nep-com New Economics Papers
on Industrial Competition
Issue of 2022‒07‒25
fifteen papers chosen by
Russell Pittman
United States Department of Justice

  1. A bargaining perspective on vertical integration By Döpper, Hendrik; Sapi, Geza; Wey, Christian
  2. The Sale of Data: Learning Synergies Before M&As By Antoine Dubus; Patrick Legros
  3. Buying groups formation: what effects on competition in the retail industry? By Marie-Laure Allain; Rémi Avignon; Claire Chambolle; Hugo Molina
  4. Les centrales d’achat : quels enjeux de concurrence ? By Marie-Laure Allain; Rémi Avignon; Claire Chambolle; Hugo Molina
  5. The role of competition in the transition to climate neutrality By Georg Zachmann
  6. Macroeconomic Effects of Market Structure Distortions: Evidence from French Cartels By Flavien Moreau; Ludovic Panon
  7. The role played by large firms in generating income inequality: UK FTSE 100 pay practices in the late twentieth and early twenty-first centuries By Willman, Paul; Pepper, Alexander
  8. Taking firms’ margin targets seriously in a model of competition in supply functions By Denis Claude; Mabel Tidball
  9. Screening Adaptive Cartels By Juan Ortner; Sylvain Chassang; Kei Kawai; Jun Nakabayashi
  10. Trade and U.S. Agriculture: Market Access, Institutions, and Competition Policy By Hafemeister, Jason
  11. Measuring Horizontal and Vertical Differentiation in Intra-industry Trade By Sourish Dutta
  12. Long information design By Koessler, Frédéric; Laclau, Marie; Renault, Jérôme; Tomala, Tristan
  13. Estimating the Gains (and Losses) of Revenue Management By Xavier D'Haultf{\oe}uille; Ao Wang; Philippe F\'evrier; Lionel Wilner
  14. The Data Economy: Market Size and Global Trade By Diane Coyle; Wendy Li
  15. Essays in international trade and industrial organization By Ludovic Panon

  1. By: Döpper, Hendrik; Sapi, Geza; Wey, Christian
    Abstract: This paper analyzes vertical integration incentives in a bilaterally duopolistic industry where input market outcomes are determined by bargaining. Vertical integration incentives are a combination of horizontal integration incentives up- and downstream and depend on the strength of substitutability or complementarity and the shape of the unit cost function. In contrast to the widely prevailing view in competition policy, vertical integration can under particular circumstances convey more bargaining power to the merged entity than a horizontal merger to monopoly. In a bidding game for an exogenously determined target firm, a vertical merger can dominate a horizontal one, while pre-emption does not occur.
    Keywords: Bargaining,Vertical Mergers,Shapley Value
    JEL: L13 L22 L42
    Date: 2022
  2. By: Antoine Dubus (D-MTEC - Department of Management, Technology, and Economics [ETH Zürich] - ETH Zürich - Eidgenössische Technische Hochschule - Swiss Federal Institute of Technology [Zürich]); Patrick Legros (ECARES - European Center for Advanced Research in Economics and Statistics - ULB - Université libre de Bruxelles)
    Abstract: Firms may share information to discover potential synergies between their data sets and algorithms, which eventually may lead to more efficient mergers and acquisitions (M&A) decisions. However, as pointed out by Arrow, information sharing also modifies the competitive balance when companies do not merge, and a firm may be reluctant to share information with potential rivals. Under general conditions, we show that firms benefit from (partially) sharing information. Because more sharing of information may increase industry expected profits both when there is head-to-head competition and when there is an M&A, the presence of a regulator who can prevent or allow the M&A can decrease or increase the level of information sharing, as well as consumer surplus, with respect to the no-regulator case. A regulator who can also control the level of information sharing will allow firms to share information.
