The recent phenomena that the gig workers, franchisees and sellers using online shopping platform establish ‘unions’ to bargain collectively with their powerful counterparties give rise to questions as to how these organisations should be dealt under the competition laws. Although it is established that Japanese competition law, Antimonopoly Act (AMA), is not applicable to workers and their collective actions, the legal status of the above entities, which I call self-employed workers, is not clear. Possibility is that they are deemed enterprises, rather than workers, and their collective activities are deemed illegal cartels on which severe sanctions are imposed under the AMA. To help discussion, the article analyses conventional trade unions’ effect and nature from competition law perspectives. Such analysis should be informative given self-employed workers organisations’ aims and activities as well as their members’ economically dependent status are largely the same with ones of trade unions. Having clarified that the trade union should not be viewed neither as a monopoly nor as a cartel for the purpose of the AMA and that market share, or union density, is not helpful in assessing unions’ power, I analyse unions’ unique ways of influencing working conditions - collective bargaining and strike and engagement in regulatory, judicial and legislative activities - and contends that their activities are generally unlikely to be anticompetitive in Japan. Meanwhile, the complex nature of such analysis also become clear. I then conclude that the AMA is a brunt tool to evaluate effect and legitimacy of collective actions to counter powerful buyers, be it conventional employees or self-employed workers, and that the legislature, neither the AMA nor the competition authority, should determine whether self-employed workers should be allowed to unionise and engage in collective actions.
{"title":"A Collective Agreement is Not Inherently Anti Competitive in Japan: Trade Unions, Self-Employed Workers and the Antimonopoly Act","authors":"Masako Wakui","doi":"10.2139/ssrn.3783773","DOIUrl":"https://doi.org/10.2139/ssrn.3783773","url":null,"abstract":"The recent phenomena that the gig workers, franchisees and sellers using online shopping platform establish ‘unions’ to bargain collectively with their powerful counterparties give rise to questions as to how these organisations should be dealt under the competition laws. Although it is established that Japanese competition law, Antimonopoly Act (AMA), is not applicable to workers and their collective actions, the legal status of the above entities, which I call self-employed workers, is not clear. Possibility is that they are deemed enterprises, rather than workers, and their collective activities are deemed illegal cartels on which severe sanctions are imposed under the AMA. To help discussion, the article analyses conventional trade unions’ effect and nature from competition law perspectives. Such analysis should be informative given self-employed workers organisations’ aims and activities as well as their members’ economically dependent status are largely the same with ones of trade unions. Having clarified that the trade union should not be viewed neither as a monopoly nor as a cartel for the purpose of the AMA and that market share, or union density, is not helpful in assessing unions’ power, I analyse unions’ unique ways of influencing working conditions - collective bargaining and strike and engagement in regulatory, judicial and legislative activities - and contends that their activities are generally unlikely to be anticompetitive in Japan. Meanwhile, the complex nature of such analysis also become clear. I then conclude that the AMA is a brunt tool to evaluate effect and legitimacy of collective actions to counter powerful buyers, be it conventional employees or self-employed workers, and that the legislature, neither the AMA nor the competition authority, should determine whether self-employed workers should be allowed to unionise and engage in collective actions.","PeriodicalId":142139,"journal":{"name":"ERN: Monopoly","volume":"50 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-10-28","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114137784","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We analyze the firm-external effects of dynamic prices in a sequential market with a monopolistic firm. The product is offered to an infinite sequence of rational consumers each of whom observes a private signal regarding the product quality. We show that dynamic prices are necessary for asymptotic learning, that is, for market interaction to asymptotically reveal the product quality. If prices are adjusted periodically to be informationally efficient, that is, to reflect the accumulated information, then asymptotic learning occurs. However, the higher the frequency with which prices are informationally efficient, the lower is expected welfare. Thus, we identify a trade-off between allocational and informational efficiency.
