|
on Industrial Competition |
| By: | Rohit Lamba; Sergey Zhuk |
| Abstract: | This paper studies Markov perfect equilibria in a repeated duopoly model where sellers choose algorithms. An algorithm is a mapping from the competitor's price to own price. Once set, algorithms respond quickly. Customers arrive randomly and so do opportunities to revise the algorithm. In the simple game with two possible prices, monopoly outcome is the unique equilibrium for standard functional forms of the profit function. More generally, with multiple prices, exercise of market power is the rule -- in all equilibria, the expected payoff of both sellers is above the competitive outcome, and that of at least one seller is close to or above the monopoly outcome. Sustenance of such collusion seems outside the scope of standard antitrust laws for it does not involve any direct communication. |
| Date: | 2022–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2205.04661&r= |
| By: | Lan Dinh |
| Abstract: | Recent evidence on rm-level markups and concentration raises a concern that market competition has declined in the U.S. over the last few decades. Since measuring competition is difficult, methodologies used to arrive at these findings have merits but also raise technical concerns which question the validity of these results. Given the significance of documenting how competition has changed, I contribute to this literature by studying a different measure of competition. Specifically, I estimate the toughness of local competition over time. To derive this estimate, I use a generalized monopolistic competition model with variable markups. This model generates insights that allows me to measure competition as the sensitivity of weighted-average markup to changes in the number of competitors using directly observable variables. Compared to firm-level markups estimation, this method relaxes the need to estimate production functions. I then use confidential Census data to estimate toughness of local competition from 1997 to 2016, which shows that local competition has decreased in non-tradable industries on average in the U.S. during this time period. |
| Keywords: | Market size, local competition, markups |
| Date: | 2022–05 |
| URL: | http://d.repec.org/n?u=RePEc:cen:wpaper:22-13&r= |
| By: | Rachel Griffith; John Van Reenen |
| 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. |
| Keywords: | competition, innovation, creative destruction |
| Date: | 2021–11–30 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp1818&r= |
| By: | Harrison, Rodrigo; Jara-Moroni, Pedro (Universidad de Santiago de Chile. Departamento de Economía; Universidad Adolfo Ibáñez. Facultad de Ingeniería y Ciencias) |
| Abstract: | IWe present a two stage entry game in which a large number of firms choose simultaneouslywhether to enter a market or not. Firms that decide to enter the market produce a homogeneousgood facing Cournot competition under a parametrized demand. Using a global game approach, weshow that there exist selection of a unique equilibrium in the first stage entry game, in which thereis efficient entry, i.e. firms that enter are the ones with the lowest entry cost, providing theoreticalfoundation for the equilibrium selection assumption utilized in entry models in the empirical entryliterature. We explore as well efficiency properties of the selected equilibrium and provide examplesthat do not fit our general framework, but where similar results may be obtained. |
| Keywords: | Cournot, Global game, Equilibrium selection, Strategic substitutes |
| JEL: | L13 D82 C72 |
| Date: | 2021–04 |
| URL: | http://d.repec.org/n?u=RePEc:ars:papers:articulo_2&r= |
| By: | Evans, R., Park, I-U.; Park, I-U. |
| Abstract: | We study design and pricing of information by a monopoly information provider for a buyer in a trading relationship with a seller. The profit-maximizing information structure has a binary threshold character. This structure is inefficient when seller production cost is low. Compared with a situation of no information, the information provider increases welfare if cost is high but reduces it if cost is low. A monopoly provider creates higher welfare than a competitive market in information if the prior distribution of buyer valuations is not too concentrated. Giving the seller a veto over the information contract generates full efficiency. |
| Keywords: | Information Sale, Mechanism Design, Information Design |
| JEL: | D42 D61 D82 D83 L12 L15 |
| Date: | 2022–05–18 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:2233&r= |
| By: | Jay Pil Choi; Christodoulos Stefanadis |
