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on Industrial Competition |
| By: | Armstrong, Mark; 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. |
| Keywords: | Price competition, consideration sets, multiproduct firms, multibranding, price discrimination, price dispersion, brand proliferation |
| JEL: | C72 D42 D43 L13 M31 |
| Date: | 2023–11 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:119322&r=com |
| By: | Raúl Bajo-Buenestado; Markus Kinateder; Raul Bajo-Buenestado |
| Abstract: | We present a general and tractable oligopoly model of multi-sided platforms with endogenous side and platform choices of heterogeneous end-users, considering any mix of single-homing and multi-homing platforms and in which participating on one side could preclude doing so on others. We show the existence of a unique equilibrium number of end-users and characterize optimal platform pricing. Using the equilibrium conditions, we formally derive (across sides and platforms) switching effects that distort optimal pricing, which can lead to markups exceeding the Lerner index and rule out the classical “cross-subsidization” result. We then provide a unifying framework to analyze multi-sided platform mergers, which rationalizes mixed results from the previous literature by providing, based on the switching effects, a set of conditions that predict the upward pricing pressure post-merger. We show that while optimal pricing is determined by the nature of end-users’ side choices, their platform choices are crucial for merger analysis. |
| Keywords: | multi-sided markets, heterogeneous end-users, endogenous side choice, mergers of platforms, digital platforms |
| JEL: | D43 G34 L11 L13 L22 L86 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_10818&r=com |
| By: | Martin Peitz |
| Abstract: | In this chapter, we discuss how platforms manage the interaction between various users. First, we discuss and exemplify governance decisions by platforms that affect access and interactions of users regarding a platform service. Here, we investigate the choice of price structure and the choice of non-price strategies. We also address the horizontal and vertical scope of these platforms. Second, we consider platform decisions that generate spillovers to other platforms or channels, and we explore private incentives and welfare effects. Third, we discuss the role of government regulation in a broad sense, that is, the laws and regulations that constrain platforms and shape their incentives regarding their governance decisions. Emphasis is given to interventions against anti-competitive conduct and practices that may lead to consumer harm. |
| Keywords: | Platform governance, platform regulation, digital ecosystems, digital markets, competition policy, network effects |
| JEL: | L12 L13 L41 L42 D42 D47 K21 K23 M21 |
| Date: | 2023–12 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2023_480&r=com |
| By: | Spektor Stanislav (Department of Economics, Lomonosov Moscow State University); Nazarova Ekaterina (Department of Economics, Lomonosov Moscow State University); Akhtemzyanov Rafael (Department of Economics, Lomonosov Moscow State University) |
| Abstract: | The distinction between the concepts of market power and bargaining power is not only a methodological, but also a practical problem. The paper describes the currently existing approaches to understanding these phenomena. An attempt has been made to include not only market power, but also bargaining power in the theoretical model. In addition, game-theoretic models of interaction between market participants with an asymmetric distribution of market power and bargaining power between them are considered. Also in the work in the context of the ratio of bargaining power between agents one of the classical economic experiments is considered. The article describes real situations in which a correct understanding of market power and bargaining power was very important for making a decision on the need to apply antitrust regulation measures. Antimonopoly regulation is currently focused on considering only market power, however, when determining the justification for the use of certain influences, it should be borne in mind that manifestations of market power may be similar to the effects of asymmetry in the distribution of bargaining power, and it is also necessary to clearly distinguish between these phenomena. At the same time, an individual approach is required for each case to assess the impact on public welfare of both the phenomena themselves and the regulatory influences applied. Length: 33 pages |
