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on Industrial Competition |
| By: | Lisa Heidelmeier; Marco Sahm |
| Abstract: | We investigate the impact of an environmental award in a Bertrand duopoly with green consumers considering a three-stage game. First, the regulator designs the environmental contest. Second, firms choose their green investments, and the winner of the contest is awarded. Third, firms compete in prices, and consumption takes place. We illustrate that the award not only incentivizes green investments and may thus reduce environmental externalities. As consumers perceive the product of the awarded firm to be of superior quality, it also gives rise to vertical product differentiation. This induces market power, and thus anti-competitive effects: Rents shift from consumers to producers, and consumer surplus may decrease, particularly if marginal investment costs in green technologies are high compared to the strength of environmental damage. |
| Keywords: | Bertrand competition, contests, environmental award, green consumer, product differentiation |
| JEL: | D43 H23 L13 L51 Q52 Q58 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11879 |
| By: | Tsuritani, Ryosuke |
| Abstract: | Since unlisted firms’ shares are not publicly traded, common ownership only affects listed firms and has no direct impact on unlisted ones. We investigate the welfare implications of this asymmetry between listed and unlisted upstream suppliers of perfectly complementary inputs. This study considers a vertically related market with S perfectly complementary inputs, in which L sole listed upstream suppliers and S-L sole unlisted upstream suppliers sell each input through linear wholesale prices to the two listed downstream manufacturers that compete à la Cournot. We find that the input price of each listed supplier is higher than that of each unlisted supplier only when the number of listed suppliers is small. The key factor contributing to this result is the price sensitivity of listed suppliers. We also find that an optimal rate of common ownership may exist for consumers and society, depending on the proportion of listed suppliers in the supply chain. |
| Keywords: | Common ownership; Vertical market; Perfectly complementary inputs; Listed suppliers; Unlisted suppliers |
| JEL: | L13 L21 L42 |
| Date: | 2025–06–13 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:125003 |
| By: | Robert M. Hunt; Konstantinos Serfes; Yin Zhang |
| Abstract: | In a two-sided model of the payment card market, we introduce a specific form of elastic demand (constant elasticity), merchant market power, ad valorem fees, and cash as an alternative. We derive the “credit card tax, ” consisting of an endogenously determined interchange fee and any rewards paid. We characterize how this tax influences prices, profits, and welfare. We also examine how these relationships vary under different assumptions about the elasticity of demand, merchant market power, and differentiation between cash and credit. Under the assumptions of our model, by endogenizing the credit card tax, we show that capping interchange fees benefits all consumers by lowering these taxes, even if rewards decrease. |
| Keywords: | credit cards; two sided networks; merchant competition; interchange fees; regulation |
| JEL: | L13 L40 G28 E42 |
| Date: | 2025–06–04 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedpwp:100061 |
| By: | Hjertstrand, Per (Research Institute of Industrial Economics (IFN)); Tangerås, Thomas (Mälardalen University and) |
| Abstract: | This paper develops a simple nonparametric test for perfect competition in markets for homogeneous goods. The method only requires data on prices and some aggregate of output. We then generalize the method to account for variable capacity and intertemporal production decisions. We apply the method to a sample of Swedish data from the Nordic wholesale electricity market. The main results show that the data are approximately rationalizable by perfect competition in bidding zones with low ownership concentration of generation assets, but not in bidding zones characterized by high ownership concentration. |
| Keywords: | Competition; Nonparametric methods; Nord Pool power exchange; Wholesale electricity markets |
| JEL: | D22 D43 D44 |
| Date: | 2025–06–10 |
| URL: | https://d.repec.org/n?u=RePEc:hhs:iuiwop:1527 |
| By: | Raffaella Sadun; Rachel J. Schuh; Jonathan S. Hartley; John Van Reenen; Nicholas Bloom |
| Abstract: | We show better-managed firms are more dynamic in plant acquisitions, disposals, openings and closings in U.S. Census and international data. Better-managed firms also birth better-managed plants and improve the performance of the plants they acquire. To explain these findings we build a model with two key elements. First, management is a combination of firm-level management ability (e.g. CEO quality), which can be transferred to all plants, and plant-level management practices, which can be changed through intangible investment (e.g. consulting or training). Second, management both raises productivity and also reduces the operational costs of dynamism: buying, selling, opening and closing plants. We structurally estimate the model on Census microdata, fitting our key dynamic moments, and then use it to establish three additional results. First, mergers and acquisitions raise economy-wide management and productivity by reallocating plants to firms with higher management ability. Banning M&A would depress GDP and management by about 15%. Second, greater product market competition improves both management and productivity by reallocating away from badly managed plants. Finally, management practices account for about 20% of the cross-country productivity differences with the US. |