| Abstract: | We examine tippy network markets that accommodate price discrimination. The analysis shows that when a mild equilibrium refinement, the monotonicity criterion, is adopted, network competition may have a unique subgame-perfect equilibrium regarding the winner’s identity; the prevailing brand may be fully determined by its product features. We bring out the concept of the dominant value margin, which is a metric of the effectiveness of divide-and-conquer strategies. The supplier with the larger dominant value margin may always sell to all customers in equilibrium. Such a market outcome is not always socially efficient since a socially inferior supplier may prevail if has a stand-alone-benefit advantage and only a modest network-benefit disadvantage. |
| Keywords: | network externalities, equilibrium uniqueness, price discrimination, monotonicity criterion, dominant value margin, divide and conquer |
| JEL: | L13 L40 D43 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_9717&r= |
| By: | Matej Bajgar; Chiara Criscuolo; Jonathan Timmis |
| Abstract: | This paper presents new evidence on the growing scale of big businesses in the United States, Japan and 11 European countries. It documents a broad increase in industry concentration across the majority of countries and sectors over the period 2002 to 2014. The rising concentration is strongly associated with intensive investment in intangibles, particularly innovative assets, software and data, and this relationship is magnified in more globalized and digital-intensive industries. The results are consistent with intangibles disproportionately benefiting large firms and enabling them to scale up and raise their market shares, increasingly over time. |
| Keywords: | competition, industry and entrepreneurship, innovation |
| Date: | 2021–10–28 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp1806&r= |
| By: | Jan Eeckhout; Laura Veldkamp |
| Abstract: | Might firms' use of data create market power? To explore this hypothesis, we craft a model in which economies of scale in data induce a data-rich firm to invest in producing at a lower marginal cost and larger scale. However, the model uncovers much richer interactions between data, welfare and market power. Data affects risk, firm size and the composition of the goods firms produce, all of which affect markups. The tradeoff between these forces depends on the level of aggregation at which markups are measured. Empirical researchers who measure markups at the product level, firm level or industry level come to different conclusions about trends and cyclical fluctuations in markups. Our results reconcile and re-interpret these facts. The divergence between product, firm and industry markups can be a sign that firms are using data to reallocate production to the goods consumers want most. |
| JEL: | D8 E3 L0 |
| Date: | 2022–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:30022&r= |
| By: | Inderst, Roman; Sartzetakis, Eftichios S.; Xepapadeas, Anastasios |
| Abstract: | We analyze firms incentives to coordinate on the introduction of a more sustainable product variant when consumers preferences for greater sustainability depend on the perceived social norm, which in turn is shaped by average consumption behavior. Such preferences lead to multiple equilibria. If the more sustainable variant allows firms to sufficiently expand their aggregate market share, when a lenient legal regime makes this feasible they will coordinate on the more sustainable outcome. If their aggregate market share however does not expand sufficiently under the more sustainable variant, coordination can forestall a more sustainable outcome. Our analysis thus both confrms and qualifies the notion of a sustainability first-mover disadvantage as a justification for an agreement between competitors, which has gained traction in antitrust. We also provide empirical evidence for norm-based sustainability preferences. |
| Keywords: | Sustainability,Antitrust,Firm Cooperation |
| JEL: | A13 D11 D22 K21 L11 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:esprep:254323&r= |
| By: | Nageeb Ali, S. (Pennsylvania State University); Lewis, Greg (Microsoft Research); Vasserman, Shoshana (Stanford University Graduate School of Business and NBER) |
| Abstract: | Firms have ever increasing access to consumer data, which they use to personalize their advertising and to price discriminate. This raises privacy concerns. Policymakers have argued in response that consumers should be given control over their data, able to choose what to share and when. Since firms learn about a consumer’s preferences both from what they do and do not disclose, the equilibrium implications of consumer control are unclear. We study whether such measures improve consumer welfare in monopolistic and in competitive markets. We find that consumer control can improve consumer welfare relative to both perfect price discrimination and uniform pricing. First, consumers can use disclosure to amplify competitive forces. Second, consumers can disclose information to induce even a monopolist to lower prices. Whether consumer control improves welfare depends on the disclosure technology and market competitiveness. Simple disclosure technologies suffice in competitive markets. When facing a monopolist, a consumer needs partial disclosure possibilities to obtain any welfare gains. |
