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on Industrial Organization |
| By: | Lin William Cong; Xiaohong Huang; Siguang Li; Jian Ni |
| Abstract: | We revisit the relationship between firm competition and real efficiency in a novel setting with informational feedback from financial markets. Although intensified competition can decrease market concentration in production, it reduces the value of proprietary information (e.g., market prospects) for speculators and discourages information production and price discovery in financial markets. Therefore, competition generates non-monotonic welfare effects through two competing channels: market concentration and information production. When information reflected in stock prices is sufficiently valuable for production decisions, competition can harm both consumer welfare and real efficiency. Our results are robust under cross-asset trading and learning and highlight the importance of considering the interaction between product market and financial market in antitrust policy, e.g., concerning the regulation of horizontal mergers. |
| JEL: | D61 D83 G14 G34 G40 |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:32944 |
| By: | D’Annunzio, Anna; Russo, Antonio |
| Abstract: | We study transaction fees applied by marketplace platforms where sellers (e.g., app developers) adopt freemium pricing. An ad valorem transaction fee reduces quality distortions introduced by the price-discriminating seller, thereby increasing consumer surplus. Moreover, a small fee increases welfare, implying that the agency model may be socially preferable to integration between platform and seller. However, the platform may set the equilibrium fee above the socially optimal level. Providing devices needed to access the marketplace (e.g., phones) induces the platform to raise the fee, whereas providing a product that competes with the seller induces a lower fee. |
| JEL: | D4 D21 L11 H22 |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:tse:wpaper:129704 |
| By: | OECD |
| Abstract: | Competition authorities have developed various tools to detect cartels and substantiate the basis for opening investigations. Ex officio investigations, meaning investigations initiated by the authorities themselves, are derived from detection tools that require a higher level of proactivity from the agency, for instance, industry monitoring and cartel screenings. New technologies such as artificial intelligence also provide competition authorities with greater opportunities to improve their detection tools. This paper provides an overview of detection tools to launch ex officio cartel investigations, including recent trends and experiences from Latin America and the Caribbean. It concludes by highlighting the need for competition authorities to implement a variety of approaches to complement one another and enhance cartel detection. |
| Date: | 2024–09–19 |
| URL: | https://d.repec.org/n?u=RePEc:oec:dafaac:311-en |
| By: | Martin Peitz; Anton Sobolev |
| Abstract: | A seller can offer an experience good directly to consumers and indirectly through an intermediary. When selling indirectly, the intermediary provides recommendations based on the consumer’s match value and the prices at which the product is sold. The intermediary faces the trade-off between extracting rents from consumers who strongly care about the match value versus providing less informative recommendations but also serving consumers who do not. We analyze the allocative and welfare effects of prohibiting price parity clauses and/or regulating the intermediary’s recommender system. Prohibiting price parity clauses is always welfare decreasing in our model. |
| Keywords: | intermediation, digital platforms, price parity, recommender system, MFN clause, e-commerce |
| JEL: | L12 L15 D21 D42 M37 |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2024_595 |
| By: | Pablo D. Azar; Adrian Casillas; Maryam Farboodi |
| Abstract: | This paper considers the “DeFi intermediation chain”—the market structure that underlies the creation and distribution of ETH, the native cryptocurrency of Ethereum—to examine how information asymmetry shapes intermediation rents. We argue that using proof-of-stake blockchain technology in DeFi leads to a novel limit to arbitrage, arising from the tension between arbitrageurs' privacy needs and blockchain transparency. Using a new dataset which distinguishes private and public transactions in Ethereum, we find that a 1% increase in private information advantage leads to a 1.4% increase in intermediaries' profit share. We develop a dynamic bargaining model that predicts information market power stems exclusively from participants' private information advantage. Our analysis illustrates how blockchain technology can sustain arbitrage opportunities despite low entry barriers. |
| JEL: | C83 D82 D86 G23 G29 L86 |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:32949 |
| By: | Jacopo Gambato; Bernhard Ganglmair; Julia K. Krämer |
| Abstract: | This chapter explores the interaction between the enforcement of and compliance with difficult-to-enforce rules in the context of data regulation. We focus on the effect of the introduction of the GDPR and its transparency principle on the readability of privacy policies for a large sample of German firms. Germany has a system of state-level data protection authorities. These data regulators enforce the same rules but face diverse funding situations, allowing for an ideal setting to study the role of a regulator's capacity in firms' compliance decisions. We find that while, on average, the GDPR lead to less readable policies, firms active in industries that have in the past received more regulatory scrutiny and those active in jurisdictions of better-funded data regulators exhibit a stronger compliance with the GDPR's readability requirement. These results exemplify a more general interaction between regulators' enforcement activity and firms' regulatory compliance. |
| JEL: | D22 K20 L51 |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:32913 |
| By: | Jens-Uwe Franck; Martin Peitz |
| Abstract: | This paper explains the novelties for sector inquiries as a result of the 11th amendment to the German Competition Act. The Bundeskartellamt is now authorized to impose measures ranging from behavioural requirements to the unbundling of a company in order to remedy identified competition problems. The new regulatory instrument supplements antitrust law in an appropriate manner. |
| Keywords: | Competition law, sector inquiry, market investigation, New Competition Tool, Bundeskartellamt, divestiture |
| JEL: | K2 L41 |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2024_598 |
| By: | Auriol, Emmanuelle; Gonzalez Fanfalone, Alexia |
| Abstract: | This paper studies how Mobile Network Operator (MNO) impacts traditional banks’ coverage decision in a model of vertical and horizontal differentiation with asymmetric transportation costs. The competitive pressure triggered by MNOs entry on traditional banking sector leads to prices decrease and broadens financial inclusion as the traditional banking sector expands its network in response to the entry of MNOs. The model’s predictions are checked against data from Kenya, where mobile banking has been most successful. Results from the econometric model for the period 2000-2011, suggest that, roughly, for each 7 new mobile agents in a sub-locality, one new bank branch opened. |
| Keywords: | Financial inclusion; Regulation; Mobile banking; Development |
| JEL: | G18 L51 L88 L96 O16 |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:tse:wpaper:129721 |