|
on Regulation |
| By: | Marc Ivaldi (TSE - Toulouse School of Economics - UT1 - Université Toulouse 1 Capitole - Université Fédérale Toulouse Midi-Pyrénées - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Milena J Petrova (Unknown); Miguel Urdanoz (Unknown) |
| Abstract: | Airline alliances have a long history yet there is no academic consensus on how they affect price levels and their impact on price dispersion has not yet been studied. We address this question using a novel methodology motivated by the service homogenization and increased price competiton in this industry in the recent years. Establishing an equivalence between the online sales process and a reverse English auction, we use methods from auction econometrics to work in a new way with the standard industry data set: using individual ticket sales where only aggregated prices have been used in the past. Applicable to other industries where sellers compete in prices, this approach allows us to reconsider the effect of airline alliances on the distribution of airfares in the US domestic market. We find lower price mean and dispersion in markets where airlines belong to an alliance as a result of the lower variability of costs. The methodology we apply here can be used to study any distribution of individualized prices, which are now prevalent since the advent of the digital economy. |
| Keywords: | Airline,cooperation,auction,price dispersion,price distribution. |
| Date: | 2021–11–12 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03455506&r= |
| By: | Simon Martin; Wolfgang Benedikt Schmal |
| Abstract: | Sophisticated collusive compensation schemes such as assigning future market shares or direct transfers are frequently observed in detected cartels. We show formally why these schemes are useful for dampening deviation incentives when colluding firms are temporary asymmetric. The relative attractiveness of each of these schemes is shaped by firms’ ability to predict future market conditions, possibly aided by algorithms. Prices and profits are inverse u-shaped in prediction ability. Assigning future market shares is optimal when prediction ability is intermediate, and otherwise direct transfers are optimal. Competition authority's limited resources should be utilized to respond to these changing market conditions. |
| Keywords: | algorithmic collusion, market forecasting, prediction ability, firm asymmetry, compensation schemes |
| JEL: | D21 L41 L51 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_9481&r= |
| By: | Bent Flyvbjerg; Dirk W. Bester |
| Abstract: | Most cost-benefit analyses assume that the estimates of costs and benefits are more or less accurate and unbiased. But what if, in reality, estimates are highly inaccurate and biased? Then the assumption that cost-benefit analysis is a rational way to improve resource allocation would be a fallacy. Based on the largest dataset of its kind, we test the assumption that cost and benefit estimates of public investments are accurate and unbiased. We find this is not the case with overwhelming statistical significance. We document the extent of cost overruns, benefit shortfalls, and forecasting bias in public investments. We further assess whether such inaccuracies seriously distort effective resource allocation, which is found to be the case. We explain our findings in behavioral terms and explore their policy implications. Finally, we conclude that cost-benefit analysis of public investments stands in need of reform and we outline four steps to such reform. |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2112.03171&r= |
| By: | Bos, Iwan; Marini, Marco A.; Saulle, Riccardo |
| Abstract: | This paper examines capacity-constrained oligopoly pricing with sellers who seekmyopic improvements. We employ the Myopic Stable Set solution concept and establish the existence of a unique pure-strategy price solution for any given level of capacity. This solution is shown to coincide with the set of pure-strategy Nash equilibria when capacities are large or small. For an intermediate range of capacities, it predicts a price interval that includes the mixedstrategy support. This stability concept thus encompasses all Nash equilibria and offers a pure-strategy solution when there is none in Nash terms. It particularly provides a behavioral rationale for different pricing patterns, including Edgeworth price cycles and states of hyper-competition with supply shortages. We also analyze the impact of a change in firm size distribution. A merger among the biggest firms may lead to more price dispersion as it increases the maximum and decreases the minimum myopically stable price. |
| Keywords: | Bounded Rationality, Capacity Constraints, Mergers, Myopic Stable Set, Oligopoly Pricing, Supply Shortages |
| JEL: | C72 D43 L13 |
| Date: | 2021–12–16 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:111176&r= |
| By: | Wang, Xiaolei (Monash University) |