| JEL: | D4 D8 |
| Date: | 2022–04 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:stabus:3890&r= |
| By: | Inderst, Roman; Griem, Fabian; Schaffer, Greg |
| Abstract: | In a model of contractual inefficiencies due to double-marginalization, we analyze the practice of tied rebates that incentivizes retailers to purchase multiple products from the same manufacturer. We isolate two opposing effects: a surplus-sharing effect that enhances efficiency and a rent-extraction effect that reduces efficiency. The overall effect is more likely to be negative when the manufacturer has a particularly strong brand for which the retailers alternatives are much inferior. Foreclosure of a more efficient provider of the manufacturers weaker product is not a sufficient condition for a welfare loss. Our key positive implication relates to the seemingly inefficient introduction of weaker products by the owners of particularly strong brands. |
| Keywords: | contractual inefficiencies,double-marginalization,competition,surplus-sharing effect,rent-extraction effect,efficiency,brand strength |
| JEL: | L14 D43 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:esprep:254324&r= |
| By: | Estavillo, Javea Maria |
| Abstract: | Access to the internet has become a basic necessity. The Philippines already labors under low rates of access and slow connectivity, while two dominant internet service providers control nearly 80% of the market, rendering the market potentially vulnerable to anti-competitive conduct. An additional challenge is faced by consumers living in multi-tenant environments (MTEs), which accounts for more than 57% of households in Metro Manila. where developers can create a monopoly within the MTE through exclusive arrangements and other legal means. Recent decisions by the Philippine Competition Commission have struck down these arrangements as being uncompetitive and an abuse of market power. Low-income neighborhoods are most impacted by this lack of choice, where homeowners and tenants who are forced to engage with the monopolistic provider are unable to access the cheaper and more efficient fixed broadband internet services. Regulators should look into market concentration of internet service providers throughout various areas in the Philippines, and actively intervene when concentration leaves consumers little choice. |
| Keywords: | competition, anti-competitive behavior, competition policy, internet services, exclusive arrangements, Philippines |
| JEL: | K20 K21 |
| Date: | 2022–05–16 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:113107&r= |
| By: | Christos Genakos; Tobias Kretschmer; Ambre Nicolle |
| Abstract: | Do firms strategically confuse their customers? Using a detailed dataset covering virtually all mobile phone tariffs and their handsets in the UK between January 2010 and September 2012, we examine the co-evolution of prices with the differentiation and overlap of operators' product portfolios. Incorporating the fact that mobile tariffs are multidimensional and hard to compare but easy to imitate and cheap to launch, we argue that firms introduced a large number of dominated tariffs as an obfuscation strategy. We show that the increase in dominated tariffs correlates with the increase in average prices despite converging product portfolios. This exploratory study is one of the first to offer suggestive evidence of the existence and role of obfuscation as a firm strategy. |
| Keywords: | competitive strategy, obfuscation, mobile telecommunications industry |
| Date: | 2021–11–01 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp1810&r= |
| By: | Ruediger Bachmann; Christian Bayer; Heiko Stüber; Felix Wellschmied |
| Abstract: | When employers face a trade-off between growing large and paying low wages—that is, when they have monopsony power—some productive employers will decide to acquire fewer customers, forgo sales, and remain small. These decisions have adverse consequences for aggregate labor productivity. Using high-quality administrative data from Germany, we document that East German plants (compared to West German ones) face a steeper size-wage curve, invest less into marketing, and remain smaller. A model with labor market monopsony, product market power, and customer acquisition matching these features of the data predicts 10 percent lower aggregate labor productivity in East Germany. . |
