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on Industrial Competition |
| By: | Jorge Florez-Acosta (Universidad del Rosario - Universidad del Rosario); Daniel Herrera-Araujo (PSE - Paris-Jourdan Sciences Economiques - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics) |
| Abstract: | This paper empirically examines the effects of product delisting on consumer shopping behavior in a context of grocery retailing by large multiproduct supermarket chains. A product is said to be delisted when a supermarket stops supplying it while it continuous being sold by competing stores. We develop a model of demand in which consumers can purchase multiple products in the same period. Consumers have heterogeneous shopping patterns: some find it optimal to concentrate purchases at a single store while others prefer sourcing several separate supermarkets. We account for this heterogeneity by introducing shopping costs, which are transaction costs of dealing with suppliers. Using scanner data on grocery purchases by French households in 2005, we estimate the parameters of the model and retrieve the distribution of shopping costs. We find a total shopping cost per store sourced of 1.79 e on average. When we simulate the delisting of a product by one supermarket, we find that customers’ probability of sourcing that store decreases while the probability of sourcing competing stores increases. The reduction in demand is considerably larger when consumers have strong feelings of loyalty for the delisted brand. This suggests that retailers may be hurting themselves, and not only manufacturers, when they delist a product. However, when customers are loyal to the store, such effects are lower, suggesting that inducing store loyalty in customers (through strong private labels and loyalty programs, for example) appears to have an effect on vertical negotiations and, in particular, it enables powerful retailers to impose vertical restraints on manufacturers. |
| Keywords: | Grocery retailing, supermarket chains, buyer power, vertical,restraints, product delisting, shopping costs, one-and multistop shopping,Simulated Maximum likelihood, D12, L13, L22, L81 |
| Date: | 2017–02 |
| URL: | http://d.repec.org/n?u=RePEc:hal:psewpa:halshs-01467435&r=com |
| By: | Antoine Mandel (PSE - Paris School of Economics, CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique); Herbert Gintis (Santa Fe Institute) |
| Abstract: | We introduce, in the standard exchange economy model, market games in which agents use private prices as strategies. We give conditions on the game form that ensure that the only strict Nash equilibria of the game are the competitive equilibria of the underlying economy. This equivalence result has two main corollaries. First, it adds to the evidence that competitive equilibria can be strategically stable even in small economies. Second, it implies that competitive equilibria have good local stability properties under a large class of evolutionary learning dynamics. |
| Keywords: | General equilibrium, Market games, Stability, Computational economics, Evolutionary game theory |
| Date: | 2016–03–01 |
| URL: | http://d.repec.org/n?u=RePEc:hal:pseose:halshs-01296646&r=com |
| By: | Stanislao Gualdi (CentraleSupélec); Antoine Mandel (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics) |
| Abstract: | We propose a simple dynamical model for the formation of production networks among monopolistically competitive firms. The model subsumes the standard general equilibrium approach à la Arrow–Debreu but displays a wide set of potential dynamic behaviors. It robustly reproduces key stylized facts of firms׳ demographics. Our main result is that competition between intermediate good producers generically leads to the emergence of scale-free production networks. |
| Keywords: | General equilibrium,Production network, Scale-free networks, Firms demographics, Distribution of firms׳ size, Monopolistic competition |
| Date: | 2016–10–15 |
| URL: | http://d.repec.org/n?u=RePEc:hal:pseose:halshs-01387547&r=com |
| By: | Jean-François Houde; Peter Newberry; Katja Seim |
| Abstract: | We examine the economies of density associated with the expansion of Amazon’s distribution network from 2006 to 2018. We demonstrate that, in placing a fulfillment center in a new state, Amazon faces a trade-off between the revenue implications of exposing local customers to sales tax on their purchases and the cost savings from reducing the shipping distance to those customers. Using detailed data on online transactions, we estimate a model of demand for retail goods and show that consumers’ online shopping is sensitive to sales taxes. We then use the demand estimates and the spatial distribution of consumers relative to Amazon’s fulfillment centers to predict revenues and shipping distances under the observed fulfillment center roll-out and under counterfactual roll-outs over this time period. Using a moment inequalities approach, we infer the cost savings from being closer to customers that render the observed network roll-out optimal. We find that Amazon saves between $0.17 and $0.47 for every 100 mile reduction in the distance of shipping goods worth $30. In the context of its distribution network expansion, this estimate implies that Amazon has reduced its total shipping cost by over 50% and increased its profit margin by between 5 and 14% since 2006. Separately, we demonstrate that prices on Amazon have fallen by approximately 40% over the same period, suggesting that a significant share of the cost savings have been passed on to consumers. |
