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on Industrial Organization |
| By: | Javier Donna (University of Florida); Pedro Pereira (Autoridade da Concorrência, Lisbon) |
| Abstract: | The 2023 Merger Guidelines (MGs) change the Agencies’ narrative regarding non-horizontal mergers. They follow a four-pronged approach: (1) They blend horizontal and non-horizontal mergers. (2) They simplify the narrative about non-horizontal mergers. (3) They consolidate and broaden the theories of harm in non-horizontal mergers. (4) They blend economics and law analysis. In this article, we elaborate on these points. We discuss how the MGs’ anticompetitive presumptions apply to non-horizontal mergers, relate them to the economics literature, and provide examples. We finish discussing the economic rationale of the structural presumption involving rivals’ exit concerns due to the exercise of market power and propose a path forward. |
| Keywords: | Antitrust, 2023 Merger Guidelines, Vertical Mergers, Rivals’ Exit, Double Marginalization, Merger Evaluation, Competition Policy |
| JEL: | K21 K41 L42 L44 L52 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:aoz:wpaper:331 |
| By: | Jin, Chuqing |
| Abstract: | This paper studies how competition affects the quality of information provided by security analysts. Security analysts compete to make earnings forecasts and are rewarded for being more accurate than their peers. This leads them to distort their forecasts to differentiate but also disciplines them against reporting over-optimistic forecasts. I structurally estimate a contest model capturing both effects and simulate counterfactual policies changing analysts’ incentives. I find the disciplinary effect dominates: rewarding relative accuracy reduces analysts’ forecast errors, but at the cost of increasing forecast noise. It is optimal to have moderate analyst competition, balancing more aggregate information against intensified distortions. |
| Keywords: | forecasting contest; security analyst; competition |
| JEL: | D80 G20 L10 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:tse:wpaper:129580 |
| By: | Gambato, Jacopo; Sandrini, Luca |
| Abstract: | In this study, we analyze the incentives of a streaming platform to bias consumption when products are vertically differentiated. The platform offers mixed bundles of content to monetize consumer interest in variety and pays royalties to sellers based on the effective consumption of the generated content. When products are not vertically differentiated, the platform has no incentive to bias consumption in equilibrium. With vertical differentiation, royalties can differ, and the platform biases recommendations in favor of the cheapest content, hurting consumers and high-quality sellers. Biased recommendations, if unconstrained, eliminate sellers' incentives to increase the quality of their content, but if constrained, may lead to the inefficient allocation of R&D efforts. |
| Keywords: | platform economics, media economics, content aggregator, recommendation bias, innovation |
| JEL: | D4 L1 L5 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:zewdip:300272 |
| By: | Eric Langlais; Nanxi Li |
| Abstract: | This paper studies how the combination of Product Liability and Tort Law shapes a monopoly' incentives to invest in R&D for developing risky AI-based technologies ("robots") that may accidentally induce harm to third-party victims. We assume that at the engineering stage, robots are designed to have two alternative modes of motion (fully autonomous vs human-driven), corresponding to optimized performances in predefined circumstances. In the autonomous mode, the monopoly (i.e. AI designer) faces Product Liability and undertakes maintenance expenditures to mitigate victims' expected harm. In the human-driven mode, AI users face Tort Law and exert a level of care to reduce victims' expected harm. In this set-up, efficient maintenance by the AI designer and efficient care by AI users result whatever the liability rule enforced in each area of law (strict liability, or negligence). However, overinvestment as well as underinvestment in R&D may occur at equilibrium, whether liability laws rely on strict liability or negligence, and whether the monopoly uses or does not use price discrimination. The first best level of R&D investments is reached at equilibrium only if simultaneously the monopoly uses (perfect) price discrimination, a regulator sets the output at the socially optimal level, and Courts implement strict liability in Tort Law and Product Liability. |
| Keywords: | Artificial Intelligence, Algorithms, Tort Law, Product Liability, Strict Liability, Negligence |
