nep-com New Economics Papers
on Industrial Competition
Issue of 2021‒11‒15
nine papers chosen by
Russell Pittman
United States Department of Justice

  1. Third-Degree Price Discrimination in Oligopoly When Markets Are Covered By Dertwinkel-Kalt, Markus; Wey, Christian
  2. Merger Review Regimes in the ASEAN Region and Case Analysis of Grab-Uber Merger By Jang, Yungshin; Kang, Gu Sang
  3. Effects of Vertical Integration on Internet Service Providers' Zero-rating Choice By Saruta, Fuyuki
  4. Relational Contracts and Trust in a High-Tech Industry By Giacomo Calzolari; Leonardo Felli; Johannes Koenen; Giancarlo Spagnolo; Konrad O. Stahl
  5. The Impact of Private Label Introduction on Assortment, Prices, and Profits of Retailers By Meilin Ma; Ralph Siebert
  6. Firm Liability When Third Parties and Consumers Incur Cumulative Harm By Schulte, Elisabeth; Friehe, Tim; Langlais, Eric
  7. How To Measure Competitive Intensity? By Khalil Assala; Suela Bylykbashi; Gilles Roehrich
  8. The Industrial Revolution in Services By Chang-Tai Hsieh; Esteban Rossi-Hansberg
  9. Too much waste, not enough rationing: the failure of stochastic, competitive markets By De Meza, David; Reito, Francesco

