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on Industrial Organization |
| By: | Andrew J. Hinchberger; Mark R. Jacobsen; Christopher R. Knittel; James M. Sallee; Arthur A. van Benthem |
| Abstract: | The marginal cost of electricity fluctuates hour-by-hour, yet retail customers typically face flat prices. Using data from all seven US wholesale markets and a new method to evaluate alternative rates set in advance that accounts for equilibrium price effects, we estimate efficiency gains from time-varying price schedules that better align price with cost. We have three main results. First, time-of-use rates and critical-peak pricing, the two most common time-varying rate plans, each correct about 10% of mispricing. Second, complex rate structures based on historical prices often backfire. Third, real-time pricing with price ceilings can capture most potential efficiency gains while limiting customer risk. |
| JEL: | L94 L97 Q41 Q48 |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:32995 |
| By: | Daniel Davi-Arderius; Tooraj Jamasb |
| Keywords: | Energy-only market, day-ahead electricity markets, negative prices, renewables, decarbonisation, ancillary services |
| JEL: | D47 L10 L22 L50 L94 |
| Date: | 2024–08 |
| URL: | https://d.repec.org/n?u=RePEc:enp:wpaper:eprg2413 |
| By: | Congressional Budget Office |
| Abstract: | CBO discusses the factors underlying prescription drug prices and examines a set of policy approaches aimed at reducing those prices. Some of the approaches that CBO examined aim to reduce prices by capping them or limiting their growth; others would reduce prices by promoting price competition or affecting the flow of information. |
| JEL: | I11 I18 L65 O31 |
| Date: | 2024–10–04 |
| URL: | https://d.repec.org/n?u=RePEc:cbo:report:58793 |
| By: | Riku Watanabe (Graduate School of Economics, Osaka University) |
| Abstract: | This study examines how corporate social responsibility (CSR) practices by oligopolistic firms impact pollution levels in a steady state. I develop a dynamic game model for polluting firms that adopt CSR. The analysis reveals that a firm’s CSR awareness drives its production strategy to align with the socially optimal level in both open-loop Nash equilibrium and Markov perfect Nash equilibrium. Achieving this social optimum is possible if firms are fully committed to CSR. The study explores two scenarios: excess pollution or underproduction, which depend on the pollutant’s impact on utility. Notably, when the pollutant’s damage to utility is significant, even a modest commitment to CSR can effectively reduce excessive pollution. These findings offer valuable insights for government policy, suggesting that stringent environmental regulations might be less necessary if firms are attentive to CSR. |
| Keywords: | Corporate social responsibility; Pollution; Oligopoly; Differential games |
| JEL: | H41 L13 Q20 |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:osk:wpaper:2410 |
| By: | Harry O'Rahilly (Department of Economics and School of Politics and International Relations, University College Dublin, Dublin, Ireland); Patrick Paul Walsh (Department of Economics and School of Politics and International Relations, University College Dublin, Dublin, Ireland) |
| Abstract: | We model the retail motor fuel market in Ireland in a two-stage market entry game, with exogenous sunk costs in stage one, and price competition with horizontal product differentiation in stage two, utilizing Salop (1979). Using GIS tools, we show how driving times, benchmarked against road distance and straight-line measures, alter estimates of the disutility of traveling between rival locations. We estimate a robust and unbiased long-run equilibrium relationship between mark-ups and market structure, identified by driving times between locations to conduct an ex-post evaluation of a merger and divestment remedies in the retail motor fuel market in Ireland. |
| Keywords: | Market Structure, Performance; Spatial Econometrics |
| JEL: | L10 L38 |
| Date: | 2024–09–19 |
| URL: | https://d.repec.org/n?u=RePEc:ucd:wpaper:202404 |
| By: | Galeotti, A.; Golub, B.; Goyal, S.; Talamas, E.; Tamuz, O. |
| Abstract: | A large differentiated oligopoly yields inefficient market equilibria. An authority with imprecise information about the primitives of the market aims to design tax/subsidy interventions that increase efficiency robustly—i.e., with high probability. We identify a condition on demand that guarantees the existence of such interventions, and we show how to construct them using noisy estimates of demand complementarities and substitutabilities across products. The analysis works by deriving a novel description of the incidence of market interventions in terms of spectral statistics of Slutsky matrices. Our notion of recoverable structure ensures that parts of the spectrum that are useful for the design of interventions are statistically recoverable from noisy demand estimates. |
| Date: | 2024–10–02 |
| URL: | https://d.repec.org/n?u=RePEc:cam:camdae:2456 |
| By: | Bartelsman, Eric (Vrije Universiteit Amsterdam); Dobbelaere, Sabien (Vrije Universiteit Amsterdam); Mattioli, Alessandro Zona (Vrije Universiteit Amsterdam) |
| Abstract: | This paper provides evidence from a natural experiment on the importance of workers' tacit knowledge about firms' intangible assets for competition in product and labor markets. Evidence is presented on product and labor market imperfections across manufacturing and services firms in the Netherlands. Price-cost markups and wage markups are both shown to be positively related to intangible intensity at the firm level. A model is developed of the processes of intangible investment and wage bargaining of heterogeneous firms, providing a mechanism that relates workers' tacit knowledge to firm-level product and labor market imperfections. The model also incorporates a role for non-compete agreements (NCAs) limiting worker mobility. Our main empirical contribution comes from using linked employer-employee panel data with information on NCAs and changes in enforceability of these agreements. Using an event-study framework, we demonstrate that the removal of NCAs leads to higher wages and worker mobility, especially for workers in intangible-intensive firms. We find that NCAs affect workers across the skill distribution. The causal findings from changes in the legality of NCAs correspond with the mechanism described in the model. |
| Keywords: | price-cost markups, rent sharing, technology, tacit knowledge, non-compete agreements |
| JEL: | J41 L10 M52 |
| Date: | 2024–08 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17260 |
| By: | Xinyao Kong; Jean-Pierre H. Dubé; Øystein Daljord |
| Abstract: | We study habitual brand loyalty, one of the earliest empirically-studied forms of switching costs and a classic source of structural state-dependence in consumer demand. Auxiliary instruments and economically-motivated restrictions can tighten nonparametric bounds on the extent of brand loyalty in choice panel data. We also prove that the canonical dynamic discrete-choice model, nested in our nonparametric framework, has “built-in” exclusion restrictions that semiparametrically identify the discount factor, in general, and point identify it for standard parameterizations of switching costs. Case studies of several large consumer goods categories show that brand loyalty accounts for at least 10.8% but no more than 72.2% of the observed choices across categories studied. In some categories, it accounts for over 90% of observed repeat-purchase behavior. Consumers are found to be forward-looking, but more impatient than would be implied by the real rate of interest. |
| JEL: | D11 D12 L66 M3 |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:32994 |