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on Industrial Competition |
| By: | Pauline Affeldt; Tomaso Duso; Klaus Gugler; Joanna Piechucka |
| Abstract: | Worldwide, the overwhelming majority of large horizontal mergers are cleared by antitrust authorities unconditionally. The presumption seems to be that efficiencies from these mergers are sizeable. We calculate the compensating efficiencies that would prevent a merger from harming consumers for 1,014 mergers affecting 12,325 antitrust markets scrutinized by the European Commission between 1990 and 2018. Compensating efficiencies seem too large to be achievable for many mergers. Barriers to entry and the number of firms active in the market are the most important factors determining their size. We highlight concerns about the Commission’s merger enforcement being too lax. |
| Keywords: | Compensating efficiencies, Efficiency gains, Merger control, Concentration, Screens, HHI, Mergers, Unilateral Effects, Market Definition, Entry barriers |
| JEL: | L19 L24 L40 K21 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp1979&r= |
| By: | Pauline Affeldt; Reinhold Kesler |
| Abstract: | Since 2010, Google, Apple, Facebook, Amazon, and Microsoft (GAFAM) have acquired more than 400 companies. Competition authorities did not scrutinize most of these transactions and blocked none. This raised concerns that GAFAM acquisitions target potential competitors yet fly under the radar of current merger control due to the features of the digital economy. We empirically study the competitive effects of big tech acquisitions on competitors in a relevant online market. We identify acquisitions by GAFAM involving apps from 2015 to 2019, matching these to a comprehensive database covering apps available in the Google Play Store. We find that competing apps tend to innovate less following an acquisition by GAFAM, while there seems to be no impact on prices and privacy-sensitive permissions of competing apps. Additionally, we find evidence that affected developers reallocate innovation efforts to unaffected apps and that affected markets experience less entry post-acquisition. |
| Keywords: | Mergers and acquisitions, digital markets, GAFAM, apps, innovation, privacy, event study |
| JEL: | K21 L41 L86 G34 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp1987&r= |
| By: | Noskova, Victoriia |
| Abstract: | In December 2020, new regulation of digital markets was proposed by European Commission. It specifically addresses main concerns raised by business behavior of operators of core services in their gatekeeping positions. However, voice assistants (or digital personal assistants, DPAs, e.g. Apple's Siri, Amazon's Alexa, Google Assistant) are not included into this regulation. In contrast, the Internal Market and Consumer Protection Committee of European Parliament suggested to include them. This paper argues that (i) voice assistants as gatekeepers for consumption should be listed among core services, (ii) some Digital Market Act's obligations need to be adopted to fit specifics of voice assistants, (iii) two relevant dimensions of power should be included into rebuttable presumptions used for competition policy and regulation: market power on voice assistants' market and ecosystem of related markets (cross-market integration criterion), (iv) growth of new gatekeepers should be prevented, among other means by stricter merger control. |
| Keywords: | Voice Assistants,Gatekeepers,Digital Market Act,Digital Personal Assistants,Virtual Assistants,Competition in Digital Markets,Competitive Bottleneck,Information Intermediaries,Platform Competition,Smart Speakers,Siri,Alexa,Google Assistant |
| JEL: | K21 L1 L4 L86 O33 D4 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:tuiedp:161&r= |
| By: | Rachel Griffith (Institute for Fiscal Studies and University of Manchester); John Van Reenen (Institute for Fiscal Studies) |
| Abstract: | We examine the economic analysis of the relationship between innovation and product market competition. First, we give a brief tour of the intellectual history of the area. Second, we examine how the Aghion-Howitt framework has influenced the development of the literature theoretically and (especially) empirically, with an emphasis on the “inverted U”: the idea that innovation rises and then eventually falls as the intensity of competition increases. Thirdly, we look at recent applications and development of the framework in the areas of competition policy, international trade and structural Industrial Organization. |
| Date: | 2021–12–03 |
| URL: | http://d.repec.org/n?u=RePEc:ifs:ifsewp:21/43&r= |
| By: | Kenji Fujiwara (School of Economics, Kwansei Gakuin University) |
| Abstract: | Comparison among Cournot, Bertrand and (Chamberlin) monopolistic competition receives recent attention in industrial organization, but not in New Economic Geography (NEG). To fulfill this gap, we examine how the difference in market structures affects industry location in a footloose capital (FC) model of NEG. We find that the home market effect is strongest in Cournot competition, second strongest in Bertrand competition, and weakest in monopolistic competition. |
