nep-com New Economics Papers
on Industrial Competition
Issue of 2023‒01‒30
thirteen papers chosen by
Russell Pittman
United States Department of Justice

  1. Upward Pricing Pressure in Two-Sided Markets: Incorporating Rebalancing Effects By Andreea Cosnita-Langlais; Bjørn Olav Johansen; Lars Sørgard
  2. Collusion Sustainability with a Capacity Constrained Firm By Leonardo Madio; Aldo Pignataro
  3. Naked Exclusion with Heterogeneous Buyers By Ying Chen; Jan Zapal
  4. Platform mergers: lessons from a case in the digital TV market By Marc Ivaldi; Jiekai Zhang
  5. Impacts and Implications of Online Platforms’ Entry into the Real Estate Brokerage Sector By Choi, Younjeong
  6. The Economics of the Public Option: Evidence from Local Pharmaceutical Markets By Juan Pablo Atal; José Ignacio Cuesta; Felipe González; Cristóbal Otero
  7. Identification and Estimation of Discrete Choice Demand Models when Observed and Unobserved Characteristics are Correlated By Mark Ponder; Amil Petrin; Boyoung Seo
  8. FinTech in the Financial Market By Maxime Delabarre
  9. Labour market concentration, wages and job security in Europe By Andrea Bassanini; Giulia Bovini; Eve Caroli; Jorge Casanova Ferrando; Federico Cingano; Paolo Falco; Florentino Felgueroso; Marcel Jansen; Pedro S. Martins; António Melo; Michael Oberfichtner; Martin Popp
  10. On the Effects of Income Heterogeneity in Monopolistically Competitive Markets By Sergei Kichko; Pierre M. Picard; Pierre Picard
  11. Is Private Equity Good for Health? Regulation and Competition Policy Lessons from a Survey of the Evidence By Antonio Estache; Ardit Litaj
  12. Audio-visual industry and digital platforms in India: A contribution from political economy of communication By Philippe Bouquillion; Christine Ithurbide
  13. How Law and Economics Was Marketed in a Hostile World : l’institutionnalisation du champ aux États-Unis de l’immédiat après-guerre aux années Reagan By Thierry Kirat; Frédéric Marty

  1. By: Andreea Cosnita-Langlais (EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique); Bjørn Olav Johansen; Lars Sørgard
    Abstract: In two-sided markets it is important to consider rebalancing effects following a merger, i.e. the impact of a change in margin on one side of the market, either due to a price change or to efficiency gains, on the pricing incentives on the other side. We propose modified versions for the indices of pricing pressure (UPP and GUPPI) that take this into account. We show that in two-sided markets where the cross-group externalities are positive the upward pricing pressure will typically be overstated if the rebalancing effect is ignored. Our approach explains why competition agencies should look at both sides of the market when assessing platform mergers
    Keywords: Merger assessment, Two-sided markets, Upward Pricing Pressure
    Date: 2021
  2. By: Leonardo Madio; Aldo Pignataro
    Abstract: We study an infinitely repeated oligopoly game in which firms compete on quantity and one of them is capacity constrained. We show that collusion sustainability is non-monotonic in the size of the capacity constrained firm, which has little incentive to deviate from a cartel. We also present conditions for the emergence of a partial cartel, with the capacity constrained firm being excluded by the large firms or self-excluded. In the latter case, we show under which circumstances the small firm induces a partial conspiracy that is Pareto-dominant. Implications for cartel identification and enforcement are finally discussed.
    Keywords: antitrust, capacity constraints, collusion, partial cartel
    JEL: D21 L13 L41
    Date: 2022
  3. By: Ying Chen; Jan Zapal
    Abstract: We investigate the effects of buyer heterogeneity in a market in which an incumbent firm prevents entry when it signs enough exclusionary contracts with buyers. With heterogeneous buyers several well-known results in exclusionary contracting with homogenous buyers are overturned and novel ones emerge. First, inefficient equilibria exist in which exclusionary contracts are signed but entry still occurs, and the loss of consumer surplus falls on small buyers. Second, sequential contracting may be more pro-competitive than simultaneous contracting in the sense that entry occurs under sequential but not simultaneous contracting. When this happens, sequential Pareto dominates simultaneous contracting.
