nep-com New Economics Papers
on Industrial Competition
Issue of 2023‒11‒13
fourteen papers chosen by
Russell Pittman, United States Department of Justice

  1. Market structure and performance in mobile markets. The example of Europe By Jeanjean, François; Liang, Julienne
  2. Non-Price Strategies of Marketplaces: A Survey By Belleflamme, Paul; Johnen, Johannes
  3. Antitrust Enforcement Increases Economic Activity By Tania Babina; Simcha Barkai; Jessica Jeffers; Ezra Karger; Ekaterina Volkova
  4. Labor Market Power and Development By Armangué-Jubert, Tristany; Guner, Nezih; Ruggieri, Alessandro
  5. Bidding and Investment in Wholesale Electricity Markets: Discriminatory versus Uniform-Price Auctions By Willems, Bert; Yu, Yueting
  6. The Persistence of Volumetric Pricing By Brennan, Tim
  7. Mergers and Acquisitions in Islamic Banking Sector: An Empirical Analysis on Size Effect, Market Structure, and Operational By Ullah, Nazim; Mat Nor, Fauzias; Abu Seman, Junaidah; Ainna Binti Ramli, Nur; FADLY, AHMED
  8. The Impact of Mergers and Acquisitions on Operational Performance of Islamic Banking sector By Ullah, Nazim
  9. Acquirer’s Operational Performance and Stability of Islamic Banks: Mediation Role of Market Structure By Ullah, Nazim; Mat Nor, Fauzias; Abu Seman, Junaidah; fadly, ahmed; ainna, nur
  10. Substitutes markets with budget constraints: solving for competitive and optimal prices By Simon Finster; Paul Goldberg; Edwin Lock
  11. Optimization of dynamic product offerings on online marketplaces: A network theory perspective By Zhou, Meihua; Angelopoulos, Spyros; Ou, Carol; Liu, Hongwei; Liang, Zhouyang
  12. Drop-Shipping – A Business Model Without Holding Inventory: A Case Study of Online Store By Barcs, Cristian; Pop, Izabela Luiza; Toader, Cezar; Ighian, Diana
  13. Кволсетов индекс као нова мера концентрације: неке емпиријске провере By Bukvić, Rajko
  14. Superstar firms: how the shift from manufacturing to services affects local concentration of sales and jobs By David Autor; Christina Patterson; John Van Reenen

  1. By: Jeanjean, François; Liang, Julienne
    Abstract: In this paper, we address the issue of the appropriate market structure in European mobile markets by presenting empirical evidence on the effect of the number of MNO on investment. Using a structural entry model based on a country-level dataset of 28 European countries, we find that, in average three player markets invest more at country level and offer more data traffic per subscriber than four or more player markets.
    Keywords: Mobile telecommunications, competition, investment, market structure, consumer welfare
    JEL: D43 L11 L96
    Date: 2023
  2. By: Belleflamme, Paul (Université catholique de Louvain, LIDAM/CORE, Belgium); Johnen, Johannes (Université catholique de Louvain, LIDAM/CORE, Belgium)
    Abstract: Two-sided platforms have a great impact on markets nowadays. Especially, online marketplaces design markets and choose many of the rules that govern how buyers and sellers interact. Researchers studied two-sided platforms very actively over the last two decades. We review the economic literature from two angles: we focus on marketplaces and we concentrate on non-price strategies that marketplaces employ to govern interactions (like user steering, self-preferencing, rating and review systems, data and targeting, privacy, and user protection).
