nep-com New Economics Papers
on Industrial Competition
Issue of 2022‒01‒31
nineteen papers chosen by
Russell Pittman
United States Department of Justice

  1. The Use of Scanner Data for Economics Research By Dubois, Pierre; Griffith, Rachel; O'Connell, Martin
  2. Myopic Oligopoly Pricing By Bos, Iwan; Marini, Marco A.; Saulle, Riccardo
  3. Dynamic Personalized Pricing with Active Consumers By Wang, Xiaolei
  4. Supply Contracts under Partial Forward Ownership By Hunold, Matthias; Schlütter, Frank
  5. Uncertain product availability in search markets By Atayev, Atabek
  6. Vertical Differentiation in Frictional Product Markets By James Albrecht; Guido Menzio; Susan Vroman
  7. Collusive Compensation Schemes Aided by Algorithms By Simon Martin; Wolfgang Benedikt Schmal
  8. Market Power in Norwegian Salmon Industry By Jamali Jaghdani, Tinoush; Čechura, Lukáš; Ólafsdóttir, Guðrún; Thakur, Maitri
  9. Airline Cooperation Effects on Airfare Distribution: An Auction-model-based Approach By Marc Ivaldi; Milena J Petrova; Miguel Urdanoz
  10. Relational Contracts and Trust in a High-Tech Industry By Calzolari, G.; Felli, L.; Koenen, J.; Spagnolo, G.; Stahl, K. O.
  11. A Model of Information Security and Competition By de Cornière, Alexandre; Taylor, Greg
  12. Labor Market Concentration and Stayers' Wages: Evidence from France By Bassanini, Andrea; Batut, Cyprien; Caroli, Eve
  13. Business models for Mobility as an Service By Vincent A.C. van den Berg; Henk Meurs; Erik T. Verhoef
  14. Negative results in science: Blessing or (winner's) curse? By Catherine Bobtcheff; Raphaël Levy; Thomas Mariotti
  15. Modelling Cournot Games as Multi-agent Multi-armed Bandits By Kshitija Taywade; Brent Harrison; Adib Bagh
  16. No-Challenge Clauses in Patent Licensing - Blessing or Curse? By Buehler, Benno; Hunold, Matthias; Schlütter, Frank
  17. Common Ownership and Environmental Corporate Social Responsibility By Hirose, Kosuke; Matsumura, Toshihiro
  18. Does Physician-Hospital Vertical Integration Signal Care-Coordination? Evidence from Mover-Stayer Analyses of Commercially Insured Enrollees By William Encinosa; Avi Dor; PhuongGiang Nguyen
  19. Dynamics of Cournot duopoly games with quadratic costs and distinct rationality degrees By Xiaoliang Li

  1. By: Dubois, Pierre; Griffith, Rachel; O'Connell, Martin
    Abstract: The adoption of barcode scanning technology in the 1970's gave rise to a new form of data; scanner data. Soon afterwards researchers began using this new resource, and since then a large number of papers have exploited scanner data. The data provide detailed price, quantity and product characteristic information for completely disaggregate products at high frequency and typ- ically either track a panel of stores and/or consumers. Their availability has led to advances, inter alia, in the study of consumer demand, the mea- surement of market power, rms' strategic interactions and decision-making, the evaluation of policy reforms, and the measurement of price dispersion and in ation. In this article we highlight some of the pro and cons of this data source, and discuss some of the ways its availability to researchers has transformed the economics literature.
    Date: 2022–01–14
  2. By: Bos, Iwan; Marini, Marco A.; Saulle, Riccardo
    Abstract: This paper examines capacity-constrained oligopoly pricing with sellers who seekmyopic improvements. We employ the Myopic Stable Set solution concept and establish the existence of a unique pure-strategy price solution for any given level of capacity. This solution is shown to coincide with the set of pure-strategy Nash equilibria when capacities are large or small. For an intermediate range of capacities, it predicts a price interval that includes the mixedstrategy support. This stability concept thus encompasses all Nash equilibria and offers a pure-strategy solution when there is none in Nash terms. It particularly provides a behavioral rationale for different pricing patterns, including Edgeworth price cycles and states of hyper-competition with supply shortages. We also analyze the impact of a change in firm size distribution. A merger among the biggest firms may lead to more price dispersion as it increases the maximum and decreases the minimum myopically stable price.
