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on Industrial Organization |
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Issue of 2021‒11‒22
six papers chosen by |
| By: | Werner, Tobias |
| Abstract: | As self-learning pricing algorithms become popular, there are growing concerns among academics and regulators that algorithms could learn to collude tacitly on non-competitive prices and thereby harm competition. I study popular reinforcement learning algorithms and show that they develop collusive behavior in a simulated market environment. To derive a counterfactual that resembles traditional tacit collusion, I conduct market experiments with human participants in the same environment. Across different treatments, I vary the market size and the number of firms that use a self-learned pricing algorithm. I provide evidence that oligopoly markets can become more collusive if algorithms make pricing decisions instead of humans. In two-firm markets, market prices are weakly increasing in the number of algorithms in the market. In three-firm markets, algorithms weaken competition if most firms use an algorithm and human sellers are inexperienced. |
| Keywords: | Artificial Intelligence,Collusion,Experiment,Human-Machine Interaction |
| JEL: | C90 D83 L13 L41 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:dicedp:372&r= |
| By: | Budzinski, Oliver; Mendelsohn, Juliane |
| Keywords: | big tech,digital economy,digital ecosystems,GAFAM,competition policy,antitrust,Digital Markets Act (DMA),sector-specific regulation,law and economics |
| JEL: | K21 K23 K24 L40 L50 L81 L86 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:tuiedp:154&r= |
| By: | Julian Schwierzy (Technical University of Munich) |
| Abstract: | The production flexibility of digital factories has the potential to revolutionise traditional manufacturing (TM) and thereby unlock a paradigm shift in production. In particular, the role of additive manufacturing (AM) technologies is gaining increased attention. Most experts consider AM as a complement to traditional manufacturing technologies. In this paper, I examine how the adoption of AM changes competition and how the coexistence with TM affects social welfare in the long-run. The results of my game-theoretical model indicate a decline in the number of companies with TM and an increase in market concentration. I show that the effect of AM adoption on prices and welfare depends on the cost structure of AM technologies. Unless the cost of AM is below a certain cut-off, its adoption is associated with a rise in prices and a decline in social welfare. The coexistence of both technologies in the same product market is therefore not necessarily beneficial for society. Based on these findings, I discuss policy implications for the stimulation of the digital transformation in the manufacturing industry. I argue that marginal cost reducing policy measures lead to a higher welfare effect than fixed cost reducing programmes. |
| Keywords: | Digital factories, Technology adoption, Market structure, Social welfare, Product differentiation, Digitalisation, Industrial Additive Manufacturing |
| JEL: | L11 L22 L23 O33 |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:aiw:wpaper:16&r= |
| By: | Stöhr, Annika |
| Abstract: | In this comprehensive review of ex-post merger studies price effects of horizontal transactions are evaluated. By combining and further analyzing the results of 52 retrospective studies on 82 mergers or merger-like transactions it can be shown that the industry alone is no strong indication for the direction of price-related merger effects. However, the "size" or "importance" of a transaction as well as market concentration pre-merger and change in concentration due to the transaction seem to have an impact on post-transaction price development. |
| Keywords: | Antitrust,Merger Control,Industrial Economics,Retrospective Studies,Ex-Post Studies,Competition Law Enforcement |
| JEL: | D49 K21 L13 L40 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:tuiedp:151&r= |
| By: | Alessandro Iaria, (University of Bristol and CEPR); Wang, Ao (University of Warwick) |
| Abstract: | We introduce a Generalized Nested Logit model of demand for bundles that can be estimated sequentially and virtually eliminates any challenge of dimensionality related to large choice sets. We use it to investigate quantity discounts for carbonated soft drinks by simulating a counterfactual with linear pricing. The prices of quantities up to 1L decrease by −31.5% while those of larger quantities increase by +14.8%. Purchased quantities decrease by −20.4%, associated added sugar by −23.8%, and industry profit by −20.5%. Consumer surplus however reduces only moderately, suggesting that linear pricing may be effective in limiting added sugar intake. |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:wrk:warwec:1378&r= |
| By: | Bertin Martens; Geoffrey Parker; Georgios Petropoulos; Marshall Van Alstyne |
| Abstract: | Our paper has benefitted from inspiring discussions with Erik Brynjolfsson, Luis Cabral, Rebecca Christie, Maria Demertzis, Erika Douglas, Nestor Duch-Brown, Justus Haucap, Jan Krämer , Maciej Sobolewski, Sebastian Steffen, Tommaso Valletti, Reinhilde Veugelers, Guntram Wolff as well as participants at Ascola 2021, Yale University’s Big Tech and Antitrust Conference 2020, OECD Competition Committee Hearing Dec. 2020, Bruegel, Digital Markets Competition Forum at Copenhagen Business School 16 June 2021, and the... |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:bre:wpaper:45784&r= |