    Date: 2022–06–17
  3. By: Marie-Laure Allain (CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - X - École polytechnique - ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique - CNRS - Centre National de la Recherche Scientifique, X - École polytechnique, IPP - Institut des politiques publiques); Rémi Avignon (CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - X - École polytechnique - ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique - CNRS - Centre National de la Recherche Scientifique); Claire Chambolle (UMR PSAE - Paris-Saclay Applied Economics - AgroParisTech - Université Paris-Saclay - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Hugo Molina (UMR PSAE - Paris-Saclay Applied Economics - AgroParisTech - Université Paris-Saclay - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)
    Abstract: Each year, commercial negotiations highlight the tensions between retailers and their suppliers, and public authorities are regularly called upon to balance the relationship. In this context, buying groups – which allow several large competing retailers to negotiate jointly with their suppliers – are likely to strengthen retailers' buyer power. France experienced two waves of buying groups formation in 2014 and in 2018 and the law was changed to allow the French Competition Authority (CA) – the Autorité de la concurrence – to control the formation of such alliances. This policy brief proposes a framework to analyse the effects of the buying groups on the sector as a whole. After a brief assessment of the economic forces at play based on a review of the literature, we discuss the results of two studies conducted by the authors of this note. The first one adopts an empirical approach to study the effects of buying groups formation in 2014 in France in the bottled water industry. It shows that the introduction of buying groups modified profit sharing at the expense of suppliers but also led to a decline in prices which benefited consumers. The second study discusses the efficiency of excluding private labels from the scope of buying groups – as advocated by the Competition Authority – to protect small suppliers and maintain product variety.
    Date: 2022–02
  4. By: Marie-Laure Allain (CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - X - École polytechnique - ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique - CNRS - Centre National de la Recherche Scientifique, IPP - Institut des politiques publiques); Rémi Avignon (CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - X - École polytechnique - ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique - CNRS - Centre National de la Recherche Scientifique); Claire Chambolle (UMR PSAE - Paris-Saclay Applied Economics - AgroParisTech - Université Paris-Saclay - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, IPP - Institut des politiques publiques, X - École polytechnique); Hugo Molina (UMR PSAE - Paris-Saclay Applied Economics - AgroParisTech - Université Paris-Saclay - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)
    Abstract: Les négociations commerciales mettent chaque année en lumière les tensions entre la grande distribution et ses fournisseurs, et les pouvoirs publics sont régulièrement appelés à intervenir pour équilibrer les relations. Dans ce contexte, les centrales d'achat, qui permettent à plusieurs distributeurs de négocier en commun avec leurs fournisseurs tout en restant en concurrence pour la vente aux consommateurs, sont susceptibles de renforcer la puissance d'achat des distributeurs. Deux vagues de formation de centrales d'achat ont eu lieu en France, en 2014 et 2018, et la loi a évolué pour permettre leur contrôle par l'Autorité de la concurrence. Cette note propose une grille d'analyse des effets des centrales d'achat sur l'ensemble du secteur. Après un bref bilan des forces économiques en jeu reposant sur une revue de la littérature, nous présentons les résultats de deux études réalisées par les auteurs de cette note. La première étudie empiriquement les effets des créations de centrales en 2014 en France dans le secteur des eaux embouteillées. Elle montre que les centrales ont modifié le partage des profits au détriment des fournisseurs, mais qu'elles ont également permis une baisse des prix bénéfique aux consommateurs. La seconde étude discute l'efficacité de l'exclusion des marques de distributeurs (MDD) du périmètre des centrales d'achat, qui est préconisée par les autorités de la concurrence pour protéger les petits fournisseurs et maintenir la diversité de l'offre.
    Date: 2022–02
  5. By: Georg Zachmann
    Abstract: An earlier version of this paper was co-written with Julia Anderson, providing excellent input on the legal basics and a deep dive into green efficiency that has been used in this paper. Based on this, and many comments (special thanks to Marie Le Mouel), the paper developed into a very broad take on the role of competition in decarbonisation. Research assistance from Ben McWilliams and Giovanni Sgaravatti is gratefully acknowledged....
    Date: 2022–06
  6. By: Flavien Moreau; Ludovic Panon
    Abstract: We provide systematic evidence on cartels’ characteristics, using novel data on cases investigated by the French Competition Authority. These practices are widely spread across sectors and cartel members are typically among the top firms in their industries. In a model with heterogeneous firms and collusion, cartels amplify misallocation by charging supracompetitive markups. Breaking down French cartels would increase aggregate productivity by 2%, welfare by 3.5%, bringing the economy 37% closer to the efficient frontier. These numbers shed light on the aggregate importance of collusion.
