nep-com New Economics Papers
on Industrial Competition
Issue of 2023‒12‒04
seventeen papers chosen by
Russell Pittman, United States Department of Justice

  1. Market size, markups and international price dispersion in the cement industry By Fabrizio Leone; Rocco Macchiavello; Tristan Reed
  2. Imperfect price information, market power, and tax pass-through By Montag, Felix; Mamrak, Robin; Sagimuldina, Alina; Schnitzer, Monika
  3. The anatomy of a hospital system merger: the patient did not respond well to treatment By Martin Gaynor; Adam Sacarny; Raffaella Sadun; Chad Syverson; Shruthi Venkatesh
  4. Patents that match your standards: firm-level evidence on competition and innovation By Antonin Bergeaud; Julia Schmidt; Riccardo Zago
  5. A Model of Greedflation By Paul Scanlon;
  6. Evaluating merger effects By Christos Genakos; Andreas Lamprinidis; James Walker
  7. Opposing firm-level responses to the China shock: output competition versus input supply By Philippe Aghion; Antonin Bergeaud; Matthieu Lequien; Marc J. Melitz; Thomas Zuber
  8. Size and Survival of Entrants to Retail Banking By David A. Benson; Vitaly M. Bord; Aaron Garner; Charles Taragin
  9. Foreign Competition and Innovation By Elhanan Helpman
  10. Big Telcos Aren’t Necessarily Better: A Case Study of EU versus US Market Concentration By Bryson, Joanna J.; Malikova, Helena; Garbe, Lisa; Backovsky, David
  11. Oligopoly competition between satellite constellations will reduce economic welfare from orbit use By Julien Guyot; Akhil Rao; Sebastien Rouillon
  12. Industrieplattformen: Eine neue Form der Handlungskoordination in der Wirtschaft By Dolata, Ulrich
  13. A Critical Review of the Common Ownership Literature By Kristopher Gerardi; Michelle Lowry; Carola Schenone
  14. A comment on "The Effects of Banking Competition on Growth and Financial Stability" By Calef, Andrea; Chzhen, Sya In; Mandas, Marco; Motoki, Fabio
  15. Firm Concentration & Job Design: The Case of Schedule Flexible Work Arrangements By Abi Adams-Prassl; Maria Balgova; Matthias Qian; Tom Waters
  16. Des TER plus performants ? La mise en concurrence ne pourra pas tout By Christian Desmaris; Guillaume Monchambert
  17. Green ammonia supply chain and associated market structure: an analysis based on transaction cost economics By Hanxin Zhao

  1. By: Fabrizio Leone; Rocco Macchiavello; Tristan Reed
    Abstract: Prices for several intermediate inputs, including cement, are higher in developing economies - particularly in Africa. Combining data from the International Comparison Program with a global directory of cement plants we estimate an industry equilibrium model to distinguish between drivers of international price dispersion: demand, costs, conduct, and entry. Developing economies feature both higher marginal costs and higher markups. African markets are not characterized by higher barriers to entry and, if anything, feature relatively more competitive conduct. The small size of many national markets, however, limits entry and competition and explains most of the higher markups. Policy implications are discussed.
    Keywords: International price dispersion, market power, market size, markup, cement, Africa
    Date: 2022–07–19
  2. By: Montag, Felix; Mamrak, Robin; Sagimuldina, Alina; Schnitzer, Monika
    Abstract: Pass-through determines how consumers respond to taxes. We investigate the impact of imperfect price information on pass-through of commodity taxes. Our theoretical model predicts that the pass-through rate increases with the share of well-informed consumers. Pass-through is higher for the minimum price, paid by well-informed consumers, than for the average price, paid by uninformed consumers. Moreover, passthrough to the average price is non-monotonic with respect to the number of sellers. An empirical analysis of multiple recent tax changes in the German and French retail fuel markets confirms our theoretical predictions. Our results have implications for tax policy and shed light on the relative effectiveness of Pigouvian taxes versus regulation.
