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on Industrial Competition |
| By: | Johari, Ramesh (Stanford U); Light, Bar (Stanford U); Weintraub, Gabriel Y. (Stanford U) |
| Abstract: | Online platforms collect rich information about participants and then share some of this information back with them to improve market outcomes. In this paper we study the following information disclosure problem in two-sided markets: If a platform wants to maximize revenue, which sellers should the platform allow to participate, and how much of its available information about participating sellers' quality should the platform share with buyers? We study this information disclosure problem in the context of two distinct two-sided market models: one in which the platform chooses prices and the sellers choose quantities (similar to ride-sharing), and one in which the sellers choose prices (similar to e-commerce). Our main results provide conditions under which simple information structures commonly observed in practice, such as banning certain sellers from the platform while not distinguishing between participating sellers, maximize the platform's revenue. An important innovation in our analysis is to transform the platform's information disclosure problem into a constrained price discrimination problem. We leverage this transformation to obtain our structural results. |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:stabus:3905&r= |
| By: | Martin Gaynor; Adam Sacarny; Raffaella Sadun; Chad Syverson; Shruthi Venkatesh |
| Abstract: | There is an ongoing merger wave in the US hospital industry, but it remains an open question how hospital mergers change, or fail to change, hospital behavior, performance, and outcomes. In this research, we open the “black box” of practices within hospitals in the context of a mega-merger between two large for-profit chains. Benchmarking the effects of the merger against the acquirer’s stated aims, we show that they achieved some of their goals: they harmonized their electronic medical records and sent managers to target hospitals; after the acquisition, managerial processes were similar across hospitals in the merged chain. However, these interventions failed to drive detectable gains in profitability or patient outcomes. Our findings demonstrate the importance of hospital organizations and internal processes for merger research and policy in health care and the economy more generally. |
| JEL: | D22 I11 M12 |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29449&r= |
| By: | Levent Celik (University of London); Mikhail Drugov (New Economic School) |
| Abstract: | We study verifiable disclosure by a monopolist when the product has multiple quality attributes. We identify an equilibrium in which the firm discloses a score— the average of the qualities—without revealing any further information. While full unraveling is still an equilibrium, it is dominated by the score equilibrium in terms of ex ante as well as ex post profits. Moreover, it is “defeated†by the score equilibrium. |
| Keywords: | Monopoly, quality uncertainty, verifiable information disclosure, multi- dimensional types. |
| JEL: | D82 D83 L12 L15 |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:abo:neswpt:w0285&r= |
| By: | Lee, Hyejin; Swinnen, Johan; Cayseele, Patrick Van |
| Keywords: | Agribusiness, Marketing |
| Date: | 2021–08 |
| URL: | http://d.repec.org/n?u=RePEc:ags:iaae21:315107&r= |
| By: | Federico Innocenti |
| Abstract: | I study the effect of polarization and competition on information provision. With a single expert who faces decision-makers with het- erogeneous priors, the expert solves a trade-off between persuading sceptics and retaining believers. With high polarization, an expert has incentives to supply low-quality information to leverage believers' credulity. With multiple experts with opposite biases, competition is harmful if attention is limited. Unbiased and Bayesian decision-makers rationally devote attention to like-minded experts. Echo chambers arise endogenously, whereas decision-makers would be better informed in monopoly. My model can rationalize the spread and persistence of conspiracy theories and fake news. |
| Keywords: | Bayesian Persuasion, Competition, Echo Chambers, Heterogeneous Priors, Limited Attention, Media Pluralism |
| JEL: | D82 D83 L82 |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2021_298v1&r= |
| By: | Sourav Ray (DeGroote School of Business, McMaster University, Canada); Avichai Snir (Department of Banking & Finance, Netanya Academic College, Israel); Daniel Levy (Department of Economics, Bar-Ilan University, Israel; Department of Economics, Emory University, USA; Rimini Centre for Economic Analysis; Research Centre for Economic Analysis) |
| Abstract: | We study different notions of sale and regular prices, and their variability with store pricing-formats. We use data from three large stores with different pricing-formats (EDLP/Hi-Lo/Hybrid) that are located within 1-km radius. Importantly, the data contain both the actual transaction prices and the actual regular prices as displayed on the store shelves. We combine these data with two “generated” regular price series and study their rigidity. Regular-price rigidity varies with store-formats because different format stores define regular-prices differently. Correspondingly, the meaning of price-cuts varies across store-formats. To interpret the findings, we consider the store pricing format distribution across the US. |
| Keywords: | Price Rigidity, Sticky Prices, Regular Prices, Sale Prices, Filtered Prices, Reference Prices, Transaction Prices, Price Cuts, Pricing Format, Every Day Low Price (EDLP), Hi-Lo, Hybrid |
| JEL: | E31 |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:rim:rimwps:21-23&r= |
| By: | Miss Anke Weber; Mr. Mico Mrkaic; Ms. Li Lin |