    Keywords: contracting with externalities; exclusionary contracts; buyer heterogeneity; pro-competitive; anti-competitive; sequential vs simultaneous contracting;
    JEL: C78 D21 L12 L42
    Date: 2022–11
  4. By: Marc Ivaldi (TSE-R - 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); Jiekai Zhang (Department of Management and Organisation, Hanken School of Economics, P.O. Box 479, FI-00101 Helsinki, Finland.)
    Abstract: This paper contributes to the analysis of mergers in two-sided markets, notably those in which a platform provides its service for free on one side but obtains all its revenues from the other, as in the digital TV industry. Specifically, we assess a decision of the French competition authority which approved the merger of the broadcasting services of the TV channels involved but imposed a behavioral remedy prohibiting the merger of their respective advertising sales services. To do so, we build a structural model allowing for multi-homing of advertisers and, using a comprehensive dataset, we estimate the demand of viewers and advertisers. Our evaluation provides evidence that the remedy has been ineffective at limiting the increase in prices and amounts of advertising, due to the cross-side externalities between viewers and advertisers. Without resulting in significant positive effects on the viewers' surplus, the remedy has also drastically increased the advertisers' total cost. Nevertheless, the remedy has benefited the competitors of the merging channels. The main lesson of our analysis is that, in the process of designing competition or regulatory policy for two-sided markets, ignoring the interaction between the two sides of platforms can result in unexpected outcomes.
    Keywords: Two-sided market, Platform merger, Advertising, TV market, Competition policy
    Date: 2022–03–26
  5. By: Choi, Younjeong (Korea Institute for Industrial Economics and Trade)
    Abstract: The Korean real estate brokerage sector has grown in size thanks to rising real estate prices and transaction volumes. Despite its importance, the industry offers low consumer utility and relatively slow innovation due to lack of incentives for competition in the quality of service and prices compared to other service sectors. As online platforms begin to offer the same services, however, the real estate brokerage market is showing signs of change, with stiffer competition, discounted fees, and improvements to the quality of service. As a result, consumers stand to benefit from better brokerage services at lower prices. Fears have risen, however, of online platforms charging higher fees to market players than other service sectors and engaging in unfair trade practices. Improving the competitiveness of the sector requires players in the market innovate. Moreover, policy measures are urgently needed to enable a win-win partnership between market players and online platforms in the sector.
    Keywords: Korean Real Estate Brokerage Sector; Brokerage Market; Brokerage Service; Market Innovate
    JEL: G24 L85
    Date: 2022–07–29
  6. By: Juan Pablo Atal; José Ignacio Cuesta; Felipe González; Cristóbal Otero
    Abstract: We study the effects of competition by state-owned firms, leveraging the decentralized entry of public pharmacies to local markets in Chile. Public pharmacies sell the same drugs at a third of private pharmacy prices, because of stronger upstream bargaining and market power in the private sector, but are of lower quality. Public pharmacies induced market segmentation and price increases in the private sector, which benefited the switchers to the public option but harmed the stayers. The countrywide entry of public pharmacies would reduce yearly consumer drug expenditure by 1.5 percent.
    JEL: D72 H4 I18 L3
    Date: 2022–12
  7. By: Mark Ponder; Amil Petrin; Boyoung Seo
    Abstract: The standard Berry, Levinsohn, and Pakes (1995) (BLP) approach to estimation of demand and supply parameters assumes that the product characteristic observed by consumers and producers but not the researcher is conditionally mean independent of observed characteristics. We extend BLP to allow all product characteristics to be endogenous, so the unobserved characteristic can be correlated with the observed characteristics. We derive moment conditions based on the assumption that firms choose product characteristics to maximize expected profits given their beliefs at that time about market conditions and that the “mistake” in the amount of the characteristic that is revealed once all products are on the market is conditionally mean independent of the firm's information set. Using the original BLP dataset we find that observed and unobserved product characteristics are highly positively correlated, biasing demand elasticities upward, as average estimated price elasticities double in absolute value and average markups fall by 50%.