    Keywords: pass-through, taxes, imperfect information, competition
    Date: 2023
  3. By: Martin Gaynor; Adam Sacarny; Raffaella Sadun; Chad Syverson; Shruthi Venkatesh
    Abstract: Despite the continuing US hospital merger wave, it remains unclear how mergers change, or fail to change, hospital behavior and performance. We open the "black box" of hospital practices through a mega-merger between two for-profit chains. Benchmarking the merger's effects against the acquirer's stated aims, we show they achieved some of their goals, harmonizing electronic medical records and sending managers to target hospitals. Post-acquisition managerial processes were similar across the merged chain. However, these interventions failed to drive detectable gains in performance. Our findings demonstrate the importance of organizations for merger research in health care and the economy more generally.
    Keywords: health care, hospital mergers, US
    Date: 2022–03–31
  4. By: Antonin Bergeaud; Julia Schmidt; Riccardo Zago
    Abstract: When a technology becomes the new standard, the firms that are leaders in producing this technology have a competitive advantage. Matching the semantic content of patents to standards and exploiting the exogenous timing of standardization, we show that firms closer to the new technological frontier increase their market share and sales. In addition, if they operate in a very competitive market, these firms also increase their R&D expenses and investment. Yet, these effects are temporary since standardization creates a common technological basis for everyone, which allows followers to catch up and the economy to grow.
    Keywords: standardization, patents, competition, innovation, text mining
    Date: 2022–10–24
  5. By: Paul Scanlon (Department of Economics, Trinity College Dublin);
    Abstract: I present a model where firms' pricing power increases with the volatility of the general price level. Confronted with a change in the price of a good, consumers solve a signal extraction problem to infer the good's relative price. Yet general price volatility obscures price signals, and consumers attribute part of any price change to variation in the price level. Ultimately, imperfect information confers firms with greater market power, raises the profit share, and magnifies inflationary shocks. These predictions are in line with recent empirical evidence.
    Keywords: Pricelevel, Inflation, InformationalFrictions, InflationVolatility, CorporateProfits, Markups
    JEL: E30 E31 E32 E52
    Date: 2023–11
  6. By: Christos Genakos; Andreas Lamprinidis; James Walker
    Abstract: This paper proposes a new algorithm with which to identify the potential effect of mergers by comparing the outcomes of interest in areas of overlap for the merging parties vis-a-vis areas of no overlap within a difference-in-differences estimation framework. Utilizing our proposed algorithm enables researchers and policymakers to perform retrospective merger evaluation studies that look at the effects of mergers on both price and non-price aspects. We demonstrate the applicability and value of our proposed methodology by examining the effects on price and product variety of four mergers of the late 1980s and the 1990s on the U.K. car market.
    Keywords: mergers, ex post policy evaluation, automobile industry
    Date: 2023–05–15
  7. By: Philippe Aghion; Antonin Bergeaud; Matthieu Lequien; Marc J. Melitz; Thomas Zuber
    Abstract: We decompose the "China shock" into two components that induce different adjustments for firms exposed to Chinese exports: an output shock affecting firms selling goods that compete with similar imported Chinese goods, and an input supply shock affecting firms using inputs similar to the imported Chinese goods. Combining French accounting, customs, and patent information at the firm-level, we show that the output shock is detrimental to firms' sales, employment, and innovation. Moreover, this negative impact is concentrated on low-productivity firms. By contrast, we find a positive effect - although often not significant - of the input supply shock on firms' sales, employment and innovation.
    Keywords: Competition shock, patent, firms, import
    Date: 2022–11–30
  8. By: David A. Benson; Vitaly M. Bord; Aaron Garner; Charles Taragin
    Abstract: The establishment of new banks and branches is especially important in the banking sector. Many consumers still use physical bank branches to access banking services (Annenberg et al, 2018; Jiang, Yu, and Zhang, 2023).
