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on Industrial Competition |
| By: | Jeroen Hinloopen; Stephen Martin; Leonard Treuren |
| Abstract: | Antitrust laws prohibit collusion by private firms, yet many types of interfirm coopera tion are legal. Using laboratory experiments, we study spillovers from legal cooperation in one market to tacit collusion in a different market. Subjects sequentially play two homogeneous goods Bertrand games once against the same opponent. We vary whether subjects can form binding price agreements in the first market. We find that allowing subjects to coordinate their prices in the first market significantly increases prices in the second market, elevating the incidence of non-competitive market prices by more than 60 percent. This shows that repeated interaction and communication are not necessary to achieve non-competitive prices, as long as subjects can form binding agreements in a different market. Additional treatments suggest that commitment and multimarket contact are both necessary and sufficient for spillovers from legal cooperation to tacit collusion to emerge. |
| Date: | 2023–06 |
| URL: | https://d.repec.org/n?u=RePEc:ete:msiper:746847 |
| By: | Charles Dennery |
| Abstract: | New Zealand’s productivity level remains markedly below the OECD frontier. Insufficient competition is an important contributor to this performance, as the relatively small number of competitors in New Zealand’s small market contributes to market concentration. Ensuring adequate competition policy settings is important for offsetting these geographic handicaps, foster innovation and support higher living standards. This paper reviews the competition landscape and the recent reforms in several concentrated markets and network sectors and provides recommendations for additional sectoral reforms or inquiries. It also provides recommendations for improving the overall regulatory landscape, including the prerogatives of the Commerce Commission and other government regulators and regulations on business entry and conduct. Finally, it addresses the question of competition enforcement in digital markets, where New Zealand faces some of the same challenges that other OECD economies have to tackle. |
| Keywords: | early childhood, education, New Zealand, primary, secondary |
| JEL: | K2 L4 L7 L8 L9 |
| Date: | 2024–08–09 |
| URL: | https://d.repec.org/n?u=RePEc:oec:ecoaaa:1817-en |
| By: | Kang, Gusang (KOREA INSTITUTE FOR INTERNATIONAL ECONOMIC POLICY (KIEP)) |
| Abstract: | This study examines how 'killer acquisitions' in the digital platform market have impacted innovation performance post-merger. This analysis focuses particularly on M&As among various types of corporate consolidations by digital platforms. It estimates factors influencing the probability of M&A by digital platforms and uses the technological similarity index between the acquiring digital platform and the acquired company as a key explanatory variable. Then, using the technological similarity index, the analysis categorizes the M&A cases involving digital platforms into 'killer acquisitions' and 'non-killer acquisitions' and compares innovation performance by type of acquisition. The analysis focused on identifying "killer acquisitions" by examining the technology similarity index between firms before and after M&As conducted by GAFAM. Killer acquisitions were defined as those with minimal change in the technology similarity index pre- and post-transaction. The study found that killer acquisitions negatively impact innovation, as measured by a significant decline in the number of patent applications from acquired companies, compared to non-killer acquisitions where patent applications tended to increase post-acquisition. These findings highlight the need for methodologies, such as the technological similarity index, to better identify and regulate such anti-competitive acquisitions in the digital platform sector. |
| Keywords: | Corporate Innovation; killer acquisitions; non-killer acquisitions; M&A |
| Date: | 2024–08–10 |
| URL: | https://d.repec.org/n?u=RePEc:ris:kiepwe:2024_025 |
| By: | Yao Lu; Gordon M. Phillips; Jia Yang |
| Abstract: | We examine the rise of cloud computing and AI in China and their impacts on industry dynamics after the shock to the cost of Internet-based computing power and services. We find that cloud computing is associated with an increase in firm entry, exit and the likelihood of M&A in industries that depend more on cloud infrastructure. Conversely, AI adoption has no impact on entry but reduces the likelihood of exit and M&A. Firm size plays a crucial role in these dynamics: cloud computing increases exit rates across all firms, while larger firms benefit from AI, experiencing reduced exit rates. Cloud computing decreases industry concentration but AI increases concentration. On the financing side, firms exposed to cloud computing increase equity and venture capital financing, while only large firms increase equity financing when exposed to AI. |
| JEL: | D25 G3 G34 L20 L23 L25 |
