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on Industrial Competition |
| By: | Budzinski, Oliver; Stöhr, Annika |
| Abstract: | In this paper, we comment on the debate about guidelines for Art. 102 TFEU in the face of the challenges brought by digital ecosystems and abuse of dominance in related markets. We take the perspective of dynamic competition economics and derive four recommendations for the future enforcement of abuse control and related merger control: (i) we advocate to abandon the as-efficient-competitor standard embraced in the late 2000s, (ii) we emphasize the relevance on focusing on exploitative abuses as well as on exclusionary ones, (iii) we suggest to implement a concept of systemic market power as a guideline to enforcement, and (iv) we argue that the same enhanced market power standard should also be applied in the corresponding merger control. While going beyond pure guideline recommendations and focusing on a dynamic-economic view, we are convinced that these steps are necessary to move towards a more effective competition policy towards abuse of digital dominance. |
| Keywords: | abuse of market power, Art. 102 TFEU, digital ecosystems, antitrust, European competition policy, as-efficient-competitor standard, exclusionary abuse, exploitative abuse, dynamic competition, merger control |
| JEL: | K21 L41 L40 L12 L14 L81 L86 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:tuiedp:289607&r=com |
| By: | Stöhr, Annika |
| Abstract: | This comprehensive review of ex-post merger studies assesses the price effects of horizontal transactions to determine whether there are common post-merger price effects, both overall and in specific markets. The aim is to derive implications for policy makers and competition authorities in terms of effective merger enforcement and competition policy. By combining and further analysing the results of 52 retrospective studies on 82 mergers or horizontal transactions, it can be shown that the sector in which the respective transaction takes place alone is not a strong indicator of the direction of price-related merger effects. In contrast, the "size" or "importance" of a transaction, as well as market concentration seem to be correlated with post-transaction price increases, especially in already highly concentrated markets. Overall, this meta-study shows the importance of ex-post case studies for improving ex-ante merger control: although generalisations can only be made with caution, the subsequent analysis of a case and its ex-post observable outcome can provide useful information for future merger enforcement in general, either in the same industry and/or with similar case characteristics, as well as for competition policy regulators. |
| JEL: | D49 K21 L13 L40 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:tuiedp:289615&r=com |
| By: | Andrew Rhodes (Toulouse School of Economics); Jidong Zhou (Yale University) |
| 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. |
| Date: | 2024–04 |
| URL: | http://d.repec.org/n?u=RePEc:cwl:cwldpp:2388&r=com |
| By: | Dayu Yang |
| Abstract: | M&A activities are pivotal for market consolidation, enabling firms to augment market power through strategic complementarities. Existing research often overlooks the peer effect, the mutual influence of M&A behaviors among firms, and fails to capture complex interdependencies within industry networks. Common approaches suffer from reliance on ad-hoc feature engineering, data truncation leading to significant information loss, reduced predictive accuracy, and challenges in real-world application. Additionally, the rarity of M&A events necessitates data rebalancing in conventional models, introducing bias and undermining prediction reliability. We propose an innovative M&A predictive model utilizing the Temporal Dynamic Industry Network (TDIN), leveraging temporal point processes and deep learning to adeptly capture industry-wide M&A dynamics. This model facilitates accurate, detailed deal-level predictions without arbitrary data manipulation or rebalancing, demonstrated through superior evaluation results from M&A cases between January 1997 and December 2020. Our approach marks a significant improvement over traditional models by providing detailed insights into M&A activities and strategic recommendations for specific firms. |
| Date: | 2024–04 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2404.07298&r=com |
| By: | Borraz, Fernando; Zipitría, Leandro |
| Abstract: | We assess price dispersion in retail markets and its sources over time. Using a product-detailed price database, we document a consistent divergence of prices over time in retail markets in Uruguay: price dispersion increased by 3.1% in fifteen years. Next, we analyze microeconomic and macroeconomic factors that correlate with price dispersion. We differentiate the effect in the short-run-i.e., static differences between markets-and long-run effects-if these effects increase or decrease over time. Macroeconomic factors fluctuate over time in their impact on price dispersion. Microeconomic factors, mainly competition between stores and differences in category assortments between stores, have a substantial shortrun correlation and an increased effect over time. When we add interactions to the trend, our measure of price dispersion, we found that price dispersion is twice higher: 6.3%. |