    Date: 2023–09–01
  9. By: Elhanan Helpman
    Abstract: Empirical studies have found that enhanced foreign competition can encourage or discourage innovation. To address this relationship, I examine a market structure in which a small number of large multi-product oligopolists compete with a large number of small single-product firms in the same industry. The single-product firms are short-lived while the multi-product firms live forever, and the large firms invest in innovation in order to enlarge their product spans. All firms export. I show that an increase in the competitiveness of foreign firms can increase or reduce innovation efforts of a large multi-product firm. Moreover, changes in the incentives to innovate can be different for more-productive and less-productive oligopolists. As a result, aggregate sectoral innovation may rise or decline, depending on the productivity distribution of the oligopolists. I also show that changes in short-term operating profits may not be aligned with changes in the incentives to invest in innovation.
    JEL: D43 F1 L1
    Date: 2023–11
  10. By: Bryson, Joanna J. (Hertie School); Malikova, Helena; Garbe, Lisa; Backovsky, David
    Abstract: Telecommunications companies (telcos) provide infrastructure essential to the delivery of digital content. The competitiveness of European Union businesses is presently seen as critically dependent on expansion of next-generation communication technologies. Yet, EU telcos are displaying returns on capital that disappoint private investors, leading in some cases to depressed share prices, and potentially making them vulnerable to takeovers bids by financial investors. Given their essential role, the prospect of EU telcos falling into mostly foreign-owned, fiercely profit-maximizing, and/or cost-cutting investors is unappealing for policy makers, at both the national and the European level. One solution suggested by the telcos themselves is that they be allowed to consolidate. Economic theory does not provide a clear answer to how such concentration might affect investment in infrastructure. In this paper, we provide a comparative empirical analysis of the relationship between market concentration and investment in infrastructure in the telco sector. First, we compare investment rates in infrastructure by major telco companies in both the EU and the more concentrated US market. We find more value being returned to customers in the form of infrastructure investment in the less-concentrated EU market. Second, we compare telcos' profitability with that of other corporations involved in the information or ``eye-ball'' value chain. We find operating profits of telcos on both sides of the Atlantic are broadly in line with other companies of the value chain, with the notable exception of the highly concentrated digital ad exchange business. This evidence suggests that lack of incentives rather than lack of ability explains the larger portion of profits invested into infrastructure in the EU compared to the US. Rather than allowing market concentration, which could raise consumer prices and lower infrastructure investment incentives, EU regulators might consider other fund-raising mechanisms, such as redistributing profits from digital ad exchanges.
    Date: 2023–01–14
  11. By: Julien Guyot (BSE - Bordeaux Sciences Economiques - UB - Université de Bordeaux - CNRS - Centre National de la Recherche Scientifique); Akhil Rao; Sebastien Rouillon (BSE - Bordeaux Sciences Economiques - UB - Université de Bordeaux - CNRS - Centre National de la Recherche Scientifique)
    Abstract: Orbital space enables many essential services, such as weather forecasting, global communication, navigation, Earth observation for environmental and agricultural management, and national security applications. Orbit use is increasingly defined by firms launching coordinated fleets—"constellations"—of satellites into low-Earth orbit. These firms operate in markets with few or no competitors, such as the market for broadband internet provision to rural areas. How will oligopolistic competition shape the allocation of orbital space? We analyze orbital-use patterns and economic welfare when two profit-maximizing firms operate satellite constellations with sophisticated collision avoidance systems. We compare this duopoly equilibrium to public utility constellations designed and regulated to maximize economic welfare from orbit use. We show that imperfect competition reduces economic welfare from orbit use by up to 12%—$1.1 billion USD—per year and distorts the allocation of orbital space. The nature of the distortion depends on the magnitude of constellation-related environmental damages. When damages are low, economic welfare is maximized by larger-than-equilibrium constellations. When damages are high, economic welfare is maximized by smaller-than-equilibrium constellations. Between the growing commercial and national interests in outer space and the importance of low-Earth orbit to space exploration, orbit-use management is likely to be a fruitful and policy-relevant area for economic research. We conclude with a discussion of future research directions in orbit-use management relevant to policymakers around the world.
