|
on Industrial Competition |
| By: | Daniel F. Garrett (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); Renato Gomes (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); Lucas Maestri (FGV-EPGE - Universidad de Brazil) |
| Abstract: | We study competition by firms that simultaneously post (potentially nonlinear) tariffs to consumers who are privately informed about their tastes. Market power stems from informational frictions, in that consumers are heterogeneously informed about firms' offers. In the absence of regulation, all firms offer quantity discounts. As a result, relative to Bertrand pricing, imperfect competition benefits disproportionately more consumers whose willingness to pay is high, rather than low. Regulation imposing linear pricing hurts the former but benefits the latter consumers. While consumer surplus increases, firms' profits decrease, enough to drive down utilitarian welfare. By contrast, improvements in market transparency increase utilitarian welfare, and achieve similar gains on consumer surplus as imposing linear pricing, although with limited distributive impact. On normative grounds, our analysis suggests that banning price discrimination is warranted only if its distributive benefits have a weight on the societal objective. |
| Keywords: | Asymmetric information,Informational frictions,Linear pricing,Nonlinear pricing,Oligopoly |
| Date: | 2022–04–04 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-03629517&r= |
| By: | Renato Gomes (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); Jean-Marie Lozachmeur (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); Lucas Maestri (FGV-EPGE - Universidad de Brazil) |
| Abstract: | We study oligopolistic competition by firms practicing second-degree price discrimination. In line with the literature on demand estimation, our theory allows for comovements between consumers' taste for quality and propensity to switch brands. If low-type consumers are sufficiently less (more) brand loyal than high types, (i) quality provision is inefficiently low at the bottom (high at the top) of the product line, and (ii) informational rents are negative (positive) for high types, while positive (negative) for low types. We produce testable comparative statics on pricing and quality provision, and show that more competition (in that consumers become less brand-loyal) is welfare-decreasing whenever it tightens incentive constraints (so much so that monopoly may be welfare-superior to oligopoly). Interestingly, pure-strategy equilibria fail to exist whenever brand loyalty is sufficiently different across consumers types. Accordingly, price/quality dispersion ensues from the interplay between self-selection constraints and heterogeneity in brand loyalty. |
| Keywords: | Price dispersion,Preference correlation,Asymmetric information,Price discrimination,Competition |
| Date: | 2022–04–04 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-03629496&r= |
| By: | Bruno Jullien (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); Markus Reisinger (Frankfurt School of Finance & Management); Patrick Rey (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 examines the effects of personalized pricing on brand distribution. We explore whether a brand manufacturer prefers to sell through its own retail outlet only (mono distribution) or through an independent retailer as well (dual distribution). Personalized pricing allows for higher rent extraction but also leads to more fierce intra-brand competition than does uniform pricing. Due to the latter effect, a brand manufacturer may prefer mono distribution even if the retailer broadens the demand of the manufacturer's product. By contrast, with uniform pricing, selling through both channels is always optimal. This result holds for wholesale contracts consisting of two-part tariffs as well as for linear wholesale tariffs. We also show that the manufacturer may obtain its largest profit in a hybrid pricing regime, in which only the retailer charges personalized prices. Keywords: personalized pricing, distribution channels, dual distribution, vertical contracting, downstream competition. |
| Keywords: | Vertical contracting,Distribution strategies,Personalized pricing,Downstream competition. |
| Date: | 2022–04–06 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-03632634&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, CNRS - Centre National de la Recherche Scientifique); 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); 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, PDG de l’Institut national de recherche pour l'agriculture, l'alimentation et l'environnement (INRAE)) |
| Abstract: | This article surveys recent attempts at characterizing competitive allocations under adverse selection when each informed agent can privately trade with several uninformed parties: that is, trade is nonexclusive. We rst show that requiring market outcomes to be robust to entry selects a unique candidate allocation, which involves cross-subsidies. We then study how to implement this allocation as the equilibrium outcome of a game in which the uninformed parties, acting as principals, compete by making oers to the informed agents. We show that equilibria typically fail to exist in competitive-screening games, in which these oers are simultaneous. We nally explore alternative extensive forms, and show that the candidate allocation can be implemented through a discriminatory ascending auction. These results yield sharp predictions for competitive nonexclusive markets. |
