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on Industrial Competition |
By: | Gordon Jochem Klein; Ralph Bernd Siebert; Ralph Siebert |
Abstract: | Our study provides empirical insights into the extent to which differential market demographics and differential competition environments affect product prices. Using big data, we find that price variations are caused mainly by differential competitive environments. More specifically, we find that Brand Competition Within Stores exerts the largest downward pressure on prices. A 10 percent increase in the number of brands reduces prices by about 10 percent. Product Competition Within Stores exerts the second-largest price effect, followed by Store Competition Within Local Markets. Moreover, retailers operating multiple stores in a local market coordinate prices to attenuate competitive downward pressure on prices. |
Keywords: | anti-inflammatory drugs, competition, market determinants, price effects, pain killers |
JEL: | D40 D90 L10 L20 M20 |
Date: | 2024 |
URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11344 |
By: | Oz Shy |
Abstract: | Sales tax is generally not included in the advertised price quoted to consumers in the United States. In contrast, value added taxes (VAT) are embedded into the price in most other countries. This article investigates how the two different pricing structures and consumers' decision-making process affect the intensity of price competition. The two pricing structures yield identical market outcomes with fast-computing consumers who are willing and able to recompute the exact sales tax each time there is a price change. With slow-computing consumers, prices and profits are higher when sellers quote and compete in prices without sales tax. In this case, a model extension with two-stage decision making shows that the entire tax burden is shifted to the consumers when they completely ignore sales tax during their initial search. |
Keywords: | price competition; price comparisons; sales tax; value added tax; fast and slow-computing consumers; mental accounting; inattention; consumer decision making |
JEL: | D43 H29 L13 M3 |
Date: | 2024–06–18 |
URL: | https://d.repec.org/n?u=RePEc:fip:fedawp:99031 |
By: | Hennessy, David; Lapan, Harvey |
Abstract: | Market concentration ratios are popular statistics for characterizing the extent of market dominance in an imperfectly competitive market, but these ratios may not agree when comparing two markets. Neither do they necessarily agree with the Herfindahl-Hirschman or entropy indices. This letter compares two Cournot oligopoly markets in which firms have constant unit costs. It is shown that the majorization pre-ordering on normalized marketing margin vectors is both necessary and sufficient for all aforementioned indices to agree on which is the more concentrated market. |
Date: | 2024–10–29 |
URL: | https://d.repec.org/n?u=RePEc:isu:genstf:202410291651270000 |
By: | Luca Macedoni; John Morrow; Vladimir Tyazhelnikov |
Abstract: | Which products are potentially produced together? When demand for a product increases, which firms will supply it? Using multi-product production patterns within and across firms, we recover a continuous cost-based distance between firms and unproduced products. Higher product distance implies decreasing adoption frequency. When export demand induces domestic product adoption, closer firms provide this supply. Potential costs imply measures of Revenue and Competition Potential. These predict firm sales and scope growth. If all firms produced all products linked by co-production, consumer welfare could increase by 16-30% under constant markups, rising to 46-86% under variable markups. |
Keywords: | multi-product firms, firm capabilities, product classification, product space, growth paths |
JEL: | F10 D20 L10 L23 L25 |
Date: | 2024 |
URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11398 |
By: | Timothy J. Bartik (W.E. Upjohn Institute for Employment Research) |
Abstract: | This paper provides estimates that lead to better U.S. labor market definitions. Current U.S. labor market definitions—for example, metropolitan areas and commuting zones—are unsatisfactory because they are ad hoc and usually do not correspond to commonly used local planning areas. This paper proposes basing U.S. labor market definitions on how a job shock to a county affects nearby counties’ employment rates. New estimates of county spillovers are presented. Using these estimated spillovers, new multicounty labor market definitions are based on maximizing a weighted sum of total spillovers captured, versus taking the average size of within-market effects. These new “spillover-defined local labor markets” (SLMs) correspond more closely to commonly used local planning areas, and they better capture spillovers and commuting flows without becoming excessively large. |
