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on Industrial Competition |
| By: | Demirer, Mert (MIT); Karaduman, Omer (Stanford U) |
| Abstract: | Using rich data on hourly physical productivity and thousands of ownership changes from U.S. power plants, we study the effects of acquisitions on efficiency and underlying mechanisms. We find a 2% average increase in efficiency for acquired plants, beginning five months after acquisitions. Efficiency gains rise to 5% under direct ownership changes, with no significant change when only parent ownership changes. Investigating the mechanisms, three-quarters of the efficiency gain is attributed to increased productive efficiency, while the rest comes from dynamic efficiency through changes in production allocation. Our evidence suggests that high-productivity firms buy underperforming assets from low-productivity firms and make them as productive as their existing assets through operational improvements. Finally, acquired plants improve their performance beyond efficiency by increasing output and reducing outages. |
| JEL: | G34 L22 L25 L40 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:ecl:stabus:4209 |
| By: | Jung Hur (Sogang University, Republic of Korea) |
| Abstract: | E-commerce has revolutionised the way firms and businesses operate and compete in the world economy. This paper examines the impact of e-commerce competition on new product entry in the manufacturing sector, using a unique dataset of the Republic of Korea’s manufacturing establishments. Our empirical results suggest that in the era of e-commerce competition, only manufacturers with advanced technological capabilities can survive and create new products to overcome the competition. Moreover, the manufacturers that are able to create new products may be targeting the export markets. This study contributes to the broader literature on the relationship between competition and product innovation by examining how e-commerce participation promotes the creation of new products by manufacturers seeking to survive in a more competitive market. |
| Keywords: | e-commerce, competition, manufacturers, new product entry, export |
| JEL: | F0 |
| Date: | 2024–05–07 |
| URL: | https://d.repec.org/n?u=RePEc:era:wpaper:dp-2024-03 |
| By: | Massimo Motta; Michele Polo |
| Abstract: | The paper analyzes the design of industrial policies, in the form of subsidies to innovation activity or to local production, when domestic firms are inefficient and there is a risk of supply-chain disruption. We first establish a case for research subsidies, since private investment (to improve the inferior technology) is lower than the socially optimal one. We next show the equivalence with subsidies to (inefficient) local production in case of intertemporal economies of scale. Then, within a general frame- work, we analyze profit and welfare maximizing investments and optimal subsidies in case of segmented markets and an integrated market organized as a duopoly, a monopoly or a research joint-venture. We show that research joint ventures or a public research center socially outperform the other environments since they benefit from a larger integrated market and a wider circulation of the innovation while preserving a competitive market. Finally, in large markets with significant technology gaps, it may be convenient to concentrate all the research in a single lab while maintaining a competitive market. |
| Keywords: | resilience, industrial policy |
| JEL: | L40 L52 O31 O32 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:bge:wpaper:1466 |
| By: | OECD |
| Abstract: | What are the different elements of a food supply chain and how can government policy related to competition, including competition law enforcement, play a role to limit market failures? This paper considers several aspects of food supply chains and their relationship to competition. Specifically, it discusses how market failures or competition law may apply to supplies to and purchasing from farmers, to the storage and transport of food, to the standards for delivering and packing food products; as well as the distributor-to-retailer negotiation. It also explores the grocery chain buyer power and potential consequences. |
| Date: | 2024–11–21 |
| URL: | https://d.repec.org/n?u=RePEc:oec:dafaac:319-en |
| By: | Francesco Del Prato; Marc Fleurbaey |
| Abstract: | We develop a theoretical framework analyzing responsible firms (REFs) that prioritize worker welfare alongside profits in labor markets with search frictions. At the micro level, REFs' use of market power varies with labor conditions: they refrain from using it in slack markets but may exercise it in tight markets without harming workers. Our macro analysis shows these firms offer higher wages, creating a distinct high-wage sector. When firms endogenously choose worker bargaining power, there is a trade-off between worker surplus and employment, though this improves with elastic labor supply. While REFs cannot survive with free entry, they can coexist with profit-maximizing firms under limited competition, where their presence forces ordinary firms to raise wages. |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2411.05567 |