{"title":"The Cost and Benefit of Dynamic Pricing","authors":"Moran Koren, Manuel Mueller-Frank","doi":"10.2139/ssrn.3689782","DOIUrl":"https://doi.org/10.2139/ssrn.3689782","url":null,"abstract":"We analyze the firm-external effects of dynamic prices in a sequential market with a monopolistic firm. The product is offered to an infinite sequence of rational consumers each of whom observes a private signal regarding the product quality. We show that dynamic prices are necessary for asymptotic learning, that is, for market interaction to asymptotically reveal the product quality. <br>If prices are adjusted periodically to be informationally efficient, that is, to reflect the accumulated information, then asymptotic learning occurs. However, the higher the frequency with which prices are informationally efficient, the lower is expected welfare. Thus, we identify a trade-off between allocational and informational efficiency.","PeriodicalId":142139,"journal":{"name":"ERN: Monopoly","volume":"57 29 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-09-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"121657241","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Michael Gelman, Zaheer Khan, Amir Shoham, S. Tarba
Abstract This paper examines the impact of local competition and local firm market power on misconduct by analyzing the investment adviser market. The study is based on an extensive sample of more than 3.8 million employee-year observations of investment advisers resulting in 709,416 firm-county-year observations over 12 years. The findings show that a firm's county-level market power and county market competition have a negative influence on investment adviser misconduct. The result is robust to a battery of empirical tests. We show that a firm exhibits lower levels of misconduct in counties in which it has greater local market power. We also identify the effect of local competition and market power on misconduct using two exogenous shocks, mergers and acquisitions (M&As) and the end of a local monopoly. We establish adviser employment stability as a novel channel for explaining the impact of local competition and firm market power on misconduct.
{"title":"Does Local Competition and Firm Market Power Affect Investment Adviser Misconduct?","authors":"Michael Gelman, Zaheer Khan, Amir Shoham, S. Tarba","doi":"10.2139/ssrn.3666596","DOIUrl":"https://doi.org/10.2139/ssrn.3666596","url":null,"abstract":"Abstract This paper examines the impact of local competition and local firm market power on misconduct by analyzing the investment adviser market. The study is based on an extensive sample of more than 3.8 million employee-year observations of investment advisers resulting in 709,416 firm-county-year observations over 12 years. The findings show that a firm's county-level market power and county market competition have a negative influence on investment adviser misconduct. The result is robust to a battery of empirical tests. We show that a firm exhibits lower levels of misconduct in counties in which it has greater local market power. We also identify the effect of local competition and market power on misconduct using two exogenous shocks, mergers and acquisitions (M&As) and the end of a local monopoly. We establish adviser employment stability as a novel channel for explaining the impact of local competition and firm market power on misconduct.","PeriodicalId":142139,"journal":{"name":"ERN: Monopoly","volume":"7 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-08-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122702012","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper provides a parsimonious and unified explanation for randomized selling mechanisms widely used in practice, yet commonly perceived as puzzling. We show that randomization implemented via opaque pricing and underpricing is optimal only if the revenue function with market clearing pricing is non-concave. Randomization involves conflation and rationing and, relative to market clearing pricing, leads to larger quantities sold. If this quantity effect is sufficiently strong, randomization increases consumer surplus. For fixed quantities resale increases consumer surplus. However, if resale is sufficiently efficient then consumer surplus can be larger under resale prohibition because resale reduces the equilibrium quantities.
{"title":"Monopoly Pricing, Optimal Randomization and Resale","authors":"S. Loertscher, Ellen V. Muir","doi":"10.2139/ssrn.3585005","DOIUrl":"https://doi.org/10.2139/ssrn.3585005","url":null,"abstract":"This paper provides a parsimonious and unified explanation for randomized selling mechanisms widely used in practice, yet commonly perceived as puzzling. We show that randomization implemented via opaque pricing and underpricing is optimal only if the revenue function with market clearing pricing is non-concave. Randomization involves conflation and rationing and, relative to market clearing pricing, leads to larger quantities sold. If this quantity effect is sufficiently strong, randomization increases consumer surplus. For fixed quantities resale increases consumer surplus. However, if resale is sufficiently efficient then consumer surplus can be larger under resale prohibition because resale reduces the equilibrium quantities.","PeriodicalId":142139,"journal":{"name":"ERN: Monopoly","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-04-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131563923","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Strong network effects typically lead to multiple equilibria in two-sided markets. To overcome the methodological challenge of selecting an appropriate equilibrium, this paper shows that many two-sided market models are weighted potential games, and thus potential maximization, a refinement of Nash equilibrium justified by many theoretical and experimental studies, can always select a unique equilibrium. Under potential maximization, platforms often subsidize one side and charge the other, i.e., divide and conquer. The fundamental determinant of which side to subsidize or monetize is cross-side network effects. This divide-and-conquer strategy implies that platforms are often designed to favor the money side much more than the subsidy side.