    Keywords: Bounded Rationality, Capacity Constraints, Mergers, Myopic Stable Set, Oligopoly Pricing, Supply Shortages
    JEL: C72 D43 L13
    Date: 2021–12–16
  3. By: Wang, Xiaolei (Monash University)
    Abstract: We study a two-period duopoly model where firms gather consumer data from first period customers then use them for second-period personalized pricing, with a focus on active consumers who can bypass price discrimination with identity management (IM). As a result, IM weakens competition and allows firms to adopt perfect price discrimination which gives massive profit for firms in the personalized-pricing stage. Anticipating this, firms engage in below-cost pricing in the first stage to compete for consumer data. This strategy is similar to predatory pricing not only because of below-cost pricing but firms can also recoup losses later, however, we show that in this case below-cost pricing is driven by competition and beneficial to consumers.
    Keywords: Personalized pricing ; behavior-based price discrimination ; identity management JEL Classification: D43 ; L13 ; L5
    Date: 2021
  4. By: Hunold, Matthias; Schlütter, Frank (Université catholique de Louvain, LIDAM/CORE, Belgium)
    Abstract: With forward ownership, an upstream supplier internalizes the effect of its supply contracts on the downstream firms, which is so far understood to decrease prices. We show that instead downstream prices generally increase if firms use two-part tariffs. The price-increasing effect of forward ownership occurs with both observable and secret two-part tariffs, albeit for different economic reasons. The results arise under both quantity and price competition as well as for different belief refinements. Partial forward ownership can be more profitable and more harmful for consumers than a full vertical merger between an upstream and a downstream firm.
    Keywords: Vertical relations ; minority shareholding ; partial forward ownership
    JEL: L22 L40 L8
    Date: 2022–01–01
  5. By: Atayev, Atabek
    Abstract: In many markets buyers are poorly informed about which firms sell the product (product availability) and prices, and therefore have to spend time to obtain this information. In contrast, sellers typically have a better idea about which rivals offer the product. Information asymmetry between buyers and sellers on product availability, rather than just prices, has not been scrutinized in the literature on consumer search. We propose a theoretical model that incorporates this kind of information asymmetry into a simultaneous search model. Our key finding is that greater product availability may harm buyers by mitigating their willingness to search and, thus, softening competition.
    Keywords: Consumer Search,Uncertain Product Availability,Information Asymmetry
    JEL: D43 D82 D83
    Date: 2021
  6. By: James Albrecht; Guido Menzio; Susan Vroman
    Abstract: We consider a version of the imperfect competition model of Butters (1977), Varian (1980) and Burdett and Judd (1983) in which sellers make an ex-ante investment in the quality of their variety of the product. Equilibrium exists, is unique and is efficient. In equilibrium, search frictions not only cause sellers to offer different surpluses to buyers but also cause sellers to choose different qualities for their varieties. That is, equilibrium involves endogenous vertical differentiation. As search frictions decline, the market becomes more and more unequal as a smaller and smaller fraction of sellers produces varieties of increasing quality, offers increasing surplus to their customers, and captures an increasing share of the market, while a growing fraction of sellers produces varieties of decreasing quality. Gains from trade and welfare grow. Under some conditions, the growth rate of gains from trade and welfare is constant.
    JEL: D43 D83 L13 O40
    Date: 2021–12
  7. By: Simon Martin; Wolfgang Benedikt Schmal
    Abstract: Sophisticated collusive compensation schemes such as assigning future market shares or direct transfers are frequently observed in detected cartels. We show formally why these schemes are useful for dampening deviation incentives when colluding firms are temporary asymmetric. The relative attractiveness of each of these schemes is shaped by firms’ ability to predict future market conditions, possibly aided by algorithms. Prices and profits are inverse u-shaped in prediction ability. Assigning future market shares is optimal when prediction ability is intermediate, and otherwise direct transfers are optimal. Competition authority's limited resources should be utilized to respond to these changing market conditions.