| By: | Hatsor, Limor; Hashimzade, Nigar; Jelnov, Artyom |
| Abstract: | Recent antitrust regulations in several countries have granted exemptions for col- lusion aimed at achieving environmental goals. Firms can apply for exemptions if collusion helps to develop or to implement costly clean technology, particularly in sec- tors like renewable energy, where capital costs are high and economies of scale are significant. However, if the cost of the green transition is unknown to the competition regulator, firms might exploit the exemption by fixing prices higher than necessary. The regulator faces the decision of whether to permit collusion and whether to commission an investigation of potential price fixing, which incurs costs. We fully characterise the equilibria in this scenario that depend on the regulator’s belief about the high cost of green transition. If the belief is high enough, collusion will be allowed. We also identify conditions under which a regulator’s commitment to always investigate price fixing is preferable to making discretionary decisions. |
| Keywords: | policy; antitrust; collusion; environment |
| JEL: | F0 G38 K21 Q52 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:122611 |
| By: | Gayle, Philip; Faheem, Adeel |
| Abstract: | The literature argues that Post and Hold (PH) laws facilitate tacit collusive price-setting behavior among suppliers of alcoholic beverages. Yet there is no explicit empirical test of this claim. We specify and estimate a structural model designed to identify the extent to which PH laws induce tacit collusive price-setting behavior among beer suppliers. Our estimates reveal evidence of PH law-induced collusive behavior that causes higher prices and lower consumption. Furthermore, we find that an alcohol content tax as a replacement for PH regulation yields the highest surplus to consumers compared to a sales tax or the PH regulation. |
| Keywords: | Post and Hold Regulation; Competitive Conduct; US Beer Industry; Externality; Corrective Tax Policy |
| JEL: | H21 H23 I18 K00 L13 L40 L66 |
| Date: | 2024–10–22 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:122541 |
| By: | Andrea Galeotti; Benjamin Golub; Sanjeev Goyal; Eduard Talam\`as; Omer Tamuz |
| Abstract: | A large differentiated oligopoly yields inefficient market equilibria. An authority with imprecise information about the primitives of the market aims to design tax/subsidy interventions that increase efficiency robustly, i.e., with high probability. We identify a condition on demand that guarantees the existence of such interventions, and we show how to construct them using noisy estimates of demand complementarities and substitutabilities across products. The analysis works by deriving a novel description of the incidence of market interventions in terms of spectral statistics of a Slutsky matrix. Our notion of recoverable structure ensures that parts of the spectrum that are useful for the design of interventions are statistically recoverable from noisy demand estimates. |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2411.03026 |
| By: | Doron Sayag (Department of Economics, Bar-Ilan University, Israel); Avichai Snir (Department of Economics, Bar-Ilan University, Israel); Daniel Levy (Department of Economics, Bar-Ilan University, Israel; Department of Economics, Emory University, USA; ICEA; ISET, TSU; Rimini Centre for Economic Analysis) |
| Abstract: | We study Israel’s “price rounding regulation” of January 1, 2014, which outlawed non-0-ending prices, forcing retailers to round 9-ending prices, which in many stores comprised 60%+ of all prices. The regulation’s goals were to eliminate (1) the rounding tax—the extra amount consumers paid because of price rounding (which was necessitated by the abolition of low denomination coins), and (2) the inattention tax—the extra amount consumers paid the retailers because of their inattention to the prices’ rightmost digits. Using 4 different datasets, we assess the government’s success in achieving these goals, focusing on fast-moving consumer goods, a category of products strongly affected by the price rounding regulation. We focus on the response of the retailers to the price rounding regulation and find that although the government succeeded in eliminating the rounding tax, the bottom line is that shoppers end up paying more, not less, because of the regulation, underscoring, once again, Friedman’s (1975) warning that policies should be judged by their results, not by their intentions. |
| Keywords: | Price Rounding Regulation, Rounding Tax, Inattention Penalty, Round Prices, 9-Ending Prices, Just-Below Prices, Inflation |
| JEL: | E31 K00 K20 L11 L40 L51 M30 |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:rim:rimwps:24-17 |
| By: | Albanese, Mattia; Aliberti, Manfredi (Rome Economics Doctorate) |