| JEL: | H71 L23 L81 |
| Date: | 2017–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:23361&r=com |
| By: | Cuiabano, Simone; Nicolini de Moraes, João Carlos; Pinha, Lucas |
| Abstract: | A key issue in the analysis of mergers in antitrust is the relevant market definition. The application of time-series techniques can be useful in this process, since only prices are required for the analysis, allowing for relatively rapid estimates. The objective of this work is to make an overview of the main time-series techniques used in the delineation of the relevant markets and make a qualitative analysis of the votes and technical notes of the cases involving the discussion of the application of time series in the relevant market definition submitted to the Brazilian Antitrust Authority (CADE). In this analysis, despite of its importance, there is a clear need for a careful assessment so the model can deliver robust and believable results. In addition, the importance of the hypothetical monopolist test and simulation methodologies for merger impact analysis are hardly replaced by time series techniques accordingly to Cade’s recent decisions. |
| JEL: | C22 K21 L40 |
| Date: | 2017–05 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:31666&r=com |
| By: | Philippe Gagnepain (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics); David Martimort (PSE - Paris-Jourdan Sciences Economiques - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics) |
| Abstract: | We propose merger guidelines for bidding markets through the construction of a simple test. It is applied in the particular context of the French urban transport industry. It designs the optimal auction and captures two opposite forces at stake: on the one hand, the optimal auction is biased against a merger due to a loss of competition; on the other hand, potential efficiency gains bias the optimal allocation towards the merger firm. The two effects can be nested in a single equation condition which determines whether the merger improves the consumer net surplus. We suggest that the merger between Transdev and Veolia is consumer surplus improving if the efficiency gains from the merger allow both firms to decrease their initial costs inability by at least 17.9% and 17.8% respectively. |
| Keywords: | transports publics urbains |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:hal:pseose:hal-01314036&r=com |
| By: | Elena Argentesi; Albert Banal-Estanol; Jo Seldeslachts; Meagan Andrews |
| Abstract: | We present an ex-post analysis of the effects of GDF’s acquisition of Suez in 2006 created one of the world’s largest energy companies. We perform an econometric analysis, based on Difference-in-Difference techniques on the market for trading on the Zeebrugge gas hub in Belgium. Removing barriers to entry and facilitating access to the hub through ownership unbundling were an important part of the objectives of the remedies imposed by the European Commission. Our analysis shows a price decline after the merger. This decline suggests the remedies were effective in limiting the potential anti-competitive effects of the merger. Moreover, it suggests that ownership unbundling has generated improved access to the hub. Therefore, the remedies may have done more than simply mitigate the potential anticompetitive effects of the merger; they may have effectively created competition. |
| Keywords: | Mergers, ex-post evaluation, gas sector, hub prices |
| JEL: | L4 Q4 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp1664&r=com |
| By: | Hattori, Masahiko; Tanaka, Yasuhito |
| Abstract: | We investigate a choice of options for a foreign innovating firm to license its technology for producing the high quality good to a domestic incumbent firm or to enter the domestic market with or without license under vertical differentiation with convex cost functions. If cost functions are non-linear, the domestic market and the foreign market are not separated, and the results depend on the relative size of those markets. We consider product innovation as quality improvement of goods not process innovation such as cost-reducing. If the size of the foreign market is small, the foreign innovating firm chooses license with entry strategy, and if the foreign market is not small, it chooses license without entry strategy. |