| Keywords: | market power, bargaining power, antitrust policy, competition, bilateral monopoly, experimental economics |
| JEL: | K21 L40 L41 L50 |
| Date: | 2023–12 |
| URL: | http://d.repec.org/n?u=RePEc:upa:wpaper:0059&r=com |
| By: | Maarten C.W. Janssen (University of Vienna); Santanu Roy (Southern Methodist University) |
| Abstract: | A manufacturer with private information about product quality may earn higher expected profit when their wholesale pricing contract with a retailer is unobserved by consumers. Secret wholesale contracts may prevent distortionary signaling by the manufacturer and double marginalization by the retailer. Instead, reasonable pooling outcomes exist where wholesale pricing is independent of quality, leaving the retailer and consumers in the dark about true quality. These outcomes may increase expected consumer and total surplus. The strategic interaction is different from standard signaling games. The pooling outcomes satisfy a new equilibrium refinement that we develop in the spirit of the Intuitive Criterion. |
| Keywords: | Asymmetric Information; Product Quality; Vertical Contracts; Wholesale Pricing; Signaling; Pooling. |
| JEL: | L13 L15 D82 D43 |
| Date: | 2023–08 |
| URL: | http://d.repec.org/n?u=RePEc:smu:ecowpa:2310&r=com |
| By: | Santiago Franco |
| Abstract: | Most product industries are local. In the U.S., firms selling goods and services to local consumers account for half of total sales and generate more than sixty percent of the nation’s jobs. Competition in these industries occurs in local product markets: cities. I propose a theory of such competition in which firms have output market power. Spatial differences in local competition arise endogenously due to the spatial sorting of heterogeneous firms. The ability to charge higher markups induces more productive firms to overvalue locating in larger cities, leading to a misallocation of firms across space. The optimal policy incen tivizes productive firms to relocate to smaller cities, providing a rationale for commonly used place-based policies. I use U.S. Census establishment-level data to estimate markups and to structurally estimate the model. I document a significant heterogeneity in markups for local industries across U.S. cities. Cities in the top decile of the city-size distribution have a fifty percent lower markup than cities in the bottom decile. I use the estimated model to quantify the general equilibrium effects of place-based policies. Policies that remove markups and relocate firms to smaller cities yield sizable aggregate welfare gains. |
| Date: | 2023–11 |
| URL: | http://d.repec.org/n?u=RePEc:cen:wpaper:23-57&r=com |
| By: | Patrice Bougette (Université Côte d'Azur; GREDEG CNRS); Oliver Budzinski (Technische Universität Ilmenau); Frédéric Marty (Université Côte d'Azur, France; GREDEG CNRS) |
| Abstract: | Mergers and acquisitions shape industry competition. Effective merger remedies are important for market efficiency and consumer welfare. This paper explores the need for more flexible remedies to address changing markets after mergers. While the EU permits some flexibility with less restrictive remedies, we conceptually advance the design elements of a dual-phase, bifurcated merger control system. This system integrates ex-ante processes with more systematic and comprehensive ex-post measures. Such an approach can address the shortcomings of the current system and, consequently, holds the potential to enhance merger control in dynamic markets. |
| Keywords: | merger remedies, competition authorities, market dynamics, dynamic competition, oligopolies, innovation effects, European Union |
| JEL: | L41 K21 L13 |
| Date: | 2023–11 |
| URL: | http://d.repec.org/n?u=RePEc:gre:wpaper:2023-17&r=com |
| By: | Marco Catola; Alessandra Chirco; Marcella Scrimitore |
| Abstract: | By developing a linear model in a two-country framework of international price competition, we show how the degree of product differentiation and the cross-country distribution of private firms affect the strategic privatization choices made by governments concerned with their own country’s welfare. More particularly, the work points out that sufficiently low product differentiation may lead public ownership to be optimally chosen to restrict competition in the country with the larger number of firms, and privatization to be global welfare enhancing in this case. |
| Keywords: | Mixed oligopoly, price competition, strategic privatization, internationalmarkets |
| JEL: | F23 L13 L32 |
| Date: | 2023–12–01 |
| URL: | http://d.repec.org/n?u=RePEc:pie:dsedps:2023/301&r=com |