| Abstract: | We study a two-period duopoly model where firms gather consumer data from first period customers then use them for second-period personalized pricing, with a focus on active consumers who can bypass price discrimination with identity management (IM). As a result, IM weakens competition and allows firms to adopt perfect price discrimination which gives massive profit for firms in the personalized-pricing stage. Anticipating this, firms engage in below-cost pricing in the first stage to compete for consumer data. This strategy is similar to predatory pricing not only because of below-cost pricing but firms can also recoup losses later, however, we show that in this case below-cost pricing is driven by competition and beneficial to consumers. |
| Keywords: | Personalized pricing ; behavior-based price discrimination ; identity management JEL Classification: D43 ; L13 ; L5 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:wrk:wrkesp:08&r= |
| By: | Steffen, Nico; Wiewiorra, Lukas; Kroon, Peter |
| Abstract: | Digitale Technologien und datengetriebene Geschäftsmodelle haben zur Entstehung einer neuen Generation von Weltmarktführern geführt, die ihre Marktposition durch die Orchestrierung digitaler Plattformen und Ökosysteme aufgebaut haben und weiter festigen. Neue Möglichkeiten der Wertschöpfung für Nutzer haben damit auch zu neuen wettbewerbsrechtlichen und gesellschaftlichen Bedenken geführt. In dieser Studie wird anhand einer strukturierten Literaturanalyse die Literatur zur Plattform- und Datenökonomie systematisch analysiert und die Kernaussagen themenspezifisch zusammengefasst. Dabei wird zunächst die Entstehung des Plattformverständnisses von den Grundlagen hin zu aktuellen Weiterentwicklungen beschrieben. Die Literatur zeigt dabei eine Reihe von Besonderheiten von digitalen Plattformen, Geschäftsmodellen und Ökosystemen auf, die unter bestimmten Umständen Konzentrationstendenzen von traditionellen Plattformen noch verstärken können. Dazu gehören insbesondere Geschäftsmodelle, die auf komplexen Algorithmen und Datennutzung basieren und durch die neue Arten von Größen- und Verbundvorteilen entstehen und sich verfestigen können. Durch diese Komplexitäten werden auch etablierte regulatorische Interventionen und Abläufe vor neue Herausforderungen gestellt. Bereits die Abgrenzung von relevanten Märkten sowie die Bestimmung von Marktmacht und möglichen Machtmissbräuchen können in dynamischen, strukturell vernetzten digitalen Märkten und Wertschöpfungsbereichen fehlschlagen. Neben aktuellen Ansätzen für Markt- und Dominanzbestimmungen werden eine Reihe von potentiell wettbewerbsschädigenden Praktiken und Konstellationen analysiert, wie z. B. Selbstbevorzugung, horizontale und vertikale Doppelrollen oder datengetriebene Übernahmestrategien. Dabei werden jeweilige Abhilfemaßnahmen, aber auch deren mögliche unerwünschte Nebeneffekte, diskutiert und abschließend der europäische Digital Markets Act (DMA) und andere neue internationale Regulierungsrahmen verglichen, deren finale Implementierung in vielen Ländern für das Jahr 2022 erwartet wird. |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:wikdps:481&r= |
| By: | Benedict Guttman-Kenney; Christopher Firth; John Gathergood |
| Abstract: | We show consumers taking out buy now, pay later (BNPL) - an interest-free FinTech product enabling consumers to defer payments into instalments - commonly charge instalments to their credit card (a higher interest rate product). We find $19.5\%$ of credit cardholders in our UK transactions data charged at least one BNPL instalment to their credit card in 2021: a practice $24\%$ more prevalent in the most deprived geographies and among younger consumers. Our analysis provides an example of how consumer financial protection regulators can use real-time transactions data to monitor markets and evaluate potential risks - especially (largely) unregulated, financial innovations such as BNPL. |
| Date: | 2022–01 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2201.01758&r= |
| By: | Akshaya Jha ⓡ; Louis Preonas ⓡ; Fiona Burlig ⓡ |
| Abstract: | Blackouts impose substantial economic costs in developing countries. This paper advances a new explanation for their continued prevalence: unlike in high-income countries, where regulatory mandates require utilities to satisfy all electricity demand, utilities in developing countries respond to wholesale electricity prices. As a result, misallocation of output across power plants can decrease the quantity of electricity supplied to end-users. We provide empirical support for this explanation using novel data from India, home to the world’s third-largest electricity sector. In contrast to the developed world, we find that Indian wholesale demand is downward-sloping. Reducing supply-side misallocation would increase electricity supply for the average household by 1.7 percent (enough to power 4.6 million additional households). Justifying a mandate that utilities must satisfy all end-use demand would require consumers to value electricity far above the cost of diesel backup generation. However, such a mandate would likely be cost-effective if paired with supply-side reforms. |