    JEL: C25 L0
    Date: 2022–12
  8. By: Maxime Delabarre (Sciences Po - Sciences Po)
    Abstract: This essay argues that the common competition framework is not to be applied to the financial sector. If traditionally competition brings efficiency and diversity in a market, financial regulators must also ensure the stability of the financial market. Henceforth, some limits and entry barriers have to exist. This is particularly true for FinTech companies. If the potential of those new actors is not to be contested, the risk they can bring is also quite obvious. If regulators want the market to be disrupted and to see consumers benefiting from the power of innovation of technology-based companies, they need to adapt their regulatory framework. Only under this condition will the benefits outweigh the potential risks.
    Keywords: Financial regulations, financial stability, competition, financial market, innovation
    Date: 2021–01–12
  9. By: Andrea Bassanini; Giulia Bovini; Eve Caroli; Jorge Casanova Ferrando; Federico Cingano; Paolo Falco; Florentino Felgueroso; Marcel Jansen; Pedro S. Martins; António Melo; Michael Oberfichtner; Martin Popp
    Abstract: We investigate the impact of labour market concentration on two dimensions of job quality, namely wages and job security. We leverage rich administrative linked employer-employee data from Denmark, France, Germany, Italy, Portugal and Spain in the 2010s to provide the first comparable cross-country evidence in the literature. We show that the elasticities of wages with respect to labour market concentration are strikingly similar across countries. Increasing labour market concentration by 10% reduces wages by 0.19% in Germany, 0.22% in France, 0.25% in Portugal and 0.29% in Denmark. We find greater elasticities for job security. An increase in labour market concentration by 10% reduces the probability of being hired on a permanent contract by 0.46% in France, 0.51% in Germany and 2.34% in Portugal. In Italy and Spain, while not affecting this probability, labour market concentration has a strong negative effect on conversions to a permanent contract once hired on a temporary one. Using German and Portuguese data, we provide suggestive evidence that the similarity of our wage elasticities across countries and the greater sensitivity of job security to labour market concentration may be explained by the fact that sector-level collective bargaining is dominant in the countries we study and that it sets wages but usually not contract type.
    Keywords: Labour market concentration, Monopsony, Wages, Job security, Collective bargaining
    JEL: J31 J42 J52 L41
    Date: 2023
  10. By: Sergei Kichko; Pierre M. Picard; Pierre Picard
    Abstract: This paper studies the market and welfare effects of income heterogeneity in monopolistically competitive product markets in the context of nonhomothetic preferences. In a closed economy, where richer individuals’ expenditures are less sensitive to price change compared to poorer ones’, a mean-preserving contraction of income distribution entices firms to charge higher markups, reduce output, and fosters creation of new varieties. General equilibrium effects have a negative impact on poorer individuals and, in specific circumstances, on the whole population. In an open economy with free trade, lower income inequality in one country creates price divergence between trading countries. Lower inequality not only further decreases trade volumes and values but also creates a general equilibrium effect that may negatively affect poor individuals. Finally, general equilibrium effects are shown to be quantitatively nonnegligible.
