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on Industrial Organization |
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Issue of 2023‒09‒18
six papers chosen by |
| By: | Babina, Tania; Barkai, Simcha; Jeffers, Jessica; Karger, Ezra; Volkova, Ekaterina |
| Abstract: | We hand-collect and standardize information describing all 3, 055 antitrust lawsuits brought by the Department of Justice (DOJ) between 1971 and 2018. Using restricted establishment-level microdata from the U.S. Census, we compare the economic outcomes of a non-tradable industry in states targeted by DOJ antitrust lawsuits to outcomes of the same industry in other states that were not targeted. We document that DOJ antitrust enforcement actions permanently increase employment by 5.4% and business formation by 4.1%. Using an event-study design, we find (1) a sharp increase in payroll that exceeds the increase in employment, meaning that DOJ antitrust enforcement increases average wages, (2) an economically smaller increase in sales that is statistically insignificant, and (3) a precise increase in the labor share. While we cannot separately measure the quantity and price of output, the increase in production inputs (employment), together with a proportionally smaller increase in sales, strongly suggests that these DOJ antitrust enforcement actions increase the quantity of output and simultaneously decrease the price of output. Our results show that government antitrust enforcement leads to persistently higher levels of economic activity in targeted industries. |
| Keywords: | antitrust enforcement, economic activity, employment, business formation |
| JEL: | L4 E24 K21 J21 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:cbscwp:332&r=ind |
| By: | Albrecht, Brian C.; Phelan, Thomas; Pretnar, Nick |
| Abstract: | A recent literature has provided empirical evidence that markups are increasing and are heterogeneous across firms. In standard monopolistic competition models, such heterogeneity implies inefficiency even in the presence of free entry. We enrich the standard model of monopolistic competition with heterogeneous firms to incorporate off-market time use that is non-separable with market consumption into the consumer problem. Within this framework the constancy of equilibrium markups is neither sufficient nor necessary for efficiency. Whether or not the competitive level of production and market concentration of firms are efficient depends on the degree to which consumption time and market goods are complements or substitutes. Such inefficiencies are the result of time use being misallocated toward home production at the expense of market production. |
| Keywords: | monopolistic competition, markups, efficiency, time use, home production, elasticity of substitution, concentration, selection, love for variety, heterogeneous firms |
| JEL: | D1 D4 D6 L1 |
| Date: | 2023–08–02 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:118172&r=ind |
| By: | Enghin Atalay; Erika Frost; Alan Sorensen; Christopher Sullivan; Wanjia Zhu |
| Abstract: | We study changes in markups across 72 product markets from 2006 to 2018. A growing literature has documented a rise in markups over time using a production function approach; we instead employ the standard microeconomic method, which is to estimate demand and then invert firms’ first-order pricing conditions to infer their markups. To make the method scalable, we propose estimating nested logit demand models, using household panel data to automate the assignment of products to nests. Our results indicate an overall upward trend in markups between 2006 and 2018, with considerable heterogeneity across and within product markets. We find that changes in firms’ marginal costs and households’ price sensitivity are the primary drivers of markup increases with changes in firm ownership playing a much smaller role. |
| Keywords: | markups; demand estimation |
| JEL: | D12 D43 L11 |
| Date: | 2023–08–07 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedpwp:96527&r=ind |
| By: | Matthias Hunold; Johannes Muthers |
| Keywords: | resale price maintenance, collusion, retailing |
| JEL: | D43 K21 K42 L41 L42 L81 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:sie:siegen:197-23&r=ind |
| By: | Liran Einav; Benjamin Klopack; Neale Mahoney |
| Abstract: | Retailers are increasingly selling goods and services via subscriptions instead of spot markets. In this paper, we study one benefit to the retailer of selling subscriptions: the possibility that – presumably because of inattention or inertia – consumers continue to pay for subscriptions after the flow benefit falls below its price. We use comprehensive data from a large payment card network and focus on credit and debit cards that get replaced (e.g., due to expiration). Replaced cards require an active subscription renewal decision, and we document that months during which cards are replaced are associated with much higher rates of cancellation for the ten subscriptions we study. We write down and estimate a stylized model of subscription renewals that allows us to recover the baseline degree of inattention. We find that estimated inattention is higher for consumers that took cash advances, a proxy for low financial sophistication. Relative to a counterfactual in which consumers are fully attentive, inattention raises seller revenues by between 14% and more than 200%. We use the estimated model to explore the quantitative impact of possible regulatory remedies. |
| JEL: | L50 L86 |
| Date: | 2023–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:31547&r=ind |
| By: | Charles Gray; Abby E. Alpert; Neeraj Sood |
| Abstract: | The pharmaceutical market has experienced a massive wave of vertical integration between pharmacy benefit managers (PBMs) and health insurers in recent years. Using a unique dataset on insurer-PBM contracts, we document increasing vertical integration in Medicare Part D–vertically integrated insurers' market share increased from about 30% to 80% between 2010 and 2018. Next, we evaluate a large insurer-PBM merger in 2015 to assess the trade-offs of vertical integration–harms to competition due to input and customer foreclosure on the one hand and improved efficiency on the other. We find premium increases after the merger for insurers who bought PBM services from rivals, which is consistent with vertically integrated PBMs raising costs through input foreclosure. |
| JEL: | I1 I11 I13 |
| Date: | 2023–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:31536&r=ind |