|
on Industrial Competition |
| By: | Caprice, Stéphane; Shekhar, Shiva |
| Abstract: | In this paper, we study supplier encroachment in competition with multi-product retailers and its effects on retail profits under endoge-nous consumer shopping behavior. We find that supplier encroach-ment (weakly) increases both supplier and retailer profits, as the re-tailer benefits from better consumer segmentation and price discrim-ination despite (weakly) higher wholesale prices. The effect of en-croachment on consumers is more nuanced: when the competitive product’s value is high, consumers benefit. Instead, when the value of the competitive product is low, consumers buying exclusively from the multi-product retailer are worse off while consumers who mix and match across stores are better off. Overall, supplier encroachment can improve market outcomes if the value of the supplier’s product offering is sufficiently high. |
| Keywords: | Encroachment; Vertical Contracting; Downstream Competition and Consumer Shopping Costs. |
| JEL: | L13 L22 L42 L81 |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:tse:wpaper:130442 |
| By: | Nicolas Schutz; Anton Sobolev |
| Abstract: | We study the competitive effects of dual pricing, a vertical restraint that involves charging a distributor a different price for units intended to be resold online than for units intended to be resold offline. We develop a model in which a manufacturer contracts with hybrid retailers, which sell the manufacturer’s product both in their brick-and-mortar stores and through an online channel. We find that dual pricing allows the manufacturer to induce the industry monopoly outcome whereas uniform pricing does not. Yet, dual pricing does not necessarily harm consumers or society at large, as the market outcome is distorted by market power regardless of whether dual or uniform pricing is used. Indeed, we find that consumer surplus and aggregate surplus tend to be higher under dual pricing if the online market is small, if the search costs faced by offline consumers are high, and if the pass-through rate of cost increases is high. |
| Keywords: | dual pricing, price dispersion, search, vertical restraints |
| JEL: | L13 L42 D43 D83 |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2025_678 |
| By: | Erich Muehlegger; Reid Taylor |
| Abstract: | We estimate the effect of competition on incumbent firm pricing by using high frequency price data and the precise geographic location for all gas stations in California. Using an event study design, we find that the entry of a new station is associated with a 2.5 cent decrease in prices at incumbent stores, which equates to a 7 percent reduction in estimated retail markups. The effects are immediate, persistent and show no sign of deterrence or limit pricing behavior. In contrast, nearby exit results in precisely estimated null effects on prices with no evidence of predatory pricing in the lead up to the station departure. We show that these results are consistent across all fuel blends, dissipate with distance and are driven by less concentrated markets. Finally, we explore the asymmetric effects, showing that the difference cannot be attributed to difference in branding, proximity to highway or data quality idiosyncrasies, although we find suggestive evidence that exit tends to happen in more competitive markets and amongst less heavily trafficked stations. |
| Keywords: | competition; entry; exit; retail gasoline; market structure |
| JEL: | D40 L11 L81 Q41 R32 |
| Date: | 2025–03–05 |
| URL: | https://d.repec.org/n?u=RePEc:fip:feddwp:99661 |
| By: | Abhishek KUMAR (University of Southampton); Apra SINHA (University of Delhi); Gazi Salah UDDIN (Linkoping University) |
| Abstract: | Using administrative plant-level data from India, we estimate the effect of revenue and cost uncertainties on markup (product market power), markdown (labour market power), and combined market power. We show that historical two- and three-digit industry averages of exports, imported inputs, and oil share are valid instruments for exports, imported inputs, and oil share at the plant level. The results suggest that revenue and cost uncertainties affect markup differently: revenue uncertainty decreases markup, whereas cost uncertainty increases markup. Despite the opposite effect of these uncertainty measures on product market power, revenue and cost uncertainties tend to increase combined market power. This is because the revenue uncertainty significantly increases labour market power. Heightened cost uncertainties reduce labour market power but by less compared to increases in product market power. Given the results obtained in this paper, it is important to make a distinction between revenue and cost uncertainty to understand their cyclical nature. |
| Keywords: | Markup, Markdown; Labour Share; Uncertainty; Exchange Rate Volatility; Oil Price Volatility |
| JEL: | D21 D22 |
