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on Industrial Competition |
| By: | Kaufmann, Matteo; Schiereck, Dirk |
| Abstract: | We investigate the effect of corporate innovation on mergers and acquisitions (M&A). Using a sample of 786 public-to-public transactions in the U.S. technology sector, we show that acquirers are willing to pay higher premiums for more innovative target firms. This effect is amplified by the acquirer's own level of innovativeness as more innovative acquirers are willing to pay higher premiums for innovative targets than non-innovative acquirers. We further document significant strategic reactions of rival firms. In the aftermath of the M&A, all acquirer rivals increase their R&D spending but the effect is more pronounced for innovative rivals than for non-innovative ones. Innovative acquirer rivals are also more likely to acquire a technology firm in the aftermath of their competitor's M&A announcement than their non-innovative peers. The similarity between acquirers and their rivals shrinks in the post-acquisition period, which may be caused by rival firms extending the breadth of their technological search in response to the acquisition. |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:dar:wpaper:142308&r=com |
| By: | Heski Bar-Isaac; Justin P. Johnson; Volker Nocke |
| Abstract: | It is often argued that startups are acquired for the sole purpose of hiring specialized talent. We show that the goal of such acquihires might be to shut down the most relevant labor market competitor. This grants the acquirer monopsony power over specialized talent. As a consequence, acquihiring may harm employees and be socially inefficient. We explore the robustness of these effects, allowing for private benefits associated with working at a startup, varying bargaining protocols, multiple employees with and without complementarities, and private information. |
| Keywords: | Acquihiring, acquisitions, monopsony power, specialized labor markets, competition policy |
| JEL: | J42 L13 M12 |
| Date: | 2024–01 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2024_500&r=com |
| By: | Luca Macedoni; John Morrow; Vladimir Tyazhelnikov |
| Abstract: | Which products are potentially produced together? When demand for a product increases, which firms will supply it? Using multi-product production patterns within and across firms, we recover a continuous cost based distance between firms and unproduced products. Higher product distance implies decreasing adoption frequency. When export demand induces domestic product adoption, closer firms provide this supply. Potential costs imply measures of Revenue and Competition Potential. These predict firm sales growth, scope growth and core focus. If all firms produced all products linked by co-production, consumer welfare would increase by 10-30%. |
| Keywords: | multi-product firms, firm capabilities, product classification, product space, growth paths |
| Date: | 2024–02–02 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp1978&r=com |
| By: | Genakos, Christos; Lamprinidis, Andreas; Walker, James |
| 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 |
| JEL: | L0 L1 L4 L5 |
| Date: | 2023–05–15 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:121325&r=com |
| By: | Francisco, Kris A.; Abrigo, Michael R.M. |
| Abstract: | High market concentration in the Philippine domestic shipping industry has always been a subject of concern among policymakers and researchers. While many reforms aimed at improving the level of competition in the industry have been implemented since the 1990s, studies show that domestic shipping operations remain in the hands of a few players, especially at the route level. This study aims to enrich the discussion by providing an alternative measure of market power in domestic shipping through the estimation of markups –a useful indicator of how firms can price their goods or services above marginal cost. Estimates confirm the exercise of market power in the domestic shipping industry, as evidenced by high markups. It was also found that the markup on freight is relatively larger than the markups on passenger services. Additional analysis confirms that having a high market share influences high markups significantly. Comments to this paper are welcome within 60 days from the date of posting. Email publications@pids.gov.ph. |
| Keywords: | market power;markups;domestic shipping |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:phd:dpaper:dp_2023-44&r=com |
| By: | Meens-Eriksson, Sef (Department of Economics, Umeå University) |