| By: | Tristany Armangué-Jubert (IDEA, UAB, BSE); Nezih Guner (CEMFI, Centro de Estudios Monetarios y Financieros); Alessandro Ruggieri (CUNEF) |
| 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 |
| URL: | http://d.repec.org/n?u=RePEc:cmf:wpaper:wp2023_2306&r=com |
| By: | Sergei Kichko (University of Trento); Pierre M. Picard (DEM, Université du Luxembourg) |
| Abstract: | This paper studies the effects of market enlargement in the context of monopolistic competition, variable markups and income heterogeneity. Market enlargement increases product diversity and entices firms to reduce prices and markups due to pro-competitive effects. It benefits all individuals but more high-income ones. The strength of market enlargement effect is independent of income inequality for Pollak (1971) preferences. In open economy, the market enlargement of one country reduces prices globally while it fosters firm entry in this country and exit in the other country. Welfare gains are also larger for higher income groups. A calibration exercise suggests that effects on market outcome and welfare gains are sizable. |
| Keywords: | Monopolistic competition, additive preferences, income inequality, pro-competitive effects, welfare, trade. |
| JEL: | D43 F12 F14 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:luc:wpaper:23-11&r=com |
| By: | Izumi, Atsuko (UTEcon); Sawada , Yasuyuki (University of Tokyo); Watanabe, Yasutora (UTEcon); Elhan-Kayalar, Yesim (Asian Development Bank) |
| Abstract: | In this paper, we review the overall micro, small, and medium-sized enterprise landscape in Asia, including the challenges and constraints faced by enterprises in physical (offline) and online markets. We then explore the unique circumstances and externalities that arise due to the special characteristics of platforms and how they impact merchants and other platform users. Our findings suggest that the unique features of platforms, and the two-sided market structure they foster, require a bespoke policy approach from competition authorities and policymakers. |
| Keywords: | competition policy; two-sided market; platforms; MSMEs |
| JEL: | K21 L41 L44 |
| Date: | 2023–11–28 |
| URL: | http://d.repec.org/n?u=RePEc:ris:adbewp:0704&r=com |
| By: | Nese, Annamaria (University of Salerno); O'Higgins, Niall (ILO International Labour Organization); Sbriglia, Patrizia (University of Campania-Luigi Vanvitelli) |
| Abstract: | One disputed topic in Organization and Management economics is how leadership and collusive agreements are set and maintained in industries where firms are characterised by similar technological opportunities and structures. This topic is particularly important to analyse online and digital markets, which can be regarded as networks where managers share information and where there are no structural differences among firms. In this paper we claim that strategic advantages may be the outcome of repeated interaction among managers and can be driven by two (in some cases) competing forces, information and reciprocity. In fact, on one side, full information on all firms' strategies, help agents to coordinate their decisions and drive the final outcomes towards more profitable solutions. On the other side, when information is limited only to their direct opponents, competitive advantages are maintained when each competitor views the individuals' share of profits as a "fair" allocation. Thus, pricing behaviour is affected both by the willingness to reciprocate the opponent behaviour and the willingness to imitate best strategies observed in other markets. Both pricing behaviours lead to different profit outcomes. We test our hypotheses with a lab experiment on a sequential pricing game. We find a striking difference in pricing behaviour across treatments, and a significant difference also in the ability of the second movers to establish and keep their leadership. Specifically, individuals are highly competitive when information on other players' prices is limited, and only in few markets we observe second movers' advantages. When information on prices on all markets is provided, the picture is entirely different, and prices are very close to the sub-game equilibrium level. Overall, reciprocity can explain the results, however, full information reduces negative reciprocity and competition. |
| Keywords: | price competition, learning direction theory, trust and reciprocity |
| JEL: | C90 C91 L1 |
| Date: | 2023–11 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp16637&r=com |
