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on Industrial Competition |
| By: | Bruno Jullien (TSE-R - TSE-R Toulouse School of Economics – Recherche - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Markus Reisinger (Frankfurt School of Finance and Management); Patrick Rey (TSE-R - TSE-R Toulouse School of Economics – Recherche - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement) |
| Abstract: | The availability of consumer data is inducing a growing number of firms to adopt more personalized pricing policies. This affects both the performance of, and the competition between, alternative distribution channels, which in turn has implications for firms' distribution strategies. We develop a formal model to examine a brand manufacturer's choice between mono distribution (selling only through its own direct channel) or dual distribution (selling through an independent retailer as well). We consider different demand patterns, covering both horizontal and vertical differentiation and different pricing regimes, with the manufacturer and retailer each charging personalized prices or a uniform price. We show that dual distribution is optimal for a large number of cases. In particular, this is always the case when the channels are horizontally differentiated, regardless of the pricing regime; moreover, if both firms charge personalized prices, a well-designed wholesale tariff allows them to extract the entire consumer surplus. These insights obtained here for the case of intrabrand competition between vertically related firms are thus in stark contrast to those obtained for interbrand competition, where personalized pricing dissipates industry profit. With vertical differentiation, dual distribution remains optimal if the manufacturer charges a uniform price. By contrast, under personalized pricing, mono distribution can be optimal when the retailer does not expand demand sufficiently. Interestingly, the industry profit may be largest in a hybrid pricing regime, in which the manufacturer forgoes the use of personalized pricing and only the retailer charges personalized prices. This paper was accepted by Joshua Gans, business strategy. Funding: The financial support of the European Research Council under the European Union's Horizon 2020 research and innovation programme [Grant Agreement 670494] and of the Agence nationale de la recherche (ANR) [Grant ANITI (ANR Grant 3IA)] and [Grant CHESS ANR-17-EURE-0010] (Investissements d'Avenir program) is gratefully acknowledged. Supplemental Material: The online appendix is available at https://doi.org/10.1287/mnsc.2022.4437 . |
| Keywords: | Personalized pricing, Distribution strategies, Vertical contracting, Downstream competition |
| Date: | 2023–03 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-04282548&r=com |
| By: | Hunold, Matthias; Werner, Tobias |
| Abstract: | This paper investigates the collusive and competitive effects of algorithmic price recommendations on market outcomes. These recommendations are often non-binding and common in many markets, especially on online platforms. We develop a theoretical framework and derive two algorithms that recommend collusive pricing strategies. Utilizing a laboratory experiment, we find that sellers condition their prices on the recommendation of the algorithms. The algorithm with a soft punishment strategy lowers market prices and has a pro-competitive effect. The algorithm that recommends a subgame perfect equilibrium strategy increases the range of market outcomes, including more collusive ones. Variations in economic preferences lead to heterogeneous treatment effects and explain the results. |
| Keywords: | Collusion, Experiment, Human-Machine Interaction, Bertrand Oligopoly |
| JEL: | C92 D43 L13 L41 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:dicedp:280937&r=com |
| By: | Jose Garcia-Louzao; Alessandro Ruggieri |
| Abstract: | Does competition in the labor market affect wage inequality? Standard textbook monopsony models predict that lower employer labor market power reduces wage dispersion. We test this hypothesis using Social Security data from Lithuania. We first fit a two-way fixed effects model to quantify the contribution of worker and firm heterogeneity to wage dispersion and document that the compression of dispersion in firm fixed effects has been the main source of the decline in inequality over the past 20 years. Using a theory-based relationship, we then leverage variation across sectors and over time to show that a 10 percentage point increase in labor market competition leads to a 0.7 percentage point reduction in the variance of firm-specific wage components. A counterfactual exercise using our preferred estimates suggests that the increase in labor market competition can explain at least 15 percent of the observed decline in overall wage inequality. |