| Keywords: | aggregate productivity, plant heterogeneity, unions, monopsony power, size-wage curve, monopolistic competition, customer capital, size distortions |
| JEL: | E20 E23 E24 J20 J42 J50 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_9751&r= |
| By: | Dubois, Pierre (Toulouse School of Economics, University of Toulouse Capitole,); Gandhi, Ashvin (UCLA Anderson School of Management); Vasserman, Shoshana (Stanford Graduate School of Business and the NBER) |
| Abstract: | The United States spends twice as much per person on pharmaceuticals as European countries, in large part because prices are much higher in the US. This fact has led policymakers to consider legislation for price controls. This paper assesses the effects of a US international reference pricing policy that would cap prices in US markets by those offered in reference countries. We estimate a structural model of demand and supply for pharmaceuticals in the US and reference countries like Canada where prices are set through a negotiation process between pharmaceutical companies and the government. We then simulate the counterfactual equilibrium under such international reference pricing rules, allowing firms to internalize the cross-country externalities introduced by these policies. We find that in general, these policies would result in much smaller price decreases in the US than price increases in reference countries. The magnitude of these effects depends on the number, size and market structure of references countries. We compare these policies with a direct bargaining on prices in the US. |
| JEL: | C51 C57 I11 I18 L11 L13 L22 |
| Date: | 2022–04 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:stabus:3889&r= |
| By: | Jolian McHardy (Department of Economics, University of Sheffield, UK) |
| Abstract: | We develop a network model of differentiated transport services explicitly incorporating interchangeable and rival aspects, characteristic of many transport systems, allowing exploration of the implications of strategic interaction on pricing amongst multiple rival operators within and across modes. The model offers a framework for studying the impacts of alternative policy scenarios with a wide variety of applications across the transport sector in a way that is tractable and allows meaningful analysis. We illustrate some of the uses of the framework through a series of applications which demonstrate the importance of explicitly recognising the dual rival and interchangeable aspects across multiple operators. Amongst other things, we show that the base model, which we characterise as n = 2, and which has been widely employed in the transport literature, in some respects represents a special case and that the relative size of equilibrium profit, consumer surplus and welfare across regimes as well as the rankings of different regimes across these performance indicators are non-monotonic in n, hence justifying a framework which explicitly allows n to vary. One application examines the performance of the multi-operator ticketing card scheme under guidelines operating in the UK local bus sector. This features as a key part in the UK government’s local bus transport strategy but is also currently under statutory review. A calibration exercise shows this regime may offer higher profit, consumer surplus and welfare as well as a more extensive service provision than the ‘free-market’ case. |
| Keywords: | Multi-operator; Transport Networks; Pricing; Welfare |
| JEL: | D43 L13 L92 R48 |
| Date: | 2022–06 |
| URL: | http://d.repec.org/n?u=RePEc:shf:wpaper:2022009&r= |
| By: | Lindsay E. Relihan |
| Abstract: | Is online retail a complement or substitute to local offline economies? This paper provides the first evidence that consumers use time saved from online retail to increase their trips for time-intensive services like coffee shops. I use new, detailed data on the daily transactions of millions of anonymized customers. I then estimate a discrete choice model of consumer trip choice, which embeds time use mechanisms and accounts for correlations in trip utility shocks. I show that the model matches key features of observed behaviour that are missed by more standard models, such as the disproportionate increase in trips to nearby coffee shops when consumers switch to online groceries. Model counterfactuals are used to forecast changes in future trip demand and outline strategies, which offline retailers can use to compete against online retail. For consumers, I find that the welfare gains from online grocery platforms go disproportionately to high-income consumers. |
| Keywords: | online, retail, time use, tips |
