Tacit collusion, firm asymmetries and numbers: Evidence from EC merger cases

This paper estimates the implicit model, especially the roles of size asymmetries and firm numbers, used by the European Commission to identify mergers with coordinated effects. This subset of cases offers an opportunity to shed empirical light on the conditions where a Competition Authority believes tacit collusion is most likely to arise. We find that, for the Commission, tacit collusion is a rare phenomenon, largely confined to markets of two, more or less symmetric, players. This is consistent with recent experimental literature, but contrasts with the facts on ‘hard-core’ collusion in which firm numbers and asymmetries are often much larger.     

Fighting collusion in auctions: An experimental investigation

The danger of collusion presents a serious challenge for auctioneers. In this paper, we compare the collusive properties of two standard auctions, the English auction and the first-price sealed-bid auction, and a lesser-known format, the Amsterdam (second-price) auction. In the Amsterdam auction, the highest losing bidder earns a premium for stirring up the price. We study two settings: in one, all bidders can collude, and in another, only a subset is eligible. The experiments show that the Amsterdam auction triggers less collusion than the standard auctions. We compare experimental results to theoretical predictions, and provide an explanation where they differ.     

CooperationV. Rivalry and factors facilitating collusion

A perennial topic in industrial economics is collusion. Kwoka and Ravenscraft (1986) developed a model to measure the collusiveness of conjectures across industries as a function of intra-industry rivalry among leading firms. But extensive literature suggests that the degree of collusion may also depend upon underlying market characteristics. We modify the Kwoka and Ravenscraft model to account for this. Our results suggest that underlying market characteristics do matter. Intra-industry rivalry and conjectures vary with the level and stability of concentration, and to a lesser degree with product homogeneity.     

Examining models of collusion: The market for lysine

We compare the experience with collusion in the market for lysine with the predictions of theory. The lysine market provides an ideal setting following the confessions of cartel participants in antitrust investigations. Data availability allows demand and cost functions to be estimated and observed mark-ups compared with predictions. We find that several integral aspects of collusion in the lysine market are not adequately addressed in the literature: the dynamics associated with entry and investment; persistent asymmetries between firms; the cartel's bargaining problem; and the existence of cheating in equilibrium. These issues are likely to have much wider applicability beyond the lysine market.     

Price wars and price collusion in China's airline markets

In the absence of an effective antitrust law, both fare wars and price collusion have been pervasive in China's airline markets, causing concern for both airlines and consumers. A study of monthly airfare data from 2002 to 2004 confirms that fare wars occur periodically, as well as price collusion. Both tend to be short-lived. The fact that collusion is more likely to occur in January and April when demand is high, as revealed by China Eastern's and China Southern's price-war and collusion models, has been confirmed by interview information obtained from the airlines' sales managers. However, there is also evidence in these models suggesting that collusion can be more easily formed when demand is low. High airport concentration measured by the HHI may facilitate collusion in certain circumstances, but it may also lead to more price wars under other conditions. Concentration in both airports and routes does not appear to systematically affect the occurrence of fare wars and collusion in all the models estimated. We also reject the possibility that mutual forbearance due to multimarket contact plays any important anti-competitive role in China's airline markets.     

工程投标中串标问题的分析

随着我国建筑招标投标市场的完善和规范化,大多数的违规行为已得到了有效的控制,但串标行为却有愈演愈烈的趋势,严重影响了建筑市场的公平竞争,阻碍了我国建筑行业的顺利发展。文章从招标者的角度分别对串标人及陪标人的期望收益进行经济分析,得到投标人串标的根本原因在于制度的缺陷及招标人对串标者的处罚费过少,并指出治理串标行为的主要措施是提高串标成本、增大串标查处概率,以及加大串标处罚力度等。     

The Innovation Value Chain in New Technology‐Based Firms: Evidence from the U.K.

Innovation is central to the survival and growth of firms, and ultimately to the health of the economies of which they are part. A clear understanding both of the processes by which firms perform innovation and the benefits which flow from innovation in terms of productivity and growth is therefore essential. This paper demonstrates the use of a conceptual framework and modeling tool, the innovation value chain (IVC), and shows how the IVC approach helps to highlight strengths and weaknesses in the innovation performance of a key group of firms—new technology‐based firms. The value of the IVC is demonstrated in showing the key interrelationships in the whole process of innovation from sourcing knowledge through product and process innovation to performance in terms of the growth and productivity outcomes of different types of innovation. The use of the IVC highlights key complementarities, such as that between internal R&D, external R&D, and other external sources of knowledge. Other important relationships are also highlighted. Skill resources matter throughout the IVC, being positively associated with external knowledge linkages and innovation success, and also having a direct influence on growth independent of the effect on innovation. A key benefit of the IVC approach is therefore its ability to highlight the roles of different factors at various stages of the knowledge–innovation–performance nexus, and to show their indirect as well as direct impact. This in turn permits both managerial and policy implications to be drawn.     

