nep-com New Economics Papers
on Industrial Competition
Issue of 2023‒06‒26
thirty papers chosen by
Russell Pittman
United States Department of Justice

  1. Endogenous Horizontal Mergers in Homogeneous Goods Industries with Bertrand Competition By Elpiniki Bakaouka; Marc Escrihuela-Villar; Walter Ferrarese
  2. Common ownership in fintech markets By Tzanaki, Anna; Alekseeva, Liudmila; Azar, José
  3. Competition and risk taking in local bank markets: evidence from the business loans segment By Canta, Chiara; Nilsen, Øivind A.; Ulsaker, Simen A.
  4. From legacy to the future: Incentivising demand migration through access fees By Eltges, Fabian; Fourberg, Niklas; Wiewiorra, Lukas
  5. R&D and Market Sharing Agreements By Dollinger, Jérôme; Mauleon, Ana; Vannetelbosch, Vincent
  6. Antitrust issues raised by answer engines By Christophe Carugati
  7. “The Effect of Competition on Language Diversity in the Movie-Theatre Industry” By Bernat Mallén
  8. Correlation-Savvy Sellers By Roland Strausz
  9. Enhancing competition in on-patent markets By Eliana Barrenho; Marjolijn Moens; Lisbeth Waagstein; Ruth Lopert
  10. Challenges Faced by Judges When Enforcing EU Competition Law: EU and National Perspectives By Pier Luigi Parcu; Giorgio Monti; Marco Botta
  11. Dissertation on Applied Microeconomics of Freemium Pricing Strategies in Mobile App Market By Naixin Zhu
  12. Shall we share? The principle of FRAND in B2B data sharing By Marco Botta
  13. Rentiership and Intellectual Monopoly in Contemporary Capitalism: Conceptual Challenges and Empirical Possibilities By Baines, Joseph; Hager, Sandy Brian
  14. They are among us: Pricing behavior of algorithms in the field By Fourberg, Niklas; Marques-Magalhaes, Katrin; Wiewiorra, Lukas
  15. Risks and incentives for gaming in electricity redispatch markets By Anna Pechan; Christine Brandstätt; Gert Brunekreeft; Martin Palovic
  16. Big Tech, the platform economy and the European digital markets By Brühl, Volker
  17. Is Collusion-proof Procurement Expensive? By Gaurab Aryal; Maria Florencia Gabrielli
  18. Ratings and Reciprocity By Johnen, Johannes; Ng, Robin
  19. Estimating the effects of regulation when treated and control firms compete: a new method with application to the EU ETS By Barrows, Geoffrey; Calel, Raphael; Jégard, Martin; Ollivier, Hélène
  20. International Jurdisdiction Over Standard-Essential Patents By Henrik Horn
  21. Production and Ownership Networks By CHEN Cheng; SUN Chang; ZHANG Hongyong
  22. The International Air Cargo Cartel By Zhiqi Chen
  23. Equity, Commodity, and Distillate Risk for Oil Upstream Producers and Downstream Consumers By Scott Alan Carson; Scott A. Carson
  24. Flexible estimation of random coefficient logit models of differentiated product demand By Kandelhardt, Johannes
  25. The Efficiency of State Aid for the Deployment of High-Speed Broadband: Evidence from the French Markets By Marc Bourreau; Lukasz Grzybowski; Ángela Muñoz-Acevedo
  26. How Different Digital Marketing Techniques Drive and Empower Sneakerhead Purchasing Behaviors: A Theoretical Literature Review By Greg Grovey, Diana Garza; Greg Grovey, Diana Garza
  27. Bankers' pay and the evolving structure of US banking By Anderson, Ronald W.; Jõeveer, Karin
  28. Market Equilibria in Cross-Border Balancing Platforms By Cartuyvels, Jacques; Bertrand, Gilles; Papavasiliou, Anthony
  29. Exploiting homogeneity in games with non-homogeneous revenue functions "Abstract: We exploit the properties of homogeneous functions to characterize the symmetric pure-strategy Nash equilibria of n-player games in which each player’s revenue function is not homogeneous but it can be decomposed into the sum of homogeneous functions with different degrees of homogeneity. These fea- tures are met in a wide range of games, including contests, imperfect competition, or public good games. Our results aim to contribute an easy checklist for finding the symmetric pure-strategy Nash equilibria. We apply these results to three examples." By Walter Ferrarese; Antoni Rubí-Barceló
  30. Misallocation in Firm Production: A Nonparametric Analysis Using Procurement Lotteries By Paul Carrillo; Dave Donaldson; Dina Pomeranz; Monica Singhal

  1. By: Elpiniki Bakaouka (Universitat de les Illes Balears); Marc Escrihuela-Villar (Universitat de les Illes Balears); Walter Ferrarese (Universitat de les Illes Balears)
    Abstract: We discuss the effect of horizontal mergers in homogeneous goods industries when firms compete à la Bertrand with increasing marginal costs of production. We set up a two-stage game where in the first stage firms decide whether to join the merger or to remain outside and in the second stage market competition takes place. We identify necessary and sufficient conditions for a market structure where a merger did occur to be coalition proof. We find that such market structure could be consumer surplus enhancing as it could arise even for lower post-merger prices with respect to the pre-merger scenario. This is in sharp contrast with the findings under both price and quantity competition where, absent efficiency gains, mergers unambiguously harm consumers.
