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on Industrial Organization |
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Issue of 2023‒10‒02
eight papers chosen by |
| By: | Xu, Lili; Matsumura, Toshihiro |
| Abstract: | This study investigates the relationship between market transparency and economic welfare in a mixed duopoly in which a welfare-maximizing public firm competes with a profit-maximizing private firm. We find that the private firm’s market share, consumer surplus, and welfare increase with market transparency. Further, the relationship between the private firm’s profit and market transparency has an inverted U shape. This result suggests that profit-maximizing firms may have incentives to improve market transparency, especially when the degree of market transparency is low, which is in sharp contrast to the results under a private duopoly. |
| Keywords: | market transparency, mixed oligopoly, product differentiation, unconstrained Hotelling model, profit-enhancing market transparency, crowding out |
| JEL: | L13 L15 L32 L33 |
| Date: | 2023–08–29 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:118415&r=ind |
| By: | Greg Buchak (Stanford University); Vera Chau (University of Geneva; Swiss Finance Institute); Adam Jørring (Boston College) |
| Abstract: | We document that in the US residential mortgage market, the share of integrated intermediaries acting as both originator and servicer has declined dramatically. Exploiting a regulatory change, we show that borrowers with integrated servicers are more likely to refinance, and conditional on refinance, are more likely to be recaptured by their own servicer. Recaptured borrowers pay lower fees relative to other refinancers. This trend is partially offset by a rise in integrated fintech originator-servicers, who recapture at higher frequency but at worse terms. We build and calibrate a dynamic structural model to interpret these facts and quantify their impact on equilibrium outcomes. Our model suggests that integreated intermediaries enjoy a marginal cost advantage when refinancing recaptured borrowers, and fully disintegrating them would reduce refinancing frequencies and increase fees. Fintechs use technology to reacquire customers and reduce borrower inertia against refinancing. This endogenously creates market power, which fintechs exploit through higher fees. Despite worse terms ex-post, fintechs increase consumer welfare ex-ante by increasing refinancing frequencies. Taken together, our results highlight the importance of intermediaries’ scope in consumer financial outcomes and highlight a novel, quantitatively important application of fintech: customer acquisition. |
| Keywords: | Financial intermediation, disintermediation, mortgage servicing, refinancing, fintech |
| JEL: | G21 G23 E44 L12 L42 O16 O33 |
| Date: | 2023–08 |
| URL: | http://d.repec.org/n?u=RePEc:chf:rpseri:rp2367&r=ind |
| By: | Garrod, Luke; Li, Ruochen; Wilson, Christopher |
| Abstract: | Automated switching services have recently emerged as online intermediaries that use algorithms to facilitate consumer switching. Unlike price comparison websites, these services i) act on behalf of consumers by actively switching them to the cheapest deals, ii) typically charge consumers directly, rather than charging suppliers commission, and iii) often survey across the entire market. We offer the first theoretical analysis of such services. In an oligopoly model with imperfect price information, we characterize an equilibrium with an auto-switching service, and analyze its impact on market outcomes and welfare. |
| Keywords: | Consumer Switching; Consumer Search; Price Information; Intermediary; Automated; Competition. |
| JEL: | D43 D83 L13 |
| Date: | 2023–09–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:118492&r=ind |
| By: | Alessandro De Chiara; Juan José Ganuza; Fernando Gómez; Ester Manna; Adrián Segura |
| Abstract: | This paper presents a framework where sellers, an online platform with monopoly power, and consumers transact. We aim to study the interaction between the imposition of liability on the platform, the reputational sanctions exerted by consumers, and the internal measures adopted by the platform to keep in check the sellers, whenever a product generates losses to consumers. We show that introducing direct legal liability of the platform may have both positive and negative effects for safety investments. Additionally, when sellers are heterogeneous (with respect to their sensitivity to the sanctions from consumers or from the platform), legal liability on the platform will have an impact on the selection of participating sellers, although the sign and size of the effect largely depend on paremeter values. |
| Keywords: | platform liability, third-party sellers, reputation |
| JEL: | K13 L15 L51 |
| Date: | 2023–09 |
| URL: | http://d.repec.org/n?u=RePEc:upf:upfgen:1868&r=ind |
| By: | Alexander Schiersch; Irene Bertschek; Thomas Niebel |
| Abstract: | Our paper contributes to the discussion about Europe’s digital sovereignty. We analyze the relationship between firm performance and the diversification of sourcing countries for imported ICT goods. The analysis is based on administrative data for 3888 German manufacturing firms that imported ICT goods in the years 2010 and 2014. We find that firms that diversify the sourcing of ICT goods across multiple countries perform better than similar firms with a less diversified sourcing structure. This result holds for value added as well as for gross operational surplus as performance measures and for two different indicators of diversification. |
| Keywords: | ICT goods imports, global sourcing, digital sovereignty, firm performance |
| JEL: | F14 F23 L14 L23 D24 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp2043&r=ind |
| By: | Nishant Chadha; Viswanath Pingali; Daniel Sokol |
| Abstract: | We investigate strategies of small businesses’ usage of digital platforms for advertising and sales. We rely on primary data from a quantitative survey of small business startups, and a few in-depth interviews of small business owners. We find that small firms prefer digital platforms for advertising and sales over conventional methods. As firms grow, while they continue to rely on digital advertising, their preference for conventional advertising (radio, television, etc.) increases. We find a strong correlation between the geographical spread of small firm sales, including exports, and their propensity to use digital platforms. We also find that small businesses multihome on both advertising and sales platforms. Multihoming occurs across established platforms and between established and nascent platforms. Our results enhance the understanding of how small firms rely on platforms and inform the policy debates on platform regulation. |
| Date: | 2023–09–18 |
| URL: | http://d.repec.org/n?u=RePEc:iim:iimawp:14704&r=ind |
| By: | Vesa Pursiainen (University of St. Gallen; Swiss Finance Institute); Hanwen Sun (University of Bath); Yue Xiang (University of Bath) |
| Abstract: | A firm’s exposure to competition is negatively associated with its ESG performance. We measure exposure to domestic product market competition by product market fluidity, based on product text descriptions, and find that higher fluidity - indicating higher product market threats - is associated with lower ESG scores. Fluidity matters more for financially constrained firms, in capital-intensive industries, and for costly activities. Increasing exposure to Chinese import competition is associated with reduction in ESG scores. This effect of import competition is stronger for firms less exposed to domestic competition. Local climate attitudes and social norms moderate the effect of competitive pressure. |
| Keywords: | competition, product market threats, ESG, sustainability, international trade |
| JEL: | D40 F18 F64 G30 M14 |
| Date: | 2023–08 |
| URL: | http://d.repec.org/n?u=RePEc:chf:rpseri:rp2369&r=ind |
| By: | David Austin |
| Abstract: | This paper presents a simulation model of the markets for light-duty electric vehicles (EVs) and the associated public charging infrastructure, as well as the network interactions between them. It illustrates the model’s attributes by simulating the effects of federal subsidies for public electric vehicle chargers and of an extension of tax credits for electric vehicles. I project that by the early 2030s the charger subsidies, which were signed into law in 2021 as part of the Infrastructure Investment and Jobs Act, will have increased the size of the charger network enough |
| JEL: | H23 H54 L98 |
| Date: | 2023–09–07 |
| URL: | http://d.repec.org/n?u=RePEc:cbo:wpaper:58964&r=ind |