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on Industrial Competition |
| By: | Martimort, David; Pouyet, Jérôme |
| Abstract: | A retailer may boost demand for a manufacturer’s product through unobservable promotional efforts. Fixed fees cannot be used to freely allocate profit within the vertical structure. When manufacturers have market power, the equilibrium wholesale contract features a retail price below cost together with a rebate for incremental units bought by the retailer when effort has succeeded in boosting sales. Loss leading emerges as an incentive device in such an incomplete contracting scenario. A ban on below-cost pricing leads to a higher retail price and a lower promotional effort. |
| Keywords: | Vertical restraints; loss leading; promotional allowances; below-cost; pricing |
| JEL: | L11 L42 L81 |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:tse:wpaper:129692 |
| By: | Brian Callaci (Open Markets Institute); Matthew Gibson (Williams College and IZA); Sérgio Pinto (University of Maryland at College Park and Instituto Universitário de Lisboa (ISCTE-IUL), DINAMIA’CET); Marshall Steinbaum (University of Utah); Matt Walsh (Lightcast) |
| Abstract: | We evaluate the nationwide impact of the Washington State attorney general’s 2018-2020 enforcement campaign against no-poach clauses in franchising contracts, which prohibited worker movement across locations within a chain. Implementing a staggered difference-in-differences research design using Burning Glass Technologies job vacancies and Glassdoor salary reports from numerous industries, we estimate a 6 percent increase in posted annual earnings from the job vacancy data and a 4 percent increase in worker-reported earnings. |
| Keywords: | Employer market power, oligopsony, monopsony, franchising chains, antitrust, wages, salaries |
| JEL: | J42 K21 L40 J31 |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:upj:weupjo:24-405 |
| By: | Rubal Dua; Prateek Bansal; Jinghai Huo (King Abdullah Petroleum Studies and Research Center) |
| Abstract: | Since the seminal work of Berry, Levinsohn, and Pakes (1995), random coefficient logit (RCL) has become the workhorse model for estimating demand elasticities in markets with differentiated products using aggregated sales data. While the ability to represent flexible substitution patterns makes RCL a preferable model, its estimation is computationally challenging due to the numerical inversion of the demand function. The recently proposed inverse product differentiation logit (IPDL) addresses these computational challenges by directly specifying the inverse demand function and representing flexible substitution patterns through nonhierarchical product segmentation in multiple dimensions. Unlike the two-stage simulation-based estimation of RCL, IPDL requires the estimation of a traditional linear instrumental variable (IV) regression model. In theory, IPDL appears to be an attractive alternative to RCL, but its potential has not yet been explored in empirical studies. We present the first application of IPDL in understanding the demand for passenger cars in China using provincial-level sales data. Our results indicate that the elasticity estimates of IPDL and RCL are not significantly different, i.e., that IPDL can capture substitution patterns in a similar manner as can RCL. The estimation of IPDL takes less than a second on a regular computer (i.e., it is approximately 500 times faster than RCL). Overall, the flexibility and computational efficiency of IPDL makes it a workhorse model for demand estimation using market-level aggregated sales data. |
| Date: | 2023–12–26 |
| URL: | https://d.repec.org/n?u=RePEc:prc:mpaper:ks--2023-mp05 |
| By: | Lancieri, Filippo Maria; Valleti, Tommaso |
| Abstract: | We discuss the design of an effective merger review policy for the 21st century. We argue that the practice of the past decades is inadequate and propose a move towards much stronger rebuttable structural presumptions. These presumptions establish that all mergers above certain thresholds are illegal unless the merging parties can prove that merger-specific efficiencies will be shared with consumers and yield tangible welfare gains. These presumptions are grounded on solid economics and also acknowledge the real-world limitations in enforcement resources and information asymmetries between companies and regulators. We outline how to establish such presumptions in practice, defending the implementation of an ex-ante system that selects in advance (rather than per transaction) which companies and markets are subject to the presumption. Finally, we outline which merger-related efficiencies can rebut the presumption. |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:cbscwp:302563 |
