|
on Industrial Competition |
| By: | Reimer, Julia; Doganoglu, Toker |
| JEL: | D42 L12 L13 L40 L81 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc23:277683&r=com |
| By: | Mathias Dewatripont; Jean Tirole |
| Abstract: | Scholars and civil society have argued that competition erodes supplier morality. This paper establishes a robust irrelevance result, whereby intense market competition does not crowd out consequentialist ethics; it thereby issues a strong warning against the wholesale moral condemnation of markets and pro-competitive institutions. Intense competition, while not altering the behavior of profitable suppliers, however may reduce the standards of highly ethical suppliers or not-for-profits, raising the potential need to protect the latter in the marketplace. |
| Keywords: | Competition, consequentialism, replacement logic, non-profits, corporate social responsability, race to the ethical bottom |
| Date: | 2023–11 |
| URL: | http://d.repec.org/n?u=RePEc:eca:wpaper:2013/365277&r=com |
| By: | Lefouili, Yassine; Madio, Leonardo |
| Abstract: | This paper examines the impact of changes in market structure on investments. We review recent theoretical and empirical contributions on this issue, starting with the relationship between competition intensity and investments. We then discuss how mergers between competitors affect firms’ incentives to introduce new products and to carry out cost-reducing and quality-enhancing investments. Lastly, we explore how acquiring an innovative entrant can influence investment incentives of both the acquirer and the acquired company. |
| Keywords: | Competition; Investments; Innovation; Mergers; Entry |
| JEL: | D43 L13 L40 |
| Date: | 2023–12–04 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:128758&r=com |
| By: | Buchali, Katrin; Grüb, Jens; Muijs, Matthias; Schwalbe, Ulrich |
| JEL: | D43 D83 L13 L49 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc23:277695&r=com |
| By: | Stefano Colombo; Paolo G. Garella; Noriaki Matsushima |
| Abstract: | In a model of behavior-based price discrimination (BBPD), we argue that sellers may have discretionary power to let buyers decide whether to be identified (e.g., creating an account) or remain anonymous (no account creation). The price equilibria generate a more fragmented market segmentation than under the standard BBPD. Firms might prefer a policy where they leave buyers the decision to remain or not be anonymous, breaking the standard BBPD result. Furthermore, firms can realize higher profits than under uniform pricing, contrary to the standard BBPD. Also, firms may adopt asymmetric policies concerning the account creation requirement. |
| Date: | 2023–11 |
| URL: | http://d.repec.org/n?u=RePEc:dpr:wpaper:1219&r=com |
| By: | Federico A. Bugni; Yulong Wang |
| Abstract: | This paper considers inference in first-price and second-price sealed-bid auctions with a large number of symmetric bidders having independent private values. Given the abundance of bidders in each auction, we propose an asymptotic framework in which the number of bidders diverges while the number of auctions remains fixed. This framework allows us to perform asymptotically exact inference on key model features using only transaction price data. Specifically, we examine inference on the expected utility of the auction winner, the expected revenue of the seller, and the tail properties of the valuation distribution. Simulations confirm the accuracy of our inference methods in finite samples. Finally, we also apply them to Hong Kong car license auction data. |
| Date: | 2023–11 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2311.09972&r=com |
| By: | Bottasso, Anna; Robbiano, Simone; Marocco, Paolo |
| Abstract: | We analyze a sample of consumer-electronics products sold by the US NewEgg online-retailer to study the impact of Price Matching Guarantees (PMGs) policies on prices. By applying aDifference-in-Differences approach, we find that prices of the policy-adopting retailer increase by 4.7% during the policy validity period and up to five days after the treatment, while those of the major non-adopting competitor are not affected. Results are mainly driven by highlyrated, visible and expensive products, while the policy does not affect low-rated, less visible and cheaper ones. Overall findings are consistent with the hypothesis that PMGs act as price discrimination tools. |
| Keywords: | Price Matching Guarantees, Online Retailing, User Generated Contents, Difference-in-Differences, Price Discrimination, Collusion, Signalling |
| JEL: | L11 L13 L15 L81 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:glodps:1351&r=com |
| By: | Miren Azkarate-Askasua; Miguel Zerecero |
