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on Industrial Competition |
| By: | Ashenfelter, Orley (Princeton University); Card, David (University of California, Berkeley); Farber, Henry S (Princeton University); Ransom, Michael R. (Brigham Young University) |
| Abstract: | This paper summarizes the results of nearly a dozen new papers presented at the Sundance Conference on Monopsony in Labor Markets held in October 2018. These papers, to be published as a special issue of the Journal of Human Resources, study various aspects of monopsony and failures of competition in labor markets. It also reports on the new developments in public policies associated with widespread concerns about labor market competition and efforts to ameliorate competitive failures. The conference papers range from studies of the labor supply elasticity individual firms face to studies of local labor market concentration to studies of explicit covenants suppressing labor market competition. New policies range from private and public antitrust litigation to concerns about the effect of mergers and inter-firm agreements on labor market competition. We provide a detailed discussion of the mechanics of the Silicon Valley High Tech Worker conspiracy to suppress competition based on Court documents in the case. Non-compete agreements, which are not enforceable in three states already, have also come under scrutiny. |
| Keywords: | monopsony, labor market power |
| JEL: | J0 J2 J3 L4 |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp14872&r= |
| By: | Yuxin Chen (Stern School of Business, New York University-Shanghai); Lin Liu (School of Economics and Management, Beihang University); X. Henry Wang (Department of Economics, University of Missouri); Haojun Yu (College of Business, Shanghai University of Economics and Finance) |
| Abstract: | Improvement in infrastructure and advances in information technology have strived to make both online and offline store visits better experiences and less costly for consumers. In addition, on-site product information search has been unprecedentedly facilitated by provisions of tools such as mobile store apps, search engines, screening/sorting aids, and better in-store display etc. With the decrease in the cost to visit stores, may firms have an incentive to facilitate consumers’ information collection and evaluation on product attributes? This paper attempts to shed light on this important question with a model that considers both travel cost (transportation cost between firm visits) and search cost (product evaluation cost) and explores how they affect consumer search behavior and firms’ pricing decisions. Specifically, consumers make a trade-off between how many attributes to evaluate (search depth) and whether continuing the search to the next firm (search breadth). We extend the classical framework for sequential search developed by Wolinsky (1986) and Anderson and Renault (1999) by letting consumers choose search depth at each step. The analysis reveals a novel interaction effect: lower (higher) search cost benefits firms if travel cost is lower (higher). Thus, facilitating consumers’ product evaluation may benefit firms in the context of reduced travel cost. Critically, we show that this interaction effect occurs only when search depth is endogenous with partial-depth search as the result. In addition, we show that travel and search costs may play opposite roles on depth and prices—they increasing (decreasing) in travel (search) cost. Relevant managerial implications are discussed. |
| Keywords: | Travel Cost, Search Cost, Partial Depth Search, Pricing, Competition |
| JEL: | D43 L13 L41 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:umc:wpaper:2201&r= |
| By: | Mark J. Tremblay |
| Abstract: | Platforms often use fee discrimination within their marketplace (e.g., Amazon, eBay, and Uber specify a variety of merchant fees). To better understand the impact of marketplace fee discrimination, we develop a model that allows us to determine equilibrium fee and category decisions that depend on the extent of fee discrimination available to the platform and we highlight how our fee discrimination strategies can be derived in practice using data from airbnb.com. In addition, we find that greater fee discrimination allows the platform to serve more markets in its marketplace but also increases fees in high surplus markets. However, if the platform enters into retail, then the platform reduces its fees and generates greater retail competition. These effects mitigate distortions from fee discrimination and improve welfare. In terms of policy, we show that (1) banning fee discrimination and platform entry is detrimental to welfare, (2) a vertical merger within a retail market mitigates fee distortions but is often worse than an equilibrium with platform entry into retail, and (3) taxing the platform in retail (not merchants) levels the retail playing field and can generate a Pareto improvement upon a policy that bans platform retail entry. |
| Keywords: | platforms, platform retail entry, price discrimination, vertical integration, intermediary |
| JEL: | L11 L12 L40 H21 L50 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_9440&r= |
| By: | Alberto Bracci; J\"orn Boehnke; Abeer ElBahrawy; Nicola Perra; Alexander Teytelboym; Andrea Baronchelli |
| Abstract: | Online marketplaces are the main engines of legal and illegal e-commerce, yet the aggregate properties of buyer-seller networks behind them are poorly understood. We analyze two datasets containing 245M transactions (16B USD) that took place on online marketplaces between 2010 and 2021. The data cover 28 dark web marketplaces, i.e., unregulated markets whose main currency is Bitcoin, and 144 product markets of one regulated e-commerce platform. We show how transactions in online marketplaces exhibit strikingly similar patterns of aggregate behavior despite significant differences in language, lifetimes available products, regulation, oversight, and technology. We find remarkable regularities in the distributions of (i) transaction amounts, (ii) number of transactions, (iii) inter-event times, (iv) time between first and last transactions. We then show how buyer behavior is affected by the memory of past interactions, and draw on these observations to propose a model of network formation able to reproduce the main stylized facts of the data. Our findings have implications for understanding market power on online marketplaces as well as inter-marketplace competition. |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2112.09065&r= |
| By: | Andrea Attar (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); Thomas Mariotti (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); François Salanié (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) |
