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on Industrial Competition |
| By: | Mark Armstrong; John Vickers |
| Abstract: | We study a market in which several firms potentially each supply a number of “brands” of fundamentally the same product. In fashion, for example, a single firm might retail similar items under different labels and different prices. Consumers differ in which products they consider for their purchase, and firms compete using (multi-dimensional) mixed pricing strategies for their brands. Using relative elasticity conditions, we discuss when firms choose to offer uniform pricing across their brands, and when they use segmented pricing so that one “discount” brand is always priced below another. We solve duopoly models in which equilibria can be derived for all parameters. We discuss the impact of introducing a new brand, of imposing a requirement to set uniform prices across a firm’s brands, and of mergers between single-brand firms. |
| Date: | 2023–11–30 |
| URL: | http://d.repec.org/n?u=RePEc:oxf:wpaper:1029&r=com |
| By: | Groh, Carl-Christian |
| JEL: | D43 D83 L13 L15 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc23:277701&r=com |
| By: | Wipusanawan, Chayanin (Tilburg University, School of Economics and Management) |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:tiu:tiutis:292e319a-9e6a-4465-8f8f-717f3f002bd4&r=com |
| By: | Holler, Marit |
| JEL: | D43 D47 D62 L13 L22 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc23:277602&r=com |
| By: | Adrián, Nerja |
| Abstract: | Parallel airline alliances have negative effects on consumers a priori; however, they can be counteracted if airports may modify the behavior of airlines. In particular, vertical airport–airline agreements allow the airport to influence the competition downstream market, changing the effects of parallel alliances. In this paper, we analyze the effects of parallel alliances in the context of competition between vertical airport–airline pairs competition. We show that under the influence of airports, parallel alliances are welfare improving, and the number of passengers increases, against former studies. These results offer a new brand of analyses to be considered by authorities that evaluate parallel alliances. |
| Keywords: | Airlines parallel alliances; Concession revenue sharing; Vertical agreements; Airports competition |
| JEL: | D43 D47 L13 L93 R49 |
| Date: | 2022–11–26 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:119174&r=com |
| By: | von Maydell, Richard |
| JEL: | L11 L13 L52 O33 D21 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc23:277654&r=com |
| By: | Pennerstorfer, Dieter |
| JEL: | L13 L25 Q12 R14 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc23:277630&r=com |
| By: | Werner, Tobias |
| JEL: | C90 D83 L13 L41 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc23:277573&r=com |
| By: | Chen, Zhuoqiong; Stanton, Christopher; Thomas, Catherine |
| Abstract: | Trialing an experience good allows consumers to learn their value for the sampled good and also informs beliefs about their value for similar products. These demand-side information spillovers across products create a relatively well-informed group of potential future consumers for rival firms. When both switching consumers and repeat buyers are profitable, firms face reduced incentives to set a low initial price to attract inexperienced consumers. Switchers and repeat buyers are more likely to be profitable in new product categories that build on major innovations and when firms can price discriminate based on purchasing history. We suggest that competing products and services arising from new innovations often have demand-side information spillovers from any product trial and are, hence, settings where competing firms can make overall profits even when selling products that consumers perceive to be indistinguishable prior to initial trial. |
| Keywords: | experience goods; duopoly; behavior based price discrimination; product differentiation; information spillovers; No. 71903046) and the “Shenzhen Peacock Program” (No. GA11409002). |
| JEL: | J50 |
| Date: | 2023–08–11 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:120790&r=com |
| By: | Brian C. Albrecht; Tom Phelan; Nick Pretnar |
| Abstract: | What are the welfare implications of markup heterogeneity across firms? In standard monopolistic competition models, such heterogeneity implies inefficiency even in the presence of free entry. We enrich the standard model with heterogeneous firms so that preferences are non-separable in off-market time and market consumption and show that this changes the welfare implications of markup heterogeneity. In this context, homogeneity of markups is neither necessary nor sufficient for efficiency. The marginal cost of the marginal firm is weakly inefficiently high when off-market time and market consumption are complements and inefficiently low when they are substitutes, and the equilibrium allocation devotes weakly too few resources to firm creation. However, when off-market time and market consumption are perfect complements, markups are heterogeneous across firms and yet the equilibrium allocation is efficient. |
| Keywords: | monopolistic competition; markups; efficiency; time use; home production; elasticity of substitution; selection; heterogeneous firms |
| JEL: | D1 D4 D6 L1 |
| Date: | 2023–11–16 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedcwq:97319&r=com |
| By: | Carsten Eckel (LMU Munich, CESifo, CEPR); Lisandra Flach (LMU Munich, ifo Institute, CESifo, CEPR); Ning Meng (Nanjing University, CESifo) |
| Abstract: | Products produced by a multiproduct firm can be linked through demand linkages or supply linkages. On the demand side, changes in the price of one product can affect the demand for a firm's other products through shifts in consumer expenditures. This is commonly referred to as the cannibalization effect. On the supply side, joint inputs can create a dependency of one product's marginal costs on the output of other products. The existence of these linkages is important for how firms respond to shocks and has major implications for several performance measures, such as productivity and markups. This paper provides first empirical evidence for the existence of cannibalization linkages in presence of supply linkages, which is implied evidence for market power. |
