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on Industrial Competition |
| By: | Joshua S. Gans |
| Abstract: | This paper surveys the relevant existing literature that can help researchers and policy makers understand the drivers of competition in markets that constitute the provision of artificial intelligence products. The focus is on three broad markets: training data, input data, and AI predictions. It is shown that a key factor in determining the emergence and persistence of market power will be the operation of markets for data that would allow for trading data across firm boundaries. |
| JEL: | L15 L40 O34 |
| Date: | 2024–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:32270&r=com |
| By: | Elliott, M.; Galeotti, A.; Koh, A.; Li, W. |
| Abstract: | There are many markets that are networked in these sense that not all consumers have access to (or are aware of) all products, while, at the same time, firms have some information about consumers and can distinguish some consumers from some others (for example, in online markets through cookies). With unit demand and price-setting firms we give a complete characterization of all welfare outcomes achievable in equilibrium (for arbitrary buyer-seller networks and arbitrary information structures), as well as the designs (networks and information structures) which implement them. |
| Date: | 2023–02–04 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camjip:2304&r=com |
| By: | Jeon, Doh-Shin; Choi, Jay Pil; Whinston, Michael |
| Abstract: | We develop a leverage theory of tying in markets with network effects. When a monopolist in one market cannot perfectly extract surplus from consumers, tying can be a mechanism through which unexploited consumer surplus is used as a demand-side leverage to create a “quasi-installed base” advantage in another market characterized by network effects. Our mechanism does not require any precommitment to tying; rather, tying emerges as a best response that lowers the quality of tied-market rivals. While tying can lead to exclusion of tied-market rivals, it can also expand use of the tying product, leading to ambiguous welfare effects. |
| Date: | 2024–04–11 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:129287&r=com |
| By: | Boa, I.; Elliott, M.; Foster, D.; |
| Abstract: | Merger analysis typically focuses on possible strategic price effects in markets where there is existing competition between the merging firms. We refer to this as the product based approach. This paper proposes a complementary approach based on an assessment of the merging firms’ capabilities that can provide insights on potential merger effects, including in circumstances where the product based approach offers little practical guidance to antitrust authorities. Our approach is rooted in the resource-based view of business strategy that starts from the premise that it is a firm’s capabilities (sometimes called core competencies), which drive its competitive advantage across markets. We argue that mergers in which firms’ capabilities are less overlapping are more pro-competitive on several dimensions: immediate competition in overlapping markets, immediate competition in other markets, long-run competition and innovation. |
| Date: | 2023–02–03 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camjip:2303&r=com |
| By: | López, Rigoberto A.; Seoane, Luis |
| Abstract: | The meatpacking industry is a crucial intermediary between ranchers and the downstream supply chain, and concentration within the industry has significant implications for stakeholders in terms of competition and transmission of efficiencies. Due to constraints on the efficient transportation of live animals over long distances, ranchers primarily operate within regional markets. In this paper we provide new knowledge about the degree of regional concentration in the beef packing industry and propose a model to examine its impact on the wholesale farm-price spread. Findings indicate a significant increase in concentration across all regions, with some regions experiencing up to a 300 percent rise in the Herfindahl index, although concentration levels vary considerably among the different regions. |
| Keywords: | Livestock Production/Industries |
| Date: | 2024–04 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea22:341195&r=com |
| By: | Michelle W. Bowman |
| Date: | 2024–04–02 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgsq:98004&r=com |
| By: | Polemis, Michael |
