nep-com New Economics Papers
on Industrial Competition
Issue of 2023‒07‒24
twenty-two papers chosen by
Russell Pittman
United States Department of Justice

  1. Data Portability and Competition: Can Data Portability Increase both Consumer Surplus and Profits? By Jeon, Doh-Shin; Menicucci, Domenico
  2. Bye-box: An Analysis of Non-Promotion on the Amazon Marketplace 03.06.2022 By Matthias Hunold; Ulrich Laitenberger; Guillaume Thébaudin
  3. Stable cartel configurations: the case of multiple cartels By Khan, Abhimanyu; Peeters, Ronald
  4. Imperfect Collusion On Surveilled Markets With Free Entry By Ludwig von Auer; Tu Anh Pham
  5. Coordination in the Fight Against Collusion By Rey, Patrick; Iossa, Elisabetta; Loertscher, Simon; Leslie M. Marx,
  6. 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. By Avichai Snir; Daniel Levy
  7. VAT Pass-Through and Competition: Evidence from the Greek Islands By Lydia Dimitrakopoulou; Christos Genakos; Themistoklis Kampouris; Stella Papadokonstantaki
  8. Market Segregation in the Presence of Customer Discrimination By J. Atsu Amegashie
  9. Competition modulates buyers’ reaction to sellers’ cheap talk By Rafiq Friperson; Hessel Oosterbeek; Bas van der Klaauw
  10. Market Power in the U.S. Beef Packing Industry By Bolotova, Yuliya V.
  11. Do Hospital Mergers Reduce Waiting Times? Theory and Evidence from the English NHS By Cirulli, Vanessa; Marini, Giorgia; Marini, Marco A.; Straume, Odd Rune
  12. Lobbying or Innovation: Who Does What Against Foreign Competition By Olimpia Cutinelli Rendina
  13. Market power and profitability of organic versus conventional dairy farmers in the EU By Hirsch, Stefan; Koppenberg, Maximilian
  14. Strategic Incentives and the Optimal Sale of Information By Rosina Rodríguez Olivera
  15. The Proper Scope of Government Reconsidered: Asymmetric Information and Incentive Contracts By Schmitz, Patrick W.
  16. Price Pass-Through Along the Supply Chain:Evidence from PPI and CPI Microdata By Ahlander, Edvin; Carlsson, Mikael; Klein, Mathias
  17. Strategic Limitation of Market Accessibility: Search Platform Design and Welfare By Christopher Teh; Chengsi Wang; Makoto Watanabe
  19. A Game of Competition for Risk By Louis Abraham
  20. Retail Intermediation and Price Premium of Local Foods By Ge, Houtian; Gomez, Miguel I.; Richards, Timothy J.
  21. A Unified Theory of Growth, Cycles and Unemployment - Part I: Technology, Competition and Growth By Pollak, Andreas
  22. Impact of Environmental Regulation on Cross-Border MAs in high- and low-polluting sectors By Federico Carril-Caccia; Juliette Milgram Baleix

  1. By: Jeon, Doh-Shin; Menicucci, Domenico
    Abstract: We study how data portability aspects consumer surplus and firms profits in a two-period model with a switching cost where two rms compete under a non-negative pricing constraint. The firms can circumvent the constraint by tying another complementary free service (called "freebies") with the original service. We consider a general framework of incomplete pass-through of freebies into consumer benet, which includes the two extreme cases of no pass through and full pass through. Regarding the effect on consumer surplus, data portability involves a trade-off between intensifying competition after consumer lock-in and reducing rent dissipation before consumer lock-in. For an intermediate range of pass-through rates, data portability increases both consumer surplus and profits.
    JEL: D21 D43 L13 L15
    Date: 2023–06–27
  2. By: Matthias Hunold (Universität Siegen [Siegen]); Ulrich Laitenberger (Télécom Paris, CRED - Centre de Recherche en Economie et Droit - Université Paris-Panthéon-Assas); Guillaume Thébaudin (Télécom Paris)
    Abstract: We study seller and product recommendations of the hybrid e-commerce platform Amazon. Using web-scraped data, we find that Amazon makes the visibility of offers of third-party suppliers in the "buybox" dependent on prices on competing marketplaces like Walmart and eBay. Amazon's own offers are visible regardless of their competitiveness. We find that the absence of seller recommendations makes recommendations to related products more effective and Amazon tends to steer consumers in these situations more often to products it sells itself. We discuss that this behavior is difficult to reconcile with the hypothesis of an independent marketplace operator.
