|
on Industrial Competition |
|
Issue of 2024‒08‒12
thirty-two papers chosen by Russell Pittman, United States Department of Justice |
| By: | Nathan H. Miller |
| Abstract: | This article addresses developments in the literature on The Rise of Market Power. First, it summarizes research about the result of De Loecker 2020 that the sales-weighted average markup has increased in the United States. Second, it summarizes and evaluates a set of industry studies that examine market power over long time horizons in specific settings. A theme that emerges from these industry studies is that technological advancements matter a great deal for the evolution of economic outcomes. By contrast, the studies do not point to weak antitrust enforcement as contributing to greater market power. The article concludes by outlining directions for future research. |
| JEL: | D40 L10 L40 L60 |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:32627&r= |
| By: | Paulo Ramos; Thomas G. Wollmann |
| Abstract: | This paper uses an aggregative games framework to predict consumer welfare when market structure is endogenously determined. Our main results characterize mergers whose synergies reduce consumer welfare by inducing rivals to exit. The conditions under which such mergers arise are broad, regardless of whether we consider quantity competition among homogeneous products or price competition among multi-product firms facing multinomial logit demand. Calibrated models based on commonly used parameter values indicate that the synergies required to avoid consumer harm can be much higher than those implied by traditional merger analysis. Neither subsequent entry nor follow-on mergers necessarily mitigate the problem. |
| JEL: | D43 G34 K21 L13 |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:32630&r= |
| By: | OECD |
| Abstract: | This paper was prepared as a background note for discussions on “Out-of-market efficiencies in competition enforcement” taking place at the December 2023 session of the OECD Competition Committee. |
| Date: | 2023–11–03 |
| URL: | https://d.repec.org/n?u=RePEc:oec:dafaac:305-en&r= |
| By: | Lopez, Rigoberto A.; Mohapatra, Debashrita; Steinbach, Sandro |
| Keywords: | Industrial Organization, Demand And Price Analysis, Agribusiness |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ags:aaea22:343711&r= |
| By: | OECD |
| Abstract: | This paper was prepared as a background note for discussions on “Serial Acquisitions and Industry Roll-ups” taking place at the December 2023 session of the OECD Competition Committee. |
| Date: | 2023–10–26 |
| URL: | https://d.repec.org/n?u=RePEc:oec:dafaac:303-en&r= |
| By: | OECD |
| Abstract: | This background note reviews the relationship between competition and innovation in both directions. This is, how competition can help boosting innovation and how innovation can shape competition. It focuses on the theoretical perspective to try to understand whether competition is indeed a driver of innovation and how it interacts with other drivers. It was prepared as a background note for discussions on “The Relationship between Competition and Innovation” taking place at the June 2023 session of the OECD Competition Committee. |
| Date: | 2023–05–05 |
| URL: | https://d.repec.org/n?u=RePEc:oec:dafaac:294-en&r= |
| By: | Toraubally, Waseem A. (Newcastle Business School) |
| Abstract: | We augment the Shapley–Shubik (1977) market game to include a spatial dimension à la Hotelling (1929). Taking firms’ locations as given, we study and characterise, through several propositions, lemmata, and a theorem, the main equilibrium predictions of this new model. When both firms locate in the centre and there is no product differentiation at all, we derive a counterexample in which both firms charge a price that is greater than marginal cost. Intriguingly, we show that even when both firms are in the same location, it is possible for the Law of One Price (LOOP) to fail, i.e., the exact same good sells at different prices across two platforms that are a priori identical. We derive similar (equal- and unequal-price) counterexamples in the context where the firms locate at the extreme ends of the city. Now, it is well known that in the traditional Hotelling model, a pure-strategy Nash equilibrium (PSNE) fails to exist when the two firms are closely spaced and near the centre of the city. In our main result, we allow the firms to be arbitrarily close to each other, and propose two counterexamples in which a PSNE exists. In one, the LOOP holds, while in the other, it fails. |
| Keywords: | Spatial Cournot oligopoly ; Existence of pure-strategy equilibrium with closely spaced firms ; Failure of Law of One Price ; Strategic behaviour with a continuum of players |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:wrk:wcreta:87&r= |
| By: | OECD |
| Abstract: | This paper discusses the main benefits of an effective communication strategy and the tools available to competition authorities to communicate the benefits of competition. It was prepared as a background note for discussions on “Assessing and Communicating the Benefits of Competition Interventions” taking place at the June 2023 session of the OECD Competition Committee’s Working Party No. 2 on Competition and Regulation. |
