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on Industrial Organization |
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Issue of 2019‒01‒07
seven papers chosen by |
| By: | Duarte Brito (Universidade Nova de Lisboa, Faculdade de Ciências e Tecnologia | Center for Advanced Studies in Management and Economics); Ricardo Ribeiro (Universidade Católica Portuguesa, Católica Porto Business School); Helder Vasconcelos (Universidade do Porto, Faculdade de Economia and Center for Economics and Finance) |
| Abstract: | In this paper we investigate the anti-competitive e¤ects of partial horizontal ownership in a setting where: (i) two cost-asymmetric ?rms compete à la Cournot; (ii) managers deal with eventual con?icting interests of the di¤erent shareholders by maximizing a weighted sum of rms?operating pro?ts; and (iii) weights result from the corporate control structure of the ?rm they run. Within this theoretical structure, we ?nd that if the manager of the more e¢ cient rm weights the operating pro?t of the (ine¢ cient) rival more than its own pro?t, then partial ownership can lessen competition more than a monopoly. |
| Keywords: | Partial Horizontal Ownership, Common-Ownership, Cross-Ownership, Full Joint Ownership, Duopoly, Cost Asymmetry |
| JEL: | L11 L12 L13 L41 L50 |
| Date: | 2018–12 |
| URL: | http://d.repec.org/n?u=RePEc:cap:wpaper:022018&r=all |
| By: | Hollenbeck, Brett |
| Abstract: | The relationship between mergers and the long run rate of innovation is an open question in antitrust economics. I develop a framework to examine this in a dynamic oligopoly model with endogenous investment, entry, exit and horizontal mergers. Firms produce vertically differentiated goods and may merge with rival firms to gain market power and potentially increase the quality of their product. I extend previous work on dynamic mergers by allowing for products differentiated on quality with competition in prices and an endogenous long run rate of innovation. In equilibrium, horizontal mergers are almost entirely harmful to consumers in the short run, but the prospect of a buyout creates a powerful incentive for firms to preemptively enter the industry and invest to make themselves an attractive merger partner. The result is significantly higher rate of innovation with mergers than without and significantly higher long-run consumer welfare as well. Further results explore the circumstances under which this result is likely to hold. In order for the long run increase in innovation to outweigh the short run harm to consumers caused by mergers, entry costs must be low, entrants and incumbents must both have the ability to innovate rapidly, and the degree of horizontal product differentiation must be low. Alternatively, when mergers can generate innovation directly by allowing firms to combine their products they typically benefit consumers in both the short run and long run. |
| Keywords: | Mergers, Antitrust, innovation, dynamic oligopoly |
| JEL: | L13 L40 O3 |
| Date: | 2018–12–19 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:90764&r=all |
| By: | Didier Laussel (Aix-Marseille Univ., CNRS, EHESS, Centrale Marseille, AMSE); Joana Resende (Economics Department, University of Porto) |
| Abstract: | We investigate how asymmetric information on final demand affects strategic interaction between a downstream monopolist and a set of up-stream monopolists, who independently produce complementary inputs. We study an intrinsic private common agency game in which each supplier i independently proposes a pricing schedule contract to the assembler, specifying the supplier's payment as a function of the assembler's purchase of input i. We provide a necessary and sufficient equilibrium condition. A lot of equilibria satisfy this condition but there is a unique Pareto-undominated Nash equilibrium from the suppliers' point of view. In this equilibrium there are unavoidable efficiency losses due to excessively low sales of the good. However, suppliers may be able to limit these distortions by implicitly coordinating on an equilibrium with a rigid (positive) output in bad demand circumstances. |
| Keywords: | complementary inputs, asymmetric information, private common agency games |
| JEL: | D82 L22 |
| Date: | 2018–12 |
| URL: | http://d.repec.org/n?u=RePEc:aim:wpaimx:1842&r=all |
| By: | Hashmat Khan (Department of Economics, Carleton University); Matthew Strathearn (Department of Economics, Carleton University) |
