nep-com New Economics Papers
on Industrial Competition
Issue of 2023‒07‒17
25 papers chosen by
Russell Pittman
United States Department of Justice

  1. How costly are cartels? By Flavien Moreau; Ludovic Panon
  2. A Theory of Conglomerate Mergers By Rey, Patrick; Chen, Zhijun
  3. The Optimal Antitrust Policies for Vertical Price Restraints in a Non-Green Supply Chain By Saglam, Ismail
  4. Personalized Pricing with Imperfect Customer Recognition By Stefano Colombo; Clara Graziano; Aldo Pignataro
  5. Ambiguous consumer tastes and product differentiation By Olivier Kayser
  6. Menu-pricing and Quality Decisions of a Platform Monopolist By Tetsuya Shinkai; Naoshi Doi
  7. Retail Pricing Format and Rigidity of Regular Prices By Sourav Ray; Avichai Snir; Daniel Levy
  8. Price Competition and Endogenous Product Choice in Networks: Evidence from the US airline Industry By ; Cristina Gualdani; Kevin Remmy
  9. Competition and Risk Taking in Local Bank Markets: Evidence from the Business Loans Segment By Chiara Canta; Øivind A. Nilsen; Simen A. Ulsaker; Øivind Anti Nilsen
  10. Market Power in the Florida Orange Juice Processing Industry By Haque, Samiul; Hammami, AbdelMalek; Xia, Tian; Guan, Zhengfei
  11. The Economics of the Public Option: Evidence from Local Pharmaceutical Markets By Juan Pablo Atal; Jose Ignacio Cuesta; Felipe Gonzalez; Cristobal Otero
  12. Corporate criminals in a market context: enforcement and optimal sanctions By Auriol, Emmanuelle; Hjelmeng, Erling; Søreide, Tina
  13. Energy, Inflation and Market Power: Excess Pass-Through in France By Axelle Arquié; Malte Thie
  14. The Impact of Repealing Sunday Blue Laws on Alcohol Sales and Retail Competition By Connolly, Cristina; Graziano, Marcello; McDonnell, Alyssa; Steinbach, Sandro
  15. Do Hospital Mergers Reduce Waiting Times? Theory and Evidence from the English NHS By Vanessa Cirulli; Giorgia Marini; Marco A. Marini; Odd Rune Straume
  16. Entry Barriers and Growth: The Role of Endogenous Market Structure By Helu Jiang; Yu Zheng; Lijun Zhu
  17. Misallocation in Firm Production: A Nonparametric Analysis Using Procurement Lotteries By Paul Carrillo; Dave Donaldson; Dina Pomeranz; Monica Singhal
  18. Economie de la donnée: écosystèmes numériques, algorithmes et intelligence artificielle By Frédéric Marty
  19. City Size, Employer Concentration, and Wage Income Inequality By Korpi, Martin; Halvarsson, Daniel
  20. Cooperative vs. Non-cooperative R&D under Uncertain Probability of Success By Chatterjee, Rittwik; Kabiraj, Tarun
  21. Lobbying or Innovation: Who Does What Against Foreign Competition By Olimpia Cutinelli Rendina
  22. The Competitive Impact of Grocery Retailer Entry by Location and Store Types By Kim, Donghoon; Steinbach, Sandro; Lopez, Rigoberto A.; Marchesi, Keenan
  23. Bilateral communication in procurement auctions By Brosig-Koch, Jeannette; Heinrich, Timo; Sterner, Martin
  24. “Labor Market Monopsony and Firm Behavior: Evidence from Spanish Exporters” By Akin A. Cilekoglu
  25. Concentration in Food Retailing, Prices, and Inflation By Çakir, Metin; Arita, Shawn; Cooper, Joseph C.; Dong, Xiao; Nemec Boehm, Rebecca L.; Perez Castaño, Ana Melissa M.

  1. By: Flavien Moreau (IMF); Ludovic Panon (Bank of Italy)
    Abstract: We study the cost of cartels in an oligopoly model with heterogeneous firms, endogenous markups, and collusion. Cartels can amplify or dampen misallocation, by charging supracompetitive markups and reallocating demand towards non-colluding firms. We find that standard competitive oligopoly models understate the cost of markups under reasonable values for the intensity of collusion and cartel composition configurations. Using French micro data, our baseline calibration suggests that breaking down cartels would increase aggregate productivity by 1.1% and welfare by 2%. These numbers shed light on the aggregate importance of collusion.
