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Economics of Competition in the U.S. Livestock Industry Clement E. Ward
Economics of Competition in the U.S. Livestock Industry Clement E. Ward, Professor Emeritus Department of Agricultural Economics Oklahoma State University January 2010 Paper Background and Objectives Questions of market structure changes, their causes, and impacts for pricing and competition have been focus areas for the author over his entire 35-year career (1974-2009). Pricing and competition are highly emotional issues to many and focusing on factual, objective economic analyses is critical. This paper is the author’s contribution to that effort. The objectives of this paper are to: (1) put meatpacking competition issues in historical perspective, (2) highlight market structure changes in meatpacking, (3) note some key lawsuits and court rulings that contribute to the historical perspective and regulatory environment, and (4) summarize the body of research related to concentration and competition issues. These were the same objectives I stated in a presentation made at a conference in December 2009, The Economics of Structural Change and Competition in the Food System, sponsored by the Farm Foundation and other professional agricultural economics organizations. The basis for my conference presentation and this paper is an article I published, “A Review of Causes for and Consequences of Economic Concentration in the U.S. Meatpacking Industry,” in an online journal, Current Agriculture, Food & Resource Issues in 2002, http://caes.usask.ca/cafri/search/archive/2002-ward3-1.pdf. This paper is an updated, modified version of the review article though the author cannot claim it is an exhaustive, comprehensive review of the relevant literature. Issue Background Nearly 20 years ago, the author ran across a statement which provides a perspective for the issues of concentration, consolidation, pricing, and competition in meatpacking. -
Price Competition with Satisficing Consumers
View metadata, citation and similar papers at core.ac.uk brought to you by CORE provided by Aberdeen University Research Archive Price Competition with Satisficing Consumers∗ Mauro Papiy Abstract The ‘satisficing’ heuristic by Simon (1955) has recently attracted attention both theoretically and experimentally. In this paper I study a price-competition model in which the consumer is satisficing and firms can influence his aspiration price via marketing. Unlike existing models, whether a price comparison is made depends on both pricing and marketing strategies. I fully characterize the unique symmetric equilibrium by investigating the implications of satisficing on various aspects of market competition. The proposed model can help explain well-documented economic phenomena, such as the positive correla- tion between marketing and prices observed in some markets. JEL codes: C79, D03, D43. Keywords: Aspiration Price, Bounded Rationality, Price Competition, Satisficing, Search. ∗This version: August 2017. I would like to thank the Editor of this journal, two anonymous referees, Ed Hopkins, Hans Hvide, Kohei Kawamura, Ran Spiegler, the semi- nar audience at universities of Aberdeen, East Anglia, and Trento, and the participants to the 2015 OLIGO workshop (Madrid) and the 2015 Econometric Society World Congress (Montreal) for their comments. Financial support from the Aberdeen Principal's Excel- lence Fund and the Scottish Institute for Research in Economics is gratefully acknowledged. Any error is my own responsibility. yBusiness School, University of Aberdeen - Edward Wright Building, Dunbar Street, AB24 3QY, Old Aberdeen, Scotland, UK. E-mail address: [email protected]. 1 1 Introduction According to Herbert Simon (1955), in most global models of rational choice, all alternatives are eval- uated before a choice is made. -
Industrial Organization 06 Market Structure and Market Power