  1. By: Dertwinkel-Kalt, Markus; Wey, Christian
    JEL: D43
    Date: 2021
    Abstract: In 2018, the largest yet cross-border M&A deal between digital platforms in Southeast Asia was reached, namely the Grab-Uber M&A case. The local digital platform Grab consolidated the regional operations of San Francisco, California-based Uber, a development which had significant effects on competition and consumer welfares in the Southeast Asia digital market. The competition authorities in the region independently initiated their investigation and started to deliberate the merger case to determine the anti-competitive effects on their domestic market, and to decide whether this transaction should be restricted or approved. Even though the two merging and merged firms completed their transactions, each authority applied different logic and imposed different remedies in deciding the case. Authorities in some member states such as Singapore and the Philippines decided that the Grab-Uber merger was anti-competitive, while others such as Indonesia and Viet Nam considered the merger not anti-competitive. Upon this backdrop, this article reviews the competition policies and laws of four major ASEAN countries – Indonesia, Singapore, Viet Nam, and the Philippines – from institutional and legal perspectives, focusing on M&A review regimes. Then, we briefly introduce how these com-petition authorities decided on the Grab-Uber merger case, also analyzing the competition effects of the case on the ride-hailing market in the countries. Based on the analysis results, we propose overseas competition policies for Korea.
    Keywords: ASEAN; Grab-Uber; merger; M&A; Southeast Asia; Indonesia; Singapore; Viet Nam; the Philippines
    Date: 2021–09–03
  3. By: Saruta, Fuyuki
    Abstract: This study investigates the effects of vertical integration between an Internet service provider (ISP) and a content provider (CP) on the ISP's zero-rating choice and social welfare. We develop a simple model where a monopolistic ISP delivers content from two CPs to a representative consumer. The ISP can offer zero-rating contracts to one or two CPs, allowing the consumer to use zero-rated content without consuming monthly data usage. We investigate how the integration between the ISP and a CP impacts the ISP's zero-rating choice and social welfare. Our findings are as follows. First, the vertically integrated ISP may zero-rate the unaffiliated CP exclusively when the CPs' profitability is low and the ISP's operating cost is high. Second, the integration decreases the total surplus when the CP's profitability is sufficiently low; otherwise, it improves the total surplus. Our results indicate that a vertical integration and zero-rating could be both welfare-enhancing and reducing.
    Keywords: Mobile Internet; Zero-rating; Sponsored data; Net neutrality; Vertical integration
    JEL: D21 L11 L96
    Date: 2021–10–23
  4. By: Giacomo Calzolari; Leonardo Felli; Johannes Koenen; Giancarlo Spagnolo; Konrad O. Stahl
    Abstract: We study how informal buyer-supplier relationships in the German automotive industry affect procurement. Using unique data from a survey focusing on these, we show that more trust, the belief that the trading partner acts to maintain the mutual relationship, is associated with both higher quality of the automotive parts and more competition among suppliers. Yet both effects hold only for parts involving unsophisticated technology, not when technology is sophisticated. We rationalize these findings within a relational contracting model that critically focuses on changes in the bargaining power, due to differences in the costs of switching suppliers.
    Keywords: relational contracts, hold-up, buyer-supplier contracts, bargaining power
    JEL: D86 L14 L62 O34
    Date: 2021
  5. By: Meilin Ma; Ralph Siebert
    Abstract: We study how the introduction of private-label brands (PLs) affects retailers’ prices, demand, and profits, explicitly accounting for assortment adjustments of national brands (NBs) in retail stores. Using a detailed dataset on the U.S. beef market, we find that, when PLs are added to the low-priced market segment, stores reposition NBs to further differentiate them from the PL and remove NBs from the same market segment. However, if PLs are introduced into the high-priced segment, NBs are not repositioned or removed from the same segment; this way, the store can compete with other stores in product variety. PL introduction and PL-driven assortment changes of NBs impose a small effect on NB prices. In contrast, PLs strongly cannibalize NB demand, and the assortment changes help steer consumers toward PLs, which imposes large negative effects on NB demands and increases store-level profits.
    Keywords: prices and demand of national brands, private label, retailer assortment decisions
    JEL: D22 L66 L81
    Date: 2021
  6. By: Schulte, Elisabeth; Friehe, Tim; Langlais, Eric
    JEL: K13
    Date: 2021
  7. By: Khalil Assala (ENSTA Bretagne_SHS - Département Sciences Humaines et Sociales ENSTA Bretagne - ENSTA Bretagne - École Nationale Supérieure de Techniques Avancées Bretagne); Suela Bylykbashi (Brest Business School); Gilles Roehrich
    Abstract: In this research, we analyse the internal structure of competitive intensity on the basis of competitive dynamics. We propose a measure of competitive intensity based on two dimensions: strategic and tactical. This two-dimensional design makes it possible to gain a better understanding of the competitive battle, allowing managers to improve operations and the allocation of resources, according to both dimensions. It also provides a better understanding of the relationship between competitive intensity and other variables.
    Keywords: Competitive intensity,Competitive dynamics,New product,Strategic decisions,Tactical decisions
    Date: 2021–01–02
  8. By: Chang-Tai Hsieh; Esteban Rossi-Hansberg
    Abstract: The U.S. has experienced an industrial revolution in services. Firms in service industries, those where output has to be supplied locally, increasingly operate in more markets. Employment, sales, and spending on fixed costs such as R&D and managerial employment have increased rapidly in these industries. These changes have favored top firms the most and have led to increasing national concentration in service industries. Top firms in service industries have grown entirely by expanding into new local markets that are predominantly small and mid-sized U.S. cities. Market concentration at the local level has decreased in all U.S. cities but by significantly more in cities thatwere initially small. These facts are consistent with the availability of a new menu of fixed-cost-intensive technologies in service sectors that enable adopters to produce at lower marginal costs in any markets. The entry of top service firms into new local markets has led to substantial unmeasured productivity growth, particularly in small markets.
    Date: 2021–10
  9. By: De Meza, David; Reito, Francesco
    Abstract: There are good reasons why sellers often post prices before the realization of demand shocks. We study whether equilibrium prices chosen ex ante coincide with the ex-ante prices that maximize expected aggregate surplus. The main result is that even in the competitive limit there is a divergence. Waste is excessive and entry decisions are distorted. The problem is that for competitive firms to sell in low-demand states involves a costly sacrifice of high-state revenue.
    Keywords: stochastic demand; rationing; waste; efficiency
    JEL: D61 D81 H23
    Date: 2020–07–01

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