| Abstract: | General features of waste treatment markets include comprehensive regulations and high fixed capital costs. Hence, firms operating in them have substantial local market power, which is used to mark up prices through spatial price discrimination (Granlund and Meens-Eriksson, 2023). This paper examines effects of waste treatment firms’ spatial price discrimination on Swedish municipalities’ welfare and costs of waste disposal, as well as the associated distributional implications. Results show that the Equivalent Variation is 3.3% of a municipality’s cost for residual waste disposal, on average. Further, the welfare loss disproportionately affects a small number of municipalities, with 10% accounting for 62% of consumer welfare loss. Nearly the entire loss in consumer welfare is redistributed to firms. Considering political ambitions to transform the waste management sector, an alternative scenario is simulated, involving closure of the smallest 20% of waste incineration plants. This would increase the disposal cost for about a quarter of municipalities, and the negative welfare effect within this group would be 12% of their cost of waste disposal. |
| Keywords: | Spatial price discrimination; welfare effects; equivalent variation; waste economics |
| JEL: | D43 D60 L11 L13 Q53 |
| Date: | 2024–02–03 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:umnees:1021&r=com |
| By: | Dimitrakopoulou, Lydia; Genakos, Christos; Kampouris, Themistoklis; Papadokonstantaki, Stella |
| Abstract: | We examine how competition affects VAT pass-through in isolated oligopolistic markets as defined by the Greek islands. Using daily gasoline prices and a difference-in-differences methodology, we investigate how changes in VAT rates are passed through to consumers in islands with different market structure. We show that pass-through increases with competition, going from 50% in monopoly to around 80% in more competitive markets, but remains incomplete. We also discover a rapid rate of adjustment for VAT changes, as well as a positive relationship between competition and the rate of price adjustment. Finally, we document higher pass-through for products with more inelastic demand. |
| Keywords: | pass-through; tax incidence; gasoline; value added tax (VAT); market structure; competition; Greek islands |
| JEL: | H22 L1 |
| Date: | 2023–05–30 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:121321&r=com |
| By: | Anomita Ghosh (National Council of Applied Economic Research); Rupayan Pal (Indira Gandhi Institute of Development Research (IGIDR)) |
| Abstract: | This paper examines strategic trade policy for differentiated network-goods oligopolies under alternative scenarios when there is export-rivalry between two countries. We demonstrate that, in the absence of managerial delegation, the optimal trade policy entails an export tax (subsidy) if network externalities are weak (strong). However, when price competition is combined with managerial delegation, the opposite is true. Subsidizing exports, on the other hand, is always optimal under quantity competition. We also show that the welfare consequences of strategic trade policy depend not only on the mode of product market competition, but also on firms’ internal organizations and the strength of network externalities. |
| Keywords: | Strategic trade policy, network goods, relative-performance based managerial delegation, price competition, quantity competition. |
| JEL: | F12 F13 L13 L22 D21 |
| Date: | 2024–01–01 |
| URL: | http://d.repec.org/n?u=RePEc:nca:ncaerw:152&r=com |
| By: | Claudia Allende; Juan Pablo Atal; Rodrigo Carril; Jose Ignacio Cuesta; Andrés González 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:upf:upfgen:1874&r=com |
| By: | Martimort, David; Pouyet, Jérôme |
| Abstract: | Pay-TV firms compete both downstream to attract viewers and upstream to acquire broadcasting rights. Because profits inherited from downstream competition satisfy a convexity property, allocating rights to the dominant firm maximizes the industry profit. Such an exclusive allocation of rights emerges as a robust equilibrium outcome but may fail to maximize welfare. We analyze whether a ban on resale and a ban on package bidding may improve welfare. These corrective policies have no impact on the final allocation but lead to profit redistribution along the value chain. |
| Keywords: | Broadcasting rights; Upstream and downstream competition; Exclusivity |
| JEL: | L13 L42 |
| Date: | 2024–01–23 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:129026&r=com |
| By: | William E. Bendinelli; Humberto F. A. J. Bettini; Alessandro V. M. Oliveira |
