|
on Industrial Competition |
| By: | Jeremy Pearce; Liangjie Wu |
| Abstract: | We study the interaction of customer capital and productivity through brand reallocation across firms. We develop a firm dynamics model with brands as transferable customer capital, heterogeneous firm productivity, and variable markups. We study the matching process between transferable brand capital and core productivity, which can be inefficient with significant welfare implications. We link USPTO trademark data with Nielsen sales data to study the prevalence of brand reallocation and the response of sales and prices to reallocation. Quantitatively, brand reallocation reduces welfare. Optimal policies deviate substantially from the literature due to the complementarity between brand capital and productivity. |
| Keywords: | firm dynamics; productivity; market concentration; product innovation; reallocation; Mergers & acquisitions; brands; Trademarks; intangible assets |
| JEL: | O31 O32 O34 O41 D22 D43 L11 L13 L22 |
| Date: | 2024–08–01 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fednsr:98772 |
| By: | Zhang Xu; Wei Zhao |
| Abstract: | Two issues of algorithmic collusion are addressed in this paper. First, we show that in a general class of symmetric games, including Prisoner's Dilemma, Bertrand competition, and any (nonlinear) mixture of first and second price auction, only (strict) Nash Equilibrium (NE) is stochastically stable. Therefore, the tacit collusion is driven by failure to learn NE due to insufficient learning, instead of learning some strategies to sustain collusive outcomes. Second, we study how algorithms adapt to collusion in real simulations with insufficient learning. Extensive explorations in early stages and discount factors inflates the Q-value, which interrupts the sequential and alternative price undercut and leads to bilateral rebound. The process is iterated, making the price curves like Edgeworth cycles. When both exploration rate and Q-value decrease, algorithms may bilaterally rebound to relatively high common price level by coincidence, and then get stuck. Finally, we accommodate our reasoning to simulation outcomes in the literature, including optimistic initialization, market design and algorithm design. |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2409.01147 |
| By: | James Albrecht (Georgetown University); Xiaoming Cai (Peking University HSBC Business School); Pieter Gautier (Vrije Universiteit Amsterdam); Susan Vroman (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: | 2024–09–13 |
| URL: | https://d.repec.org/n?u=RePEc:tin:wpaper:20240054 |
| By: | Eric Bartelsman (Vrije Universiteit Amsterdam); Sabien Dobbelaere (Vrije Universiteit Amsterdam); Alessandro Zona Mattioli (Vrije Universiteit Amsterdam) |
| Abstract: | This paper provides evidence from a natural experiment on the importance of tacit knowledge that workers have about firms’ intangible assets for competition in product and labor markets. First, evidence is presented on product and labor market imperfections across firms in manufacturing and services industries in the Netherlands. Price-cost markups and wage markups are both shown to be positively related to intangible intensity at the firm level. A model is developed of the processes of intangible investment and wage bargaining of heterogeneous firms, providing a mechanism that relates workers’ tacit knowledge to product and labor market imperfections at the firm level. The model also incorporates a role for non-compete agreements (NCAs) limiting worker mobility. Our main empirical contribution comes from using linked employer-employee panel data with information on NCAs and changes in enforceability of these agreements. Using an event-study framework, we demonstrate that the removal of NCAs leads to higher wages and worker mobility and that the effect is stronger for workers employed in intangible-intensive firms. We find that NCAs affect workers across the skill distribution and across industries. The causal findings from changes in the legality of NCAs correspond with the mechanism described in the model. |
| Keywords: | Price-cost markups, rent sharing, technology, tacit knowledge, non-compete agreements |
| JEL: | J41 L10 M52 |
| Date: | 2024–09–13 |
| URL: | https://d.repec.org/n?u=RePEc:tin:wpaper:20240055 |
| By: | Cave, Martin |
| Abstract: | Forty years have passed since an inflation-adjusted price cap, widely called RPI-X, was proposed as a way of controlling prices in the UK’s newly privatised monopoly telecommunications company by a form of incentive regulation. The paper traces developments since then in several jurisdictions, within the context of a wider field of changing regulatory governance involving legislatures and governments as well as regulatory agencies. The focus is on, first, the experience of increasing complexity of the incentive schemes adopted, and second on the growing political salience of regulatory decisions which adds goals such as net zero, with more direct quantitative targets, to maximising consumer welfare. The implications of these changes for regulatory interventions are considered. |
| Keywords: | incentive regulation; network price caps; competition in networks; Springer deal |
| JEL: | L51 |
| Date: | 2024–08–19 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:124579 |
| By: | Hirose, Kosuke; Matsumura, Toshihiro |
