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on Industrial Competition |
| By: | Okuyama, Suzuka |
| Abstract: | We investigate mixed markets in which a social welfare-maximizing public firm and a private firm engage in behavior-based price discrimination. We consider two cases: one where the private firm is completely owned by domestic shareholders and one where it is completely owned by foreign shareholders. In the domestic mixed duopoly, BBPD is irrelevant from the viewpoint of social welfare. This is because poaching does not occur. In the international mixed duopoly, BBPD reduces the public firm’s market share but improves domestic social welfare. This is because the outflow to foreign shareholders decreases. We also consider domestic and international pure duopoly and find that the presence of public firms reduces welfare loss caused by BBPD. |
| Keywords: | Behavior-based price discrimination, Mixed oligopoly, Foreign firms, Privatization |
| JEL: | D43 H42 L13 |
| Date: | 2021–10–08 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:110206&r= |
| By: | Saruta, Fuyuki |
| Abstract: | We investigate a two-sided market model in which two platforms compete for sellers and buyers who can participate in multiple platforms (multihoming), and one of the two platforms can make exclusive contracts with sellers. The platform faces a trade-off when it enters into exclusivity agreements with sellers, which gives it an advantage when competing for buyers but reduces its revenue from the seller side. In addition, we expect that the existence of multihoming buyers weakens the platform's incentive to have an exclusive contract with sellers. Even when buyers can multihome, does a platform have an incentive to make exclusive contracts with sellers? If so, how does exclusive dealing affect social welfare? We obtain the following results. First, in equilibrium, the platform makes exclusive contracts with all sellers or not at all. If sellers' network externality on buyers is sufficiently large (small), it chooses fully exclusive dealing (nonexclusive dealing). Second, exclusive dealing is preferable (detrimental) to social welfare when the network externality is sufficiently large (small). Exclusive dealing encourages the multihoming of buyers, which allows agents to have more interactions on one platform and prompts more buyers to obtain stand-alone benefits from multiple platforms. |
| Keywords: | Exclusive contracts; Two-sided markets; Multihoming; Platform competition. |
| JEL: | D43 D62 L13 L14 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:110070&r= |
| By: | David Bounie; Antoine Dubus; Patrick Waelbroeck |
| Abstract: | We analyze competition between data intermediaries collecting information on consumers, which they sell to firms for price discrimination purposes. We show that competition between data intermediaries benefits consumers by increasing competition between firms, and by reducing the amount of consumer data collected. We argue that merger policy guidelines should investigate the effect of the data strategies of large intermediaries on competition and consumer surplus in related markets. |
| Keywords: | data, mergers, competition, consumer surplus |
| JEL: | L13 L40 L86 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_9339&r= |
| By: | Didier Laussel; Ngo Van Long |
| Abstract: | A monopolist producing vertically differentiated durable goods can offer in each period a sequence of price-quality menus to segment the market. We show that, contrary to the Coase conjecture for the homogeneous durable good monopoly, thanks to the ability to produce differentiated durable goods, in all Markov-Perfect Equilibria, the profit of a monopolist that cannot commit to future price-quality menus is bounded below by a strictly positive value independent of the discount factor. |
| Keywords: | product quality, durable good monopoly, second-degree price discrimination, Coase conjecture |
| JEL: | C73 D42 L12 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_9331&r= |
| By: | Okuyama, Suzuka |
| Abstract: | This paper investigates price and quality competition in a mixed duopoly market, where a state-owned welfare-maximizing public firm competes against a profit-maximizing private firm. We use a differential game approach with a Hotelling spatial competition framework. We extend Cellini et al.(2018) by incorporating a state-owned public firm and derive open- and closed-loop solutions. The steady-state quality levels are optimal in the open-loop solution. Numerical results show that the steady-state quality level of the public firm in the closed-loop solution does not necessarily lower than that in the open-loop solution. As a private firm's investment is large, the public firm’s incentive for quality improvement increases since there exists intertemporal strategic substitutability between investment and quality. Competition and privatization policies are neutral under the open-loop solution but not under the closed-loop solution. Competition policy improves social welfare with an increase in quality and privatization policy improves it with an decrease in quality in the closed-loop solution. |
| Keywords: | Mixed oligopoly, Privatization, Differential-game, Quality. |
| JEL: | H42 L13 |
| Date: | 2021–08–30 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:110148&r= |
| By: | Laszlo Goerke (Institute for Labour Law and Industrial Relations in the European Union (IAAEU), Trier University); Marco de Pinto (University of Applied Labour Studies) |
| Abstract: | How does cost uncertainty affect the welfare consequences of an oligopoly? To answer this question, we investigate a Cournot oligopoly in which firms produce a homogeneous commodity and market entry is feasible. Marginal costs are unknown ex-ante, i.e. prior to entering the market. They become public knowledge before output choices are made. We show that uncertainty induces additional entry in market equilibrium and also raises the socially optimal number of firms. Since the first change dominates, the excessive entry distortion is aggravated. This prediction is robust to various extensions of the analytical set-up. Furthermore, the welfare loss due to oligopoly tends to increase with uncertainty. |
| Keywords: | Oligopoly, Excessive Entry, Uncertainty, Welfare |
| JEL: | D43 L13 |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:iaa:dpaper:202105&r= |
| By: | Stefanie Bossard; Armin Schmutzler |
