dominant firms have easier access to financial markets, but the fringe firms finance their expansion with internal finance. We also investigate the effect of the public support of renewable energy firms through subsidies. Our model is built on Judd and Peterson (1986, JET), but our solutions are obtained through a non-linear model predictive control algorithm. By this technique, we can predict the outcome of the competition between incumbents and entrants and the impact of financial and fiscal policies considering moving-horizon strategies. |
| Keywords: | Global warming; Renewable energy; Limit pricing; Strategic entry game; Non-linear model predictive control |
| JEL: | D40 D21 D43 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:sap:wpaper:wp200&r= |
| By: | Giovanni Dosi; Elisa Palagi; Andrea Roventini; Emanuele Russo |
| Abstract: | The role of the patent system in the pharmaceutical sector is highly debated also due to its strong public health implications. In this paper we develop an evolutionary, agent-based model of the pharmaceutical industry to explore the impact of different configurations of the patent system upon innovation and competition. The model is able to replicate the main stylized facts of the drug industry as emergent properties. We perform policy experiments to assess the impact of different IPR regimes changing the breadth and length of patents. Results suggest that enlarging the extent and duration of patents yields adverse effects in terms of innovation outcomes, as well as of market competition and consumer welfare. Such general conclusions hold even if one takes into account the possible positive effects on R&D intensity and information disclosure triggered by patents. |
| Keywords: | Innovation; Intellectual property rights; Market power; Pharmaceutical sector; Agent-based models. |
| Date: | 2021–10–28 |
| URL: | http://d.repec.org/n?u=RePEc:ssa:lemwps:2021/37&r= |
| By: | Philippe Gagnepain (PSE - Paris School of Economics - ENPC - École des Ponts ParisTech - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique - EHESS - École des hautes études en sciences sociales - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Stéphane Gauthier (PSE - Paris School of Economics - ENPC - École des Ponts ParisTech - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique - EHESS - École des hautes études en sciences sociales - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement) |
| Abstract: | This paper exploits the repeal of the Wright amendment as a natural experiment in order to contribute to the ongoing discussion on how the enlargement of the relevant market affects the ability of firms to coordinate on a Nash equilibrium. Using data on the U.S. air transportation industry, we present a Difference-inDifference procedure which sheds light on the significant loss of accuracy in airlines' predictions in markets originating in Dallas after the Love Field airport started operating long distance services in 2014. This suggests that competition authorities should be careful when they refer to the Nash equilibrium following market expansion reforms. |
| Keywords: | Airline industry,Nash equilibrium,Market definition,Transportation |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-03359597&r= |
| By: | Bena, Jan (University of British Columbia); Erel, Isil (Ohio State University and European Corporate Governance Institute); Wang, Daisy (Ohio State University); Weisbach, Michael S. (Ohio State University and European Corporate Governance Institute) |
| Abstract: | Inducing firms to make specialized investments through bilateral contracts can be challenging because of potential holdup problems. Such contracting difficulties have long been argued to be an important reason for acquisitions. To evaluate the extent to which this motivation leads to mergers, we perform a textual analysis of the patents filed by the same lead inventors of the target firms before and after the mergers. We find that patents of inventors from target firms become 28.9% to 46.8% more specific to those of acquirers’ inventors following completed mergers, benchmarked against patents filed by targets and a group of counterfactual acquirers. This pattern is stronger for vertical mergers that are likely to require specialized investments. There is no change in the specificity of patents for mergers that are announced but not consummated. Overall, we provide empirical evidence that contracting issues in motivating specialized investment can be a motive for acquisitions. |
| JEL: | G34 L14 L22 |
| Date: | 2021–08 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:ohidic:2021-13&r= |
| By: | Frederic Boissay; Torsten Ehlers; Leonardo Gambacorta; Hyun Song Shin |
| Abstract: | The business model of big techs rests on enabling direct interactions among a large number of users on digital platforms, such as in e-commerce, search and social media. An essential by-product is their large stock of user data, which they use to offer a wide range of services and exploit natural network effects, generating further user activity. Increased user activity completes the circle, as it generates yet more data. Building on the self-reinforcing nature of the data- network-activities loop, some big techs have ventured into financial services, including payments, money management, insurance and lending. The entry of big techs into finance promises efficiency gains and greater financial inclusion. At the same time, it introduces new risks associated with market power and data privacy. The nature of the new trade-off between efficiency and privacy will depend on societal preferences, and will vary across jurisdictions. This increases the need to coordinate policies both at the domestic and international level. |
| JEL: | E51 G23 O31 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:bis:biswps:970&r= |
| By: | Mattia Guerini (OFCE - Observatoire français des conjonctures économiques - Sciences Po - Sciences Po); Philipp Harting; Mauro Napoletano (OFCE - Observatoire français des conjonctures économiques - Sciences Po - Sciences Po) |