| Abstract: | Can union and firm market power counteract each other? What are the output and welfare effects of employer and union labor market power? Using data from French manufacturing firms, we leverage mass layoff shocks to competitors to identify a negative effect of employment concentration on wages. In line with the reduced form evidence and the French institutional setting, we develop and estimate a multi-sector bargaining model that incorporates employer market power. We find that in the absence of unions output decreases by 0.48 percent because they partially counteract distortions coming from oligopsony power. Furthermore, eliminating employer and union labor market power increases output by 1.6 percent and the labor share by 21 percentage points. Workers’ geographic mobility is key to realizing the output gains. |
| Keywords: | Labor markets, Wage setting, Misallocation, Monopsony, Unions |
| JEL: | J2 J42 J51 |
| Date: | 2023–11 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2023_475&r=com |
| By: | Vial Lecaros Felipe; Zárate Román D.; Pérez Pérez Jorge |
| Abstract: | This paper estimates the effects of a subway expansion on labor market outcomes in Santiago, Chile. First, we estimate these effects through a reduced-form analysis. We find changes in work locations and wages consistent with a reduction in firms' labor market power in areas where the subway expanded. We then lay out a model with labor market oligopsonies to calculate the welfare gains from the subway expansion. The model allows decomposition of welfare gains into i) efficiency gains from improved worker-firm matching and ii) gains from reducing labor misallocation due to labor market power. We analyze the distributional implications of the subway expansion. We find that workers benefit as firms see reduced profits. In a model with labor market power these welfare gains are larger than in a competitive model. |
| Keywords: | transit infrastructure;labor market power;spatial misallocation;quantitative spatial economics |
| JEL: | J44 R12 R42 |
| Date: | 2023–11 |
| URL: | http://d.repec.org/n?u=RePEc:bdm:wpaper:2023-17&r=com |
| By: | Loukas Karabarbounis |
| Abstract: | As of 2022, the share of U.S. income accruing to labor is at its lowest level since the Great Depression. Updating previous studies with more recent observations, I document the continuing decline of the labor share for the United States, other countries, and various industries. I discuss how changes in technology and product, labor, and capital markets affect the trend of the labor share. I also examine its relationship with other macroeconomic trends, such as rising markups, higher concentration of economic activity, and globalization. I conclude by offering some perspectives on the economic and policy implications of the labor share decline. |
| Keywords: | Inequality; Production; Labor share |
| JEL: | J30 E20 D20 |
| Date: | 2023–11–03 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedmwp:97393&r=com |
| By: | Cédric Argenton (CentER & TILEC, Tilburg University); Radosveta Ivanova-Stenzel (TU Berlin); Wieland Müller (VCEE, University of Vienna, CentER & TILEC, Tilburg University) |
| Abstract: | We conduct a series of Cournot duopoly market experiments with a high number of repetitions and fixed matching. Our treatments include markets with (a) complete cost symmetry and complete information, (b) slight cost asymmetry and complete information, and (c) varying cost asymmetries and incomplete information. For the case of complete cost symmetry and complete information, our data confirm the well-known result that duopoly players achieve, on average, partial collusion. However, as soon as any level of cost asymmetry or incomplete information is introduced, observed average individual quantities are remarkably close to the static Bayes-Nash equilibrium predictions. |
| Keywords: | Cournot; Bayesian game; Bayes-Nash equilibrium; repeated games; collusion; cooperation; experimental economics; |
| JEL: | D43 L13 C72 C92 |
| Date: | 2023–11–21 |
| URL: | http://d.repec.org/n?u=RePEc:rco:dpaper:460&r=com |
| By: | Heidelmeier, Lisa; Sahm, Marco |
| JEL: | C7 D1 D2 D6 H4 L1 Q5 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc23:277635&r=com |
| By: | Davide Radi; Laura Gardini |
| Abstract: | The global dynamics is investigated for a duopoly game where the perfect foresight hypothesis is relaxed and firms are worst-case maximizers. Overlooking the degree of product substitutability as well as the sensitivity of price to quantity, the unique and globally stable Cournot-Nash equilibrium of the complete-information duopoly game, loses stability when firms are not aware if they are playing a duopoly game, as it is, or an oligopoly game with more than two competitors. This finding resembles Theocharis' condition for the stability of the Cournot-Nash equilibrium in oligopolies without uncertainty. As opposed to complete-information oligopoly games, coexisting attractors, disconnected basins of attractions and chaotic dynamics emerge when the Cournot-Nash equilibrium loses stability. This difference in the global dynamics is due to the nonlinearities introduced by the worst-case approach to uncertainty, which mirror in bimodal best-reply functions. Conducted with techniques that require a symmetric setting of the game, the investigation of the dynamics reveals that a chaotic regime prevents firms from being ambiguity averse, that is, firms are worst-case maximizers only in the quantity-expectation space. Therefore, chaotic dynamics are the result and at the same time the source of profit uncertainty. |