| JEL: | L94 O13 Q41 |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29610&r= |
| By: | Olukunle O. Owolabi; Toryn L. J. Schafer; Georgia E. Smits; Sanhita Sengupta; Sean E. Ryan; Lan Wang; David S. Matteson; Mila Getmansky Sherman; Deborah A. Sunter |
| Abstract: | The U.S. electrical grid has undergone substantial transformation with increased penetration of wind and solar -- forms of variable renewable energy (VRE). Despite the benefits of VRE for decarbonization, it has garnered some controversy for inducing unwanted effects in regional electricity markets. In this study, we examine the role of VRE penetration on the system electricity price and price volatility based on hourly, real-time, historical data from six Independent System Operators in the U.S. using quantile and skew t-distribution regressions. After correcting for temporal effects, we observe a decrease in price, with non-linear effects on price volatility, for an increase in VRE penetration. These results are consistent with the modern portfolio theory where diverse volatile assets may lead to more stable and less risky portfolios. |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2112.11338&r= |
| By: | Anders Aslund |
| Abstract: | Thirty years after the collapse of the Soviet Union, it is rather clear what transition policies have worked. Almost all the post-communist countries have become market economies and have achieved macroeconomic stability. Privatization was economically necessary, and its economic outcomes have been very positive. Alas, politically, these successes have often been unsustainable because of strong popular sentiments against the private ownership of big enterprises. Substantial renationalization has occurred. What went wrong? How could privatization be done better, or be defended? What should be done to defend private enterprise in the future? This paper argues that the nature of privatization is far less important than the establishment of good rule of law so that private property rights can be defended. |
| Keywords: | Eastern Europe, former Soviet Union, post-communist transformation, market economy, privatization |
| JEL: | P20 P26 P30 P31 K00 K42 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:sec:worpap:0016&r= |
| By: | Vincent A.C. van den Berg (Vrije Universiteit Amsterdam); Henk Meurs (Radboud University); Erik T. Verhoef (Vrije Universiteit Amsterdam) |
| Abstract: | Travellers often combine transport services from different firms to form trip chains: e.g. first taking a train and then a bus. Integration of different forms of public and private transport into a single service is gaining attention with the concept of Mobility as a Service (MaaS). Usually the attention focuses on such things as ease of use for travellers and shifting demand away from the car. We focus on the effects of MaaS on behaviour and welfare via the market structure of transportation. In particular, we analyse three archetypical ways in which MaaS could be operationalised: Integrator, Platform, and Intermediary. |
| Keywords: | MaaS, market structure, platform, intermediary, integrator, regulation |
| JEL: | R4 D21 D43 |
| Date: | 2022–01–17 |
| URL: | http://d.repec.org/n?u=RePEc:tin:wpaper:20220002&r= |
| By: | Calzolari, G.; Felli, L.; Koenen, J.; Spagnolo, G.; Stahl, K. O. |
| Abstract: | We study how informal buyer-supplier relationships in the German automotive industry affect procurement. Using unique data from a survey focusing on these, we show that more trust, the belief that the trading partner acts to maintain the mutual relationship, is associated with both higher quality of the automotive parts and more competition among suppliers. Yet both effects hold only for parts involving unsophisticated technology, not when technology is sophisticated. We rationalize these findings within a relational contracting model that critically focuses on changes in the bargaining power, due to differences in the costs of switching suppliers. |
| Keywords: | Relational Contracts, Hold-up, Buyer-Supplier Contracts, Bargaining Power |
| JEL: | D86 L14 L62 O34 |
| Date: | 2021–08–02 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camjip:2101&r= |
| By: | Hunold, Matthias; Schlütter, Frank (Université catholique de Louvain, LIDAM/CORE, Belgium) |
| Abstract: | With forward ownership, an upstream supplier internalizes the effect of its supply contracts on the downstream firms, which is so far understood to decrease prices. We show that instead downstream prices generally increase if firms use two-part tariffs. The price-increasing effect of forward ownership occurs with both observable and secret two-part tariffs, albeit for different economic reasons. The results arise under both quantity and price competition as well as for different belief refinements. Partial forward ownership can be more profitable and more harmful for consumers than a full vertical merger between an upstream and a downstream firm. |
| Keywords: | Vertical relations ; minority shareholding ; partial forward ownership |