| By: | Paulo Bastos (World Bank); Lisandra Flach (LMU Munich, ifo Institue); Klaus Keller (LMU Munich, Max-Planck Institute for Competition and Innovation) |
| Abstract: | We investigate the impact of product market competition on firms’ automation investments. We use a rich combination of micro-data on Portuguese exporters and exploit a novel source of variation in the degree of competition they face – a tariff liberalization between the European Union and Central and Eastern European countries in the 1990s. We find that firms facing greater competition in export markets tend to reduce investments in automation technologies. These average negative effects are driven by the least productive firms, while the most efficient exporters in industries that are more prone to automation tend to robotize in order to compete. These findings suggest that an increase in the degree of product market competition widens disparities between firms. |
| Keywords: | automation; product market competition; firm heterogeneity; trade liberalization; workers; multi-product firms; |
| JEL: | D22 F16 J23 L25 O33 |
| Date: | 2023–11–28 |
| URL: | http://d.repec.org/n?u=RePEc:rco:dpaper:467&r=com |
| By: | David Autor; Christina Patterson; John Van Reenen |
| Abstract: | National U.S. industrial concentration rose between 1992-2017. Simultaneously, the Herfindhahl Index of local (six-digit-NAICS by county) employment concentration fell. This divergence between national and local employment concentration is due to structural transformation. Both sales and employment concentration rose within industry-by-county cells. But activity shifted from concentrated Manufacturing towards relatively un-concentrated Services. A stronger between-sector shift in employment relative to sales explains the fall in local employment concentration. Had sectoral employment shares remained at their 1992 levels, average local employment concentration would have risen by 9% by 2017 rather than falling by 7%. |
| Keywords: | Employment concentration, sales concentration, local labor markets, structural transformation |
| JEL: | L11 L60 O31 O34 P33 R3 |
| Date: | 2023–11 |
| URL: | http://d.repec.org/n?u=RePEc:cen:wpaper:23-59&r=com |
| By: | Yukihide Kurakawa (Kanazawa Seiryo University.); Makoto Tanaka (National Graduate Institute for Policy Studies.) |
| Abstract: | This study demonstrates how market power in the day-ahead electricity market influences the balancing cost in incentive-based demand response (DR) programs. The marginal cost of DR in an incentive-based DR program corresponds to the marginal benefit of energy services that might be provided under baseline electricity consumption. We analyze a stylized Cournot oligopoly model and demonstrate that distortion of an imperfectly competitive day-ahead market generates additional social cost (welfare loss) in the balancing period by increasing the cost of DR. We further investigate the case where some firms in the day-ahead market can also benefit from power generation in the balancing period and demonstrate that the strategic behavior of these firms further decreases total supply in an imperfectly competitive day- ahead market. The results indicate that procompetitive policies in the day-ahead market will lower the cost of DR, which makes demand more flexible and yields additional welfare gains, thereby lowering the balancing cost during the balancing period. |
| Keywords: | Incentive-based demand response, Market power, Day-ahead electricity market, Demand-side flexibility |
| JEL: | L13 Q41 |
| Date: | 2023–12 |
| URL: | http://d.repec.org/n?u=RePEc:was:dpaper:2303&r=com |
| By: | De Angelis, Tiziano; Gensbittel, Fabien; Villeneuve, Stéphane |
| Abstract: | We construct a Nash equilibrium in feedback form for a class of two-person stochastic games with absorption arising from corporate finance. More precisely, the paper focusses on a strategic dynamic game in which two financially-constrained firms operate in the same market. The firms distribute dividends and are faced with default risk. The strategic interaction arises from the fact that if one firm defaults, the other one becomes a monopolist and increases its profitability. To determine a Nash equilibrium in feedback form, we develop two different concepts depending on the initial endowment of each firm. If one firm is richer than the other one, then we use a notion of control vs. strategy equilibrium. If the two firms have the same initial endowment (hence they are symmetric in our setup) then we need mixed strategies in order to construct a symmetric equilibrium. |
| Date: | 2023–12–13 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:128772&r=com |