Industrial Organization 06 Market structure and market power Marc Bourreau Telecom ParisTech Marc Bourreau (TPT) Lecture 06: Market structure and market power 1 / 39 Outline 1 Introduction: definition of market power 2 Definition of relevant market An example: market definition in the telecommunications sector Approach based on cross price-elasticities Other approaches 3 The relationship between concentration and market power An example with the Cournot oligopoly model Issues in measuring concentration and market power Other concentration measures Other market power measures 4 The SCP paradigm 5 Some elements about the control of concentration Marc Bourreau (TPT) Lecture 06: Market structure and market power 2 / 39 Introduction Introduction Remember, from the lecture on Monopoly: Definition of "market power" The ability of a firm to raise its price over marginal cost. Importance of measuring "market power": In competition policy, some practices (for instance, bundling) are illegal if a firm has market power. In order to estimate the market power of a firm, we need to define first the relevant market. Marc Bourreau (TPT) Lecture 06: Market structure and market power 3 / 39 Market definition Definition of the relevant market Two questions: Product market Which products should we include in the "market"? Geographical market Which geographical zone do we have to consider? An economic definition of the market A market can be defined as a group of products presenting strong demand- substitutability and supply-substitutability. Marc Bourreau (TPT) Lecture 06: Market structure and market power 4 / 39 Market definition Definition of the relevant market Definition of the European Commission (1997) The relevant market includes all the products and/or services considered as interchangeable or substitutable on the account of product characteristics, price, and regular use. -
Law-And-Political-Economy Framework: Beyond the Twentieth-Century Synthesis Abstract
JEDEDIAH BRITTON- PURDY, DAVID SINGH GREWAL, AMY KAPCZYNSKI & K. SABEEL RAHMAN Building a Law-and-Political-Economy Framework: Beyond the Twentieth-Century Synthesis abstract. We live in a time of interrelated crises. Economic inequality and precarity, and crises of democracy, climate change, and more raise significant challenges for legal scholarship and thought. “Neoliberal” premises undergird many fields of law and have helped authorize policies and practices that reaffirm the inequities of the current era. In particular, market efficiency, neu- trality, and formal equality have rendered key kinds of power invisible, and generated a skepticism of democratic politics. The result of these presumptions is what we call the “Twentieth-Century Synthesis”: a pervasive view of law that encases “the market” from claims of justice and conceals it from analyses of power. This Feature offers a framework for identifying and critiquing the Twentieth-Century Syn- thesis. This is also a framework for a new “law-and-political-economy approach” to legal scholar- ship. We hope to help amplify and catalyze scholarship and pedagogy that place themes of power, equality, and democracy at the center of legal scholarship. authors. The authors are, respectively, William S. Beinecke Professor of Law at Columbia Law School; Professor of Law at Berkeley Law School; Professor of Law at Yale Law School; and Associate Professor of Law at Brooklyn Law School and President, Demos. They are cofounders of the Law & Political Economy Project. The authors thank Anne Alstott, Jack Balkin, Jessica Bulman- Pozen, Corinne Blalock, Angela Harris, Luke Herrine, Doug Kysar, Zach Liscow, Daniel Markovits, Bill Novak, Frank Pasquale, Robert Post, David Pozen, Aziz Rana, Kate Redburn, Reva Siegel, Talha Syed, John Witt, and the participants of the January 2019 Law and Political Economy Work- shop at Yale Law School for their comments on drafts at many stages of the project. -
The United States Has a Market Concentration Problem Reviewing Concentration Estimates in Antitrust Markets, 2000-Present
THE UNITED STATES HAS A MARKET CONCENTRATION PROBLEM REVIEWING CONCENTRATION ESTIMATES IN ANTITRUST MARKETS, 2000-PRESENT ISSUE BRIEF BY ADIL ABDELA AND MARSHALL STEINBAUM1 | SEPTEMBER 2018 Since the 1970s, America’s antitrust policy regime has been weakening and market power has been on the rise. High market concentration—in which few firms compete in a given market—is one indicator of market power. From 1985 to 2017, the number of mergers completed annually rose from 2,308 to 15,361 (IMAA 2017). Recently, policymakers, academics, and journalists have questioned whether the ongoing merger wave, and lax antitrust enforcement more generally, is indeed contributing to rising concentration, and in turn, whether concentration really portends a market power crisis in the economy. In this issue brief, we review the estimates of market concentration that have been conducted in a number of industries since 2000 as part of merger retrospectives and other empirical investigations. The result of that survey is clear: market concentration in the U.S. economy is high, according to the thresholds adopted by the antitrust agencies themselves in the Horizontal Merger Guidelines. By way of background, recent studies of industry concentration conclude that it is both high and rising over time. For example, Grullon, Larkin, and Michaely conclude that concentration increased in 75% of industries from 1997 to 2012. In response to these and similar studies, the antitrust enforcement agencies recently declared that their findings are not relevant to the question of whether market concentration has increased because they study industrial sectors, not antitrust markets. Specifically, they wrote, “The U.S. -
