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on Industrial Organization |
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Issue of 2020‒04‒06
eight papers chosen by |
| By: | Giuseppe Attanasi (Université Côte d'Azur, CNRS, GREDEG, France); Kene Boun My (BETA, Université de Strasbourg); Andrea Guido (Institute for Futures Studies; Laboratory for Agent-Based Social Simulations (LABSS)); Mathieu Lefebvre (BETA, Université de Strasbourg) |
| Abstract: | There is robust evidence in the experimental economics literature showing that monopoly power is affected by trading institutions. In this paper we study whether trading institutions themselves can shape agents' market behaviour through the formation of anchors and reference points. We recreate experimentally five different double-auction market structures (perfect competition, perfect competition with quotas, cartel on price, cartel on price with quotas, and monopoly) in a within-subject design, varying the order of markets implementation. We investigate whether monopoly power endures the formation of reference prices emerged in previously implemented market structures. Results from our classroom experiments suggest that double-auction trading institutions succeed in preventing monopolists to exploit their market power. Furthermore, the formation of reference points in previously implemented markets negatively impacts on monopolists' power in later market structures. |
| Keywords: | Double Auctions, Perfect Competition, Monopoly, Market Imperfection, Spillovers, Classroom Experiments |
| JEL: | C90 D41 D42 D43 D44 |
| Date: | 2020–03 |
| URL: | http://d.repec.org/n?u=RePEc:gre:wpaper:2020-06&r=all |
| By: | Iossa, Elisabetta; Loertscher, Simon; Marx, Leslie; Rey, Patrick |
| Abstract: | Collusive schemes by suppliers often take the form of allocating customers or markets among cartel members. We analyze incentives for suppliers to initiate and sustain such a collusive schemes in a repeated procurement setting. We show that, contrary to some prevailing beliefs, staggered (versus synchronized) purchasing does not make collusion more difficult to sustain or initiate. Buyer defensive measures include synchronized rather than staggered purchasing, first-price rather than second-price auctions, more aggressive or secrete reserve prices, longer contract lengths, withholding information, and avoiding observable registration procedures. Inefficiency induced by defensive measures is an often unrecognized social cost of collusive conduct. |
| Keywords: | synchronized vs staggered purchasing; sustainability and initiation of collusion; coordinated effects |
| JEL: | D44 D82 L41 |
| Date: | 2020–03 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:124177&r=all |
| By: | Neus, Werner; Stadler, Manfred; Unsorg, Maximiliane |
| Abstract: | We study oligopolistic competition in product markets where the firms' quantity decisions are delegated to managers. Some firms are commonly owned by shareholders such as index funds whereas the other firms are owned by independent shareholders. Under such an asymmetric ownership structure, the common owners have an incentive to coordinate when designing the manager compensation schemes. This implicit collusion induces a less aggressive output behavior by the coordinated firms and a more aggressive behavior by the noncoordinated firms. The profits of the noncoordinated firms are increasing in the number of coordinated firms. The profits of the coordinated firms exceed the profits without coordination if at least 80 % of the firms are commonly owned - an astonishing resemblance to the merger literature. |
| Keywords: | Common ownership,index funds,shareholder coordination,manager com-pensation |
| JEL: | G32 L22 M52 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:tuewef:133&r=all |
| By: | Emek Basker; Fariha Kamal |
| Abstract: | How resilient are buyer-supplier relationships to new information about product defects? We construct a novel dataset of U.S. consumer product recalls sourced from foreign suppliers between 1995 and 2013. Using an event-study approach, we find that, compared to control relationships, buyers that experience recalls temporarily reduce their probability of trading with the suppliers of the recalled products by 25%. A milder decrease persists, accompanied by increased reliance on other foreign suppliers. Buyers that are affiliated with their suppliers decrease trade several quarters earlier than unaffiliated buyers, consistent with decisionmaking and information flowing faster within than across firm boundaries. |
| Keywords: | Buyer-supplier relationships; information flows; firm boundary; recalls |
| JEL: | L14 L15 F14 F23 |
| Date: | 2020–03 |
| URL: | http://d.repec.org/n?u=RePEc:cen:wpaper:20-13&r=all |