Keywords: | Local labor markets, commuting zones, metropolitan areas |
JEL: | R10 R12 R23 |
Date: | 2024–10 |
URL: | https://d.repec.org/n?u=RePEc:upj:weupjo:24-407 |
By: | Jay Pil Choi; Heiko Gerlach |
Abstract: | This paper analyzes private and social incentives to levy an ad valorem licensing fee in a supply chain governed by the legal principle of patent exhaustion. With perfect competition at the upstream and downstream stage, the choice of the licensing segment is irrelevant for the patent holder and consumers. When exactly one segment of the value chain is monopolistic while the other one is competitive, the patent holder prefers licensing at the monopolistic stage leading to an alignment of private and social incentives. With imperfect competition at both stages, excessive downstream licensing can arise. We demonstrate that charging licensing fees at both stages of the supply chain (“double-dipping”) can be profitable for the patent holder and beneficial for consumers. We discuss the implications of this result for the application of the patent exhaustion principle. |
Keywords: | patent licensing, supply chain, first sale doctrine, patent exhaustion, double-dipping |
JEL: | D43 L41 L44 |
Date: | 2024 |
URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11313 |
By: | James Albrecht; Xiaoming Cai; Pieter Gautier; Susan Vroman; Pieter A. Gautier |
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 |
URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11309 |
By: | Ralph Siebert; Xiaoyan Zhou |
Abstract: | This study provides a test for measurement of spatial competition in residential real estate markets. Several alternative spatial competition measures are tested. We employ a Bertrand oligopoly model with differentiated products and adopt a Spatial Autoregressive model using a two stage least squares estimator. Our results show that commonly used count-based measures using the number of competitors in specific geographic radii are outperformed by price-based measures using prices of nearest competing neighbors. The main reason is that the latter measure accounts for heterogeneous neighborhood density of competitors. The measure captures the decaying pattern of spatial price competition over distance. The measure also stands out in capturing het-erogeneous spatial price competition effects. We find that spatial price competition is more intense among high-value homes within the five nearest competing houses. |
Keywords: | price effects, real estate market, spatial competition, spatial econometrics, spatial markets |
JEL: | D40 R10 R30 |
Date: | 2024 |
URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11380 |
By: | Ana Maria de Paula Morais; Silvinha Vasconcelos; Marcelo Resende |
Abstract: | The Brazilian government started to implement, mainly from the 2000s onwards, mechanisms to stimulate the supply and demand for higher education in Brazil. Especially the offer of private higher education has shown strong growth in recent years as a result of systematic public policies, which has increased competition in this market. In this expansion scenario, it remains to be seen how the competitive market environment is configured in terms of market power. Therefore, this article intends to estimate the market power of Brazilian higher education institutions - HEIs from an alternative use of the stochastic frontier model, as proposed by Kumbhakar et. al (2012), for the period 2010 to 2019. This method is adopted because it solves the impasse of the lack of information on marginal costs, which prevents the application of other models for estimating market power. The results pointed to the presence of positive and significant market power of Brazilian HEIs, which may imply anti-competitive behavior. |
Keywords: | higher education market, market power, stochastic frontier |
JEL: | I22 L10 |
Date: | 2024 |
URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11370 |
By: | Payal Malik (Indian Council for Research on International Economic Relations (ICRIER)); Bhargavee Das; Harishankar Thayyil Jagadeesh |
Abstract: | Cloud computing is the engine powering the Artificial Intelligence (AI) revolution and several other emerging technologies. While current demand and expected market growth have enabled the entry of new players, the market remains highly concentrated, with a few large cloud service providers who enjoy first-mover advantage and leverage certain common characteristics of digital markets such as economies of scale, network effects and conglomerate effects. This report examines these economic characteristics in the context of cloud computing and provides a comprehensive analysis of the competitive landscape of the market in India and worldwide. A key focus of the report is on the competition concerns that have been highlighted by competition authorities across jurisdictions, such as egress fees, committed spending discounts, tying and bundling, limited interoperability, and application portability. This report undertakes a discussion of these technical and financial market barriers within the Indian context through secondary research and stakeholder consultations. It highlights the ways in which the Indian market follows global trends. Finally, the report explores possible options for enhancing competition. |