| JEL: | L22 L40 L8 |
| Date: | 2022–01–01 |
| URL: | http://d.repec.org/n?u=RePEc:cor:louvco:2022003&r= |
| By: | Vazquez, Antonio B. (Mistra Center for Sustainable Markets (Misum)); Martinez, Sofia (Stockholm School of Economics) |
| Abstract: | We examine the effects of an ESG reporting mandate on firms’ corporate performance. Exploiting discontinuous ESG reporting requirements assigned to otherwise similar small and large-sized private firms, we document that ESG reporting increases firms’ corporate performance. Our evidence suggests that the mandate helps firms establishing a credible commitment with employees and customers, which allows them to enjoy higher performance. Our results are robust to a matched sample, a mixed difference-in-differences and regression discontinuity setting and to the use of alternative thresholds of ESG reporting. We contribute to the literature by providing evidence that suggests private firms benefit from reporting non-financial information. |
| Keywords: | private firms; mandatory ESG reporting; regression discontinuity design; difference-in-differences design |
| JEL: | G38 K22 M14 M41 M48 |
| Date: | 2022–01–10 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:hamisu:2022_005&r= |
| By: | James Albrecht; Guido Menzio; Susan Vroman |
| Abstract: | We consider a version of the imperfect competition model of Butters (1977), Varian (1980) and Burdett and Judd (1983) in which sellers make an ex-ante investment in the quality of their variety of the product. Equilibrium exists, is unique and is efficient. In equilibrium, search frictions not only cause sellers to offer different surpluses to buyers but also cause sellers to choose different qualities for their varieties. That is, equilibrium involves endogenous vertical differentiation. As search frictions decline, the market becomes more and more unequal as a smaller and smaller fraction of sellers produces varieties of increasing quality, offers increasing surplus to their customers, and captures an increasing share of the market, while a growing fraction of sellers produces varieties of decreasing quality. Gains from trade and welfare grow. Under some conditions, the growth rate of gains from trade and welfare is constant. |
| JEL: | D43 D83 L13 O40 |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29618&r= |
| By: | Hirose, Kosuke; Matsumura, Toshihiro |
| Abstract: | We theoretically investigate how common ownership (or the extent of collusion in an industry) affects firms' voluntary commitment with emission restrictions and emissions abatement activities in an oligopoly. We find that common ownership reduces emissions by reducing output, and may stimulate emissions abatement activities if the degree of common ownership is small. However, significant common ownership always reduces emissions abatement activities. Additionally, common ownership may or may not improve welfare, depending on the implicit carbon cost. |
| Keywords: | corporate social responsibility, anticompetitive effect, voluntary emissions cap, emissions abatement |
| JEL: | L13 M14 Q57 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:111120&r= |
| By: | Loïc Bonneval (CMW - Centre Max Weber - CNRS - Centre National de la Recherche Scientifique - ENS Lyon - École normale supérieure - Lyon - UL2 - Université Lumière - Lyon 2 - UJM - Université Jean Monnet [Saint-Étienne]); Florence Goffette-Nagot (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - ENS Lyon - École normale supérieure - Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - UJM - Université Jean Monnet [Saint-Étienne] - Université de Lyon - CNRS - Centre National de la Recherche Scientifique); Zhejin Zhao (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - ENS Lyon - École normale supérieure - Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - UJM - Université Jean Monnet [Saint-Étienne] - Université de Lyon - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | This paper reexamines the debated issue of the effects of rent control policy on the rental market. We investigate the impact on rents of three different forms of rent regulation in Lyon over a 78-year period. We use an original historical data set which allows us to track regulation changes, rent paid, and tenant moves for a long-run panel of flats. Using a difference-in-differences method, we estimate the impact of regulation on rents depending on the type of rent control over different economic periods. Our results show that the impact of rent control deepened over time. Starting with an 11% reduction in rents between 1914 and 1929, it reached a decrease by 47% in the regulated rental market in the 1949–1968 period. We do not find any increase in rents in the unregulated segment of the rental market, which could be a result of a reduction in housing investment in the long run. |
| Keywords: | Rent control,Housing policy,Difference-in-differences |
| Date: | 2021–11–08 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:halshs-03465125&r= |