Harvard Law Review 132, No. 2, December 2018, Pp
SURESH NAIDU November 12, 2019 BUSINESS ADDRESS: 1405 IAB MC 3328 [email protected] 420 W. 118th St. www.santafe.edu/~snaidu New York, NY. 10027 APPOINTMENTS: Professor, Department of Economics/SIPA, Columbia University. September-December 2016 Visiting Researcher Princeton University Industrial Relations Section. July 2010-July 2016 - Assistant Professor, Department of Economics/SIPA, Columbia University. August 2013-May 2014 – Visiting Assistant Professor, MIT Department of Economics. 2008-2010 - Harvard Academy Junior Scholar Postdoctoral Fellow, Harvard University. OTHER AFFILIATIONS: Santa Fe Institute External Faculty Roosevelt Institute Fellow NBER Faculty Research Fellow (DEV, POL, and, DAE) BREAD faculty affiliate Microsoft Research New York: Visiting Researcher (2016-2017), Consulting Researcher (2017-2018). Faculty Affiliate with Columbia University Population Research Center and Data Sciences Institute. Social Science Research Council Working Group on Big Data in the Historical Social Sciences. EDUCATION: DEGREE DATE FIELD University of California, Berkeley Ph.D. December 2008 Economics University of Massachusetts, Amherst M.A. August 2004 Economics University of Waterloo B.Math.(With Distinction) May 2001 Pure Mathematics (minor in Peace and Conflict Studies) PUBLISHED PAPERS: “Text-based Ideal Points” (with David Blei and Keyon Vafa) -Proceedings of the 58th Annual Meeting of the Association for Computational Linguistics 2020. “Do Americans Want to Tax Capital? Evidence from Online Surveys” (with Ray Fisman, Ilyana Kuziemko, and Keith Gladstone). -Forthcoming in Journal of Public Economics.. “Monopsony in Online Labor Markets” (with Arindrajit Dube, Jeff Jacobs, and Siddarth Suri) -American Economic Review- Insights, 2(1) March 2020. 33-46. “American Slavery and Labor Market Power” -Economic History of Developing Regions, 35(1), January 2020 3-22. -
Behavioral Economics As Applied to Firms: a Primer1
Munich Personal RePEc Archive Behavioral economics as applied to firms: a primer Armstrong, Mark and Huck, Steffen University College London (UCL) January 2010 Online at https://mpra.ub.uni-muenchen.de/20356/ MPRA Paper No. 20356, posted 02 Feb 2010 03:16 UTC Behavioral Economics as Applied to Firms: A Primer1 Mark Armstrong and Steffen Huck Department of Economics University College London January 2010 Abstract We discuss the literatures on behavioral economics, bounded rationality and experimental economics as they apply to firm behavior in markets. Topics discussed include the impact of imitative and satisficing behavior by firms, outcomes when managers care about their position relative to peers, the benefits of employing managers whose objective diverges from profit-maximization (including managers who are overconfident or base pricing decisions on sunk costs), the impact of social preferences on the ability to collude, and the incentive for profit-maximizing firms to mimic irrational behavior. 1. Introduction In recent years there has been a good deal of research investigating how poor or non-standard decision making by consumers might affect market outcomes. In much of this work, the assumption is that firms are fully rational and aim to maximize their profits (and sometimes they do this by exploiting the behavioral biases of consumers). Some of this work points to situations where there is a role for policy which protects consumers from their own failings and from exploitative firms.2 In this article we focus instead on non-standard approaches to firm behavior. Consumers are kept in the background, and are present merely to generate in some fashion a demand curve for the firms' products. -
Resource Issues a Journal of the Canadian Agricultural Economics Society