    Keywords: Homogeneous Goods; Horizontal Mergers; Bertrand Competition; Coalition Proof Nash Equilibrium.
    JEL: C72 D43 G34 L13
    Date: 2022
  2. By: Tzanaki, Anna; Alekseeva, Liudmila; Azar, José
    Keywords: financial technology, ownership structure, institutional investor, private investment, competition law
    Date: 2023
  3. By: Canta, Chiara (TBS Business School); Nilsen, Øivind A. (Dept. of Economics, Norwegian School of Economics and Business Administration); Ulsaker, Simen A. (Telenor Research)
    Abstract: This paper studies empirically the relationship between competition and risk taking in banking markets. We exploit an unique dataset providing information about all bank loans to Norwegian firms over several years. Rather than relying on observed market shares, we use the distance between bank branches and firms to measure the competitiveness of local markets. The cross-sectional and longitudinal variation in competition in local markets are used to identify the relationship between competition and risk taking, which we measure by the non-performing loans and loss provision rates of the individual banks. We find that more competition leads to more risk taking. We also examine the effects of bank competition on the availability of loans. More competition leads to lower interest rates and higher loan volumes, but also makes it more difficult for small and newly established firms to obtain a loan.
    Keywords: Competition; risk
    JEL: G21 L11 L13
    Date: 2023–05–18
  4. By: Eltges, Fabian; Fourberg, Niklas; Wiewiorra, Lukas
    Abstract: In this paper, we analyze how wholesale access fees of a crucial input can be utilized to influence demands for products of different technologies and the deployment sequence between an incumbent and entrant firm. In a setting of multi-product competition with horizontally differentiated products we find that the access fee gives rise to asymmetric pricing incentives for the entrant firm if she offers a legacy and new product in parallel. The entrant's price for the new product decreases in the access fee while its legacy price increases with the aim to induce intra-brand legacy-to-new migration of demand. Fur- thermore, a regulator can depart from the socially optimal access fee and use this entrant's pricing channel to effectively promote demand side take-up of the new technology. Lastly, it is welfare beneficial in a sequential deployment process, that the entrant moves first to introduce the new technology while such a move can be fostered by a strategic use of the access fee that lowers profits from competition based on legacy products.
    Keywords: Access pricing, Multi-product competition, Product differentiation, Next generation networks
    JEL: L13 L51 L96 D4
    Date: 2022
  5. By: Dollinger, Jérôme (Université catholique de Louvain, LIDAM/CORE, Belgium); Mauleon, Ana (Université catholique de Louvain, LIDAM/CORE, Belgium); Vannetelbosch, Vincent (Université catholique de Louvain, LIDAM/CORE, Belgium)
    Abstract: We analyze the formation of R&D alliances and market sharing (MS) agreements by which firms commit not to enter in each other’s territory in oligopolistic markets. We show that R&D alliance structures are stable only in the presence of MS agreements. Thus, long lasting R&D alliances could signal the existence of some MS agreement in the industry. We characterize the set of stable symmetric pairs of coalition structures with identical R&D and MS structure. In addition, we show the stability of a class of asymmetric pairs of coalition structures where the most efficient firms form both an R&D and a MS agreement while the other firms do not form any MS agreement but form two smaller R&D alliances. Even though MS agreements are detrimental for consumers, we show that stable cooperation in terms of R&D is yet a better outcome for consumers than no cooperation at all.