| Keywords: | Cournot competition, Bertrand competition, monopolistic competition, Home market effect |
| JEL: | D43 F12 F21 L13 |
| Date: | 2022–01 |
| URL: | http://d.repec.org/n?u=RePEc:kgu:wpaper:235&r= |
| By: | Gérard Mondello (UCA - Université Côte d'Azur) |
| Abstract: | This paper analyzes the impact of strict liability on imperfect competition and shows first that it is not an obstacle to achieving a socially optimal level of care. Second, this result is compromised when firms face a scarce generic asset. Under this asset limitation, this paper shows that competition (here a Cournot-Nash duopoly) leads to a lower level of prevention even if more product at lower price is supplied at the equilibrium. Introducing standards linked to operating permits improves the economy's safety level but may lead firms to exit. |
| Keywords: | Tort Law,Strict Liability,Negligence Rule,Imperfect Competition,Oligopoly,Cournot Competitio |
| Date: | 2021–12–26 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-03502602&r= |
| By: | Foros, Øystein (Dept. of Economics, Norwegian School of Economics and Business Administration); Kind, Hans Jarle (Dept. of Economics, Norwegian School of Economics and Business Administration); Stähler, Frank (University of Tübingen) |
| Abstract: | Competition between firms that sell incompatible varieties of network products might be fierce, because it is important for each of them to attract a large number of users. The literature therefore predicts that stronger network effects decrease prices and profits. We show that this prediction hinges critically on an implicit or explicit assumption that each consumer buys only one of the varieties offered in the market (singlehoming consumers). We show that multihoming (some consumers buy more than one variety) may arise endogenously if the number of exclusive features that each variety offers is sufficiently high. In sharp contrast to the conventional prediction under consumer singlehoming, we further show that both prices and profits could increase in the strength of the network effects if (some) consumers multihome. However, this does not necessarily imply that profits are higher under multihoming than under singlehoming. On the contrary, multihoming might constitute a prisoner s dilemma for the firms, in the sense that they could make higher profits if each consumer bought only one of the varieties. |
| Keywords: | multihoming; incremental pricing; network effects. |
| JEL: | L13 L14 L82 |
| Date: | 2022–02–06 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:nhheco:2022_002&r= |
| By: | J.A.|info:eu-repo/dai/nl/06912261X Bikker; J.G.J. Bekooij |
| Abstract: | This paper investigates the impact of market forces on competitive behaviour and efficiency in healthcare by investigating the Dutch healthcare insurance reform in 2006. This reform replaced the dual system of public and private insurance with a single compulsory health insurance scheme, in which insurance providers compete for customers in a free market. We measure competition directly from either shifts in market shares, or developments in profits. Using formal tests we find that in each approach a structural break occurs after the reform: competition is significantly higher after 2006 than before. Several robustness tests confirm this outcome. Nevertheless, we find that the health insurance sector is still less competitive than the banking, manufacturing and service industries, and even less competitive than life insurance. |
| Keywords: | (regulated) competition, concentration, healthcare insurance, performance-conduct-structure model, boone-indicator, scale economies |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:use:tkiwps:2104&r= |
| By: | Walter Beckert (Institute for Fiscal Studies and Birkbeck, University of London); Paolo Siciliani (Institute for Fiscal Studies) |
| Abstract: | This paper studies regulatory policy interventions aimed at protecting sticky consumers who are exposed to exploitation. We model heterogeneous consumer switching costs alongside asymmetric market shares. This setting encompasses many markets in which established ?rms are challenged by new entrants. We identify circumstances under which such interventions can be counterproductive, both with regard to the stated consumer protection objective and the complementary aim to promote competition. |
| Date: | 2021–04–27 |
| URL: | http://d.repec.org/n?u=RePEc:ifs:ifsewp:21/10&r= |
| By: | 岡本, 和久; Okamoto, Kazuhisa; 孫, 彦鵬; Sun, Yanpeng |
