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on Industrial Organization |
| By: | Massimo Motta; Michele Polo |
| Abstract: | The paper analyzes the design of industrial policies, in the form of subsidies to innovation activity or to local production, when domestic firms are inefficient and there is a risk of supply-chain disruption. We first establish a case for research subsidies, since private investment (to improve the inferior technology) is lower than the socially optimal one. We next show the equivalence with subsidies to (inefficient) local production in case of intertemporal economies of scale. Then, within a general frame- work, we analyze profit and welfare maximizing investments and optimal subsidies in case of segmented markets and an integrated market organized as a duopoly, a monopoly or a research joint-venture. We show that research joint ventures or a public research center socially outperform the other environments since they benefit from a larger integrated market and a wider circulation of the innovation while preserving a competitive market. Finally, in large markets with significant technology gaps, it may be convenient to concentrate all the research in a single lab while maintaining a competitive market. |
| Keywords: | resilience, industrial policy |
| JEL: | L40 L52 O31 O32 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:bge:wpaper:1466 |
| By: | Hatsor, Limor; Hashimzade, Nigar; Jelnov, Artyom |
| Abstract: | Recent antitrust regulations in several countries have granted exemptions for col- lusion aimed at achieving environmental goals. Firms can apply for exemptions if collusion helps to develop or to implement costly clean technology, particularly in sec- tors like renewable energy, where capital costs are high and economies of scale are significant. However, if the cost of the green transition is unknown to the competition regulator, firms might exploit the exemption by fixing prices higher than necessary. The regulator faces the decision of whether to permit collusion and whether to commission an investigation of potential price fixing, which incurs costs. We fully characterise the equilibria in this scenario that depend on the regulator’s belief about the high cost of green transition. If the belief is high enough, collusion will be allowed. We also identify conditions under which a regulator’s commitment to always investigate price fixing is preferable to making discretionary decisions. |
| Keywords: | policy; antitrust; collusion; environment |
| JEL: | F0 G38 K21 Q52 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:122611 |
| By: | Demirer, Mert (MIT); Karaduman, Omer (Stanford U) |
| Abstract: | Using rich data on hourly physical productivity and thousands of ownership changes from U.S. power plants, we study the effects of acquisitions on efficiency and underlying mechanisms. We find a 2% average increase in efficiency for acquired plants, beginning five months after acquisitions. Efficiency gains rise to 5% under direct ownership changes, with no significant change when only parent ownership changes. Investigating the mechanisms, three-quarters of the efficiency gain is attributed to increased productive efficiency, while the rest comes from dynamic efficiency through changes in production allocation. Our evidence suggests that high-productivity firms buy underperforming assets from low-productivity firms and make them as productive as their existing assets through operational improvements. Finally, acquired plants improve their performance beyond efficiency by increasing output and reducing outages. |
| JEL: | G34 L22 L25 L40 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:ecl:stabus:4209 |
| By: | Doron Sayag (Department of Economics, Bar-Ilan University, Israel); Avichai Snir (Department of Economics, Bar-Ilan University, Israel); Daniel Levy (Department of Economics, Bar-Ilan University, Israel; Department of Economics, Emory University, USA; ICEA; ISET, TSU; Rimini Centre for Economic Analysis) |
| Abstract: | We study Israel’s “price rounding regulation” of January 1, 2014, which outlawed non-0-ending prices, forcing retailers to round 9-ending prices, which in many stores comprised 60%+ of all prices. The regulation’s goals were to eliminate (1) the rounding tax—the extra amount consumers paid because of price rounding (which was necessitated by the abolition of low denomination coins), and (2) the inattention tax—the extra amount consumers paid the retailers because of their inattention to the prices’ rightmost digits. Using 4 different datasets, we assess the government’s success in achieving these goals, focusing on fast-moving consumer goods, a category of products strongly affected by the price rounding regulation. We focus on the response of the retailers to the price rounding regulation and find that although the government succeeded in eliminating the rounding tax, the bottom line is that shoppers end up paying more, not less, because of the regulation, underscoring, once again, Friedman’s (1975) warning that policies should be judged by their results, not by their intentions. |
| Keywords: | Price Rounding Regulation, Rounding Tax, Inattention Penalty, Round Prices, 9-Ending Prices, Just-Below Prices, Inflation |
| JEL: | E31 K00 K20 L11 L40 L51 M30 |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:rim:rimwps:24-17 |
| By: | Gayle, Philip; Faheem, Adeel |
| Abstract: | The literature argues that Post and Hold (PH) laws facilitate tacit collusive price-setting behavior among suppliers of alcoholic beverages. Yet there is no explicit empirical test of this claim. We specify and estimate a structural model designed to identify the extent to which PH laws induce tacit collusive price-setting behavior among beer suppliers. Our estimates reveal evidence of PH law-induced collusive behavior that causes higher prices and lower consumption. Furthermore, we find that an alcohol content tax as a replacement for PH regulation yields the highest surplus to consumers compared to a sales tax or the PH regulation. |
| Keywords: | Post and Hold Regulation; Competitive Conduct; US Beer Industry; Externality; Corrective Tax Policy |
| JEL: | H21 H23 I18 K00 L13 L40 L66 |
| Date: | 2024–10–22 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:122541 |