    Keywords: R&D alliances ; Market sharing agreements ; Oligopoly ; Cournot competition ; Stability
    JEL: C70 L13 L40
    Date: 2023–01–20
  6. By: Christophe Carugati
    Abstract: This paper outlines some early antitrust issues related to answer engines and the response competition authorities should adopt.
    Date: 2023–06
  7. By: Bernat Mallén (AQR-IREA University of Barcelona)
    Abstract: In this paper I investigate the effect of competition on language diversity in a cultural market, the movies market, in which language is a relevant characteristic of the good. I analyse the case of the bilingual region of Catalonia to empirically test the effect of competition in two stages of the supply chain – the distribution and the exhibition – on the availability of films in the weaker language. I create a unique data set of all the screenings in the region over 10 months from different sources using advanced web-scraping techniques. I find that the concentration at the distribution level reduces the percentage of films in Catalan by 4.04 percentage points compared with the counterfactual of perfect competition. The effect of the concentration at the exhibition level is not significant. This implies that without such market failure, the total supply of films in Catalan would be 96% greater. I also look for heterogeneous effects disentangling two types of audiences: children-targeted films and adult-targeted films. I find that children have higher preference intensity over the language because the market is more responsive to them; the concentration at the exhibition level matters when it comes to this type of consumer.
    Keywords: Language diversity, Movie theatres, Dubbing, Bilingualism, Cultural market. JEL classification: D43, L13, L82, Z13
    Date: 2023–05
  8. By: Roland Strausz
    Abstract: A multi-product monopolist sells sequentially to a buyer who privately learns his valuations. Using big data, the monopolist learns the intertemporal correlation of the buyer’s valuations. Perfect price discrimination is generally unattainable—even when the seller learns the correlation perfectly, has full commitment, and in the limit where the consumption good about which the buyer has ex ante private information becomes insignificant. This impossibility is due to informational externalities which requires information rents for the buyer’s later consumption. These rents induce upward and downward distortions, violating the generalized no distortion at the top principle of dynamic mechanism design.
    Date: 2023–05–26
  9. By: Eliana Barrenho; Marjolijn Moens; Lisbeth Waagstein; Ruth Lopert
    Abstract: The 2018 OECD report Pharmaceutical Innovation and Access to Medicines noted that fostering competition in both on- and off-patent markets can improve the efficiency of pharmaceutical spending. Various policies are used to promote competition among off-patent medicines, but generally do not induce competition in on-patent markets. While tendering is widely used for hospital and other institutional purchasing, it is less common for ambulatory care medicines, or where medicines are reimbursed rather than supplied directly. As part of its broader work agenda on “Increasing the transparency of pharmaceutical markets to inform policies”, this paper explores how payers could harness competition to improve the efficiency of spending on medicines still subject to patent protection or regulatory exclusivity. The OECD undertook an extensive analysis consisting of two parts: 1) a quantitative analysis using product-level time series sales data to explore whether therapeutic competition occurs, and, if so, how it has affected prices and volumes over time, based on a sample of countries and therapeutic classes and 2) a review of current practices and policies on pricing, coverage and procurement of on-patent medicines to identify whether these have been influencing competition between alternative therapeutic products. This report presents the key findings from this analytical work.
    Date: 2023–06–09
  10. By: Pier Luigi Parcu; Giorgio Monti; Marco Botta
    Abstract: This working paper includes a collection of case notes written by those national judges who attended the European Networking and Training for National Competition Enforcers (ENTraNCE Judges, 2022). The training programme was organised by RSCAS between November, 2021, and October, 2022, with the financial contribution of the DG Competition of the European Commission. The case notes included in the working paper summarise judgments from different EU Member States that relate to diverse aspects of competition law enforcement. This working paper thus aims to increase the understanding of the challenges that are faced by the national judiciaries in enforcing national and EU competition in the context of the decentralised regime of competition law enforcement that was introduced by Reg. 1/2003.
