nep-com New Economics Papers
on Industrial Competition
Issue of 2022‒11‒28
sixteen papers chosen by
Russell Pittman
United States Department of Justice

  1. On the Welfare Effects of Adverse - Selection in Oligopolistic Markets By Marco de Pinto; Lazlo Goerke; Alberto Palermo
  2. Green Transformation in Oligopoly Markets under Common Ownership By Hirose, Kosuke; Matsumura, Toshihiro
  3. The Effect of Input Price Discrimination on Retail Prices: Theory and Evidence from France By Marie-Laure Allain; Claire Chambolle; Stéphane Turolla
  4. Welfare effects of common ownership in an international duopoly By Liu, Yi; Matsumura, Toshihiro
  5. Mergers of Complements: On the Absence of Consumer Benefits By Kadner-Graziano, Alessandro
  6. Oligopsony Power and Factor-Biased Technology Adoption By Michael Rubens
  7. Competition in digital markets By Samranchit, Peerawat
  8. Evaluating the Impact of Online Market Integration-Evidence from the EU Portable PC Market By Néstor Duch-Brown; Lukasz Grzybowski; André Romahn; Frank Verboven
  9. Regulating the Innovators: Approval Costs and Innovation in Medical Technologies By Rogers, Parker
  10. Cross-Border Mergers and Acquisitions By Isil Erel; Yeejin Jang; Michael S. Weisbach
  11. The Unequal Incidence of Payroll Taxes with Imperfect Competition: Theory and Evidence By Felipe Lobel
  12. Evidence Disclosure in Competitive Markets By Péter Eso; Chris Wallace
  13. Trade secret protection and R&D investment of family firms By Hussingera, Katrin; Issahd, Wunnam
  14. Worker power, rent-seeking and income inequality in Canada: A sector-level analysis By Silas Xuereb
  15. An Analysis of the Effects of Service Quality on Society of Mobile Technology Applications Used by Banks By Goyal, Krishna
  16. Digital Platform Strategy: A Theory Primer with Selected Conceptual Add-ons By Bruche, Gert

  1. By: Marco de Pinto (University of Applied Labour Studies, Mannheim); Lazlo Goerke (Institute for Labour Law and Industrial Relations in the EC, University of Trier, IZA Bonn and CESifo Muenchen); Alberto Palermo (Institute for Labour Law and Industrial Relations in the EC, University of Trier)
    Abstract: We consider a principal-agent relationship with adverse selection. Principals pay informational rents due to asymmetric information and sell their output in a homogeneous Cournot-oligopoly. We find that asymmetric information may mitigate or more than compensate the welfare reducing impact of market power, irrespective of whether the number of firms is given exogenously or determined endogenously by a profit constraint. We further show that welfare in a setting with adverse selection may be higher than the maximized welfare level attainable in a world with perfect observability.
    Keywords: Adverse Selection, Oligopoly, Welfare
    JEL: D43 D82 L51
  2. By: Hirose, Kosuke; Matsumura, Toshihiro
    Abstract: A theoretical investigation is conducted on how common ownership (or the extent of cooperation in an industry) affects firms' incentives to adopt green fuel in an oligopoly. The findings show that common ownership hinders the switch from brown to green fuels in two ways. First, an increase in the degree of common ownership reduces a firm's incentive to adopt green fuel. Second, an increase in the degree of common ownership induces a production substitution from green to brown fuel firms. Both these effects reduce the share of green fuel.
    Keywords: green transition; green fuel; brown fuel; competition restricting effect; production substitution
    JEL: L13 M14 Q57
    Date: 2022–11–01
  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); Claire Chambolle (Université Paris-Saclay, 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); Stéphane Turolla (SMART-LERECO - Structures et Marché Agricoles, Ressources et Territoires - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - Institut Agro Rennes Angers - Institut Agro - Institut national d'enseignement supérieur pour l'agriculture, l'alimentation et l'environnement)
    Abstract: We develop a model of vertical relations between national brand and private label producers and competing multi-product retailers to derive new predictions on the impact of input price discrimination on retail prices. A reform that lifted a ban on input price discrimination in France provides a natural experiment to test these predictions. Using household scanner data on food prices, we run a difference-in-differences analysis and show that the reform caused a significant decrease of the relative prices of national brand products. These results suggest a pro-competitive effect of authorizing input price discrimination.
    Abstract: Nous développons un modèle de relations verticales entre les producteurs de marques nationales et de marques de distributeur et des distributeurs multi-produits concurrents pour dériver de nouvelles prédictions sur l'impact de la discrimination des prix sur le marché amont sur les prix de détail. En France, une réforme a levé l'interdiction de la discrimination des prix sur le marché amont et fournit une expérience naturelle pour tester ces prédictions. A partir de données des scanners des ménages sur les prix des denrées alimentaires, nous effectuons une analyse des différences de différence et montrons que la réforme a généré une baisse significative des prix relatifs des produits de marque nationale. Ces résultats suggèrent un effet pro-concurrentiel de l'autorisation de la discrimination des prix sur le marché amont.