| Date: | 2023–11 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2311.11366&r=com |
| By: | Luttmann, Alexander; Ladd, Daniel |
| Abstract: | Over the past forty years, one of the most important datasets in industrial organization has been the Airline Origin and Destination Survey (DB1B). Most studies relying on these data remove tickets with fares less than $20, assuming that these are heavily discounted frequent flyer awards (FFAs). We investigate the validity of this approach by first defining the size of the frequent flyer market using annual Form 10-K filings. Exploiting a federal regulation, we then outline a novel approach to identify FFAs in the DB1B. Our method indicates that the $20 cutoff used by researchers is too high and may be lowered to $12 for tickets appearing in the DB1B after February 1, 2002. Using the FFAs we identify, we show how the characteristics of award tickets differ from paid tickets and how these characteristics have changed over time. We then demonstrate how various market and product quality characteristics influence the share of passengers traveling on FFAs. Finally, we find that price dispersion increases on routes with higher shares of frequent flyer passengers, implying that airline loyalty programs enhance market power. |
| Keywords: | Airlines, competition, loyalty rewards, frequent flyer tickets, product quality |
| JEL: | L11 L13 L14 L93 M31 R40 R49 |
| Date: | 2023–11–21 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:119214&r=com |
| By: | Brekke, Kurt R. (Dept. of Economics, Norwegian School of Economics and Business Administration); Dalen, Dag Morten (Dept. of Economics, BI Norwegian Business School); Straume, Odd Rune (Dept. of Economics, University of Bergen) |
| Abstract: | We study the competitive effects of combination therapies in pharmaceutical markets, which crucially hinge on the additional therapeutic value of combinatory use of drugs and the therapeutic substitutability with the most relevant monotherapy. With large additional therapeutic value, the introduction of combination therapies leads to higher prices and, somewhat paradoxically, may reduce the health plan's surplus. Although combination therapies imply that drugs become both substitutes and complements, we show that drug prices increase if the firms are allowed to coordinate their prices. Allowing for price discrimination might increase allocational efficiency, but only at the expense of higher purchasing costs. |
| Keywords: | Pharmaceutical markets; Combination therapies; Therapeutic competition |
| JEL: | I11 I18 L13 L65 |
| Date: | 2023–11–22 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:nhheco:2023_019&r=com |
| By: | Claudia Allende; Juan Pablo Atal; Rodrigo Carril; José Ignacio Cuesta; Andres Gonzalez-Lira |
| Abstract: | This paper examines the determinants of public procurement prices using comprehensive data on pharmaceutical purchases by the Chilean public sector. We start by estimating the extent to which different public agencies pay different prices for the same product. These buyer effects are sizable, and the difference between average prices paid by buyers at the 10th and 90th percentiles is 16%. Our main set of results is related to the role of market structure. The variation in market structure explains three times more variation in procurement prices than buyer effects. Moreover, using exogenous variation from patent expirations, we estimate that the entry of an additional vendor decreases average procurement prices by 11.7%, which is 72% of the gap between average prices paid by buyers at the 10th and 90th percentiles of the distribution of buyer effects. These results suggest that supply-side factors are key determinants of public procurement prices and that their quantitative importance may exceed that of demand-side factors previously emphasized in the literature. |
| Keywords: | Procurement, Bureaucracy, competition, pharmaceutical drugs |
| JEL: | D44 D73 H57 |
| Date: | 2023–11 |
| URL: | http://d.repec.org/n?u=RePEc:bge:wpaper:1413&r=com |
| By: | David Arnold; Kevin S. Milligan; Terry Moon; Amirhossein Tavakoli |
| Abstract: | This paper connects changes in employer characteristics through job transitions to employee earnings following mergers and acquisitions (M&As). Using firm balance sheet data linked to individual earnings data in Canada and a matched difference-in-differences design, we find that after M&As acquirers expand while targets shrink substantially relative to their matched control groups. Additionally, profit margins decrease for both acquirers and targets in the medium run. Furthermore, workers at target firms suffer losses in earnings, and this decline in earnings is entirely driven by workers who move to other firms after an M&A event. We find that workers leaving target firms after M&As move to larger firms with higher wage premiums, but with much worse match qualities on average. Taken together, it appears that job transitions to employers with poor match qualities primarily explain the post-M&A decline in worker earnings in our setting. |