    Keywords: Space economics, Satellites, Oligopoly, Common-pool resources, Game theory
    Date: 2023–10–16
  12. By: Dolata, Ulrich
    Abstract: Dieses Discussion Paper ist ein Plädoyer für eine dringend notwendige Perspektivverschiebung: Von der Konzentration der sozialwissenschaftlichen Forschung auf die im Alltagsleben allgegenwärtigen Plattformen des konsum- und kommunikationsbasierten Internets hin zur Untersuchung der weit weniger im Fokus der Aufmerksamkeit stehenden plattformorientierten Reorganisation industrieller Distributions-, Produktions- und Innovationsprozesse. Im Zentrum dieses explorativen Textes stehen zwei Fragen. Erstens: Was unterscheidet Industrieplattformen von den Plattformen, die das konsum- und kommunikationsorientierte Internet prägen? Lassen sich typische Eigenheiten und übergreifende Charakteristika plattformbasierter Arbeits- und Organisationsformen in der Industrie herausarbeiten? Und zweitens: Schält sich mit Plattformen eine eigenständige Organisations- und Koordinationsform industrieller Markt-, Produktions- und Innovationsprozesse heraus, die sich insbesondere von organisierten Netzwerken substanziell absetzt? Der Text unternimmt eine empirische Kartierung und Einordnung des noch wenig erschlossenen Feldes und erörtert in theoretisch-konzeptioneller Perspektive, warum Plattformen als eine Organisationsform sui generis begriffen werden sollten, deren dominierender Koordinationsmodus als regelbasierte Kuratierung bezeichnet werden kann.
    Abstract: This discussion paper is a plea for an urgently needed shift in perspective: from the concentration of social science research on the ubiquitous platforms of the consumption- and communication-based Internet to the investigation of the platform-oriented reorganization of industrial distribution, production, and innovation processes, which has so far received far less attention. This exploratory text focuses on two questions. First, what distinguishes industrial platforms from the platforms that characterize the consumption- and communication-oriented Internet? Can typical peculiarities and overarching characteristics of platform-based forms of work and organization in industry be identified? And second, do platforms represent a specific form of organization and coordination of industrial market, production, and innovation processes that is substantially different especially from organized networks? The text undertakes an empirical mapping and classification of the still little explored field of industrial platforms and discusses from a theoretical-conceptual perspective why platforms should be conceived as a sui generis form of organization whose dominant mode of coordination can be described as rule-based curation.
    Date: 2023
  13. By: Kristopher Gerardi; Michelle Lowry; Carola Schenone
    Abstract: The rapid growth in index funds and significant consolidation in the asset-management industry over the past few decades has led to higher levels of common ownership and increased attention on the topic by academic researchers. A consensus has yet to emerge from the literature regarding the consequences of increased common ownership on firm behavior and market outcomes. Given the potential implications for firms and investors alike, it is perhaps not surprising that policymakers, legal scholars, finance and accounting academics, and practitioners have all taken a keen interest in the subject. This paper provides an overview of the theoretical underpinnings of common ownership and critically reviews the empirical literature. Measurement issues and identification challenges are detailed, and a discussion of plausible causal mechanisms is provided. Across the newest papers employing the most credible identification techniques, there is relatively little evidence that common ownership causes lower competition. However, further research is necessary before broad conclusions can be reached.
    Keywords: common ownership; institutional investors; corporate governance
    JEL: G23 G32 G34 L22
    Date: 2023–11–08
  14. By: Calef, Andrea; Chzhen, Sya In; Mandas, Marco; Motoki, Fabio
    Abstract: Carlson et al. (2022) examine the causal impact of banking competition by investigating a unique circumstance in the National Banking Era of the nineteenth century in the US, where a discontinuity in bank capital requirements occurred. On the one hand, their findings suggest that banks operating in markets with fewer barriers to entry tend to increase their lending activities, promoting real economic growth. On the other hand, banks in less restricted markets also exhibit a higher propensity for risk-taking, posing risks to financial stability. First, we fully reproduce the paper's outcomes apart from a minor discrepancy in the estimate of Table 9 attributed to issues in the provided codes. Second, we test the robustness of the results by (i) changing the ranges used to select the sample of cities included in the analysis, (ii) adopting different options to address outliers' potential issues and (iii) introducing additional control variables. We observe that the estimation results remain mostly consistent when subjecting them to various robustness checks. However, it is worth highlighting that the results can be partially influenced by the criteria used to select the sample of cities and the inclusion of control variables.