| Date: | 2022–12 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp1836&r= |
| By: | Martin Gaynor; Adam Sacarny; Raffaella Sadun; Chad Syverson; Shruthi Venkatesh |
| Abstract: | Despite the continuing US hospital merger wave, it remains unclear how mergers change, or fail to change, hospital behavior and performance. We open the "black box" of hospital practices through a mega-merger between two for-profit chains. Benchmarking the merger's effects against the acquirer's stated aims, we show they achieved some of their goals, harmonizing electronic medical records and sending managers to target hospitals. Post-acquisition managerial processes were similar across the merged chain. However, these interventions failed to drive detectable gains in performance. Our findings demonstrate the importance of organizations for merger research in health care and the economy more generally. |
| Date: | 2022–12 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp1845&r= |
| By: | Jara-Moroni, Pedro (Universidad de Santiago de Chile. Departamento de Economía) |
| Abstract: | In this article we prove that, when firms are identical, there are no non-degenerate mixed strategy equilibria in the linear quantity setting duopoly game studied by van Damme and Hurkens (1999) , in which firms engage in the “Action Commitment Game” proposed by Hamilton and Slutsky (1990). The consequence of this is that in the symmetric case, there can not be equilibrium selection through risk dominance in such game |
| Keywords: | Stackelberg, Cournot, Endogenous Timing, Mixed Strategies |
| JEL: | C72 D43 |
| Date: | 2021–07 |
| URL: | http://d.repec.org/n?u=RePEc:ars:papers:articulo_1&r= |
| By: | Domenico Colucci; Nicola Doni; Giorgio Ricchiuti; Vincenzo Valori |
| Abstract: | We analyze the market dynamics in a model in which one dominant firm and a large number of small, not fully rational firms coexist. The dominant firm announces a reference price, but the market price can diverge from such reference price: this is due to the dominant firm taking advantage of the bounded rationality of the fringe firms. In the baseline model, we find that the dominant firm has an incentive to announce a very low price and in the steady state the market price is usually higher than the reference price. In a more complex model, where a fraction of small firms employ an evolutionary mechanism to adjust their expectations, we find that the lower the reference price the higher the period-by-period fluctuations of the market prices. We show that both mean profits and their volatility are decreasing in the reference price and that the optimal choice is positively correlated with the degree of risk aversion of the dominant firm. In general, socially preferable outcomes can be achieved when the dominant firm behaves as strongly risk averse. We draw some policy implications from this conclusion. |
| Keywords: | market dynamics, competitive fringe, dominant firm, switching mechanism |
| JEL: | D21 D25 D84 D91 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:frz:wpaper:wp2022_05.rdf&r= |
| By: | Christos Genakos; Mario Pagliero |
| Abstract: | A fundamental issue in economics is how firms deal with unexpected cost increases, perhaps arising from taxes, exchange rate fluctuations or rising input prices: what drives the extent to which they pass the costs through to the prices they charge? To explore the relationship between 'pass-through' and competition within a sector, Christos Genakos and Mario Pagliero take us to the Greek islands. |
| Keywords: | trade, competition |
| Date: | 2021–06–15 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepcnp:605&r= |
| By: | Victor Aguirregabiria |
| Abstract: | This paper studies identification and estimation of a dynamic discrete choice model of demand for differentiated product using consumer-level panel data with few purchase events per consumer (i.e., short panel). Consumers are forward-looking and their preferences incorporate two sources of dynamics: last choice dependence due to habits and switching costs, and duration dependence due to inventory, depreciation, or learning. A key distinguishing feature of the model is that consumer unobserved heterogeneity has a Fixed Effects (FE) structure -- that is, its probability distribution conditional on the initial values of endogenous state variables is unrestricted. I apply and extend recent results to establish the identification of all the structural parameters as long as the dataset includes four or more purchase events per household. The parameters can be estimated using a sufficient statistic - conditional maximum likelihood (CML) method. An attractive feature of CML in this model is that the sufficient statistic controls for the forward-looking value of the consumer's decision problem such that the method does not require solving dynamic programming problems or calculating expected present values. |
