Abstract Political candidates, legislators, and academics have made proposals to separate services provided by dominant digital platforms from activities that rely on these services. Although the platforms have different economic and technical characteristics, common themes that motivate these proposals are the incentives of platforms to favor their own products and to suppress investment by imitating rivals. As has been shown in other contexts, this paper demonstrates that structural separation does not eliminate incentives for platforms to discriminate in the provision of service quality. Furthermore, the ability of vertically integrated platforms to imitate rivals does not necessarily harm consumers. Structural or functional separation can address some complaints lodged against activities by dominant platforms, but experience demonstrates that separation requirements are difficult to administer and can harm innovation. Public policy should rely on a mix of antitrust enforcement and regulation to address concerns about privacy, data security, and potential influence of major platforms in politics and the media, as well as the abuse of market power.
{"title":"Separation: A Cure for Abuse of Platform Dominance?","authors":"R. Gilbert","doi":"10.2139/ssrn.3620541","DOIUrl":"https://doi.org/10.2139/ssrn.3620541","url":null,"abstract":"Abstract Political candidates, legislators, and academics have made proposals to separate services provided by dominant digital platforms from activities that rely on these services. Although the platforms have different economic and technical characteristics, common themes that motivate these proposals are the incentives of platforms to favor their own products and to suppress investment by imitating rivals. As has been shown in other contexts, this paper demonstrates that structural separation does not eliminate incentives for platforms to discriminate in the provision of service quality. Furthermore, the ability of vertically integrated platforms to imitate rivals does not necessarily harm consumers. Structural or functional separation can address some complaints lodged against activities by dominant platforms, but experience demonstrates that separation requirements are difficult to administer and can harm innovation. Public policy should rely on a mix of antitrust enforcement and regulation to address concerns about privacy, data security, and potential influence of major platforms in politics and the media, as well as the abuse of market power.","PeriodicalId":18516,"journal":{"name":"Microeconomics: Production","volume":"523 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2020-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"80816744","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}
The "spokes model" takes the name from its graphical visualisation, that resembles the spokes of a bike's wheel. It describes a market as a collection of spokes, joining at a common centre, where consumers are located. Firms may be situated at the extreme of these spokes, at the interior of the market structure or even outside of the spokes structure. The model has been introduced relatively recently (Chen and Riordan, Price and Variety in the Spokes Model, Economic Journal, 2007) and it is a useful tool to model product differentiation. An important characteristic is that competition between firms is spatial, i.e., the distance between consumers and firms is crucial for the outcomes, but non-localised, as a firm competes directly with all others and not only with the neighbours. This chapter: (i) introduces a benchmark version of the spokes model; (ii) clarifies important characteristics that distinguish it from other approaches existing in the literature; (iii) highlights its suitability for applications, by reviewing the flourishing literature that has been adopting this approach. Applications are presented by reviewing the role of non-localised competition on: (i) pricing decisions; (ii) location choices; (iii) variety provision.
{"title":"Non-localised Spatial Competition: The \"Spokes Model\"","authors":"Carlo Reggiani","doi":"10.2139/ssrn.3600787","DOIUrl":"https://doi.org/10.2139/ssrn.3600787","url":null,"abstract":"The \"spokes model\" takes the name from its graphical visualisation, that resembles the spokes of a bike's wheel. It describes a market as a collection of spokes, joining at a common centre, where consumers are located. Firms may be situated at the extreme of these spokes, at the interior of the market structure or even outside of the spokes structure. The model has been introduced relatively recently (Chen and Riordan, Price and Variety in the Spokes Model, Economic Journal, 2007) and it is a useful tool to model product differentiation. An important characteristic is that competition between firms is spatial, i.e., the distance between consumers and firms is crucial for the outcomes, but non-localised, as a firm competes directly with all others and not only with the neighbours. \u0000 \u0000This chapter: (i) introduces a benchmark version of the spokes model; (ii) clarifies important characteristics that distinguish it from other approaches existing in the literature; (iii) highlights its suitability for applications, by reviewing the flourishing literature that has been adopting this approach. Applications are presented by reviewing the role of non-localised competition on: (i) pricing decisions; (ii) location choices; (iii) variety provision.","PeriodicalId":18516,"journal":{"name":"Microeconomics: Production","volume":"24 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2020-05-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"89480608","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}
Most assets clear independently rather than jointly. This paper presents a model based on the uniform‐price double auction which accommodates arbitrary restrictions on market clearing, including independent clearing across assets (allowed when demand for each asset is contingent only on the price of that asset) and joint market clearing for all assets (required when demand for each asset is contingent on the prices of all assets). Additional trading protocols for traded assets—neutral when the market clears jointly—are generally not redundant innovations, even if all traders participate in all protocols. Multiple trading protocols that clear independently can be designed to be at least as efficient as joint market clearing for all assets. The change in price impact brought by independence in market clearing can overcome the loss of information, and enhance diversification and risk sharing. Except when the market is competitive, market characteristics should guide innovation in trading technology.