| Date: | 2023–05–11 |
| URL: | https://d.repec.org/n?u=RePEc:oec:dafaac:297-en&r= |
| By: | Patrick Rey; Yossi Spiegel; Konrad O. Stahl |
| Abstract: | We study the feasibility and profitability of predation in a dynamic environment, using a parsimonious infinite-horizon, complete information setting in which an incumbent repeatedly faces potential entry. When a rival enters, the incumbent chooses whether to accommodate or predate it; the entrant then decides whether to stay or exit. We show that there always exists a Markov perfect equilibrium, which can be of three types: accommodation, monopolization, and recurrent predation. We then analyze and compare the welfare effects of different antitrust policies, accounting for the possibility that recurrent predation may be welfare improving. |
| Keywords: | predation, accommodation, entry, legal rules, Markov perfect equilibrium |
| JEL: | D43 L41 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11172&r= |
| By: | OECD |
| Abstract: | This paper reviews how competition authorities have incorporated innovation as part of their assessment in enforcement cases. It explores scenarios that have considered innovation from a static perspective, mostly analysing current and potential competition in well-identified product markets (incentives-based approach), as well as scenarios that have considered innovation from a dynamic perspective, often defining innovation markets (impact-based approach). It also looks at cases that have considered increases in innovation as potential justifications for decreases in competition. This note reviews how these different approaches have shaped market definition, the theories of harm considered, and even the design of remedies and commitments. |
| Date: | 2023–10–24 |
| URL: | https://d.repec.org/n?u=RePEc:oec:dafaac:301-en&r= |
| By: | Montag, Felix; Sagimuldina, Alina; Winter, Christoph |
| Abstract: | The widespread availability of digital technologies has made mandatory price disclosure policies (MPD) a convenient tool for policymakers to increase price transparency and foster competition. The literature has shown that these can increase or decrease prices. We shed light on the circumstances under which MPD lowers prices. We study the introduction of MPD in the German retail fuel market by combining a stylized theoretical model with detailed data on prices, seller characteristics and consumer information. We find that low levels of prior consumer information, a high number of sellers, and complementary information campaigns foster the procompetitive effects of MPD. |
| Keywords: | Mandatory price disclosure, consumer information, retail fuel market |
| JEL: | D83 L41 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:cbscwp:300263&r= |
| By: | Rabinovich, Elliot; Chenarides, Lauren; Richards, Timothy J. |
| Keywords: | Industrial Organization, Marketing, Agricultural And Food Policy |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ags:aaea22:343649&r= |
| By: | OECD |
| Abstract: | Companies increasingly use algorithms to set prices and create or enhance new products and services. While algorithms can result in many efficiency-enhancing and pro-competitive effects, they can also be used by firms to restrict competition. Competition authorities should be aware of these risks, know how to investigate them and identify any possible harm to consumers, as well as consider how to address this harm. This background note considers these important issues. It was prepared for discussions on “Algorithmic Competition” taking place at the June 2023 OECD Competition Committee. |
| Date: | 2023–05–10 |
| URL: | https://d.repec.org/n?u=RePEc:oec:dafaac:296-en&r= |
| By: | OECD |
| Abstract: | This paper was prepared as a background note for discussions on “Competition and Professional Sports” taking place at the December 2023 session of the OECD Competition Committee’s Working Party No. 2 on Competition and Regulation. |
| Date: | 2023–10–18 |
| URL: | https://d.repec.org/n?u=RePEc:oec:dafaac:300-en&r= |
| By: | OECD |
| Abstract: | This paper was prepared as a background note for discussions on “The Optimal Design, Organisation and Powers of Competition Authorities” taking place at the December 2023 session of the OECD Competition Committee’s Working Party No. 3 on Co-operation and Enforcement. |
| Date: | 2023–10–31 |
| URL: | https://d.repec.org/n?u=RePEc:oec:dafaac:304-en&r= |
| By: | Duarte, Marco; Ma, Meilin; Song, Yujing; Zhu, Xinrong |
| Keywords: | Industrial Organization, Agribusiness |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ags:aaea22:343858&r= |
| By: | OECD |
| Abstract: | This paper was prepared as a background note for discussions on “Ex-post Assessment of Merger Remedies” taking place at the 2023 Global Forum on Competition on 7-8 December 2023, |
| Date: | 2023–10–25 |
| URL: | https://d.repec.org/n?u=RePEc:oec:dafaac:302-en&r= |
| By: | Utesov, Nurlan; Mitchell, Paul D.; Du, Xiaodong |