| By: | Donna, Javier; Walsh, Anita |
| Abstract: | n 2020, an antitrust lawsuit was filed against the Pork Integrators alleging a §1 Sherman Act violation. At the center of the Lawsuit, there is an alleged exchange of atomistic information about the Pork integrators’ operations using Agri Stats, Inc. as a clearinghouse. We use the Supreme Court benchmark in American Column & Lumber to discuss two questions that arise from the Lawsuit. The first is whether the association of Pork Integrators and Agri Stats, Inc., resulted in the restraint of interstate commerce, the main specific issue at stake in the pork Lawsuit. The second is whether information-exchange agreements using clearinghouses like Agri Stats, Inc., lessen competition and offend U.S. antitrust law, a more general issue beyond the pork Lawsuit. We find that there appears to be ample evidence in the Lawsuit to merit prosecution regarding both trade restraints and information-sharing agreements. We conclude by discussing the role of the Agencies in setting the standards in information-exchange agreements. |
| Keywords: | antitrust, price-fixing, competition, information sharing, cartel, pork industry |
| JEL: | K21 L12 L13 L41 L42 L66 |
| Date: | 2023 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:121649 |
| By: | Koharu Nakao (Graduate School of Economics, Kwansei Gakuin University) |
| Abstract: | This study focuses on the e-commerce market and analyzes the pricing behavior of a peer-to-peer platform that intermediates transactions between consumers (individuals). We consider two types of fee rates charged by a platform to consumers. Each consumer type is represented by two vectors, and consumers act depending on the values of these vectors. We investigate how the platform's profit, price of goods, and fee rate are affected by whether the platform charges the fee rate to sellers or buyers. The results indicate that, first, the platform's equilibrium profit is equivalent regardless of whether a fee rate is imposed on sellers or buyers. Second, consumer surplus and social welfare are also equivalent. Finally, the equilibrium price and equilibrium fee rate result in contrasting ones depending on whether sellers or buyers pay the fee. Specifically, when the cost of supply on the seller side increases, the fee rate falls in both cases; however, the price of goods increases more if a platform charges a fee rate to the buyers rather than the sellers. |
| Keywords: | sharing economy, peer-to-peer, e-commerce, fee, platform |
| JEL: | L81 L11 D21 |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:kgu:wpaper:277 |
| By: | Boris Nikolov (University of Lausanne; Swiss Finance Institute; European Corporate Governance Institute (ECGI)); Norman Schuerhoff (Swiss Finance Institute - HEC Lausanne); Zepeng Wang (University of Lausanne and Swiss Finance Institute) |
| Abstract: | Corporate financial leverage within competition networks is determined by both direct and indirect competitors. Using data on firms’ self reported competitors, we identify eleven stable competition communities within the U.S. economy, where firms are grouped into communities based on competitive interactions both within and across industries. We find a strong complementarity between a firm’s leverage and that of its community members, consistent with strategic interactions with both immediate peers and chain effects from the propagation of shocks affecting indirect peers. To achieve identification, we employ a granular instrumental variable approach. Our results highlight that firms’ financial strategies are shaped not only by direct competition but also by the broader competitive environment. |
| Keywords: | capital structure, strategic competition, financial complementarity, competitor networks |
| JEL: | G31 G32 L13 |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:chf:rpseri:rp2445 |
| By: | Gianluca Antonecchia (KU Leuven); Ajay Bhaskarabhatla (Erasmus School of Economics); Enrico Pennings (Erasmus School of Economics) |
| Abstract: | This paper develops a novel theory linking quantity discounts to bargaining power in scenarios where retailers, organized as a trade association, negotiate uni- form wholesale prices with suppliers. Our theory predicts that suppliers offer greater quantity discounts in regional markets where they possess relatively less bargaining power, as a counterbalance to the higher national wholesale prices negotiated by the retailer trade association. We test these predictions using detailed product-level data from the Indian pharmaceutical industry, where significant geographic variations in quantity discounts are observed. Our findings provide empirical support for the proposed theory. |