| Keywords: | multiproduct firms; cannibalization effect; demand linkages; supply linkages; anti-dumping tariffs; quality; mark-ups; |
| JEL: | D21 D24 F12 F13 F14 L11 L15 L25 |
| Date: | 2023–11–17 |
| URL: | http://d.repec.org/n?u=RePEc:rco:dpaper:456&r=com |
| By: | Jay Pil Choi; Kyungmin Kim; Arijit Mukherjee |
| Abstract: | Platform-run marketplaces may exploit third-party sellers’ data to develop competing products, but potential for future competition can deter sellers’ entry. We explore how this trade-off affects the platform’s referral fee and its own entry decision. We first characterize the platform’s optimal referral fee under full commitment on entry decision and study its economic implications. We then analyze the extent to which the platform’s own information sharing policy substitutes for its commitment to entry. We characterize the platform’s optimal information policy and examine how it interacts with the platform’s fee structure. Our findings highlight the importance of considering the platform’s fee structure as a regulatory response in the policy debates on marketplace regulation. |
| Keywords: | hybrid platforms, referral fee, information design |
| JEL: | D82 D42 L10 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_10769&r=com |
| By: | Foerster, Manuel; Habermacher, Daniel |
| JEL: | C72 D72 D82 D83 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc23:277613&r=com |
| By: | Ylhäinen, Ilkka; Pajarinen, Mika |
| Abstract: | Abstract We examined mergers and acquisitions in the service sector and the effects of the transition to foreign ownership. We analyzed firm-level data encompassing 1, 243 service sector acquisitions that occurred from 2009–2018. The most foreign acquisitions occurred in the health and social services, business services, and trade; the largest shares were noted in health and social services, IT services, and communication. Larger firms with lower levels of cash flow and firms characterized by a growth-resource imbalance were most likely to be the targets of foreign acquisitions. After an acquisition, the target company’s equity ratio and profit before taxes decreased; however, effects on growth and employment remained limited. |
| Keywords: | Mergers and acquisitions, Service sector, Foreign ownership, Foreign company |
| JEL: | F23 F61 G34 L80 |
| Date: | 2023–11–30 |
| URL: | http://d.repec.org/n?u=RePEc:rif:report:143&r=com |
| By: | Jens-Uwe Franck; Till Seyer |
| Abstract: | If an antitrust fine has been imposed on a company, the question of managerial recourse liability arises. We present court cases from the Netherlands, the UK, and Germany, in part denying managerial liability and claiming that it would undermine the fines’ deterrent effect. We analyse whether managerial liability should be limited or banned to prevent, on the one hand, the company or its shareholders being under-deterred or, on the other hand, the company’s management being over-deterred. Regarding the former, we argue that a ban of managerial liability – which would have to be accompanied by a ban on any other type of internal financial sanction – would take an indispensable governance instrument out of the hands of shareholders. This holds true despite the availability of D&O insurance. Regarding the latter, we identify risks of over deterrence but also see mitigating mechanisms at work. We conclude that, while a restriction on managerial liability may be regarded a reasonable measure, this should be viewed as lying within the discretion of company law legislation and jurisprudence but not as a mandatory implication of antitrust fining laws. |
| Keywords: | antitrust law, cartels, antitrust fines, deterrence, managerial liability, antitrust compliance, D&O insurance, EU law, principle of effectiveness |
| JEL: | K21 K22 K42 L40 |
| Date: | 2023–05 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2023_429v2&r=com |
| By: | Dionne, Georges (HEC Montreal, Canada Research Chair in Risk Management); Fombaron, Nathalie (Université Paris-Nanterre); Mimra, Wanda (ESCP Business Schoo) |
| Abstract: | In this survey we present some of the more significant results in the literature on adverse selection in insurance markets. Sections 1 and 2 introduce the subject, and Section 3 discusses the monopoly model developed by Stiglitz (1977) for the case of single-period contracts, which has been extended by many authors to the multi-period case. The introduction of multi-period contracts raises issues that are discussed in detail; time horizon, discounting, commitment of the parties, contract renegotiation, and accident underreporting. Section 4 covers the literature on competitive contracts, where the analysis is more complicated because insurance companies must take competitive pressures into account when they set incentive contracts. As pointed out by Rothschild and Stiglitz (1976), there is not necessarily a Nash equilibrium when there is adverse selection. However, market equilibrium can be sustained when principals anticipate competitive reactions to their behavior. Multi-period contracting is discussed. We show that different predictions on the evolution of insurer profits over time can be obtained from different assumptions concerning the sharing of information between insurers about an individual's choice of contracts and accident experience. The roles of commitment and renegotiation between the parties to the contract are important. Section 5 introduces models that consider moral hazard and adverse selection simultaneously, and Section 6 covers adverse selection when people can choose their risk status. Section 7 discusses many extensions to the basic models such as risk categorization, multidimensional adverse selection, symmetric imperfect information, double-sided adverse selection, participating contracts, and nonexclusive contracting. |
| Keywords: | Adverse selection; insurance markets; monopoly; competitive contracts; self-selection mechanisms; single-period contracts; multi-period contracts; commitment; contract renegotiation; accident underreporting; risk categorization; participating contracts; nonexclusive contracting |
| JEL: | D80 D81 G22 |
| Date: | 2023–11–30 |
| URL: | http://d.repec.org/n?u=RePEc:ris:crcrmw:2023_005&r=com |