    Keywords: competition, cartels, collusion, productivity, welfare, misallocation
    JEL: D43 K21 L13 L41 O47
    Date: 2023–06
  2. By: Rey, Patrick; Chen, Zhijun
    Abstract: We present a theory of conglomerate mergers and explore the effect of portfolio differentiation due to the heterogeneity of consumption synergy derived from product bundling. The differentiation of product portfolios reduces competition and leads to higher prices for stand- alone products in highly concentrated markets. As a result, conglomerate mergers benefit consumers who purchase bundled products from the merged entity but can harm those who prefer to mix-and-match standalone products. We demonstrate that a conglomerate merger increases total consumer surplus if the merged firm continues to sell standalone products, but it can be detrimental to consumers if the firm commits to pure bundling. Our analysis provides important policy implications for assessing conglomerate merger cases.
    Keywords: Conglomerate mergers; Portfolio differentiation; Bundling
    Date: 2023–06–19
  3. By: Saglam, Ismail
    Abstract: This paper studies the optimal antitrust policies for vertical price restraints in an infinitely-lived non-green supply chain channel that emits air pollution during production. The channel involves a supplier and a retailer that can either engage in sequential (Stackelberg) price competition where the supplier moves first or engage in vertical price coordination where they choose the retail price to maximize their joint profits and choose the wholesale price using the generalized Nash bargaining. We first consider the absence of an antitrust authority and characterize a necessary and sufficient condition for the stability of coordination, which we call internal stability. Then, we characterize the socially optimal antitrust policies. The policies we consider involve the costly auditing of the channel to detect coordination at a fixed probability in each period and a penalty fee charged to the channel members in case coordination is detected. When coordination is internally unstable, it is socially optimal to prevent its formation if the relative abatement cost of collusive emissions is sufficiently large or if the minimum cost of auditing is sufficiently small. In the case where coordination is internally stable, destabilization is also an option for the antitrust authority. In this case, our necessary and sufficient conditions characterizing the optimal antitrust decisions imply that it is socially optimal to destabilize (allow) the vertical price coordination of the channel if both the minimum cost of auditing and the relative abatement cost of collusive emissions are sufficiently small (large) and to prevent it otherwise.
    Keywords: Supply chain; vertical price coordination; vertical price restraints; antitrust policy.
    JEL: D43 L11 L22 L42 Q52
    Date: 2023–05
  4. By: Stefano Colombo; Clara Graziano; Aldo Pignataro
    Abstract: We consider a duopoly model where firms can identify only a share of consumers, which is positively correlated with the consumer’ preferences. Firms charge personalized prices to the consumers they can recognize and a uniform price to the rest of consumers. The firms’ available information is given by the combination of two factors: the intensive margin, which determines the share of consumers the firms can recognize in each single location, and the extensive margin, which determines how many locations the firms can identify. Different market configurations emerge according to the size of these margins. We characterize the values of the intensive and extensive margins that maximize firms’ profits, and we show that profits are non-monotonic. We also show that the composition, in addition to the size, of the available information – i.e., the mix of these margins – affects firms’ profits significantly. Implications for regulatory policies concerning the protection of consumers’ information are finally discussed.
    Keywords: personalized pricing, price discrimination, privacy, margins of information
    JEL: D80 D43 L10
    Date: 2023
  5. By: Olivier Kayser
    Abstract: Considering that firms have multiple consumer taste distributions, we introduce in the vertical differentiation framework an ambiguous demand in a duopoly. We investigate the effects of ambiguity aversion on product differentiation and pricing choices. By specifying these distributions by Heaviside functions we obtain results on the existence and form of several Subgame-Perfect Nash Candidate Equilibria. The associated equilibrium prices are decreasing with ambiguity aversion. Under the market coverage assumption, we show that the level of differentiation is always maximal whatever the degree of ambiguity aversion. Finally, we study which of the Subgame-Perfect Nash Candidate Equilibria is the solution of the game depending on the width of the taste distributions and the degree of ambiguity aversion.