| Keywords: | Adverse Selection,Entry-Proofness,Discriminatory Pricing,Nonexclusive,Markets,Ascending Auctions |
| Date: | 2022–04–04 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-03629592&r= |
| By: | Bruno Jullien (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); Alessandro Pavan (Northwestern University [Evanston]); Marc Rysman (BU - Boston University [Boston]) |
| Abstract: | The chapter has 9 sections, covering the theory of two-sided markets and related empirical work. Section 1 introduces the reader to the literature. Section 2 covers the case of markets dominated by a single monopolistic rm. Section 3 discusses the theoretical literature on competition for the market, focusing on pricing strategies that rms may follow to prevent entry. Section 4 discusses pricing in markets in which multiple platforms are active and serve both sides. Section 5 presents alternative models of platform competition. Section 6 discusses richer matching protocols whereby platforms pricediscriminate by granting access only to a subset of the participating agents from the other side and discusses the related literature on matching design. Section 7 discusses identication in empirical work. Section 8 discusses estimation in empirical work. Finally, Section 9 concludes. |
| Keywords: | Matching,Network effects,Pricing,Platform,Two-sided market |
| Date: | 2022–04–04 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-03629451&r= |
| By: | Jackie M.L. Chan; Michael Irlacher; Michael Koch |
| Abstract: | This paper investigates the effects of mergers on the product mix of multiproduct firms. Thus, we open the black box of post-merger efficiency improvements to reveal a new margin of adjustment along the product dimension. We analyze horizontal mergers in a theoretical model where oligopolistic firms employ a flexible manufacturing technology and allocate assets between differentiated varieties. After a merger, acquirers drop products from their consolidated domestic product portfolio and reallocate assets towards core varieties. We further demonstrate that such merger-induced efficiency gains imply greater activity in foreign markets. Using detailed Danish register data, we document novel facts regarding mergers and multiproduct firms and find empirical evidence strongly supporting the model’s predictions. Our results show that the number of domestic products of the post-merger acquirer falls relative to the sum of the premerger acquirer and target, that skewness of domestic sales rises towards core products, and that export activity increases. |
| Keywords: | multiproduct firms, horizontal mergers, flexible manufacturing, exports, product mix, event study |
| JEL: | F12 F14 G34 L22 L25 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_9722&r= |
| By: | Kazakis, Pantelis |
| Abstract: | Income inequality in the United States is on the rise. At the same time, firm market power has also increased. In this paper, I attempt to shed light on the relation between these two variables. Using data for U.S. firms I find a positive relation between market power and top executive pay. I also find that market power is positively associated with executive wage-to-employee wage ratios, potentially indicating that market power is a force that increases within-firm inequality |
| Keywords: | within-firm inequality, CEO & executive pay, firm markups, competition |
| JEL: | J2 J31 J33 L1 |
| Date: | 2022–04–21 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:112823&r= |
| By: | Rabbani, Maysam |
| Abstract: | In 2010, the Federal Trade Commission (FTC) stated that mergers between incumbents and future rivals may be anticompetitive. Lacking evidence, however, this statement was never used in litigation. This study empirically examines the statement. In 2012, an incumbent pharmaceutical firm acquired a promising future rival that was expected to enter competition within two years. First, I find strong evidence that, immediately after the merger, the incumbent boosted its existing drug prices. Second, the merger indirectly boosted the incumbent’s quantity of sales: higher drug prices increased the marginal returns on advertisement, and realizing that, the incumbent amplified its advertisement expenditures after the merger, and achieved a higher quantity of sales and market share. It explains how mergers with future rivals can increase market concentration by influencing advertisement. Third, mergers with future rivals can create strong entry barriers: by identifying and acquiring promising future rivals, incumbents can maintain their market dominance and postpone competition indefinitely. While mergers with future rivals are endemic to the pharmaceutical industry, I introduce a variation of it that explains the motive for major software industry mergers such as Facebook’s acquisition of Instagram and WhatsApp and Google’s takeover of Android and YouTube. Last, I propose an alternative merger analysis framework that suits mergers with future rivals. |
| Keywords: | pharmaceutical; entry barrier; merger; future rival; fringe firm |
| JEL: | I11 L41 L51 |