| By: | Juan A. Máñez Castillejo (University of Valencia and ERICES); James H. Love (Unviersity of Leeds) |
| Abstract: | This paper analyzes and quantifies the fundamental factors that are likely to cause persistence in performing R&D activities: the existence of sunk costs associated with R&D activities and the process of learning that characterizes this type of activity. We estimate our model with Spanish manufacturing firms for the period 1991-2014. By decomposing the effects of sunk costs and learning effects, we find that both are important determinants of R&D persistence, and that failing to allow for learning systematically overestimates sunk cost effects. Both large firms and SMEs benefit from direct and indirect (via productivity) effects of R&D experience, but in large firms this is more likely to be manifest through productivity improvements while in smaller firms the effect is more skewed towards a direct effect on R&D likelihood. Further, our results suggest that whereas the impact of sunk costs in R&D persistence is greater for large firms than for SMEs, the scope for direct learning from continuous R&D engagement is greater for SMEs than for larger firms. |
| Keywords: | R&D persistence, sunk costs; learning effects |
| JEL: | O32 L60 |
| Date: | 2019–12 |
| URL: | http://d.repec.org/n?u=RePEc:eec:wpaper:1920&r=all |
| By: | Fabian Stephany; Niklas Stoehr; Philipp Darius; Leonie Neuh\"auser; Ole Teutloff; Fabian Braesemann |
| Abstract: | While the coronavirus spreads around the world, governments are attempting to reduce contagion rates at the expense of negative economic effects. Market expectations have plummeted, foreshadowing the risk of a global economic crisis and mass unemployment. Governments provide huge financial aid programmes to mitigate the expected economic shocks. To achieve higher effectiveness with cyclical and fiscal policy measures, it is key to identify the industries that are most in need of support. In this study, we introduce a data-mining approach to measure the industry-specific risks related to COVID-19. We examine company risk reports filed to the U.S. Securities and Exchange Commission (SEC). This data set allows for a real-time analysis of risk assessments. Preliminary findings suggest that the companies' awareness towards corona-related business risks is ahead of the overall stock market developments by weeks. The risk reports differ substantially between industries, both in magnitude and in nature. Based on natural language processing techniques, we can identify corona-related risk topics and their perceived relevance for different industries. Our approach allows to distinguish the industries by their reported risk awareness towards COVID-19. The preliminary findings are summarised an online index. The CoRisk-Index tracks the industry-specific risk assessments related to the crisis, as it spreads through the economy. The tracking tool could provide relevant empirical data to inform models on the immediate economic effects of the crisis. Such complementary empirical information could help policy-makers to effectively target financial support and to mitigate the economic shocks of the current crisis. |
| Date: | 2020–03 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2003.12432&r=all |
| By: | Neuhäusler, Peter; Rothengatter, Oliver |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:efisdi:42020&r=all |
| By: | Joseph Cullen; Nicolas Schutz; Oleksandr Shcherbakov |
| Abstract: | We study the social welfare implications of early termination fees in the US wireless industry. It is hypothesized that the elimination of long-term contracts at the end of 2015 was a transition from one market equilibrium to another. We use a theoretical model to illustrate that the endogenous choice of consumer switching costs by service providers does not necessarily raise firms' profits or hurt consumers. The forward-looking behavior of consumers facing switching costs results in significant downward pressure on prices. Service fees may be so low that consumers are better off and firms are worse off in an equilibrium with switching costs. Empirically, we find that without early termination fees, firms would increase prices by 2 to 5 percent, on average, resulting in an unambiguous increase in consumer surplus. Firms' profits derived from monthly service fees also increase. However, if we consider additional revenues from contract termination payments, the cost of processing these payments should be large enough for producer profits to be higher in the new equilibrium. |
| Keywords: | Econometric and statistical methods; Firm dynamics; market structure and pricing |
| JEL: | D22 L96 |
| Date: | 2020–03 |
| URL: | http://d.repec.org/n?u=RePEc:bca:bocawp:20-9&r=all |