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on Industrial Competition |
| By: | Ignatenko, Anna (Dept. of Economics, Norwegian School of Economics and Business Administration) |
| Abstract: | This paper documents price discrimination by transport companies, revealing their market power. Larger shipments of similar products sharing a container receive lower prices. A trade model with non-linear pricing of transportation rationalizes this with economies of scale and price discrimination, highlighting their distinct policy implications. To distinguish them, I test for the effect of competition on freight price variation specific to price discrimination. Using unexpected water level changes to instrument for competition in river transportation, I find increased competition causes steeper discounts for larger shipments. Thus, market power in transportation is less distortionary for larger firms gaining additional cost advantages. |
| Keywords: | price discrimination; quantity discounts; transportation; competition; economies of scale; mark-ups; market power |
| JEL: | D22 D43 F10 F12 F14 |
| Date: | 2024–04–26 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:nhheco:2024_006&r= |
| By: | Mary Amiti; Sebastian Heise |
| Abstract: | The increasing dominance of large firms in the United States has raised concerns about pricing power in the product market. The worry is that large firms, facing fewer competitors, could increase their markups over marginal costs without fear of losing market share. In a recently published paper, we show that although sales of domestic firms have become more concentrated in the manufacturing sector, this development has been accompanied by the entry and growth of foreign firms. Import competition has lowered U.S. producers’ share of the U.S. market and put smaller, less efficient domestic firms out of business. Overall, market concentration in manufacturing was stable in recent decades, though import penetration has greatly altered the makeup of the U.S. manufacturing sector. |
| Keywords: | concentration; markups; import competition |
| JEL: | E2 F0 |
| Date: | 2024–05–03 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednls:98182&r= |
| By: | OECD |
| Abstract: | Recent global developments, and a number of serious crises, have led to large government interventions in many jurisdictions, driving a debate on whether there is a need to rethink the role of industrial policy in modern economies. This paper explores how to use industrial policy and make it pro-competitive. Competition authorities can play a crucial role in strengthening the impact of industrial policy: by ensuring that competition principles remain a cornerstone of carefully designed industrial policy. Moreover, competition enforcement keeps markets more competitive, laying a good foundation for industrial policy. |
| Date: | 2024–05–22 |
| URL: | http://d.repec.org/n?u=RePEc:oec:dafaac:309-en&r= |
| By: | Pablo D. Azar; Adrian Casillas; Maryam Farboodi |
| Abstract: | The decentralized nature of blockchain markets has given rise to a complex and highly heterogeneous market structure, gaining increasing importance as traditional and decentralized (DeFi) finance become more interconnected. This paper introduces the DeFi intermediation chain and provides theoretical and empirical evidence for private information as a key determinant of intermediation rents. We propose a repeated bargaining model that predicts that profit share of Ethereum market participants is positively correlated with their private information, and employ a novel instrumental variable approach to show that a 1 percent increase in the value of intermediaries’ private information leads to a 1.4 percent increase in their profit share. |
| Keywords: | financial intermediation; oligopoly; blockchain; decentralized finance; cybersecurity |
| JEL: | G23 D82 L14 L22 G14 D43 |
| Date: | 2024–05–01 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednsr:98219&r= |
| By: | Jessica Coria; Jūratė Jaraitė |
| Abstract: | This study examines how the impact of Tradable Green Certificates (TGC) on profitability and investment behavior varies depending on the vertical integration status of regulated firms. Our theoretical model predicts that vertical integration does not lead to higher profits when internal pricing aligns with market values for green certificates. However, it stimulates greater investment in renewable electric capacity since it reduces the costs of the sourced certificates. Empirical analysis of the Swedish TGC system confirms these findings, revealing that vertically integrated firms did not experience profit increases. Instead, they exhibited distinct investment patterns, prioritizing cost-effective technologies like hydro and thermal capacity over more expensive renewables, in contrast to non-integrated firms. |
| Keywords: | renewable energy, tradable green certificates, vertical integration, firm-level data, causal effects, profits, investments, Sweden |
| JEL: | L10 L50 Q58 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_11079&r= |
| By: | Joshua S. Gans |
| Abstract: | Mobile app commissions paid by app developers to a monopolist device maker/app store operator are examined. Three results are demonstrated. First, unregulated app commissions are set at a level that maximises consumer surplus. Second, eliminating app commissions will lead to higher device prices. Third, requiring a menu of options for consumers as to how device makers receive subsidies from app developers constrains app commissions in a way that provides a more equal balance between consumer versus app developer interests. |
| JEL: | L11 L40 |
| Date: | 2024–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:32339&r= |
| By: | Kolos Csaba \'Agoston; Veronika Varga |
