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on Industrial Organization |
| By: | Langinier, Corinne (University of Alberta, Department of Economics); Ray Chaudhuri, Amrita (University of Winnipeg) |
| Abstract: | When the antitrust authority has imperfect information about firms' costs, we show that all firms (including firms not participating in a merger) can influence the antitrust authority's merger decision by manipulating pre-merger quantities. As long as the antitrust authority engages in Bayesian updating, we find that there exists a clear relationship between the level of synergy generated by a given merger and the type of error in the merger decision that is more likely to occur. The larger the level of merger-induced synergy, the greater the likelihood of a Type II error whereby a consumer surplus-decreasing merger is allowed. The smaller the level of synergy, the greater the likelihood of a Type I error whereby a consumer surplus increasing merger is rejected. |
| Keywords: | Horizontal mergers; Asymmetric information; Competition policy; Cournot competition |
| JEL: | L13 L40 L41 |
| Date: | 2024–10–31 |
| URL: | https://d.repec.org/n?u=RePEc:ris:albaec:2024_009 |
| By: | Panle Jia Barwick; Myrto Kalouptsidi; Nahim B. Zahur |
| Abstract: | Industrial policy has been used throughout history in some form or other by most countries. Yet, it remains one of the most contentious issues among policymakers and economists alike. In part, this is because the empirical evidence on whether and how it should be implemented remains slim. Scant data on government subsidies, conflicting theoretical arguments, and the need to account for governments’ short and long-run objectives, render research particularly challenging. In this article, we outline a theory-based empirical methodology that relies on estimating an industry equilibrium model to measure hidden subsidies, assess their welfare consequences for the domestic and global economy, as well as evaluate the effectiveness of different policy designs. We illustrate this approach using the global shipbuilding industry as a prototypical example of an industry targeted by industrial policy, especially in periods of heavy industrialization. Just in the past century, Europe, followed by Japan, then South Korea, and more recently China, developed national shipbuilding programs to propel their firms to global leaders. Success has been mixed across programs, certainly by welfare metrics, and sometimes even by growth metrics. We use our methodology on China to dissect the impact of such programs, what made them more or less successful, and how we can justify why governments have chosen shipbuilding as a target. |
| JEL: | L50 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33043 |
| By: | Luis Aguiar; Joel Waldfogel; Axel Zeijen |
| Abstract: | Digitization has facilitated the emergence of large distribution platforms downstream from traditionally powerful suppliers. Digital platforms can carry many suppliers’ products, test the products’ consumer appeal, and choose which products to promote, potentially shifting power from the suppliers to the platforms. We study these forces in the recorded music industry, which was traditionally dominated by a few “major” record labels distributing their products through fragmented radio stations and retailers. Now, the majors receive most of their promotion and distribution through platforms like Spotify, which carry millions of songs from both major and “independent” suppliers. We study Spotify’s use of playlists using data covering 2017-2020. First, Spotify used their expanded playlist capacity to test – and discover – proportionately more independent songs to promote on their playlists. Second, at least relative to major-label playlists, Spotify-operated playlists promoted new independent songs more than was indicated by their subsequent success. Third, placement on Spotify new-music playlists has a large causal impact on streams. The independent-label share of new-music promotion rose from 38 percent in late 2017 to 55 percent in early 2020, which helps to explain the reported decline in the share of Spotify royalty payments to major-label suppliers over the same period. |
| JEL: | L13 L82 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33048 |
| By: | Langinier, Corinne (University of Alberta, Department of Economics); Ray Chaudhuri, Amrita (University of Winnipeg) |
| Abstract: | We analyze the impact of patent policies and emission taxes on green innovation. We allow for strategic interactions of firms in a duopolistic market in the presence of green conscious consumers. We identify a paradoxical effect of increasing emission taxes beyond a certain threshold which results in an increase in emissions. Decreasing patenting costs mitigates this paradox, while the impact of tightening patentability requirements is more complex. Moreover, we show that the greater the proportion of green-conscious consumers, the less likely firms are to license a green patent, which results in higher emissions levels. With green consumers, the lowest emissions occur for an intermediate range of taxes for which licensing does occur. Finally, we find that while tax increases lead to a switch from overinvestment to underinvestment in the absence of green conscious consumers, they have the reverse effect in their presence. |
| Keywords: | Patent; Green Innovation; Pollution |
| JEL: | L13 O34 Q50 |
| Date: | 2024–10–10 |
| URL: | https://d.repec.org/n?u=RePEc:ris:albaec:2024_007 |
| By: | OECD |
| Abstract: | This paper explores the role of competition and regulation in shaping the outcomes and consumer experiences of the care industry (early childhood care and long-term care). Both services are vital to economic and social well-being, particularly in light of demographic change and the cross-cutting implications for other aspects of the economy, such as women’s participation in the labour market. This paper analyses how competition and regulation can drive quality and market outcomes, whilst addressing market failures and equity concerns within the industry, to arrive at a conclusion on the role competition authorities can play. |
| Date: | 2024–10–30 |
| URL: | https://d.repec.org/n?u=RePEc:oec:dafaac:315-en |
| By: | C. Lanier Benkard; Przemyslaw Jeziorski; Gabriel Weintraub |
| Abstract: | This paper presents a new approach to modeling transitional dynamics in dynamic models of imperfect competition, a crucial yet often neglected aspect of empirical models in industrial organization that seek to understand market responses to policy and environmental changes. We introduce Nonstationary Oblivious Equilibrium (NOE), a computationally efficient equilibrium concept based on a mean-field approximation designed to model short- and medium-run market dynamics. Addressing potential limitations of NOE in more concentrated markets or under aggregate shocks, we propose a variant, NOE with Re-solving (RNOE). RNOE modifies firms' strategies by re-computing NOE as industry states get realized; an iterative process inspired by real-world industry practice that has behavioral appeal. We show the potential of NOE and RNOE by applying them to an empirical setting of technology adoption and to two classic dynamic oligopoly models, demonstrating that, in a wide variety of settings of empirical interest, they generate equilibrium behavior that is close to Markov perfect equilibrium in both the short and long runs. |
| JEL: | D43 L0 L13 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33045 |
| By: | Pablo Ottonello; Wenting Song; Sebastian Sotelo |
| Abstract: | We study the distribution of political speech across U.S. firms. We develop a measure of political engagement based on firms’ communications (earning calls, regulatory filings, and social media) by training a large language model to identify statements that contain political opinions. Using these data, we document five facts about firms’ political engagement: (1) Political engagement is rare among firms; (2) Political engagement is concentrated among large firms; (3) Firms tend to specialize in specific topics and outlets; (4) Large firms tend to engage in a wider set of topics and outlets; (5) The 2020 surge in firms’ political engagement was associated with an increase in the engagement of medium-sized firms and a change in the mix of political topics. |
| Keywords: | Firm dynamics; Market structure and pricing; Recent economic and financial developments |
| JEL: | D22 D63 G41 L11 L20 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:bca:bocawp:24-37 |