| Abstract: | 本研究は，圧倒的な競争地位を有していた既存企業が，後発企業によって逆転されるプロセスを，既存企業間の競争がもたらす影響を勘案して検討している。中国のシェアサイクル産業の事例分析の結果，①既存企業間の競争によって引き起こされた周辺プレーヤーの対応行動によって後発企業の成長余地がもたされうること，②既存企業が他の既存企業への対応を優先するあまり，後発企業への対応が不十分になりうることが明らかになった。, Prior studies have shown that the basic cause of the latecomer's reversal of an incumbents’ dominant competitive position is its internal organizational processes and fixed relationships with its business partners. However, when there is competition among incumbents in a product market, the competitive relationship among incumbents will also affect the way the incumbents respond to the latecomer. This study examines the above issues through a case study analysis of China's shared- cycle industry from 2016 to 2018. This study revealed the following two points. First, the competitive behavior among incumbents triggered the response behavior of the latecomer and the government which created an unexpected market environment for the incumbents and created room for the latecomer to grow. Second, the incumbents were so caught up in competition with other incumbents that they neglected to respond to the latecomer. |
| Keywords: | 既存企業, 後発企業, 相互作用, 対応, 逆転, Incumbent, Latecomer, Interaction, Response, Reversal |
| Date: | 2022–01 |
| URL: | http://d.repec.org/n?u=RePEc:hit:hmicwp:247&r= |
| By: | Luca Fontanelli (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - UNS - Université Nice Sophia Antipolis (... - 2019) - COMUE UCA - COMUE Université Côte d'Azur (2015-2019) - CNRS - Centre National de la Recherche Scientifique - UCA - Université Côte d'Azur, SSSUP - Scuola Universitaria Superiore Sant'Anna [Pisa]); Mattia Guerini (University of Brescia, GREDEG - Groupe de Recherche en Droit, Economie et Gestion - UNS - Université Nice Sophia Antipolis (... - 2019) - COMUE UCA - COMUE Université Côte d'Azur (2015-2019) - CNRS - Centre National de la Recherche Scientifique - UCA - Université Côte d'Azur, SSSUP - Scuola Universitaria Superiore Sant'Anna [Pisa]); Mauro Napoletano (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - UNS - Université Nice Sophia Antipolis (... - 2019) - COMUE UCA - COMUE Université Côte d'Azur (2015-2019) - CNRS - Centre National de la Recherche Scientifique - UCA - Université Côte d'Azur, OFCE - Observatoire français des conjonctures économiques - Sciences Po - Sciences Po, SKEMA Business School, SSSUP - Scuola Universitaria Superiore Sant'Anna [Pisa]) |
| 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,rm dynamics,market selection,Pólya urn |
| Date: | 2022–01–04 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-03509092&r= |
| By: | Gérard Mondello (UCA - Université Côte d'Azur); Evens Salies |
| Abstract: | This article extends the unilateral accident standard model to allow for Cournot competition. Assuming risk-neutrality for the regulator and injurers, it analyzes three liability regimes: strict liability, negligence rule, and strict liability with administrative authorization or permits systems. Under competition the equivalence between negligence rule and strict liability no longer holds, and negligence insures a better level of social care. However, enforcing both a permit system and strict liability restores equivalence between liability regimes. However, whatever the current regime, competition leads to lower the global safety level of industry. |
| Keywords: | Tort Law,Strict Liability,Negligence rule,Imperfect Competition,Oligopoly,Cournot Competition. JEL: D43,L13,L52,K13 |
| Date: | 2021–12–26 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-03502604&r= |
| By: | Roman Inderst (Faculty of Economics and Business Administration, Goethe University Frankfurt); Eftichios S. Sartzetakis (Department of Economics, University of Macedonia); Anastasios Xepapadeas (Department of International and European Economic Studies, Athens University of Economics and Busines) |
| Abstract: | We posit that consumers?preferences for more sustainable products depend on the perceived social norm, which in turn is shaped by average consumption behavior. We explore the implications of such preferences for ?rms?incentives to introduce more sustainable products and to co-operate in order to either foster or forestall their introduction. Our main motivation lies in the increasing pressure put on antitrust authorities to exert more leniency towards horizontal agreements that are motivated by sustainability considerations. |
| Keywords: | Sustainability; Antitrust; Firm Cooperation. |
| Date: | 2022–02 |
| URL: | http://d.repec.org/n?u=RePEc:mcd:mcddps:2022_02&r= |
| By: | Vladimir Asriyan; Dana Foarta; Victoria Vanasco |
| Abstract: | We study the joint determination of product quality and complexity in a rational setting. We introduce a novel notion of complexity, which affects how costly it is for an agent to acquire information about product quality. In our model, an agent can accept or reject a product proposed by a designer, who can affect the quality and the complexity of the product. Examples include banks that design financial products that they offer to retail investors, or policymakers who propose policies for approval by voters. We find that complexity is not necessarily a feature of low quality products. While an increase in alignment between the agent and the designer leads to more complex but better quality products, higher product demand or lower competition among designers leads to more complex and lower quality products. Our findings produce novel empirical implications on the relationship between quality and complexity, which we relate to evidence within the context of financial products and regulatory policies. |