Keywords: | Cloud Computing, Competition, Digital Markets, Digital Public Infrastructure, icrier |
Date: | 2024–08 |
URL: | https://d.repec.org/n?u=RePEc:bdc:report:24-r-04 |
By: | Paul Heidhues; Mats Köster; Botond Kőszegi; Botond Köszegi |
Abstract: | We develop a theory of digital ecosystems built on the premise that a multi-market firm can steer users it has in one market toward its products in other markets. Due to this “cross-market leverage, ” a leader in an “access-point” market (where users begin their online journeys) derives a high value from offering services in connected markets (where users continue their journeys), and can thus make profitable takeovers. Indeed, because the firm has the outside option of acquiring, and steering users toward, its target’s competitor, it can take over the target at a discount. In contrast, other firms have no or smaller incentives for takeovers, explaining why ecosystems grow out of market leaders at access points. Conversely, cross-market leverage also implies that once an ecosystem has grown, it has an increased value of controlling access points, so it may go to great lengths to dominate these markets. Our theory suggests that ecosystems have mixed implications for consumer welfare. Under plausible assumptions, a to-be ecosystem takes over market leaders, and this consolidation of good services across markets benefits consumers in the short run. But an ecosystem’s takeovers and dominance of access points lower incentives for entry and innovation, and lower the efficiency of access-point markets with superior alternatives. Hence, the long-run welfare implications of ecosystems are often negative. |
Keywords: | digital ecosystems, takeover, contestability, entry, envelopment, default effects, steering |
Date: | 2024 |
URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11332 |
By: | Frédéric Marty (Université Côte d'Azur, France; GREDEG CNRS) |
Abstract: | L'articulation entre interventions ex ante et ex post dans le cadre de l'encadrement européen des marchés numériques peut se concevoir de trois façons. La première est relative à la temporalité de l'exercice des contrôles concurrentiels, comme le montre le cas du contrôle des concentrations entre mécanisme de notification ex ante et possibilité de contrôle ex post. La deuxième porte sur les modalités d'application des règles de concurrence. Doivent-elles reposer sur des règles définies ex ante ou résulter d'une balance des effets ex post ? La troisième que nous considérons dans ce texte est celui de l'articulation entre interventions réglementaires et activation des règles de concurrence. Nous considérons cette question sous l'angle de l'économie du droit dans un contexte spécifique, celui de l'articulation entre les différents règlements européens relatifs au secteur numérique et du droit antitrust de l'U.E. |
Keywords: | économie numérique, régulation, règles de concurrence |
JEL: | K21 K23 L12 L13 L43 |
Date: | 2024–11 |
URL: | https://d.repec.org/n?u=RePEc:gre:wpaper:2024-29 |
By: | Xiaodan Yu; Giovanni Dosi; Maria Enrica Virgillito; Can Huang; Lanhua Li |
Abstract: | By means of a fine-grained dataset linking exported product-level and firm-level data, this pa- per reconstructs the Chinese accumulation regimes at the microlevel in the period 2000-2013. After documenting a few macro stylized facts on the Chinese export-led accumulation regime in terms of the trend of Chinese exports in international markets, and the appreciation in the terms of trade in manufacturing products, the paper gives evidence of a process of restructuring of exporting firms towards more complex products and sectors, against any hypothesis of a purported price dumping in international markets. The positive relationship between technological content of the exported product and pricing markup strategies confirms the Sylos-Labini hypothesis linking prices and technological advantage, yielding the formation of international oligopolies able to exercise forms of market power and setting prices well-above any competitive level. As such, the trend in export prices has signalled the progressive capacity of the Chinese firms to orient the patterns of international market penetration, particularly in most complex productions. |