| Keywords: | wage inequality, firm heterogeneity, monopsony, labor supply elasticity |
| JEL: | J31 J42 O15 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_10829&r=com |
| By: | B. F. Oliveira; A. V. M Oliveira |
| Abstract: | This paper describes an econometric model of the Brazilian domestic carrier Azul Airlines' network construction. We employed a discrete-choice framework of airline route entry to examine the effects of the merger of another regional carrier, Trip Airlines, with Azul in 2012, especially on its entry decisions. We contrasted the estimated entry determinants before and after the merger with the benchmarks of the US carriers JetBlue Airways and Southwest Airlines obtained from the literature, and proposed a methodology for comparing different airline entry patterns by utilizing the kappa statistic for interrater agreement. Our empirical results indicate a statistically significant agreement between raters of Azul and JetBlue, but not Southwest, and only for entries on previously existing routes during the pre-merger period. The results suggest that post-merger, Azul has adopted a more idiosyncratic entry pattern, focusing on the regional flights segment to conquer many monopoly positions across the country, and strengthening its profitability without compromising its distinguished expansion pace in the industry. |
| Date: | 2023–12 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2312.05630&r=com |
| By: | Tiziano De Angelis; Fabien Gensbittel; St\'ephane Villeneuve |
| 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 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2312.07703&r=com |
| By: | Ayush Pant (Ashoka University); Federico Trombetta (Universita Cattolica del Sacro Cuore) |
| Abstract: | Conventional wisdom suggests that competition in the modern digital environment pushes media outlets toward the early release of less accurate information. We show that this is not necessarily the case. We argue that two opposing forces determine the resolution of the speed-accuracy tradeoff: preemption and reputation. More competitive environments may be more conducive to reputation building, which may lead to better reporting. However, the audience may be worse off due to the outlets' better initial information. Finally, we show how a source may exploit the speed-accuracy tradeoff to quickly get "unverified facts" out to the audience. |
| Keywords: | media competition; preemption; reputation |
| Date: | 2023–01–30 |
| URL: | http://d.repec.org/n?u=RePEc:ash:wpaper:92&r=com |
| By: | Wentian Zhang |
| Abstract: | This paper studies the effect of antitrust enforcement on venture capital (VC) investments and VC-backed companies. To establish causality, I exploit the DOJ's decision to close several antitrust field offices in 2013, which reduced the antitrust enforcement in areas near the closed offices. I find that the reduction in antitrust enforcement causes a significant decrease in VC investments in startups located in the affected areas. Furthermore, these affected VC-backed startups exhibit a reduced likelihood of successful exits and diminished innovation performance. These negative results are mainly driven by startups in concentrated industries, where incumbents tend to engage in anticompetitive behaviors more frequently. To mitigate the adverse effect, startups should innovate more to differentiate their products. This paper sheds light on the importance of local antitrust enforcement in fostering competition and innovation. |
| Date: | 2023–12 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2312.13564&r=com |
| By: | Kroft Kory; Laliberté Jean-William; Leal Vizcaíno René; Notowidigdo Matthew J. |
| Abstract: | We develop a theory of commodity taxation featuring imperfect competition along with love-of-variety preferences and endogenous firm entry and exit, and we derive new formulas for the efficiency and pass-through of specific and ad valorem taxes. These formulas unify existing canonical ones and feature a new term capturing the effect of variety on consumer surplus. Intuitively, if taxes reduce product varieties in the market, then the impact on social welfare depends on how much consumers value variety. As a proof-of-concept, we use the theoretical formulas to identify love-of-variety preferences in an empirical application. Our welfare analysis shows that the marginal excess burden of taxation is very sensitive to the estimated love-of-variety, which can overturn classical results on the desirability of ad valorem versus specific taxation. |
| Keywords: | Public economics;Taxation;Tax incidence;Sales tax |
| JEL: | H20 H22 H71 |
| Date: | 2023–12 |
| URL: | http://d.repec.org/n?u=RePEc:bdm:wpaper:2023-20&r=com |
| By: | Dolata, Ulrich |
