nep-com New Economics Papers
on Industrial Competition
Issue of 2024‒03‒25
twelve papers chosen by
Russell Pittman, United States Department of Justice

  1. The Pro-competitive Effects of Trade Agreements By Meredith Crowley; Lu Han; Thomas Prayer
  2. Inequality and Market Concentration: New Evidence from Australia By Hotchin, Lachlan; Leigh, Andrew
  3. Polycentric governance in collusive agreements By Schmal, Wolfgang Benedikt
  4. Acquiring R&D Projects: Who, When, and What? Evidence from Antidiabetic Drug Development By Jan Malek; Melissa Newham; Jo Seldeslachts; Reinhilde Veugelers
  5. Determinantes concorrenciais dos atrasos dos voos no aeroporto e na rota By William E. Bendinelli; Alessandro V. M. Oliveira
  6. Coordination in the fight against collusion By Elisabetta Iossa; Simon Loertscher; Leslie M. Marx; Patrick Rey
  7. Do Cooperatives Exercise Market Power?. By Federico M. Accursi, Raúl Bajo-Buenestado
  8. Information-Based Pricing in Specialized Lending By Blickle, Kristian; He, Zhiguo; Huang, Jing; Parlatore, Cecilia
  9. Do large firms generate positive productivity spillovers? By Mary Amiti; Cedric Duprez; Jozef Konings; John Van Reenen
  10. The One and Only: Single-Bidding in Public Procurement By Vitezslav Titl
  11. Tax Incidence in Heterogeneous Markets: The Pass-through of Air Passenger Taxes on Airfares By Wozny, Florian
  12. Algorithmische Such- und Empfehlungssysteme in digitalen Märkten und die Umsetzung von Vorgaben des DMA und DAS By Gaenssle, Sophia; Budzinski, Oliver; Stöhr, Annika

  1. By: Meredith Crowley; Lu Han; Thomas Prayer
    Abstract: How does trade policy affect competition? Using the universe of product exports by firms from eleven low and middle-income countries, we document that tariff reductions under trade agreements have strong procompetitive effects – they encourage entry and reduce the (tariff exclusive) price-cost markups of exporters. This finding, that markups fall with tariff cuts, contradicts a core prediction of standard oligopolistic competition models of trade. We extend a workhorse international pricing model of oligopolistic competition to include multiple countries and a rich preference structure. Our preference structure allows for fierce competition among firms from the same country and less intense competition among firms from different countries. We show a firm’s optimal markup after a tariff cut can rise or fall depending on the parameters of the preference structure and tariff-induced reallocation of market share among firms and across countries.
    Keywords: trade agreements, variable markups, markup elasticity, trade elasticity, competition policy, firm level data.
    JEL: F13 F14 F15
    Date: 2022–07
  2. By: Hotchin, Lachlan (Monash University); Leigh, Andrew (Parliament of Australia)
    Abstract: Are excessively concentrated markets inequitable as well as inefficient? We explore this issue by analyzing the degree of market concentration in the industries where Australia's wealthiest made their fortunes. Compared with the economy at large, we find that top wealth holders have tended to make their fortunes in industries with a higher-than-average degree of market concentration. Top wealth shares have grown substantially, and from 1990 to 2020, there appears to have been an increase in the propensity of top wealth holders to make their fortunes in highly concentrated industries.
    Keywords: income distribution, competition, market power
    JEL: D31 L12 L41
    Date: 2024–02
  3. By: Schmal, Wolfgang Benedikt
    Abstract: Collusive agreements in the form of cartels among firms are complex structures. The involved firms need to agree on prices and sales quotas that are legally not enforceable. Market characteristics that foster cartels' failure or success are widely examined. However, the interplay between the involved firms in a collusive agreement, i.e., the governance dimension within a cartel, has received surprisingly low attention. Using a comprehensive dataset of 191 cartels from 2012 - 2018, this paper empirically reveals that polycentric structures within the cartel governance may contribute to longer duration and lower sanctions imposed by competition authorities, especially for large cartels. By that, the paper sheds new light on two aspects: The entangled governance structures of collusive undertakings as well as the relevance of polycentricity in the firm environment. The insights may be helpful for cartel authorities and new research combining institutional and industrial economics.