Keywords: | Chinese exports, product/firm level export prices, pass-through, international oligopolies, profitabilities |
Date: | 2024–11–09 |
URL: | https://d.repec.org/n?u=RePEc:ssa:lemwps:2024/29 |
By: | Gokkaya, Sinan (Ohio U); Liu, Xi (Miami U of Ohio); Stulz, Rene M. (Ohio State U and ECGI) |
Abstract: | For many firms, the acquisition process begins with the development of an acquisition plan that is communicated to investors. We construct a comprehensive sample of acquisition plans to provide novel perspectives on the acquisition process and find that acquisition plans are informative to investors and incrementally predict subsequent acquisition activity. These results are more pronounced for firms announcing their commitment to acquisitions from an internal pipeline. Acquisition plans improve acquisition performance due to learning from market feedback and alleviate acquisition-related market uncertainty. Communication of acquisition plans does not increase takeover premiums but is less common in more competitive industries. |
JEL: | G14 G24 G30 G34 |
Date: | 2024–02 |
URL: | https://d.repec.org/n?u=RePEc:ecl:ohidic:2024-04 |
By: | Anna D'Annunzio; Antonio Russo; Shiva Shekhar |
Abstract: | The adtech industry plays a key role in facilitating connections between digital publishers and advertisers. This paper studies the impact of vertical integration between an intermediary and a major publisher on the online advertising ecosystem and the provision of content. We find that vertical integration enables the intermediary to leverage exclusive access to data, leading to dominance in the intermediation market. As a result, the integrated intermediary is able to collect a larger ad-tech tax from independent publishers by shading its bid for impressions. This practice reduces investments in content by independent publishers, while the integrated publisher increases its investment. Therefore, the net effect of vertical integration on consumer welfare and total welfare can be positive or negative. We discuss potential policy interventions that restore the outcome as under vertical separation. |
Keywords: | online advertising, intermediaries, vertical integration, adtech tax, content quality |
JEL: | D43 D62 L82 M37 |
Date: | 2024 |
URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11400 |
By: | OECD |
Abstract: | The increasing need in certain jurisdictions to engage in a “more economic” or an “effects-based” approach to establish competition law violations have raised the question of whether the standard of proof and the related evidentiary standard are set to a level which make it excessively difficult for competition authorities to prove their cases. But what has led to this widespread perception? Is there something that could or should be done? While this paper does not seek to provide definitive answers or recommend specific actions, it does provide an overview of the current policy landscape and an analysis of the evidentiary elements for decision makers . This paper also presents a practical perspective of the standard and burden of proof that could be useful for competition authorities in building their cases. |
Date: | 2024–11–12 |
URL: | https://d.repec.org/n?u=RePEc:oec:dafaac:318-en |
By: | Dehez, Pierre (Université catholique de Louvain, LIDAM/CORE, Belgium); Ferey, Samuel (University of Lorraine) |
Abstract: | Leniency programs in antitrust investigations exist in Europe since the late nineties. They cover secret agreements and concerted practices between companies, and provide total or partial immunity to companies reporting evidence. This raises the question of assessing correctly the contribution of each company that take part in a leniency program. This question is formalized within a cooperative game with transferable utility. The resulting game being convex, its core is nonempty and contains the Shapley value in its center. It defines a reference allocation that treats the participants symmetrically. In practice, companies report sequentially leading to allocations that are vertices of the core. |
Keywords: | Competition law ; leniency programs ; core ; Shapley value |
JEL: | L40 K21 C71 |
Date: | 2024–05–13 |
URL: | https://d.repec.org/n?u=RePEc:cor:louvco:2024008 |
By: | Zhengyang Liu; Haolin Lu; Liang Shan; Zihe Wang |
Abstract: | In this paper, we consider the dynamic oscillation in the Cournot oligopoly model, which involves multiple firms producing homogeneous products. To explore the oscillation under the updates of best response strategies, we focus on the linear price functions. In this setting, we establish the existence of oscillations. In particular, we show that for the scenario of different costs among firms, the best response converges to either a unique equilibrium or a two-period oscillation. We further characterize the oscillations and propose linear-time algorithms for finding all types of two-period oscillations. To the best of our knowledge, our work is the first step toward fully analyzing the periodic oscillation in the Cournot oligopoly model. |