    Keywords: Vertical differentiation, Ambiguous consumer tastes, Ambiguous demand, Ambiguity aversion
    JEL: C72 D43 L13 D8
    Date: 2023
  6. By: Tetsuya Shinkai (School of Economics, Kwansei Gakuin University); Naoshi Doi (Otaru University of Commerce- Economics)
    Abstract: This article examines menu-pricing and quality decisions of a platform monopolist for two types of sellers and buyers on a two-sided market. Under the GPD (general Pareto distribution) valuation of buyers for transaction services, we show that unique optimal services fees exist for sellers and buyers. The two types of services (premium and spot) are offered to both sellers and buyers. An optimal premium membership fee and the quality service level are considered for the premium type of buyers in a platform optimization problem. Assuming that the unit cost of the product is fixed, we show that the optimal membership fee/the level of quality service for premium-type buyers decreases/increases as the service cost for premium-type sellers increases. However, if delivery fees charged by transport companies for spot-type sellers increase, the optimal membership fee/level of quality service increases/decreases. However, if the demand for services of the platform for both types of buyers increases, both the optimal membership fee and quality level of services increase.
    Keywords: Platform monopoly; Menu-pricing; Quality decisions; Two-sided market.
    JEL: D21 D43 L13 L15
    Date: 2023–06
  7. By: Sourav Ray (Department of Marketing and Consumer Science, University of Guelph, Canada); Avichai Snir (Department of Economics, Bar-Ilan University, Israel); Daniel Levy (Department of Economics, Bar-Ilan University, Israel; Department of Economics, Emory University, USA; International Centre for Economic Analysis; ISET, Tbilisi State University, Georgia; Rimini Centre for Economic Analysis)
    Abstract: We study the price rigidity of regular and sale prices, and how it is affected by pricing formats (i.e., pricing strategies). We use data from three large Canadian stores with different pricing formats (Every-Day-Low-Price, Hi-Lo, and Hybrid) that are located within a 1 km radius of each other. Our data contains both the actual transaction prices and actual regular prices as displayed on the store shelves. We combine these data with two “generated” regular price series (filtered prices and reference prices) and study their rigidity. Regular price rigidity varies with store formats because different format stores treat sale prices differently, and consequently define regular prices differently. Correspondingly, the meanings of price cuts and sale prices vary across store formats. To interpret the findings, we consider the store pricing format distribution across the US.
    Keywords: Price Rigidity, Sticky Prices, Regular Prices, Sale Prices, Filtered Prices, Reference Prices, Temporary Price Changes, Transaction Prices, Price Cuts, Pricing Format, Pricing Strategy, Every-Day-Low-Price (EDLP), Hi-Lo, Hybrid
    JEL: E31 E52 D22 D40 L11 L16 M30 M31
    Date: 2023–06
  8. By: (ENAC & Toulouse School of Economics, University of Toulouse Capitole, Toulouse, France.); Cristina Gualdani (Queen Mary University of London, London, United Kingdom); Kevin Remmy (University of Mannheim, Mannheim, Germany.)
    Abstract: We develop a two-stage game in which competing airlines first choose the networks of markets to serve in the first stage before competing in price in the second stage. Spillovers in entry decisions across markets are allowed, which accrue on the demand, marginal cost, and fixed cost sides. We show that the second-stage parameters are point identified, and we design a tractable procedure to set identify the first-stage parameters and to conduct inference. Further, we estimate the model using data from the domestic US airline market and find significant spillovers in entry. In a counterfactual exercise, we evaluate the 2013 merger between Amer-ican Airlines and US Airways. Our results highlight that spillovers in entry and post-merger network readjustments play an important role in shaping post-merger outcomes.
    Keywords: endogenous market structure, multiple equilibria, oligopoly, product reposition-ing, mergers, remedies, bankruptcy.