| Keywords: | Price Dispersion, Market Segmentation, Retail Industry |
| JEL: | D4 F40 L1 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:glodps:1424&r=com |
| By: | Jonas von Wangenheim |
| Abstract: | Consumer data increasingly enable online marketplaces to identify buyers’ preferences and provide individualized product information. Buyers, however, fully learn their product value only after contracting, when the product is delivered. I characterize the impact of such ex-ante information on buyer surplus and seller surplus, when the seller sets prices and refund conditions in response to the ex-ante information. I show that efficient trade and an arbitrary split of the surplus can be achieved. For the buyer- optimal signal low-valuation buyers remain partially uninformed. Such a signal induces the seller to sell at low prices without refund options. |
| Keywords: | information disclosure, sequential screening, information design, strategic learning, Bayesian persuasion, mechanism design, platform economics, consumer protection |
| JEL: | D82 D47 D18 |
| Date: | 2022–05 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2022_352v2&r=com |
| By: | Josep Dols-Miro (Universitat de València, Valencia, Spain); Joaquim Cuevas (Universitat de València, Valencia, Spain); Juan Fernández de Guevara (Instituto Valenciano de Investigaciones Económicas (IVIE), Valencia, Spain) |
| Abstract: | This study links the evolution of market power in the Spanish banking sector since 1971 with changes in banking regulation between 1970 and 1990. The main contributions are: 1) An exhaustive chronology of liberalization and deregulation measures in the sector during those years is provided; and 2) Market power is empirically measured for over 40 years using the Lerner Index. A decrease in market power in the 70s was observed, coinciding with increased competition through the branch network, followed by an increase in the 80s, as the liberalization process was affected by the economic cycle. Since 1988, competition intensified with the consolidation of liberalization measures. The results allow for an additional hypothesis in the literature analyzing competition in the Spanish banking sector: There seems to be no evidence that the bulk of deregulation was the trigger per se for rivalry. Rather, it appears that entities anticipated, taking advantage of the imminent changes, and the increase in competition was early. Possibly, it was not the regulatory changes. The latent rivalry between entities took advantage of the opportunities offered by liberalization. |
| Keywords: | Spain, Banking History, Regulation, Lerner Index |
| JEL: | D40 G18 N20 |
| Date: | 2024–04 |
| URL: | http://d.repec.org/n?u=RePEc:ahe:dtaehe:2402&r=com |
| By: | Rolf Golombek; Michael Hoel; Snorre Kverndokk; Stefano Ninfole; Knut Einar Rosendahl; Michael Olaf Hoel |
| Abstract: | It is widely recognized that a cost-efficient way to achieve the climate targets of the Paris agreement requires investment in carbon capture and storage (CCS). However, to trigger sizeable investment in CCS the carbon price must exceed the historic carbon prices. This paper examines whether a higher price of carbon enhances competition of storage services and thus leads to lower costs of CCS. Using a Hotellling model with two storage sites, each being located at each end of the Hotelling line, we show that there are three alternative competition regimes. The level of the carbon tax determines which regime materializes. For “low” carbon taxes, there is no competition between the two storage firms. For “high” carbon taxes, there is standard Bertrand competition between the two storage firms. Finally, for “intermediate” carbon taxes, there is so called partial competition with multiple equilibria. Contrary to the standard conclusion on competition, we find that when each storage site is imposed to charge the same price for all its clients, the price under monopoly is lower than under partial competition. We offer several extensions of the model as well as numerical illustrations. With our reference parameter values and a carbon tax sufficiently high to reach the Paris targets, we find that we may end in a partial competition regime. |
| Keywords: | Hotelling line, kinked demand curve, duopoly, multiple equilibria, emission tax, carbon capture and storage |
| JEL: | L13 Q35 Q38 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_11052&r=com |
| By: | Tendai Gwatidzo; Witness Simbanegavi |