| Abstract: | The longevity of cartels has been a highly contested topic among economists and managers, with numerous researchers arguing that cartels are inherently unstable and their endurance is usually short-lived. Understanding the main factors that influence a cartel duration is essential from a managerial point of view let alone the competition policy perspective. Despite having a large body of literature, there has been no systematic evaluation of the existing driving factors to determine the current understanding and identify potential paths for future research. The present paper employs quantile regression techniques thus allowing for a more thorough and precise depiction of the data in terms of estimations compared to the traditional OLS analysis. The empirical findings support that the number of cartelists imposes an asymmetric effect, reducing (increasing) the lifespan of the collusion only in the short (long) lived cartels. Operating internationally and having a third-party facilitator both lengthen cartels, but the magnitudes of these effects decline monotonically over the range of the distribution. Relative to price-fixing, bid-rigging lengthens cartels in the bottom 20% of the distribution but has no significant effect elsewhere. Finally, the prevalence of leniency programs appears to have no significant effect on cartel duration, except at the very bottom of the distribution where the effect is small in magnitude. |
| Keywords: | Collusion; Longevity; Cartelists; Sanctions; Quantiles |
| JEL: | C31 D43 L13 L41 |
| Date: | 2024–03–23 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:120534&r=com |
| By: | Bastian Krieger; Malte Prüfer; Linus Strecke |
| Abstract: | Public procurement accounts for 15 to 20 percent of global GDP and is considered an effective innovation policy. However, the detrimental effects of non-innovative public procurement - public procurement tenders awarded solely based on their price - on firm innovations have been largely neglected, even though it represents the majority of all tenders. We contribute by i) developing a comprehensive theory on the effects of winning non-innovative public procurement tenders as a firm and ii) empirically testing our theory by combining representative German data with two-way fixed effect difference-in-differences estimations. In total, the estimations demonstrate winning non-innovative public procurement reduces firms’ product and process innovations on the one hand, and increases firms’ focus on their established products and services on the other hand. These results confirm our theory and empirically hold at the level of the individual firm and the German enterprise sector. |
| Keywords: | Public procurement, Firm innovation, Demand side |
| Date: | 2024–03–29 |
| URL: | http://d.repec.org/n?u=RePEc:ete:msiper:739379&r=com |
| By: | Kovalenko, Tim; Sauerbier, Timo; Schröpf, Benedikt |
| Abstract: | In West Germany, the average size of establishments declined during the 1990s and started to increase again in the late 2000s, while the employer size wage premium followed the opposite trajectory. In this paper, we show that these two developments are interrelated. More precisely, our results suggest that variations in the employer size wage premiums induced establishments to vary their employment level, consistent with monopsony power on the labor market. Moreover, our regional analyses show that average establishment size correlates positively with GDP per capita. We rationalize these findings with a heterogeneous firms model with monopsonistic competition in the labor market, stemming from the household's love-of-variety preferences for employers. Both empirics and theory reveal that higher size wage premiums decrease average establishment size by downsizing incumbent establishments and triggering the entry of small establishments, thus also negatively affecting aggregate productivity. |
| Keywords: | Establishment Size, Size Wage Premium, Productivity, Labor MarketPower, Germany |
| JEL: | E24 J31 J42 L25 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:bubdps:287762&r=com |
| By: | Roberto Serrano |
| Abstract: | This is a comment on Nomidis (2023). Using simple examples, the focus is on the conditions that lead to Cournot’s competitive limit result, showcasing the connections between the Cournot model and competitive equilibrium. Citing original sources, it is argued that the Neoclassical economists did not misunderstand Cournot, as Nomidis (2023) asserts. |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:bro:econwp:2023-003&r=com |
| By: | Pham, Hien |
| Abstract: | A monopolistic seller jointly designs allocation rules and (new) information about a pay-off relevant state to a buyer with private types. When the new information flips the ranking of willingness to pay across types, a screening menu of prices and threshold disclosures is optimal. Conversely, when its impact is marginal, bunching via a single posted price and threshold disclosure is (approximately) optimal. While information design expands the scope for random mechanisms to outperform their deterministic counterparts, its presence leads to an equivalence result regarding sequential versus. static screening. |