{"title":"Exchange Design and Efficiency","authors":"M. Rostek, Ji Hee Yoon","doi":"10.2139/ssrn.3604976","DOIUrl":"https://doi.org/10.2139/ssrn.3604976","url":null,"abstract":"Most assets clear independently rather than jointly. This paper presents a model based on the uniform‐price double auction which accommodates arbitrary restrictions on market clearing, including independent clearing across assets (allowed when demand for each asset is contingent only on the price of that asset) and joint market clearing for all assets (required when demand for each asset is contingent on the prices of all assets). Additional trading protocols for traded assets—neutral when the market clears jointly—are generally not redundant innovations, even if all traders participate in all protocols. Multiple trading protocols that clear independently can be designed to be at least as efficient as joint market clearing for all assets. The change in price impact brought by independence in market clearing can overcome the loss of information, and enhance diversification and risk sharing. Except when the market is competitive, market characteristics should guide innovation in trading technology.","PeriodicalId":18516,"journal":{"name":"Microeconomics: Production","volume":"5 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2020-05-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"90244879","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}
Data associated with the Home Mortgage Disclosure Act (HMDA) are often studied for evidence of discrimination in terms of minority applicants or for home location in minority neighborhoods, with mixed results. The present analysis utilizes a data set covering 2014–2016, combining characteristics of home location and applicants from the HMDA data with information on depositor characteristics from the Federal Insurance Deposit Corporation's Summary of Deposits data and the Census Bureau's American Community Survey. Consistent with predictions from the red‐lining literature, loan acceptance rates are adversely influenced by high minority locations, although the effect is larger for minority applicants. The relationship banking literature predicts that community banks will yield higher rates of loan acceptance, and the results support that hypothesis. That same literature suggests that familiarity in terms of similar race/ethnicity characteristics for depositors and home location or loan applicants will yield a loan acceptance advantage; and that hypothesis is not supported. Subsidiary analyses suggest that market competition improves loan acceptance rates for minority applicants, consistent with models of discrimination. Additionally, minority depositors are associated positively with loan acceptance rates, which may reflect higher levels of bank risk, and a risk premium, in those markets.
{"title":"Race in Relation to Bank Depositors and Mortgage Applications","authors":"Russell Kashian, R. Drago","doi":"10.1111/ecno.12168","DOIUrl":"https://doi.org/10.1111/ecno.12168","url":null,"abstract":"Data associated with the Home Mortgage Disclosure Act (HMDA) are often studied for evidence of discrimination in terms of minority applicants or for home location in minority neighborhoods, with mixed results. The present analysis utilizes a data set covering 2014–2016, combining characteristics of home location and applicants from the HMDA data with information on depositor characteristics from the Federal Insurance Deposit Corporation's Summary of Deposits data and the Census Bureau's American Community Survey. Consistent with predictions from the red‐lining literature, loan acceptance rates are adversely influenced by high minority locations, although the effect is larger for minority applicants. The relationship banking literature predicts that community banks will yield higher rates of loan acceptance, and the results support that hypothesis. That same literature suggests that familiarity in terms of similar race/ethnicity characteristics for depositors and home location or loan applicants will yield a loan acceptance advantage; and that hypothesis is not supported. Subsidiary analyses suggest that market competition improves loan acceptance rates for minority applicants, consistent with models of discrimination. Additionally, minority depositors are associated positively with loan acceptance rates, which may reflect higher levels of bank risk, and a risk premium, in those markets.","PeriodicalId":18516,"journal":{"name":"Microeconomics: Production","volume":"5 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2020-05-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"90276857","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}
The optimal duration of a supply contract balances the costs of re-selecting a supplier against the costs of being matched to an inefficient supplier when the contract lasts too long. I develop a structural model of contract duration that captures this trade-off and provide an empirical strategy for quantifying (unobserved) transaction costs. I estimate the model using federal supply contracts for a standardized product, where suppliers are selected by procurement auctions. The estimated transaction costs are substantially greater than consumer switching costs and a significant portion of total buyer costs. Counterfactuals illustrate the importance of accounting for the duration margin. (JEL D22, D23, D44, D86, H57, L14)
{"title":"Contract Duration and the Costs of Market Transactions","authors":"Alexander Mackay","doi":"10.2139/ssrn.3096534","DOIUrl":"https://doi.org/10.2139/ssrn.3096534","url":null,"abstract":"The optimal duration of a supply contract balances the costs of re-selecting a supplier against the costs of being matched to an inefficient supplier when the contract lasts too long. I develop a structural model of contract duration that captures this trade-off and provide an empirical strategy for quantifying (unobserved) transaction costs. I estimate the model using federal supply contracts for a standardized product, where suppliers are selected by procurement auctions. The estimated transaction costs are substantially greater than consumer switching costs and a significant portion of total buyer costs. Counterfactuals illustrate the importance of accounting for the duration margin. (JEL D22, D23, D44, D86, H57, L14)","PeriodicalId":18516,"journal":{"name":"Microeconomics: Production","volume":"8 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2020-05-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"74835882","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 article aims to provide a comprehensive survey of the theoretical research on multi-unit auctions to help identify the gap in this literature. In particular, the focus is on those research that study multi-unit auctions for the sale of multiple units of homogeneous objects to potential buyers with more than one unit demand. The articles are categorized based on the assumptions of their models regarding bidders' values and the type of auction. Further the gap in this literature is identified with those areas that require further theoretical research.