| Date: | 2025–03–04 |
| URL: | https://d.repec.org/n?u=RePEc:era:wpaper:dp-2024-37 |
| By: | Drake, Samielle (Department of Economics, Umeå University) |
| Abstract: | This study examines the impact of local market concentration on the participation and success of small and medium enterprises (SMEs) in Swedish municipal cleaning service procurement auctions. A 10 percentage point reduction in the joint market share of the four largest firms (CR4), while maintaining a constant Herfindahl-Hirschman Index (HHI), results in a 7.5% increase in SME participation and raises the likelihood of an SME winning by 2.4%. Furthermore, the 2014 revisions to the EU public procurement directives mitigated the adverse effects of market concentration. However, despite the increase in participation, there is no evidence that the success rates of SMEs improved following the implementation of the revised EU directives. |
| Keywords: | Public Procurement; Market Concentration; SMEs; Competition; Regulations |
| JEL: | D44 H57 L13 L33 |
| Date: | 2025–03–11 |
| URL: | https://d.repec.org/n?u=RePEc:hhs:umnees:1034 |
| By: | TAKAHASHI, Yuta; TAKAYAMA, Naoki; TOYAMA, Yuta |
| Abstract: | Technological innovation in computer hardware, often measured by rapid decline in the relative price of computer hardware, significantly boosted productivity growth in the past. The massive decline in these relative prices stopped during the last two decades globally. To disentangle the causes behind recent price increases, we structurally estimate supply and demand model using detailed Japanese computer productlevel data from 2006 to 2015, and back out the marginal costs and markups. Our results indicate that price reductions in earlier sample period resulted from marginal cost decreases, while the price stabilization in later sample period reflects halted technological progress rather than increased market power. Recent PC market trends suggest genuine technological stagnation. |
| Keywords: | Market Power, Markup, Computer Hardware, Demand Estimation |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:hit:hituec:762 |
| By: | Ezzat, Asmaa; Zaki, Chahir |
| Abstract: | Efficient institutions matter in promoting Global Value Chains (GVCs) participation since they help reduce transaction costs for firms that engage in trade. Competition policy is considered an important dimension of these institutions. This paper investigates whether competition policy matters for participation of emerging countries in GVCs, with a special focus on African countries. To do so, we use the EORA dataset on backward and forward linkages and merge it with different indicators pertaining to the de jure (competition law) and the de facto (market dominance, antimonopoly, etc.) measures of competition policy. We find that both the de jure and the de facto dimensions of competition policy matter for backward and forward GVC participation. In addition, our findings indicate that this relationship is non-linear as the market can become saturated. Two important transmissions channels can explain this effect: market diversification and trade liberalization. These results remain robust after we control for the endogeneity between GVC and competition. In the case of African countries, we find that more diversified economies benefit from competitive markets, whereas other results remain unchanged, especially for the de jure measures. |
| Keywords: | competition policy, GVC, Africa |
| JEL: | D40 F12 F14 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:sgscdp:314432 |
| By: | Igor Sadoune; Marcelin Joanis; Andrea Lodi |
| Abstract: | This paper introduces the Minimum Price Markov Game (MPMG), a theoretical model that reasonably approximates real-world first-price markets following the minimum price rule, such as public auctions. The goal is to provide researchers and practitioners with a framework to study market fairness and regulation in both digitized and non-digitized public procurement processes, amid growing concerns about algorithmic collusion in online markets. Using multi-agent reinforcement learningdriven artificial agents, we demonstrate that (i) the MPMG is a reliable model for first-price market dynamics, (ii) the minimum price rule is generally resilient to non-engineered tacit coordination among rational actors, and (iii) when tacit coordination occurs, it relies heavily on self-reinforcing trends. These findings contribute to the ongoing debate about algorithmic pricing and its implications. Cet article présente le jeu du prix minimum de Markov (MPMG), un modèle théorique qui se rapproche raisonnablement des marchés réels qui suivent la règle du prix minimum, tels que les enchères publiques. L'objectif est de fournir aux chercheurs et aux praticiens un cadre pour étudier l'équité du marché et la réglementation dans les processus de marchés publics numériques et non numériques, dans un contexte de préoccupations croissantes concernant la collusion algorithmique sur les marchés en ligne. En utilisant des agents artificiels basés sur l'apprentissage par renforcement multi-agents, nous démontrons que (i) le MPMG est un modèle fiable pour la dynamique du marché au premier prix, (ii) la règle du prix minimum est généralement résistante à la coordination tacite non technique entre les acteurs rationnels, et (iii) lorsque la coordination tacite se produit, elle s'appuie fortement sur des tendances qui se renforcent d'elles-mêmes. Ces résultats contribuent au débat en cours sur la tarification algorithmique et ses implications. |
