Price staggering in cartels

In this paper we investigate the optimal organization of staggered price increases in cartels. Staggered price increases impose a cost during cartel formation as the price leader initially loses sales. We show that for intermediate discount factors, staggered price increases can only be sustained when the increase is neither too small nor too large. When a cartel executes two consecutive price increases, the choice between using the same leader or alternating leadership depends on the initial price level in the industry. We also discuss the choice between simultaneous and staggered price increases with an exogenous antitrust detection function, the allocation of price leadership with cost asymmetry, and the effect of product differentiation on price staggering.     

Poverty effects of food price escalation: The importance of substitution effects in Mexican households

Recent food price increases reportedly caused significant numbers of households to fall into poverty, particularly in the developing world. Most research into the welfare effects of these food price changes assumes constant demand or approximates second order substitution effects. Poverty forecasts with these assumptions may overestimate or underestimate the effect of food price increases in a nation where most households consume diverse food baskets. We account for full substitution by calculating a theoretically consistent food demand system, accounting for household responses to food price changes by decreasing some food purchases and increasing other food purchases. We use Mexican data to confirm the mitigation of adverse welfare effects from food price increases after accounting for country-specific dietary preferences in modeling demand. In comparison to previous literature, our welfare measures predict theoretically consistent numbers of Mexican households entering poverty due to recent food price changes.     

Identifying and characterising price leadership in British supermarkets

Price leadership is a concept that lacks precision. We propose a deliberately narrow, falsifiable, definition then develop it, illustrate its feasibility and test it using the two leading British supermarket chains. We find both firms engaging in leading prices upward over a range of products, with the larger being initially more dominant but the smaller increasing leadership activity to take overall leadership over time. However, more price leadership events are price reductions than price increases, consistently led by the smaller firm. Nevertheless, the increases are of larger monetary amounts than the falls, so average basket price increases over time.     

Commodity price inflation, retail pass-through and market power

When commodity prices rise, wholesalers and retailers of products derived from basic commodities respond by passing along at least a portion of the price increase to consumers. In this paper we examine whether firms respond differently to positive commodity price shocks than to negative commodity price shocks; that is, whether commodity price volatility alters market power. We exploit recent volatility in food commodity prices over the period 2007-2010 to investigate how commodity price shocks translate into market power in two different vertically-structured food product industries: potatoes and fluid milk. For potatoes, we find both wholesale and retail market power decreases (increases) during periods of rising (falling) commodity prices. Moreover, price-cost margins widen a substantially greater degree in response to negative shocks than margins narrow in response to positive shocks, indicating that commodity price volatility increases market power. For fluid milk, we find that market power likewise declines during periods of rising commodity prices; however, market power does not significantly change during periods of falling commodity prices, suggesting that commodity price volatility decreases market power.     

HOW DOES THE INTERNET INFLUENCE PRICE DISPERSION? EVIDENCE FROM THE AIRLINE INDUSTRY*

I estimate the Internet's effect on the level and dispersion of airline fares on a given route within and across firms. The results suggest that increases in Internet penetration reduce average price and lead to higher intrafirm price dispersion, while increases in Internet penetration do not affect interfirm price dispersion on a given route. Internet penetration affects average fares most in competitive markets. These results suggest that the Internet has significantly but subtlely influenced domestic airline competition. The effect of the Internet on prices and price dispersion is larger on direct flights.     

Cash to spend: IPO wealth and house prices

This study demonstrates the impact of initial public offerings (IPOs) on local house prices. Applying spatial difference-in-differences methods to IPOs in California from 1993 to 2017, we find house prices increase by 0.7%–0.9% near an IPO firm's headquarters around filing and issuing dates. Upon lockup expiration, price changes depend on postissuance returns. Treating the San Francisco Bay as a commuting barrier, we identify sustained price increases after filings and temporary increases after issuing and lockup expiration. We also confirm post-IPO price divergence between the treatment and synthetic control areas. Our findings indicate the effect of liquid wealth under mild financial constraints.     

The Competitive Effects of Not-for-Profit Hospital Mergers: A Case Study

Applying conventional horizontal merger enforcement rules to nonprofit hospitals is controversial. Critics contend that the different objective function of not-for-profits entities should mitigate competitive concerns about mergers involving nonprofit hospitals. We analyze a merger that reduced the number of competitors (both nonprofit) in the alleged relevant market from three to two. We find that the transaction was followed by significant price increases; we reject the hypothesis that these price increases reflect higher post-merger quality. This study should help policymakers assess the validity of current merger enforcement rules, especially as they apply to not-for-profit enterprises.     