    Keywords: Amazon marketplace buybox self-preferencing algorithm bias recommendation algorithms D40 L42 L81, Amazon marketplace, buybox, self-preferencing, algorithm bias, recommendation algorithms D40, L42, L81
    Date: 2022–06–03
  3. By: Khan, Abhimanyu; Peeters, Ronald
    Abstract: We develop a framework to analyse stability of cartels in differentiated Cournot oligopolies when multiple cartels may exist in the market. The consideration of formation of multiple cartels is in direct contrast to the existing literature which assumes, without further justification, that at most a single cartel may be formed, and we show that this consideration has markedly different implications for cartel stability. We define a cartel configuration to be stable if: (i) a firm in a cartel does not find it more profitable to leave the cartel and operate independently, (ii) a firm that operates independently does not find it more profitable to join an existing cartel, (iii) a firm in a cartel does not find it more profitable to join another existing cartel or form a new cartel with an independent firm, and (iv) two independent firms do not find it more profitable to form a new cartel. We show that now, when multiple cartels may exist in the market, a single cartel is never stable.
    Keywords: multiple cartels; stability; differentiated market.
    JEL: C70 D43 L13
    Date: 2023–06–26
  4. By: Ludwig von Auer; Tu Anh Pham
    Abstract: Surveys of cartel proceedings reveal that illegal cartels usually (1) attempt to minimize the risk of detection, (2) achieve merely imperfect levels of collusion, (3) compete against some fringe firms, and (4) adjust to market entries and exits. By contrast, existing oligopoly models of collusive behavior consider only some of the four listed stylized facts and, thus, run the risk of missing important interdependencies between them. Therefore, the present paper develops a general quantity leadership model that simultaneously accommodates all four stylized facts. Within this model, an imperfectly colluding group of firms competes against independent fringe rivals. The market is surveilled by an antitrust authority that has three different policy instruments at its disposal: Ensuring free market access, obstructing collusion, and discouraging collusion through law enforcement. The results of the model indicate that the latter two instruments are rather ineffective.
    Keywords: antitrust, fringe, oligopoly, stability, sustainability
    JEL: L0 L1
    Date: 2023
  5. By: Rey, Patrick; Iossa, Elisabetta; Loertscher, Simon; Leslie M. Marx,
    Abstract: While antitrust authorities strive to detect, prosecute, and thereby deter collusive conduct, entities harmed by that conduct are also advised to pursue their own strategies to deter collusion. The implications of such delegation of deterrence have largely been ignored, however. In a procurement context, we find that buyers may prefer to accommodate rather than deter collusion among their suppliers. We also show that a multi-market buyer, such as a centralized procurement authority, may optimally deter collusion when multiple independent buyers would not, consistent with the view that “large” buyers are less susceptible to collusion.
    Keywords: Collusion; Cartel; Auction; Procurement; Reserves; Sustainability and initiation of collusion; Coordinated effects
    JEL: D44 D82 H57 L41
    Date: 2023–06–05
  6. By: Avichai Snir (Bar-Ilan University); Daniel Levy
    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: 2023–07
  7. By: Lydia Dimitrakopoulou; Christos Genakos; Themistoklis Kampouris; Stella Papadokonstantaki
    Abstract: We examine how competition affects VAT pass-through in isolated oligopolistic markets as defined by the Greek islands. Using daily gasoline prices and a difference-in-differences methodology, we investigate how changes in VAT rates are passed through to consumers in islands with different market structure. We show that pass-through increases with competition, going from 50% in monopoly to around 80% in more competitive markets, but remains incomplete. We also discover a rapid rate of adjustment for VAT changes, as well as a positive relationship between competition and the rate of price adjustment. Finally, we document higher pass-through for products with more inelastic demand.