| JEL: | J0 |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33765 |
| By: | Abada, I.; Ehrenmann, A. |
| Abstract: | Risk-mitigation instruments are essential for fostering investments in renewable electricity-production assets and their role is all the more important in the case of market incompleteness. At the same time, such instruments may induce distortions of competition, thereby limiting the effectiveness of spot markets. An example of such an effect is the dramatic increase in negative prices observed in many power markets. Some mechanisms that protect investors from risk decouple operating incentives from spot prices, leading to inefficient trading. At the same time, those negative prices incentivize investments in storage. Such distortions have so far been overlooked in most quantitative research focused on market incompleteness. Using a bi-level programming approach, this paper proposes a framework within which to integrate market distortions when analyzing incompleteness. The lower level of the framework models the power economy via an equilibrium formulation of the two-stage investment problem under risk aversion, where agents invest in the first stage before operating in the stochastic second stage. A central planner offers a set of risk-mitigation schemes in the form of Contracts for Difference and price markups to foster investments, but these schemes can distort competitive bidding. On the upper level, the central planner tunes the design of contracts optimally so that social welfare is maximized. We provide an existence result and undertake a thorough numerical simulation inspired by the French power system, which demonstrates the potential for optimally adjusting the risk-mitigation instruments offered to electricity producers to enhance welfare and limit the prevalence of negative prices. |
| Keywords: | Incomplete Markets, Market Distortion, Bi-level Programming, Stochastic Equilibrium Models, Optimal Regulation, Power Markets |
| JEL: | D81 C72 C73 Q41 |
| Date: | 2025–03–25 |
| URL: | https://d.repec.org/n?u=RePEc:cam:camdae:2525 |
| By: | Oberfichtner, Michael (Institute for Employment Research (IAB), Nuremberg, Germany); Popp, Martin (Institute for Employment Research (IAB), Nuremberg, Germany) |
| Abstract: | "In concentrated labor markets, firms command high market shares when recruiting workers and, thus, may have a dominant market position. International studies show that higher labor market concentration leads to lower wages and worse employment conditions for workers. Using social security data, the authors examine and document the extent of concentration in occupationally and regionally defined labor markets in Germany." (Author's abstract, IAB-Doku) ((en)) |
| Keywords: | IAB-Open-Access-Publikation ; IAB-Beschäftigtenhistorik |
| Date: | 2025–06–11 |
| URL: | https://d.repec.org/n?u=RePEc:iab:iabkbe:202510 |
| By: | Harold D. Chiang; Jack Collison; Lorenzo Magnolfi; Christopher Sullivan |
| Abstract: | This paper develops a flexible approach to predict the price effects of horizontal mergers using ML/AI methods. While standard merger simulation techniques rely on restrictive assumptions about firm conduct, we propose a data-driven framework that relaxes these constraints when rich market data are available. We develop and identify a flexible nonparametric model of supply that nests a broad range of conduct models and cost functions. To overcome the curse of dimensionality, we adapt the Variational Method of Moments (VMM) (Bennett and Kallus, 2023) to estimate the model, allowing for various forms of strategic interaction. Monte Carlo simulations show that our method significantly outperforms an array of misspecified models and rivals the performance of the true model, both in predictive performance and counterfactual merger simulations. As a way to interpret the economics of the estimated function, we simulate pass-through and reveal that the model learns markup and cost functions that imply approximately correct pass-through behavior. Applied to the American Airlines-US Airways merger, our method produces more accurate post-merger price predictions than traditional approaches. The results demonstrate the potential for machine learning techniques to enhance merger analysis while maintaining economic structure. |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2506.05225 |
| By: | Muhammad Farooq Ahmad (SKEMA Business School - SKEMA Business School); Christos Alexakis (ESC [Rennes] - ESC Rennes School of Business); Saqib Aziz (ESC [Rennes] - ESC Rennes School of Business); Konstantinos Eleftheriou (University of Piraeus) |
