Review of Industrial Organization最新文献

Firms can mitigate the harm of an input cartel by passing on some of the higher cost to their customers by raising their own prices. Recent damages claims have highlighted that firms may also respond by reducing the prices that are paid to their suppliers of complementary inputs; the firm thereby passes back some harm upstream. To provide guidance for practitioners as to how such effects together affect the division of the harm, we derive the equilibrium ‘passing-on’ and ‘passing-back’ effects in a successive oligopolies model where one of two inputs is cartelised. We show that the passing-back effect is larger when there is greater market power in the complementary input sector. This reduces the passing-on effect. The complementary input suppliers can incur substantial harm, and the harm that is inflicted on the cartel’s direct and/or indirect purchasers can thereby be reduced.

Ronald Coase famously exposed the limitations of economic analyses that rely upon assumptions of frictionless markets. He highlighted the importance of including transaction costs in economic analyses and issued a challenge to economists to think seriously about how transaction costs affect economic systems. Harold Demsetz, extended Coase’s analysis to show how these costs alter the way firms price and market their products. Demsetz’s analysis underscored that the costs of providing a market sometimes exceed the benefits of creating one in the first place and examined conditions where transaction costs imply that zero amounts of explicit market pricing will be efficient. This article extends Demsetz’s insights with respect to non-linear pricing contracts that seem not to “price” key side effects of the economic exchange. In particular, we analyze the welfare and output effects of two examples of such contracts that are commonly used by firms that are frequently subject to antitrust scrutiny: metered pricing; and loyalty discounts. The analysis demonstrates how a firm’s choice to set prices for its products are influenced by transaction and information costs and examines whether changes in output that are caused by the use of these non-linear pricing schemes are positively correlated with changes in total and consumer welfare. The article then discusses conditions under which measuring output effects can reliably differentiate between welfare-increasing and welfare-reducing uses of non-linear pricing.

This work revisits the classic spatial duopoly location-then-prices competition with quadratic transportation costs, in the presence of vertical differentiation. We show that contrary to the substitutability between horizontal and vertical differentiation that has appeared thus far in the literature, higher-quality asymmetry does not affect locational differentiation in equilibrium. While the better-quality seller indeed approaches the city center, the worse-quality seller is simultaneously driven further away from the city, and ultimately out of the market when quality differences become large enough. Interestingly, although vertical differentiation weakens competition, total welfare increases – even when the better-quality seller ultimately monopolizes the market.

One of the most famous and outstanding formalizations of the Coase Conjecture is by Gul et al. (J Econ Theory 39(1):155–190, 1986. https://doi.org/10.1016/0022-0531(86)90024-4) peculiarity of their model—as well as nearly all other examinations of the Coase Conjecture, including that by Coase himself—is that it assumes that the monopolist and customers have the same discount rate. I re-examine their model, while relaxing this restriction. Gul et. al. show that, if the (common) discount rate of the monopolist and customers approaches one, then the Coase Conjecture follows. I show that one only needs the discount rate of the customers to approach one for this to be true. I also show a second result: If the customers’ discount rate is fixed at a value less than one, while the monopolist’s discount rate approaches one, then the Coase Conjecture is guaranteed not to follow.

This paper estimates the effects of a motor fuel tax cut on retail prices and examines the role of market competition intensity in determining the pass-through rate. By employing a matched difference-in-differences strategy that uses nationwide panel data at the gas station level, I investigate how the magnitude of price reduction in response to the temporary tax reform in South Korea varies across local market structures. The results indicate a positive association between pass-through rates and the intensity of competition, with incomplete pass-through observed predominantly among firms that face fewer rivals. These findings offer an explanation for the incomplete tax-cut effects that are observed in energy and other consumption taxes and suggest that tax-reduction programs can benefit firms with local market power by increasing their profits, which thereby decreases the efficacy of fiscal policies that are aimed at reducing prices.

We examine several ways in which the U.S. Federal Trade Commission’s antitrust enforcement has changed under its new leadership during the Biden Administration, including policy changes and proposed technology-related rulemakings, and relevant recent court cases and academic research. We comment on the potential consequences of these changes for both the market and for the Commission’s reputation as a public institution.