    Keywords: Pass-through, tax incidence, gasoline, Value added tax (VAT), market structure, competition, Greek islands
    JEL: H22 L1
    Date: 2023
  8. By: J. Atsu Amegashie
    Abstract: I consider a market with two firms, a minority group of customers, and a bigoted (racist, ethnocentric, xenophobic, or sexist) majority group of customers. There exists a Nash equilibrium with full segregation in which a low-price firm serves only the minority and a high-price firm serves only the majority. There is also a partial-integration equilibrium in which a high-price firm serves only the majority while a low-price firm serves both the minority and majority. Paradoxically, if the minority group is sufficiently big and the majority is sufficiently prejudiced, then both equilibria hold in the sense that the high-price firm does not lose customers, although its competitor charges a lower price. If the firms can price discriminate, none of these equilibria will hold. The partial integration equilibrium depends on how the prejudice of the majority is modelled.
    Keywords: customer discrimination, majority, markets, minority, segregation
    JEL: J15
    Date: 2023
  9. By: Rafiq Friperson (Vrije Universiteit Amsterdam); Hessel Oosterbeek (University of Amsterdam); Bas van der Klaauw (Vrije Universiteit Amsterdam)
    Abstract: Sellers in real-estate markets, on internet platforms, in auction houses, and so forth, routinely pose non-binding price requests. Using a laboratory experiment, we examine how competition moderates the way such cheap-talk communication affects trade between buyers and sellers. For bilateral trade, the literature has identified efficiency, anchoring, and granularity effects of cheap-talk communication on negotiation outcomes. Our results show that most of these effects survive with competition, although some of them become weaker. Our main findings are the following: (i) The ability of sellers to make non-binding price requests has a positive effect on efficiency in that it helps trading partners close marginal deals both in bilateral bargaining and in competition; (ii) Competition reduces the informativeness of the price requests and weakens the anchoring effect of the level of the price request; (iii) Sellers communicating more granular price requests attract more granular buyer bids; (iv) The granularity of the seller’s price request does not impact the selling price.
    Keywords: Cheap-talk communication, efficiency, anchoring, price granulatiry, laboratory experiment
    JEL: C72 C92 D91
    Date: 2023–06–22
  10. By: Bolotova, Yuliya V.
    Abstract: This case study is motivated by recent developments in the U.S. beef packing industry involving allegations of an illegal exercise of buyer and seller market power by the four largest beef packers in the country in the markets for fed cattle and beef products, respectively. In 2019, fed cattle producers and beef buyers filed class action antitrust lawsuits against these companies alleging that they engaged in an unlawful conspiracy with the purpose of decreasing fed cattle prices and increasing wholesale and retail prices of beef as early as January 2015 and thus violated Section 1 of the Sherman Act. The case study focuses on applications of economic models that may explain conduct and performance of the beef packing industry using the perspectives of plaintiffs and defendants in the on-going cattle and beef antitrust litigation. The case study also introduces a basic empirical analysis of beef production, beef values, and marketing margins in the beef supply chain based on publicly available data reported by the U.S. Department of Agriculture. The intended audiences are undergraduate and graduate students, as well as extension and outreach communities. The teaching note1 summarizes student learning objectives and teaching strategies, and also includes multiple-choice questions, as well as suggested answers and guidance to analytical, discussion, and multiple-choice questions.
    Keywords: Demand and Price Analysis, Livestock Production/Industries
    Date: 2023–07
  11. By: Cirulli, Vanessa; Marini, Giorgia; Marini, Marco A.; Straume, Odd Rune
    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: Health Economics and Policy, Productivity Analysis, Public Economics
    Date: 2023–07–04
  12. 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
  13. By: Hirsch, Stefan; Koppenberg, Maximilian
    Keywords: Agribusiness, Production Economics, Research Methods/Statistical Methods
    Date: 2023
  14. By: Rosina Rodríguez Olivera
    Abstract: I consider a model in which a monopolist data-seller owners information to privately informed data-buyers who play a game of incomplete information. I characterize the data-seller's optimal menu, which screens between two types of data-buyers. Data-buyers' preferences for information cannot generally be ordered across types. I show that the nature of data-buyers' preferences for information allows the data-seller to extract all surplus. In particular, the data-seller owners a perfectly informative experiment to the data-buyer with highest willingness to pay and a partially informative experiment, which makes the data-buyer with the highest willingness to pay for perfect information indifferent between both experiments. I also show that the features of the optimal menu are determined by the interaction between data-buyers' strategic incentives and the correlation of their private information. Namely, the data-seller owners two informative experiments even when data-buyers would choose the same action without supplemental information if data-buyers: i) have coordination incentives and their private information is negatively correlated or ii) have anti-coordination incentives and their private information is positively correlated.