| Abstract: | This study theoretically investigates energy-saving investment incentives in duopolies. First, we investigate a binary choice model in which each firm chooses whether to make an energy-saving investment and then they face Cournot competition. We focus on the incentive to become the leading firm by the investment, when the rival does not engage in this project. We find the private incentive to be insufficient for welfare (thereby requiring promotion through policies), if Pigouvian tax is imposed. However, this incentive can be excessive when the emission tax rate is lower than the Pigouvian level. Next, we investigate a model in which firms can choose energy-saving investment levels continuously. We find that the equilibrium investment can be (is not) excessive for welfare when the emission tax rate is lower than (equal to) the Pigouvian. These results suggest a risk of policy formation combining a low emission tax and subsidies for promoting energy-saving investments. |
| Keywords: | emission tax; investment subsidy; policy combination; energy-conservation; production substitution |
| JEL: | L13 Q38 Q58 |
| Date: | 2024–08–27 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:121836 |
| By: | Sara Calligaris; Chiara Criscuolo; Josh De Lyon; Andrea Greppi; Oliviero Pallanch; Miguel Chavez |
| Abstract: | Concentration – the share of an industry’s output accounted for by its largest firms and a frequently used proxy of competition – has increased in European countries. This paper provides evidence about this development by introducing several methodological refinements in the cross-country measurement of concentration: it defines industries at a disaggregated level, mostly 3-digit; it takes into account the geographic level at which competition takes place - domestic, European or global; and it accounts for linkages between firms within the same domestic and multinational business group in the relevant geographic region of competition. It then applies these improvements to representative data for fifteen European countries, showing that average concentration increased by about 5 percentage points over the period 2000-2019, from 26% to more than 31%. Third, the paper investigates how each of the methodological improvements affects the levels and trends of concentration. |
| Keywords: | Competition, Concentration, Market power |
| JEL: | F14 F60 L11 L22 D22 |
| Date: | 2024–09–13 |
| URL: | https://d.repec.org/n?u=RePEc:oec:stiaaa:2024/06-en |
| By: | Sara Calligaris; Chiara Criscuolo; Josh De Lyon; Andrea Greppi; Oliviero Pallanch |
| Abstract: | This paper develops a taxonomy of 151 industries, mainly defined at the 3-digit level, indicating at which geographical level competition takes place. It classifies 40 industries as competing at the domestic level, 85 at the European level, and 26 at the global level. First, this paper creates a novel dataset that combines production and international trade data for both goods and services industries, defined at a detailed level of industry aggregation for 15 European countries (based on data availability). Then, by comparing domestic sales with international trade flows, and their source/destination, it identifies the geographic level of competition of each industry. The proposed classification can be used in numerous applications, from the design of trade policies to the assessment of competition by antitrust authorities. The paper shows that the taxonomy is broadly consistent with external data sources that provide alternative ways of inferring the degree of internationalisation of each industry. |
| Keywords: | Competition, International Trade, Market Boundaries, Trade Costs |
| JEL: | F14 F60 L11 |
| Date: | 2024–09–13 |
| URL: | https://d.repec.org/n?u=RePEc:oec:stiaaa:2024/05-en |
| By: | Meena Jagadeesan; Michael I. Jordan; Jacob Steinhardt |
| Abstract: | Emerging marketplaces for large language models and other large-scale machine learning (ML) models appear to exhibit market concentration, which has raised concerns about whether there are insurmountable barriers to entry in such markets. In this work, we study this issue from both an economic and an algorithmic point of view, focusing on a phenomenon that reduces barriers to entry. Specifically, an incumbent company risks reputational damage unless its model is sufficiently aligned with safety objectives, whereas a new company can more easily avoid reputational damage. To study this issue formally, we define a multi-objective high-dimensional regression framework that captures reputational damage, and we characterize the number of data points that a new company needs to enter the market. Our results demonstrate how multi-objective considerations can fundamentally reduce barriers to entry -- the required number of data points can be significantly smaller than the incumbent company's dataset size. En route to proving these results, we develop scaling laws for high-dimensional linear regression in multi-objective environments, showing that the scaling rate becomes slower when the dataset size is large, which could be of independent interest. |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2409.03734 |
| By: | Bukvić, Rajko |