| Abstract: | Using survey data from the World Banks Global Findex Database and a pseudo panel we investigate two pertinent issues pertaining to financial inclusion in South Africa. First, we consider the factors driving the likelihood of accessing financial services in South Africa. Second, we investigate the impact of banking sector competition on financial inclusion in South Africa essentially testing the information and market power hypotheses. Household head characteristics such as age, education and income are found to positively influence the likelihood of being financially included. Considering the relationship between financial inclusion and banking sector competition, evidence supports the information hypothesis rather than the market power hypothesis. That is, lower bank competition facilitates the formation of longer-lasting relationships between banks and their clients, which incentivises banks to invest in information generation and monitoring in previously unserved markets, thereby expanding financial inclusion. |
| Date: | 2024–04–16 |
| URL: | http://d.repec.org/n?u=RePEc:rbz:wpaper:11061&r=com |
| By: | Richard Gray; James Nolan; Peter Slade |
| Abstract: | The purpose of this report is to analyze the potential effects of the Bunge-Viterra (BV) merger on competition across the grain industry. As described in Competition Bureau Guidelines, we also recognise we are working with sparse data and have made assumptions about behavioral relationships. While we lack the data to provide detailed and precise estimates of market impacts, we are confident that our analysis accurately portrays both the direction and magnitude of likely market impacts potentially stemming from the merger. |
| Keywords: | Agricultural and Food Policy, Industrial Organization |
| Date: | 2024–03–29 |
| URL: | http://d.repec.org/n?u=RePEc:ags:uskbpm:341829&r=com |
| By: | Tan Gan; Hongcheng Li |
| Abstract: | We consider the robust pricing problem of an advertising platform that charges a producer for disclosing hard evidence of product quality to a consumer before trading. Multiple equilibria arise since consumer beliefs and producer's contingent advertisement purchases are interdependent. To tackle strategic uncertainty, the platform offers each producer's quality type a menu of disclosure-probability-and-price plans to maximize its revenue guaranteed across all equilibria. The optimal menus offer a continuum of plans with strictly increasing marginal prices for higher disclosure probabilities. Full disclosure is implemented in the unique equilibrium. All partial-disclosure plans, though off-path, preclude bad equilibrium play. This solution admits a tractable price function that suggests volume-based pricing can outperform click-based pricing when strategic uncertainty is accounted for. Moreover, the platform prioritizes attracting higher types into service and offers them higher rents despite symmetric information between the platform and the producer. |
| Date: | 2024–04 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2404.06019&r=com |
| By: | Klitzka, Michael; He, Jianan; Schiereck, Dirk |
| Abstract: | This study analyzes mergers and acquisitions (M&A) payment methods in large transactions of public U.S. acquirers between 2009 and 2016. While we find consistent with previous evidence that asymmetric information between acquirers and targets significantly influences the choice of M&A payment methods, we show that contrary to prevailing findings in the literature, acquirers cannot exploit their overvaluation through stock-financed M&A at targets’ disadvantage. In addition, when facing larger uncertainty in the counterparty’s valuation, a higher ratio of cash is applied in M&A payment. Our results document that both acquirers and targets are rational in choosing M&A payment methods. |
| Date: | 2024–04–02 |
| URL: | http://d.repec.org/n?u=RePEc:dar:wpaper:144309&r=com |
| By: | Graubner, Marten; Hüttel, Silke |
| Abstract: | Much of the land economics literature has largely ignored the spatial nature of competition and related differences between farmland rental and sales markets. In this note we propose a model for price formation in both markets under a spatial competition framework. We demonstrate that price formation differs, particularly under policy-induced output price shocks. We suggest that using rent-price ratio as an approximation for expectations in the net returns of farming, based on the net present value model, may produce biased results. We conclude that estimates for the capitalization of agricultural, environmental and energy policy into farmland prices can be biased. |
| Keywords: | Land Markets, Rent-price Ratio, Spatial Competition |
| JEL: | L13 Q12 Q18 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:forlwp:290396&r=com |
| By: | Devereux, Kevin; Studnicka, Zuzanna |