    Keywords: Competition law, Article 101 TFEU, Article 102 TFEU, Reg. 1/2003, judicial training, national judges
    Date: 2023–03
  11. By: Naixin Zhu
    Abstract: In my dissertation, I will analyze how the product market position of a mobile app affects its pricing strategies, which in turn impacts an app's monetization process. Using natural language processing and k-mean clustering on apps' text descriptions, I created a new variable that measures the distinctiveness of an app as compared to its peers. I created four pricing variables, price, cumulative installs, and indicators of whether an app contains in-app ads and purchases. I found that the effect differs for successful apps and less successful apps. I measure the success here using cumulative installs and the firms that developed the apps. Based on third-party rankings and the shape of the distribution of installs, I set two thresholds and divided apps into market-leading and market-follower apps. The market-leading sub-sample consists of apps with high cumulative installs or developed by prestigious firms, and the market-follower sub-sample consists of the rest of the apps. I found that the impact of being niche is smaller in the market-leading apps because of their relatively higher heterogeneity. In addition, being niche also impact utility apps differently from hedonic apps or apps with two-sided market characteristics. For the special gaming category, being niche has some effect but is smaller than in the market follower sub-sample. My research provides novel empirical evidence of digital products to various strands of theoretical research, including the optimal distinctiveness theory, product differentiation, price discrimination in two or multi-sided markets, and consumer psychology.
    Date: 2023–04
  12. By: Marco Botta
    Abstract: Data is often defined as the ‘oil’ of the 21st century economy: companies that successfully collect and process a large amount of data can provide more personalized services to their customers, develop new products, and reduce their production costs, thus becoming more competitive. Similarly, public institutions can provide more personalized services to citizens if they can access a large dataset. However, small firms and public institutions often cannot collect a sufficiently large amount of data on their own, and via data sharing small firms and public institutions can access larger and more diversified sets of data, thus boosting their efficiency. Despite its well-recognized benefits, several technical, regulatory and economics obstacles currently limit the degree of data sharing.This paper first discusses the market failures that currently limit data ‘access’ and ‘re-use’ – which are jointly defined as ‘data sharing’. Secondly, the paper analyses the legislation recently adopted by the European Union (EU) to foster Business2Business (B2B), Government2Business (G2B) and Business2Government(B2G) data sharing, especially by comparing the terms of the compensation that is provided by the EU legislation. Finally, the paper analyses the meanings of Fair, Reasonable and Non-Discriminatory (FRAND) terms in the context of the licensing of Standard Essential Patents (SEPs) and access remedies in EU competition law, to draw some lessons on how the principle of FRAND, in the context of B2B data sharing, is interpreted.
    Keywords: Data access, Data portability, Data Governance Act, Digital Markets Act, Data Act, FRAND, Standard Essential Patents, Antitrust access remedies
    Date: 2023–04
  13. By: Baines, Joseph; Hager, Sandy Brian
    Abstract: The concepts of rentiership and intellectual monopoly have gained increased prominence in discussions about the transformation of global capitalism in recent years. However, there have been few if any attempts to construct measures for rentiership and intellectual monopoly using firm-level financial data. The absence of such work, we argue, is symptomatic of conceptual challenges in delineating what precisely qualifies as rent, intellectual or otherwise. In place of static conceptions of rent and intellectual monopoly, we develop a dynamic framework for analyzing the processes of rentierization and intellectual monopolization and apply this framework to the analysis of the transformation of non-financial firms in the United States since the 1950s. We find that the timing and intensity of rentierization and intellectual monopolization differs significantly across sector and firm size and is heavily mediated by the uneven ramifications of government policy across companies and industries. Overall, our framework illuminates the variegated landscape of corporate power in the US, and offers a useful guide for critically interrogating rentierization and intellectual monopolization in other contexts.