{"title":"Divide and Conquer in Two-Sided Markets: A Potential-Game Approach","authors":"Lester T. Chan","doi":"10.2139/ssrn.3498394","DOIUrl":"https://doi.org/10.2139/ssrn.3498394","url":null,"abstract":"Strong network effects typically lead to multiple equilibria in two-sided markets. To overcome the methodological challenge of selecting an appropriate equilibrium, this paper shows that many two-sided market models are weighted potential games, and thus potential maximization, a refinement of Nash equilibrium justified by many theoretical and experimental studies, can always select a unique equilibrium. Under potential maximization, platforms often subsidize one side and charge the other, i.e., divide and conquer. The fundamental determinant of which side to subsidize or monetize is cross-side network effects. This divide-and-conquer strategy implies that platforms are often designed to favor the money side much more than the subsidy side.","PeriodicalId":142139,"journal":{"name":"ERN: Monopoly","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-12-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130154788","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We propose a slight modification to the Herfindahl-Herschman Index of market concentration, resulting in a formula that indicates the number of firms dominating a market. We call this metric the opoly number because it has a value of 1 for a monopoly, 2 for a duopoly, etc.
{"title":"The Opoly Number","authors":"Michael Poulshock","doi":"10.2139/ssrn.3495139","DOIUrl":"https://doi.org/10.2139/ssrn.3495139","url":null,"abstract":"We propose a slight modification to the Herfindahl-Herschman Index of market concentration, resulting in a formula that indicates the number of firms dominating a market. We call this metric the opoly number because it has a value of 1 for a monopoly, 2 for a duopoly, etc.","PeriodicalId":142139,"journal":{"name":"ERN: Monopoly","volume":"8 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-11-28","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"124209946","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
In this paper, we analyse the effects of input price discrimination by an upstream monopolist selling to firms with various degrees of efficiency. When downstream markets are independent, we first study whether the upstream monopolist has an incentive to reduce or to increase the relative cost difference amongst downstream firms. Then, we examine the impact of input price discrimination on output and welfare. A key determinant of the effects of input price discrimination on prices, output, and welfare is the sum of demand curvature and pass-through elasticity. We apply our findings to the set of demand forms with constant pass-through rates, as well as other demand forms. We also discuss the cases of demand asymmetries across markets and price competition downstream.
{"title":"Input Price Discrimination, Demand Forms, and Welfare","authors":"Germain Gaudin, Romain Lestage","doi":"10.2139/ssrn.3488770","DOIUrl":"https://doi.org/10.2139/ssrn.3488770","url":null,"abstract":"In this paper, we analyse the effects of input price discrimination by an upstream monopolist selling to firms with various degrees of efficiency. When downstream markets are independent, we first study whether the upstream monopolist has an incentive to reduce or to increase the relative cost difference amongst downstream firms. Then, we examine the impact of input price discrimination on output and welfare. A key determinant of the effects of input price discrimination on prices, output, and welfare is the sum of demand curvature and pass-through elasticity. We apply our findings to the set of demand forms with constant pass-through rates, as well as other demand forms. We also discuss the cases of demand asymmetries across markets and price competition downstream.","PeriodicalId":142139,"journal":{"name":"ERN: Monopoly","volume":"9 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-11-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122285408","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Supplement is available at: https://ssrn.com/abstract=3452506 Alliances of buyers to negotiate input prices with suppliers have become commonplace in many industries. Using pre- and post-alliances data on household purchases of bottled water, I develop a structural model of bilateral oligopoly to estimate the effects of buyer alliances formed by retailers on the bargaining power of firms and retail prices paid by consumers. Results provide evidence of a countervailing buyer power effect that reduces retail prices by roughly 7%. Exploring determinants of buyer power, I find that changes in firms’ bargaining ability play an important role in the countervailing force exerted by buyer alliances which, absent this effect, may harm retailers.