    Date: 2023–06–21
  9. By: Chiara Canta; Øivind A. Nilsen; Simen A. Ulsaker; Øivind Anti Nilsen
    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: banking, local competition, risk taking, firm behaviour
    JEL: G21 L11 L13
    Date: 2023
  10. By: Haque, Samiul; Hammami, AbdelMalek; Xia, Tian; Guan, Zhengfei
    Keywords: Agribusiness, Marketing, Production Economics
    Date: 2023
  11. By: Juan Pablo Atal (University of Pennsylvania); Jose Ignacio Cuesta (Stanford University and NBER); Felipe Gonzalez (Queen Mary University of London); Cristobal Otero (University of California Berkeley)
    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 1.6 percent.
    JEL: D72 H4 L3
    Date: 2023–06–21
  12. By: Auriol, Emmanuelle; Hjelmeng, Erling; Søreide, Tina
    Abstract: By combining approaches from the economic theory of crime and of industrial organization, this paper analyzes optimal enforcement for three different forms of corporate misconduct that harm competition. The analysis shows why corporate crime is more harmful in large markets, why governments have a disinclination to sanction firms whose crime materializes abroad, and why leniency for those who self-report their crime is a complement, and not a substitute, to independent investigation and enforcement. As public authorities rely increasingly on self-reporting by companies to detect cartels, the number of leniency applications is likely to decline, and this is borne out by data. Upon a review of 50 cases of corporate liability from five European countries, competition law enforcement, governed by a unified legal regime, is more efficient than enforcement in bribery and money laundering cases, governed by disparate criminal law regimes. Sanction predictability and transparency are higher when governments cooperate closely with each other in law enforcement, when there are elements of supra-national authority, and when the offense is regulated by a separate legal instrument. Given our results, Europe would benefit from stronger supra-national cooperation in regulation and enforcement of transnational corporate crime, especially for the sake of deterrent penalties against crime committed abroad.
    Keywords: Corporate liability; Corruption; Collusion; Antitrust; Money Laundering; Deterrence; Sanctions; Litigation
    JEL: K14 K21 K23 K42 L13 L41 H57
    Date: 2023–06–06
  13. By: Axelle Arquié; Malte Thie
    Abstract: We explore how, in the French manufacturing sector, producer prices vary with market power during a severe episode of energy price hikes (between January 2020 and February 2023). Our work provides some empirical evidence in favor of a role for firms' market power in explaining inflation, and in favor of the "sellers' inflation" hypothesis (Weber and Wasner 2023): in less competitive sectors, firms could use the energy price hike to increase their prices more than warranted by actual changes in costs. Using a rich dataset on French manufacturing firms' balance sheets, we first estimate markups at the firm-level, and aggregate them at the sectoral level. We then study the response of the producer price index (PPI) to a change in spot energy prices, depending on average market power within sectors. We show that, in sectors with higher markups, prices increase relatively more: in the least competitive sector, firms pass through up to 110% of the energy shock, implying an excess pass-through of 10 percentage points. In addition, we find that the association between markup and pass-through is even higher when markup dispersion is low, consistent with the argument that firms engage in price hikes when they expect their competitors to do the same.
    Keywords: Inflation ;Markups
    JEL: E31 F4 L11
    Date: 2023–06
  14. By: Connolly, Cristina; Graziano, Marcello; McDonnell, Alyssa; Steinbach, Sandro
    Keywords: Marketing, Food Consumption/Nutrition/Food Safety, Agribusiness
    Date: 2023
  15. By: Vanessa Cirulli (Italian Agency for Development Cooperation and Sapienza University of Rome); Giorgia Marini (Department of Juridical and Economic Studies (DSGE), Sapienza University of Rome); Marco A. Marini (Department of Social Sciences and Economics, Sapienza University of Rome); Odd Rune Straume (Department of Economics/NIPE, University of Minho)
    Abstract: We analyse – theoretically and empirically – the effect of hospital mergers on waiting times in healthcare markets where prices are fixed. Using a spatial modelling framework where patients choose provider based on travelling distance and waiting times, we show that the effect is theoretically ambiguous. In the presence of cost synergies, the scope for lower waiting times as a result of the merger is larger if the hospitals are more profit-oriented. This result is arguably confirmed by our empirical analysis, which is based on a conditional flexible difference-indifferences methodology applied to a long panel of data on hospital mergers in the English NHS, where we find that the effects of a merger on waiting times crucially rely on a legal status that can reasonably be linked to the degree of profit-orientation. Whereas hospital mergers involving Foundation Trusts tend to reduce waiting times, the corresponding effect of mergers involving hospitals without this legal status tends to go in the opposite direction.