| Keywords: | mechanism design, information design, sequential screening, random mechanisms, bunching. |
| JEL: | D42 D82 D86 L15 |
| Date: | 2023–04–30 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:120462&r=com |
| By: | Tat-kei Lai (IESEG School of Management, Univ. Lille, CNRS, UMR 9221 - LEM - Lille Economie Management, France); Travis Ng (The Chinese University of Hong Kong, Hong Kong) |
| Abstract: | Policies that restrict outsiders are common. Some justifications include protecting insiders from high price and leaving more of the concerned products to insiders. Sometimes these policies fail to work because outsiders can get around the restrictions. In a model in which a policy of restricting outsiders is anticipated, we find that if the policy works, it only sometimes lowers the price. When the price does decrease, the product quality decreases too. Not every insider would benefit equally; those insiders who likely suffer are identified. While restricting outsiders may or may not reduce insiders’ consumer surplus, outsiders and the producer are always worse off. They therefore would find ways to get around the restrictions. Evaluating these policies must (a) take into account the possibility that they might not work at all, (b) check their effects beyond just price if they do work. |
| Keywords: | Product quality; Customer restrictions; Vertical restraints; Foreign restrictions; Discrimination |
| JEL: | K25 K29 L25 L51 R38 |
| Date: | 2024–02 |
| URL: | http://d.repec.org/n?u=RePEc:ies:wpaper:e202410&r=com |
| By: | Crémer, Jacques; Biglaiser, Gary; Mantovani, Andrea |
| Abstract: | The aim of this report is to present the main facets of the development of cloud services, its economics and the related policy issues. We begin by surveying the sector, its growth and the significant increase in concentration in recent years. We then discuss the tools that economics gives us to study these phenomena before turning to a critical analysis of some of the most prominent policy reports which have been produced on the topic. We finally turn to a more detailed look at the (meagre) economic literature on the industry and of the economic theories which could be used for deeper analysis. |
| JEL: | K21 L13 L51 L86 O33 |
| Date: | 2024–03–28 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:129265&r=com |
| By: | Macchiavello, Rocco; Reardon, Thomas; Richards, Timothy J. |
| Abstract: | Food value chains (FVCs) in developing countries are transforming rapidly, with some regions in the modern stage (led by supermarkets and large processors) and other regions in a transitional stage (led by midstream small and medium enterprises). With transformation, however, come market-performance issues related to monopoly and monopsony power, vertical bargaining, contracting, and other issues addressed by empirical industrial organization (EIO) researchers. Although the concepts and methods of EIO are evolving rapidly, the two bodies of literature on EIO and FVC transformation as part of the food markets and food industries branches of development economics have not sufficiently cross-pollinated. Applying tools of modern EIO to FVCs in developing countries is now relevant because of the transformation that has occurred and possibly due to the increasing availability of data from surveys of farms, processors, and wholesalers, and for some retailers, from scanner data. We review the transformation trends, the EIO themes and tools relevant to them, and the emerging data sources. |
| Keywords: | development; empirical industrial organization; food value chains; relational contracting; structural modeling |
| JEL: | J22 Q12 Q18 |
| Date: | 2022–10–01 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:117430&r=com |
| By: | Matthias Kehrig; Nicolas Vincent |
| Abstract: | We document that most dispersion in marginal revenue products of inputs occurs across plants within firms rather than between firms. This is commonly thought to reflect misallocation: dispersion is “bad.” However, we show that eliminating frictions hampering internal capital markets in a multi-plant firm model may in fact increase productivity dispersion and raise output: dispersion can be “good.” This arises as firms optimally stagger investment activity across their plants over time to avoid raising costly external finance, instead relying on reallocating internal funds. The staggering in turn generates dispersion in marginal revenue products. We use U.S. Census data on multi-plant manufacturing firms to provide empirical evidence for the model mechanism and show a quantitatively important role for good dispersion. Since there is less scope for good dispersion in emerging economies, the difference in the degree of misallocation between emerging and developed economies looks more pronounced than previously thought. |