| Abstract: | We develop and test a novel prediction of the theory of collusion over the business cycle. Building on Haltiwanger and Harrington (1991), we present a model of collusive behaviour in the presence of persistent demand and an Antitrust Authority (AA) in a Cournot framework. The level of collusion is higher during a boom relative to a recession as collusion occurs more frequently when demand is increasing (entering into a collusive arrangement is more profitable and deviating from an existing cartel is less profitable). The model predicts that the number of discovered cartels and hence an- titrust filings should be procyclical because the level of collusion is procyclical. Using a unique data set of United States Antitrust filings, we present robust evidence con- sistent with the model's prediction. We find that antitrust filings are procyclical even after controlling for AA's monitoring intensity. The evidence suggests that procyclical competition policies may be a cost minimizing solution to asymmetries in collusive behaviour over the business cycle. |
| Keywords: | Collusion; Cournot Competition; Antitrust Filings; Business Cycle |
| JEL: | C73 L13 E32 |
| Date: | 2018–12–20 |
| URL: | http://d.repec.org/n?u=RePEc:car:carecp:18-13&r=all |
| By: | Grzybowski, Lukasz; Nicolle, Ambre |
| Abstract: | In this paper, we use a unique database on switching between mobile handsets in a sample of about 5,000 subscribers using tariffs without commitment from a single mobile operator on monthly basis between March 2012 and December 2014. We estimate discrete choice model in which we account for disutility from switching to a different operating systems and handset brands and for unobserved time-persistent preferences for operating systems and brands. Our estimation results indicate presence of significant state-dependency in the choices of operating systems and brands. We find that it is harder for consumers to switch from iOS to Android and other operating systems than from Android and other operating systems to iOS. Moreover, we find that there is significant time-persistent heterogeneity in preferences for different operating systems and brands, which also leads to state-dependent choices. We use our model to simulate market shares in the absence of switching costs and conclude that the market share of Android and smaller operating systems would increase at the expense of the market share of iOS. |
| Keywords: | Smartphones,Consumer Inertia,Switching Costs,Mixed Logit,iOS,Android |
| JEL: | L13 L50 L96 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:itsb18:190389&r=all |
| By: | Jonathan E. Hughes; Ian A. Lange |
| Abstract: | The movement to deregulate major industries over the past 40 years has produced large efficiency gains. However, distributional effects have been more difficult to assess. In the electricity sector, deregulation has vastly increased information available to market participants through the formation of wholesale markets. We test whether upstream suppliers, specifically railroads that transport coal from mines to power plants, use this information to capture economic rents that would otherwise accrue to electricity generators. Using natural gas prices as a proxy for generators’ surplus, we find railroads charge higher markups when rents are larger. This effect is larger for deregulated plants, high-lighting an important distributional impact of deregulation. This also means policies that change fuel prices can have substantially different effects on downstream consumers in regulated and deregulated markets. |
| Keywords: | deregulation, price discrimination, electricity markets, procurement contracts |
| JEL: | L11 L51 Q48 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_7374&r=all |
| By: | Huayta, Katia (Superintendencia de Banca, Segurosy AFP); Garcia, Antonella (Superintendencia de Banca, Segurosy AFP); Sotomayor, Narda (Superintendencia de Banca, Segurosy AFP) |
| Abstract: | This paper examines the relationship between competition and financial stability for Peruvian microfinance institutions, during the 2002-2016 period. Using the Panzar and Rosse H-statistic as well as the Boone indicator for the evaluation of competition, and the Roy Z-score as a proxy for financial stability, we find a non-linear relationship (inverted U-shaped) between competition and financial stability, which validates the Martínez-Miera and Repullo approach. Furthermore, we find that competition in the Peruvian microfinance system might increase even when market concentration increases; and, according to the H-statistic, the market structure that best fits this system is monopolistic competition. |
| Keywords: | SVARs, Competition, Panzar and Rosse H-statistic, Boone indicator, relevant market, financial stability, Z-score, microfinance |
| JEL: | L11 L22 L25 G21 |
| Date: | 2018–11 |
| URL: | http://d.repec.org/n?u=RePEc:rbp:wpaper:2018-005&r=all |