    Keywords: Competition; cartels; collusion; welfare; misallocation; cartel member; market structure distortion; characteristics of cartel; systematic evidence; markup dispersion; Productivity; Demand elasticity; Total factor productivity; Inflation; Europe; Global
    Date: 2022–05–27
  7. By: Willman, Paul; Pepper, Alexander
    Abstract: We examine the role of large firms in generating income inequality. Specifically, we consider the growth in the use of asset-based rewards for senior executives, combined with continued use of salaries and wages for other employees, and the impact this has on measures of inequality within firms. Our paper presents data on intra firm inequality from the UK FTSE 100 for the period 2000-2015. It looks at ratios of CEO to average earnings and attempts to explain both the growth in inequality on this measure and the extent of variance between firms. It distinguishes between a period of “administered inequality” up to the early 1980’s when intra-firm processes defined differential pay and a subsequent one of “outsourced inequality”, when capital market measures dominate executive pay. In the latter period, intra firm inequality measures are defined by upward movements in capital market measures and the extent of outsourcing of low paid work. We conclude by discussing a number of UK public policy proposals regarding executive pay.
    Keywords: CEO compensation; firms; inequality; pay ratios; International Inequalities Institute
    JEL: R14 J01
    Date: 2020–12–01
  8. By: Denis Claude (LEDi - Laboratoire d'Economie de Dijon [Dijon] - UB - Université de Bourgogne - UBFC - Université Bourgogne Franche-Comté [COMUE]); Mabel Tidball (CEE-M - Centre d'Economie de l'Environnement - Montpellier - UM - Université de Montpellier - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - Institut Agro Montpellier - Institut Agro - Institut national d'enseignement supérieur pour l'agriculture, l'alimentation et l'environnement)
    Abstract: We introduce price-markup objectives into a model of supply function competition. We characterize the corresponding supply-function equilibrium and study its qualitative properties. Adherence to price-markup targets is conducive to reduced market competition and increased firm profitability. While pursuing such goals reduces social welfare, welfare never drops below the level corresponding to a Cournot oligopoly. Finally, we establish conditions under which consumer preference for fair pricing inhibits the industry's use of markups as a collusive device.
    Keywords: supply function,markup pricing,price fixing,oligopoly
    Date: 2022–01–31
  9. By: Juan Ortner (Boston University); Sylvain Chassang (Princeton University); Kei Kawai (University of California, Berkeley); Jun Nakabayashi (Kindai University)
    Abstract: We propose an equilibrium theory of data-driven antitrust oversight in which regulators launch investigations on the basis of suspicious bidding patterns and cartels can adapt to the statistical screens used by regulators. We emphasize the use of asymptotically safe tests, i.e. tests that are passed with probability approaching one by competitive firms, regardless of the underlying economic environment. Our main result establishes that screening for collusion with safe tests is a robust improvement over laissez-faire. Safe tests do not create new collusive equilibria, and do not hurt competitive industries. In addition, safe tests can have strict bite, including unraveling all collusive equilibria in some settings. We provide evidence that cartel adaptation to regulatory oversight is a real concern.
    Keywords: collusion, auctions, bidding rings, cartels, procurement, antitrust
    JEL: D44 L40
    Date: 2022–06
  10. By: Hafemeister, Jason
    Keywords: International Relations/Trade, Agricultural and Food Policy
    Date: 2021–02
  11. By: Sourish Dutta (Centre for Development Studies, Trivandrum - Centre for Development Studies, Trivandrum)
    Abstract: 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
    Date: 2022–05–31
  12. By: Koessler, Frédéric; Laclau, Marie; Renault, Jérôme; Tomala, Tristan
    Abstract: We analyze information design games between two designers with opposite preferences and a single agent. Before the agent makes a decision, designers repeatedly disclose public information about persistent state parameters. Disclosure continues until no designer wishes to reveal further information. We consider environments with general constraints on feasible information disclosure policies. Our main results characterize equilibrium payoffs and strategies of this long information design game and compare them with the equilibrium outcomes of games where designers move only at a single predetermined period. When information disclosure policies are unconstrained, we show that at equilibrium in the long game, information is revealed right away in a single period; otherwise, the number of periods in which information is disclosed might be unbounded. As an application, we study a competition in product demonstration and show that more information is revealed if each designer could disclose information at a predetermined period. The format that provides the buyer with most information is the sequential game where the last mover is the ex-ante favorite seller.