| By: | Jean-Marc Zogheib |
| Abstract: | Two digital firms compete in prices and information disclosure levels. A consumer signing up to one firm's service decides how much personal information to provide. We find that firms essentially trade-off between consumer valuations and disclosure levels to determine their business strategies when consumers single-home. Under multi-homing, business strategies are more complex to assess and may completely shift compared to single-homing. All things being equal, implementing a strict privacy regime with no data disclosure can be optimal under single-homing, while a soft privacy regime with data disclosure may be preferred under multi-homing. |
| Keywords: | competition, online privacy, information disclosure, multi-homing. |
| JEL: | D11 D40 L21 L41 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:drm:wpaper:2023-34&r=com |
| By: | Blázquez, Mario (Dept. of Business and Management Science, Norwegian School of Economics); Hovdahl, Isabel (Dept. of Business and Management Science, Norwegian School of Economics); Arve, Malin (Dept. of Business and Management Science, Norwegian School of Economics); Bjørndal, Endre (Dept. of Business and Management Science, Norwegian School of Economics); Bjørndal, Mette (Dept. of Business and Management Science, Norwegian School of Economics) |
| Abstract: | We study the effect of introducing a market for green energy attributes on the market for the energy itself. In Europe, renewable energy producers receive Guarantees of Origin (GOs) that they can sell to consumers who wish to declare their electricity consumption as “green”. In a model of price competition, we show how the introduction of such a GO market can increase competition in the spot electricity market, leading to reduced electricity prices. In the current market design, the trade of GOs is not restricted by the physical transmission capacity in the spot electricity market. However, since the production capacity of GOs is still limited by the total dispatch of electricity, suppliers have incentives to compete more fiercely in the spot market. This pro-competitive effect disappears if the physical transmission capacity is also imposed on the GO market. |
| Keywords: | Electricity market; competition; pricing; guarantees of origin |
| JEL: | D43 L13 L94 Q41 Q48 |
| Date: | 2023–12–15 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:nhhfms:2023_024&r=com |
| By: | Nevermann, Daniel; Heckmann, Lotta |
| Abstract: | Despite the ongoing consolidation trend in the banking industry and the attention some mergers (in particular between large banks) have been receiving, there is no consistent picture of the impact of mergers on the stability of the financial system. In this paper, we aim to provide a universal framework to study the generic effect of mergers and acquisitions on the resilience of financial systems based on different network models. We investigate the impact of a wide variety of model assumptions, e.g. connectivity, contagion channel and the merger process, on different static and dynamic stability measures. We provide a range of theoretical results highlighting the mechanisms that influence systemic risk in consolidated financial systems. Our main finding is that merger activities can stabilize or destabilize the modelled financial network, depending on various details such as the connectivity of the network and the assumed merger process. Merger activities can increase diversification of single banks and support their resilience to shocks, and may slow down contagious default. However, merger activities can also decrease stability if, for example, the network is driven into the contagion window or insufficiently stable banks emerge in key positions in the network. |
| Keywords: | Financial network model, Mergers and Acquisitions, Financial Stability, Contagion |
| JEL: | G01 G21 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:bubdps:280415&r=com |
| By: | Tymoteusz Doligalski |
| Abstract: | This paper presents a common typology of virtual communities and multi-sided platforms. The analyzed entities comprise 69 of Poland's most prominent websites, representing one of two business models. Based on three dimensions: collaboration among users, reputation-based user competition, and user multi-sidedness, we identified four business models. These are problem community, object community, object market, and reputation market. They were depicted in qualitative system dynamics diagrams. The typology was verified using the statistical clustering technique, which yielded corresponding results. This paper helps comprehend the diversity of value creation logic in virtual communities and multi-sided platforms. |