    Keywords: Two-Sided Platforms ; Marketplaces ; Platform Governance ; Platform Strategy ; Platform Regulation ; Platform Self-Regulation
    Date: 2023–05–31
  3. By: Tania Babina; Simcha Barkai; Jessica Jeffers; Ezra Karger; Ekaterina Volkova
    Abstract: We hand-collect and standardize information describing all 3, 055 antitrust law suits brought by the Department of Justice (DOJ) between 1971 and 2018. Using restricted establishment-level microdata from the U.S. Census, we compare the economic outcomes of a non-tradable industry in states targeted by DOJ antitrust lawsuits to outcomes of the same industry in other states that were not targeted. We document that DOJ antitrust enforcement actions permanently increase employment by 5.4% and business formation by 4.1%. Using an event-study design, we find (1) a sharp increase in payroll that exceeds the increase in employment, meaning that DOJ antitrust enforcement increases average wages, (2) an economically smaller increase in sales that is statistically insignificant, and (3) a precise increase in the labor share. While we cannot separately measure the quantity and price of output, the increase in production inputs (employment), together with a proportionally smaller increase in sales, strongly suggests that these DOJ antitrust enforcement actions increase the quantity of output and simultaneously decrease the price of output. Our results show that government antitrust enforcement leads to persistently higher levels of economic activity in targeted industries.
    Keywords: antitrust enforcement, economic activity, employment, business formation
    JEL: L4 E24 K21 J21
    Date: 2023–10
  4. By: Armangué-Jubert, Tristany (Barcelona Graduate School of Economics); Guner, Nezih (CEMFI); Ruggieri, Alessandro (CUNEF, Madrid)
    Abstract: Imperfect competition in labor markets can lead to efficiency losses and lower aggregate output. In this paper, we study whether differences in competitiveness of labor markets can help explain differences in GDP per capita across countries. We structurally estimate a model of oligopsony with free entry for countries at different stages of development and show that the labor supply elasticity, which determines the extent of firms' labor market power, is increasing with GDP per capita. Wage mark-downs range from 55 percent among low-income countries to around 23 percent among the richest. Output per capita in poorer countries would increase by up to 69 percent if their labor markets were as competitive as in countries at the top of the development ladder.
    Keywords: labor market power, oligopsony, development, inequality
    JEL: J42 L13 O11 E24
    Date: 2023–10
  5. By: Willems, Bert (Université catholique de Louvain, LIDAM/CORE, Belgium); Yu, Yueting (Tilburg University)
    Abstract: We compare uniform and discriminatory-price auctions in wholesale electricity markets, studying both long-run investment incentives and short-run bidding behaviors. We develop a monopolistic competition model with a continuum of generation technologies ranging from base load to peak load, free entry and uncertain elastic demand. Our findings reveal that discriminatory-price auctions are inefficient because consumers’ willingness to pay exceeds the marginal costs and investment incentives are distorted. Despite having an equal total installed capacity, the generation mix under discriminatory-price auctions skews towards a shortage of base-load technologies. Consequently, this results in a lower long-run consumer surplus.
    JEL: D44 D47 L94
    Date: 2023–08–31
  6. By: Brennan, Tim (Resources for the Future)
    Abstract: How to recover the costs of electricity distribution has become a prominent and controversial issue in the wake of California Public Utilities Commission proposals to reform compensation for solar electricity homeowners who sell into the grid, with subsequent proposals to recover more of the distribution costs through fixed charges based on household income. This debate raises questions about the ubiquity of volumetric pricing for fixed-cost recovery in regulated industries. Ideal cost recovery entails marginal cost pricing of kilowatt-hours delivered, per-user connections, and capacity needed to handle coincident peak use. Remaining uncovered costs of distribution should be recovered by fixed charges. Equity and efficiency considerations suggest assigning fixed charges on the basis of willingness to pay or income, although neither is perfect. Nevertheless, volumetric recovery of fixed costs has persisted for several reasons: mistaken analogies to competitive markets, simplicity, network effects, incumbent resistance, and fairness and rights. Getting pricing right matters not just for general efficiency but also to remove pricing barriers to decarbonization. For this reason, electricity regulators should consider recovering more fixed costs through fixed charges.