{"title":"Multi-Unit Auctions: A Survey of Theoretical Literature","authors":"Peyman Khezr, Anne Cumpston","doi":"10.2139/ssrn.3596663","DOIUrl":"https://doi.org/10.2139/ssrn.3596663","url":null,"abstract":"This article aims to provide a comprehensive survey of the theoretical research on multi-unit auctions to help identify the gap in this literature. In particular, the focus is on those research that study multi-unit auctions for the sale of multiple units of homogeneous objects to potential buyers with more than one unit demand. The articles are categorized based on the assumptions of their models regarding bidders' values and the type of auction. Further the gap in this literature is identified with those areas that require further theoretical research.","PeriodicalId":18516,"journal":{"name":"Microeconomics: Production","volume":"56 1-2","pages":""},"PeriodicalIF":0.0,"publicationDate":"2020-05-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"72606950","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}
Manufacturing and supply networks worldwide are undergoing digital transformation under the umbrella of Smart Manufacturing and Industry 4.0. Just as companies embrace digital technologies and leverage the opportunities presented by Artificial Intelligence (AI) forming digital supply networks, the world has been hammered by one of the biggest interruptions in the modern history—the COVID-19 pandemic. Many businesses are facing existential threats and scrambling to survive in the short term. Conceivably, some are inclined to scrap AI initiatives and projects as non-essential in these horrific times, as evidenced by canceled and delayed consulting contracts with the projected loss of US$30 billion in 2020 alone. In this article, we make the case that digital technology and AI can mitigate the adversities and strengthen the resiliency and preparedness of manufacturing and supply networks in the future.
{"title":"Impact of COVID-19 on Manufacturing and Supply Networks — The Case for AI-Inspired Digital Transformation","authors":"Thorsten Wuest, A. Kusiak, Tinglong Dai, S. Tayur","doi":"10.2139/ssrn.3593540","DOIUrl":"https://doi.org/10.2139/ssrn.3593540","url":null,"abstract":"Manufacturing and supply networks worldwide are undergoing digital transformation under the umbrella of Smart Manufacturing and Industry 4.0. Just as companies embrace digital technologies and leverage the opportunities presented by Artificial Intelligence (AI) forming digital supply networks, the world has been hammered by one of the biggest interruptions in the modern history—the COVID-19 pandemic. Many businesses are facing existential threats and scrambling to survive in the short term. Conceivably, some are inclined to scrap AI initiatives and projects as non-essential in these horrific times, as evidenced by canceled and delayed consulting contracts with the projected loss of US$30 billion in 2020 alone. In this article, we make the case that digital technology and AI can mitigate the adversities and strengthen the resiliency and preparedness of manufacturing and supply networks in the future.","PeriodicalId":18516,"journal":{"name":"Microeconomics: Production","volume":"90 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2020-05-05","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"87735477","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}
Marco Bonomo, Carlos M. Carvalho, Oleksiy Kryvtsov, Sigal Ribon, Rodolfo Rigato
We study a unique dataset with comprehensive coverage of daily prices in large multiproduct retailers in Israel. Retail stores synchronize price changes around occasional ‘peak’ days when they reprice around 10% of their products. To assess aggregate implications of partial price synchronization, we develop a new model in which multiproduct firms face economies of scope in price adjustment, and synchronization is endogenous. Synchronization of price changes attenuates the average price response to monetary shocks, but only high degrees of synchronization can substantially strengthen the real effects of monetary policy shocks. Our calibrated model generates real effects similar in magnitude to those in Golosov and Lucas (2007).