    Keywords: Screening, Information, Strategic incentives
    JEL: D80 D82
    Date: 2023–06
  15. By: Schmitz, Patrick W.
    Abstract: We revisit the contract-theoretic literature on privatization initiated by Hart et al. (1997). This literature has two major shortcomings. First, it is focused on ex-ante investment incentives, whereas ex-post inefficiencies which are ubiquitous in the real world cannot be explained. Second, ownership does not matter when incentive contracts can be written. Both shortcomings are due to the fact that this literature has studied the case of symmetric information only. We explore how asymmetric information leads to different kinds of ex-post inefficiencies depending on the ownership structure. Moreover, we show that under asymmetric information ownership matters even when incentive contracts are feasible.
    Keywords: incomplete contracts; privatization; control rights; asymmetric information; investment incentives
    JEL: D23 D82 D86 H11 L32
    Date: 2023–06
  16. By: Ahlander, Edvin (Research Department, Central Bank of Sweden); Carlsson, Mikael (Uppsala University, UCLS and Sveriges Riksbank, Research Division); Klein, Mathias (Research Department, Central Bank of Sweden)
    Abstract: We examine the pass-through from producer to consumer prices, using product-group data derived from the microdata underlying the official Swedish PPI and CPI indices. We find a robust pass-through, in line with theoretical models emphasizing production inter-linkages between sectors. The results also display important heterogeneity in pricing behavior both along the supply chain, as well as across product groups. That is, upstream pricing seems much more rigid than downstream pricing in the supply chain and the pass-through across CPI products varies substantially with price-change frequencies. The recent COVID- and high-inflation periods do not change the main results.
    Keywords: Price pass-through; consumer and producer prices; microdata
    JEL: E30 E31 E32
    Date: 2023–06–01
  17. By: Christopher Teh; Chengsi Wang; Makoto Watanabe
    Abstract: This paper explores the relationship between market accessibility and various participants’ welfare in an intermediated directed-search market. For a general class of meeting technologies, we provide a necessary and sufficient condition under which efficiency requires imperfect accessibility, such that each seller’s listing is only observed by some but not all buyers. We show that the platform optimally implements the efficient outcome, but fully extracts surplus from the transactions it intermediates. We also find that in general, buyers prefer to minimize market accessibility, while sellers prefer a weakly greater accessibility level than that which is socially efficient. The efficiency of imperfect accessibility is robust to the introduction of a second chance for unmatched buyers to search.
    Keywords: meeting technology, directed search, platform, intermediation, accessibility
    JEL: D83 J64 M37
    Date: 2023
  18. By: Sylvain Dejean (ULR - La Rochelle Université, NUDD - Usages du Numérique pour le Développement Durable - ULR - La Rochelle Université); Marianne Lumeau (UA - Université d'Angers, GRANEM - Groupe de Recherche Angevin en Economie et Management - UA - Université d'Angers - AGROCAMPUS OUEST - Institut National de l'Horticulture et du Paysage); Stéphanie Peltier (NUDD - Usages du Numérique pour le Développement Durable - ULR - La Rochelle Université, ULR - La Rochelle Université)
    Abstract: This article analyzes the share of attention that the French allocate to different media groups, based on Prat [2018]. Based on a survey of 6, 000 individuals, we show that the media market is concentrated. The top four groups concentrate 47% of French people's attention. The public group (Radio France and France Télévision) is by far the most concentrated (19.8%), except among the youngest, for whom Meta has the strongest media power. We also show that the planned merger between the TF1 and M6 groups would have increased the level of concentration on the market without calling into question the leading position of either the public group or Meta. This work highlights a new tool for measuring concentration in the media market.
    Abstract: Cet article analyse la part d'attention que les Français allouent aux différents groupes médiatiques en se basant sur Prat [2018]. A partir d'une enquête diffusée auprès de 6 000 individus, nous montrons que le marché des médias est concentré. Les quatre premiers groupes concentrent 47% de l'attention des Français. Le groupe public (Radio France et France Télévision) est de loin celui qui concentre le plus l'attention des consommateurs (19, 8%), sauf chez les plus jeunes pour qui Meta dispose du pouvoir médiatique le plus fort. Nous montrons également que la fusion projetée entre les groupes TF1 et M6 aurait accru le niveau de concentration sur le marché sans remettre en cause la position de leader du groupe public ou de Meta. Ce travail met en lumière un nouvel outil de mesure de la concentration sur le marché des médias.