| Abstract: | Minimum wages decrease employment in competitive markets, but can increase it in monopsonistic markets so long as they do not exceed the marginal product of labour. We find evidence of non-monotonicity both by market structure and minimum wage level. Minimum wage hikes initially increase hours worked for minimum wage workers (MWWs) in high-concentration local labour markets (LLMs), while increasing job loss likelihood for MWWs in low-concentration LLMs. Repeated hikes reverse initial hours gains, and may increase job loss. Non-MWWs show economically negligible responses throughout. Observing minimum wage status allows for both within- and across-market difference-in-difference designs, whose findings provide mutual support. We combine these into a triple-difference specification. Our results help to resolve the lack of consensus around the sign of the minimum wage's employment effects. |
| Keywords: | Minimum wage, Monopsony, Oligopsony, Local labour Markets |
| JEL: | J22 J23 J38 J42 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:clefwp:289599&r=com |
| By: | Alexander Erlei; Mattheus Brenig; Nils Engelbrecht |
| Abstract: | Extensive research shows that consumers are generally averse to price discrimination. However, instruments of differential pricing can benefit consumer surplus and alleviate inequity through targeted price discounts. This paper examines how these outcome considerations influence consumer reactions to price discrimination. Six studies with 3951 participants show that a large share of consumers is willing to costly switch away from a store that introduces a discount for low-income consumers. This happens irrespective of whether income differences are due to luck or merit. While the price-discriminating store does attract some new high-income consumers, it cannot compensate the loss of existing consumers. Allowing for altruistic preferences by simulating a market mechanism increases costly support for price discounts, but does not alleviate consumer aversions. Finally, we provide evidence that warm glow drives costly support for price discounts. |
| Date: | 2024–04 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2404.03581&r=com |
| By: | Budzinski, Oliver |
| Abstract: | Financial regulation in sports is usually discussed in the context of representing an instrument against 'financial doping'. Notwithstanding the merits of this discussion, this paper takes the opposite perspective and analyses how market-internal financial regulation itself may anticompetitively influence sporting results. Virtually every regulative financial intervention distorts sporting competition to some extent and creates beneficiaries and losers. Sometimes, the actual winners and losers of financial regulation stand in line with the (legitimate) goals of the regulation like limiting financial imbalances or preventing distortive midseason insolvencies of teams. However, financial regulation may also display unintended side-effects like protecting hitherto successful teams from new challengers, cementing the competitive order, creating foreclosure and entry barriers, or serving vested interests of powerful parties. All of these effects may also be hidden agendas by those who are implementing and enforcing market-internal financial regulation or influencing it. This paper analyses various types of budget caps (including salary caps) with respect to potentially anticompetitive effects. UEFA's so-called Financial Fair Play Regulations and Formula One's recent budget cap are highlighted as examples. Furthermore, the paper discusses allocation schemes of common revenues (like from the collective sale of broadcasting rights) as another area of financial regulation with potentially anticompetitive effects. Eventually, the effects of standards for accounting, financial management, and auditing are discussed. |
| Keywords: | sports economics, financial regulation, budget caps, salary caps, financial fair play, financial doping, collective sale of media rights, sports broadcasting rights, revenue sharing, formula one |
| JEL: | Z20 Z23 L40 L83 K21 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:tuiedp:289605&r=com |
| By: | Buccella, Domenico; Fanti, Luciano; Gori, Luca |
| Abstract: | The Corporate Social Responsibility (CSR) theory of the firm states that, in strategic markets, social actions lead to a prisoner's dilemma. This paper develops a model with pollution externalities and environmental taxation to incentivise firms' abatement activities through green R&D investments. When the firms' objective function embed environmental issues (Environmental CSR, ECSR), a large spectrum of Nash equilibria emerges, from the Pareto inefficient to the Pareto efficient (ECSR, ECSR), depending on social concern and product differentiation degree. The time (in)consistency policy affects the endogenous market structure of the ECSR decision game more than in the standard CSR without abatement and taxation. |
| Keywords: | Abatement, Corporate Social Responsibility, Duopoly, Emissions |