    Keywords: monopolistic competition, nonhomothetic additive preferences, income inequality, pricing-to-markets, welfare, trade
    JEL: D43 L16 F12
    Date: 2022
  11. By: Antonio Estache; Ardit Litaj
    Abstract: The paper summarizes the evidence on regulatory and competition policy weaknesses in dealing with healthcare market failures associated with the entry of private equity (PE) investors in the sector. It also suggests reforms that would address some of the main issues. In that context, it contributes to the debate on how fairness and social concerns could be added more explicitly to the efficiency mandate of regulatory and competition agencies. This debate and related ones in the sector have emerged in view of the growing evidence on the risks of negative coverage, pricing and quality impacts due to the margin for cream-skimming allowed to PE firms to ease their entry in the sector. Although the evidence shows that the negative outcomes are not systematic, there are common and can be associated with the failure of current regulatory and competition policies and tools to protect jointly investors, medical and para-medical staff, patients and taxpayers. The case to internalize the insights of the global experience to reassess the design of current policies aiming at diversifying the financing sources in the health sector seems to be strong.
    Keywords: Health Care Financing, Health Expenditures, Health outcomes, Health quality, Private Equity, Fairness, Efficiency, Regulation, Anti-trust
    Date: 2023–01
  12. By: Philippe Bouquillion (LabSIC - Laboratoire des Sciences de l'Information et de la Communication - LABEX ICCA - UP13 - Université Paris 13 - Université Sorbonne Nouvelle - Paris 3 - CNRS - Centre National de la Recherche Scientifique - UPCité - Université Paris Cité - Université Sorbonne Paris Nord - Université Sorbonne Paris Nord); Christine Ithurbide (CNRS - Centre National de la Recherche Scientifique, Passages - UB - Université de Bordeaux - ENSAP Bordeaux - École nationale supérieure d'architecture et du paysage de Bordeaux - Université Bordeaux Montaigne - CNRS - Centre National de la Recherche Scientifique)
    Abstract: This article examines the role played by digital platforms in the transformation of the audio-visual industry in India. Are video-on-demand platforms contributing to India's growing dependence on global players or are they asserting the diversification of domestic players and the progress of Indian capitalism in the cultural and digital industries? To answer, we analyse the strategies of competition and collaboration between historical audio-visual players versus communication players, the dynamics of foreign ownership and the content localisation strategies of global players. We conclude that the study of digital platforms offers an important insight into new forms of economic and cultural hegemony in the cultural industries.
    Keywords: India, Audiovisual Industry, Digital Platform, Coopetition, Transnational Players, Political Economy of Communication
    Date: 2022
  13. By: Thierry Kirat (IRISSO - Institut de Recherche Interdisciplinaire en Sciences Sociales - Université Paris Dauphine-PSL - PSL - Université Paris sciences et lettres - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Frédéric Marty (OFCE - Observatoire français des conjonctures économiques (Sciences Po) - Sciences Po - Sciences Po, GREDEG - Groupe de Recherche en Droit, Economie et Gestion - UNS - Université Nice Sophia Antipolis (1965 - 2019) - COMUE UCA - COMUE Université Côte d'Azur (2015-2019) - CNRS - Centre National de la Recherche Scientifique - UCA - Université Côte d'Azur, CIRANO - Centre interuniversitaire de recherche en analyse des organisations - UQAM - Université du Québec à Montréal = University of Québec in Montréal)
    Abstract: This article discusses the institutionalization of the field of Law and Economics in the United States from the post-war period to the Reagan administration. It emphasizes the role of pro-market corporate foundations in the development of Law and Economics. It analyses individual and collective trajectories, including research projects, judges training programs, and leading academics contributions and judicial and administrative careers. It ultimately focuses on the impact of this institutionalization on judging methods.
    Abstract: Cet article traite de l'institutionnalisation du champ de la Law and Economics aux Etats-Unis de l'après-guerre aux années Reagan. Il met l'accent sur le rôle de fondations d'entreprises pro-marché dans l'essor de la Law and Economics et s'appuie sur l'analyse de trajectoires individuelles ou collectives, qu'il s'agisse de projets de recherche, de programmes de formation des juges ou encore de travaux académiques et de carrières judiciaires et administratives de théoriciens de premier plan. Il s'attache in fine à l'impact de cette institutionnalisation sur les manières de juger
    Keywords: conservatism, antitrust, foundations, law and economics, fondations, économie du droit, conservatisme
    Date: 2021–03–08

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