    Keywords: capital accumulation, competition, degree of monopoly, financialization, intangibles, intellectual property, productivity, profit, United States, rent, scarcity
    JEL: P1 D72 L12 D42 D4 O34
    Date: 2023
  14. By: Fourberg, Niklas; Marques-Magalhaes, Katrin; Wiewiorra, Lukas
    Abstract: We analyze pricing patterns and price level effects of algorithms in the market segments for OTC-antiallergics and -painkillers in Germany. Based on a novel hourly dataset which spans over four months and contains over 10 million single observations, we produce the following results. First, price levels are substantially higher for antiallergics compared to the segment of painkillers, which seems to be reflective of a lower price elasticity for antial- lergics. Second, we find evidence that this exploitation of demand character- istics is heterogeneous with respect to the pricing technology. Retailers with a more advanced pricing technology establish even higher price premiums for antiallergics than retailers with a less advanced technology. Third, retailers with more advanced pricing technology post lower prices which contradicts previous findings from simulations but are in line with empirical findings if many firms compete in a market. Lastly, our data suggests that pricing algo- rithms take web-traffic of retailers' online-shops as demand side feedback into account when choosing prices. Our results stress the importance of a careful policy approach towards pricing algorithms and highlights new areas of risks when multiple players employ the same pricing technology.
    Keywords: Algorithmic pricing, Collusion, Artificial intelligence
    JEL: C13 D83 L13 L41
    Date: 2022
  15. By: Anna Pechan; Christine Brandstätt; Gert Brunekreeft; Martin Palovic
    Abstract: Market design for electricity often ignores network congestion initially and addresses it in a second, so-called 'redispatch' stage. For market participants, any two-stage design offers an opportunity to strategically optimize between the different market stages. The current debate is how to design a market-based redispatch to integrate new actors, in particular consumers, given increasing levels of congestion. Strategic bidding may occur if market players anticipate congestion in their region and manipulate bidding to exploit this congestion. In this paper, we pick up the current debate and study the precise incentives for gaming with respect to competitive conditions on the market with a formal model. We propose that depending on competitive conditions, the expected profits of gaming can be negative and link the range of negative expected gaming profits to a so-called reference bidder, reflecting competitive conditions in the market. We also discuss how several potential remedies can increase the risk of the gaming strategy and can thereby reduce the practical potential for gaming. With this paper, we provide the theoretical framework for authorities and empirical works to assess the potential of market-based as opposed to administrative redispatch.
    Keywords: Electricity market, Market-based redispatch, Strategic behaviour, Inc-Dec gaming, congestion management
    JEL: D21 D22 D43 L13 L94
  16. By: Brühl, Volker
    Abstract: Digital platforms have become an important part of the digital economy by facilitating transactions between large numbers of users and by fostering innovation on collaborative platforms. In combination with technical platform services, some platform operators have managed to create powerful ecosystems that create network externalities and benefit from economies of scale and economies of scope. It is striking that, due to the specific economic drivers of the digital infrastructure, platform-based or platform-related services are dominated by a select number of global players. Most of the global platform operators are headquartered in the US, including Alphabet, Amazon, Apple, Meta and Microsoft, also known as the "Big 5". Some are located in Asia (e.g. Alibaba, Tencent). In Europe there are only a limited number of platform operators with a small market share. [...]
    JEL: L14 L22 L25
    Date: 2023
  17. By: Gaurab Aryal (University of Chicago); Maria Florencia Gabrielli (Universidad Nacional de Cuyo/CONICET)
    Abstract: Collusion adversely affects procurement cost and efficiency. It is hard to quantify just how prevalent collusion is, but it’s safe to assume that there’s a lot of collusion going on. Detecting collusion from (just) bid data is hard so the extent of the damages can never be known. A natural response would have been to use collusion-proof procurement, yet, such auctions are hardly used. Why? Using California highway procurements data, we estimate the extra cost of implementing a collusion-proof auction to be anywhere between 1.6% to 5%. Even after we factor in the marginal excess burden of taxes needed to finance the expenses, the cost ranges between 2.08% and 6.5%, which is too small to be the answer. Since other than cost there is no obvious answer, this shows that there is a lacuna in the empirical auction literature.