| Abstract: | This paper develops an econometric model of flight delays to investigate the influence of competition and dominance on the incentives of carriers to maintain on-time performance. We consider both the route and the airport levels to inspect the local and global effects of competition, with a unifying framework to test the hypotheses of 1. airport congestion internalization and 2. the market competition-quality relationship in a single econometric model. In particular, we examine the impacts of the entry of low cost carriers (LCC) on the flight delays of incumbent full service carriers in the Brazilian airline industry. The main results indicate a highly significant effect of airport congestion self-internalization in parallel with route-level quality competition. Additionally, the potential competition caused by LCC presence provokes a global effect that suggests the existence of non-price spillovers of the LCC entry to non-entered routes. |
| Date: | 2024–01 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2401.09174&r=com |
| By: | Moreno, Diego; Takalo, Tuomas |
| Abstract: | We study a competitive banking sector in which banks choose the level of risk of their asset portfolios and, upon the public disclosure of stress test results, raise funding by promising investors a repayment. We show that competition forces banks to choose risky assets so as to promise investors high repayments, and to gamble on favorable stress test results. Increasing stress test precision increases banks' asset riskiness but also improves allocative efficiency. When risk taking is not too sensitive to the precision of information, maximal transparency maximizes both stability and surplus. In contrast, when banks exercise market power assets are less risky, while opacity maximizes banks' stability and, when the social cost of bank failure is sufficiently large, the surplus as well. Our results in overall highlight the need to take into account the structure of banking industry when designing stress tests. |
| Keywords: | financial stability, stress tests, bank transparency, banking regulation, bank competition |
| JEL: | G21 G28 D83 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:bofrdp:281999&r=com |
| By: | Dirk Bergemann; Tibor Heumann; Michael C. Wang |
| Abstract: | We analyze the welfare impact of a monopolist able to segment a multiproduct market and offer differentiated price menus within each segment. We characterize a family of extremal distributions such that all achievable welfare outcomes can be reached by selecting segments from within these distributions. This family of distributions arises as the solution to the consumer maximizing distribution of values for multigood markets. With these results, we analyze the effect of segmentation on consumer surplus and prices in both interior and extremal markets, including conditions under which there exists a segmentation benefiting all consumers. Finally, we present an efficient algorithm for computing segmentations. |
| Date: | 2024–01 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2401.12366&r=com |
| By: | Lopez, Rigoberto A.; Steinbach, Sandro; Li, Mengjie |
| Keywords: | Agribusiness, Agricultural and Food Policy, Agricultural Finance, Consumer/Household Economics |
| Date: | 2024–02 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea22:339614&r=com |
| By: | Hannes Wallimann; Silvio Sticher |
| Abstract: | We present a classroom game that integrates economics and data-science competencies. In the first two parts of the game, participants assume the roles of firms in a procurement market, where they must either adopt competitive behaviors or have the option to engage in collusion. Success in these parts hinges on their comprehension of market dynamics. In the third part of the game, participants transition to the role of competition-authority members. Drawing from recent literature on machine-learning-based cartel detection, they analyze the bids for patterns indicative of collusive (cartel) behavior. In this part of the game, success depends on data-science skills. We offer a detailed discussion on implementing the game, emphasizing considerations for accommodating diverging levels of preexisting knowledge in data science. |
| Date: | 2024–01 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2401.14757&r=com |
| By: | Luis Guijarro; Vicent Pla; Jose Ramon Vidal |
| Abstract: | We analyze the effects of enforcing vs. exempting access ISP from net neutrality regulations when platforms are present and operate two-sided pricing in their business models. This study is conducted in a scenario where users and Content Providers (CPs) have access to the internet by means of their serving ISPs and to a platform that intermediates and matches users and CPs, among other service offerings. Our hypothesis is that platform two-sided pricing interacts in a relevant manner with the access ISP, which may be allowed (an hypothetical non-neutrality scenario) or not (the current neutrality regulation status) to apply two-sided pricing on its service business model. We preliminarily conclude that the platforms are extracting surplus from the CPs under the current net neutrality regime for the ISP, and that the platforms would not be able to do so under the counter-factual situation where the ISPs could apply two-sided prices. |