    Date: 2023
  15. By: Abi Adams-Prassl; Maria Balgova; Matthias Qian; Tom Waters
    Abstract: We build a model of job design under monopsony that yields predictions over the relationship between: (i) the amenity value of non-wage job features; (ii) whether they are costly or profitable to firms; (iii) monopsony power. We analyse the amenity value of schedule flexibility offered in the labour market by combining our model’s predictions with a new measure of schedule flexibility, which we construct from job vacancy text using a supervised machine learning approach. We show that the amenity value of schedule flexibility depends crucially on whether it is offered alongside a salaried contract that insures workers from earnings variation.
    Date: 2023–02–22
  16. By: Christian Desmaris (LAET - Laboratoire Aménagement Économie Transports - UL2 - Université Lumière - Lyon 2 - ENTPE - École Nationale des Travaux Publics de l'État - CNRS - Centre National de la Recherche Scientifique, IEP Lyon - Sciences Po Lyon - Institut d'études politiques de Lyon - Université de Lyon); Guillaume Monchambert (LAET - Laboratoire Aménagement Économie Transports - UL2 - Université Lumière - Lyon 2 - ENTPE - École Nationale des Travaux Publics de l'État - CNRS - Centre National de la Recherche Scientifique)
    Abstract: [Extrait] Sur les services TER, à compter de décembre 2023, à l'exception de l'Île-de-France qui a un calendrier spécifique, les régions auront l'obligation de lancer des appels d'offres à la fin de leur contrat d'exploitation signé avec SNCF Voyageurs, et ce pour un délai maximum de dix ans. Cette possibilité de s'ouvrir à la concurrence est offerte depuis décembre 2019. Certains territoires ont déjà renouvelé leur confiance au transporteur historique, comme les Pays de la Loire au début du mois de juin ou les Hauts de France en mars de cette année. Provence-Alpes-Côte d'Azur a fait le choix de la nouveauté : à partir de juillet 2025 et pour dix ans, c'est Transdev qui s'occupera de 10 % des TER sur la ligne Marseille-Toulon-Nice. Faut-il néanmoins tout attendre de cette ouverture ? [...]
    Keywords: TER, Ouverture à la concurrence, Train Express Régional, Transport ferroviaire, Transport régional ferroviaire, Contractualisation
    Date: 2023–07–19
  17. By: Hanxin Zhao
    Abstract: Green ammonia is poised to be a key part in the hydrogen economy. This paper discusses green ammonia supply chains from a higher-level industry perspective with a focus on market structures. The architecture of upstream and downstream supply chains are explored. Potential ways to accelerate market emergence are discussed. Market structure is explored based on transaction cost economics and lessons from the oil and gas industry. Three market structure prototypes are developed for different phases. In the infancy, a highly vertically integrated structure is proposed to reduce risks and ensure capital recovery. A restructuring towards a disintegrated structure is necessary in the next stage to improve the efficiency. In the late stage, a competitive structure characterized by a separation between asset ownership and production activities and further development of short-term and spot markets is proposed towards a market-driven industry. Finally, a multi-linear regression model is developed to evaluate the developed structures using a case in the gas industry. Results indicate that high asset specificity and uncertainty and low frequency lead to a more disintegrated market structure, and vice versa, thus supporting the structures designed. We assume the findings and results contribute to developing green ammonia supply chains and the hydrogen economy.
    Date: 2023–10

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