| JEL: | H23 L13 M14 Q58 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:glodps:1421&r=com |
| By: | Sara Fish; Yannai A. Gonczarowski; Ran I. Shorrer |
| Abstract: | The rise of algorithmic pricing raises concerns of algorithmic collusion. We conduct experiments with algorithmic pricing agents based on Large Language Models (LLMs), and specifically GPT-4. We find that (1) LLM-based agents are adept at pricing tasks, (2) LLM-based pricing agents autonomously collude in oligopoly settings to the detriment of consumers, and (3) variation in seemingly innocuous phrases in LLM instructions ("prompts") may increase collusion. These results extend to auction settings. Our findings underscore the need for antitrust regulation regarding algorithmic pricing, and uncover regulatory challenges unique to LLM-based pricing agents. |
| Date: | 2024–03 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2404.00806&r=com |
| By: | Giambattista Albora; Matteo Straccamore; Andrea Zaccaria |
| Abstract: | Defining and finalizing Mergers and Acquisitions (M&A) requires complex human skills, which makes it very hard to automatically find the best partner or predict which firms will make a deal. In this work, we propose the MASS algorithm, a specifically designed measure of similarity between companies and we apply it to patenting activity data to forecast M&A deals. MASS is based on an extreme simplification of tree-based machine learning algorithms and naturally incorporates intuitive criteria for deals; as such, it is fully interpretable and explainable. By applying MASS to the Zephyr and Crunchbase datasets, we show that it outperforms LightGCN, a "black box" graph convolutional network algorithm. When similar companies have disjoint patenting activities, on the contrary, LightGCN turns out to be the most effective algorithm. This study provides a simple and powerful tool to model and predict M&A deals, offering valuable insights to managers and practitioners for informed decision-making. |
| Date: | 2024–04 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2404.07179&r=com |
| By: | Lukas Delgado-Prieto; Andrea Otero-Cortés; Andrés Calderón |
| Abstract: | Hard discount stores (HDS) have changed the dynamics of the traditional retail sector by selling a basket of products at very low prices. This business model has gained significant market share in many countries, but little is known about its impact on the labor market. To fill this gap in the literature, in this paper we study the impact of the entry of hard discounters on local labor markets in Colombia. Making use of the staggered geographic expansion of major discount chains throughout the country as part of our empirical strategy and using information from different sources, such as administrative records on social security and household survey data, we analyze the impact of these stores on labor formality and tax collection. Our results show that the arrival of HDS in a municipality increases local formal employment, especially in retail, manufacturing and agriculture. This suggests that there are significant spillover effects from retail to other industries, as most of the goods sold by these stores are locally produced. As for the informal sector, increased competition between formal and informal businesses has no statistical effect on informal employment. However, there seems to be a decline in labor income of informal retailers, suggesting that the margin of adjustment is not through lower employment but via lower earnings. **** RESUMEN: Las tiendas de descuento duro (HDS por sus siglas en inglés) han cambiado las dinámicas del sector minorista tradicional al vender una canasta de productos a muy bajo precio. Este modelo de negocio ha ganado una importante cuota del mercado en muchos países, pero poco se conoce sobre su impacto en el mercado laboral. Para llenar este vacío en la literatura, en este trabajo estudiamos el impacto de la entrada de las tiendas de descuento duro en los mercados laborales locales de Colombia. Haciendo uso de la expansión geográfica escalonada de las principales cadenas de descuento por todo el país como parte de nuestra estrategia empírica y usando información de distintas fuentes, como registros administrativos sobre seguridad social y la encuesta de hogares, analizamos el impacto de estas tiendas sobre la formalidad laboral y recaudo de impuestos. Nuestros resultados muestran que la llegada de las HDS a un municipio aumenta el empleo formal local, sobre todo en los sectores del comercio minorista, la industria manufacturera y la agricultura. Esto sugiere que existen importantes efectos de derrame del comercio minorista a otros sectores económicos, ya que la mayoría de los bienes que venden estas tiendas son productos locales. En cuanto al sector informal, el aumento de la competencia entre comerciantes formales e informales no tiene efectos estadísticos sobre el empleo informal. No obstante, parece haber una disminución en los ingresos laborales de los minoristas informales, lo que sugeriría que el margen de ajuste no se da a través de menor empleo sino vía menores ingresos. |
