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on Industrial Competition |
| By: | Kang, Gusang (KOREA INSTITUTE FOR INTERNATIONAL ECONOMIC POLICY (KIEP)); Kim, Hyok Jung (KOREA INSTITUTE FOR INTERNATIONAL ECONOMIC POLICY (KIEP)); Kim, Jonghyuk (KOREA INSTITUTE FOR INTERNATIONAL ECONOMIC POLICY (KIEP)); Kwon, Hyuk Ju (KOREA INSTITUTE FOR INTERNATIONAL ECONOMIC POLICY (KIEP)); Sung, Won (Economic Research Institute, Bank of Korea) |
| Abstract: | 본 연구에서는 지난 20년간 미국 대형 디지털플랫폼이 수많은 중소기업을 대상으로 수행한 기업결합 행위가 해당 디지털플랫폼의 성과에 미친 영향을 혁신 및 수익성 관점에서 분석하였다. 또한 이 연구는 그와 같은 기업결합 거래 중 대형 디지털플랫폼이 자사의 잠재 경쟁자로 성장할 수 있는 혁신기업을 인수함으로써 미래 시장 경쟁을 완화하려는 목적으로 수행하는 ‘킬러 인수’를 식별하고, 해당 기업결합 행위가 디지털플랫폼의 혁신에 미친 영향을 살펴보았다. 이를 통해 본 연구는 디지털플랫폼을 대상으로 한 한국 공정거래위원회의 기업결합 심사에 대한 관련된 정책 시사점을 도출하였다. This study analyzes the impact of the large U.S. digital platforms such as GAFAM (Google, Apple, Facebook, Amazon, Microsoft) on their performance in terms of innovation and sales, focusing on their mergers and acquisitions (M&A) activities targeting numerous small and medium-sized enterprises over the past 20 years. It also identifies ‘killer acquisitions’, where these platforms acquire innovative companies that could become potential competitors, thereby potentially reducing future market competition. The study provides insights and policy implications for the Korean Fair Trade Commission’s merger review process for digital platforms. Chapter 2 reviews the literature on the relationship between M&A and innovation and discusses the motives for M&A in the digital platform market, including ‘killer acquisitions’. Traditional M&A motives such as economies of scale and scope, acquisition of unique technologies or new distribution channels, and increased market dominance are contrasted with those in the digital platform industry, which include securing core assets like technology, processes, and intellectual property. Recent literature has raised concerns about ‘killer acquisitions’ that may reduce or eliminate future competition, although the definition of ‘particularly competitive future competitors’ and the limited pre-emptive merger policy pose challenges. Chapter 3 examines the types, characteristics, and status of M&As conducted by GAFAM, categorizing them into vertical, horizontal, and conglomerate mergers. Despite the unique characteristics of the digital platform industry, most M&As have been approved by the U.S. competition authorities. However, this has led to criticism of high market concentration. Recent arguments suggest the need to actively incorporate data characteristics in assessing the competitive restraints of M&A.(the rest omitted) |
| Keywords: | Competition policy; intellectual property rights; business combination; innovation; digital platform; Killer Acquisition; competition policy |
| Date: | 2023–12–05 |
| URL: | http://d.repec.org/n?u=RePEc:ris:kieppa:2023_005&r=com |
| By: | Filip Abraham; Yannick Bormans; Jozef Konings; Werner Roeger |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:asx:nugsbd:2024-24&r=com |
| By: | Laureen de Barsy; Axel Gautier |
| Abstract: | In the past 20 years, large digital platforms have made many acquisitions, mainly young and innovative startups. Few of them have been reviewed by competition authorities and little is known on their evolution after acquisition. This paper intends to fill in this gap by looking at the development of the technologies owned by the acquired firms. We focus on technologies protected by a patent and we investigate whether an acquisition by a big tech contributes to their development. For this analysis, we use patent citations as a proxy for the innovation effort by the acquirer. Our main result is to show that acquisition increases the innovation effort of the acquirer but only temporarily. After 1.5 year, there is no longer a significant impact of the acquisition on the acquirer’s innovation effort. This decline is relatively larger when the acquired patent belongs to a core technology field of the acquiring firm or to a large patent portfolio. On the contrary, citations by the rest of the industry are not negatively affected by acquisition, which does not corroborate the idea that the acquired technology has reached its maturity. |
| Keywords: | mergers, digital, big techs, innovation, patents, killer acquisitions |
| JEL: | D43 G34 K21 L40 L86 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_11025&r=com |
| By: | Simon Cowan |
| Abstract: | General conditions that are sufficient for mergers in symmetric Cournot industries to be profitable or unprofitable are found and applied. If inverse demand curvature is weakly higher than the number of firms then all mergers are profitable. The same condition implies that outputs are strategic complements locally. If demand is log-concave, so inverse demand curvature is at most 1, two-firm mergers are unprofitable. Log-concavity of demand implies that outputs are strategic substitutes. The issue of the profitability of mergers in Cournot was first addressed by Salant, Switzer, and Reynolds (1983) in a model with linear demand. |