| Keywords: | platforms, communities, business models, typology |
| JEL: | M10 |
| Date: | 2022–07 |
| URL: | http://d.repec.org/n?u=RePEc:sgh:kaewps:2022079&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. |
| JEL: | D2 D33 E0 J2 |
| Date: | 2023–11 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:31854&r=com |
| By: | Mueller, Clemens |
| JEL: | J41 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc23:277621&r=com |
| By: | Taipov Michail (Department of Economics, Lomonosov Moscow State University) |
| Abstract: | The introduction of net neutrality has a huge impact on the functioning of the Internet service provider market. There are economic articles analyzing the various restrictions arising from the principle of net neutrality and their impact on social welfare. Since the authors in these articles examine different aspects of net neutrality and reach different conclusions, it seems extremely useful to review the major works on this topic and draw general conclusions about the implications of net neutrality for public welfare. This paper analyzed the economic literature exploring the following aspects of network neutrality: the zero-price rule; prohibition on selling suppliers the preferential quality of delivery of their content; the impact of net neutrality on Internet fragmentation. By summarizing the results obtained in these works, conclusions were drawn about the effects of net neutrality. |
| Keywords: | network neutrality, two-sided markets, platforms, public welfare, zero price rule |
| JEL: | D21 D40 D62 |
| Date: | 2023–12 |
| URL: | http://d.repec.org/n?u=RePEc:upa:wpaper:0060&r=com |
| By: | Madhuri H.Shastry (Department of Economics, Delhi School of Economics); Uday Bhanu Sinha (Department of Economics, Delhi School of Economics) |
| Abstract: | We analyse the interplay of privatization and technology licensing under a public budget constraint, where a cost-disadvantaged public firm has to generate profits to pay for the license. In a mixed duopoly, we consider the licensing of a cost-reducing technology by an outsider innovator. The innovator chooses to license smaller sizes of innovation to both firms, whereas, larger innovation is licensed exclusively to the private firm. The public firm alone never gets the license. Thus, the public firm can never “catch up” with its more efficient private rival. We find the possibility of both partial and full privatization in our model. Additionally, from a social planner’s perspective, it is always optimal to allocate licenses to both firms. |
| Keywords: | mixed duopoly; technology licensing; privatization; budget constraint; welfare. JEL codes: L32, L33, H42, O33, O38 |
| Date: | 2023–12 |
| URL: | http://d.repec.org/n?u=RePEc:cde:cdewps:343&r=com |
| By: | Francesc Dilmé (University of Bonn) |
| Abstract: | In this paper we analyze a continuous-time Coase setting with finite horizon, interdependent values, and different discount rates for the buyer and seller. We fully characterize the equilibrium behavior, which permits us to study how the agents’ discount rates (i.e., patience levels) shape the bargaining outcome. We find that the seller’s commitment problem persists even when she is fully patient, and that higher seller impatience may lead to higher equilibrium prices. Higher buyer impatience, on the other hand, incentivizes the buyer to trade earlier, which accelerates price decline since the seller’s commitment problem is more severe at earlier times. Under appropriate conditions, we conclude that the buyer is better off when he is more impatient, independently of his private valuation; hence, higher bargaining costs may give negotiators with private information greater bargaining power. |
| Keywords: | Bargaining with private information, different discount factors |
| JEL: | C78 D82 |
| Date: | 2023–12 |
| URL: | http://d.repec.org/n?u=RePEc:ajk:ajkdps:267&r=com |
| By: | Huma Javaid (Manchester Institute of Innovation Research, The University of Manchester); Xavier Castaner (Department of Strategy, Globalisation and Society, The University of Lausanne); Panos Desyllas (School of Management, The University of Bath); Orietta Marsili (School of Management, The University of Bath) |