| Keywords: | Hard discount stores, competition, local labor markets, informality, tiendas de descuento duro, competencia, mercados laborales locales, informalidad |
| JEL: | E24 J46 O17 |
| Date: | 2024–04 |
| URL: | http://d.repec.org/n?u=RePEc:bdr:region:326&r=com |
| By: | Siciliani, Paolo (Bank of England); Eccles, Peter (Bank of England) |
| Abstract: | We analyse how the design of credit registers can influence competition in lending markets. We focus on a particular design choice, namely whether or not credit registers should record previous loan applications that did not result to a subsequent loan origination. This design choice can have subtle effects to the extent that the fact that a prospective borrower has previously applied with other lenders for the same loan can be informative. This is particularly likely to be the case if the failed or withdrawn application was with an innovative lender that is better at screening prospective borrowers thanks to the use of Big Data-driven methodologies (eg ML and AI) alongside the traditional credit scoring approach. On the one hand, we find that when credit registers record previous loan requests rates advertised to borrowers are lower than when credit registers do not record loan requests. On the other hand, the incentives to invest in advanced screening technologies are weakened as a result. |
| Keywords: | Innovation; competition; disclosure; credit markets |
| JEL: | G20 L15 L40 |
| Date: | 2024–03–28 |
| URL: | http://d.repec.org/n?u=RePEc:boe:boeewp:1067&r=com |
| By: | Adam Feher (Institute for Labour Law and Industrial Relations in the European Union (IAAEU), Trier University) |
| Abstract: | The degree of access granted to employees to a firm’s critical asset is a pivotal organizational decision. This access can boost the employees’ productivity within the firm but also enables them to become competitors after leaving, leading to a holdup problem. Economic theory suggests that non-competition agreements (noncompetes) can mitigate this issue. This paper examines the optimal compensation package for an employee, considering access, wage, and noncompete agreements. I demonstrate that firms compensate lower ability agents primarily through access, coupled with the minimum wage and strictest noncompete agreements since access not only increases the employee’s utility but also the firm’s production. For higher ability agents, the maximum degree of access is provided, while the wage and stringency of the noncompete depends on the damage the employee causes with competing. For low damages, the firm offers a lax noncompete with lower wages. Conversely, high potential damage necessitates higher wages and a stricter noncompete. The study’s findings are consistent with observed patterns in CEO contracts. |
| Keywords: | Noncompete agreements, wage differential, Optimal contract |
| JEL: | J31 J33 J42 |
| Date: | 2024–04 |
| URL: | http://d.repec.org/n?u=RePEc:iaa:dpaper:202404&r=com |
| By: | Daniel Freund; S\'ebastien Martin; Jiayu Kamessi Zhao |
| Abstract: | Flexibility is a cornerstone of operations management, crucial to hedge stochasticity in product demands, service requirements, and resource allocation. In two-sided platforms, flexibility is also two-sided and can be viewed as the compatibility of agents on one side with agents on the other side. Platform actions often influence the flexibility on either the demand or the supply side. But how should flexibility be jointly allocated across different sides? Whereas the literature has traditionally focused on only one side at a time, our work initiates the study of two-sided flexibility in matching platforms. We propose a parsimonious matching model in random graphs and identify the flexibility allocation that optimizes the expected size of a maximum matching. Our findings reveal that flexibility allocation is a first-order issue: for a given flexibility budget, the resulting matching size can vary greatly depending on how the budget is allocated. Moreover, even in the simple and symmetric settings we study, the quest for the optimal allocation is complicated. In particular, easy and costly mistakes can be made if the flexibility decisions on the demand and supply side are optimized independently (e.g., by two different teams in the company), rather than jointly. To guide the search for optimal flexibility allocation, we uncover two effects, flexibility cannibalization, and flexibility abundance, that govern when the optimal design places the flexibility budget only on one side or equally on both sides. In doing so we identify the study of two-sided flexibility as a significant aspect of platform efficiency. |
| Date: | 2024–04 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2404.04709&r=com |