| JEL: | K13 K2 L1 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:drm:wpaper:2024-22 |
| By: | Paolo Bertoletti; Federico Etro |
| Abstract: | We study entry in markets with monopolistic competition under quasi-linear preferences, with homogeneous and heterogeneous firms. For common demand systems with a price aggregator that is a demand shifter, we show that entry tends to be insufficient: namely that, given market pricing, the business stealing effect of entry cannot dominate the consumer surplus effect. We then identify preferences that deliver efficient production and selection of firms (including the isoelastic demand case), confirming the insufficient entry result also compared to first-best allocations, and discuss a specification (which includes the Logit case) that also delivers efficient entry. Finally, we introduce more general quasi-linear preferences (nesting those of Spence, Melitz-Ottaviano and other cases) that generate flexible demand systems depending on a price aggregator. In this framework, we show that competitive effects of entry on prices actually strengthen the case for insufficient entry, and discuss conditions for its emergence. |
| Keywords: | Entry, Monopolistic competition, Business stealing, Heterogeneous |
| JEL: | D11 D43 L11 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:mib:wpaper:543 |
| By: | Frondel, Manuel; Thiel, Patrick; Vance, Colin |
| Abstract: | Exploiting exogenous variation in retail fuel prices from a temporary fuel tax discount in Germany, we estimate how the pass-through of the discount varies over space and time. We draw on daily gasoline prices of virtually all gas stations in Germany and neighboring France, with France serving as a control, and estimate an event study model covering the full period of the discount from June to August 2022. We find average pass-through rates on the order of 87% for diesel and 71% for petrol, but with substantially lower rates in high-income regions and in regions with a low degree of competition. More strikingly, our results suggest pronounced heterogeneity over time: The magnitude of the pass-through rate dissipates sharply over the three months in which the discount was in effect, dropping to 50% by the final month, a pattern consistent with retailer responses to short-term changes in consumer attention. Taken together, our results indicate that average pass-through estimates may obscure a high degree of spatial and temporal heterogeneity that bears upon the assessment of competition and distributional effects: While our estimation of the budgetary costs of the discount confirms the government's a priori estimate of €3.1 billion, we find that about 61% of the discount's financial relief accrues to households with above-median incomes. |
| Abstract: | Unter Ausnutzung exogener Schwankungen der Einzelhandelspreise für Kraftstoffe, die sich aus einer zeitlich begrenzten Ermäßigung der Kraftstoffsteuer in Deutschland ergeben, schätzen wir, wie sich die Weitergabe der Ermäßigung über Raum und Zeit verändert. Wir greifen auf die täglichen Benzinpreise von praktisch allen Tankstellen in Deutschland und dem benachbarten Frankreich, wobei Frankreich als Kontrollgruppe dient, zurück und schätzen ein Event-Study-Modell, das den gesamten Zeitraum des Rabatts von Juni bis August 2022 abdeckt. Wir finden durchschnittliche Überwälzungsraten in der Größenordnung von 87 % für Diesel und 71 % für Benzin, wobei die Raten in Regionen mit hohem Einkommen und in Regionen mit geringem Wettbewerb deutlich niedriger sind. Noch auffälliger ist, dass unsere Ergebnisse auf eine ausgeprägte Heterogenität im Zeitverlauf hindeuten: Die Höhe der Weitergabequote nimmt im Laufe der drei Monate, in denen der Rabatt in Kraft war, stark ab und sinkt bis zum letzten Monat auf 50 %, ein Muster, das mit den Reaktionen der Einzelhändler auf kurzfristige Veränderungen der Verbraucheraufmerksamkeit übereinstimmt. Insgesamt deuten unsere Ergebnisse darauf hin, dass die Schätzungen des durchschnittlichen Pass-Through ein hohes Maß an räumlicher und zeitlicher Heterogenität verdecken können, die sich auf die Bewertung der Wettbewerbs- und Verteilungseffekte auswirkt: Während unsere Schätzung der Haushaltskosten des Rabatts die A-priori-Schätzung der Regierung von 3, 1 Milliarden Euro bestätigt, stellen wir fest, dass etwa 61% der finanziellen Entlastung durch den Rabatt Haushalten mit überdurchschnittlichem Einkommen zugute kommt. |
| Keywords: | Competition, demand elasticity, fuel tax discount, gasoline market |
| JEL: | L13 L81 D43 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:rwirep:300564 |