    Keywords: Hospital merger, waiting times, profit-orientation
    JEL: I11 I18 L21 L41
    Date: 2023–07
  16. By: Helu Jiang (Institute for Advanced Research, Shanghai University of Finance and Economics. 111 Wuchuan Road, Shanghai, China, 200433.); Yu Zheng (Queen Mary University of London and CEPR); Lijun Zhu (Peking University)
    Abstract: We use China’s growth experience as a laboratory to study how reductions in entry barrier contribute to economic growth by inducing a more competitive market structure. The removal of entry restrictions on private firms in the late 1990s and early 2000s made the Chinese economy more competitive and dynamic, propelling the growth acceleration from the early 1990s to late 2000s. We develop a model of endogenous productivity and market structure with heterogeneous firms and frictional entry and calibrate it to Chinese manufacturing from 2004-7. We show about 25% of the productivity growth in 2004-7 is contributed by the reduction of entry barriers during the reforms in the previous decade. While close to 40% of the gain in growth comes from entry bringing about younger firms with higher growth potential, over 60% of the gain in growth comes from entry enforcing tighter market competition which strengthens all active firms’ incentive to grow. We also provide suggestive evidence that this mechanism may be at play in a wider economic context.
    Keywords: Entry Barriers; Firm Dynamics; Market Structure; Endogenous Growth
    JEL: D22 D43 O11 O30 O47
    Date: 2023–06–23
  17. 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.
    JEL: D24 D61 H57 L10 O40
    Date: 2023–06
  18. By: Frédéric Marty (Université Côte d'Azur, France; GREDEG CNRS)
    Abstract: L'accès à des flux de données massifs, renouvelés et diversifiés est l'une des clés de la performance des firmes en ce qu'il participe à l'entraînement de leurs algorithmes. Les firmes de la donnée peuvent potentiellement accéder à des situations de dominance significative et étendre leurs activités à des secteurs connexes formant autant d'écosystèmes numériques. L'exemple des activités bancaires et assurantielles illustre les potentialités en termes d'efficacité mais aussi d'inclusion liées aux possibilités de quasi-personnalisation des offres mais également les risques qui peuvent en résulter tant pour la concurrence que pour les consommateurs. Il s'agit donc d'illustrer les gains et les risques potentiels et d'envisager quelle peut être la portée des remèdes offerts par les règles de concurrence en la matière.
    Keywords: données, écosystèmes numériques, intelligence artificielle, personnalisation des prix, discrimination, abus d'éviction, abus d'exploitation
    JEL: K21 L12 L13 L22
    Date: 2023–06
  19. By: Korpi, Martin (The Ratio Institute); Halvarsson, Daniel (The Ratio Institute)
    Abstract: In this paper, we build upon a monopsony framework, suggested by Card et. al. 2016, which links firm level productivity and rent-sharing to wage inequality. Specifically, our research questions address i) to which extent labor market concentration across firms (within different types of locally situated industries) affects variation in wages among workers within these firms and industries, and ii) how this variation in turn spills over into economy-wide inequality (measured at the level of local labor markets). Using linked employer-employee full population data for Sweden, and an AKM modelling framework to separate between worker and firm-level heterogeneity, our results suggest that higher firm-level fixed effects (a measure of rent-sharing) is associated with lower labor market employer concentration, something which affects average wage income among firms accordingly. Addressing wage income inequality by applying our model to different segments of the local labor market income distribution, we find that reduced average employer concentration in larger cities accounts for almost all variation in the (positive) link between city size-and wage inequality, except for the largest metropolises where it captures around 30-50 percent of variation depending on the income segment that we focus on.