    Keywords: Collusion, illegal cartels, polycentricity, governance, institutions
    JEL: A14 D02 D23 K42 L40 O17
    Date: 2024
  4. By: Jan Malek; Melissa Newham; Jo Seldeslachts; Reinhilde Veugelers
    Abstract: This paper analyzes M&A patterns of R&D projects in the antidiabetics industry. For this purpose, we construct a database with all corporate individual antidiabetics R&D projects over the period 1997 - 2017, and add detailed information on firms’ technology dimension using patent information, next to their position in product markets. This allows us to identify the identity of targets and acquirers (who), the timing of acquisitions along the R&D process (when), and which type of R&D projects changes hands in terms of technology novelty (what). The main results can be summarized as follows. First, most of the action in M&As is in early R&D stages, still far from product markets. Second, most of the early-stage projects that change hands are high-risk/high-gain novel projects. Third, the industry leaders in the product markets are rather inactive in acquiring those novel early-stage projects. The likely acquirers of such projects are small or pipeline firms. Our results put in perspective the narrative that large incumbents acquire small targets with low-risk projects close to product launch.
    Keywords: M&As, innovation, R&D, pharmaceutics, technology, novelty, patents
    JEL: L41 L65 O31
    Date: 2024
  5. By: William E. Bendinelli; Alessandro V. M. Oliveira
    Abstract: Flight delays are a reality in the modern air industry worldwide. However, studies in the literature have investigated the competitive determinants of delays arising from factors originating at the airport and along the route separately. This work aims to present a national study that used a unifying approach from the literature, considering the local and global effects of competition on delays. The analysis took into account a phenomenon known as the "internalization of externalities" of airport congestion. Furthermore, it discusses the relationship between quality and competition on the route and the impacts of the entry of a low-cost carrier (LCC) on the delays of incumbent airlines in the Brazilian air market. The literature suggests that there is evidence of congestion internalization at Brazilian airports, in parallel with competition for quality at the route level. Additionally, the potential competition caused by the presence of the LCC leads to a global effect that suggests the existence of impacts other than prices on routes where it has not entered.
    Date: 2024–02
  6. By: Elisabetta Iossa; Simon Loertscher; Leslie M. Marx; Patrick Rey (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)
    Abstract: While antitrust authorities strive to detect, prosecute, and thereby deter collusive conduct, entities harmed by that conduct are also advised to pursue their own strategies to deter collusion. The implications of such delegation of deterrence have largely been ignored, however. In a procurement context, we find that buyers may prefer to accommodate rather than deter collusion among their suppliers. We also show that a multi-market buyer, such as a centralized procurement authority, may optimally deter collusion when multiple independent buyers would not, consistent with the view that "large" buyers are less susceptible to collusion.
    Keywords: Reserves, Sustainability and initiation of collusion, Coordinated effects
    Date: 2024–02
  7. By: Federico M. Accursi, Raúl Bajo-Buenestado
    Keywords: Cooperatives, Pass-through to prices; Market power; Firm conduct; Retail fuel market.
    JEL: D22 H22 H32 L21 L29 P13
    Date: 2024–02
  8. By: Blickle, Kristian (Federal Reserve Bank of New York); He, Zhiguo (Stanford U); Huang, Jing (Texas A&M U); Parlatore, Cecilia (New York U)
    Abstract: We study specialized lending in a credit market competition model with private information. Two banks, equipped with similar data processing systems, possess "general" signals regarding the borrower's quality. However, the specialized bank gains an additional advantage through further interactions with the borrower, allowing it to access "speciliazed" signals. In equilibrium, both lenders use general signals to screen loan applications, and the specialized lender prices the loan based on its specialized signal conditional on making a loan. This private-information-based pricing helps deliver the empirical regularity that loans made by specialized lenders have lower rates (i.e., lower winning bids) and better ex-post performance (i.e., lower non-performing loans). We show the robustness of our equilibrium characterization under a generalized information structure, endogenize the specialized lending through information acquisition, and discuss its various economic implications.