Universal service subsidies and cost overstatement: Evidence from the U.S. telecommunications sector

Utility subsidies are often defended as promoting universal service. However, specific support formulas may be poorly targeted and/or designed. The U.S. high-cost loop support (HCLS) program (formerly referred to as the Universal Service Fund (USF)), has been a key component of the FCC's USF program. With proposed initiatives for universal access to broadband, it is useful to critically evaluate how the HCLS creates a moral hazard problem. This study finds that companies receiving HCLS subsidies have an incentive to report high costs to the FCC in order to qualify for still higher support payments. Using data from 1136 rural telecom firms in 50 states (1992-2002), this study shows that some companies respond to current incentives by overstating costs (or incurring higher costs) as they approach the subsidy cutoff points. Compared to the no-subsidy group, companies at the point of greatest subsidy jump appear to overstate costs more due to larger marginal benefits. Such perverse incentives need to be recognized in future universal service initiatives.     

Flexible Contract Workers in Inferior Jobs: Reappraising the Evidence

There is concern that the increase in flexible employment contracts witnessed in many OECD economies is evidence of a growth in low‐pay, low‐quality jobs. In practice, it is difficult to evaluate the ‘quality’ of flexible jobs. Previous research has primarily investigated objective measures of job quality such as wages and training or subjective measures such as job satisfaction. We jointly evaluate these elements of flexible employment contracts using a job quality index. Analysis of this index demonstrates that flexible jobs are of a lower quality. Differences in the subjective and objective assessment of factors like pay and hours are evident.     

Incentives in the Asian Context: Theory and Preliminary Evidence

Incentive design for productivity gains has become important for Asian organizations in recent years. This paper introduces the theory of incentive design to an Asian audience while extending the agency theoretic approach to control. Hypotheses derived from this theory were tested in 61 retail stores in Singapore. The results show that employee skills, output measurability and task uncertainty impact incentive design. The results indicate that agency theory may be applicable across cultures. Implications for the Asian context, and its adaptation in terms of behavior, are discussed.     

Coordination in inter-network co-opetitition: Evidence from the tourism sector

In this paper, we investigate whether and to what extent formal governance forms such as contracts are a necessary condition to manage coopetitive interactions among networks. We situate our analysis within the tourism sector where we gain insights from an in-depth exemplar case of co-opetition among nearby Italian tourism destinations conjointly developing and marketing an event, the Pink Night Festival. We suggest that coordination mechanisms with varying degrees of formality seem to play a crucial role to manage coopetitive interactions. Subsequently, we identify eight key drivers of formalization of coordination mechanisms in inter-network co-opetitition: 1) leadership; 2) brokerage and pivotal attitude; 3) power asymmetry; 4) focus on strategic thinking; 5) maturity of network management approach; 6) maturity and distance of the marketing approach; 7) past experience working together; 8) cultural, functional and organizational similarities. Last, we develop a conceptual framework highlighting that each stage of the evolution of an inter-network coopetitive relationship has key features in terms of the underlying coordination mechanisms.     

Payment by Results Systems: British Evidence

A model of the firm's decision to adopt a payment by results system is developed and tested with British establishment data. The model maintains that payment by results systems have larger set-up costs but lower supervision costs than time rates, particularly for short-tenure workers who are not well motivated by deferred compensation. The evidence confirms the model's predictions by showing that payment by results systems substitute for supervision, and that larger establishments and those with shorter-tenure workers are more likely to adopt payment by results. In addition, both the presence of a payment by results system and the new adoption of such a system are shown to exert a positive influence on measures of establishment performance.     

Pro-competitive Price Beating Guarantees: Experimental Evidence

We report experimental results on duopoly pricing with and without price beating guarantees (PBG). In two control treatments, price beating is either imposed as an industry-wide rule or offered as a business strategy. Our major finding is that when price beating guarantees are imposed as a rule or offered as an option, effective prices are equal to or lower than those in a baseline treatment in which price beating is forbidden. Also, when price beating is treated as a business strategy, less than 50% of subjects adopted the guarantee, suggesting that, subjects realize the pro-competitive effects of the guarantee. JEL Classifications: C91, L11.This revised version was published online in April 2005 with corrections to one of the authors name and to the page numbering.     

The effects of the business cycle on oligopoly coordination: Evidence from the U.S. rayon industry

Recent game-theoretic studies of the effects of the business cycle on oligopoly coordination predict that coordination is weakest when demand is high and expected future profit is lower. An empirical model that uses a conjectural elasticity term to measure the degree of coordination is developed to test for these two effects. The rayon industry of the 1930s is one that exhibited significantly non-competitive conduct that appears to have varied, in degree, with fluctuations in demand. Application of the empirical model to data from this industry produces results that support the predictions of recent theoretical models.     

Export intensity and marketing in transition economies: Evidence from China

Firms in transition economies face a common adaptation problem of having to compete within increasingly marketized environments. This creates a need for managers to learn skills associated with marketing, such as those pertaining to the development of new and better products. Although distance is usually a barrier to learning, we propose that in exchange situations involving transition economy firms, the benefits of long-distance trade may outweigh the costs of knowledge acquisition. We find support for this proposition in this study by establishing a link between the export intensity of Chinese exporters and their acquisition of marketing know-how. We also find evidence that the marketing knowledge of transition economy firms has a positive effect on overall performance.