With the prevalence of smartphones, it is important to understand the relationship between the smartphone channel and the computer channel. In this paper, we examine the extent to which smartphones substitute for or complement computers. We utilize unique panel data on individuals’ smartphone and computer usage, which contain detailed information on all domains and apps that individuals visit on their smartphones and computers. To examine the effect that smartphone usage has on computer usage, we exploit the panel nature of the data and use instrumental variables. We instrument for smartphone usage time with the use of the Android operating system version. We find that an increase in smartphone usage time decreases computer usage time, which indicates that smartphones and computers are overall substitutes. We find that the substitution pattern is greater on weekends compared to weekdays. We also examine how the effect of smartphone usage on computer usage differs across user characteristics. When we additionally examine the heterogeneity in substitution effects across domain and app categories, we find larger substitution effects for categories where computers may have been a dominant traditional digital channel prior to smartphones.

Forty years have passed since an inflation-adjusted price cap, widely called RPI-X, was proposed as a way of controlling prices in the UK’s newly privatised monopoly telecommunications company by a form of incentive regulation. The paper traces developments since then in several jurisdictions, within the context of a wider field of changing regulatory governance involving legislatures and governments as well as regulatory agencies. The focus is on, first, the experience of increasing complexity of the incentive schemes adopted, and second on the growing political salience of regulatory decisions which adds goals such as net zero, with more direct quantitative targets, to maximising consumer welfare. The implications of these changes for regulatory interventions are considered.

We propose a dynamic framework with consumers who have different valuations and an arbitrary number of firms that compete in quantities in each period. The consumers’ ability to behave strategically about the timing of consumption differs in the three distinct cognitive structures that we study: Under perfect rationality, consumers are strategic. Under extreme bounded rationality, consumers are myopic. Under explicit bounded rationality, consumers start the game myopic and can become strategic by incurring a cost. We make three contributions: First, we examine how the welfare of consumers is affected when new firms enter the industry, ceteris paribus. We find that under perfect rationality no consumers are worse off with a larger number of firms, whereas under extreme and explicit bounded rationality, some consumers may be worse off. Second, we reevaluate the profitability of exogenous horizontal mergers. We prove that mergers in which the merging firms represent more than 80% of the industry may be unprofitable. This outcome appears under explicit bounded rationality and represents a new merger paradox. Third, we demonstrate that, under explicit bounded rationality, an increase in the cognition cost, ceteris paribus, may decrease profits per firm. One can view the cognition cost as relevant to the transparency of the market. Thus, our finding questions the benefits from less transparent markets for oligopolistic firms.

Platform self-preferencing is often attacked as being “unfair.” Proponents of the consumer welfare standard complain that a fairness standard is too vague and too untethered from competitive effects to be a useful guide for antitrust enforcement. However, the consumer welfare standard relies on assessment of whether competition is “on the merits,” and the criteria for “merits” substantially overlap with those for “fairness.” Both standards generally condemn: (a) deception; (b) raising rivals’ costs; and (c) gaining too much competitive advantage from past success, especially across markets. This article examines whether these criteria help identify when the competitive effects of self-preferencing are positive or negative. The discussion is framed in terms of a platform that facilitates the interaction of buyers and sellers, and chooses whether to preference certain sellers. As the literature has shown, whether it owns a seller or not, a platform may use preferencing to promote seller competition or to promote seller market power, depending on the circumstances. Given the varying effects of self-preferencing, a blanket prohibition is unwarranted. Unfortunately, the common criteria for fairness and merit do not reliably identify the direction of self-preferencing’s competitive effects. For example, deception by a lagging firm could strengthen competition in the sense of lowering equilibrium purchase prices and raising consumer welfare. And gaining “too much” competitive advantage from past successes could facilitate entry into new markets, thus increasing competition in those markets. Instead of applying criteria for fairness and merit, a case-by-case, fact-intensive analysis of actual competitive effects is needed.