| Date: | 2021–06 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:112864&r= |
| By: | Helmuth Cremer (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); Jean-Marie Lozachmeur (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: | This paper studies a market for a medical product in which there is perfect competition among health insurers, while the good is sold by a monopolist. Individuals di¤er in their severity of illness and there is ex post moral hazard. We consider two regimes : one in which insurers use coinsurance rates (ad valorem reimbursements) and one in which insurers use copayments (specic reimbursements). We show that the induced equilibrium with copayments involves a lower producer price and a higher level of wel- fare for consumers. This results provides strong support for a reference price based reimbursement policy. |
| Keywords: | Copayments,Health insurance competition,Ex post moral hazard,Imperfect competition |
| Date: | 2022–04–04 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-03629480&r= |
| By: | Bukvić, Rajko |
| Abstract: | Russian. В статье рассматриваются степень и перемены в концентрации в банковском секторе Сербии (без Косова и Метохии) во второй половине второго и начале третьего десятилетия. В первой части обсуждаются основные теоретические и методологические вопросы исследования концентрации и конкуренции, и специфичности конкуренции в банковском секторе. Указывается на значение выбора переменных для вычисления показателей концентрации и выбирает в этом качестве следующие: активы, депозиты, капитал, доход и кредиты. В последующей части на основе индекса Херфиндаля – Хиршмана показано, что степень концентрации низкая, хотя и близкая умеренной. Наконец, проведена декомпозиция изменений индекса концентрации на две части: неравенство в распределении рыночных долей и число банков. Вклады двух факторов неравномерные и варьируют по годам. Среди выделенных типов перемен преобладает тип VI (уменьшение неравенства рыночных долей и уменьшение числа банков, причём первое по абсолютном значении больше). Но, в 2021 г. (I–VI) для всех переменных произошло изменение типа I (рост компоненты неравенства и уменьшение числа банков). Оказалось, что индекс концентрации не рос, хотя число банков постоянно уменьшалось и компонент числа банков имел в большинстве случаев даже больший вклад в перемены индекса концентрации. English. Paper considers the degree and changes in concentration in banking sector of Serbia (without Kosovo and Metohia) in the second half of 2010s and beginning of 2020s. In the first part the main theoretical and methodological questions of the research of concentration and competition were presented, and the characteristics of competition in banking sector. Author emphasizes the importance of the choice of variables for the calculation of concentration indices and chooses next variables: assets, deposits, capital, operating income, and loans. In the next part using the Herfindahl – Hirschman index it was shown that the degree of concentration is low, although close to moderate. At the end, it were decomposed the changes of concentration into two factors: inequality in market shares distribution and number of banks. Impacts of two factors are not equal and vary through the years. Among the six types of changes the type VI prevails in many cases (decrease of inequality of market shares and decrease of number of banks). But, in 2021 (I–VI) for all variables type of changes I happens (increase of inequality and decrease of number of banks). It was shown that in general concentration index was not increased, although the number of banks constantly decreased and component of inequality in many cases had greater impact on the changes of concentration index than the component of inequality. |
| Keywords: | конкуренция, концентрация, банковский сектор, Сербия, индекс Херфиндаля – Хиршмана, декомпозиция индекса, неравенство рыночных долей, число банков, competition, concentration, banking sector, Serbia, Herfindahl – Hirschman index, index decomposition, inequality of market shares, number of banks |
| JEL: | C38 G21 L10 L19 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:112928&r= |
| By: | Frédéric Cherbonnier (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); David J. Salant; Karine van der Straeten (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: | An auction of transport capacity can only roll forward if competitive bidders show up at the start. To characterize bidding behavior, we develop a model with a single incumbent potentially in competition with a single challenger; should the challenger obtain slots, the two firms will engage post-auction in capacity con-strained price competition. We show how the auction structure, that is, whether the slots are auctioned one at a time, and if not, how they are packaged affects the outcome. Our key finding is that the division of the available slots into tranches can significantly affect the outcome of the auction. Absent any set-asides, a single auc-tion for all the slots will almost certainly be won by an incumbent. Set-asides can enable the challenger to win one or more packages of slots. Further, when the slots are split up, and auctioned one-at-a-time or in batches, a challenger's prospects improve significantly, and no longer rely only on set-asides. The implications of our analysis are (a) the outcome will depend crucially on auction design decisions,(b) set-asides for challengers can help and (c) an auction that results in successful entry by challengers may result in reduced auction revenues and industry profits. |