| Abstract: | This paper studies competitive allocations under adverse selection. We rst provide a general necessary and sucient condition for entry on an inactive market to be unprotable. We then use this result to characterize, for an active market, a unique budget-balanced allocation implemented by a market tari making additional trades with an entrant unprotable. Motivated by the recursive structure of this allocation, we nally show that it emerges as the essentially unique equilibrium outcome of a discriminatory ascending auction. These results yield sharp predictions for competitive nonexclusive markets.. |
| Keywords: | Adverse Selection,Entry-Proofness,Discriminatory Pricing,Nonexclusive,Markets,Ascending Auctions.,Nonexclusive Markets,Ascending Auctions. JEL Classification: D43,D82,D86 |
| Date: | 2021–12–17 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-03485384&r= |
| By: | Enrique Bátiz-Zuk; José Luis Lara Sánchez |
| Abstract: | This paper examines the link between bank competition measures and risk indicators using quarterly interbank exposures data for all banks in Mexico during 2008Q1-2019Q1. The classical literature focuses on disentangling the link between competition and individual bank solvency risk. In this paper, we take one step forward in analyzing the relationship between competition and systemic risk. We use counterfactual bank-level contagion risk indicators as a proxy of systemic risk to assess their relationship with traditional competition measures. Our main finding indicates a negative relationship between the bank-level Lerner index and systemic risk. This means that an increase in competition is associated with an increase in systemic risk. Additionally, we find that the implementation of regulatory reform during the period studied does not affect this relationship. |
| JEL: | C23 D40 G21 G28 L14 L16 L22 |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:bdm:wpaper:2021-26&r= |
| By: | Paulie, Charlotte (Uppsala University,) |
| Abstract: | Does increasing product-market competition from foreign firms affect domestic labor shares? By combining detailed Swedish firm-level data with an instrumental variable design, I show that an increase in import penetration caused by increased global competition results in a decrease in domestic industry-level labor shares. The decrease comes both from a reallocation of firms’ market shares and a fall in labor shares at the firm level. The analysis shows that the negative effect of competition on firm-level labor shares is driven by an increase in productivity that is not met by a corresponding increase in compensation to labor. I use these findings to calibrate a heterogeneous-firm model where domestic and foreign firms compete on the domestic product market. The calibrated model predicts that an increase in foreign competition corresponding to a one standard deviation increase in import penetration results in a 1.12 percentage point increase in welfare. |
| Keywords: | Labor Share; Competition; International Trade; Welfare. |
| JEL: | E25 F10 L11 |
| Date: | 2021–10–15 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:ifauwp:2021_013&r= |
| By: | Dirk Bergemann (Cowles Foundation, Yale University); Benjamin Brooks (Dept. of Economics, University of Chicago); Stephen Morris (Dept. of Economics, MIT) |
| Abstract: | We characterize the revenue-maximizing information structure in the second price auction. The seller faces a classic economic trade-o¤: providing more information improves the efficiency of the allocation but also creates higher information rents for bidders. The information disclosure policy that maximizes the revenue of the seller is to fully reveal low values (where competition will be high) but to pool high values (where competition will be low). The size of the pool is determined by a critical quantile that is independent of the distribution of values and only dependent on the number of bidders. We discuss how this policy provides a rationale for conflation in digital advertising. |
| JEL: | D44 D47 D83 D84 |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:cwl:cwldpp:2318&r= |
| By: | Antonio Acconcia (Università di Napoli Federico II and CSEF); Elisa Scarinzi (Bank of Italy) |
| Abstract: | We use firm-level data to investigate the causal response of markup to a contraction in local demand and supply. We find that the effects of the two types of drops are symmetric overall, quantitatively heterogeneous among sectors, and amplified by spillovers. For differentiated manufacturing products, transport and business services, markups change quite a lot: they amplify after a decrease in supply while they shrink in response to a decrease in demand. For horizontally differentiated local services, essentially retail, wholesale, accommodation and food, markups change much less mainly because of the adjustment in the labor cost. We also find that in response to the reallocation of demand resulting from a supply contraction, firms with the lowest markups already increase more the markups while highest markup firms mainly gain in terms of market shares. Our findings have implications for business cycle modeling, suggest more market concentration after a deep recession like the one related to the Covid-19 pandemic and caution against the use of aggregate model to understand its impact. |
| Keywords: | Demand/Supply Contraction, Markup, Local Competition, Labor Cost, Reallocation Shock. |
| JEL: | E30 D22 D40 |
| Date: | 2022–01–07 |
| URL: | http://d.repec.org/n?u=RePEc:sef:csefwp:635&r= |
| By: | Andrea Galeotti; Benjamin Golub; Sanjeev Goyal; Eduard Talam\`as; Omer Tamuz |
| Abstract: | Suppliers of differentiated goods make simultaneous pricing decisions, which are strategically linked due to consumer preferences and the structure of production. Because of market power, the equilibrium is inefficient. We study how a policymaker should target a budget-balanced tax-and-subsidy policy to increase welfare. A key tool is a certain basis for the goods space, determined by the network of interactions among suppliers. It consists of eigenbundles -- orthogonal in the sense that a tax on any eigenbundle passes through only to its own price -- with pass-through coefficients determined by associated eigenvalues. Our basis permits a simple characterization of optimal interventions. For example, a planner maximizing consumer welfare should tax eigenbundles with low pass-through and subsidize ones with high pass-through. We interpret these results in terms of the network structure of the market. |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2112.08153&r= |