    Keywords: algorithmic collusion, market forecasting, prediction ability, firm asymmetry, compensation schemes
    JEL: D21 L41 L51
    Date: 2021
  8. By: Jamali Jaghdani, Tinoush; Čechura, Lukáš; Ólafsdóttir, Guðrún; Thakur, Maitri
    Keywords: Industrial Organization, Agribusiness
    Date: 2020–09–18
  9. By: Marc Ivaldi (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); Milena J Petrova (Unknown); Miguel Urdanoz (Unknown)
    Abstract: Airline alliances have a long history yet there is no academic consensus on how they affect price levels and their impact on price dispersion has not yet been studied. We address this question using a novel methodology motivated by the service homogenization and increased price competiton in this industry in the recent years. Establishing an equivalence between the online sales process and a reverse English auction, we use methods from auction econometrics to work in a new way with the standard industry data set: using individual ticket sales where only aggregated prices have been used in the past. Applicable to other industries where sellers compete in prices, this approach allows us to reconsider the effect of airline alliances on the distribution of airfares in the US domestic market. We find lower price mean and dispersion in markets where airlines belong to an alliance as a result of the lower variability of costs. The methodology we apply here can be used to study any distribution of individualized prices, which are now prevalent since the advent of the digital economy.
    Keywords: Airline,cooperation,auction,price dispersion,price distribution.
    Date: 2021–11–12
  10. By: Calzolari, G.; Felli, L.; Koenen, J.; Spagnolo, G.; Stahl, K. O.
    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: 2021–08–02
  11. By: de Cornière, Alexandre; Taylor, Greg
    Abstract: Cyberattacks are a pervasive threat in the digital economy, with the potential to harm rms and their customers. Larger rms constitute more valuable targets to hack- ers, thereby creating negative network eects. These can be mitigated by investments in security, which play both a deterrent and a protective role. We study equilibrium investment in information security under imperfect competition in a model where con- sumers dier in terms of security savviness. We show that the competitive implications of security depend on rms' business models: when rms compete in prices, security intensies competition, which implies that it is always underprovided in equilibrium (unlike in the monopoly case). When rms are advertising-funded, security plays a business-stealing role, and may be overprovided. In terms of policy, we show that both the structure of the optimal liability regime and the ecacy of certication schemes also depend on rms' business model.
    Date: 2021–12
  12. By: Bassanini, Andrea (OECD); Batut, Cyprien (Paris School of Economics); Caroli, Eve (Université Paris-Dauphine)
    Abstract: We investigate the impact of labor market concentration on stayers' wages, where stayers are defined as individuals who were already employed in the same firm the year before. Using administrative data for France, we show that the elasticity of stayers' wages to labor market concentration ranges between -0.0185 and -0.0230, depending on the instrument we use, and controlling for labor productivity and local product market concentration. This represents between about two thirds and three fourth of the elasticity we estimate for new hires. Given the strong wage rigidities characterizing the French labor market, this estimate can be considered a lower bound of the effect of labor market concentration on stayers' wages in an international perspective.
    Keywords: labor market concentration, monopsony, wages, stayers
    JEL: J31 J42 L41
    Date: 2021–12
  13. By: Vincent A.C. van den Berg (Vrije Universiteit Amsterdam); Henk Meurs (Radboud University); Erik T. Verhoef (Vrije Universiteit Amsterdam)
    Abstract: Travellers often combine transport services from different firms to form trip chains: e.g. first taking a train and then a bus. Integration of different forms of public and private transport into a single service is gaining attention with the concept of Mobility as a Service (MaaS). Usually the attention focuses on such things as ease of use for travellers and shifting demand away from the car. We focus on the effects of MaaS on behaviour and welfare via the market structure of transportation. In particular, we analyse three archetypical ways in which MaaS could be operationalised: Integrator, Platform, and Intermediary.
    Keywords: MaaS, market structure, platform, intermediary, integrator, regulation
    JEL: R4 D21 D43
    Date: 2022–01–17
  14. By: Catherine Bobtcheff (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); Raphaël Levy (HEC Paris - Ecole des Hautes Etudes Commerciales); 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, CNRS - Centre National de la Recherche Scientifique)
    Abstract: Two players receiving independent signals on a risky project with common value compete to be the first to invest. We characterize the equilibrium of this preemption game as the publicity of signals varies. Private signals create a winner's curse: the first mover suspects that his rival might have privately received adverse information, hence exited. To compensate, players seek more evidence supporting the project, resulting in later investment. A conservative planner concerned with avoiding unprofitable investments may then prefer private signals. Our results suggest that policy interventions should primarily tackle winner-takes-all competition, and regulate transparency only once competition is sufficiently mild.