| Keywords: | Rail transportation,Open access,Auctions,Regulation |
| Date: | 2022–04–04 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-03629619&r= |
| By: | Milo Bianchi (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, TSM - Toulouse School of Management Research - CNRS - Centre National de la Recherche Scientifique - TSM - Toulouse School of Management - UT1 - Université Toulouse 1 Capitole - Université Fédérale Toulouse Midi-Pyrénées - UT1 - Université Toulouse 1 Capitole - Université Fédérale Toulouse Midi-Pyrénées); Matthieu Bouvard (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, TSM - Toulouse School of Management Research - CNRS - Centre National de la Recherche Scientifique - TSM - Toulouse School of Management - UT1 - Université Toulouse 1 Capitole - Université Fédérale Toulouse Midi-Pyrénées - UT1 - Université Toulouse 1 Capitole - Université Fédérale Toulouse Midi-Pyrénées); Renato Gomes (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); Andrew Rhodes (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); Vatsala Shreeti (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: | We connect various streams of academic literature to shed light on how the degree of interoperability in mobile payments affects market outcomes and welfare. We organize our discussion around four dimensions of interoperability. First, we consider mobile network interoperability (whether clients of one telecom can access another telecom's payment services) in connection with the IO literature on tying. Second, we discuss platform level interoperability (the ability to send money offnetwork) in light of the literature on compatibility. We also build on the behavioral IO literature to suggest how the effects of interoperability may be very heterogeneous across various types of firms and consumers, or even backfire. Third, we consider interoperability in the cash-in-cash-out agent network, in light of the literature on co-investment in network industries, and of more specific studies on ATMs' interoperability. Fourth, we discuss how the literature in banking and on data ownership can be used to understand interoperability of data. We conclude with some broader remarks on policy implications and on possible directions for future research. |
| Keywords: | Mobile Payments,Interoperability,Financial Inclusion,Competition,Policy. |
| Date: | 2022–04–04 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-03629513&r= |
| By: | Renato Gomes (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); Andrea Mantovani (TBS - Toulouse Business School) |
| Abstract: | Online intermediaries greatly expand consumer information, but also raise sellers' marginal costs by charging high commissions. To prevent disintermediation, some platforms adopted price parity and anti-steering provisions, which restrict sellers' ability to use alternative sales channels. Whether to uphold, reform, or ban these provisions has been at the center of the policy debate, but, so far, little consensus has emerged. As an alternative, this paper studies how to cap platforms' commissions. The utilitarian cap reflects the Pigouvian precept according to which the platform should charge net fees no greater than the informational externality it exerts on other market participants. |
| Keywords: | Extreme value theory,Commission caps,Regulation,Price parity,Platforms |
| Date: | 2022–04–04 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-03629525&r= |
| By: | Johannes Hörner (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); Anna Sanktjohanser (Yale University [New Haven], 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: | We consider a repeated game, in which due to private information and a lack of flexible transfers, cooperation cannot be sustained efficiently. In each round, the buyer either buys from the seller or takes an outside option. The fluctuating outside option may be public or private information. When the buyer visits, the seller chooses what quality to provide. We find that the buyer initially forgoes mutually beneficial trades before then visiting more often than he would like to, myopically. Under private information, the relationship recurrently undergoes gradual self-reinforcing downturns when trust is broken and instantaneous recoveries when loyalty is shown. |
| Keywords: | Trust,Loyalty,Imperfect Monitoring |
| Date: | 2022–04–06 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-03632455&r= |
| By: | Falk Bräuning; José Fillat; Gustavo Joaquim |
| Abstract: | The US economy is at least 50 percent more concentrated today than it was in 2005. In this paper, we estimate the effect of this increase on the pass-through of cost shocks into prices. Our estimates imply that the pass-through becomes about 25 percentage points greater when there is an increase in concentration similar to the one observed since the beginning of this century. The resulting above-trend price growth lasts for about four quarters. Our findings suggest that the increase in industry concentration over the past two decades could be amplifying the inflationary pressure from current supply-chain disruptions and a tight labor market. |