| Keywords: | complexity, information acquisition, signaling, regulation, financial products |
| JEL: | D82 D83 G18 P16 D78 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:baf:cbafwp:cbafwp21155&r= |
| By: | Martin O'Connell (Institute for Fiscal Studies and University of Wisconsin); Kate Smith (Institute for Fiscal Studies and Institute for Fiscal Studies) |
| Abstract: | This paper studies the design of sin taxes when ?rms exercise market power. We outline an optimal tax framework that highlights how market power impacts the e?ciency and redistributive properties of sin taxation, and quantify these e?ects in an application to sugar-sweetened beverage taxation. We estimate a detailed model of demand and supply for the UK drinks market, which we embed in our tax design framework to solve for optimal sugar-sweetened beverage tax policy. Positive price-cost margins on drinks create allocative distortions, which act to lower the optimal rate compared with a perfectly competitive setting. However, since pro?ts accrue to the rich, this is partially mitigated under social preferences for equity. Overall, ignoring market power when setting the optimal sugar-sweetened beverage tax rate leads to welfare gains that are 40% below those at the optimum. We show that moving from a single tax rate on sugar-sweetened beverages to a multi-rate system can result in further substantial welfare gains, with much of these gains realized by instead taxing sugar content directly. |
| Date: | 2021–09–21 |
| URL: | http://d.repec.org/n?u=RePEc:ifs:ifsewp:21/30&r= |
| By: | Allen Head (Queen's University); Timothy Kam (Australian National University); Sam Ng (Australian National University); Isaac Pan (University of Sydney) |
| Abstract: | Using micro-level data for the U.S., we provide new evidence—at national and state levels—of a positive (negative) relationship between the standard deviation (coefficient of variation)and the average in bank lending-rate markups. In a quantitative theory consistent with theseempirical observations, banks’ lending market power is determined in equilibrium and is a novelchannel of monetary policy. At low inflation, banks tend to extract higher markups from existingloan customers rather than competing for additional loans. As a result, banking activity neednot be welfare-improving if inflation is sufficiently low. This result speaks to concerns regardingmarket power in the banking sectors of low-inflation countries. Normatively, under a giveninflation target, welfare gains arise if a central bank can use additional liquidity-provision (ortax-and-transfer) instruments to offset banks’ market-power incentives |
| Keywords: | Banking; Credit; Markup Dispersion; Market Power; Stabilization Policy; Liquidity |
| JEL: | E41 E44 E51 E63 G21 |
| Date: | 2022–02 |
| URL: | http://d.repec.org/n?u=RePEc:qed:wpaper:1481&r= |
| By: | Hakan Yilmazkuday (Department of Economics, Florida International University) |
| Abstract: | This paper estimates profit margins in the U.S. airline industry at the domestic route level. The dynamic estimation methodology used not only is robust to any simultaneity/endogeneity bias by construction but also results in profit margin estimates that are highly consistent with actual profit data from the U.S. airline industry. Estimated annual profit margins have an average of about 13.3%, with a range between 2.7% and 42.9% across routes. A cross-route analysis further suggests that annual profit margins increase with the market share of the largest airline serving the route, whereas they decrease with airfare. Important policy suggestions follow. |
| Keywords: | Profit Margin, Price Elasticity, U.S. Domestic Routes |
| JEL: | C32 L93 |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:fiu:wpaper:2125&r= |
| By: | Hildenbrand, Hannah-Maria; von Rueden, Christina; Viete, Steffen |
| Abstract: | Online platforms have become one of the most important business models of the digital economy and likely counteracted some of the drop in economic activity during the COVID-19 pandemic. At the same time, platform markets are subject to controversial debates about market power and the need for pro-competitive policy reforms. Despite their rising importance in modern economies, however, a lack of data on platforms' activity complicates the evaluation of their impact on economies and societies. In this paper we aim to improve the understanding of patterns of platform diffusion and market dynamics among online platforms in Germany using proprietary data on website traffic between 2018 and 2021. Our analysis suggests that German platform markets experienced considerable growthover the past years, and especially since the onset of the COVID-19 pandemic. Results also show that the pandemic led to diverging growth patterns between sectors of the German platform economy, reflecting the sectoral heterogeneity of the COVID-19 shock. Finally, while German platforms are numerous, they often fail to reach a critical size to challenge the mostly foreign dominant platforms. We associate this finding with the observation that dominance in platform market typically persists over time, possibly reflecting a lack of market contestability. |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:svrwwp:072021&r= |