| Keywords: | Algorithmic Game Theory, Multiagent Reinforcement Learning, Algorithmic Coordination, Algorithmic Pricing, Théorie algorithmique des jeux, apprentissage par renforcement multi-agents, coordination algorithmique, tarification algorithmique |
| Date: | 2025–04–08 |
| URL: | https://d.repec.org/n?u=RePEc:cir:cirwor:2025s-07 |
| By: | Leonardo Bursztyn (University of Chicago & NBER); Rafael Jiménez-Durán (Bocconi University, IGIER & Chicago Booth Stigler Center); Aaron Leonard (University of Chicago); Filip Milojević (University of Chicago); Christopher Roth (University of Cologne, NHH, Max Planck Institute for Research on Collective Goods, IZA & CEPR) |
| Abstract: | Firms can increase the demand for their products and consolidate their market power not only by increasing user utility but also by decreasing non-user utility. In this paper, we examine this mechanism by considering the case of smartphones. In particular, Apple has faced criticism for allegedly degrading the Android user experience by making messages to Android devices appear as green bubbles on iPhones—a salient signal often perceived as reflecting a lower socioeconomic status. Using samples of US college students, we show that green bubbles are widely stigmatized and that a majority of both iPhone and Android users would prefer green bubbles to no longer exist. We then conduct an incentivized deactivation experiment, revealing that iPhone users have a significant willingness to pay to prevent their messages from appearing as green bubbles on other iPhones. Next, we examine the market implications of non-user utility and find that respondents are substantially more likely to choose an Android over an iPhone when green bubbles are removed. We conclude by presenting case studies that illustrate how companies use product features to reduce non-user utility in various markets. |
| Keywords: | Non-user utility, Stigma, Market Power, Consumer Welfare, Anti-trust. |
| JEL: | D83 D91 P16 J15 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:ajk:ajkdps:360 |
| By: | Rehse, Dominik; Valet, Sebastian |
| Abstract: | On October 4, 2021, all services provided by Meta Platforms, Inc. (then Facebook, Inc.) became unavailable unexpectedly for all its worldwide users for a period of about six hours. We use detailed high-frequency tracking data from smartphones, tablets and desktop computers of thousands of Meta users from Spain and the United States to study their behavioral responses during the outage. We find (1) the strongest substi- tution occurs within social media and messaging services, (2) evidence of substitution across service categories, (3) substitution patterns that vary across demographic groups, (4) substantially higher substitution rates among multi-homers, (5) substitution rates that increase over the course of the outage, (6) distinct differences in substitution patterns between countries, and (7) increased usage of non-Meta digital services after the outage. To our knowledge, this study presents the first comprehensive revealed-preference analysis of substitution patterns when an entire user population simultaneously seeks alternatives to major digital services. |
| Keywords: | Digital services, Competition, Substitution, Attention markets, Outage |
| JEL: | L40 L82 L86 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:zewdip:314420 |
| By: | Amparo Moyano; Frédéric Dobruszkes |
| Abstract: | This paper investigates the destiny of high-speed rail (HSR) operations as rail liberalisation challenges the cross-subsidy single rail operators established between profitable and non-profitable routes when they monopolised the whole HSR network. When an incumbent HSR operator has to share the cake with newcomers, the resulting decline in revenues and profits may limit the effectiveness of the relevant cross-subsidies. We analyse such scenarios through the case of Spain, in which the state-owned incumbent rail company, Renfe, faces increasing competition in its more lucrative HSR corridors. Scenarios suggest that with only a 30% drop in ticket sales in the northeastern HSR corridor, the financial balance of Renfe’s HSR commercial operations becomes negative. This means that beyond the profits made by new entrants in one or two specific corridors, the outcomes for non-profitable corridors will be quite different: public authorities will have to cover losses and/or Renfe will have to increase ticket prices and/or the frequencies of HSR services will have to be cut. Travellers on the most profitable HSR routes will enjoy greater frequency of services and lower fares, while those on other HSR routes could experience less frequency and higher fares. In geographical terms, rail liberalisation applied to HSR operations may thus have very heterogeneous effects and reinforce spatial inequalities between regions. |