| JEL: | E21 G34 J31 J42 L25 |
| Date: | 2023–11 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:31866&r=com |
| By: | Hutschenreiter, Dennis |
| JEL: | G23 G32 G34 L20 L25 O32 O33 O34 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc23:277640&r=com |
| By: | Fraunhoffer, Robert; Kim, Ho Young; Schiereck, Dirk |
| Abstract: | This study investigates whether conference calls accompanying M&A announcements in Europe provide valuable information for capital market participants and hence induce an abnormal stock price revaluation on the bidder’s equity. Based on handpicked data for transactions between 2008 and 2012 we focus on the five most acquisitive country markets in Europe. Overall, our results show that bidders are more likely to conduct conference calls with increasing transaction value, for transactions with public targets and non-diversifying transactions. Further, the decision for voluntary disclosure is positively influenced by increased bidder size and the comparably weaker governance systems for German and Swiss firms. After controlling for self-selection bias and other determinants of stock returns around mergers and acquisitions (M&A) announcement, evidence is in strong support that firms with merger-related conference calls yield a higher abnormal return than firms merely publishing a press release. However, significant favourable investor reaction is only present in the UK and French subsamples and in the subsamples of industries with a focus on research and development (R&D). |
| Date: | 2023–11–21 |
| URL: | http://d.repec.org/n?u=RePEc:dar:wpaper:141432&r=com |
| By: | David P. Myatt (London Business School); David Ronayne (ESMT Berlin) |
| Abstract: | We broaden and develop the classic captive-and-shopper model of sales. Firstly, we allow for asymmetric marginal costs as well as asymmetric captive audiences. These asymmetries jointly determine the identities of the two or more firms we find compete (via randomized sales) to serve shoppers. In a leading case, the prices paid by shoppers fall following a cost rise for the firm that serves most of them. Secondly, we study asymmetric price adjustment opportunities via a two-stage game in which firms may cut but not raise their initial prices. In this setting (and in scenarios with risk aversion or endogenous move order) we predict the play of pure strategies and that a unique firm serves the shoppers. Despite the different pricing predictions across games, firms’ profits are equivalent. Welfare properties depend on whether firm asymmetry is predominantly on the supply side (costs) or on the demand side (captive audiences). Thirdly, we allow firms to choose production technologies via process innovations. One firm innovates distinctly more than others, attains a lower marginal cost, and ultimately serves the shoppers. We connect the distinctive asymmetric pattern of innovations to demand-side asymmetries and the shape of technology opportunity. |
| Keywords: | model of sales; captives; shoppers; price dispersion; clearinghouse models; |
| JEL: | D43 L11 M3 |
| Date: | 2023–11–13 |
| URL: | http://d.repec.org/n?u=RePEc:rco:dpaper:450&r=com |
| By: | Fix, Blair |
| Abstract: | There’s an old joke that economics is too important to be left to economists. In the same vein, I think rich people are too important to be left to the self-help industry. Yes, the popular appeal of you-can-get-rich-too books is obvious. But what’s not obvious is why so few social scientists study wealth.1 Clearly, the public thirsts for serious inquiries about the rich. (Thomas Piketty’s opus on inequality was a bestseller.) But for the most part, social scientists are content to focus on ‘poverty’ and let the self-help gurus wax about ‘wealth’. The irony, in my view, is that poverty and wealth are two sides of the same coin. Concentrated wealth begets concentrated poverty. Still, there is an asymmetry between the two extremes. As a rule, poor people have little power, which means they cannot be blamed for their own poverty. But almost by definition, the rich wield power to their own benefit, which means they create the conditions of their own opulence … and everyone else’s misery. Given their power over society, I find myself on a research kick studying rich people. This post concludes the binge with a look at what drives wealth concentration among the richest Americans. I find that there’s a straight line between wealth concentration, corporate consolidation, and the strategy of ‘buying, not building’. In short, Peter Thiel is correct when he says that ‘competition is for losers’. |
| Keywords: | corporation, distribution, mergers & acquisitions, stock market, United States |
| JEL: | P P1 D3 G3 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:esprep:279885&r=com |