| Keywords: | license with or without entry; convex cost function; vertical differentiation |
| JEL: | D43 L13 |
| Date: | 2017–05–07 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:78995&r=com |
| By: | Hattori, Masahiko; Tanaka, Yasuhito |
| Abstract: | We consider a choice of options for a foreign innovating firm to license its new cost-reducing technology to a domestic incumbent firm or to enter the domestic market with or without license under convex cost functions. With convex cost functions the domestic market and the foreign market are not separated, and the results depend on the relative size of those markets. In a specific case with linear demand and quadratic cost, entry without license strategy is never the optimal strategy for the innovating firm; if the ratio of the size of the foreign market relatively to the domestic market is small, license with entry strategy is optimal; and if the ratio of the size of the foreign market relatively to the domestic market is not small, license without entry strategy is optimal. |
| Keywords: | license with or without entry, duopoly, foreign and domestic markets, foreign innovating firm |
| JEL: | D43 L13 |
| Date: | 2017–05–07 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:78996&r=com |
| By: | Hattori, Masahiko; Tanaka, Yasuhito |
| Abstract: | We examine the relationship between the definition of license fee and a possibility of negative royalty in a duopoly with an outside innovator which has an option to enter the market and imposes a combination of a royalty per output and a fixed fee under general demand and cost functions. We consider two scenarios about determination of license fee. One is a scenario which does not assume entry of the innovator, and the other is a scenario which takes a possibility of entry of the innovator into the market. We will show that the optimal royalty rate for the innovator in the former case is smaller than that in the latter case, and the sign of the optimal royalty rate depends on whether the goods of firms are strategic substitutes or strategic complements. |
| Keywords: | negative royalty, duopoly, general demand and cost functions |
| JEL: | D43 L13 |
| Date: | 2017–05–07 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:79000&r=com |
| By: | Hattori, Masahiko; Tanaka, Yasuhito |
| Abstract: | When an outside innovating firm has a technology to produce a higher quality good than the good produced at present, it can sell licenses of its technology to incumbent firms, or enter the market and at the same time sell licenses, or enter the market without license. We examine the definitions of license fee in such a situation in an oligopoly with three firms under vertical product differentiation, one outside innovating firm and two incumbent firms, considering threat by entry of the innovating firm using a two-step auction. Also we show that in the case of uniform distribution of consumers' taste parameter and zero cost when the quality improvement (the difference between the quality of the high-quality good and the quality of the low-quality good) is small (or large), the two-step auction is (or is not) credible. |
| Keywords: | license; entry; oligopoly; vertical differentiation; two-step auction |
| JEL: | D43 L13 |
| Date: | 2017–05–07 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:78987&r=com |
| By: | Hattori, Masahiko; Tanaka, Yasuhito |
| Abstract: | When an outside innovating firm has a cost-reducing technology, it can sell licenses of its technology to incumbent firms, or enter the market and at the same time sell licenses, or enter the market without license. We examine the definitions of license fees in such situations under oligopoly with three firms, one outside innovating firm and two incumbent firms, considering threat by entry of the innovating firm using a two-step auction. |
| Keywords: | license; entry; oligopoly; innovating firm; two-step auction |
| JEL: | D43 L13 |
| Date: | 2017–05–07 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:78992&r=com |
| By: | Heyman, Fredrik (Research Institute of Industrial Economics (IFN)); Norbäck, Pehr-Johan (Research Institute of Industrial Economics (IFN)); Persson, Lars (Research Institute of Industrial Economics (IFN)) |
| Abstract: | We show that increasing the intensity of product market competition can reduce discrimination against female managers, even in an environment in which all employers have a preference for discrimination. The reason is that due to the glass ceiling effect, female managers will, on average, be more skilled than male managers and will therefore, on average, be more beneficial for the firm when product market competition is intense. Using detailed matched employee-employer data, we find that (i) more intense competition leads to relatively higher wages for female managers and (ii) the share of female managers is higher in firms in more competitive industries. |