Number 3/2002/p.1-28 www.CAFRI.org Agriculture, Food ß Current & Resource Issues A Journal of the Canadian Agricultural Economics Society A Review of Causes for and Consequences of Economic Concentration in the U.S. Meatpacking Industry Clement E. Ward Professor and Extension Economist, Oklahoma State University This paper was prepared for presentation at the conference The Economics of Concentration in the Agri-Food Sector, sponsored by the Canadian Agricultural Economics Society, Toronto, Ontario, April 27-28, 2001 The Issue This squall between the packers and the producers of this country ought to have blown over forty years ago, but we still have it on our hands .... Senator John B. Kendrick of Wyoming, 1919 lear and continuing changes in the structure of the U.S. meatpacking industry have Csignificantly increased economic concentration since the mid-1970s. Concentration levels are among the highest of any industry in the United States, and well above levels generally considered to elicit non-competitive behavior and result in adverse economic performance, thereby triggering antitrust investigations and subsequent regulatory actions. Many agricultural economists and others deem this development paradoxical. While several civil antitrust lawsuits have been filed against the largest meatpacking firms, there have been no major antitrust decisions against those firms and there have been no significant federal government antitrust cases brought against the largest meatpacking firms over the period coincident with the period of major structural changes. The structural changes in the U.S. meatpacking industry raise a number of questions. What is the nature of the changes and what economic factors caused them? What evidence is ß 1 Current Agriculture, Food & Resource Issues C. -
Market Concentration, Multi-Market Participation and Antitrust
MARKET CONCENTRATION, MULTI-MARKET PARTICIPATION AND ANTITRUST By Dennis L. Weisman* Department of Economics Kansas State University Waters Hall Manhattan, KS 66506-4001 [email protected] (785) 532-4588 (V) (785) 539-7225 (F) January 2005 JEL Classification Codes: L51, L96 Keywords: antitrust, market concentration, mergers, demand complementarities * The author is grateful to Michael Babcock, Philip Gayle, Alfred Kahn, Andrew Kleit, Dale Lehman, Michael Redisch, David Sappington and Kelley Weber for helpful discussions. The usual caveat applies. Abstract We explore the trade-off between market concentration and multi-market participation in evaluating proposed mergers. When demands are complementary, the price-decreasing effect of multi-market participation provides a countervailing influence on the price- increasing effect of higher market concentration. The larger the “footprint” of the multi- market provider, the greater the likelihood the price-decreasing effect dominates, ceteris paribus. In the case of substitutes, precisely the opposite occurs, multi-market participation compounds the price-increasing effect of higher market concentration. A key finding in the case of complements is that higher market concentration may be consistent with non-increasing prices despite the absence of merger economies. It follows that merger guidelines that place undue emphasis on market concentration can lead policymakers to block mergers that enhance consumer welfare and vice versa. 1. Introduction The horizontal merger guidelines (HMG) of the Department of Justice (DOJ) place considerable weight on market concentration in evaluating proposed mergers. An emphasis on market concentration may be appropriate for evaluating mergers that do not involve multi-market participation. In contrast, for mergers that transform single-market providers (SMPs) into multi-market providers (MMPs), such an emphasis can lead policymakers to block mergers that actually enhance consumer welfare and vice versa. -
The Rise of Market Power and the Macroeconomic Implications∗
The Rise of Market Power and the Macroeconomic Implications∗ Jan De Loeckery Jan Eeckhoutz Gabriel Ungerx KU Leuven UPF Barcelona (ICREA, GSE) Harvard University NBER and CEPR and UCL November 15, 2019 Abstract We document the evolution of market power based on firm-level data for the US econ- omy since 1955. We measure both markups and profitability. In 1980, average markups start to rise from 21% above marginal cost to 61% now. The increase is driven mainly by the upper tail of the markup distribution: the upper percentiles have increased sharply. Quite strikingly, the median is unchanged. In addition to the fattening upper tail of the markup distribution, there is reallocation of market share from low to high markup firms. This rise occurs mostly within industry. We also find an increase in the average profit rate from 1% to 8%. While there is also an increase