| Abstract: | Healthcare in the United States is the most expensive in the world, with real per capita spending growth averaging 4 percent since 1980. This paper examines the role of market power of U.S. healthcare providers and pharmaceutical companies. It finds that markups (the ability to charge prices above marginal costs) for publicly listed firms in the U.S. healthcare sector have almost doubled since the early 1980s and that they explain up to a quarter of average annual real per capita healthcare spending growth. The paper also finds evidence that the Affordable Care Act and Medicaid expansion were successful in raising coverage and expanding care, but may have had the undesirable side-effect of leading to labor cost increases: Hourly wages for healthcare practitioners are estimated to have increased by 2 to 3 percent more in Medicaid expansion states over a five-year period, which could be an indication that the supply of medical services is relatively inelastic, even over a long time horizon, to the boost to demand created by the Medicaid expansion. These findings suggest that promoting more competition in healthcare markets and reducing barriers to entry can help contain healthcare costs. |
| Keywords: | Medicaid expansion; sector markup; healthcare cost; healthcare in the United States; healthcare provider; Wages; Employment; Insurance companies; Insurance; Labor costs; Global |
| Date: | 2021–07–06 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:2021/180&r= |
| By: | Martina Kirchberger (Department of Economics, Trinity College Dublin); Keelan Beirne (Department of Economics, Princeton University) |
| Abstract: | This paper uses new micro-data on key input prices in the construction sector and market structure to understand the reasons for price differences and their implications for capital accumulation. Our key motivating facts are that (i) there is large dispersion in prices of eight key construction sector inputs and that cement prices were particularly high in Sub-Saharan Africa compared to the rest of the world; (ii) using data on the market structure of the cement industry at a global level, cement prices are highest in countries with few firms; (iii) cement plays a significant role in construction sector expenditures, particularly in the poorest countries. Estimates from our model of oligopoly suggest that lower levels of competition lead to significantly higher prices. Financial accounts data point toward substantial pure profits, and there is no evidence from plant size distributions that minimum efficient scale is driving high prices. Finally, embedding the oligopoly model into a neoclassical growth model, we show that distortions in investment producing sectors have a disproportionate impact on productive capacity and that the steady-state capital stock in the poorest countries is most sensitive to changes in markups in cement. |
| Keywords: | construction, infrastructure, capital, cement, investment, markups, general equilibrium |
| JEL: | E22 H54 L13 L74 O18 O41 |
| Date: | 2021–06 |
| URL: | http://d.repec.org/n?u=RePEc:tcd:tcduee:tep0621&r= |
| By: | Utami, Anisa; Harianto, Harianto; Krisnamurthi, Bayu |
| Keywords: | Demand and Price Analysis, Marketing |
| Date: | 2021–08 |
| URL: | http://d.repec.org/n?u=RePEc:ags:iaae21:315229&r= |
| By: | Agrawal, Sneha (International Monetary Fund); Gaurav, Abhishek (Princeton University); Suveg, Melinda (Research Institute of Industrial Economics (IFN)) |
| Abstract: | In this paper, we study a new channel to explain firms’ price-setting behavior. We propose that uncertainty about factor prices has a positive effect on markups. We show theoretically that firms with higher shares of inputs with volatile prices set higher markups. We use the Bartik shift-share approach to empirically test whether firms that use more oil relative to other inputs set higher markups when oil prices are more volatile. Our estimates imply that a one standard deviation increase in oil price volatility leads to a 0.38 percent increase in the markup of firms with average oil exposure. |
| Keywords: | Price setting; Markups; Input price volatility; Precautionary pricing |
| JEL: | D21 D22 D24 D42 D80 E31 E32 L11 L60 |
| Date: | 2021–11–16 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:iuiwop:1418&r= |
| By: | Suting Hong; Robert M. Hunt; Konstantinos Serfes |
| Abstract: | We construct a two-period model of revolving credit with asymmetric information and adverse selection. In the second period, lenders exploit an informational advantage with respect to their own customers. Those rents stimulate competition for customers in the first period. The informational advantage the current lender enjoys relative to its competitors determines interest rates, credit supply, and switching behavior. We evaluate the consequences of limiting the repricing of existing balances as implemented by recent legislation. Such restrictions increase deadweight losses and reduce ex-ante consumer surplus. The model suggests novel approaches to identify empirically the effects of this law. We find the pattern of changes to interest rates and balance transfer activity before and after the CARD Act are consistent with the testable implications of the model. |
| Keywords: | Financial contracts; Credit Card Accountability Responsibility and Disclosure Act; holdup; risk-based pricing; credit supply |
| JEL: | D14 D18 D86 G28 K12 |
| Date: | 2021–11–23 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedpwp:93394&r= |
| By: | Jung Hur (Department of Economics, Sogang University, Korea); Jin Young Yoon (Department of Economics, Queen’s University, Canada) |
| Abstract: | This paper studies a role of Multinational Factoryless Goods Producers (MFGPs) on the recent expansion of the wholesale and retail industries in Korea. We empirically investigate the impacts of industry-level store entry rate of the MFGPs on labor productivity growth and storeentry and exit probabilities of Non-MFGPs which are the majority of firms in the industries. Our main results are as follows. First, the industry-level store entry rates of MFGPs are positively associated with increases in labor productivity growth of Non-MFGPs. Second, the industry-level store entry rates of MFGPs are positively related to store-entry decision of Non-MFGPs. These findings may imply that the entries of MFGP-stores contribute to the growth and expansion of the wholesale and retail industries as a whole. |