| Date: | 2024–02–28 |
| URL: | http://d.repec.org/n?u=RePEc:oxf:wpaper:1041&r=com |
| By: | Joel Waldfogel |
| Abstract: | Regulators around the world are discussing, or taking action to limit, self-preferencing by large platforms. This paper explores Amazon's search rankings of its own products as the European Union's Digital Markets Act (DMA) was coming into effect. Using data on over 8 million Amazon search results at 22 Amazon domains in the US, Europe, and elsewhere, I document three things. First, conditional on rudimentary product characteristics, Amazon's own products receive search ranks that are 24 positions better on average throughout the sample period. Second, the Amazon rank differential is large in comparison with the differential for 142 other popular brands. Third, shortly after the EU designated Amazon a “gatekeeper” platform in September 2023, the Amazon rank differential fell from a 30 position advantage to a 20 position advantage, while other major brands' rank positions were unaffected. The changed Amazon search rankings appear in both Europe and other jurisdictions. |
| JEL: | L40 L50 L81 |
| Date: | 2024–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:32299&r=com |
| By: | Jack (Peiyao) Ma; Andrea Mantovani; Carlo Reggiani; Annette Broocks; Néstor Duch-Brown |
| Abstract: | Dominant platforms such as Booking.com and Amazon often impose Price Parity Clauses to prevent sellers from charging lower prices on alternative sales channels. We provide quasi experimental evidence on the removal of these price restrictions in France in 2015 for three major international hotel groups. First, our analysis reveals limited and non-significant effects on room prices sold through channels visible to consumers, such as the hotels’ websites or Online Travel Agencies. Second, we document a significant price reduction on sales channels not visible to consumers, such as the hotels’ direct offline channel. Third, we identify a significant shift in sales share from online travel agencies to the hotels’ direct offline channel. |
| Date: | 2024–04–10 |
| URL: | http://d.repec.org/n?u=RePEc:oxf:wpaper:1043&r=com |
| By: | Rhodes, Andrew; Zhou, Jidong |
| Abstract: | This paper studies consumers’ privacy choices when firms can use their data to make personalized offers. We first introduce a general framework of personalization and privacy choice, and then apply it to personalized recommendations, personalized prices, and personalized product design. We argue that due to firms’ reaction in the product market, consumers who share their data often impose a negative externality on other consumers. Due to this privacy-choice externality, too many consumers share their data relative to the consumer optimum; moreover, more competition, or improvements in data security, can lower consumer surplus by encouraging more data sharing. |
| Keywords: | personalization; consumer data; privacy; personalized pricing; personalized recommendations; personalized product design |
| JEL: | D43 D82 L13 |
| Date: | 2024–04–16 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:129289&r=com |
| By: | van Leuvensteijn, Michiel; Huljak, Ivan; de Bondt, Gabe |
| Abstract: | This paper extends Boone (2008) by introducing a competition measure at the individual firm level rather than for an entire market segment. It is based on the elasticity between profits and efficiency and called marginal relative profitability (MRP). Its intuition is that when a small change in efficiency derived from marginal costs can cause a large change in profits, a firm exercises pressure on its peers and gains profits. The MRP is embedded in the theoretical framework of Boone and measures competition vis-à-vis other market participants. We apply this extended Boone indicator to individual bank-level competition in the loan market in the four largest euro area countries and Austria. The MRP distribution is skewed to the left and many banks have a MRP below one, indicating that those banks have little incentive to enhance their efficiency to increase their profits. The MRP approach is shown to be a powerful tool to test the efficient-structure, structure-conduct performance, and ‘quiet life’ hypotheses and to detect comparatively weak non-competitive banks. Our new measure of firm-level competition enriches and complements other competition measures and provides a promising starting point for future market power analyses. JEL Classification: D4, L16, G21 |
| Keywords: | banks, competition, firm level |