| Date: | 2024–08 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:32811 |
| By: | Kim, Jong Duk (KOREA INSTITUTE FOR INTERNATIONAL ECONOMIC POLICY (KIEP)); Koo, Kyong Hyun (KOREA INSTITUTE FOR INTERNATIONAL ECONOMIC POLICY (KIEP)); Kang, Gusang (KOREA INSTITUTE FOR INTERNATIONAL ECONOMIC POLICY (KIEP)); Kim, Hyuk-Hwang (KOREA INSTITUTE FOR INTERNATIONAL ECONOMIC POLICY (KIEP)) |
| Abstract: | In general, negative discussions and impressions regarding outward FDI, such as capital outflows, job losses, leakage of trade secrets, and hollowingout of domestic industries, seem to dominate. The controversy, which focused on greenfield investments in the past, seems to be widely applied to recent mergers and acquisitions (M&As). Against this backdrop, the purposeof this report is twofold: first, to improve the understanding of how the increase in Korean firms’ FDI through M&As and related innovation activities in the U.S. market affects the performance of the investing Korean firms and their domestic affiliates; and second, to provide objective long-term policy directions on outward FDI and firms’ innovation activities based on the results found using firm-level data. The following results and findings in each chapter of this report are presented as follows. On the theoretical side, based on the theoretical model developed by Akcigit, Ates, and Impullitti (2018), Chapter 2 examines the mechanisms through which FDI can affect the incentives to innovate and the financial performance of investing firms. Market integration through M&As creates a scale effect and a competitive effect. The cost of innovation also plays a role in firms’ innovation incentives and financial performance. A spillover expected from knowledge sharing resulting from access to a new market is an additional channel. Regarding the scale effect, access to large, developed markets is one of the reasons why direct investment is a rational choice for a firm’s innovation. Large markets tend to have more intermediate resources to use and a larger pool of information to share. However, access to a new market through FDI can change the competitive structure that the investing companies face. Direct access to a foreign market creates higher expected profits if an investing firm’s innovation is successful. Still, if it is not, the firm may face stiffer competition or be forced out of the market. The degree of monopoly power is indeed the main factor determining the profits of successful innovations. However, the firm’s current profit only lasts until the next innovation occurs, and if there is no subsequentinnovation that is better than that the competitor’s, the company’s profit will decrease or it will be exited from the market. To survive, companies need to continuously invest and work on innovation. The spillover of technologies and the knowledge embedded in the R&D performed or in the patents filed as part of these efforts are another channel through which companies strive for better quality and innovation. (the rest omitted) |
| Keywords: | outward FDI; mergers and acquisitions; firms innovation activities; long term policy directions |
| Date: | 2023–12–29 |
| URL: | https://d.repec.org/n?u=RePEc:ris:kieppa:2023_022 |
| By: | Colliard, Jean-Edouard (HEC Paris); Foucault, Thierry (HEC Paris); Lovo, Stefano (HEC Paris) |
| Abstract: | We let ``Algorithmic Market Makers'' (AMs), using Q-learning algorithms, determine prices for a risky asset in a standard market making game with adverse selection and compare these prices to the Nash equilibrium of the game. We observe that AMs effectively adapt to adverse selection, adjusting prices post-trade as anticipated. However, AMs charge a markup over the competitive price and this markup increases when adverse selection costs decrease, in contrast to the predictions of the Nash equilibrium. We attribute this unexpected pattern to the diminished learning capacity of AMs when faced with increased profit variance. |
| Keywords: | Algorithmic pricing; Market Making; Adverse Selection; Market Power; Reinforcement learning |
| JEL: | D43 G10 G14 |
| Date: | 2022–10–20 |
| URL: | https://d.repec.org/n?u=RePEc:ebg:heccah:1459 |
| By: | Huck, Steffen; Normann, Hans-Theo; Petros, Fidel |
| Abstract: | We use a laboratory experiment to investigate whether statements from a governmental institution expressing concerns about price increases trigger such increases by facilitating tacit collusion. Such statements on market conduct are disclosed after an exogenous and unexpected upward cost shock. The two potential channels affecting tacit collusion work through (i) a reduction of strategic uncertainty and (ii) an inducement of correlated beliefs. We find that issued statements of concern become a self-fulfilling prophecy, triggering price increases, and that a reduction in strategic uncertainty drives this adverse effect. Our results suggest that institutions should refrain from publishing such statements of concern |
| Keywords: | beliefs, coordination device, strategic uncertainty, tacit collusion |
| JEL: | C91 C72 L41 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:wzbmbh:301157 |