    Keywords: Procurements; Collusion-Proof Auction; Local Polynomial Estimator
    JEL: C1 C4 C7 D44 L4
    Date: 2023–06
  18. By: Johnen, Johannes (Université catholique de Louvain, LIDAM/CORE, Belgium); Ng, Robin (Université catholique de Louvain, LIDAM/CORE, Belgium)
    Abstract: Evidence suggests online ratings and reviews are motivated by reciprocity. We incorporate a standard model of reciprocity into a model of ratings to capture that consumers are only willing to make the effort to rate a seller if this seller provides a sufficient value-for-money. Using this model, we explore how firms use prices to impact their own ratings. We show that firms harvest ratings: they offer lower prices in early periods to trigger consumers’ reciprocal behaviour and obtain a good rating and larger profits in the future. Because also low-quality firms harvest ratings, reciprocity makes ratings less-informative about quality. Based on this mechanism, (i) we argue that reciprocity-based ratings cause rating inflation; (ii) we show that a marketplace that facilitates ratings (e.g. through reminders, one-click ratings etc.) may get more ratings, but also less-informative ratings; (iii) a marketplace that screens the quality of sellers makes ratings less-informative if the screening is insufficient. We show that even as ratings become less-informative, consumers can benefit from lower prices. Nonetheless consumers prefer more-informative ratings than average sellers. We apply these results to characterise when a two-sided platform wants to facilitate ratings, and thereby undermines the informativeness of ratings and harms consumers.
    Keywords: Reciprocity ; Ratings and Reviews ; Digital Economy ; Reputation
    JEL: D21 D83 D90 L10
    Date: 2023–02–09
  19. By: Barrows, Geoffrey; Calel, Raphael; Jégard, Martin; Ollivier, Hélène
    Abstract: This paper presents a method for estimating treatment effects of regulations when treated and control firms compete on the output market. We develop a GMM estimator that recovers reduced-form parameters consistent with a model of differentiated product markets with multi-plant firms, and use these estimates to evaluate counterfactual revenues and emissions. Our procedure recovers unbiased estimates of treatment effects in Monte Carlo experiments, while difference-in-differences estimators and other popular methods do not. In an application, we find that the European carbon market reduced emissions at regulated plants without undermining revenues of regulated firms, relative to an unregulated counterfactual.
    Keywords: regulation; spillovers; environment; energy; firms
    JEL: Q48 L10 L50
    Date: 2023–05–18
  20. By: Henrik Horn
    Abstract: Countries are alleged to pursue commercial interests through their antitrust interventions regarding FRAND commitments for standard-essential patents (SEPs). This paper examines pros and cons of allocating jurisdiction according to fundamental principles in international law, assuming that countries’ regulations promote national objectives. It shows why the Territoriality Principle yields too lenient treatment of patent-issuing countries’ SEPs, and too strict of treatment of other countries’ SEPs, and why the Nationality Principle yields too lenient treatment generally. Non-discrimination obligations can, but need not, improve on outcomes. Hence, existing international law will typically not implement efficient outcomes, suggesting that an international agreement is required.
    Keywords: Standard-essential patents, international jurisdiction, default rules
    JEL: F15 K21 K33 L40 O38
    Date: 2023–04
  21. By: CHEN Cheng; SUN Chang; ZHANG Hongyong
    Abstract: Using data on both buyer-supplier and owner-subsidiary links between Japanese firms, we characterize the interconnection between production and ownership networks. In the cross-section, we find that the majority of the owner-subsidiary links are also buyer-supplier links, thus highlighting the role of goods or services transactions in vertical integration. In addition, we find that firms are more likely to engage with buyers/suppliers that have already been used by related parties, thereby suggesting an indirect benefit of integration. Finally, we show evidence that more capable firms are more likely to integrate buyers/suppliers conditional on the number of buyers/suppliers. As firms grow, however, they rely less on related buyers/suppliers and more on unrelated ones.