| Keywords: | quantity discounts, bargaining power, pharmaceuticals, India |
| JEL: | L11 L42 D22 |
| Date: | 2024–07–19 |
| URL: | https://d.repec.org/n?u=RePEc:tin:wpaper:20240048 |
| By: | Albrecht, James (Georgetown University); Cai, Xiaoming (Peking University); Gautier, Pieter A. (Vrije Universiteit Amsterdam); Vroman, Susan (Georgetown University) |
| Abstract: | This paper considers competitive search equilibrium in a market for a good whose quality differs across sellers. Each seller knows the quality of the good that he or she is offering for sale, but buyers cannot observe quality directly. We thus have a "market for lemons" with competitive search frictions. In contrast to Akerlof (1970), we prove the existence of a unique equilibrium, which is separating. Higher-quality sellers post higher prices, so price signals quality. The arrival rate of buyers is lower in submarkets with higher prices, but this is less costly for higher-quality sellers given their higher continuation values. For some parameter values, higher-quality sellers post the full-information price; for other values these sellers have to post a higher price to keep lower-quality sellers from mimicking them. In an extension, we show that if sellers compete with auctions, the reserve price can also act as a signal. |
| Keywords: | competitive search, signaling |
| JEL: | C78 D82 D83 |
| Date: | 2024–08 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17246 |
| By: | Broere, Mark; Christmann, Robin |
| Abstract: | Crowdfunding as a part of micro-finance has received considerable attention from the public and among researchers, both due to its novel form of collecting funds and the emergence of fraud and misconduct to the disadvantage of lay backers. We develop an adverse selection model of reward-based crowdfunding that introduces Bertrand-style competition between campaign owners. We find that the traditional result in the literature about successful separation of high-type and low-type creators does no longer hold when accessible information about quality becomes less reliable and the market for the high-quality product grows. Under certain conditions, we also observe an instability in competition where campaign owners randomize between withdrawing to a certain market niche and price competition. All this gives rise to fraud in equilibrium. In this perspective, crowdfunding scams resemble a bet on market demand and are often able to evade liability. We then discuss specific remedies and provide insights for platform policy and regulation. |
| Keywords: | adverse selection; price competition; reward-based crowdfunding; fixed funding; enforcement |
| JEL: | G14 G18 K42 |
| Date: | 2024–08–21 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:121784 |
| By: | Xin Du; Xiaoxia Shi |
| Abstract: | What impact does import competition have on firms' production organizational choices? Existing literature has predominantly focused on the relationship between import competition and firms' global production networks, with less attention given to domestic. We first develop a Nash-bargaining model to guide our empirical analysis, then utilize tariff changes as an exogenous shock to test our theoretical hypotheses using a database of Chinese listed firms from 2000 to 2023. Our findings indicate that a decrease in downstream tariffs lead to an increase in vertical integration. In our mechanism tests, we discover that a reduction in upstream tariffs also enhances this effect. Moreover, the impact of tariff reductions on vertical integration is primarily observed in industries with high asset specificity, indicating that asset-specificity is a crucial mechanism. We further explore whether import competition encourages vertical integration for technological acquisition purpose, the effect is found only among high-tech firms, while it's absent in non-high-tech firms. Our research provides new perspectives and evidence on how firms optimize their production organization in the process of globalization. |
| Date: | 2024–08 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2408.13706 |
| By: | Eshwar Ram Arunachaleswaran; Natalie Collina; Sampath Kannan; Aaron Roth; Juba Ziani |