| By: | Thierry Kirat (IRISSO - Institut de Recherche Interdisciplinaire en Sciences Sociales - Université Paris Dauphine-PSL - PSL - Université Paris sciences et lettres - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Frédéric Marty (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - UNS - Université Nice Sophia Antipolis (... - 2019) - COMUE UCA - COMUE Université Côte d'Azur (2015-2019) - CNRS - Centre National de la Recherche Scientifique - UCA - Université Côte d'Azur, CIRANO - Centre interuniversitaire de recherche en analyse des organisations - UQAM - Université du Québec à Montréal = University of Québec in Montréal) |
| Abstract: | The experience of the war economy during the First World War in the United States reinforced the influence of arguments in favour of managed competition. By extending the principles of scientific management to the economy as a whole, this approach aimed to coordinate firms through the exchange of information, which was seen as a necessity both in terms of economic efficiency and response to cyclical fluctuations. Such a stance greatly reduced the application of competition rules. Nevertheless, the proposals that emerged during the 1929 crisis – leading to the reproduction of the war-economy experience in peacetime at the risk of steering the US economy towards the formation of cartels under the supervision of the federal government – were rejected by President Herbert Hoover, despite his defence of a model for regulated competition in the 1920s. The paradox was President Franklin D. Roosevelt's resumption of these projects within the framework of the First New Deal. This paper deals with the arguments that were put forward to evade competition rules and explains why the Democratic administration ultimately decided to return to a resolute enforcement of the Sherman Act. |
| Keywords: | Information Exchange,Scientific Management,Competition Rules,Cartelization,War Economy |
| Date: | 2020–12–10 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-03052417&r= |
| By: | Dongwei Zhao; Mehdi Jafari; Audun Botterud; Apurba Sakti |
| Abstract: | Arbitrage is one important revenue source for energy storage in electricity markets. However, a large amount of storage in the market will impact the energy price and reduce potential revenues. This can lead to strategic behaviors of profit-seeking storage investors. To study the investors' strategic storage investments, we formulate a non-cooperative game between competing investors. Each investor decides the storage investment over a long investment horizon, and operates the storage for arbitrage revenues in the daily electricity market. Different investors can deploy storage with different characteristics. Their decisions are coupled due to the market price that is determined by all the investors' decisions. We use market data from California ISO to characterize the storage impact on the market price, based on which we establish a centralized optimization problem to compute the market equilibrium. We show that an increasing number of investors will increase the market competition, which reduces investors' profits but increases the total invested storage capacity. Furthermore, we find that a slight increase in the storage efficiency (e.g., increased charge and discharge efficiency) can significantly improve an investor's profit share in the market. |
| Date: | 2022–01 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2201.02290&r= |
| By: | E. Raguseo (DIGEP - Department of Management and Production Engineering [Politecnico di Torino] - Polito - Politecnico di Torino = Polytechnic of Turin); Pigni, F. (Grenoble Ecole de Management); Claudio Vitari (CERGAM - Centre d'Études et de Recherche en Gestion d'Aix-Marseille - AMU - Aix Marseille Université - UTLN - Université de Toulon, AMU ECO - Aix-Marseille Université - Faculté d'économie et de gestion - AMU - Aix Marseille Université) |
| Abstract: | Firms can achieve a competitive advantage by leveraging real-time Digital Data Streams (DDSs). The ability to profit from DDSs is emerging as a critical competency for firms and a novel area for Information Technology (IT) investments. We examine the relationship between DDS readiness and competitive advantage by studying the mediation effect of product effectiveness and process efficiency. The research model is tested with data obtained from 302 companies, and the results confirm the existence of the mediation effects. Interestingly, we confirm that competitive advantage is more significantly impacted by IT investments affecting product effectiveness than those affecting process efficiency |
| Keywords: | Streams of big data,process efficiency,product effectiveness,competitive advantage |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:hal:gemptp:hal-03323663&r= |