    Keywords: Wage distribution; rent sharing; monopsony; linked employer-employee data; local labor markets
    JEL: D22 J31 J42 R12
    Date: 2023–05–15
  20. By: Chatterjee, Rittwik; Kabiraj, Tarun
    Abstract: R&D decision of a firm involves various sources of incomplete information. The present paper introduces incomplete information about the success probability of R&D in a model of two firms interacting in R&D and production and discusses the choice between cooperative and non-cooperative research. We consider research joint venture as the form of R&D cooperation. While the choice depends on the constellation of parameters, the following results are derived, in general. First, the high type firm always has a larger incentive for both cooperative and non-cooperative R&D compared to the low type firm. Second, if the low type firm goes for non-cooperative research, then the high type firm must go for the same, and if the high type firm prefers cooperative research, the low type firm must also prefer cooperative R&D. However, if the high type firm prefers non-cooperative R&D, the low type firm may go for either form of research depending on the parameters. The paper derives conditions, in particular, for the case when the high type firm prefers non-cooperative research whereas the low type firm prefers cooperative research.
    Keywords: Cooperative research; Non-cooperative research; Probability of success; Incomplete information; Research joint venture.
    JEL: D43 D82 L13 O31
    Date: 2023–06–14
  21. By: Olimpia Cutinelli Rendina (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, PJSE - Paris Jourdan Sciences Economiques - 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)
    Abstract: This paper studies the relationship between competition and firms' political influence. I use the China shock identification strategy to assess the impact of rising imports over the last two decades on US corporate lobbying. The empirical results are the following i) the increase in foreign competition has brought firms to increase their lobbying effort by approximately 35 percent per four-year period, ii) results are heterogeneous and the increase is focused on low productivity firms, iii) this increase does not target trade policies specifically but rather a variety of topics contributing to firms' competitiveness. I comment two mechanisms: First, firms for which innovation is too expensive naturally increase their lobbying effort in proportion to the threat of competition, and second differentiation (though innovation) and exit concentrate the lobbying effort on fewer firms, helping to decrease free-riding.
    Date: 2023–02
  22. By: Kim, Donghoon; Steinbach, Sandro; Lopez, Rigoberto A.; Marchesi, Keenan
    Keywords: Agribusiness, Community/Rural/Urban Development, Food Consumption/Nutrition/Food Safety
    Date: 2023
  23. By: Brosig-Koch, Jeannette; Heinrich, Timo; Sterner, Martin
    Abstract: We ask how buyers can make use of bilateral communication in a procurement setting with moral hazard. We focus on a setting where buyers and potential sellers can exchange cheap-talk messages before trading and where the seller is determined via a buyer-determined procurement auction. In this type of auction, buyers can freely choose among bidders based on bidders’ observable characteristics and the prices they ask for. In a controlled laboratory experiment, we find that buyers use free-form text messages to make requests and to reduce social distance. The relationship between the offers sellers make and the messages they send is mediated by buyers’ requests. But, in general, buyers may increase their profits by choosing sellers who promise high quality or large profits. Furthermore, despite the cheap-talk nature of requests, buyers in our experiment increase their profits by specifically demanding high quality or large profits.
    Keywords: procurement auctions; bilateral communication; social distance; promises; requests; moral hazard
    JEL: C91 D44 D83
    Date: 2023–06
  24. By: Akin A. Cilekoglu (University of Barcelona)
    Abstract: In this paper, I develop a method to estimate the effect of firm behavior on labor market monopsony power. Using China’s accession to WTO for the identification, I employ the proposed empirical framework to analyse the impact of Spanish firms’ exports on their labor market monopsony power. The findings suggest that higher exports raised monopsony power of firms in labor markets between 1996 and 2007. After 2001, more intensely exporting firms reduced their wages by 36-45 percentage points and paid their employees around 39-49 percent of their marginal revenue product. Aligned with increased monopsony power, exporting firms experienced a decline labor productivity and labor share while they employed more low-skilled workers and temporary contracts.
    Keywords: Labor market monopsony, Firm behavior, Exports, Trade JEL classification: J42, D22, F16, F14, J21
    Date: 2023–07
  25. By: Çakir, Metin; Arita, Shawn; Cooper, Joseph C.; Dong, Xiao; Nemec Boehm, Rebecca L.; Perez Castaño, Ana Melissa M.
    Keywords: Marketing, Agricultural and Food Policy, Research Methods/Statistical Methods
    Date: 2023

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