| Abstract: | There has been substantial recent concern that pricing algorithms might learn to ``collude.'' Supra-competitive prices can emerge as a Nash equilibrium of repeated pricing games, in which sellers play strategies which threaten to punish their competitors who refuse to support high prices, and these strategies can be automatically learned. In fact, a standard economic intuition is that supra-competitive prices emerge from either the use of threats, or a failure of one party to optimize their payoff. Is this intuition correct? Would preventing threats in algorithmic decision-making prevent supra-competitive prices when sellers are optimizing for their own revenue? No. We show that supra-competitive prices can emerge even when both players are using algorithms which do not encode threats, and which optimize for their own revenue. We study sequential pricing games in which a first mover deploys an algorithm and then a second mover optimizes within the resulting environment. We show that if the first mover deploys any algorithm with a no-regret guarantee, and then the second mover even approximately optimizes within this now static environment, monopoly-like prices arise. The result holds for any no-regret learning algorithm deployed by the first mover and for any pricing policy of the second mover that obtains them profit at least as high as a random pricing would -- and hence the result applies even when the second mover is optimizing only within a space of non-responsive pricing distributions which are incapable of encoding threats. In fact, there exists a set of strategies, neither of which explicitly encode threats that form a Nash equilibrium of the simultaneous pricing game in algorithm space, and lead to near monopoly prices. This suggests that the definition of ``algorithmic collusion'' may need to be expanded, to include strategies without explicitly encoded threats. |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2409.03956 |
| By: | Simplice A. Asongu (Johannesburg, South Africa); Emeride F. Kayo (University of Yaoundé II-Soa, Cameroon); Vanessa S. Tchamyou (ASPROWORDA, Cameroon); Therese E. Zogo (University of Yaoundé II-Soa, Cameroon) |
| Abstract: | Purpose – This article analyses the effect of bank concentration on women's political empowerment in 80 developing countries over the period 2004-2020. Design/methodology/approach – Banking concentration (BC) is measured by the assets held by the three largest commercial banks as a percentage of total commercial bank assets in a country. We use several indices to measure political empowerment, namely: the political empowerment index, composed of three indices (i.e., the women's civil liberties index, the women's participation in civil society index and the women's political participation index). The empirical evidence is based on the Ordinary Least Squares (OLS) and Fixed Effects (FE) techniques. Findings – The following findings are established. Banking concentration reduces women's political empowerment. Furthermore, information sharing offices (i.e. public credit registries and private credit bureaus) mitigate the negative effect of bank concentration on women’s political empowerment. Information sharing thresholds that are needed to completely dampen the negative effect of bank concentration on women’s political empowerment are provided. Policy implications are discussed, notably: (i) that governments in developing countries increase competition by easing barriers to entry for potential banks, to facilitate the transition from confiscatory concentration to distributive concentration favorable to all stakeholders; and (ii) information sharing offices should be consolidated beyond the established thresholds in order to completely crowd-out the unfavorable effect of bank concentration of women’s political empowerment. Originality/value – The paper provides new empirical evidence that helps to advance the debate on the effects of banking concentration and information sharing in the banking sector on women's political empowerment in developing countries. |
| Keywords: | Banking concentration; women political empowerment; OLS; Fixed Effects |
| Date: | 2024–01 |
| URL: | https://d.repec.org/n?u=RePEc:agd:wpaper:24/028 |
| By: | Carlos A. Arango-Arango; Yanneth Rocío Betancourt-García |