| Date: | 2024–04 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20242925&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: | In Milgrom-Roberts (1986)’s model, introducing the possibility to die before customers’ repurchase alters the firm’s advertising incentive to signal hidden product quality. Two opposing forces result, one mechanical and the other strategic. Depending on their relative strengths, the equilibrium advertising can either rise or fall. To the extent that competition threatens firms’ survival, our result explains the mixed findings on the causal effects of competition on advertising. Introducing firm deaths in their model offers a new test of whether advertising signals quality, still an unsettled empirical question since Nelson (1974) first articulates advertising as a signal. |
| Keywords: | Advertising; Signaling; Competition; Product Quality; Introductory pricing |
| Date: | 2023–11 |
| URL: | http://d.repec.org/n?u=RePEc:ies:wpaper:e202405&r=com |
| By: | François Pannequin (CEPS, ENS Paris-Saclay, Université Paris-Saclay); Anne Corcos (CURAPP-ESS UMR 7319, CNRS, Université de Picardie Jules Verne) |
| Abstract: | Using a principal-agent framework, we extend the insurance monopoly model (Stiglitz, 1977) to self-insurance opportunities. Relying on a two-part tariff contract as an analytical tool, we show that an insurance monopoly can achieve the same equilibrium as a competitive insurer. However, in the monopoly situation, the insurer captures all the insurance market surplus. Yet, compared to a monopoly market with insurance only, self-insurance opportunities act as a threat to the insurer, resulting in a cut of the insurer's market power and an increase in the policyholders' welfare. Moreover, within our principal-agent framework, we show that while insurance and self-insurance are substitutes, compulsory self-insurance, and compulsory insurance have non-equivalent effects. Although compulsory self-insurance reduces the market size of the insurer, it has no impact on the policyholder's well-being. On the other hand, mandatory insurance favors the insurer and makes policyholders worse off. The implications of these public policies are discussed. |
| Keywords: | self-insurance, insurance, monopoly, compulsory insurance, public regulation |
| JEL: | D86 D42 G22 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:eve:wpaper:23-02&r=com |
| By: | Marco de Pinto (University of Applied Labour Studies); Laszlo Goerke (Institute for Labour Law and Industrial Relations in the European Union (IAAEU), Trier University); Alberto Palermo (University of Roehampton) |
| Abstract: | Entry in a homogeneous Cournot oligopoly can be excessive if there is business stealing. Since this excessive entry prediction has been established, a variety of circumstances have been identified which allow for insufficient entry, despite the business stealing externality. This paper shows that most of them rely on the same mechanism and, therefore, constitute a special case of a general set-up. To establish this insight, we survey the pertinent contributions and classify the circumstances, which are invoked to establish the possibility of insufficient entry into four categories. Importantly, they all imply that the oligopolists pay a rent, which reduces profits and deters entry. Since rents are welfare-neutral, insufficient entry will occur if the rent is high enough. |
| Keywords: | : Business stealing, Cournot oligopoly, Economic rent, Excessive entry, Insufficient entry, Literature survey |
| JEL: | D43 D62 L13 |
| Date: | 2024–04 |
| URL: | http://d.repec.org/n?u=RePEc:iaa:dpaper:202402&r=com |
| By: | Daniel Krähmer |
| 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 decreas- ing 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: | 2024–04 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2024_523&r=com |
| By: | Ashkenazi-Golan, Galit; Tsodikovich, Yevgeny; Viossat, Yannick |
| Abstract: | A common practice in many auctions is to offer bidders an opportunity to improve their bids, known as a best and final offer stage. This improved bid can depend on new information either about the asset or about the competitors. This paper examines the effects of new information regarding competitors, seeking to determine what information the auctioneer should provide assuming the set of allowable bids is discrete. The rational strategy profile that maximizes the revenue of the auctioneer is the one where each bidder makes the highest possible bid that is lower than his valuation of the item. This strategy profile is an equilibrium for a large enough number of bidders, regardless of the information released. We compare the number of bidders needed for this profile to be an equilibrium under different information structures. We find that it becomes an equilibrium with fewer bidders when less additional information is made available to the bidders regarding the competition. It follows that when the number of bidders is a priori unknown, there are some advantages to the auctioneer not revealing information and conducting a one-stage auction instead. |
| Keywords: | auctions; BAFO; information utilization; multistage auctions; NSFC-ISF; China Grant #2510/17. Y |
| JEL: | D44 D82 |
| Date: | 2023–11–01 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:118706&r=com |