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on Industrial Organization |
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Issue of 2020‒05‒04
eight papers chosen by |
| By: | Gary Biglaiser; Jacques Crémer; André Veiga |
| Abstract: | We study incumbency advantage in markets with positive consumption externalities. Users of an incumbent platform receive stochastic opportunities to migrate to an entrant. They can accept a migration opportunity or wait for a future opportunity. In some circumstances, users have incentives to delay migration until others have migrated. If they all do so, no migration takes place, even when migration would have been Pareto-superior. This provides an endogenous micro-foundation for incumbency advantage. We use our framework to identify environments where incumbency advantage is larger. |
| Keywords: | platform migration, standardization and compatibility, industry dynamics |
| JEL: | D85 L14 R23 L15 L16 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_8185&r=all |
| By: | Borsenberger, Claire; Cremer, Helmuth; Joram, Denis; Lozachmeur, Jean-Marie; Malavolti, Estelle |
| Abstract: | This paper considers an e-commerce market wherein a vertically integrated marketplace competes downstream with a single retailer and upstream with an independent parcel delivery operator. Because of the information collected by the marketplace on customersíhabits and preferences, the integrated parcel delivery operator has lower delivery costs than its competitor. Products are di§erentiated according to the retailer and the parcel operator who delivers them. The representation of product di§erentiation is inspired by the Anderson, De Palma and Thisse (2002) discrete choice model. We study several scenarios each representing a speciÖc policy implemented to regulate the marketplace. The Örst one is a data sharing policy. The integrated marketplace has to share its information with the other delivery operator which in turn will lower this operatorís cost of delivering the marketplaceís product. The second one is vertical separation under which the parcel delivery operator previously owned and managed by the marketplace becomes independent. Finally we consider a full dismantlement scenario under which there is both vertical and horizontal separation. We show that the optimal policy is either complete dismantlement or data sharing. The relative impacts on consumer surplus and total welfare of these two options involve a tradeo§ between the increased competition implied by complete dismantling and the data related delivery cost advantage achieved under data sharing. When this cost advantage is small, completely dismantling dominates, while data sharing is the best policy when the cost advantage is large. |
| Keywords: | E-commerce, delivery operators, vertical integration, platform regulation, data sharing, dismantling |
| JEL: | L42 L81 L87 |
| Date: | 2020–05 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:124217&r=all |
| By: | Matthias Hunold; Johannes Muthers |
| Abstract: | We provide a theory of how RPM facilitate upstream cartels absent any information asymmetries using a model with manufacturer and retailer competition. Because retailers have an effective outside option to each manufacturer’s contract, the manufacturers can only ensure contract acceptance by leaving a sufficient margin to the retailers. This restricts the wholesale price level even when manufacturers collude. In this context, resale price maintenance may only be profitable for the manufacturers if they collude. We thus provide a novel theory of harm for resale price maintenance when manufacturers collude and illustrate the fit of this theory in various competition policy cases. |
| Keywords: | resale price maintenance, collusion, retailing. |
| JEL: | L41 L42 L81 |
| Date: | 2020–03 |
| URL: | http://d.repec.org/n?u=RePEc:jku:econwp:2020-06&r=all |
| By: | Pauline Affeldt; Tomaso Duso; Florian Szücs |
| Abstract: | We study the evolution of EC merger decisions over the first 25 years of common European merger policy. Using a novel dataset at the level of the relevant antitrust markets and containing all merger cases scrutinized by the Commission over the 1990-2014 period, we evaluate how consistently arguments related to structural market parameters – dominance, concentration, barriers to entry, and foreclosure – were applied over time and across different dimensions such as the geographic market definition and the complexity of the merger. Simple, linear probability models as usually applied in the literature overestimate on average the effects of the structural indicators. Using non-parametric machine learning techniques, we find that dominance is positively correlated with competitive concerns, especially in concentrated markets and in complex mergers. Yet, its importance has decreased over time and significantly following the 2004 merger policy reform. The Commission’s competitive concerns are also correlated with concentration and the more so, the higher the entry barriers and the risks of foreclosure. These patterns are not changing over time. The role of the structural indicators in explaining competitive concerns does not change depending on the geographic market definition. |
| Keywords: | merger policy, EU Commission, dominance, concentration, entry barriers, foreclosure, causal forests |
| JEL: | K21 L40 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_8213&r=all |
| By: | Kaganovich, Michael (Indiana University); Sarpca, Sinan (Koc University); Su, Xuejuan (University of Alberta, Department of Economics) |
| Abstract: | The structure and functioning of the market of higher education in the United States possess distinctive if not puzzling features such as the wide spectrum of institutional arrangements and sources of funding, stark segmentation in levels of selectivity and instructional resources, and high variance in tuition pricing across and within institutions, including price discrimination based on merit and ability to pay. At the same time, many fundamental questions, including what defines the quality of higher education and explains its (growing) cost continue to be debated. The Chapter surveys theoretical analyses addressing this range of issues. |
| Keywords: | Higher Education; Competition; Theories |
| JEL: | D40 I21 I22 I23 J24 |
| Date: | 2020–04–24 |
| URL: | http://d.repec.org/n?u=RePEc:ris:albaec:2020_003&r=all |
| By: | Eric Barrette; Gautam Gowrisankaran; Robert Town |
| Abstract: | While economic theories indicate that monopsony power by downstream firms can potentially counteract market power upstream, antitrust policy is opaque about whether to incorporate countervailing market power in merger analyses. We use detailed national claims data from the healthcare sector to evaluate whether insurer monopsony power does indeed limit hospitals' exercise of market power. We estimate willingness-to-pay models to evaluate hospital market power across analysis areas. We find that countervailing market power is important: a typical hospital merger would raise hospital prices 4.3% at the 25th percentile of insurer concentration but only 0.97% at the 75th percentile of insurer concentration. |
| JEL: | I11 I18 L11 L13 |
| Date: | 2020–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:27005&r=all |
| By: | Gastón Illanes; Sarah Moshary |
| Abstract: | We examine how market structure, measured as the number of firms, affects prices, quantities, product assortment, and consumer surplus. Our analysis exploits Washington’s deregulation of spirit sales, which generated exogenous variation in market structure across the state. Consistent with the uniform pricing literature, we find no effect of increased competition on prices. Rather, we document an expansion of product assortment, which in turn increases purchasing. Using a discrete-choice demand model, we estimate that wider assortments increase consumer surplus by $3.20/month when moving from monopoly to duopoly. However, the likelihood that a household engages in heavy drinking, as defined by the CDC, increases by 5.6 percentage points, raising concerns about social welfare. |
| JEL: | D43 D62 L43 L66 |
| Date: | 2020–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:27016&r=all |
| By: | Patty Duijm; Ilke van Beveren |
| Abstract: | We investigate the relationship between product diversification and performance in the Dutch property-liability (P&L) insurance industry for the period 2007-2018. We employ a two-step approach: we first investigate the drivers of diversification and, as a second step, we investigate the impact of diversification on risk and return. Our results suggest that the impact of diversification can be beneficial, as it reduces an insurer's risk. Diversification is however also associated with lower returns, while it is not significantly related to risk-adjusted returns. Furthermore, the impact of diversification on performance is contingent upon an insurer's size and its extent of diversification. |
| Keywords: | insurance companies; diversification; risk; performance |
| JEL: | G22 G3 L25 |
| Date: | 2020–03 |
| URL: | http://d.repec.org/n?u=RePEc:dnb:dnbwpp:677&r=all |