    Keywords: media, information, concentration, part d'attention, capture médiatique, fusions media, news, attention share, media capture
    Date: 2023–06–10
  19. By: Louis Abraham (UP1 - Université Paris 1 Panthéon-Sorbonne, PRISM Sorbonne - Pôle de recherche interdisciplinaire en sciences du management - UP1 - Université Paris 1 Panthéon-Sorbonne)
    Abstract: In this study, we present models where participants strategically select their risk levels and earn corresponding rewards, mirroring real-world competition across various sectors. Our analysis starts with a normal form game involving two players in a continuous action space, confirming the existence and uniqueness of a Nash equilibrium and providing an analytical solution. We then extend this analysis to multi-player scenarios, introducing a new numerical algorithm for its calculation. A key novelty of our work lies in using regret minimization algorithms to solve continuous games through discretization. This groundbreaking approach enables us to incorporate additional real-world factors like market frictions and risk correlations among firms. We also experimentally validate that the Nash equilibrium in our model also serves as a correlated equilibrium. Our findings illuminate how market frictions and risk correlations affect strategic risk-taking. We also explore how policy measures can impact risk-taking and its associated rewards, with our model providing broader applicability than the Diamond-Dybvig framework. We make our methodology and code open-source 1. Finally, we contribute methodologically by advocating the use of algorithms in economics, shifting focus from finite games to games with continuous action sets. Our study provides a solid framework for analyzing strategic interactions in continuous action games, emphasizing the importance of market frictions, risk correlations, and policy measures in strategic risk-taking dynamics.
    Date: 2023–05–31
  20. By: Ge, Houtian; Gomez, Miguel I.; Richards, Timothy J.
    Keywords: Marketing, Agribusiness, Institutional and Behavioral Economics
    Date: 2023
  21. By: Pollak, Andreas
    Abstract: Part I of this paper proposes a model of endogenous growth, in which the scale of individual production units is endogenously determined in a novel way. The basic model has desirable growth and static properties, including the following: (1) The economy exhibits productivity growth at a constant rate that only depends on technology parameters; (2) at the aggregate level, the economy is identical to the neoclassical growth model, thus (3) featuring the full medium-term capital dynamics familiar from this framework; moreover, (4) the model explains why the aggregate production function and many industries exhibit constant returns to scale; (5) there are no unrealistic constraints on the firm-level production technology; in particular, production is not linear in a capital-like input and (6) the notion that R&D investments become less effective with rising technology levels is accounted for; (7) generally, there are no knife-edge conditions or implausible scale effects; (8) no particular assumptions regarding market power or the competitive structure of industries are required; markets can be modelled as perfectly competitive, but the framework is robust to alternative assumptions such as monopolistic competition; (9) being based on the quality-ladder idea, the model can be extended to feature the rich industry-level dynamics that have been studied using Schumpeterian growth models; (10) in its basic version, the model is far simpler while being more general than popular models of endogenous growth.
    Keywords: endogenous growth, technology, market structure
    JEL: E2 O3 O4
    Date: 2022–12–14
  22. By: Federico Carril-Caccia (Universidad de Granada, Departamento de Economia Española e Internacional); Juliette Milgram Baleix
    Abstract: We test the influence of environmental regulation (ER) on the location decision of cross-border Mergers and Acquisitions (M&As) for a large sample of countries, sectors, and years using a structural gravity model. Our results confirm the pollution haven hypothesis in highly polluting sectors, according to which more stringent ER makes countries less attractive to foreign investors planning to invest through M&As compared with domestic investors. Policies that set quantitative limits on emissions discourage investments in dirty sectors, while taxes on emissions only have a negative impact on clean sectors. The impact of ER differs depending on the type of investors and investees, reflecting the fact that investments in developed countries and BRICS respond to different motivations. In emerging countries, lax ER could attract significantly more inward M&As. In developed countries, ER has a less discouraging effect.
    Keywords: Environmental stringency, pollution havens, M&As, structural gravity, polluting sectors.
    Date: 2023–06–13

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