    Date: 2023–10–20
  7. By: Ullah, Nazim; Mat Nor, Fauzias; Abu Seman, Junaidah; Ainna Binti Ramli, Nur; FADLY, AHMED
    Abstract: The corporate expansion approach is mergers and acquisitions. The paper aims to analyze the impact of mergers and acquisitions on the Islamic banking sector's operational performance. This study uses empirical research methodologies, such as panel data regression, to examine samples of 10 Islamic banks involved in M&A from 6 countries, gathered from the International Monetary Fund, World Bank, FicthConnect, and Bloomberg from 2004Q1 to 2020Q4. Accounting-based measurements are used to quantify operational success, whereas the Herfindahl-Hirschman Index and the concentration ratio are used to signify market structure. To estimate M&A results, Stata package 14.2 is used (5 years pre and 5 years post). According to the findings, M&A improve the operational performance of Islamic banks. In addition, small-sized banks outperform large and medium-sized banks, market structure (LHHI) degrades M&A performance. Therefore, the paper suggests that Islamic banks should be involved in M&A deals and remove the constraints of size.
    Keywords: M&A, Bank Sizes, Market Structure, Operational Performance, Islamic Bank
    JEL: G34
    Date: 2023–08–08
  8. By: Ullah, Nazim
    Abstract: Merger and acquisition (hereafter M&A) is the business expansion strategy. Islamic bank is the niche banking sector compared to its peers while it is categorized as too small to succeed. The paper aims to analyze the impact of M&A on the operational performance of the Islamic banking sector. This study employs empirical research methods, namely cross-sectional pooled regression and panel data regression to analyse a set of samples consisting of 10 Islamic banks involved in M&A from 6 countries, drawn from the International Monetary Fund (IMF), World bank, FicthConnect and Bloomberg over the years of 2009Q1 to 2018Q4. The operational performance is estimated using accounting-based measures while the Herfindahl-Hirschman Index (HHI) and the concentration ratio (CR) are applied to signify market structure. Total assets, total deposits and operating income variables are used to represent bank size. The findings indicate that bank size shows negative impact on operational performance. While the segregated level of bank size which is larger banks and concentrated market structure have a greater impact on the operational performance of Islamic banks in the post-M&A period. The paper concludes by discussing policy implications for policy-makers and academicians for having the strategic decision on the M&A deal and further research.
    Keywords: Bank Sizes, Islamic Banking, M&A, Market Structure, Operational Performance
    JEL: G34
    Date: 2022–12–07
  9. By: Ullah, Nazim; Mat Nor, Fauzias; Abu Seman, Junaidah; fadly, ahmed; ainna, nur
    Abstract: Merger and acquisition known as a market expansion strategy. This paper examines several factors associated with M&A namely bank size, intermediary role, modes of financing, bank-specific variables, and macro-economic variables on the operational performance and stability along with the mediation role of market structure for Islamic banks. This paper employs panel data techniques and SEM to analyse a set of unbalanced panel samples of 10 Islamic banks during 2004Q1 to 2020Q4 from six countries, namely Qatar, Kuwait, Saudi Arabia, United Arab Emirate, Bahrain, and Pakistan. The results indicate that M&A improve post-M&A performance of Islamic banks while stability does not improve. Interestingly, there is no mediation effects of market structure on the relationship between M&A, operational performance, and stability. Policymakers should emphasis M&A towards the Islamic bank, however, to be stable, it may take more than 5 years.
    Keywords: Merger and Acquisition (M&A); operational performance; bank stability; market structure; Islamic banks.
    JEL: G34
    Date: 2023–03–02
  10. By: Simon Finster; Paul Goldberg; Edwin Lock
    Abstract: Markets with multiple divisible goods have been studied widely from the perspective of revenue and welfare. In general, it is well known that envy-free revenue-maximal outcomes can result in lower welfare than competitive equilibrium outcomes. We study a market in which buyers have quasilinear utilities with linear substitutes valuations and budget constraints, and the seller must find prices and an envy-free allocation that maximise revenue or welfare. Our setup mirrors markets such as ad auctions and auctions for the exchange of financial assets. We prove that the unique competitive equilibrium prices are also envy-free revenue-maximal. This coincidence of maximal revenue and welfare is surprising and breaks down even when buyers have piecewise-linear valuations. We present a novel characterisation of the set of "feasible" prices at which demand does not exceed supply, show that this set has an elementwise minimal price vector, and demonstrate that these prices maximise revenue and welfare. The proof also implies an algorithm for finding this unique price vector.
