Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

Tuesday, April 30, 2019

EU Merger Regulation – Review of 2017 and Beyond

Bernd Meyring and Neil Hoolihan describe EU Merger Regulation – Review of 2017 and Beyond.

ABSTRACT:

  • 2017 saw a continuation of the Commission’s focus on concerns regarding reduction in innovation. The decision in Dow/Dupont is noteworthy because it assessed an impediment of innovation outside the framework developed for pipeline competition.

  • We saw several mergers in consolidated industries where the Commission imposed significant remedies to remove competition concerns. Moreover, to ensure the continuity of the divested business in the hands of a purchaser with suitable capabilities, up-front-buyer requirements have become a frequent feature.

  • The Commission’s enforcement practice showed that acting against companies infringing procedural requirements of the Merger Regulation (particularly, preventing ‘gun jumping’) is a high priority.

April 30, 2019 | Permalink | Comments (0)

Testing the Production Approach to Markup Estimation

Devesh Raval, Federal Trade Commission is Testing the Production Approach to Markup Estimation.

Abstract: Under the underlying assumptions of the production approach to markup estimation, one should recover the same markup from any flexible input. I test this approach by comparing estimates of markups derived using labor and materials for four national manufacturing censuses and store-level data from a nationwide US retailer. Across all five datasets, I find that markups estimated using labor are negatively correlated with those estimated using materials, exhibit much greater dispersion, and have different trends over time. I also find different correlations with the degree of competition faced by the store for the retailer. I examine several mechanisms that may explain these findings, and find evidence that they are consistent with plant level heterogeneity in production technology. In order to successfully measure markups, the production approach will have to model such heterogeneity.

April 30, 2019 | Permalink | Comments (0)

An Empirical Analysis of Market Formation, Pricing, and Revenue Sharing in Ride-Hailing Services

Liu Ming The Chinese University of Hong Kong, Shenzhen Tunay I. Tunca University of Maryland - Robert H. Smith School of Business Yi Xu University of Maryland - Decision and Information Technologies Department Weiming Zhu University of Navarra, IESE Business School offer An Empirical Analysis of Market Formation, Pricing, and Revenue Sharing in Ride-Hailing Services.

Abstract: We empirically study the two-sided market for ride-hailing services and the effects of pricing policies and regulation on the value generated by these platforms. We first develop a discrete choice model for the formation of mutually dependent demand (consumer side) and supply (driver side) that jointly and endogenously determine pricing. Using this model and a comprehensive data set obtained from the largest mobile ride platform in China, we estimate consumer and driver price elasticities as well as other factors that affect market participation for the two main markets the company hosts, namely basic ride-hailing and taxi services, with a high level of model fit. Based on these estimation results and counterfactual analysis, we demonstrate that surge pricing improves consumer and driver welfare as well as platform revenues, while reducing taxi revenues on the platform. However, our analysis suggests that surge pricing can hurt consumer surplus and platform revenues during non-peak hours, and hence should be used selectively during the day. We show that platform revenues can be maximized by increasing drivers' revenue share from the current levels. We measure the effects of proposed regulations such as imposing ride-hail price hikes, and demonstrate that they would decrease consumer and driver surplus significantly. Finally, we estimate that the platform's basic ride-hailing services generated consumer value equivalent to more than 32 Billion USD in China in 2017.

April 30, 2019 | Permalink | Comments (0)

Unfair Disruption

Mark A. Lemley, Stanford Law School and Mark P. McKenna, Notre Dame Law School describe Unfair Disruption. Worth downloading

Abstract: New technologies disrupt existing industries. They always have, and they probably always will. Incumbents don’t like their industries to be disrupted. And they often rely on intellectual property (IP), unfair competition, or related legal doctrines as tools to prevent disruptive entry. What that means is that many of the cases in these areas are really about whether competition from new players can force incumbents to change their business models, generally to the advantage of particular players and the detriment of others. These cases are, in an important sense, all unfair competition cases; they are about the ways in which the law permits new entrants to compete with incumbents. 

Unfortunately, we lack any comprehensive way of thinking about market disruption in these settings. As a result, courts react quite differently to disruptive technology or business models in different cases. As one example, consider intellectual property (IP) cases brought against new technologies. Sometimes courts find the disruptive technology to infringe existing IP rights. New technology might fit within the legal definition of a prior invention, appropriately construed. Sometimes the technology might not itself infringe any prior invention, but makes it easier for third parties to infringe IP rights and is deemed illegal for that reason. 