| Date: | 2022–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2205.03948&r= |
| By: | Scheresky, Gwen; Wilson, William W.; Bullock, David W. |
| Keywords: | Demand and Price Analysis, International Relations/Trade |
| Date: | 2021–11–30 |
| URL: | http://d.repec.org/n?u=RePEc:ags:nddaes:320807&r= |
| By: | Pinter, Gabor (Bank of England); Uslu, Semih (Johns Hopkins Carey Business School) |
| Abstract: | In intermediated markets, trading takes time and intermediaries extract rents. We estimate a structural search‑and‑bargaining model to quantify these trading delays, intermediaries’ ability to extract rents, and the resulting welfare losses in government and corporate bond markets. Using transaction‑level data from the UK, we identify a set of clients who are active in both markets. We exploit the cross-market variation in the distributions of these clients’ trading frequency, prices, and trade sizes to estimate our structural model. We find that trading delays and dealers’ market power both play a crucial role in explaining the differences in liquidity across the two markets. Dealers’ market power is more severe in the government bond market, while trading delays are more severe in the corporate bond market. We find that the welfare loss from frictions in the government and corporate bond markets are 7.8% and 12.2%, respectively, and our decomposition implies that this loss is almost exclusively caused by trading delays in the corporate bond market, while trading delays and dealers’ market power split the welfare loss equally in the government bond market. Using data from the Covid‑19 crisis period, we also find that these welfare losses might more than triple during turbulent times, revealing the fragility of the over‑the‑counter market structure. |
| Keywords: | Search frictions; market power; government bonds; corporate bonds; OTC markets |
| JEL: | D40 G10 G11 L10 |
| Date: | 2022–04–14 |
| URL: | http://d.repec.org/n?u=RePEc:boe:boeewp:0974&r= |
| By: | Abid, Hofa (Bt research scoiety) |
| Abstract: | Any product's price is incredibly complicated and intense since it is the result of a lot of calculations, research effort, risk-taking abilities, and knowledge of the market and the customers. Before pricing a product, the company's management evaluates everything, including the product's segment, a consumer's capacity to pay for the goods, market circumstances, competitor activity, production and raw material costs, or the cost of manufacturing, and, of course, the margins or profit margins. This research review the common pricing strategies of firms and showed that each pricing strategy has its own set of justifications and market reach. |
| Date: | 2022–02–01 |
| URL: | http://d.repec.org/n?u=RePEc:osf:osfxxx:a274h&r= |
| By: | Margit Molnar |
| Abstract: | The impressive emergence of China’s economy is set to lose some momentum as the country catches up with more advanced economies and its rapid ageing also weighs on it. However, China can still reap the “reform dividend”, especially with measures to keep up the sustained growth of productivity. Reforms that enhance competition in product markets are among those that can potentially bring about significant productivity gains. China has been lowering the burden on start-ups and simplifying administrative procedures for a while already, achieving significant progress, though more procedures could go online and a one-stop shop is still to be implemented across the country. State ownership remains dominant in most network industries and there are many SOEs even in commercially-oriented industries such as retail or catering. SOEs enjoy implicit government guarantees and are the main beneficiaries of administrative monopolies, i.e. exclusive rights granted by regulations. In addition, they also benefit from various subsidies, sometimes leading to low-level, repetitious investment, excess capacity and waste of public money. A more level playing field would bring about efficiency-enhancing competition by private and foreign firms. Some network industries such as electricity and gas have recently accelerated their opening up and competition is developing in some segments. Digitalisation is a promising candidate to lift China’s long-term growth potential. Competition, in particular competitive pressure from foreign counterparts when there are few domestic players could be an important source of efficiency gains in digital services. China has been a frontrunner in business digitalisation for a while already, but the outbreak accelerated also the provision of e-government services. While strengthening of IPR protection and promoting innovative ways of financing are welcome steps to nurture innovative industries, generous tax exemptions – which by OECD standards do not constitute good tax policy - reduce the availability of public funds for other priority areas. |