| Date: | 2024–01 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2401.14791&r=com |
| By: | Boeri, Tito Michele; Garnero, Andrea; Luisetto, Lorenzo G. |
| Abstract: | Non-compete clauses (NCCs) limiting the mobility of workers have been found to be rather widespread in the US, a flexible labour market with large turnover rates and a limited coverage of collective bargaining. This paper explores the presence of such arrangements in a rigid labour market, with strict employment protection regulations by OECD standards and where all employees are, at least on paper, subject to collective bargaining. Based on a representative survey of employees in the private sector, an exam of collective agreements and case law, we find that in Italy i) collective agreements play no role in regulating the use of NCCs while the law specifies only the formal requirements, ii) about 16% of private sector employees are currently bound by a NCC, iii) NCCs are relatively frequent among low educated employees in manual and elementary low paid occupations having no access to any type of confidential information, and iv) in addition to NCCs, a number of other arrangements limit the post-employment activity of workers. Many of the NCCs do not comply with the minimum requirements established by law and yet workers do not consider them as unenforceable and appear to behave as they were effective. Even when NCCs are unenforceable they appear to negatively affect wages when they are introduced without changing the tasks of the workers involved. Normative implications are discussed in the last section of the paper. |
| Keywords: | non-compete clauses; monopsony; labour market concentration; employment; wages |
| JEL: | J31 J41 J42 L40 |
| Date: | 2023–04–03 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:121338&r=com |
| By: | Michel-Pierre Chélini (CREHS - Centre de Recherche et d'Etudes - Histoire et Sociétés - UA - Université d'Artois) |
| Abstract: | Prices are an essential component of markets and incorporate a lot of information about the products or services exchanged. From 1940 to 1986 there existed in France at the Ministry of the Economy and Finance a price control administration, the essential justification of which was France's propensity for inflation higher than that of its partners: 5.4 % on annual average from 1950 to 2000 compared to 4% for the United States or 2.8% for the FRG. The service was first called Economic Control, then evolved in stages until in 1986 it became Directorate-General for Competition, Consumption and Fraud Repression, gradually moving from vigilant monitoring of prices to their contractual regulation and finishing in competition policy |
| Abstract: | Les prix sont une composante essentielle des marchés et intègrent beaucoup d'informations sur les produits ou les services échangés. De 1940 à 1986 a existé en France auprès du ministère de l'Économie et des Finances une administration d'encadrement des prix, dont la justification essentielle était la propension de la France à une inflation supérieure à celle de ses partenaires : de 5, 4 % en moyenne annuelle de 1950 à 2000 contre 4 % pour les États-Unis ou 2, 8 % pour la RFA. Le service s'est d'abord appelé Contrôle économique, puis a évolué par étapes jusqu'à devenir en 1986 direction générale de la Concurrence, de la Consommation et de la Répression des Fraudes, passant progressivement d'une surveillance vigilante des prix à leur régulation contractuelle et finissant en politique de la concurrence |
| Keywords: | Prices regulation, Inflation policy, France 1940-1990 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-04399936&r=com |
| By: | Datta, Nikhil |