Other areas of law reflect similarly mixed feelings about market disruption. Business tort claims like unjust enrichment—and even nominally procompetitive laws like antitrust—are often asserted by companies with a vested interest in restricting a competitor’s new technology. We have seen similar variability in antitrust, unfair competition, and business tort cases. Antitrust and unfair competition cases are brought against incumbents that try to prevent competition, but they are also brought by incumbents upset that their markets are being disrupted. Whether those laws encourage or inhibit market disruption depends critically on what kinds of competition courts deem “unfair.”

Our goal in this paper is to address the broader question of when competition by market disruption is “unfair.” In our view, courts are often overly receptive to market disruption arguments because they tend to be concerned about upsetting the status quo and affecting the settled expectations of market players, particularly when presented with arguments that some new technology will radically alter the industry. 

Courts should intervene to prevent market disruption only when they have very good reasons—reasons connected to the fundamental policy concerns of the legal systems called upon to prevent the disruption. To achieve that goal, we must know what the legitimate ends of the asserted law are. Sometimes the legal doctrine used to prevent market disruption is one like unjust enrichment, interference with economic advantage, or unfair competition that doesn’t have a clear animating principle. We think those doctrines should be disfavored, and courts should employ them only when they are tied to some independent metric for deciding whether the defendant’s conduct is unfair or unjust. Other doctrines, like antitrust and IP, have clearer purposes. There, we can evaluate legal challenges to market disruption by testing the fit between the goals of the statute and its use in a particular case. 

Courts in many types of cases have recognized this problem and begun to develop tools for dealing with them. But IP law has lagged behind, rarely even recognizing that what seem to be cases of infringement are really challenges to market disruption. We suggest a test that helps separate legitimate cases of IP infringement from cases of pure market disruption. Drawn from the antitrust injury doctrine, our test would treat market disruption as relevant to an IP case only if the disruption is traceable to the act of infringement itself. If the plaintiff would suffer the same injury from a market intervention that is not infringing, that injury cannot be evidence of IP infringement. 

April 30, 2019 | Permalink | Comments (0)

Monday, April 29, 2019

Call for PapersThe Competition Law Scholars Forum (CLaSF) and The School of Law of the University College Cork due Friday 7 June 2019

Call for Papers
The Competition Law Scholars Forum (CLaSF)
and The School of Law of the University College
Cork
invite contributions to a workshop on
The Courts & Competition Law
at University College Cork (Ireland) on Thursday 5 September 2019.
The Competition Law Scholars Forum (CLaSF) will be running a workshop on Thursday, 5
September 2019, at the School of Law of the University College Cork. The subject of the
workshop will be the broad theme of ‘The Courts & Competition Law’. We invite abstract paper
proposals from researchers, scholars, practitioners and policy-makers in relation to any issue
within this broad theme. We welcome theoretical, economics-driven, practice-based or policy focused papers, and we are interested in receiving abstracts for papers which may be focused
on perspectives or experience at national, regional (e.g. EU), international levels, or a
combination. Suggestions are invited particularly in the field of the following matters:

• The development and experience of specialist competition courts;
• The duration of cases and the issues of undue delay & the right to a fair hearing;
• Trial by Judge & Jury in criminal enforcement cases;
• The importance of judicial training for judges hearing competition cases;
• The Duty of Cooperation of National Courts in EU Competition Law;
• The Evaluation of Evidence by Courts;
• The discretion to the Commission by the CJEU in competition cases;
• Differences in, and merits of, courts versus competition agencies;
• Judicial review of decisions by administrative competition authorities;
• Public enforcement and Private Enforcement of Competition Law: Interaction (or lack of it)
between competition authorities and judges;
• The operation of the Follow-on Damages Regime;
• Experts and Expert Evidence in Competition Law Court Cases; and,
• Collective redress before the Courts
The Workshop will consist of a mix of invited speakers and contributions chosen following this
call for papers.
Any person interested in being considered on the basis of the call for papers at the workshop is
asked to contact Professor Barry Rodger at barry.j.rodger@strath.ac.uk. An abstract is
required of approximately 500-1,000 words, to be submitted by no later than Friday 7
June 2019, and decisions on successful submissions will be taken by Friday 21 June
2019. Submission of presentation/draft paper is also required a week prior to the workshop.