| By: | Cedric Durand (University of Geneva); Céline Baud (DRM - Dauphine Recherches en Management - Université Paris Dauphine-PSL - PSL - Université Paris sciences et lettres - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | This article explores the metamorphosis of profit-making and profit uses in the context of retailing's digital transition. To assess the qualitative mutations of the sector, it is not enough to focus on technological changes since the unequal operational development of firms is also the outcome of managerial strategies and financial policies. This research analyses them from an economic and accounting perspective. The contribution is twofold. First, at the conceptual level, it proposes an original combinatory outlook on value creation and value appropriation to account for the diversity of profit trajectories in the context of retail digitalization. Second, at the empirical level, it gathers essential information concerning the mutation of the sector based on a comparative analysis of the strategies and trajectories of Walmart—the industry leader—and two of its main challengers since the mid-nineties: the main historical rival, Carrefour, and the new entrant, Amazon. Stylized facts about their respective financial trajectories and a description of their engagement with digitalization enable the identification and the interpretation of their distinct dynamics. Beyond the retail sector, this article brings fresh insights to the wider literature on intellectual monopoly by questioning the nature of investment and the transformation of cost structure in the digital age. |
| Keywords: | Retailing, digitalization, profits, accounting, intellectual monopoly |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-04262663&r=com |
| By: | Sawada, Yasuyuki (University of Tokyo); Elhan-Kayalar, Yesim (Asian Development Bank); Shum, Matthew (California Institute of Technology); Xu, Daniel Yi (Duke University) |
| Abstract: | Micro, small, and medium-sized enterprises (MSMEs) are recognized as crucial drivers of economic development, particularly in low- and middle-income countries. The advent of digital platforms, characterized by economies of scale and significant cross-network externalities in two-sided markets, has brought about unprecedented changes to people’s daily lives, employment, businesses, and markets. These transformations have unlocked opportunities for MSMEs. In this paper, we analyze the dynamics of e-commerce and how they unfolded during the coronavirus disease (COVID-19) pandemic, using a unique, composite dataset focusing on GoFood merchants in Indonesia. This paper makes a notable contribution by expanding the analysis of the platform efficiency contributions into static efficiency and dynamic efficiency perspectives. Our analysis reveals three key findings. First, online platforms like Gojek offered a novel form of social safety nets for MSMEs. Second, as the COVID-19 pandemic intensified, we observed market congestion externalities and cannibalization tendencies. Third, women- and men-owned businesses opted for different crisis-mitigation and coping strategies. Vulnerable microenterprises, often owned by women merchants with limited support networks and business assets, were disproportionately affected by the pandemic. Overall, our study demonstrates that the rapid acceleration of digital transformation during the COVID-19 pandemic presents unique research opportunities on distributive justice, external effects, and scale economies, as well as related competition policies |
| Keywords: | digital platform; distributive justice; e-commerce; platform economies; MSMEs; scale economies; two-sided network externalities; competition policy; COVID-19 pandemic |
| JEL: | D22 D63 L25 L26 |
| Date: | 2023–11–24 |
| URL: | http://d.repec.org/n?u=RePEc:ris:adbewp:0703&r=com |
| By: | Aghion, Philippe; Bergeaud, Antonin; Van Reenen, John |
| Abstract: | We present a framework that can be used to assess the equilibrium impact of regulation on endogenous innovation with heterogeneous firms. We implement this model using French firm-level panel data where there is a sharp increase in the burden of labor regulations on companies with 50 or more employees. Consistent with the model’s qualitative predictions, we find a sharp fall in the fraction of innovating firms just to the left of the regulatory threshold. Furthermore, we find a sharp reduction in the positive innovation response of firms to exogenous demand shocks just below the regulatory threshold. Using the structure of our model we quantitatively estimate parameters and find that the regulation reduces aggregate equilibrium innovation (and growth) by 5.7% which translates into a consumption equivalent welfare loss of at least 2.2%, approximately doubling the static losses in the existing literature. |
| Keywords: | innovation; regulation; patents; firm size |
| JEL: | O31 L11 L51 J80 L25 |
| Date: | 2023–11–01 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:120206&r=com |