| Abstract: | Skills acquired on the job, whether general or industry-specific, significantly influence workers' labor market outcomes. Workers with general skills tend to have higher re-employment prospects and greater resilience to economic shocks. Using novel data from a recent policy intervention in the Italian labor market, we develop a new measure that captures the tasks taught in firm-provided training for individual workers. This measure enables us to examine the relationship between labor market competition and firms' decisions to invest in general versus industry-specific skills. Our findings indicate that, as theory predicts, workers in more competitive labor markets receive less general training. |
| Date: | 2024–10–30 |
| URL: | https://d.repec.org/n?u=RePEc:osf:socarx:4ugq5 |
| By: | Ivan Radanovic (National Bank of Serbia) |
| Abstract: | The goal of this paper is to analyse the concepts of open banking and open finance as data sharing models in banking and financial industry. A key idea behind these concepts is to enhance competition among payment service providers, ensure greater transparency of their work, expand the range of choices for consumers and, most of all, add value for the final consumer by improving the quality and reducing the price of services. In Europe, service providers from several European Union countries (Germany, the Netherlands, and Sweden – Sofortüberweisung, iDeal and Trustly) became the key drivers of data sharing models, prompting the European Union to regulate this new type of payment services in order to improve competition in the payment services market and ensure better consumer protection. The Payment Services Directive 2 (PSD2) 2015/2366 was thus adopted, requiring banks to allow access to customer information to all third-party providers such as payment institutions, e-money institutions, FinTech companies and other credit institutions, subject to customer’s consent. PSD2 recognises two new types of non-banking market participants – account information service providers (AISP) and payment initiation service providers (PISP). The paper combines the descriptive and comparative methods, as well as the case-study method, to give an outline of important data sharing regulations and models, and of the abovementioned payment service providers. The paper also looks into the experience of applying open banking and open finances in the United Kingdom and Brazil. The final section of the paper deals with institutional assumptions for developing the data sharing model in the Republic of Serbia. The current Law on Payment Services (RS Official Gazette, Nos 139/2014 and 44/2018) is largely harmonised with PSD2, as the original Payment Services Directive 2007/64 was fully transposed into the national legislation. Full harmonisation with PSD2 has been achieved through amendments to the Law on Payment Services (RS Official Gazette, No 64/2024) of 31 July 2024, which lay down measures to further enhance competition, innovation and the range of choices for the end-consumer. This Law will be applied as of 6 May 2025. Among other things, open banking will be introduced, as will the domestic equivalents to AISP and PISP participants. |
| Keywords: | data, open banking, open finance, payment initiation, account information, Law on Payment Services |
| JEL: | E42 G15 G21 G28 |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:nsb:bilten:24 |
| By: | Aleksei Pastushkov |
| Abstract: | We examine the dynamics of informational efficiency in a market with asymmetrically informed, boundedly rational traders who adaptively learn optimal strategies using simple multiarmed bandit (MAB) algorithms. The strategies available to the traders have two dimensions: on the one hand, the traders must endogenously choose whether to acquire a costly information signal, on the other, they must determine how aggressively they trade by choosing the share of their wealth to be invested in the risky asset. Our study contributes to two strands of literature: the literature comparing the effects of competitive and strategic behavior on asset price efficiency under costly information as well as the actively growing literature on algorithmic tacit collusion and pseudo-collusion in financial markets. We find that for certain market environments (with low information costs) our model reproduces the results of Kyle [1989] in that the ability of traders to trade strategically leads to worse price efficiency compared to the purely competitive case. For other environments (with high information costs), on the other hand, our results show that a market with strategically acting traders can be more efficient than a purely competitive one. Furthermore, we obtain novel results on the ability of independently learning traders to coordinate on a pseudo-collusive behavior, leading to non-competitive pricing. Contrary to some recent contributions (see e.g. [Cartea et al. 2022]), we find that the pseudo-collusive behavior in our model is robust to a large number of agents, demonstrating that even in the setting of financial markets with a large number of independently learning traders non-competitive pricing and pseudo-collusive behavior can frequently arise. |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2411.05032 |