考虑结构突变的大宗商品价格波动对中国经济的影响分析

本文从结构突变的视角,考察国际大宗商品价格波动对中国经济的影响规律。首先,运用内生多重结构突变的Bai-Perron检验,发现从1990～2015年的国际原油价格指数、工业投入品（包括金属和农产品）价格指数、中国工业增加值增长速度、消费物价指数等4个指标均存在结构突变现象。然后,利用退势处理方法去除这4个指标的结构突变影响,并运用结构向量自回归（SVAR）模型,建立了这4个指标之间的动态关系系统。脉冲响应分析表明,国际原油价格上升,短期内会减缓我国经济增长速度,但中期内反而会对经济有小幅刺激作用,同时会逐渐拉升我国物价水平;工业投入品价格上升也会减缓我国经济增长速度,但会先拉升后降低物价水平。本文通过考虑结构突变这一重要因素,能更精确地揭示国际大宗商品价格波动对中国经济的影响情况。     

Regulation of price increases

U.S. federal and state governments rarely regulate healthcare price levels, but do regulate price changes for pharmaceuticals, hospitals, and health insurance. Previous research showed that limiting price increases can raise launch prices and reduce both profit and social welfare, assuming consumers are myopic. We show that with forward-looking consumers, limiting price increases can have the opposite effect, that is, launch prices fall while profit and social welfare rise. Ironically, inflation regulation can cause inflation to rise, but only because firms are reducing launch prices to make the regulation bind and credibly commit to future prices.     

A Simple Search and Bargaining Model of Real Estate Markets

This paper examines the impact of brokers on buyers' and sellers' search behavior and on the transaction prices in real estate markets. It is shown that the seller and the buyer search less intensively if the house is listed with a broker. The seller gets a higher price when he employs a broker, but the increase in price is smaller than the commission fee. More specifically, the portion of the commission covered by the increase in price is directly related to the bargaining powers of the buyer and the seller. In the special case where the price is determined according to the Nash bargaining solution, the increase in price is shown to be half of the commission fee. It is also shown that an increase in the commission rate increases the equilibrium price but decreases the equilibrium search intensities.     

Stackelberg price leadership in spatial competition

This paper examines Stackelberg price leadership in a spatially competitive model with infinitely many stores on an infinite line. A Stackelberg price leader charges significantly more than the pure Nash equilibrium price, induces its neighbors to charge somewhat more than the pure Nash equilibrium price, and increases its profits. Under Nash equilibrium, collusion of two stores makes a difference to prices only if the colluding stores are nearest neighbors. Under Stackelberg price leadership, collusion makes a difference to prices even if the stores are not nearest neighbors.     

The effect of design protection on price and price dispersion: Evidence from automotive spare parts

The design right is a widely used but poorly understood intellectual property right that allows the protection of products’ aesthetics and outer appearances. We study the influence of design protection on price by exploiting cross-country differences in the scope of protection in the European automotive spare parts market: In some countries, repair parts are exempted from design protection, while in others they are not. Based on detailed price data, our difference-in-differences estimates imply that design protection increases prices by about 5–8%, with large differences between carmakers. We then link our findings to the literature on deviations from the law of one price. We document large cross-country price deviations for identical spare parts and provide evidence that a part of these price deviations can be explained by the lack of harmonization of design protection in combination with carmakers’ pricing-to-market strategies.     

Do Low‐Price Guarantees Guarantee Low Prices? Evidence from Competition between Amazon and Big‐Box Stores

It has long been understood in theory that price‐match guarantees can be anticompetitive, but to date, scant empirical evidence is available outside of some narrow markets. This paper broadens the scope of empirical analysis, studying a wide range of products sold on a national online market. Using an algorithm that extracts data from charts, I obtain a novel source of data from online price trackers. I examine prices of goods sold on Amazon before and after two big‐box stores (Target and Best Buy) announced a guarantee to match Amazon's prices. Employing both difference‐in‐difference and regression‐discontinuity approaches, I robustly estimate a positive causal effect of six percentage points. The effect was heterogeneous, with larger price increases for initially lower‐priced items. My results support anticompetitive theories which predict price increases for Amazon, a firm that did not adopt the guarantee, and are consistent with plausible mechanisms for the heterogeneous impact.     

Measuring House Price Bubbles

Using data for six metropolitan housing markets in three countries, this article provides a comparison of methods used to measure house price bubbles. We use an asset pricing approach to identify bubble periods retrospectively and then compare those results with results produced by six other methods. We also apply the various methods recursively to assess their ability to identify bubbles as they form. In view of the complexity of the asset pricing approach, we conclude that a simple price–rent ratio measure is a reliable method both ex post and in real time. Our results have important policy implications because a reliable signal that a bubble is forming could be used to avoid further house price increases.     