| 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. The paper focuses on two questions. Firstly, what distinguishes industrial platforms from the platforms that characterize the consumption- and- communication-based internet? Can typical peculiarities and overarching characteristics of platform-based forms of work and organization in industry be identified? And secondly, do platforms represent an independent form of organization and coordination of industrial market, production and innovation processes that is substantially different from organized networks? The paper undertakes an empirical mapping and classification of the little explored field of industrial platforms and discusses from a theoretical-conceptual perspective why platforms should be conceived of as a sui generis form of organization whose dominant mode of coordination can be described as rule-based curation. |
| 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 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. |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:stusoi:280954&r=com |
| By: | Bradley, Sebastien (Drexel University); Carril-Caccia, Federico (University of Granada); Yotov, Yoto (Drexel University) |
| Abstract: | We study the relationship between corporate income taxes and mergers and acquisitions (M&As). To this end, we compile and deploy a dataset consisting of all cross-border and domestic M&A deals for 118 source (acquirer) and 122 destination (target) countries and 84 sectors over the period 1995-2019. From a methodological perspective, we implement leading methods from the empirical gravity literature on trade, foreign direct investment, and migration, and we demonstrate their importance for estimating the impact of corporate income taxes on cross-border versus domestic M&A activity. Our main finding is that a one percentage point increase in target country corporate income tax rates decreases the number of cross-border acquisitions by about 0.8 percent relative to domestic M&As. This result is robust to various sensitivity checks and is comparable to previously published estimates. Nevertheless, our stepwise estimation strategy exemplifies the importance of individual empirical refinements. These should serve as the basis for future work investigating the effects of taxation on bilateral flows. |
| Keywords: | Corporate income taxes; Mergers and acquisitions; Gravity method |
| JEL: | F10 F14 F21 F23 H25 H87 |
| Date: | 2023–12–20 |
| URL: | http://d.repec.org/n?u=RePEc:ris:drxlwp:2023_008&r=com |
| By: | Richeng Piao |
| Abstract: | This study investigates the implications of algorithmic pricing in digital marketplaces, focusing on Airbnb's pricing dynamics. With the advent of Airbnb's new pricing tool, this research explores how digital tools influence hosts' pricing strategies, potentially leading to market dynamics that straddle the line between efficiency and collusion. Utilizing a Regression Discontinuity Design (RDD) and Propensity Score Matching (PSM), the study examines the causal effects of the pricing tool on pricing behavior among hosts with different operational strategies. The findings aim to provide insights into the evolving landscape of digital economies, examining the balance between competitive market practices and the risk of tacit collusion facilitated by algorithmic pricing. This study contributes to the discourse on digital market regulation, offering a nuanced understanding of the implications of AI-driven tools in market dynamics and antitrust analysis. |
| Date: | 2023–12 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2312.05633&r=com |
| By: | Camille Megy (LGI - Laboratoire Génie Industriel - CentraleSupélec - Université Paris-Saclay) |
| Abstract: | Alongside our baseline scenario without PTG, we define a series of alternative scenarios that represent various PTGownership structures. |
| Date: | 2022–12–14 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-04325987&r=com |
| By: | Sebastian G. Kessing |
| Abstract: | A global monopoly supplier country of necessary inputs for the provision of global public goods has an incentive to subsidize these exports. The strategic interdependence in the global public good context reverses the ”large country” incentives to manipulate the terms-of-trade. It is optimal for a monopoly supplier country to deliberately worsen its terms of trade. The existence of a global monopoly supplier increases global public good supply relative to a competitive setting. Import-dependent countries may also benefit from a monopoly supplier. While they are strategically exploited to increase their contributions to the global public good, they do so at lower costs, and they benefit from increased contributions by the other importer countries. |
| Keywords: | global public goods, market power, climate policy, terms-of-trade, Inflation Reduction Act, Net Zero Industry Act |
| JEL: | H41 D60 Q54 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_10834&r=com |