| Keywords: | Agribusiness |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ags:aaea22:343964&r= |
| By: | OECD |
| Abstract: | Standards in competition policy, such as the consumer welfare standard or the protecting competition standard, are the subject of considerable debate. This paper considers the relative advantages and disadvantages of alternative standards by first identifying their desirable attributes and then assessing several candidate standards against them. It was prepared as a background note for discussions on “Consumer Welfare Standards - Advantages and Disadvantages compared to Alternative Standards” taking place at the June 2023 session of the OECD Competition Committee. |
| Date: | 2023–05–05 |
| URL: | https://d.repec.org/n?u=RePEc:oec:dafaac:295-en&r= |
| By: | O. A. Malafeyev; I. E. Khomenko |
| Abstract: | In economics, there are many ways to describe the interaction between a "seller" and a "buyer". The most common one, with which we interact almost every day, is selling for a fixed price. This option is perfect for selling a mass product, when we have a number of sellers and many buyers, and the price for the product varies depending on the conditions of the relationship between supply and demand. Another situation meets us already in markets, where a product can be either mass-produced or more unique, so this option is already closer to the object of our discussion.However, a one-on-one transaction is a much more unstable option, which is why it is also more difficult to model, since it is determined not so much by algorithms as by psychology and the difference in the bargaining ability of the two parties. An even closer example of an auction is price discrimination, when the price for the buyer is determined not only by supply and demand, but also by which group the buyer belongs to. But in this case, the product is not unique, and the final seller is the only one. Thus, we have identified the main auction criteria and their features of the "game". |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2407.06248&r= |
| By: | Steinbach, Sandro; Graziano, Marcello; Connolly, Cristina |
| Keywords: | Industrial Organization, Agribusiness |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ags:aaea22:343800&r= |
| By: | Heng-fu Zou (The World Bank) |
| Date: | 2023–04 |
| URL: | https://d.repec.org/n?u=RePEc:cuf:wpaper:636&r= |
| By: | Çakir, Metin; Li, Qingxiao; Zhang, Xiaowei; Gregory, Christian A. |
| Keywords: | Food Consumption/Nutrition/Food Safety, Industrial Organization |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ags:aaea22:344056&r= |
| By: | Jérémy Tanguy (Institut de Recherche en Gestion et en Economie); Sylvie Blasco (Centre de recherche en économie et management); Johanne Bacheron (Aix-Marseille Sciences Economiques); Eva Moreno Galbis (Aix-Marseille Sciences Economiques) |
| Abstract: | This presentation analyzes how labor market concentration affects gender inequalities in wages, hirings, and working conditions. While theoretical models predict that firms will be able to extract a monopsony rent from workers who have lower geographical mobility, very speci |
| Date: | 2024–06–29 |
| URL: | https://d.repec.org/n?u=RePEc:boc:fsug24:31&r= |
| By: | OECD |
| Abstract: | This paper focuses on how competition, economic growth, and the shift to a circular economy interact. It was prepared as a background note for discussions on “Competition in the Circular Economy” taking place at the June 2023 session of the OECD Competition Committee. |
| Date: | 2023–05–30 |
| URL: | https://d.repec.org/n?u=RePEc:oec:dafaac:298-en&r= |
| By: | Rigotti, Luca; LeRoux, Matthew N.; Schmit, Todd M. |
| Keywords: | Agribusiness, Demand And Price Analysis, Marketing |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ags:aaea22:343558&r= |
| By: | Christian Reimsbach-Kounatze; Andras Molnar |
| Abstract: | Data portability enhances access to and sharing of data across digital services and platforms. It can empower users to play a more active role in the re-use of their data and can help stimulate competition and innovation by fostering interoperability while reducing switching costs and lock-in effects. However, the effectiveness of data portability in enhancing competition depends on the terms and conditions of data transfer and the extent to which competitors can make use of the data effectively. Additionally, there are potential downsides: data portability measures may unintentionally stifle competition in fast-evolving markets where interoperability requirements may disproportionately burden SMEs and start-ups. Data portability can also increase digital security and privacy risks by enabling data transfers to multiple destinations. This note presents the following five dimensions essential for designing and implementing data portability frameworks: sectoral scope; beneficiaries; type of data; legal obligations; and operational modality. |
| Keywords: | data portability |
| Date: | 2024–06–29 |
| URL: | https://d.repec.org/n?u=RePEc:oec:stiaad:25-en&r= |
| By: | Jaedo Choi; Andrei A. Levchenko; Dimitrije Ruzic; Younghun Shim |