| Abstract: | Based on information economics and organizational learning literatures, we investigate how information asymmetry and uncertainty regarding the value of technological resources of target firms influence the due diligence process after an acquisition announcement is made by the acquirer. We study how information asymmetry between the acquirer and target firm captured by the technological distance between the two firms’ patent portfolio extends the due diligence process. Additionally, we study how uncertainty about target firms’ technological resources explained by the pending patent applications of target firms tends to prolong the duration of due diligence. Further, we argue that business similarity reduces information asymmetry between the acquirer and target firm and shortens the duration of due diligence. We test the predictions on a sample of acquisitions of privately held technology firms in the UK and find a significantly positive effect of targets’ pending patent applications on due diligence duration that is amplified by technological distance but reduced by business similarity. The findings of the study contribute to the M&A literature that higher information asymmetry and uncertainty lengthen the due diligence process of the acquirers when evaluating prospective target firms. |
| Keywords: | Mergers and Acquisitions (M&A), Due diligence, Information asymmetry, Uncertainty |
| Date: | 2023–03 |
| URL: | http://d.repec.org/n?u=RePEc:bdj:smioir:2023-02&r=com |
| By: | Pascal Troxler, Marcus Roller, Monika Bandi Tanner |
| Abstract: | In recent years, ski area operators in Switzerland have faced a decreasing demand due to climate change, exchange rate pressure and demographical changes among other factors. At the same time, ski lift and snowmaking capabilities have increased – partly with financial aid from public funds. It is therefore crucial to find out how much ski area investments retain demand and affect the competition for the remaining guests. We link firm-level data from ski areas to natural snowpack data and use Two-Way Fixed Effect (TWFE) estimators to study (i) how ski areas lower their dependency on natural snow by investing in snowmaking facilities, (ii) the effect of ski lift investments on skiing demand and revenue and (iii) the impact of lift investments on the spatial competition between neighboring ski areas. We find that ski areas with above-median snowmaking capabilities lower their dependency on natural snow by two-thirds. Ski lift investments induce a one-time positive average effect of 4.1% on demand and 1.9% on revenue in the winter following the construction. Finally, we document negative effects of ski lift expansions of neighboring areas within a road distance of up to 50 kilometers on demand. |
| Keywords: | : Ski area operators, investment competition, ski area expansion, ski lift replacement, snowmaking, spatial competition, tourism |
| JEL: | L83 L88 R41 Z32 |
| Date: | 2023–12 |
| URL: | http://d.repec.org/n?u=RePEc:rdv:wpaper:credresearchpaper45&r=com |
| By: | Christophe Carugati |
| Date: | 2023–12 |
| URL: | http://d.repec.org/n?u=RePEc:bre:wpaper:node_9593&r=com |
| By: | Margarita Machelett (Banco de España) |
| Abstract: | This paper describes a large-scale field experiment conducted in the US auto repair industry to study the existence and structure of gender-based price discrimination in service markets. Women receive price quotes that are 2% (over 10 dollars) higher than those received by men. These differences disappear when women signal low search costs, suggesting statistical rather than taste-based discrimination. Price requests that appear to come from high-income households raise quotes for men but not women, eliminating the gender gap. The price gap also falls with the number of nearby repair shops, suggesting that market competition alleviates gender-based price discrimination. |
| Keywords: | competition, discrimination, field experiment, gender |
| JEL: | C93 D4 J16 J18 J71 |
| Date: | 2023–11 |
| URL: | http://d.repec.org/n?u=RePEc:bde:wpaper:2333&r=com |
| By: | Goerke, Laszlo; Neugart, Michael |
| Abstract: | Monopsony power by firms and social preferences by consumers are well established. We analyze how wages and employment change in a monopsony if workers compare their income with that of a reference group. We show that the undistorted, competitive outcome may no longer constitute the benchmark for welfare comparisons and derive a condition that guarantees that the monopsony distortion is exactly balanced by the impact of social comparisons. We also demonstrate how wage restrictions and subsidies or taxes can be used to ensure this condition, both for a welfarist and a paternalistic welfare objective. |
| Date: | 2023–12–11 |
| URL: | http://d.repec.org/n?u=RePEc:dar:wpaper:141883&r=com |