| Abstract: | In this paper, we study the coexistence of cash and electronic payments introducing some distortions in the payments markets to understand the widespread use of cash, specially in emerging countries. Following Lagos and Wright (2005) we model explicitly some frictions in the exchange process considering money as essential. We introduce in this theoretical framework, theft and informality (measured by tax evasion), as factors affecting cash usage and, therefore competition with an electronic payment method. In this paper, segmentation in the payments market is considered by introducing heterogeneity in the seller's side, assuming different levels of productivity to explain the preference for cash or for electronic payments. Considering the above, the provision of the electronic payment platform is modeled under three different market structures to identify the effects of the distortions comparing the results with the social planner solution. In the first case, the electronic payment platform is provided by a public firm as a free service; in the second case a private monopoly provides the platform at a positive cost, and in the third case the conditions for the existence of a mixed duopoly are derived. The existence of a public provider in the electronic payments market could lead private networks to provide these services at a lower cost than in the monopoly case, increasing the coverage of digital payments and reducing cash usage, which implies gains in social welfare. This paper gives a theoretical basis and key insights to the discussions regarding public provision of new payment services when the market is already served by private suppliers. **** RESUMEN: Este artículo analiza teóricamente la coexistencia de dos medios de pago, como el efectivo y los pagos electrónicos, considerando algunas distorsiones en el mercado de pagos. Siguiendo a Lagos y Wright (2005), se modelan explícitamente algunas fricciones existentes en el proceso de intercambio. En este marco teórico, que considera al dinero como esencial, se introduce el robo y la informalidad (medida por la evasión fiscal), como factores que afectan el uso de efectivo y, por tanto, la competencia con otro medio de pago. Adicionalmente, se considera la segmentación en el mercado de pagos mediante la heterogeneidad en el lado de los vendedores, suponiendo diferentes niveles de productividad, para explicar la preferencia por el efectivo o por los pagos electrónicos. Los efectos de estas distorsiones se modelan bajo tres estructuras de mercado diferentes en la provisión de los pagos electrónicos, las cuales se comparan con los resultados del planificador social. En el primer caso, la plataforma de pago electrónico es proporcionada por una empresa pública como un servicio gratuito; en el segundo caso, un monopolio privado proporciona la plataforma a un costo positivo, y en el tercer caso se analiza la existencia de un duopolio mixto en la provisión de estos servicios de pago. Se demuestra teóricamente que la existencia de un proveedor público en el mercado de pagos podría llevar a las redes privadas a proporcionar estos servicios a un costo menor que en el caso de un monopolio privado, aumentando la cobertura de los pagos digitales y reduciendo el uso de efectivo, lo que implica ganancias en el bienestar social. Este artículo proporciona una base teórica que puede ayudar a los debates actuales sobre la provisión pública de nuevos servicios de pago cuando el mercado ya cuenta con proveedores privados. |
| Keywords: | Cash, payment methods, payments services, electronic payments, instant payments, Efectivo, medios de pago, instrumentos de pago, servicios de pago, pagos electrónicos, pagos instantáneos, duopolio mixto. |
| JEL: | E40 E41 E42 E44 |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:bdr:borrec:1280 |
| By: | Prabaharan M (Madurai Kamaraj University); M Selvalakshmi (TSM - Thiagarajar School of Management); R Christina Jeya Nithilia (St. Xavier's College, Palayamkottai) |
| Abstract: | Objectives: The present research aims to study how digital touchpoints impact the exploration of purchase opportunities for customers in car purchases. Another purpose is to explore how customers use digital touchpoints to gather information and how it influences their purchase decisions. It also aims to explore the potential mediation effect of "exciting pursuit" on the relationship between using digital touchpoints and exploring purchase opportunities. Methods: The study employed a descriptive approach. A structured online questionnaire was framed that encompassed digital touchpoint usage, information search experience, and purchase opportunities. Stratified and purposive sampling techniques were used to collect data from 605 car owners and prospective buyers across five high-selling states in India. Data analysis via SPSS & SMART-PLS confirmed construct validity, revealed the direct and indirect effects of the model. Findings: Websites and non-official websites emerged as preferred digital touchpoints for information search. Most customers were male (61.4%), aged between 30 and 35 (35.4%). Customers' age is associated with the official websites (p=0.001, χ =14.21) and YouTube (p=0.007, χ =18.698) usage. Enabling digital content search (EDCS; β=0.311, t =7.331), appropriateness of digital information (AOI; β=0.594, t =11.556) positively