{"title":"Buyer Alliances in Vertically Related Markets","authors":"H. Molina","doi":"10.2139/ssrn.3452497","DOIUrl":"https://doi.org/10.2139/ssrn.3452497","url":null,"abstract":"Supplement is available at: https://ssrn.com/abstract=3452506 \u0000 \u0000Alliances of buyers to negotiate input prices with suppliers have become commonplace in many industries. Using pre- and post-alliances data on household purchases of bottled water, I develop a structural model of bilateral oligopoly to estimate the effects of buyer alliances formed by retailers on the bargaining power of firms and retail prices paid by consumers. Results provide evidence of a countervailing buyer power effect that reduces retail prices by roughly 7%. Exploring determinants of buyer power, I find that changes in firms’ bargaining ability play an important role in the countervailing force exerted by buyer alliances which, absent this effect, may harm retailers.","PeriodicalId":142139,"journal":{"name":"ERN: Monopoly","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-09-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"129885404","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Import competition induces firms either to reduce their markup, upgrade their quality, or both. Modern models of international trade typically consider one margin of adjustment to explain the consequences of import competition. However, examining U.S. import data suggests that firms actively respond by adjusting both quality and markup. This paper develops and calibrates a Ricardian model of trade which incorporates the endogenous response of quality and markup to import competition. Countries are heterogeneous both in physical efficiency and quality capability. Firms engage in a two-dimensional Bertrand competition in which they simultaneously choose the price and quality of output. Estimation results indicate that developed countries are more productive both in physical and quality production. Moreover, in response to import competition, developed countries mainly upgrade quality, while developing countries mainly reduce the markup. Ignoring the quality channel would underestimate the gains from trade that the U.S. derives with developed countries and overestimate the gains from trade with developing countries. The counterfactual experiment indicates as the U.S. economy grows, it benefits more from free trade with quality-capable countries than with countries which are less capable.
{"title":"Competing on Price and Quality: Theory and Evidence from Trade Data","authors":"H. Atrianfar, Hamid Firooz","doi":"10.2139/ssrn.3401094","DOIUrl":"https://doi.org/10.2139/ssrn.3401094","url":null,"abstract":"Import competition induces firms either to reduce their markup, upgrade their quality, or both. Modern models of international trade typically consider one margin of adjustment to explain the consequences of import competition. However, examining U.S. import data suggests that firms actively respond by adjusting both quality and markup. This paper develops and calibrates a Ricardian model of trade which incorporates the endogenous response of quality and markup to import competition. Countries are heterogeneous both in physical efficiency and quality capability. Firms engage in a two-dimensional Bertrand competition in which they simultaneously choose the price and quality of output. Estimation results indicate that developed countries are more productive both in physical and quality production. Moreover, in response to import competition, developed countries mainly upgrade quality, while developing countries mainly reduce the markup. Ignoring the quality channel would underestimate the gains from trade that the U.S. derives with developed countries and overestimate the gains from trade with developing countries. The counterfactual experiment indicates as the U.S. economy grows, it benefits more from free trade with quality-capable countries than with countries which are less capable.","PeriodicalId":142139,"journal":{"name":"ERN: Monopoly","volume":"65 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-07-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128605886","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Using plausibly exogenous variation in Chinese imports, we provide evidence that firms strategically announce capacity expansions when facing entry threats. We first construct and validate a novel text-based measure of voluntary disclosure that reflects firms’ explicit forward-looking statements about capacity expansion plans. We then show that firms respond to heightened entry threats by announcing capacity expansions. Consistent with our predictions, larger firms are more likely to respond in this fashion, while more opaque firms are less likely to respond in this fashion. Our results cannot be explained by an overall increase in transparency/disclosure; we observe no increase overall disclosure. Thus, our results are unlikely to be driven by investors’ demand for information, but rather firms’ strategic choices to supply information in order to protect their product markets. Capacity expansion announcements appear to be effective at deterring entry.
{"title":"Do Firms Strategically Announce Capacity Expansions in Response to Heightened Entry Threats?","authors":"Matthew J. Bloomfield, M. Tuijn","doi":"10.2139/SSRN.3195932","DOIUrl":"https://doi.org/10.2139/SSRN.3195932","url":null,"abstract":"Using plausibly exogenous variation in Chinese imports, we provide evidence that firms strategically announce capacity expansions when facing entry threats. We first construct and validate a novel text-based measure of voluntary disclosure that reflects firms’ explicit forward-looking statements about capacity expansion plans. We then show that firms respond to heightened entry threats by announcing capacity expansions. Consistent with our predictions, larger firms are more likely to respond in this fashion, while more opaque firms are less likely to respond in this fashion. Our results cannot be explained by an overall increase in transparency/disclosure; we observe no increase overall disclosure. Thus, our results are unlikely to be driven by investors’ demand for information, but rather firms’ strategic choices to supply information in order to protect their product markets. Capacity expansion announcements appear to be effective at deterring entry.","PeriodicalId":142139,"journal":{"name":"ERN: Monopoly","volume":"40 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-03-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126665486","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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