| Abstract: | This paper analyzes decisions of multi-product firms regarding product selection, innovation and advertising as choices of consumer valuation distributions. We show that a profit-maximizing monopolist chooses these distributions so as to maximize the dispersion of the valuation differences between goods across consumers. By contrast, she chooses the willingness-to-pay to be maximally or minimally dispersed, depending on the set of available distributions. In our benchmark model with uniform valuation differences, prices are increasing in valuation difference heterogeneity, but in more general settings this is not necessarily true. Moreover, the relation between willingness-to-pay heterogeneity and prices may well be non-monotone. Over wide parameter ranges, the firm’s choice of valuation distribution does not maximize net consumer surplus. This problem is exacerbated when the firm has access to strategies that distort valuation heterogeneity or willingness-to-pay heterogeneity. |
| Keywords: | Product choice, multiproduct firms, product heterogeneity, valuation distributions, consumer confusion |
| JEL: | D43 L13 M30 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:zur:econwp:396&r= |
| By: | Michael Kunin; Kresimir Zigic |
| Abstract: | We study how private intellectual property rights protection affects equilibrium prices and profits in a duopoly competition between firms that offer a product variety of distinct qualities (vertical product differentiation) in a setup that is closely related to that put forward by Jain (2008), where firms offer the same qualities in equilibrium (horizontal product differentiation). Consumers may make a choice to buy a legal version, use an illegal copy (if they want to and can), or not use a product at all. Using an illegal version violates intellectual property rights protection and is thus punishable when disclosed. Thus, both private and public (copyright) intellectual property rights protection are available on scene. |
| Keywords: | vertical and horizontal product differentiation; software piracy; Bertrand competition; private and public intellectual property rights protection; |
| JEL: | D43 L11 L21 O25 O34 |
| Date: | 2021–08 |
| URL: | http://d.repec.org/n?u=RePEc:cer:papers:wp701&r= |
| By: | Dögüs, Ilhan |
| Abstract: | This paper argues that the case of product differentiation of concentrated markets (i.e., innovation competition) is one where production per unit of profit of non-financial corporations is lower than in competitive mass production and profit share is not an increasing function of capacity utilisation. Rather the desired excess capacity is higher compared since the break-even point where total costs and revenues equalize tends to be lower. The argument is supported with descriptive annual data for the period 1947-2019 in the USA. |
| Keywords: | product differentiation,market structure,capacity utilisation,profits |
| JEL: | D24 E12 L11 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:cessdp:88&r= |
| By: | Elena Deryugina (Bank of Russia, Russian Federation); Alexey Ponomarenko (Bank of Russia, Russian Federation); Andrey Sinyakov (Bank of Russia, Russian Federation) |
| Abstract: | In the digital economy, customer data becomes particularly valuable. Customer transactions monitored by banks, payment systems, and retail platforms are a useful source of information to assess potential borrowers’ credit risk. Thus, a dominant player at a payment or deposit market, behaving strategically, may influence the characteristics of the lending market. In this article, we show, within the game-theoretic framework, that such dominance can affect the market structure, loan pricing, financial inclusion, and credit risk accumulated on banks’ balance sheets. Our results show that specifics of the digital economy set a new link between structures of deposit and credit markets. Information asymmetries allow the dominant player to increase its profits at the expense of the profits gained by other players. At the same time, the accessibility of loans to more risky borrowers reduces while credit risks of banks’ loan portfolios decline. |
| Keywords: | retail payments, banking, market structure, asymmetric information, customer data |
| JEL: | D43 D82 G21 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:bkr:wpaper:wps78&r= |
| By: | Jourquin, Bart; Demilie, Laurent; Beuthe, Michel |
| Keywords: | Industrial Organization |
| Date: | 2021–10–14 |
| URL: | http://d.repec.org/n?u=RePEc:ags:ctrf31:314680&r= |
| By: | Hiroshi Kitamura; Noriaki Matsushima; Misato Sato |
| Abstract: | We consider exclusive contracts a survival strategy for a local incumbent manufacturer facing a multinational manufacturer's entry. Although both manufacturers prefer to trade with an efficient local distributor, trading with inefficient competitive distributors is acceptable only to the entrant, because of the entrant's efficiency. Hence, such competitive distributors can be an outside option for the entrant. As the entrant becomes efficient, the outside option works effectively, implying that the entry does not considerably benefit the efficient local distributor. Thus, the local manufacturer is more likely to sign an exclusive contract with the efficient distributor as the entrant becomes efficient. |
| Date: | 2021–03 |
| URL: | http://d.repec.org/n?u=RePEc:dpr:wpaper:1122r&r= |
| By: | Chen, Junhong; Gao, Zhifeng; Nian, Yefan |
| Keywords: | Marketing, Institutional and Behavioral Economics, Agribusiness |
| Date: | 2021–08 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea21:313963&r= |
| By: | Andrea Coveri; Claudio Cozza; Dario Guarascio |
| Abstract: | The paper applies the radical view of Monopoly Capitalism to the digital platform economy. Based on the seminal ideas of Hymer and Zeitlin that led Cowling and Sugden to define the large monopolistic firm as a means to plan production from a unique centre of strategic decision-making, we attempt to develop a framework where digital platforms are conceived as an evolution of large transnational corporations. Power and control in our Monopoly Capitalism view are then meant not only in terms of market relations, but rather as levers for coordinating global production and influencing world societies. Applying this framework to the Amazon case, we highlight the key analytical dimensions to be considered: not only Amazon dominates other firms and suppliers through its diversification and a direct control of data and technology; its power is also linked to global labour fragmentation and uneven bargaining power vis-à-vis world governments, as in the Hymer and Cowling's tradition. |
| Keywords: | Monopoly Capital; Monopoly Power; Digital Platforms; Amazon; Multinational corporation. |
| Date: | 2021–10–06 |
| URL: | http://d.repec.org/n?u=RePEc:ssa:lemwps:2021/33&r= |