impact Exciting Pursuit (EP; β=0.629, t =27.610) and the customer's interest in exploring various purchase opportunities (EPO). EP (t=28.525) significantly influences EPO and act as a mediator between EDCS/AOI (t=11.834/t = 7.399) and EPO. Novelty: This research focuses on the role of digital touchpoints in the car purchase journey in India. It focuses on the customer's emotional response to the digital touchpoints, which are used to gather information for their purchase, and it is creating a mediating effect of exciting pursuit in the relationship between digital touchpoints and purchase opportunities. By leveraging the S-O-R model, this study contributes to the current discussion regarding the changing role of digital touchpoints in the automobile industry. Keywords: Digital Touchpoints, Digital Marketing, StimuliOrganismResponse Model, Car Buyer Behaviour, Automobile Industry, Structural Equation Modelling |
| Keywords: | Digital Touchpoints Digital Marketing StimuliOrganismResponse Model Car Buyer Behaviour Automobile Industry Structural Equation Modelling, Digital Touchpoints, Digital Marketing, StimuliOrganismResponse Model, Car Buyer Behaviour, Automobile Industry, Structural Equation Modelling |
| Date: | 2024–07–31 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-04668727 |
| By: | Kiho Yoon |
| Abstract: | We study the equilibria of uniform price auctions where bidders have flat demands up to their respective quantity constraints. We present an iterative procedure that systematically finds a Nash equilibrium outcome under semi-complete information as well as a novel ascending auction under incomplete information that has this outcome as a dominant strategy equilibrium. Demand reduction and low price equilibrium may occur since it is sometimes advantageous for a bidder to give up some of his/her demand and get the remaining demand at a low price rather than to get his/her entire demand at a higher price. |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2409.04047 |
| By: | Marjolijn Moens; Eliana Barrenho; Valérie Paris |
| Abstract: | In recent years, the call for transparency in pharmaceutical pricing has gained momentum among policymakers and stakeholders. Following a resolution of the 72nd World Health Assembly and the establishment of the Oslo Medicines Initiative, there has been a concerted push for greater transparency in pricing practices. However, the exact scope of transparency measures remains unclear. Key questions persist regarding which prices and for which medicines should be disclosed, the conditions under which countries are willing to share this information, and the barriers hindering such efforts. To clarify these issues and advance the policy debate, the OECD examined the feasibility of sharing medicine price information across countries. A country survey was conducted to explore the willingness, expectations, and motives of governments and payers for sharing information on medicine prices. This report presents the key findings derived from the survey and concludes with an assessment of the feasibility of sharing net medicine price information among OECD countries. |
| JEL: | F6 H51 H57 I11 I18 K12 K23 K32 L1 L65 |
| Date: | 2024–09–11 |
| URL: | https://d.repec.org/n?u=RePEc:oec:elsaad:171-en |
| By: | Peter Cramton (University of Maryland & Max Planck Institute for Research on Collective Goods Bonn); Axel Ockenfels (University of Cologne & Max Planck Institute for Research on Collective Goods Bonn) |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:ajk:ajkpbs:062 |
| By: | Fabrizio Lillo; Andrea Macr\`i |
| Abstract: | The use of reinforcement learning algorithms in financial trading is becoming increasingly prevalent. However, the autonomous nature of these algorithms can lead to unexpected outcomes that deviate from traditional game-theoretical predictions and may even destabilize markets. In this study, we examine a scenario in which two autonomous agents, modeled with Double Deep Q-Learning, learn to liquidate the same asset optimally in the presence of market impact, using the Almgren-Chriss (2000) framework. Our results show that the strategies learned by the agents deviate significantly from the Nash equilibrium of the corresponding market impact game. Notably, the learned strategies exhibit tacit collusion, closely aligning with the Pareto-optimal solution. We further explore how different levels of market volatility influence the agents' performance and the equilibria they discover, including scenarios where volatility differs between the training and testing phases. |
| Date: | 2024–08 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2408.11773 |