| Abstract: | The tourism industry is one of the largest sectors of the international economy with a 10.3 percent share in global GDP while cross-border mergers and acquisitions (M&A) activity contributes 42–45 percent to aggregate foreign direct investment (FDI) flows. However, little is known about the extent to which tourism activity may affect cross-border M&A activity. We employ a spatial econometrics framework over a sample of 3849 M&A transactions from 34 countries to examine the role of tourism activity in cross-border M&A in the tourism sector. Our results indicate that tourism activity reduces M&As investment uncertainty. In addition, cultural distance negatively affects tourism's role as a channel for M&A activity. |
| Keywords: | Tourism industry Mergers and acquisitions Cross-border deals Spatial econometrics |
| Date: | 2025–05–12 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05068471 |
| By: | Levy, Daniel; Chen, Haipeng (Allan); Ray, Sourav; Charette, Elliot; Ling, Xiao; Zhao, Weihong; Bergen, Mark; Snir, Avichai |
| Abstract: | Studies of micro-level price datasets find more frequent small price increases than decreases, which can be explained by consumer inattention because time-constrained shoppers might ignore small price changes. Recent empirical studies of the link between shopping behavior and price attention over the business cycle find that consumers are more (less) attentive to prices during economic downturns (booms). These two sets of findings have a testable implication: the asymmetry in small price changes should vary over the business cycle—it should diminish during recessions and strengthen during expansions. We test this prediction using a large US store-level dataset with more than 98 million weekly price observations for the years 1989–1997, which includes an 8-month recession period, as defined by the NBER. We compare price adjustments between periods of recession (high unemployment) and expansion (low unemployment). Focusing on small price changes, we find, consistent with our hypothesis, that there is a greater asymmetry in small price changes during periods of low unemployment compared to the periods of high unemployment, implying that firms’ price-setting behavior varies over the business cycle. |
| Keywords: | Asymmetric Price Adjustment; Small Price Changes; Consumer Inattention; Price Rigidity; Sticky Prices; Business Cycles; Unemployment; Recessions; Expansions |
| JEL: | D11 D21 D80 D91 E31 E32 L11 L16 M31 |
| Date: | 2025–06–11 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:124999 |
| By: | Germà Bel (GiM-IREA, Universitat de Barcelona, Spain.); Joël Bühler (GiM-IREA, Universitat de Barcelona, Spain.) |
| Abstract: | We study how the privatisation of urban water is being challenged in Catalonia, which has a high proportion of private management and a high degree of monopolisation in the water contract market, compared to Spain. We use detailed and up-to-date municipal data to study the dynamics of monopolisation and remunicipalisation. We find that remunicipalisation, rather than potential competition for contracts, is a remedy against monopolisation. Inter-municipal cooperation in Catalonia facilitated the implementation of remunicipalisation in smaller municipalities. In addition, we analyse the democratisation of water management following remunicipalisation and find that progress was modest, both in Catalonia and in Spain. |
| Keywords: | Privatisation; Monopolisation; Remunicipalisation; Cooperation; Democratisation; Commons. JEL classification: B50, D42, H42, L33. |
| Date: | 2025–01 |
| URL: | https://d.repec.org/n?u=RePEc:ira:wpaper:202503 |
| By: | Pietro Calice |
| Abstract: | This paper extends the classic Tinbergen rule within the context of financial regulation, explicitly accounting for the inverted U-shaped relationship between market competition and financial stability. Conventional policy frameworks, premised on independent relationships between policy targets and instruments, inadequately address the complex interactions inherent in the competition-stability nexus. The proposed framework addresses this gap by incorporating four critical dimensions overlooked in traditional applications of the Tinbergen rule: (i) nonlinear interactions among policy objectives, (ii) conflicts arising at extremes of competition, (iii) a hierarchical prioritization of financial stability objectives, and (iv) inherent structural constraints of prudential instruments. The paper introduces a dynamic optimization approach that calibrates policy instruments according to the financial system’s position along the competition-stability curve. Additionally, it provides a comprehensive taxonomy of regulatory instruments, categorizing them based on their primary targets and secondary (cross-) effects, thereby facilitating state-dependent policy formulation. The paper also outlines practical institutional arrangements and coordination mechanisms that are crucial for effective implementation. Overall, the approach may help to equip regulators with strategies for dynamically managing competition and stability, ultimately enhancing the efficiency and robustness of financial systems. |
| Date: | 2025–05–19 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:11124 |