| Abstract: | We develop a model to study the impact of corporate governance on firm investment decisions and industry competition. In the model, governance structure affects the distribution of shares among short- and long-term oriented investors, the robustness of the management regarding pos- sible stockholder interference, and the managerial remuneration scheme. A bargaining process between firm's stakeholders determines the optimal allocation of financial resources between real investments in R&D and financial investments in shares buybacks. We characterize the relation between corporate governance and firm's optimal investment strategy and we study how different governance structures shape technical progress and the degree of competition over the industrial life cycle. Numerical simulations of a calibrated set-up of the model show that pooling together industries characterized by heterogeneous governance structures generate the well-documented inverted-U shaped relation between competition and innovation. |
| Keywords: | governance structure,industry dynamics,competition,technical change |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-03374377&r= |
| By: | Sergio León à lvarez Fernández |
| Abstract: | En la era digital las plataformas de dos lados hacen parte elemental del estudio de la microeconomía moderna. Actualmente, en la literatura se encuentra mucha información acerca de la competencia, determinación de precios y el poder de mercado que estas poseen; sin embargo, poco se ha escrito con respecto a los mecanismos que brinden a las plataformas distintas maneras de mantener su supervivencia, es decir, sobre cómo hacer que los usuarios de ambos lados usen la plataforma y decidan transar en esta. En este artículo se pretende mostrar, por medio de la teoría de juegos, tres mecanismos en los que el uso de las plataformas es un equilibrio de Nash, para después comparar cuál de ellos –si lo hay– produce mejores resultados sociales al momento de repetirse indefinidamente. El lector podrá observar que los incentivos no coercitivos, o zanahorias, serán mejores, en términos sociales, para garantizar la supervivencia de las plataformas en el mercado. *** In digital era, the two-sided platforms play an important role in the study of modern microeconomics. Currently, there is a lot of information in the literature about the competence, pricing, and market power that they have; nevertheless, little has been written about the mechanisms that provide platforms with different ways to maintain their survival. That is, in how to encourage users in both sides of the platform to use it and decide to transact on it. This article aims to show, by means of game theory, three mechanisms in which the use of platforms is a Nash equilibrium, and then to compare which of them -if any- produces better social outcomes when repeated indefinitely. The reader may observe that non-coercive incentives, also known as carrots, will be better to maintain the survival of platforms in the market. |
| Keywords: | plataformas de dos lados, diseño de mecanismos, compatibilidad de incentivos, teoría de juegos. |
| JEL: | C70 C72 C73 D40 |
| Date: | 2021–10–29 |
| URL: | http://d.repec.org/n?u=RePEc:col:000178:019717&r= |
| By: | Hugues Dastarac |
| Abstract: | Derivatives contracts are designed to improve risk sharing in financial markets, but among them, forwards, futures and swaps often appear redundant with their underlying assets: buying the asset and storing it is equivalent to buying it later. I show that imperfect competition in a dynamic market creates an incompleteness, opening gains from trading futures; but surprisingly, in equilibrium, agents trading these contracts have lower welfare than without futures. To mitigate their price impact, buyers (sellers) of an asset postpone profitable trades, exposing themselves to upward (downward) future spot price movements: buyers (sellers) would like to buy (sell) futures. However, when futures are introduced, traders also want to influence the spot price at futures maturity to increase futures payoff: this leads buyers (sellers) to sell (buy) futures. Moreover, despite the absence of market segmentation that would preclude arbitrage, the futures price can be above or below the spot price. |
| Keywords: | Futures, Imperfect Competition, Inefficiency, Mispricing |
| JEL: | G10 G13 G15 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:bfr:banfra:841&r= |
| By: | Schmutzler, Armin; Letina, Igor; Seibel, Regina |
| JEL: | O31 L41 G34 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc21:242420&r= |
| By: | Pedro Cavalcanti Gonçalves Ferreira |
| Abstract: | This paper attempts to draw some lines regarding the interplay between market concentration and income inequality in the Brazilian economy. Our goal is to uncover some of the mechanisms by which market power influences macroeconomic aggregates and, consequently, indicators such as the share of the income appropriated by the richest and the Country's Gini index. For this purpose, we have first conducted an empirical estimation using a PVAR approach with data from Brazilian states. We found that the markup shock is positively related to inequality. Moreover, that result is robust to changes in the model specification or different Cholesky ordering. Second, we built a dynamic general equilibrium model and calibrated it to reproduce the Brazilian economy. The model has three representative agents and heterogeneity in asset market participation and labor supply/skills. Additionally, firms exhibit endogenous oligopolistic and oligopsonistic (in the labor market) behavior. In response to unexpected markup shocks, the model showed a regressive dynamic, transferring income from the bottom to the top of the distribution. Nevertheless, its effects on economic growth may be positive in the short term, due to the increased investment in creating new companies. The disturbances in the TFP reduce inequality on impact, which is due to the countercyclical behavior of the markup. Instead, when we allow the TFP shock to be correlated with the markup, this effect is reversed, with the largest share of income being appropriated by the wealthiest. Finally, it is noteworthy that the labor supply elasticities partially determine the behavior of income distribution between poor and middle-class households. |
| Keywords: | market power, inequality, markup, general equilibrium, antitrust policy, income distribution, Brazil. |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:ise:remwps:wp02012021&r= |