| Keywords: | inflation; supply shock identification; cost-price pass-through; industry concentration |
| JEL: | E30 E31 L11 L16 |
| Date: | 2022–05–23 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedbcq:94265&r= |
| By: | Haitian Xie; Ying Zhu |
| Abstract: | This paper studies the gap between the classical pricing theory and the data-based pricing theory. We focus on the problem of price discrimination with a continuum of buyer types based on a finite sample of observations. Our first set of results provides sharp lower bounds in the worst-case scenario for the discrepancy between any data-based pricing strategies and the theoretical optimal third-degree price discrimination (3PD) strategy (respectively, uniform pricing strategy) derived from the distribution (where the sample is drawn) ranging over a large class of distributions. Consequently, there is an inevitable gap between revenues based on any data-based pricing strategy and the revenue based on the theoretical optimal 3PD (respectively, uniform pricing) strategy. We then propose easy-to-implement data-based 3PD and uniform pricing strategies and show each strategy is minimax optimal in the sense that the gap between their respective revenue and the revenue based on the theoretical optimal 3PD (respectively, uniform pricing) strategy matches our worst-case lower bounds up to constant factors (that are independent of the sample size $n$). We show that 3PD strategies are revenue superior to uniform pricing strategies if and only if the sample size $n$ is large enough. In other words, if $n$ is below a threshold, uniform pricing strategies are revenue superior to 3PD strategies. We further provide upper bounds for the gaps between the welfare generated by our minimax optimal 3PD (respectively, uniform pricing) strategy and the welfare based on the theoretical optimal 3PD (respectively, uniform pricing) strategy. |
| Date: | 2022–04 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2204.12723&r= |
| By: | Kick, Thomas |
| Abstract: | We study the effects of interest rate shocks (IRS) on banks' liquidity creation. A unique supervisory data set from the Deutsche Bundesbank allows identifying banks' liquidity creation for the real economy and the effects of banking market competition. Here, we employ a novel approach to account for IRS that are both unexpected and effective for a bank's business model. We find that higher individual pricing power in the market lowers banks' liquidity creation, which is in line with theory that monopolistic firms undersupply the market when utilizing their high pricing power in the bank competition-liquidity creation nexus. While positive IRS per se lead to an increase in bank liquidity creation, we find that a high bank-individual pricing power curbs this impact on liquidity creation significantly. Moreover, we show that monetary policy was most effective during the global financial crisis and for well-capitalized banks, whereas periods of low interest rates are characterized by the persistent increase in liability-side liquidity creation. |
| Keywords: | bank liquidity creation,unexpected monetary policy,low interest rate environment,financial crisis,financial markets regulation,banking market competition,dynamic GMM |
| JEL: | G21 G28 G30 C23 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:bubdps:142022&r= |
| By: | Brosig-Koch, Jeannette; Hehenkamp, Burkhard; Kokot, Johanna |
| Abstract: | We study how competition between physicians affects the provision of medical care. In our theoretical model physicians are faced with a heterogeneous patient population, in which patients systematically vary with regard to both, their responsiveness to the provided quality of care and their state of health. We test the behavioral predictions derived from this model in a controlled laboratory experiment. In line with the model, we observe that competition significantly improves patient benefits as long as patients are able to respond to the quality provided. For those patients, who are not able to choose a physician, competition even decreases the patient benefit compared to a situation without competition. This decrease is in contrast to our theoretical prediction implying no change in benefits for passive patients. Deviations from patient-optimal treatment are highest for passive patients in need of a low quantity of medical services. With repetition, both, the positive effects of competition for active patients as well as the negative effects of competition for passive patients become more pronounced. Our results imply that competition can not only improve but also worsen patient outcome and that patients' responsiveness to quality is decisive. |
| Keywords: | physician competition,patient characteristics,heterogeneity in quality responses,fee-for-service,laboratory experiment |
| JEL: | I11 D43 C91 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:hcherp:202227&r= |
| By: | Ronan Le Velly (UMR Innovation - Innovation et Développement dans l'Agriculture et l'Alimentation - Cirad - Centre de Coopération Internationale en Recherche Agronomique pour le Développement - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - Institut Agro - Montpellier SupAgro) |