Access regulation and the incumbent investment in quality-upgrades and in cost-reduction

This papers studies if access price regulation has an impact on incumbents’ incentives to invest in their network that might differ according to the nature of investments, that is, quality-upgrading and cost-reducing. It is shown that if the marginal cost of quality-upgrading is very low both types of investment are increasing in the access price. If the marginal cost of cost-reducing is very low, both investments decrease after an increase in the access price. Otherwise, a high access price increases the incentives for quality-upgrading and reduces the incentives for cost-reducing. Therefore, regulators should set a higher access price the lower is the marginal cost of quality-upgrading as compared to the marginal cost of cost-reducing.     

Understanding heterogeneity in price changes and firm responses to a national unhealthy food tax in Mexico

To address the high prevalence of overweight and obesity in Mexico, an eight percent ad valorem excise tax on non-essential energy-dense foods came into effect on 1 January 2014. This paper estimates price changes after the tax implementation among the top four food categories and by leading vs. non-leading firms using purchase information from over 6000 urban households in the 2012–2015 Nielsen Mexico Consumer Panel. We create product-city-month specific prices that correct for potential biases associated with household and retailer characteristics. Using these corrected prices, we conduct before and after quasi-experimental analyses and find that price increases were larger than eight percent for cookies but were less than eight percent for ready-to-eat cereals, salty snacks, and pre-packaged sweet bread. For the latter food group, event-study analyses on the gradual price change over time suggest that price changes might be the result of an increasing price trend rather than the tax implementation. Firm-level analyses mostly show that price increases by the leading firms were larger than the overall increase at the food market level, helping explain variability in post-tax declines in food purchases as reported in other research. We also find that price changes are generally underestimated when we do not correct prices for biases associated with households and retailers. These results improve our understanding of the mechanisms behind heterogeneous changes in purchases after the tax implementation. Additionally, these results can assist policymakers when designing or improving taxes on non-essential energy-dense foods at a time when these policy options are high on the agenda in many places.     

MANAGING CAPITAL EXPENDITURES : APPRAISAL OF SPECIFIC PROPOSALS

High income-tax rates and an increasing price level, prominent among the economic developments of the last 20 years, have long been strongly criticized in business circles. They are considered major deterrents to investment, acting as brakes on the growth of the economy. Demands for lower tax rates, and for a halt to price escalation (usually called inflation), are constant topics in the business press, in public addresses by high company officials, ¹ in presentations for the justification of price or rate increases before regulatory commissions, and in institutional advertising designed for the general public.     

Information disclosure in optimal auctions

This paper analyzes a situation in which the seller controls the accuracy of what potential buyers learn about their valuation of a good to be sold. This setting is related to many real situations such as home sales, antique auctions, and digital platforms such as Google and Facebook selling online advertising slots. Two important questions arise: what is the optimal selling mechanism, and what is the optimal disclosure policy of the seller. Under the assumption of private values, a simple auction with a reserve price is the optimal mechanism. What we show is that the amount of (costly) information provided increases with the number of potential bidders when using the optimal mechanism and is greater than when the object is always sold. Because information changes the distribution of a bidder’s expected valuations, the optimal reserve price also changes, so that the number of bidders (indirectly) affects the reserve price. We show that as the number of bidders increases, the optimal reserve price becomes more restrictive.     

The impact of vertical integration on losses from collusion

Upstream collusion that increases the price of an input can harm an independent downstream producer (D). We ask whether this harm is more or less pronounced when D’s downstream rival is a vertically integrated producer. We find that such vertical integration increases D’s loss from collusion when D is not a particularly strong competitor. However, when D is a sufficiently strong competitor, vertical integration can reduce D’s loss from collusion when price competition prevails downstream.     

产业间平台合作下的双边定价机制研究——基于对固有收益影响的分析

本文以近期日益增多的产业间平台企业合作为背景,针对合作后平台用户固有收益水平提高这一特征,构建了双寡头竞争模型,以此分析合作对平台定价的影响。研究发现,随着合作平台上用户固有收益水平的提高,该平台将提高产生较弱网络外部性的一边用户的定价,而对另一边用户的定价则必须视平台双边用户交叉网络外部性大小差异而定。不仅如此,合作还增加了该平台上双边用户定价的非对称程度。对与之竞争的非合作平台而言,双边用户的定价则恰恰相反。研究还表明,合作可能提高合作平台的利润水平,增加消费者总剩余和社会总福利。这启示规制机构在对双边平台合作进行规制时要特别谨慎,切忌过度干预。