    JEL: C72 D82
    Date: 2022–06–16
  13. By: Xavier D'Haultf{\oe}uille; Ao Wang; Philippe F\'evrier; Lionel Wilner
    Abstract: Despite the wide adoption of revenue management in many industries such as airline, railway, and hospitality, there is still scarce empirical evidence on the gains or losses of such strategies compared to uniform pricing or fully flexible strategies. We quantify such gains and losses and identify their underlying sources in the context of French railway transportation. The identification of demand is complicated by censoring and the absence of exogenous price variations. We develop an original identification strategy combining temporal variations in relative prices, consumers' rationality and weak optimality conditions on the firm's pricing strategy. Our results suggest similar or better performance of the actual revenue management compared to optimal uniform pricing, but also substantial losses of up to 16.2\% compared to the optimal pricing strategy. We also highlight the key role of revenue management in acquiring information when demand is uncertain.
    Date: 2022–06
  14. By: Diane Coyle; Wendy Li
    Abstract: Data is a key digital economy input and its use is growing rapidly. Large online platforms using data at massive scale operate globally. The data gap between them and the incumbents they disrupt, a barrier to entry in the markets they dominate, affects not only firms but also aggregate innovation, investment and trade. Valuing data is problematic, yet this information is crucial for informed policy decisions on infrastructure and human capital as well as business investment decisions. In this paper we demonstrate a novel sectoral methodology for estimating the economic value of markets for data. Our conservative estimate of the market size for data in the global hospitality industry was US $43.2 billion in 2018, and it has been doubling its size every three years. Our method can provide industry-level and country-level information on data markets. The scale of data flows affects the international division of labor in the digital economy, with important policy implications. With many jurisdictions introducing different data protection and trade regimes, affecting the data gap and data access by market participants, we present a trade typology of countries and discuss their ability to benefit from data value creation.
    Keywords: data, digital, innovation, trade
    JEL: F1 F2 O3
    Date: 2021–08
  15. By: Ludovic Panon (ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique)
    Abstract: This dissertation is a collection of three essays in the fields of international trade and industrial organization. The first two chapters study the macroeconomic implications of firm heterogeneity. In the first chapter, I use data on the universe of French manufacturing exporters from 1994-2001 to study the relationship between international trade and the manufacturing labor share. In particular, I investigate how and to what extent changes in demand conditions on foreign markets impact the labor share. This chapter aims to shed light on whether international trade may affect the labor share through channels other than changes in import exposure. In the second chapter, which is joint work with Flavien Moreau, we study the cost of distortions to competition on aggregate productivity. To do so, we have assembled a database on the identity of colluding firms that have been fined by the French competition regulator. We document novel stylized facts on cartels and anticompetitive firms. We use a static macroeconomic model to study the economic cost of cartels and help answer the following questions: is it large? If so, why does it differ from what Arnold Harberger obtained in his 1954 paper? Finally, the last chapter co-authored with Florin Cucu studies the link between asylum policies and foreign policy concerns using panel data on asylum applications in the European Union from 1999 to 2017. We then study what this relationship implies for international trade flows in a gravity regression framework.
    Abstract: Cette thèse est un recueil de trois essais dans les domaines du commerce international et de l'organisation industrielle. Les deux premiers chapitres étudient les implications macroéconomiques de l'hétérogénéité des entreprises. Dans le premier, j'utilise des données sur l'univers des firmes exportatrices françaises de produits manufacturés de 1994 à 2001 pour étudier la relation entre le commerce international et la part du travail dans le secteur manufacturier. En particulier, j'étudie comment et dans quelle mesure des changements de demande sur les marchés étrangers ont un impact sur la part du travail. Le deuxième chapitre, fruit d'un travail conjoint avec Flavien Moreau, étudie le coût des distorsions de concurrence sur la productivité agrégée. Pour ce faire, nous avons constitué une base de données sur l'identité des entreprises qui pratiquent l'entente et qui ont été sanctionnées par l'Autorité de la concurrence. Nous documentons de nouveaux faits stylisés sur les cartels et les entreprises anticoncurrentielles. Nous utilisons un modèle macroéconomique statique pour étudier le coût économique des cartels : est-il important ? Si oui, pourquoi diffère-t-il de ce qu'Arnold Harberger a révélé dans son article de 1954 ? Le troisième chapitre, co-écrit avec Florin Cucu, étudie le lien entre les politiques d'asile et la politique étrangère en utilisant des données de panel sur les demandes d'asile dans l'Union européenne de 1999 à 2017. Nous étudions ensuite les conséquences de cette relation sur les flux commerciaux internationaux dans un modèle de régression gravitaire.
    Keywords: International trade,Labor share,Cartels,Refugees,Commerce international,Part du travail,Ententes,Réfugiés
    Date: 2020–06–25

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