    Date: 2023–06
  22. By: Zhiqi Chen (Department of Economics, Carleton University)
    Abstract: This case study reviews the history and operation of the international air cargo cartel, in which over 20 airlines around the world colluded on the setting and implementation of fuel and other surcharges for international air cargo services from late 1999 to 2006. To an economist, this cartel has several interesting features, including the choice of a simple variable to collude on, the use of a fuel price index as a facilitating device, and the reliance on a complex web of contacts among the executives of different airlines to enforce the cartel. Most interesting of all is that the airlines colluded on the surcharges without coordinating on the freight rates. On the surface, this cartel seemed to be poorly designed because higher surcharges achieved through collusion could have simply been offset by lower freight rates as the airlines competed for customers. But the theoretical analyses by Chen (2017 and 2022) demonstrate that colluding on surcharges without coordination on base prices could be an effective way of raising the full price of a product.
    Keywords: cartels, collusion, surcharges
    JEL: L41
    Date: 2023–05–31
  23. By: Scott Alan Carson; Scott A. Carson
    Abstract: The oil and gas industry’s role in economic activity is hard to overstate. This study considers upstream, midstream, and downstream oil producer returns and risk compared to downstream oil consumers in airlines, ground-freight, railroads, and tire manufacturing. Between 2000 and 2020, the oil and gas industry had the lowest expected returns, greater risk, and only Integrated producer returns approached downstream oil and gas consumer risk-return profiles. Railroad companies were the least risky with the highest returns, followed by tire manufacturers, airlines, and freight companies. Equity, commodity, and distillate markets positively price risk into oil and gas producer returns, and upstream producers had greater project and equity market risk than downstream consumers. Most downstream oil consumer equity returns are positively related to equity and commodity market risk, while a few downstream commercial consumers have negative equity and commodity return variation, indicating that crude oil is an input to downstream consumers.
    Keywords: oil and gas, air transportation, ground freight, railroads, tire manufacturing
    JEL: L62 L72 L93 L91 L92
    Date: 2023
  24. By: Kandelhardt, Johannes
    Abstract: The Berry, Levinsohn, and Pakes (1995, BLP) model is widely used to obtain parameter estimates of market forces in differentiated product markets. The results are often used as an input to evaluate economic activity in a structural model of demand and supply. Precise estimation of parameter estimates is therefore crucial to obtain realistic economic predictions. The present paper combines the BLP model and the logit mixed logit model of Train (2016) to estimate the distribution of consumer heterogeneity in a flexible and parsimonious way. A Monte Carlo study yields asymptotically normally distributed and consistent estimates of the structural parameters. With access to micro data, the approach allows for the estimation of highly flexible parametric distributions. The estimator further allows to introduce correlations between tastes, yielding more realistic demand patterns without substantially altering the procedure of estimation, making it relevant for practitioners. The BLP estimator is established to yield biased and inconsistent results when the underlying distributional shape is non-normally distributed. An application shows the estimator to perform well on a real world dataset and provides similar estimates as the BLP estimator with the option of specifying consumer heterogeneity as a function of a polynomial, step function or spline, resulting in a flexible estimation procedure.
    Date: 2023
  25. By: Marc Bourreau; Lukasz Grzybowski; Ángela Muñoz-Acevedo
    Abstract: In this paper, we evaluate the efficiency of the French State aid plan for broadband deployment, the Plan France Très Haut Débit. According to State aid rules, public subsidies should not be substitute for private investment and should target areas with market failures. We estimate a structural model of fiber entry using a rich dataset on fiber deployment for more than 34, 000 municipalities in mainland France over 2014-2019. We then assess whether private investment would have occurred in subsidized municipalities in the absence of public subsidies. We find that between 64% and 93% of the time, public subsidies were granted to municipalities where private entry would not have occurred. Overall, we estimate the cost of "inefficient" public subsidies to be between 243 and 902 million euros, with total subsidies amounting to 2, 203 million euros by the end of 2019. Finally, we find that the plan helped to increase fiber coverage in subsidized municipalities in the early stages of fiber deployment.