{"title":"Multi-Product Pricing: Theory and Evidence From Large Retailers","authors":"Marco Bonomo, Carlos M. Carvalho, Oleksiy Kryvtsov, Sigal Ribon, Rodolfo Rigato","doi":"10.2139/ssrn.3590402","DOIUrl":"https://doi.org/10.2139/ssrn.3590402","url":null,"abstract":"\u0000 We study a unique dataset with comprehensive coverage of daily prices in large multiproduct retailers in Israel. Retail stores synchronize price changes around occasional ‘peak’ days when they reprice around 10% of their products. To assess aggregate implications of partial price synchronization, we develop a new model in which multiproduct firms face economies of scope in price adjustment, and synchronization is endogenous. Synchronization of price changes attenuates the average price response to monetary shocks, but only high degrees of synchronization can substantially strengthen the real effects of monetary policy shocks. Our calibrated model generates real effects similar in magnitude to those in Golosov and Lucas (2007).","PeriodicalId":18516,"journal":{"name":"Microeconomics: Production","volume":"12 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2020-04-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"81358885","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 characterize the optimal prize distribution in an all-pay contest under organizer objectives of expected outcome, expected maximum outcome, and expected mth highest outcome. Multiple prizes can be optimal for small contests, but as the number of entrants grows large a single prize becomes optimal. A large number of entrants is not optimal in all cases. Every feasible integer is optimal for some cost function. We characterize the limiting value of contest outcomes; exactly in the case of linear production and up to bounds in the concave/convex case. In all cases the limiting value is bounded away from zero.
{"title":"Prizes in Contests with Many Entrants","authors":"Michael Menietti","doi":"10.2139/ssrn.3584552","DOIUrl":"https://doi.org/10.2139/ssrn.3584552","url":null,"abstract":"We characterize the optimal prize distribution in an all-pay contest under organizer objectives of expected outcome, expected maximum outcome, and expected mth highest outcome. Multiple prizes can be optimal for small contests, but as the number of entrants grows large a single prize becomes optimal. A large number of entrants is not optimal in all cases. Every feasible integer is optimal for some cost function. We characterize the limiting value of contest outcomes; exactly in the case of linear production and up to bounds in the concave/convex case. In all cases the limiting value is bounded away from zero.","PeriodicalId":18516,"journal":{"name":"Microeconomics: Production","volume":"3 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2020-04-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"73068124","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}
Abstract Economic theory suggests that occupational licensing can be a barrier to entry that restricts labor supply (Friedman, 1962; Stigler, 1971) or a signal of quality that enhances the labor market (Leland, 1979). This paper studies two types of licenses for dental assistants (DAs) in the U.S. to illustrate the competing supply-restricting and quality-signaling effects of licensing on minority workers. Specifically, I study the effects of introducing the X-ray permit, a state-issued license to perform X-ray procedures that also carries information about a DA’ s competence, against that of the entry-level license, which provides little information about a DA’ s competence. I find that the X-ray permit requirement reduces the wage gap between non-Hispanic white and minority DAs by 8 percent, presumably because it helps minority DAs secure jobs that entail X-ray procedures. In contrast, entry-level licensing does not reduce the racial wage gap. These findings suggest that licensing alleviates statistical discrimination if it reveals information about the holder’ s productivity.
{"title":"Barrier to Entry or Signal of Quality? The Effects of Occupational Licensing on Minority Dental Assistants","authors":"Xing Xia","doi":"10.2139/ssrn.3584068","DOIUrl":"https://doi.org/10.2139/ssrn.3584068","url":null,"abstract":"Abstract Economic theory suggests that occupational licensing can be a barrier to entry that restricts labor supply (Friedman, 1962; Stigler, 1971) or a signal of quality that enhances the labor market (Leland, 1979). This paper studies two types of licenses for dental assistants (DAs) in the U.S. to illustrate the competing supply-restricting and quality-signaling effects of licensing on minority workers. Specifically, I study the effects of introducing the X-ray permit, a state-issued license to perform X-ray procedures that also carries information about a DA’ s competence, against that of the entry-level license, which provides little information about a DA’ s competence. I find that the X-ray permit requirement reduces the wage gap between non-Hispanic white and minority DAs by 8 percent, presumably because it helps minority DAs secure jobs that entail X-ray procedures. In contrast, entry-level licensing does not reduce the racial wage gap. These findings suggest that licensing alleviates statistical discrimination if it reveals information about the holder’ s productivity.","PeriodicalId":18516,"journal":{"name":"Microeconomics: Production","volume":"16 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2020-04-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"89240039","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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