| Abstract: | Based on a qualitative analysis of practical guides and legal comments on sustainable public procurement, the author studies how the introduction of sustainable development objectives into public procurement law has changed the public markets' competition rules. He shows that since the end of the 1990s, there has been a gradual widening of the scope of acceptable discrimination in calls for tenders and the recognition of new purposes for public procurement. However, this expansion is contained by the fundamental principles of competition stated in the law. The preference for a local purchase remains strictly prohibited, even when it is promoted in the name of sustainable development. Similarly, sourcing and allotment are promoted both as levers for improving sustainability and as means of increasing competition. |
| Abstract: | En s'appuyant sur une analyse qualitative de guides pratiques et de commentaires juridiques, l'article étudie la façon dont l'introduction du développement durable dans le droit de la commande publique a modifié les règles de concurrence des marchés publics. Il montre qu'il s'est opéré depuis la fin des années 1990 un élargissement progressif du périmètre des discriminations acceptables lors des appels d'offres et la reconnaissance de nouvelles finalités pour la commande publique. Pour autant, cet élargissement est contenu dans son ampleur par les principes fondamentaux de concurrence affirmés dans la loi. La préférence pour un achat local demeure strictement interdite, y compris lorsqu'elle est défendue au nom du développement durable. De même, la promotion du sourcing et de l'allotissement résulte autant d'une volonté d'accroître la durabilité que de renforcer la concurrence. |
| Keywords: | Sourcing,Marchés publics,Développement durable,Concurrence,Code de la commande publique |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03647718&r= |
| By: | Myśliwski, Mateusz (Norwegian School of Economics); Rostom, May (Bank of England) |
| Abstract: | We formulate a structural model of search with lender and borrower heterogeneity to estimate the value of information provided to UK households by mortgage brokers. Using administrative data on loans originating in 2016 and 2017, we document the existence of a substantial degree of unexplained price dispersion, and observe that while mortgages obtained from brokers are cheaper, borrowers who use intermediaries pay more once commissions are factored in. Assuming that borrowers with high search costs are more likely to use brokers, we nonparametrically estimate the distributions of search, and the banks’ costs of providing these loans. Our results show that search costs vary by demographic groups, and that broker presence exerts negative pressure on lenders’ market power. Compared to a world where broker advice is unavailable, we estimate their presence reduces average monthly mortgage costs by 21%, and welfare losses arising from search frictions by 70% – although the results differ by borrower and loan charateristics. We also find that regulation in support of market centralization halves lenders’ markups and lowers monthly costs of an average mortgage by 4.4%. |
| Keywords: | Mortgage markets; consumer search; intermediation; auction estimation |
| JEL: | C57 D83 G21 L85 |
| Date: | 2022–03–25 |
| URL: | http://d.repec.org/n?u=RePEc:boe:boeewp:0967&r= |
| By: | Schmitz, Patrick W. |
| Abstract: | A buyer wants to purchase an innovative good from a seller. Both parties are risk-neutral, and payments from the buyer to the seller must be non-negative. After the contract is signed, the seller privately observes a signal, which may be informative about the seller's costs. We compare two contracting regimes. In the case of specific performance, the courts enforce the trade level specified in the contract. In the case of at-will contracting, the seller is free to walk away from the contract after the signal has been realized. While the buyer prefers specific performance and the seller prefers at-will contracting, the optimal regime from an economic efficiency point-of-view depends on the informativeness of the signal. |
| Keywords: | contract theory; specific performance; at-will contracts; asymmetric information; ex-post inefficiencies |
| JEL: | D86 H57 K12 L14 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:112839&r= |
| By: | Shota Ichihashi; Alex Smolin |
| Abstract: | A seller faces a consumer with an uncertain value for the product. The seller has imperfect private information about the value and requests additional data to set the price. The consumer can decline any request. The consumer's willingness to provide data depends on his belief about the seller's type which in turn depends on the request. We show that the type uncertainty limits the scope of data collection: All equilibrium payoffs are spanned by fully pooling equilibria in which the seller collects the same data regardless of the type. The seller's private information lowers efficiency and profits, but benefits the consumer by fueling his skepticism and preventing excessive data collection. Having less private information may enable the seller to collect more data directly from the consumer and may lower the overall consumer welfare. |
| Date: | 2022–04 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2204.08723&r= |