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on Industrial Organization |
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Issue of 2021‒07‒26
six papers chosen by |
| By: | Gaurab Aryal; Federico Zincenko |
| Abstract: | We propose an empirical framework for Cournot oligopoly with private information about costs. First, considering a linear demand with a random intercept, we characterize the Bayesian Cournot-Nash equilibrium and determine its testable implications. Then we establish nonparametric identification of the joint distribution of demand and technology shock and firm-specific cost distributions. Finally, we propose a likelihood-based estimation method and apply it to the global crude oil market. Using counterfactuals, we also quantify the effect of firms sharing information about their costs on consumer welfare. We also extend the model to include either firm-specific conduct parameters, nonlinear demand, or selective entry. |
| Date: | 2021–06 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2106.15035&r= |
| By: | Antoine Dubus (Télécom ParisTech) |
| Abstract: | This article analyzes behavior-based price discrimination in a two-period competition framework where firms endogenously collect consumer data and strategically target past customers. When firms strategically target customers: (i) they price-discriminate high valuation customers; (ii) they charge a homogeneous price to low valuation customers, even when they have precise information on them. Strategic targeting questions the main classical results of the literature: in a symmetric equilibrium firms do not compete for customer information acquisition and there is no consumer poaching. Sufficiently asymmetric data collection costs can restore previous results of the literature, and we discuss their implications for firms' data strategies and competition in digital markets. |
| Keywords: | Behavior-based price discrimination,Strategic Targeting,Data collection |
| Date: | 2021–06–24 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-03269586&r= |
| By: | Paul L. E. Grieco; Charles Murry; Ali Yurukoglu |
| Abstract: | We construct measures of industry performance and welfare in the U.S. car and light truck market from 1980-2018. We estimate a differentiated products demand model for this market using product level data on market shares, prices, and product characteristics, and consumer level data on demographics, purchases, and stated second choices. We estimate marginal costs under the conduct assumption of Nash-Bertrand pricing. We relate trends in consumer welfare and markups to industry trends in market structure and the composition of products, like the rise of import competition, the proliferation of SUV's, and changes in vehicle characteristics. We find that although prices rose over time, concentration and market power decreased substantially. Consumer welfare increased over time due to improving product quality and falling marginal costs. The fraction of total surplus accruing to consumers also increased. |
| JEL: | L1 L40 L62 |
| Date: | 2021–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29013&r= |
| By: | Luis Aguiar; Joel Waldfogel; Sarah B. Waldfogel |
| Abstract: | Platforms are growing increasingly powerful, raising questions about whether their power might be exercised with bias. While bias is inherently difficult to measure, we identify a context within the music industry that is amenable to bias testing. Our approach requires ex ante platform assessments of commercial promise - such as the rank order in which products are presented - along with information on eventual product success. A platform is biased against a product type if the type attains greater success, conditional on ex ante assessment. Theoretical considerations and voiced industry concerns suggest the possibility of platform biases in favor of major record labels, and industry participants also point to bias against women. Using data on Spotify curators' rank of songs on New Music Friday playlists in 2017, we find that Spotify's New Music Friday rankings favor independent-label music, along with some evidence of bias in favor of music by women. Despite challenges that independent-label artists and women face in the music industry, Spotify's New Music curation appears to favor them. |
| JEL: | K21 L12 L82 |
| Date: | 2021–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29017&r= |
| By: | Kevin R. Williams |
| Abstract: | Airfares fluctuate due to demand shocks and intertemporal variation in willingness to pay. I estimate a model of dynamic airline pricing accounting for both sources of price adjustments using novel flight-level data. I use the model estimates to evaluate the welfare effects of dynamic airline pricing. Relative to uniform pricing, dynamic pricing benefits early-arriving, leisure consumers at the expense of late-arriving, business travelers. Although dynamic pricing ensures seat availability for business travelers, these consumers are then charged higher prices. When aggregated over markets, welfare is higher under dynamic pricing than under uniform pricing. The directionality of the welfare effect at the market level depends on whether dynamic price adjustments are mainly driven by demand shocks or by changes in the overall demand elasticity. |
| JEL: | L11 L12 L93 |
| Date: | 2021–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28989&r= |
| By: | Gorecki, Paul |
| Abstract: | Since 2017 Ireland’s competition agency, the Competition and Consumer Protection Commission (CCPC), has cleared two merger to monopoly transactions, albeit both subject to the divestment of selected assets to an entrant. One of these transactions was Kantar Media’s 2017 acquisition of Newsaccess. Prior to 2017 the CCPC had prohibited mergers to monopoly. Does this apparent relaxation mark a sea change in CCPC merger policy? Taking the Kantar Media/Newsaccess merger as a case study, the paper explores this question. The paper finds that there has been a relaxation of merger enforcement by the CCPC. On an ex ante basis the Kantar Media/Newsaccess merger should have been prohibited or the remedy substantially strengthened. However, ex post, due to business difficulties of the merger entity consequent upon a major pre-merger restructuring, the market has self-corrected through successful entry facilitated in large part by these business difficulties. Such rapid self-correction in restoring competition is very much the exception rather than the rule. If it were otherwise there would be no need for merger control. |
| Keywords: | Ireland; merger control; structural remedies; substantial lessening of competition; ex post evaluation; Competition Act 2002. |
| JEL: | D22 K21 L41 |
| Date: | 2021–07–11 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:108743&r= |