| Keywords: | Discrimination; Management; Competition; Gender |
| JEL: | J70 L20 M50 |
| Date: | 2017–05–15 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:iuiwop:1169&r=com |
| By: | Laura Levaggi (Libera Università di Bolzano, Italy); Rosella Levaggi (Università di Brescia, Italy) |
| Abstract: | Competition in the market for health care has followed different patterns, and some health care systems have opted for mixed markets where public organisations compete alongside private ones. Empirical evidences on these market structures are however mixed. In this article we argue that public hospitals which have different objectives than private ones and faces different constraints, are also perceived differently by patients. For this reason we model the market for hospital care as Salop circle with a centre where the public hospital is located; private providers are located on the circle. We show that, depending on the difference in the productivity advantage, mixed markets may outperform both the benchmark (one public hospital at the centre) and private competition (N private providers competing along the circle), but the welfare distribution of these improvements should be carefully analysed. In some cases monopoly franchise on the mixed market should be introduced to redistribute these benefits. |
| Keywords: | Private hospitals, Public hospitals, Salop competition |
| JEL: | D47 H44 L51 |
| URL: | http://d.repec.org/n?u=RePEc:ipu:wpaper:57&r=com |
| By: | Shijaku, Gerti |
| Abstract: | This paper addresses the dynamic relationship between competition and bank stability in Albanian banking system during the period 2008 - 2015. To this purpose, we construct a proxy for bank competition as referred to the Boone indicator. We also calculated the Lerner index and the efficient adjusted Lerner index, as well as the profit elasticity index and the Herfindahl–Hirschman Index. The main results provide support for the “competition – stability” view – that lower degree of market power sets banks to less overall risk exposure. The results further show that increasing concentration will have a larger impact on bank’s fragility. Similar, bank stability is positively linked with macroeconomic conditions and capital ratio and inverse with operational efficiency. We also used a quadratic term of the competition measures to capture a possible non-linear relationship between competition and stability, but find no supportive evidence. |
| Keywords: | Bank Fragility, Competition, Boone and Lerner indicator, Panel Data, GMM. |
| JEL: | C26 C32 E32 E43 G21 H63 |
| Date: | 2016–11–17 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:79084&r=com |
| By: | Dvir, Eyal; Strasser, Georg |
| Abstract: | We study cross-country price differences in the European market for new passenger cars based on detailed pricing and technical data. Car prices in Europe converged until the year 2003, but not thereafter. Within the EU 15 countries the price range of the median model in 2004 was close to 20 percent. We document a source of international price differentiation, which is not related to distribution and border costs, but instead systematically linked to product features. Price dispersion increases with the market segment and varies significantly across models. Marketing appears to position identical goods differently in each country, for example by feature bundles tailored to local consumer preferences. Both the convergence before the actual reduction of barriers to arbitrage and the systematic international price differentiation by product feature point to active pricing-to-market strategies that treat countries as marketing regions. JEL Classification: F15, F31, L11, L62, D22 |
| Keywords: | arbitrage, European car market, international price dispersion, law of one price, market segmentation |
| Date: | 2017–05 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20172059&r=com |
| By: | Dennis Epple; Richard Romano; Sinan Sarpça; Holger Sieg; Melanie Zaber |
| Abstract: | The main purpose of this paper is to estimate an equilibrium model of private and public school competition that can generate realistic pricing patterns for private universities in the U.S. We show that the parameters of the model are identified and can be estimated using a semi-parametric estimator given data from the NPSAS. We find substantial price discrimination within colleges. We estimate that a $10,000 increase in family income increases tuition at private schools by on average $210 to $510. A one standard deviation increase in ability decreases tuition by approximately $920 to $1,960 depending on the selectivity of the college. Discounts for minority students range between $110 and $5,750. |
| JEL: | H52 I2 L3 |
| Date: | 2017–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:23360&r=com |