in overhead costs, the markup increase is in excess of overhead. We then discuss the macroeconomic implications of an increase in average market power, which can account for a number of secular trends in the last four decades, most notably the declining labor and capital shares as well as the decrease in labor market dynamism. Keywords: Market Power; Markups; Profits; Secular Trends; Labor Market; Declining Labor Share. JEL: E2, D2, D4, J3, K2, L1 ∗We would like to thank Mark Aguiar, Pol Antras,` John Asker, Eric Bartelsman, Susanto Basu, Steve Berry, Tim Bresnahan, Emmanuel Farhi, Xavier Gabaix, Bob Hall, John Haltiwanger, Eric Hurst, Loukas Karabarbounis, Patrick Kehoe, Pete Klenow, Christian Michel, Ariel Pakes, Thomas Philippon, Esteban Rossi-Hansberg, Chad Syverson, James Traina, Jo Van Biesebroeck and Frank Verboven for insightful discussions and comments. -
Market Concentration, Corporate Governance and Innovation: Partial and Combined Effects in Us-Listed Firms
Journal of Governance and Regulation / Volume 1, Issue 3, 2012, Continued - 2 MARKET CONCENTRATION, CORPORATE GOVERNANCE AND INNOVATION: PARTIAL AND COMBINED EFFECTS IN US-LISTED FIRMS Mehmet Ugur*, Nawar Hashem** Abstract Existing research on the relationship between market concentration and innovation has produced conflicting findings. In addition, the emerging literature on the relationship between corporate governance and innovation tends to focus only on partial effects of corporate governance on innovation. We aim to contribute to the debate by investigating both partial and combined effects of corporate governance and market concentration on innovation. Utilising a dataset for 1,400 non- financial US-listed companies and two-way cluster-robust estimation methodology, we report several findings. First, the relationship between market concentration and innovation is non-linear. Secondly, the relationship has a U-shape in the case of input measure of innovation (research and development - R&D – expenditures); but it has an inverted-U shape when net book-value of brands and patents is used as output measure of innovation. Third, corporate governance indicators such as anti-takeover defences and insider control tend to have a negative partial effect on R&D expenditures but a positive partial effect on net book-value of brands and patents. Finally, when interacted with market concentration, anti-takeover defences and insider control act as complements to market concentration. Hence, firms with strong anti-take-over defences and under insider control tend to spend more on R&D but are less able to generate valuable brands and patents as market concentration increases. These results are based on two-way cluster-robust estimation, which takes account of both serial and cross-sectional dependence in the error terms. -
1. Introduction and Concentration Measures
Industrial Organization Introduction Matilde Machado Download slides from: http://www.eco.uc3m.es/~mmachado/ 1 Syllabus of the course 1. Introduction 1. Concentration Measures [Tirole 5.5; Cabral 2.3; Clarke pp 2.1.1, 2.1.2, Shy 8.1] 2. Monopoly and Price Discrimination 1. Perfect Competition versus Monopoly 2. Price Discrimination [Tirole 3.1, 3.2, 3.3.] 3. Other Marketing Strategies [Shy ch. 14] 4. Multiproduct Monopoly [Tirole 1.1.2] Industrial Organization - Matilde Machado Introduction 2 1 Syllabus of the course 3. Oligopoly 1. The Cournot Model [Cabral, Luis 3.2., Tirole 5.4] 2. The Bertrand Model [Cabral, Luis 3.3, Tirole 5.1-5.2] 3. Price competition with capacity constraints [Cabral, Luis 3.4, Tirole 5.3] 4. Entry, Spence-Dixit Model –if time allows [Tirole 8.1-8.2.2.1 (except 8.1.3), Church y Ware 13.3] 5. Tacit Colusion: Repeated Games [Tirole 6.3] Industrial Organization - Matilde Machado Introduction 3 Syllabus of the course 4. Product Differentiation 1. Definitions [Cabral, Luis 8.4] 2. The Hotelling Model – the linear city [Tirole 7.1.1] 5. Basic notes for empirical work 6. When the costs depend on the client’s type: The Rothschild & Stiglitz Model of Adverse Selection and Empirical Testing Industrial Organization - Matilde Machado Introduction 4 2 Bibliography: Luis Cabral “Economía Industrial” McGraw-Hill 1997. There is an english version http://luiscabral.org/iio/about_book/ Jeffrey Church and Roger Ware “Industrial Organization: A Strategic Approach” McGraw-Hill, 2000. Roger Clarke “Industrial Economics” Blackwell 1999. Oz Shy “Industrial Organization: Theory and Practice” The MIT Press 1996 Jean Tirole “The Theory of Industrial Organization” The MIT Press 1990.