    Date: 2022–01
  15. By: Kshitija Taywade; Brent Harrison; Adib Bagh
    Abstract: We investigate the use of a multi-agent multi-armed bandit (MA-MAB) setting for modeling repeated Cournot oligopoly games, where the firms acting as agents choose from the set of arms representing production quantity (a discrete value). Agents interact with separate and independent bandit problems. In this formulation, each agent makes sequential choices among arms to maximize its own reward. Agents do not have any information about the environment; they can only see their own rewards after taking an action. However, the market demand is a stationary function of total industry output, and random entry or exit from the market is not allowed. Given these assumptions, we found that an $\epsilon$-greedy approach offers a more viable learning mechanism than other traditional MAB approaches, as it does not require any additional knowledge of the system to operate. We also propose two novel approaches that take advantage of the ordered action space: $\epsilon$-greedy+HL and $\epsilon$-greedy+EL. These new approaches help firms to focus on more profitable actions by eliminating less profitable choices and hence are designed to optimize the exploration. We use computer simulations to study the emergence of various equilibria in the outcomes and do the empirical analysis of joint cumulative regrets.
    Date: 2022–01
  16. By: Buehler, Benno; Hunold, Matthias; Schlütter, Frank (Université catholique de Louvain, LIDAM/CORE, Belgium)
    Abstract: We analyze the effects of no-challenge clauses that prevent licensees from challenging the validity of patents. Contrary to popular arguments, we show that banning these clauses does not necessarily improve the frequency of successful patent challenges. Depending on the patent strength, patent holders may profitably offer license contracts that incentivize licensees to not challenge the patent. Even worse, such a strategy can lead to higher running royalties and lower consumer surplus compared to contracts with no-challenge clauses. We demonstrate that measures that aim at improving the prospects of patent challenges, such as prohibiting termination-upon-challenge clauses, can cause additional detrimental effects.
    Keywords: No-challenge clause ; probabilistic patents ; license contracts
    JEL: K11 K41 L24 L42
    Date: 2021–12–03
  17. By: Hirose, Kosuke; Matsumura, Toshihiro
    Abstract: We theoretically investigate how common ownership (or the extent of collusion in an industry) affects firms' voluntary commitment with emission restrictions and emissions abatement activities in an oligopoly. We find that common ownership reduces emissions by reducing output, and may stimulate emissions abatement activities if the degree of common ownership is small. However, significant common ownership always reduces emissions abatement activities. Additionally, common ownership may or may not improve welfare, depending on the implicit carbon cost.
    Keywords: corporate social responsibility, anticompetitive effect, voluntary emissions cap, emissions abatement
    JEL: L13 M14 Q57
    Date: 2021
  18. By: William Encinosa; Avi Dor; PhuongGiang Nguyen
    Abstract: We examine the impacts of physician-hospital integration on care fragmentation and other measures of care-coordination using a dynamic model of movers and stayers in commercially insured plans. Although recent growth in the share of practicing physicians belonging to these vertical organizations has sparked considerable policy debate, there is a paucity of evidence on the merits of vertical integration in the private segment of the market. We fill the gap by focusing on care-coordination in the relatively open plans that dominate commercial insurance, namely Preferred Provider Organizations (PPOs). We exploit the fact that physician-hospital integration levels vary dramatically across MSA and focus on orthogonal employment-based transfers for identification. We track 415,000 beneficiaries with 17 million claims between 2010 and 2016. We find that standard two-way fixed effect mover-stayer models produce biased estimates since there are heterogeneous effects of integration. Extending the dynamic event study design of Sun and Abraham (2021) to mover-stayer analyses, we are able to avoid these biases. We find that a move from the 10th to 90th percentile of physician integration level causes a 20% relative decrease in a care fragmentation index; similar declines are found in independent markers of fragmentation such as use of out-of-network and single-service facilities. Vertical integration of either primary care physicians or specialists reduced fragmentation significantly. However, only vertical integration of specialists led to significant reductions in medical spending. Our results are robust when adjusting for moves associated with alternative contractual arrangements among providers that do not require outright ownership.
    JEL: I11 L11
    Date: 2021–12
  19. By: Xiaoliang Li
    Abstract: In this discussion draft, we explore different duopoly games of players with quadratic costs, where the market is supposed to have the isoelastic demand. Different from the usual approaches based on numerical computations, the methods used in the present work are built on symbolic computations, which can produce analytical and rigorous results. Our investigation shows that the stability regions are enlarged for the games considered in this work compared to their counterparts with linear costs.
    Date: 2021–12

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