This website uses cookies.

By clicking the "Accept" button or continuing to browse our site, you agree to first-party and session-only cookies being stored on your device to enhance site navigation and analyze site performance and traffic. For more information on our use of cookies, please see our Privacy Policy.

  1. Home
  2. ASSA Annual Meeting
  3. 2024
  4. Program
  5. Competition
« Back to Results

Competition

Paper Session

Saturday, Jan. 6, 2024 10:15 AM - 12:15 PM (CST)

Convention Center, 224
Hosted By: American Economic Association
  • Chair: Victoria Ray Marone, University of Texas-Austin

Contractual Data and Market Power

Alistair Milne
,
Loughborough University
Anil Savio Kavuri
,
Loughborough University

Abstract

This paper provides an industrial organisation perspective on the economics of data. This growing literature has largely focused on ownership and exchange of consumer data, not on business to business data. The novel contributions made here are: (i) highlighting the importance of shared data as an input to production; (ii) proposing a framework for analysing how control of data shared between businesses affects competition and market power. The focus is on data as an input to production of goods and services, a possibility whenever the supply is “contract data based” either involving changes in asset ownership (property rights) or requiring agreed co-ordinated performance across multiple businesses (contractual rights). To explore the economic implications we propose a model of vertical separation, with an ‘upstream’ market for data control and imperfect competition in a ‘downstream’ market for supply of goods and services. This combines connection (or switching) costs upstream with a Salop circle downstream (a setup to our knowledge not previously explored in the industrial organisation literature). The modelling explores how varying the ownership and government arrangements for upstream data control impacts on downstream market power, with markedly different outcomes depending on whether the upstream data access is provided competitively, by a for-profit monopoly, a co-operative owned by all downstream firms or by a subset of downstream firms. This highlights the importance of governance and ownership of data control for promoting effective competition in contract data based goods and services. It also highlights the economic role of connections costs in data control and potential for reducing these, and improving economic outcomes, through standardisation and addressing data fragmentation (e.g. blockchain). The paper discusses application in several contexts, both financial (payments, securities clearing and settlement, trade finance) and non-financial (logistics and supply chains, registers of land and vehicle ownership and travel services).

Data, Product Targeting and Competition

Ulrich Hege
,
Toulouse School of Economics
Alexander Guembel
,
Toulouse School of Economics

Abstract

We analyze how access to data affects competition and consumer surplus in a
model where more data allows firms to offer products that are better targeted
to consumer preferences and at the same time to price discriminate more
effectively. We find that consumer surplus in a monopoly market is highest for
an intermediate level of data access, while it is increasing in available data
when firms compete. The effect of data on competition is asymmetric:
Competition becomes fiercer if the more poorly informed firm gets better
information, but softens when the better informed firm improves its
information. Firm's preferred choice of information is an outcome where they
are strongly differentiated by information quality. This preference limits the
possibility to create an informational level playing field via data sharing or
data brokers, and explains why total surplus may drop following entry. If an
entrant can use data gathered in one market in another market, entry does not
necessarily improve overall consumer surplus, since it enhances the entrant's
ability to price discriminate in the other market.

Broadband Deployment in Equilibrium: Is Competition the Solution to the Digital Divide?

Andrew Kearns
,
Federal Trade Commission

Abstract

Broadband access has become a near necessity, yet many U.S. households remain without access or significant choice among Internet service providers. This paper examines whether competition between broadband providers increases the availability and quality of broadband, as well as the effects of policies that have been proposed to ameliorate the digital divide. Combining data from a survey of Seattle households’ broadband subscriptions and broadband deployment data from the FCC, I estimate a structural model of Seattle’s broadband market, which allows me to quantify the effect of competition on broadband availability, quality, and price in equilibrium. I find that, of recent policies proposed to address the digital divide, a demand-side subsidy program increasing broadband affordability for low-income households is significantly more cost effective than a supply-side policy that subsidizes increased broadband deployment. Additionally, I find evidence that providers’ incentive to increase quality is weaker under competition, however, the benefits of competition to consumers, in terms of increased product choice and lower prices, are substantial.

Market Power and Spatial Price Discrimination in the Liquefied Natural Gas Industry

Nahim Bin Zahur
,
Queen's University

Abstract

The liquefied natural gas (LNG) industry is characterized by systematic inter-regional price differentials, raising the question of whether sellers price discriminate. This paper measures market power in the LNG spot market and studies how market power influences pricing, trade and welfare. I develop a novel method for inferring market conduct that utilizes information on sellers' pricing and quantity decisions across multiple geographically segmented markets. My test for market conduct is based on the observation that sellers exercising market power engage in third-degree price discrimination, whereas sellers behaving competitively do not. Using data from 2006 to 2017 on spot market trade flows, spot prices, shipping costs and seller capacities, I estimate a structural model of LNG trade and pricing that incorporates spatial differentiation, capacity constraints and trade frictions and flexibly nests different models of seller market power. I find that seller decisions are consistent with a Cournot model and unlikely to be generated by a competitive model. The total deadweight loss from market power is estimated to be USD 12 billion, or about 4.5% of total revenue. I find that market power plays a key role in exacerbating inter-regional price differentials.

Price Competition under Information (Dis)Advantage

Hsin-Tien Tiffany Tsai
,
National University of Singapore
Nan Chen
,
National University of Singapore

Abstract

We examine the impact of asymmetric data access within a vertically integrated e-commerce platform. Using a unique daily panel, we find that both the platform owner and third-party sellers base pricing on past sales, but only the owner exploits competitors' sales data. We estimate a price competition model with heterogeneous seller learning. We find that (1) eliminating the owner's access to competitors' data increases social welfare by 0.33%, negatively impacting the owner through reduced first-party sales and (2) providing third-party sellers with equal access to competitors' data as the owner increases social welfare by 1.65%, benefiting the owner through increased referral fees and yielding a Pareto improvement.
JEL Classifications
  • L1 - Market Structure, Firm Strategy, and Market Performance