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on Industrial Competition |
| By: | Francesc Dilmé |
| Abstract: | This paper studies repeated trade with noisy information about previous transactions. A buyer has private information about his willingness to pay, which is either low or high, and buys goods from different sellers over time. Each seller observes a noisy history of signals about the buyer’s previous purchases and sets a price. We compare the cases where previous prices are observable to sellers with the case where they are not. We show that more signal precision is counterbalanced by two equilibrium mechanisms that slow learning and keep incentives in balance: (1) sellers offer discounted prices more often, and (2) the buyer rejects high prices with a higher probability. The effect of making prices observable depends on the signal precision: When the signal is imprecise, making prices public strengthens the discounting mechanism, improving efficiency and buyer welfare; when the signal is precise, making prices public activates the rejection mechanism, and efficiency and buyer welfare may decrease. Independently of the price observability, the buyer tends to benefit from a more precise signal about previous purchases. |
| Keywords: | Repeated Trade, Asymmetric Information, Internet Cookies |
| JEL: | C73 C78 D82 |
| Date: | 2024–04 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2024_538&r=com |
| By: | Cemil Selcuk |
| Abstract: | This note pursues two primary objectives. First, we analyze the outcomes of an all-pay auction within a store where buyers with and without financial constraints arrive at varying rates, and where buyer types are private information. Second, we investigate the selection of an auction format (comprising first-price, second-price, and all-pay formats) in a competitive search setting, where sellers try to attract customers. Our results indicate that if the budget constraint is not too restrictive, the all-pay rule emerges as the preferred selling format in the unique symmetric equilibrium. This is thanks to its ability to prompt buyers to submit lower bids, thereby generally avoiding budget constraints, while allowing the seller to collect all bids. |
| Date: | 2024–04 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2404.08762&r=com |
| By: | Brian Love (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); Yassine Lefouili (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); Christian Helmers (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: | To what extent and with what effect do owners of standard-essential patents (SEPs) "hold-up" companies that produce standard-compliant products? To explore this question, we construct measures of opportunistic patent licensing behaviors using detailed information collected from the dockets of U.S. patent cases filed (2010-2019) to enforce SEPs and a matched sample of non-SEPs. Overall, we find evidence of opportunistic behavior by the patent enforcer in approximately 77% of SEP and 65% of non-SEP assertions in court. The figures mask important heterogeneity. There is significantly more opportunistic conduct aimed at increasing a potential licensee's loss if the patent enforcer prevails in court: 35% of SEP assertions vs. 10% of non-SEP assertions. In contrast, conduct that increases a potential licensee's litigation costs is less common and the difference between SEP assertions (8%) and non-SEP assertions (6%) is small. We also show that opportunistic behavior is associated with case outcomes, with the effect on settlement depending on the type of opportunistic behavior. Behavior that increases a potential licensee's litigation costs is associated with an increase in the probability of settlement, while behavior that increases a potential licensee's loss if the patent enforcer prevails in court is negatively associated with settlement. |
| Keywords: | Litigation, Standards, Patents, Holdup, U.S |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-04547832&r=com |
| By: | Buhui Qiu; Teng Wang |
| Abstract: | This paper examines corporate mergers and acquisitions (M&A) outcomes under lender scrutiny. Using the unique shocks of U.S. supervisory stress testing, we find that firms under increased lender scrutiny after their relationship banks fail stress tests engage in fewer but higher-quality M&A deals. Evidence from comprehensive supervisory data reveals improved credit quality for newly originated M&A-related loans under enhanced lender scrutiny. This improvement is further evident in positive stock return reactions to M&A deals financed by loans subject to enhanced lender scrutiny. As companies engage in fewer but higher-quality deals, they also experience higher returns on assets. Our findings highlight the importance of lender scrutiny in corporate M&A activities. |
| Keywords: | Mergers and acquisitions; Lender scrutiny; Stress tests |
| JEL: | G21 G34 |
| Date: | 2024–04–19 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfe:2024-25&r=com |
| By: | Miller, David A; Watson, Joel |
| Keywords: | Economics, Applied Economics, Economic Theory, equilibrium selection, active contracting, bargaining power, relationships, Applied economics, Economic theory |
| Date: | 2023–01–01 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:ucsdec:qt2dg817mv&r=com |
| By: | Ponthiere, Gregory; Stevens, Nicolas |
| Abstract: | Dewatripont and Tirole (2024) defend the morality of markets on the ground of an irrelevance result: the social production of moral actions is independent from competitive pressure on markets. No matter how strong competitive pressure is, markets perform well in diffusing signals about moral values and in coordinating suppliers of moral actions. In this comment, we argue, on the contrary, that markets lead to a double crowding out of moral values: first, imperfect transmission of moral values on markets leads to an underproduction of moral actions despite the presence of highly ethical suppliers; second, competitive pressure on markets favors the eviction of highly ethical suppliers by less ethical suppliers. |
| Keywords: | competition, markets, morality, crowding out |
| JEL: | D21 D6 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:glodps:1433&r=com |
| By: | John M. Barrios; Jeremy Bertomeu; Radhika Lunawat; Ibrahima Sall |