| Keywords: | High-speed rail; Rail market liberalisation; Cross-subsidising; Spatial inequalities |
| Date: | 2025–03–01 |
| URL: | https://d.repec.org/n?u=RePEc:ulb:ulbeco:2013/389172 |
| By: | Ronel Elul; Deeksha Gupta; David K. Musto |
| Abstract: | When home prices threaten to decline, large investors may attempt to prop up prices by fostering new lending. We show this motive increased acquisitions of risky mortgages by the government-sponsored enterprises in the first half of 2007. When home prices threaten to decline, large mortgage investors can benefit from fostering new lending that boosts demand. We ask whether this benefit contributed to the growth in acquisitions of risky mortgages by the government-sponsored enterprises (GSEs) in the first half of 2007. We find that it helps explain the variation of this growth across regions as well as regional house price and credit changes. The growth predicted by this benefit is on top of the acquisition growth caused by the exit of private-label securitizers. Our results are consistent with the GSEs actively targeting their acquisitions to counter home-price declines. |
| Keywords: | GSEs; Concentration; Risk Exposure |
| JEL: | G01 G21 L25 R31 |
| Date: | 2025–03–28 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedpwp:99739 |
| By: | Martimort, David; Poudou, Jean-Christophe; Thomas, Lionel |
| Abstract: | A buyer (the principal) procures a good or service from a risk-neutral seller (the agent). The seller, protected by limited liability, has private information on his marginal cost of production (adverse selection), and exerts a non-verifiable effort that increases surplus (moral hazard). Even when the effort and production technologies are separable, the optimal contract always mixes features that are found separately under with pure moral hazard or pure screening. Screening distortions are mitigated in comparison with the pure screening scenario with the possibility of bunching for the least efficient types even in contexts where full separation would be obtained with pure screening. Effort distortions are also used as a screening device. In comparison with a pure moral hazard scenario, those distortions may be lessened for the most efficient types, up to the point of possibly allowing implementation of the first-best effort, while they are worsened for the worst types. Although our analysis is cast in a simple procurement setting, we illustrate our findings in other economic environments of general interest including economic and environmental regulation, financial contracting, provision of quality in services, and price discrimination. |
| Keywords: | Adverse selection; moral hazard; contract theory |
| JEL: | D82 |
| Date: | 2025–03–11 |
| URL: | https://d.repec.org/n?u=RePEc:tse:wpaper:130428 |
| By: | Fan Xiao; Frédéric Dobruszkes; Huihui Mo; Jiaoe Wang |
| Abstract: | Studies have contributed to airport competition issues in metropolitan areas; however, most have focused on passengers’ airport choices. Proposing a more systematic framework as well as a measuring method, this study contributes to the understanding of competition and complementarity in multiple airport systems (MASs). In this context, our research revisits MASs from the perspective of air routes and flights. These two approaches were combined. First, a quantitative analysis was conducted to investigate the degree of route overlap between airports belonging to the same MAS, ranging from strong complementarity to strong competition. In the second step, a qualitative analysis focused on the regulatory and policy context in which five MASs (Seoul, Brussels, Shanghai, Miami, and Montreal) were developed. This helps determine how much airports cooperate or compete with each other. Empirical evidence from 37 two-airport MASs worldwide suggests that inter-airport matches occur on less than 20% of routes that offer more than 40% of seats. Qualitative analysis confirmed a range of contexts, from genuine cooperation to forced regulation to de facto complementarity and head-on competition. Our findings broaden the understanding of MAS competition and complementarity profiles worldwide and their reasons. |
| Keywords: | multi-airport region; competition; airline routes; air transport network; transport management |
| Date: | 2025–03–01 |
| URL: | https://d.repec.org/n?u=RePEc:ulb:ulbeco:2013/389175 |