| Abstract: | The estimation of labour supply elasticities is central to the measurement of monopsony power in the labor market. In this paper I provide new, firm-level estimates of the labour supply elasticity that distinguish between a recruitment elasticity (for potential new workers) and a separation elasticity (as relevant to incumbents). My study uses comprehensive HR data for a large multi-establishment firm in the UK. This setting allows me to develop job-establishment level variation in wages derived from both a government wage floor policy which only effects my firm under study and arbitrary variation in advertised wages resulting from idiosyncratic HR department decisions. My estimates show that, in contrast to common assumptions, the recruitment elasticity is almost double the size of the separation elasticity. Heterogeneity analysis is suggestive that differences in wage-saliency for job seekers versus incumbents is likely a factor in this difference. Combined the elasticities give a labour supply elasticity to the firm of 4.6 implying a wage markdown of 18% from the marginal product of labour. I find no evidence of spillovers from wage changes to the local market despite establishments being relatively large, indicating a monopsonistic wage setting framework is more suitable than an oligopsonistic one. |
| Keywords: | monopsony; recruitment elasticity; separation elasticity; markdown; market power |
| JEL: | J42 J31 J22 |
| Date: | 2023–07–03 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:121312&r=com |
| By: | Rodrigo Carril; Audrey Guo |
| Abstract: | Veteran-owned businesses are given preferential treatment in the allocation of procurement contracts from the U.S. Department of Veterans Affairs – currently the largest civilian federal agency in terms of procurement spending. We exploit a 2016 Supreme Court ruling that significantly increased the scope of these set-asides, to study the impacts of preference programs on both the targeted businesses and procurement outcomes. The policy change increased the share of contracts awarded to the target population, service-disabled veteran-owned small businesses, and led to significant entry of new vendors, including those who had previously failed to win contracts. New entrants were also more likely to win future contracts, and the policy led to an increase in survival for targeted firms. We find no evidence of relevant spillovers to awards by other federal agencies, no decline in competition for awards, and no deterioration of contract execution performance by vendors. These findings suggest that VA set-asides have successfully improved outcomes for the target population without imposing significant costs on the government. |
| Keywords: | Procurement, set-asides, veterans, competition |
| JEL: | D44 H57 L14 |
| Date: | 2023–12 |
| URL: | http://d.repec.org/n?u=RePEc:upf:upfgen:1876&r=com |
| By: | Graham Pilgrim; Shirly Ang |
| Abstract: | The OECD and the United Nations Statistics Division (UNSD) have developed jointly the new Multinational Enterprise Information Platform (MEIP). MEIP is built on past OECD and UN efforts to compile statistics on the scale and scope of the international activities of Multinational Enterprises (MNEs). The new platform uses publicly available data to gather information on the world’s 500 largest MNEs in a timely manner, facilitating a comprehensive view of their physical and digital presence. It also includes a monitoring tool for large events such as Mergers and Acquisitions (M&A). The platform also provides a valuable benchmark for National Statistical Offices (NSOs) and researchers, allowing them to compare the national presence of an individual MNE to the global presence. Information on MNEs and their global network can also be visualised in a user-friendly dashboard. |
| Keywords: | business register, multinationals, open source |
| JEL: | C55 C81 F23 |
| Date: | 2024–02–02 |
| URL: | http://d.repec.org/n?u=RePEc:oec:stdaaa:2024/01-en&r=com |
| By: | Muhammad, Andrew; Valdes, Constanza; DeLong, Karen; Grebitus, Carola |
| Keywords: | Agribusiness, Agricultural Finance, International Relations/Trade |
| Date: | 2022–12 |
| URL: | http://d.repec.org/n?u=RePEc:ags:iats22:339456&r=com |
| By: | Daniel Krähmer (Universität Bonn) |
| Abstract: | The paper studies the canonical hold-up problem with one-sided investment by the buyer and full ex post bargaining power by the seller. The buyer can covertly choose any distribution of valuations at a cost and privately observes her valuation. The main result shows that in contrast to the well-understood case with linear costs, if investment costs are strictly convex in the buyer’s valuation distribution, the buyer’s equilibrium utility is strictly positive and to tal welfare is strictly higher than in the benchmark when valuations are public information, thus alleviating the hold-up problem. In fact, when costs are mean-based or display decreasing risk, the hold-up problem may disappear completely. Moreover, the buyer’s equilibrium utility and total welfare might be non-monotone in costs. The paper utilizes an equilibrium characterization in terms of the Gateaux derivative of the cost function. |
| Keywords: | Information Design, Hold-Up Problem, Unobservable Information |
| JEL: | C61 D42 D82 |
| Date: | 2024–02 |
| URL: | http://d.repec.org/n?u=RePEc:ajk:ajkdps:278&r=com |