| Keywords: | administrative monopolies, competition, digitalisation, e-commerce, industrial policy, innovation, private firms, product markets, regulation, state-owned enterprises, trade in services |
| JEL: | D40 H81 L11 L50 L63 L84 L90 O25 P20 |
| Date: | 2022–05–19 |
| URL: | http://d.repec.org/n?u=RePEc:oec:ecoaaa:1716-en&r= |
| By: | Kensuke Fukunaga (Economist, Institute for Monetary and Economic Studies, Bank of Japan (currently, Senior Analyst, UTokyo Economic Consulting Inc., E-mail: kensuke_fukunaga@utecon.net)); Daisuke Miyakawa (Associate Professor, Hitotsubashi University Business School (E-mail: dmiyakawa@hub.hit-u.ac.jp)) |
| Abstract: | How do supply chain networks affect credit supply? To answer this question, we empirically detect clusters of firms by using firm-to- firm transaction data, then measure banks' exposures to those clusters and borrowing firms by using bank-to-firm lending data. Through the panel estimations controlling for unobservable factors potentially affecting credit demand and supply, first, we find that the higher portfolio concentration of banks on the clusters of firms lowers credit supply to less creditworthy firms. Second, we also find that such a pattern is more apparent for banks lending to creditworthy firms. These results suggest that the change in real network propagates to credit supply through banks' risk management. |
| Keywords: | Credit supply, supply chain network, cluster detection |
| JEL: | D22 E44 G11 G21 |
| Date: | 2022–05 |
| URL: | http://d.repec.org/n?u=RePEc:ime:imedps:22-e-08&r= |
| By: | Luis E. Gonzales; Koichiro Ito; Mar Reguant |
| Abstract: | Effective and economical expansion of renewable energy is one of the most urgent and important challenges of addressing climate change. However, many countries are facing a problem because existing network infrastructures (i.e., transmission networks) were not originally built to accommodate renewables, which creates disconnections between demand centers and renewable supply. In this paper, we study the static and dynamic impacts of market integration on renewable energy expansion. Our theory highlights that statically, market integration improves allocative efficiency by gains from trade, and dynamically, it incentivizes new entry of renewable power plants. Using two recent grid expansions in the Chilean electricity market, we empirically test our theoretical predictions and show that commonly-used event study estimation underestimates the dynamic benefits if renewable investments occur in anticipation of market integration. We build a structural model of power plant entry and show how to correct for such bias. We find that market integration resulted in price convergence across regions, increases in renewable generation, and decreases in generation cost and pollution emissions. Furthermore, a substantial amount of renewable entry would not have occurred in the absence of market integration. We show that ignoring this dynamic effect would substantially understate the benefits of transmission investments. |
| JEL: | L94 L97 Q41 Q42 Q53 Q56 |
| Date: | 2022–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:30016&r= |
| By: | Müller, Carola |
| Abstract: | Bank regulators interfere with the efficient allocation of resources for the sake of financial stability. Based on this trade-off, I compare how different capital requirements affect default probabilities and the allocation of market shares across heterogeneous banks. In the model, banks' productivity determines their optimal strategy in oligopolistic markets. Higher productivity gives banks higher profit margins that lower their default risk. Hence, capital requirements indirectly aiming at highproductivity banks are less effective. They also bear a distortionary cost: Because incumbents increase interest rates, new entrants with low productivity are attracted and thus average productivity in the banking market decreases. |
| Keywords: | bank competition,bank regulation,Basel III,capital requirements,heterogeneous banks,leverage ratio |
| JEL: | G11 G21 G28 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:iwhdps:152022&r= |
| By: | Keeler Marku; Sergio Ocampo (University of Western Ontario); Jean-Baptiste Tondji (University of Texas Rio Grande Valley) |