    Date: 2023–10
  11. By: Zhou, Meihua; Angelopoulos, Spyros (Tilburg University, School of Economics and Management); Ou, Carol (Tilburg University, School of Economics and Management); Liu, Hongwei; Liang, Zhouyang
    Date: 2023
  12. By: Barcs, Cristian; Pop, Izabela Luiza; Toader, Cezar; Ighian, Diana
    Abstract: Drop-shipping is a recently new, commonly used fulfilment method, especially in e-commerce sites. By applying dropshipping, many businesses and e-commerce sites have the possibility to reach a much greater customer base, as well as manage their business without holding, in most cases, any product as stock. This order fulfilment method has made possible the existence of drop-shipping as a business model, people from all over the world being able to sell items internationally, without ever seeing them. Also, the start-up cost for such a business is rather low, since there is no need for deposit means, a physical store, or even employees. However, the low barrier of entry this business model determines many people to try it, which is why the competition is very high. Even though the business looks easy, the low barrier of entry and the great competition means that only a small fraction of the new drop-shipping businesses get profitable. This paper will analyze what are the odds of turning such a business profitable while also looking at which are the pillars of drop shipping and most importantly, how the people who succeed are doing it. The proposed theoretical model is illustrated through a case study conducted at a dropshipping store that is selling back posture correctors. The results of the study are useful both, for practitioners and scholars interested in the topic of drop-shipping.
    Keywords: drop-shipping, e-commerce, business, management
    JEL: M21 M31
    Date: 2022–05–31
  13. By: Bukvić, Rajko
    Abstract: Serbian: Анализа концентрације, као једног од основних појмова у економској теорији, већ дуги низ деценија привлачи пажњу истраживача и креатора економске политике. У оквиру великог броја приступа и метода за њено мерење издвојила се класа тзв. апсолутних мера, а у њој индекс концентрације Cm (најчешће C4) и Хиршман-Херфиндалов индекс CH. Временом су развијене и друге мере, као што је Розенблатов, а једна од последњих је Кволсетов индекс. У раду се на основу података за банковни сектор Србије (без Косова и Метохије) за период 2016–2021 анализира понашање ових индекса и њихова међусобна корелисаност. Показано је да су три индекса доста чврсто корелисана, док кретање Розенблатовог у значајној мери одступа. English: Concentration analysis, as one of the basic concepts in economic theory, has been attracting the attention of researchers and economic policy makers for many decades. Within the large number of approaches and methods for its measurement, a class of so-called absolute measures, and in it the concentration index Cm (most often C4) and the Hirschman-Herfindahl index CH. Over time, other measures were developed, such as Rosenbluth's, and one of the last is the Kvålseth index. The paper analyzes the behavior of these indices and their mutual correlation based on data for the banking sector of Serbia (without Kosovo and Metohija) for the period 2016-2021. It is shown that the three indices are quite strongly correlated, while the movement of Rosenbluth’s deviates significantly.
    Keywords: концентрација, показатељи, индекс концентрације, Хиршман-Херфиндалов индекс, Розенблатов индекс, Кволсетов индекс, емпиријске провере, concentration, indicators, concentration index, Hirschman-Herfindahl index, Rosenbluth’s index, Kvålseth index, empirical tests
    JEL: C38 G21 L10 L19
    Date: 2023
  14. By: David Autor; Christina Patterson; John Van Reenen
    Abstract: The leading US firms in many industries have increased their national market share substantially over the last four decades - making these industries more concentrated. But locally the picture is more complex. David Autor, Christina Patterson and John Van Reenen show that while the local concentration of sales in the US has also risen, the concentration of local employment has fallen. These divergent trends are driven by the same underlying economic factor: the shift from manufacturing to services.
    Keywords: market share, growth, Employment, Technological change
    Date: 2023–06–20

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