    JEL: G21 L13 L52 O33 O36
    Date: 2023–12
  9. By: Mary Amiti; Cedric Duprez; Jozef Konings; John Van Reenen
    Abstract: The potentially negative effects of market concentration on consumers and workers has received much attention, but Mary Amiti, Cédric Duprez, Jozef Konings and John Van Reenen find that big firms can also promote productivity in the wider economy. Analysing data from Belgium, they find that being global is not necessary for such benefits, with large domestic firms generating spillovers of the same magnitude as multinationals.
    Keywords: productivity, fdi, spillovers
    Date: 2024–02–20
  10. By: Vitezslav Titl
    Abstract: Approximately 23% of public procurement contracts in the European Union are awarded to the sole firm that submits a bid. The public procurement contracts market constitutes around one-seventh of GDP in developed countries, rendering any inefficiencies on this market a firstorder problem. In this paper, I exploit a unique reform implemented in the Czech Republic that made it impossible to award contracts with only one bid and. Using a difference-indifferences strategy on the dataset of all public procurement contracts, I first show that the reform reduced prices by 10% relative to the estimated costs for single-bid public procurement contracts. Second, I provide evidence that procuring authorities started to provide significantly longer descriptions of procurement contracts and extended the timeframe for firms to prepare their bids. Last, I show that the prices of procurement contracts supplied by politically connected and anonymously owned firms were not reduced after the reform. The main contribution of this paper lies in estimating the savings attributable to the ban on single-bidding in public procurement.
    Keywords: Single-bidding, Public procurement, Political connections, Corruption
    Date: 2023–10
  11. By: Wozny, Florian (German Aerospace Center DLR)
    Abstract: The tax incidence is central to the effectiveness of taxation. In this paper, I examine the pass-through rate of an air passenger tax to airfares. Additionally, I analyse its impact on passenger numbers, air transport capacity, and the interaction with supply and demand elasticity. For identification, I exploit the implementation of an air passenger tax on worldwide departures from Sweden and compare them with similar departures from Denmark and Finland with no such air passenger tax implementation. For the analysis, I use a unique data set of the universe of worldwide airline bookings. On average, airlines choose an immediate and nearly full pass-through of taxes. Consistent with theoretical priors for oligopolistic markets, tax incidence increases with competition but decreases with lower demand elasticity. Furthermore, the air passenger tax reduces passenger numbers and air transport capacity significantly.
    Keywords: tax incidence, competition, air passenger tax, environmental policy
    JEL: H22 L13 Q52
    Date: 2024–02
  12. By: Gaenssle, Sophia; Budzinski, Oliver; Stöhr, Annika
    Abstract: Der vorliegende Beitrag betrachtet die wettbewerbs- und medienökonomischen Eigenschaften und Effekte von algorithmischen Such- und Empfehlungssystemen und ihrer Regulierung. Dabei werden nach einer einführenden Klarstellung des Sinns und der Notwendigkeit solcher Systeme in der digitalen Welt (Abschnitt I) zunächst die nachfrage- und angebotsseitigen ökonomischen Effekte wie die Nutzung personalisierter Daten, der Erfahrungs- bzw. Vertrauensgutcharakter algorithmischer Rankings, Selbstbevorzugung und Gatekeeper-Macht thematisiert (Abschnitt 2). Anschließend widmet sich der Beitrag den jüngsten europäischen Regulierungspaketen für digitale Dienste (Digital Markets Act und Digital Services Act) und beschreibt die hierdurch anstehenden Regulierungswirkungen (Abschnitt 3). Schließlich diskutiert der Beitrag, ob die aktuellen Regulierungen geeignet sind, die erfassten Problemfelder adäquat zu regulieren.
    Keywords: algorithmische Such- und Empfehlungssysteme, digitale Dienste, Gatekeeper, Digital Markets Act, Digital Services Act
    JEL: L86 L40 D83 D18 K21 L50 L82 Z10
    Date: 2024

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