April 29, 2019 | Permalink | Comments (0)

Deputy Assistant Attorney General Roger Alford Delivers Remarks at the American Chamber of Commerce in Japan Tokyo,Japan ~ Wednesday, April 24, 2019

See here.

April 29, 2019 | Permalink | Comments (0)

The FRAND Ceremony and the Engagement of Article 102 TFEU in the Licensing of Standard Essential Patents

Jeffery Atik, Loyola Law School Los Angeles has written The FRAND Ceremony and the Engagement of Article 102 TFEU in the Licensing of Standard Essential Patents.

Abstract: This Essay examines the FRAND formulation for determining the maximum royalties payable to the holder of a Standard Essential Patent (“SEP”), with a focus on EU competition law. The holder undertaking to license a SEP on FRAND terms undoubtedly makes a contractual commitment. Moreover, the SEP holder effects a change in legal status, engaging Article 102 of the Treaty on the Functioning of the European Union (“TFEU”). There are two related and overlapping sets of FRAND obligations now in play: one established by private law according to express terms defined by the SEP-holder and the SSO; the other flowing from EU competition law. A SEP is a patent that must be practiced by any firm wishing to commercially deploy a privately-adopted standard. The adoption of a standard by a major Standard Setting Organization (“SSO”) requires a declaration by a covered SEP-holder that constitutes a legal commitment to license that the SEP on a fair, reasonable and non-discriminatory basis (“FRAND”). This gesture – which I describe as a “FRAND ceremony” – has multiple legal consequences. The FRAND ceremony binds the SEP-holding declarant to the express terms of the commitment as a matter of private law. Moreover, the FRAND ceremony establishes additional obligations binding on the SEP-holder – sourced in EU competition law. The declarant acknowledges the “essentiality” of its patent to the practice of the standard, which goes a long way to presumptively establishing a “dominant position” under Article 102 TFEU and charging the SEP-holder with “special responsibility.” The holder of a SEP incorporated in a standard of most important SSOs is thus likely bound to make available licenses on FRAND (or FRAND-like) terms that overlay or augment the FRAND undertaking expressly set out in the FRAND declaration itself.

April 29, 2019 | Permalink | Comments (0)

Playing Both Sides: Branded Sales, Generic Drugs, and Antitrust Policy

Michael A. Carrier, Rutgers Law School, Mark A. Lemley, Stanford Law School, Shawn P. Miller, Stanford Law School are Playing Both Sides: Branded Sales, Drugs, and Antitrust Policy.

ABSTRACT: The issue of high drug prices has recently exploded into public consciousness. And while many potential explanations have been offered, one has avoided scrutiny. Why has the growth in generic drugs not resulted in lower drug prices? 

In this article, we explore a phenomenon we call “playing both sides”: companies that participate in pharmaceutical markets as both brand owners and generics. We hypothesize that companies that earn a significant amount of their revenue from patented drugs may have less incentive to aggressively pursue a generic agenda, since patented drugs generate far more revenue for firms than generic drugs do. 

To investigate this phenomenon, we built a comprehensive database of all major pharmaceutical companies, evaluating where their revenue comes from, how that has changed over time, and how it relates to their behavior in court. Despite broad industry trends toward specialization, about one third of the firms we study have opted for a mixed business model over time. And those firms behave differently than pure generic firms. Our data show that when companies with significant generic sales play both sides, they behave differently than firms with a purer generic revenue stream. Dollar for dollar, the pure generic firms in our study challenged more patents as invalid or not infringed than the mixed firms. Further, “mixed generic” companies with growing brand sales (or a growing share of their revenue from brand sales) are more likely to settle the patent challenges they bring; companies with growing generic share are less likely to settle and more likely to take those cases to judgment. And when they do go to judgment, patent challengers with a greater generic share are more likely to win those challenges while companies with higher brand sales are less likely to win.

In short, we find evidence to support the hypothesis that generic companies that make more of their revenue from patented drugs are less likely to pursue challenges to judgment and less likely to win when they do. Playing both sides may reduce the incentive of generic challengers to fight as hard as possible to win the case before them. That may be especially true of the sorts of challenges that affect not just the patent in the instant case but might change legal doctrines that may ultimately hurt the generic challenger’s brand business.

Our article’s findings suggest a more nuanced antitrust analysis of mergers involving generic companies and patent settlements in which generics delay entering the market. In challenging more patents, settling fewer cases by agreeing to delay entry, and winning more of the cases they do bring, pure generic companies promise to unleash the generic competition that they were intended to. In the wide-ranging effort to lower drug prices, we must pay attention not only to whether a drug is patented but also to who is, or is not, challenging that patent and why.