| Abstract: | Since 2016 the operation of insurance companies in the European Union is regulated by the Solvency II directive. According to the EU directive the capital requirement should be calculated as a 99.5\% of Value at Risk. In this study, we examine the impact of this capital requirement constraint on equilibrium premiums and capitals. We discuss the case of the oligopoly insurance market using Bertrand's model, assuming profit maximizing insurance companies facing Value at Risk constraints. First we analyze companies' decision on premium level. The companies strategic behavior can result positive as well as negative expected profit for companies. The desired situation where competition eliminate positive profit and lead the market to zero-profit state is rare. Later we examine ex post and ax ante capital adjustments. Capital adjustment does not rule out market anomalies, although somehow changes them. Possibility of capital adjustment can lead the market to a situation where all of the companies suffer loss. Allowing capital adjustment results monopolistic premium level or market failure with positive probabilities. |
| Date: | 2024–04 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2404.17915&r= |
| By: | Delgado-Rojas, Martha Elena (FEDESARROLLO); Benavides, Juan (FEDESARROLLO) |
| Abstract: | We analyze the retail sector in Colombia, the traditional and online market stakeholders. Chapter 1 includes an evolution analysis of online sales in Latin America and the Caribbean, and the importance of internet adoption to increasing consumer value. Chapter 2 focuses on retail industry in Colombia, in supply and demand side. Chapter 3 presents the study results. |
| Keywords: | E-commerce; Online Retail; Comercio Electrónico Ventas en Línea |
| JEL: | L81 |
| Date: | 2023–06–16 |
| URL: | http://d.repec.org/n?u=RePEc:col:000124:021031&r= |
| By: | Elena Panova (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - 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) |
| Abstract: | We consider the problem of sharing the cost of a fixed tree-network among users with differentiated willingness to pay for the good supplied through the network. We find that the associated value-sharing problem is convex, hence, the core is large and we axiomatize a new, computationally simple core selection based on the idea of proportionality. |
| Keywords: | Sharing network cost, Core, Proportional allocation |
| Date: | 2023–11 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-04556220&r= |
| By: | Angel Espinoza E. |
| Abstract: | Improving public transport infrastructure changes local market conditions. In this paper, I examine the impact of the construction and operation of "Metrobus", Mexico City's Bus Rapid Transit (BRT) system on consumer prices in chain stores, street vendors, and small family-owned (mom and pop) stores. I do so through a panel event study design. I consider the construction and operation of BRT as two different phenomena; while the former is associated to street closures, the latter reduces transportation costs. I show that only prices in mom and pop stores respond to changes in local market conditions produced by the introduction of BRT. For these businesses, construction pressures prices downwards; in contrast, operation is associated with partial price recoveries. I cannot reject a null effect in prices from chain stores or street vendors. |
| Keywords: | Public Transportation;Local Markets;Price Formation |
| JEL: | L11 L92 R12 R42 |
| Date: | 2024–05 |
| URL: | http://d.repec.org/n?u=RePEc:bdm:wpaper:2024-02&r= |
| By: | Li, Shuo (Faculty of Business and Economics, The University of Hong Kong, Hong Kong, China); Wang, Min (China Center for Economic Research, National School of Development, Peking University, Beijing, China) |
| Abstract: | The paper provides a comprehensive investigation of the effects of environmental regulations on Chinese firms’ extensive margins. Using registration information of all firms in 35 industries from 1991 to 2010, we show that environmental regulations deter firm entry, increase firm exit and reduce the net entry of firms. Specifically, in response to such regulations, large, long-lived and private entrants are less likely to enter the market, and small and long-lived incumbents are more likely to exit. This concentrates the market and expands the state sector in pollution-intensive industries. Moreover, the entrants are more heavily regulated than incumbents. We also find evidence that, in response to environmental regulations, firms in regulated locations are more likely to create new firms in pollution-intensive industries in unregulated areas. However, these spatial spillover effects are negligible, posing little threat to the estimation of environmental regulatory impacts on firm entry in our setting and therefore alleviating the concern of pollution relocation. |
| Keywords: | Environmental Regulation; Firm Entry; Firm Exit; Equity Investment; Spatial Spillover; Inter-city Investment |
| JEL: | L51 O44 Q52 Q58 R38 |
| Date: | 2022–10–12 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:gunefd:2022_015&r= |
| By: | David M. Kaplan (University of Missouri); Xin Liu (Washington State University) |
| Abstract: | We provide finite-sample, nonparametric, uniform confidence bands for the bid distribution's quantile function in first-price, second-price, descending, and ascending auctions with symmetric independent private values, when only the transaction price (highest or second-highest bid) is observed. Even with a varying number of bidders, finite-sample coverage is exact. With a fixed number of bidders, we also derive uniform confidence bands robust to auction-level unobserved heterogeneity. This includes new bounds on the bid quantile function in terms of the transaction price quantile function. We also provide results on computation, median-unbiased quantile estimation, and pointwise quantile inference. Empirically, our new methodology is applied to timber auction data to examine heterogeneity across appraisal value and number of bidders, which helps assess the combination of symmetric independent private values and exogenous participation. |
| Keywords: | first-price; order statistics; second-price; uniform confidence band; unobserved heterogeneity |
| JEL: | C57 |
| Date: | 2024–05 |
| URL: | http://d.repec.org/n?u=RePEc:umc:wpaper:2403&r= |