| Keywords: | Multinational Factoryless Goods Producers, Wholesale and retail industries; Labor Productivity; Store Entry and Exit |
| JEL: | F23 L81 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:sgo:wpaper:2107&r= |
| By: | Sergey Kovbasyuk (New Economic School); Giancarlo Spagnolo (SITE-Stockholm School of Economics, EIEF, Tor Vergata & CEPR) |
| Abstract: | In many environments, including credit and online markets, past records about participants are collected, published, and erased after some time. We study the effects of erasing past records in a dynamic market where sellers’ quality follows a Markov process and buyers leave feedback about sellers to an information intermediary. When the average quality of sellers is low, unlimited records lead to a market breakdown in the long run. We consider the general information design problem and characterize information policies that can sustain trade and that maximize welfare. These policies hide some information from the market in order to foster socially desirable experimentation. We show that these outcomes can be implemented by appropriately deleting observable past records. Crucially, positive and negative records play opposite roles with different intensity and must have different length: negative records must be sufficiently long, and positive records sufficiently short. |
| Keywords: | Limited records, rating systems, information design, credit registers, privacy, data retention, online reputation, market experimentation |
| JEL: | D82 D53 G20 G28 K35 L14 L15 |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:abo:neswpt:w0284&r= |
| By: | Stefan Behringer |
| Abstract: | In this paper I investigate a Bayesian inverse problem in the specific setting of a price setting monopolist facing a randomly growing demand in multiple possibly interconnected markets. Investigating the Value of Information of a signal to the monopolist in a fully dynamic discrete model employing the Kalman-Bucy-Stratonovich filter, we find that it may be non-monotonic in the variance of the signal. In the classical static settings of the Value of Information literature this relationship may be convex or concave, but is always monotonic. The existence of the non-monotonicity depends critically on the exogenous growth rate of the system. |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2111.00839&r= |
| By: | Mattila, Juri; Seppälä, Timo; Salakka, Kaisa |
| Abstract: | Abstract In a recent trend in digitalization, many platform incumbents have steered their focus towards creating collectively shared persistent virtual frameworks known as ‘metaverses’. Due to the emergence of digital platforms in the game industry over the last decade, the industry is now challenging the digital platform incumbents in metaverse development. Will the development unlock new data-driven markets, how will the landscape of digital platforms be reconfigured, and what are the strategic and policy implications for Finland and the European Union? |
| Keywords: | Game Engine, Virtual Reality, Metaverse, Platform, Platform Business Group (PBG) Strategy, System of Systems, Digitalization |
| JEL: | L8 L82 O3 O33 |
| Date: | 2021–11–18 |
| URL: | http://d.repec.org/n?u=RePEc:rif:briefs:101&r= |
| By: | Senran Lin |
| Abstract: | This paper studies the advance-purchase problem when a consumer has reference-dependent preferences in the form of Koszegi and Rabin (2009), in which planning affects reference formation. When the consumer exhibits plan revisability, loss aversion increases the price at which she is willing to pre-purchase. This implies that loss aversion can lead to risk-seeking. Moreover, I endogenize the seller$'$s price-commitment behavior in the advance-purchase problem. The result shows that the seller commits to his spot price even if he is not obliged to, which was treated as a given assumption in previous literature. |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2110.14929&r= |
| By: | Gary Clyde Hufbauer (Peterson Institute for International Economics); Euijin Jung (Peterson Institute for International Economics) |
| Abstract: | Industrial policy is making a comeback in the United States. It is more urgent than ever to understand how and whether industrial policy has worked to strengthen the US economy. This study analyzes and scores 18 US industrial policy episodes implemented between 1970 and 2020, in an effort to assess what went right and what went wrong—and how the current initiatives might fare. These case studies can guide policymakers as they embark on what appears to be a major initiative in US government involvement in the economy today. The authors divide the 18 case studies into three broad categories: cases where trade measures blocked the US market or opened foreign markets, cases where federal or state subsidies were targeted to specific firms, and cases where public and private R&D was funded to advance technology. The outcome of each episode is scored by grading three criteria: (1) the effect on US competitiveness in global markets (or in some cases the national market), (2) whether the annual cost per job saved or created in the sector was reasonable (i.e., no more than the prevailing average wage), and (3) whether support advanced the technological frontier. Some of the episodes are partly or entirely successful while others are complete failures. Industrial policy can save or create jobs, but often at high cost. A major political selling point for industrial policy is to save or create jobs in a specific industry or location. In most cases, import protection does not create a competitive US industry, and it imposes extreme costs on household and business users per job-year saved. Trade policy concentrated on opening markets abroad is a better bet. Designating a single firm to advance technology yields inconsistent results. The highly successful model of Operation Warp Speed vividly demonstrates that competition is an American strength. R&D industrial policy has the best track record by far. Among the 18 cases, the Defense Advanced Research Projects Agency (DARPA) has the outstanding record. |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:iie:piiebs:piieb21-5&r= |