| Abstract: | Serbian. Чланак се бави проблемом одређивања степена монополисаности у сектору осигурања Србије (без Косова и Метохије) у раздобљу 2011–2022. Основ истраживања били су подаци о укупној премији осигурања друштава за осигурање, на којима је извршен обрачун коефицијента тржишне концентрације и Хиршман-Херфиндаловог коефицијента, као најпопуларнијих и најчешће коришћених мера концентрације. Њихове вредности показују (релативно) висок ниво концентрације, али без јасних тенденција у његовом кретању, и с минималним падом у целини. На основу еквивалентног броја, као реципрочне (инверзне) вредности Хиршман-Херфиндаловог коефицијента, предложен је индекс, или рацио граница монополисаности тржишта, који показује степен у коме је дато тржиште монополисано. Његове вредности у посматраном периоду крећу се од око 75 до 60, с јасном тенденцијом опадања, знатно интензивнијим од минималног пада вредности коефицијената концентрације. То показује да се на тржишту осигурања у Србији у датом периоду смањује утицај монополских (и олигополских) структура и да оно постаје све конкурентније, упркос смањивању броја друштава за осигурање у првој половини посматраног периода и њиховом неизмењеном броју од 2018. English. This article deals with the matter of determining the level of monopolization in the insurance sector of Central Serbia during the period 2011–2022. The basis of the research were data on the total insurance premium of insurance companies, for which we calculated the market concentration coefficient and the Hirschman-Herfindahl Index (HHI), as the most popular and most commonly used measures of concentration. Their values show a (relatively) high level of concentration, but without clear tendencies in its movement, and with minimal decline overall. Based on the equivalent number, as the reciprocal (inverse) value of the HHI coefficient, an index called the monopoly market ratio or boundary index of market monopolization was proposed, showing the degree to which the market is monopolized. The values of this index during the observed period range from around 75 to 60, with a clear downward tendency, significantly more intense than the minimal decline in the concentration coefficient values. This indicates that the insurance market in Serbia is reducing the influence of monopolistic (and oligopolistic) structures during the given period and is becoming increasingly competitive, despite the decrease in the number of insurance companies in the first half of the observed period and their unaltered number since 2018. |
| Keywords: | монополисаност, концентрација, конкуренција, осигурање, Србија, показатељи, тржишни удели, број компанија, еквивалентни број, monopolization, concentration, competition, insurance, Serbia, indicators, market shares, number of companies, equivalent number |
| JEL: | C38 D43 G22 L11 L84 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:121964 |
| By: | Bukvić, Rajko |
| Abstract: | Russian. В статье рассматривается проблема определения степени монополизации страхового сектора Сербии (без Косово и Метохии) в период 2010-2023 гг. Исследование проведено на основе данных о совокупной страховой премии страховых компаний, согласно которым были рассчитаны обичный коэффициент концентрации рынка и коэффициент Хиршмана-Херфиндаля, как наиболее популярные и наиболее часто используемые меры концентрации. Их значения показывают относительно высокий уровень концентрации, но без четких тенденций в ее движении и с минимальным снижением в целом. На основе эквивалентного числа как обратного значения коэффициента Хиршмана-Херфиндаля был предложен индекс, или коэффициент предела монополизации рынка, показывающий степень монополизации данного рынка. Его значения в наблюдаемый период колеблются примерно от 75 до 60 %, с чёткой тенденцией к снижению, значительно более интенсивному, чем минимальное снижение значений коэффициентов концентрации. Это показывает, что влияние монополистических (и олигополистических) структур на страховом рынке Сербии в данный период снижается и что он становится все более конкурентным, несмотря на уменьшение числа страховых компаний в первой половине наблюдаемого периода и их неизменном количестве с 2018 года. English. This article deals with the matter of determining the level of monopolization in the insurance sector of Serbia (excluding Kosovo and Metohia) during the period 2010–2023. The basis of the research were data on the total insurance premium of insurance companies, for which we calculated the market concentration coefficient and the Hirschman-Herfindahl Index (HHI), as the most popular and most commonly used measures of concentration. Their values show a (relatively) high level of concentration, but without clear tendencies in its movement, and with minimal decline overall. Based on the equivalent number, as the reciprocal (inverse) value of the HHI coefficient, an index called the monopoly market ratio or boundary index of market monopolization was proposed, showing the degree to which the market is monopolized. The values of this index during the observed period range from around 75 to 60, with a clear downward tendency, significantly more intense than the minimal decline in the concentration coefficient values. This indicates that the insurance market in Serbia is reducing the influence of monopolistic (and oligopolistic) structures during the given period and is becoming increasingly competitive, despite the decrease in the number of insurance companies in the first half of the observed period and their unaltered number since 2018. |
| Keywords: | монополизация, концентрация, конкуренция, страховое дело, Сербия, показатели, рыночные доли, число компаний, эквивалентное число, monopolization, concentration, competition, insurance, Serbia, indicators, market shares, number of companies, equivalent number |
| JEL: | C38 D43 G22 L11 L84 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:121940 |