| Abstract: | We examine the impacts of ethical declarations on market transactions through a controlled laboratory experiment, where privately-informed sellers issue a public report prior to a first-price auction. We find that while signing an ethical statement does not reduce misreporting by sellers, it significantly increases buyer trust, often skewing the terms of the trade in favor of sellers. Contrary to rational expectations, buyers consistently struggle to undo the bias. In counterfactual scenarios, from our structural analysis, we find that price efficiency improves when buyers rationally process uncertainty about sellers' ethical preferences, yet bias persists even when buyers have more accurate perceptions of sellers'’ ethical standards. Overall, our results suggests that disclosure interventions aimed at enhancing ethical conduct in market settings may not necessarily lead to more efficient pricing or reduced bias, and in some instances, may even disadvantage certain market participants. |
| JEL: | D53 G10 G14 G4 G41 |
| Date: | 2024–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:32385&r=com |
| By: | Richard Hornbeck; Shanon Hsuan-Ming Hsu; Anders Humlum; Martin Rotemberg |
| Abstract: | We examine the long transition from water to steam power in US manufacturing, focusing on early users of mechanical power: lumber and flour mills. Digitizing Census of Manufactures manuscripts for 1850 to 1880, we show that as steam costs declined, manufacturing activity grew faster in counties with less waterpower potential. This growth was driven by steam powered entrants and agglomeration, as water powered incumbents faced switching barriers primarily from sunk costs. Estimating a dynamic model of firm entry and steam adoption, we find that the interaction of switching barriers and high fixed costs creates a quantitatively important and socially inefficient drag on technology adoption. Despite substantial entry and exit, switching barriers remained influential for aggregate steam adoption throughout the 19th century, as water power required lower fixed costs and therefore was attractive to relatively low productivity entrants. These entrants then became incumbents, locked into water power even if their productivity grew. |
| JEL: | D25 N61 O14 |
| Date: | 2024–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:32384&r=com |
| By: | Serafica, Ramonette B. |
| Abstract: | This essay discusses the rationale for economic charter change through the lens of services reform and identifies three issues with the current proposal of Congress: the retention of the legislative franchise requirement, the exclusion of mass media from the scope of the amendments, and the choice of the liberalization approach. To harness the full potential of services as an engine of economic growth and development in the 21st century, the paper recommends addressing these issues and removing all the specific restrictions that have been locked in the 1987 Constitution, namely: Art. XII Sec. 11 (public utility), Art. XII Sec. 14 (practice of all professions), Art. XIV Sec. 4(2) (educational institutions); Art. XVI Sec. 11(1) (mass media); and Art. XVI Sec. 11(2) (advertising industry). Liberalization must be pursued as part of a broader structural reform agenda. This involves improving regulations and strengthening institutions that will foster an economic environment that supports robust competition, encourages innovation, and facilitates the efficient allocation of resources. The reforms will contribute to higher productivity, which the Constitution itself recognizes “as the key to raising the quality of life for all, especially the underprivileged” (Art. XII Sec.1). Comments to this paper are welcome within 60 days from the date of posting. Email publications@pids.gov.ph. |
| Keywords: | services;restrictions;trade;investment;regulation |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:phd:dpaper:dp_2024-03&r=com |
| By: | Alessandro GUAZZINI |
| Abstract: | Since Veblen’s “The Leisure Class†was published in 1899, a considerable amount of literature on conspicuous consumption has been produced; while much has been said from a demand viewpoint, its supply side and social consequences rest largely undetermined. This paper aims at highlighting the highly conflictual interests between firms and the generality of consumers in a market characterized by conspicuous consumption. It also has in view to take a step forward towards the formalization of conspicuous consumption, to accelerate his admittance in the broadly accepted microeconomic theory. Starting from an analysis of the past literature and the state of the art in demand theory, I will first include positional concerns in an individual utility function. I will then examine the adverse economic and socio-psychological externalities that similar behaviors entail. I will eventually turn to the analysis of the supplier’s responsibility in shaping the phenomenon. Through an advertising augmented Lerner index I will investigate the role of a firm’s advertising expense in both raising markups and increasing conspicuous consumption’ negative effects. After an empirical analysis aimed at supporting my thesis, I will finally suggest a few remedies. |
| Keywords: | Conspicuous consumption, Positional concerns, Utility function, Profit function, Lerner index, Advertising externalities, Advertising tax |
| JEL: | D01 D62 D91 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:frz:wpaper:wp2024_03.rdf&r=com |
| By: | Jacob P. Gramlich; Serafin J. Grundl |
| Abstract: | The U.S. banking industry is well suited to assess the common ownership hypothesis (COH), because thousands of private banks without common ownership (CO) compete with hundreds of public banks with high and increasing levels of CO. This paper assesses the COH in the banking industry using more comprehensive ownership data than previous studies. In simple comparisons of raw deposit rate averages we document that (i) private banks do offer substantially more attractive deposit rates than public banks, but (ii) the deposit rates of public banks are similar in markets without CO where a single public bank competes only with private rivals, and in markets with CO where multiple public banks compete with each other. Panel regressions of deposit rates on the profit weights implied by the COH are generally consistent with the COH if only quarter FEs (without other controls) are included but not if bank-quarter FEs are included. Estimates with bank-quarter FEs are “precise zeros†with 95% CIs suggesting that the threefold rise in CO among public banks between 2005 and 2022 moved their deposit rates by less than a quarter of a basis point in either direction. To assess the COH along non-price dimensions we also estimate the effect of CO on deposit quantities, and find that the estimates are also not consistent with the COH. |
| Keywords: | Bank competition; Common ownership |
| JEL: | L40 L10 G34 G21 L20 |
| Date: | 2024–04–19 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfe:2024-22&r=com |