| Abstract: | We consider a game between several principals and a common agent, where principals know only a subset of the agent’s available actions. Principals demand robustness and evaluate contracts on a worst-case basis. This robust approach allows for a crisp characterization of the equilibrium contracts and payoffs and provides a novel proof of equilibrium existence in common agency by constructing a pseudo-potential for the game. Robust contracts make explicit how the efficiency of the equilibrium outcome relative to collusion among principals depends on the principals’ ability to extract payments from the agent. |
| Keywords: | Common Agency, Robustness, Worst Case, Efficiency |
| JEL: | C72 D81 D86 H21 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:uwo:uwowop:20222&r= |
| By: | Abedullah (Pakistan Institute of Development Economics) |
| Abstract: | Nitrogenous chemical fertilisers were introduced in 1952 in Pakistan, initially through imports, followed by phosphorus in 1959 and potassium in 1967 (NFDC 2021).[1] Upon nationalisation of the fertiliser industry in 1973, production for all fertiliser companies was undertaken and control was given to National Fertiliser Corporation (NFC). A domestic fertiliser plants such as Fauji Fertiliser Company (FFC) was Established in 1978. |
| Keywords: | Fertiliser, Subsidy, Policy Tool, Food Commodities |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:pid:kbrief:2021:31&r= |
| By: | Dutta, Sourish |
| Abstract: | This paper deals with the problem of measuring intra-industry trade. In section 2, it presents two existing approaches (Balboni, 2007) to measuring intra-industry trade: the so-called “recovery of trade”, developed by Balassa (1966); Grubel and Lloyd (1975) & the “type of trade” one initiated by Abd-el Rahman (1986b); Vona (1991). Then this paper presents indicators and empirical methods inspired by these two approaches. Notions of trade recovery & trade type come from two different definitions of the empirical phenomena they aim to measure. This paper also discusses these definitions and the theoretical foundations in the section 3. |
| Keywords: | Intra-industry Trade; Inter-Industry Trade; Horizontal Differentiation; Vertical Differentiation |
| JEL: | F10 F11 F12 F14 |
| Date: | 2022–05 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:113195&r= |
| By: | Dutta, Sourish |
| Abstract: | From a historical perspective, the development of research studies concerning the emergence of intra-industry trade is fruitful interaction between theoretical explanations and empirical methods to measure this phenomenon. The foundation of indicators to measure the intensity of intra-industry trading caused the rise of theoretical models explaining the determinants of these trade flows. It also contributed to the debate on the need to distinguish, in empirical analyses, intra-industry trade in horizontal differentiation from that in vertical differentiation. |
| Keywords: | Intra-Industry Trade; Horizontal Differentiation; Vertical Differentiation |
| JEL: | F10 F11 F12 F14 |
| Date: | 2022–05 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:113194&r= |
| By: | Kim, Jinhwan (Stanford U); Valentine, Kristen (U of Georgia) |
| Abstract: | We examine the spillover effect of public firm innovation disclosures on the patent trading market. Relative to equity markets, the patent market is decentralized and rife with information frictions, yet it serves as an important mechanism through which innovations reallocate to the most productive users. Using data on patent transactions, we find that going from the 25th percentile to the 75th percentile in innovation-relevant public firm disclosures – proxied by the number of innovation-relevant sentences in 10-K filings – is linked to a 13.0% to 14.9% increase in future patent sales by other parties that likely consume these disclosures. These results are consistent with financial statement disclosures generating positive information externalities useful for trading patents. The positive link between innovation-relevant firm disclosures is stronger where information asymmetry is likely greatest (transactions between public and private firms) and where information uncertainty likely prevails (transactions between private firms) relative to transactions less likely to suffer from information frictions (transactions between public firms). We corroborate that the positive link between public firm disclosures and other parties’ patent sales is likely due to the resolution of information frictions through several cross-sectional tests, the use of proprietary patent broker data, and the plausibly exogenous implementation of Edgar by public firms. Our results speak to an important, but previously underexplored, externality of financial statement disclosures – their contribution to a well-functioning patent market. |
| JEL: | D23 M40 M41 O30 O31 O32 O34 O39 |
| Date: | 2022–03 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:stabus:4013&r= |