    Keywords: Input price discrimination,Policy evaluation,Food retail sector,Discrimination des prix sur le marché amont,Evaluation des politiques,Grande distribution alimentaire
    Date: 2022–10–24
  4. By: Liu, Yi; Matsumura, Toshihiro
    Abstract: We formulate an international oligopoly model in the presence of global common ownership. We theoretically investigate how common ownership affects the volume of international trade in an oligopoly market and global welfare. We find that welfare decreases (increases) with the degree of common ownership when the international transport costs are low (high)
    Keywords: overlapping ownership, transport cost, welfare-improving production substitution
    JEL: F12 K21 L13
    Date: 2022–10–13
  5. By: Kadner-Graziano, Alessandro
    JEL: L44 L12
    Date: 2022
  6. By: Michael Rubens
    Abstract: I show that buyer power of firms could either increase or decrease their technology adoption, depending on the direction of technical change and on which input markets are imperfectly competitive. I examine this relationship empirically in a setting that features both concentrated labor markets and a large technology shock: the introduction of mechanical cutters in the 19th century Illinois coal mining industry. Using a model of production and labor supply which is estimated with mine-level data, I find that oligopsony power over skilled miners reduced the usage of cutting machines, an unskill-biased technology. However, it would have increased the usage of counterfactual skill-biased and Hicks-neutral technologies.
    JEL: J42 L11 L13 N52
    Date: 2022–10
  7. By: Samranchit, Peerawat (Tilburg University, School of Economics and Management)
    Date: 2022
  8. By: Néstor Duch-Brown (JRC - European Commission - Joint Research Centre [Seville]); Lukasz Grzybowski (SES - Département Sciences Economiques et Sociales - Télécom ParisTech, ECOGE - Economie Gestion - I3, une unité mixte de recherche CNRS (UMR 9217) - Institut interdisciplinaire de l’innovation - X - École polytechnique - Télécom ParisTech - MINES ParisTech - École nationale supérieure des mines de Paris - PSL - Université Paris sciences et lettres - CNRS - Centre National de la Recherche Scientifique, IP Paris - Institut Polytechnique de Paris); André Romahn (Düsseldorf Institute for Competition Economics (DICE), Heinrich Heine University, University of Dusseldorf); Frank Verboven (KU Leuven - Catholic University of Leuven - Katholieke Universiteit Leuven)
    Abstract: We develop a framework to evaluate the impact of market integration, accounting for spillovers between multiple distribution channels. Our adaptation of the standard random coefficients logit demand model allows for substitution between distribution channels and incorporates consumer arbitrage across countries. We apply our framework to the European portable PC market, where geo-blocking practices that restrict online cross-border trade have recently been banned. The distributional effects from the crosscountry price convergence are substantial. Consumers in high income countries gain most, while consumers in medium and low income countries are only marginally better or even worse off. The total consumer and welfare gains from reducing cross-border arbitrage costs are more modest, and mainly due to increased product choice rather than reduced price discrimination.
    Date: 2022–09–19
  9. By: Rogers, Parker
    Abstract: How does FDA regulation affect innovation and market concentration? I examine this question by exploiting FDA deregulation events that affected certain medical device types but not others. I use text analysis to gather comprehensive data on medical device innovation, device safety, firm entry, prices, and regulatory changes. My analysis of these data yields three core results. First, these deregulation events significantly increase the quantity and quality of new technologies in affected medical device types relative to control groups. These increases are particularly strong among small and inexperienced firms. Second, these events increase firm entry and lower the prices of medical procedures that use affected medical device types. Third, the rates of serious injuries and deaths attributable to defective devices do not increase measurably after these events. Perhaps counterintuitively, deregulating certain device types lowers adverse event rates significantly, consistent with firms increasing their emphasis on product safety as deregulation exposes them to more litigation.
    Date: 2022–11–01
  10. By: Isil Erel; Yeejin Jang; Michael S. Weisbach
    Abstract: One of the most consequential events in any firm’s lifetime is a major acquisition. Because of their importance, mergers and acquisitions (M&As) have been an enormous area of research. However, the vast majority of this research and survey papers summarizing this research have focused on domestic deals. Cross-border ones, however, constitute about 30% of the total number and 37% of the total volume of M&As around the world since the early 1990s. We survey the literature on cross-border M&As, focusing on international factors that can lead firms to acquire a firm in another country. Such factors include differences in economic development, laws, institutions, culture, labor rights, protection of intellectual property, taxes, and corporate governance.
    JEL: F0 G15 G34
    Date: 2022–10
  11. By: Felipe Lobel
    Abstract: This paper provides a comprehensive examination of a Brazilian corporate tax reform targeted at the sector and product level. Difference-in-differences estimates instrumented by sector eligibility show that a 20 percentage point cut on payroll tax rates caused a 9% employment increase at the firm level, mostly driven by small firms. This expansion is not driven by formalization of existing workers, and it is explained by reduction on separations rather than additional hires. In terms of earnings, there is a significant 4% earnings increase in the long run, which is concentrated at leadership positions. The unequal pass-through worsen within-firm wage inequality. I exploit the exogenous variation on labor cost to document substantial labor market power in Brazil, where wages are marked down by 36%. Consistent with the empirical findings, I develop a model of factor demand with imperfect competition in the goods and labor market to shed light on the mechanism through which imperfect competition drives corporate tax incidence. The model is identified by the reduced form elasticities, and allows me to structurally estimate the capital-labor elasticity of substitution, which differs from the benchmark case of perfect competition.