Date: | 2024–10 |
URL: | https://d.repec.org/n?u=RePEc:arx:papers:2410.09435 |
By: | G. Spano |
Abstract: | This study explores the effects of economic uncertainty on general equilibrium when firms hold market power due to common ownership. By modifying the model of Azar and Vives (2021) and introducing uncertainty as shocks to consumer preferences, we examine how this influences the decisions of both workers and firms. The results clearly show that uncertainty has real effects on the economy, both in a single-sector model and in the multi-sector model. In the single-sector model, uncertainty leads to variations in labor supply based on consumers' expectations regarding the future value of consumption. If consumers assign a higher expected value to future consumption, they increase their labor supply to finance higher levels of consumption. Conversely, a lower expected value of consumption reduces workers' willingness to work, causing a contraction in labor supply and a decrease in total production. In the multi-sector model, uncertainty is more pervasive. Despite the expected value of each shock remaining unchanged, the inability of economic agents to fully diversify risk across different sectors amplifies the effects of uncertainty, leading to a negative impact on overall economic outcomes. In terms of welfare, the introduction of uncertainty results in a decrease in the overall well-being of both workers and firm owners. Although market power can reduce losses due to uncertainty, it simultaneously leads to a lower level of economic welfare. |
Keywords: | Common Ownership;uncertainty;general equilibrium;Market power |
Date: | 2024 |
URL: | https://d.repec.org/n?u=RePEc:cns:cnscwp:202421 |
By: | Gregory J. Martin; Nicola Mastrorocco; Joshua McCrain; Arianna Ornaghi |
Abstract: | Recent decades have seen major changes to the local media environment in the United States, with the absorption of many formerly independent local TV stations into conglomerates. Using a comprehensive dataset of acquisitions, we examine the effects of ownership by the three largest television conglomerates on local news advertising, content, and viewership. Conglomerate owners consistently increase advertising duration during local newscasts. We find large effects on stations’ coverage of local events and local politics, but the direction of these effects varies across owners. Despite these changes, viewer responses are minimal. We conclude by investigating downstream consequences on viewers’ political knowledge. |
Keywords: | local news, consolidation, media |
JEL: | L10 L82 D72 P00 |
Date: | 2024 |
URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11356 |
By: | Jing Cai; Wei Lin; Adam Szeidl |
Abstract: | We make randomized firm-to-firm referrals between 700 supplier and client firms in the industry producing the Chinese writing brush. Subsidized referrals lead to subsequent transactions and a partial crowding out of prior partners; information-only referrals have no effect. The referrals increase revenue, profit, and hours worked in supplier firms and growth-oriented client firms. Treated suppliers increase product quality, while treated clients expand product variety into higher-quality products, suggesting that the referrals enable complementary upgrading. Treated firms increase beliefs about the value of partners, search for partners, and the number of non-referred partners, suggesting that pessimistic beliefs is a key partnering friction. The referrals generate very large private and social returns. |
JEL: | D22 L20 O12 |
Date: | 2024–10 |
URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33082 |
By: | Alexandre Chirat; Ulysse Lojkine |
Abstract: | We investigate the concept of economic power in the three main paradigms of economic thinking in the 20th century: neoclassical, marxist and institutionalist. We propose a reconstruction, based on a new taxonomy, of the various forms of power conceptualized by each of them. In particular, we claim that the neoclassical paradigm contains a consistent although often implicit theory of power. We then show that many controversies between these paradigms were debates on power and that some shifts in mainstream economics in the 1970s and 1980s are a reaction to the criticisms leveled against the neoclassical conceptualization of power. |
Keywords: | Power – Markets – Consumer sovereignty – History of economics |
JEL: | B20 B40 L00 P00 |
Date: | 2024 |
URL: | https://d.repec.org/n?u=RePEc:drm:wpaper:2024-31 |
By: | Kolaric, Sascha; Kiesel, Florian; Schiereck, Dirk |
Date: | 2024–06–23 |
URL: | https://d.repec.org/n?u=RePEc:dar:wpaper:150229 |