| Keywords: | Misallocation, Productivity Dispersion, Multi-Plant Firms, Internal Capital Markets. |
| JEL: | E2 G3 L2 O4 |
| Date: | 2024–03 |
| URL: | http://d.repec.org/n?u=RePEc:cen:wpaper:24-13&r=com |
| By: | AMORES Antonio F (European Commission - JRC); SPEITMANN Raffael (European Commission - JRC); STOEHLKER Daniel (European Commission - JRC) |
| Abstract: | In May 2023, the Austrian government announced to set up a new online database to help people compare retail prices across supermarkets and find the cheapest offers in an effort to fight soaring food prices. While plans for a government-built website have been abandoned, private developers released a handful of easy to navigate price comparison websites by June 2023, comprising the assortments of all main supermarket chains in Austria. This brief analyses the extent to which price transparency led to an effective reduction in final consumer prices. To this end, we compare the prices of listed products in Austria with those of the exact same products in Germany, where such price comparison websites are not available. Our results indicate that retail prices of affected products have not decreased since the availability of such websites, potentially due to a low up-take of the service. |
| Date: | 2024–03 |
| URL: | http://d.repec.org/n?u=RePEc:ipt:iptwpa:jrc137127&r=com |
| By: | Jonathan F. Cogliano and Roberto Veneziani |
| Abstract: | In A Mathematical Formulation of the Ricardian System, Pasinetti (1960) lays out the foundations of what has been dubbed the canonical classical model. He proves the model to be logically consistent and determinate in all its macro-economic features, and derives the solutions for all key variables independently of demand conditions. The model thus provides macroeconomic foundations to the classical theory of distribution. This paper examines the decentralised, competitive mechanism underlying the macroeconomic outcomes. First, we model a classical economy with capitalists, workers, and landlords and define the notion of a Classical Competitive Equilibrium (CCE). A unique CCE exists in a large class of concave classical economies and the resulting income distribution is proved to coincide with that of Pasinetti’s canonical classical model. Second, we use an agent-based model in order to examine more explicitly the decentralised competitive mechanisms at play in the classical economy. We show that a realistic competitive interaction between boundedly rational agents with localised knowledge generates classical gravitational dynamics with the key distributive variables oscillating around their equilibrium values. |
| Keywords: | Luigi Pasinetti, Income distribution, Classical competition, Agent-based model. |
| JEL: | B51 C63 D50 |
| Date: | 2024–04–09 |
| URL: | http://d.repec.org/n?u=RePEc:mab:wpaper:2024-01&r=com |
| By: | Carreño Bustos, José Gabo (Tilburg University, Center For Economic Research); Huizinga, Harry (Tilburg University, Center For Economic Research); Uras, Burak (Tilburg University, Center For Economic Research) |
| Keywords: | job discplacement; flexible contracts; alternative work arrangements; earning losses; firm-specific wage premiums; income disparities; labor market |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:tiu:tiucen:d5a55842-bcf3-42bf-9859-890e353436f5&r=com |
| By: | Olimpia Cutinelli Rendina (PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, Collège de France - Chaire Economie des institutions, de l'innovation et de la croissance - CdF (institution) - Collège de France); Sonja Dobkowitz (Universität Bonn = University of Bonn); Antoine Mayerowitz (PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, Collège de France - Chaire Economie des institutions, de l'innovation et de la croissance - CdF (institution) - Collège de France) |
| Abstract: | How do firms respond to rising environmental concerns of consumers? We investigate this question for the automotive industry in the US using a shift-share instrumental variable approach. We construct a novel dataset at the firm-level to instrument changes in household preferences with natural disasters. Our findings suggest that firms not only engage in cleaner innovation but also increase their lobbying on environmental topics. We show that the increase in environmental lobbying and clean patenting follow the same dynamics which points to a complementarity between the two strategies. These results can be understood as firms using lobbying to increase the value of clean patents: higher environmental standards tailored to the firm's new clean technologies diminish the competition the firm faces. |
| Date: | 2024–03–13 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-04502992&r=com |