    Date: 2022–10
  12. By: Péter Eso; Chris Wallace
    Abstract: We introduce a model of competitive equilibrium in a market for a divisible good in which both buyer and seller may possess concealable hard information about the state of the market. When an agent knows the state he or she can verifiably disclose it, but an absence of evidence cannot be proved. Agents endogenously determine which states to disclose and conceal (if informed), and the market price at which they trade reflects that. Under general conditions we establish the existence of an equilibrium consisting of disclosure rules, consistent beliefs, contingent market prices, supply and demand decisions. In an extended example we fully characterize these objects. As an agent becomes better able to discover concealable evidence he or she discloses a larger set of states. The other side of the market becomes more suspicious that unfavourable evidence is being concealed; the resulting pressure on the market price alters the optimal disclosure rule on both sides, and trade can be reduced even when prices do not change.
    Date: 2022–07–14
  13. By: Hussingera, Katrin; Issahd, Wunnam
    Abstract: Family firms are known for their reluctance to invest in research and development. We show that strengthened trade secret protection is associated with higher R&D investment by family firms. More specifically, we show that the association between the strength of trade secret protection through the U.S. Uniform Trade Secrets Act and R&D investment is positively moderated by family control. Our results further show that the positive moderation of family control on the association between the strength of trade secret protection and R&D investment varies with the industry context, being stronger in high tech industries and weaker in discrete product industries.
    Keywords: Family firms,intellectual property protection,trade secret protection,UTSA,R&Dinvestment,socioemotional wealth
    JEL: O34 O32 G32 M14
    Date: 2022
  14. By: Silas Xuereb (PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, WIL - World Inequality Lab)
    Abstract: Neoclassical economics' explanations of the income distribution typically ignore the role of various forms of power. This paper explores the relationships between worker power, market power, rentseeking and the income distribution using a novel panel dataset on sector-level income distributions in Canada from 2000-2019. Levels of within-sector inequality were relatively stable throughout this time period but there is significant between-sector variation. Finance and insurance contributes disproportionately to top-end income inequality. Workers' bargaining power explains a significant portion of between-sector variation in inequality. Increases in market power and decreases in unionization are related to increases in sector-level income inequality. Increases in real average incomes at the sector level are associated with increases in top shares three years later and this effect is mitigated by high unionization. Results are discussed within the broader context of Canadian income inequality and the relationship between power and wage-setting.
    Date: 2022–09
  15. By: Goyal, Krishna
    Abstract: The banking industry has undergone significant changes over the past few decades as a result of changes in consumer demand as well as technological advancements, particularly in the area of computer and online technology, as well as increased competition from banks and other financial institutions. Banks today are increasingly reliant on technological advancements and techniques to be able to provide their customers with the services they need. As a result of the proliferation of mobile applications, many banks are now providing their services through different mobile applications, taking the place of traditional brick-and-mortar banks. Technology advancements in the banking industry, particularly those relating to mobile applications, have been a major source of competitiveness among banks and financial institutions. The use of technology has opened up the ways for banks to reduce their costs, increase productivity, and build efficient customer relationships. In developed and developing countries alike, most banks providing mobile banking services are using mobile apps banking as a means of meeting their customers' needs and providing services. It is important for banks to pay more attention to the service parameters related to mobile services in order to maintain a positive relationship between them and their customers in terms of customer trust.
    Keywords: Banking, Competitiveness, Mobile Banking, Financial Transactions, Remittance, Telecom Operators, Mobile Banking apps, Mobile Technology
    JEL: O32 O35 O4 O43
    Date: 2022–10–16
  16. By: Bruche, Gert
    Abstract: This primer is intended to serve as a background text for a 'platform chapter' in Bachelor or Master level courses on Strategic Management. While the 'traditional firm' can be described as a value-adding chain (Pipeline), platform businesses 'invert' production and consumption to the outside and in essence 'manufacture' transactions. The constitutive drivers of the platform competition and the platform economy are network effects which come in different types and varying geographic reach. There is a very wide variety of different types of platform businesses, however on a fundamental level it makes sense to distinguish transaction (exchange) and innovation (maker) platforms. 'Platform strategy analysis' is still at an early stage, it is focused on 'single platforms', and it is still a 'moving target'. The large dominant players like Google, Amazon, Microsoft, Apple and others expand and defend their dominant positions through complex 'multi-platform strategies'. Early-stage platform Start-ups on the other hand must overcome the 'chicken-or-egg' problem with various strategies and tactics. In the internationalization strategy of platforms two archetypes, country-by-country (or multidomestic) and global (globally integrated) strategies, prevail in platform markets. There is a need for platform regulation by governments and the EU in five different domains: antitrust policy, publishing (hate speech, fake news), data ownership/privacy, labour market, tax avoidance.
    Date: 2022

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