| Abstract: | We quantify the contribution of the largest firms to South Korea's economic performance over the period 1972-2011. Using firm-level historical data, we document a novel fact: firm concentration rose substantially during the growth miracle period. To understand whether rising concentration contributed positively or negatively to South Korean real income, we build a quantitative heterogeneous firm small open economy model. Our framework accommodates a variety of potential causes and consequences of changing firm concentration: productivity, distortions, selection into exporting, scale economies, and oligopolistic and oligopsonistic market power in domestic goods and labor markets. The model is implemented directly on the firm-level data and inverted to recover the drivers of concentration. We find that most of the differential performance of the top firms is attributable to higher productivity growth rather than differential distortions. Exceptional performance of the top 3 firms within each sector relative to the average firms contributed 15% to the 2011 real GDP and 4% to the net present value of welfare over the period 1972-2011. Thus, the largest Korean firms were superstars rather than supervillains. |
| JEL: | F12 F16 L11 N15 O40 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:32648&r= |
| By: | Nouve, Yawotse; Zheng, Yuqing; Zhao, Shuoli |
| Keywords: | Industrial Organization, Marketing, Agribusiness |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ags:aaea22:343795&r= |
| By: | Judson Boomhower; Meredith Fowlie; Jacob Gellman; Andrew Plantinga |
| Abstract: | As climate risk escalates, property insurance is critical to reduce the risk exposure of households and firms and to aid recovery when disasters strike. To perform these functions efficiently, insurers need to access high quality information about disaster risk and set prices that accurately reflect the costs of insuring this risk. We use proprietary data on parcel-level wildfire risk, together with insurance premiums derived from insurers' regulatory filings, to investigate how insurance is priced and provided in a large market for homeowners insurance. We document striking variation in insurers' risk pricing strategies. Firms that rely on coarser measures of wildfire risk charge relatively high prices in high-risk market segments -- or choose not to serve these areas at all. Empirical results are consistent with a winner's curse, where firms with less granular pricing strategies face higher expected losses. A theoretical model of a market for natural hazard insurance that incorporates both price regulation and asymmetric information across insurers helps rationalize the empirical patterns we document. Our results highlight the underappreciated importance of the winner's curse as a driver of high prices and limited participation in insurance markets for large, hard-to-model risks. |
| JEL: | D82 G22 Q54 |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:32625&r= |
| By: | OECD |
| Abstract: | Leniency programmes are a powerful detection tool for competition authorities. Over the period 2015-2021, the number of leniency applications in OECD jurisdictions dropped by 58% and the same trend can be observed across most regions. This Note explores whether and to what extent the drop in leniency applications may constitute a threat to cartel enforcement and the possible reasons behind the declining trends. It was prepared as a background note for discussions on “The Future of Effective Leniency Programmes: Advancing Detection and Deterrence of Cartels” taking place at the June 2023 session of the OECD Competition Committee’s Working Party No. 3 on Co-operation and Enforcement. |
| Date: | 2023–06–09 |
| URL: | https://d.repec.org/n?u=RePEc:oec:dafaac:299-en&r= |
| By: | Giacomo Calzolari; Leonardo Felli; Johannes Koenen; Giancarlo Spagnolo; Konrad O. Stahl |
| Abstract: | We investigate the role of mutual trust in long-term vertical relationships involving trades of complex goods. High complexity is associated with high contract incompleteness and hence the increased relevance of trust-based relational contracts. Contrary to expectations, we find that changes in trust do not impact the quality of highly complex objects. Instead, higher trust improves the quality of less complex objects. Even more surprisingly, trust is associated with more competi-tion in procurement, again for low tech objects. This complexity-based difference persists even when the same supplier provides both types of objects, suggesting relational contracting may be object-specific. These findings are derived from a comprehensive survey of buyers and critical suppliers in the German automotive industry. We explain these results with a relational contracting model, where the cost of switching suppliers is technology-specific and increases with object complexity, shifting bargaining power and altering the effects of trust on each party’s incentives. |
| Keywords: | relational contracts, complexity, bargaining power, trust, high-tech industries |
| JEL: | D86 L14 L62 O34 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11170&r= |