    Keywords: state aid, ex-post evaluation, broadband, entry, coverage, crowding out
    JEL: D22 L10 L40 L33 L96 H44
    Date: 2023
  26. By: Greg Grovey, Diana Garza (University of the Incarnate Word, United States); Greg Grovey, Diana Garza (University of the Incarnate Word, United States)
    Abstract: Marketing to consumers has become an art that needs to be further studied, particularly in the sneaker industry. The sneaker product category has exploded in the last few years, forcing retailers to be creative when developing marketing strategies. Technology has allowed consumers to be in control, extending their connection with a particular brand. Consumers have become digitally enabled and can shop at any time and on any channel. For brands to be successful, they must be able to realign their business around the consumer rather than the brand. The use of technology is a competitive force that strengthens competitiveness by using social media as an outlet to reach specific market segments, in this case, the Sneakerhead segment. Consumers will be attracted to brands that treat them intelligently and know their preferences creating a seamless experience at the time of purchase. This literature review will explore different types of marketing, as well as collaborations between brands and celebrities, and how these strategies can influence purchasing behavior.
    Keywords: digital marketing, hunger marketing, live-stream marketing,
    Date: 2023–04
  27. By: Anderson, Ronald W.; Jõeveer, Karin
    Abstract: We study the evolution of pay in US bank holding companies since 1986. We first set out the main empirical characteristics in both cross-section and time series focussing on banking structure (size and concentration) and pay characteristics given by labor's share of bank value-added, the level of an average bankers' real compensation and the sensitivity of that compensation to firm performance. Then we introduce a structural model in which bankers of heterogenous talent are matched with banks where shareholders design compensation contracts so as to maximise shareholder payoff in the face of managerial moral hazard. We calibrate this model to see if it provides an internally consistent account of the observed empirical patterns. By incorporating structural changes coinciding with three major changes in banking regulation we are able to reproduce changes in pay level and pay sensitivity observed and to establish a secular decline in labor's share consistent with a superstar firm effect in US banking. Overall we find that the observed pay fits closely to fair pay as predicted by our equilibrium model.
    Keywords: banking industry structure; rent extraction; superstar firms; regulation
    JEL: G21 G32
    Date: 2022–04–12
  28. By: Cartuyvels, Jacques (Université catholique de Louvain, LIDAM/CORE, Belgium); Bertrand, Gilles; Papavasiliou, Anthony (Université catholique de Louvain, LIDAM/CORE, Belgium)
    Abstract: The next phase of electricity markets integration in Europe will see the introduction of pan-European balancing platforms, MARI and PICASSO, for the trading of manual and automatic frequency restoration reserve. This paper provides an analytical framework for the study of pricing asymmetries between European member states in this context. The pricing asymmetries are due to balancing incentive components and consist of the unilateral introduction by a member state of either (i) an adder on the imbalance price and balancing price, (ii) an adder on the imbalance price solely, or (iii) the introduction of a real-time price for the trading of real-time balancing capacity. Our analytical framework allows us to characterize the optimal bidding strategy of flexible assets under the different designs and to derive the resulting equilibria. Our analysis demonstrates that adders without the trading of balancing capacity create inefficiencies by distorting the merit order and tend to be detrimental to the member state that introduces it.
    Keywords: Balancing market ; cross-border balancing ; frequency restoration reserve ; real-time market for reserve
    Date: 2023–03–01
  29. By: Walter Ferrarese (Universitat de les Illes Balears); Antoni Rubí-Barceló (Universitat de les Illes Balears)
    Keywords: equilibrium characterization, homogeneous functions’ properties, non-homogeneous revenue function.
    JEL: Q58 H23 D72
    Date: 2022
  30. By: Paul Carrillo; Dave Donaldson; Dina Pomeranz; Monica Singhal
    Abstract: How costly is the misallocation of production that we might expect to result from distortions such as market power, incomplete contracts, taxes, regulations, or corruption? This paper develops new tools for the study of misallocation that place minimal assumptions on firms’ underlying technologies and behavior. We show how features of the distribution of marginal products can be identified from exogenous variation in firms’ input use, and how these features can be used both to test for misallocation and to quantify the welfare losses that it causes. We then consider an application in which thousands of firms experience demand shocks derived from a lottery-based assignment of public procurement contracts for construction services in Ecuador. Using administrative tax data about these firms, we reject the null of efficiency but estimate that the welfare losses resulting from misallocation are only 1.6% relative to the first-best. Standard parametric assumptions applied to the same setting would suggest losses that are at least an order of magnitude larger.
    Keywords: allocative efficiency, misallocation, aggregate productivity
    JEL: D24 D61 H57 L10 O40
    Date: 2023

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