April 29, 2019 | Permalink | Comments (0)

Taxation and Market Power in the Legal Marijuana Industry

By: Hollenbeck, BrettUetake, Kosuke
Abstract: In 2012 the state of Washington created a legal framework for production and retail sales of marijuana. Nine other U.S. states and Canada have followed. These states hope to generate tax revenue for their state budgets while limiting harms associated with marijuana consumption. We use a unique administrative dataset containing all transactions in the history of the industry in Washington to evaluate the effectiveness of different tax and regulatory policies under consideration by policymakers and study the role of imperfect competition in determining these results. We examine 3 main research questions. First, how effective is Washington’s excise tax at raising revenue? With the nation’s highest tax rate on marijuana, is Washington maximizing revenue or potentially overtaxing, leading to reduced legal sales and lower tax revenue. Second, what is the incidence of taxes in this industry? Finally, most states have restricted entry, resulting in firms with substantial market power. What is the role of imperfect competition in studying these basic questions on tax policy? We combine structural methods and a reduced form sufficient statistic approach to show a number of results. First, Washington’s 37% excise tax is still on the upward sloping portion of the Laffer curve and state revenue could be substantially higher with a higher tax rate. The amount of revenue generated by a tax increase is significantly larger due to retailer market power than it would be under perfect competition. In addition, these taxes are primarily borne by consumers and not by firms, and there is a large social cost associated with each dollar raised.
Keywords: tax incidence, marijuana, pass-through, imperfect competition, regulation
JEL: D22 H21 H22 L13 L51 L81
Date: 2018–11–12
URL: http://d.repec.org/n?u=RePEc:pra:mprapa:90085&r=com

April 29, 2019 | Permalink | Comments (0)

The Economics of Regulating Ride-Hailing and Dockless Bike Share

By: Rex Deighton-Smith
Abstract: This paper reviews the economic case for regulating ride-hailing and dockless bikeshare. Ride-hailing has disrupted heavily regulated taxi markets and is calling much of the rationale for taxi regulation into question. It argues for light-handed regulation to enable fair, nondistorting competition across the sector. A similar approach to bikeshare is needed, though the context differs greatly. These services are creating new mobility options, while their business models are evolving rapidly. Regulators should adopt a cautious approach which minimises the risk of undermining their potential.
Date: 2018–11–26
URL: http://d.repec.org/n?u=RePEc:oec:itfaab:2018/24-en&r=com

April 29, 2019 | Permalink | Comments (0)

Friday, April 26, 2019

Repercussions of International Trade on the Market Power of Firms in Different Market Structures.

By: Rashid, Muhammad Mustafa
Abstract: The purpose of this paper is to provide an introduction of market power in different market structures and how this market power diminishes because of international trade and the effects on welfare. A review of relevant literature from Pugel (2012), McConnel Bruce and Flynn (2012) and Bernheim and Winston (2014) provides the effects of international trade on the market power conditions in different market structures and the effects on welfare. Asprilla, Berman, Cadot and Jaud (2016), Devereux and Lee (2001) and Krugman (1994) serve to provide further evidence through PTM literature, bilateral exchange rate shocks and protectionism.
Keywords: Market Power, Market Structures, International Trade and Policy.
JEL: E6 F01 F1 F23 F4 F41 F42 F5 M16 M2
Date: 2018–06–19
URL: http://d.repec.org/n?u=RePEc:pra:mprapa:89889&r=com

April 26, 2019 | Permalink | Comments (0)

FDI and International Collusion

By: Uday Bhanu Sinha (Department of Economics, Delhi School of Economics)
Abstract: We develop a supergame model of collusion between price-setting oligopolists when the trade between countries involves per-unit trade cost and FDI requires a fixed cost of setting up a subsidiary in a foreign country. We demonstrate that cross hauling of FDI may facilitate collusion based on territorial allocation of markets. Whenever FDI is not helpful for sustaining collusion, the collusive arrangement involves no FDI at all. With asymmetric number of home firms or with different sizes of the markets, FDI may facilitate international collusion at lower levels of trade costs and thus our analysis also throws some light on the empirical puzzle regarding the trade liberalisation and FDI flows observed since the 1990s.
Keywords: Foreign direct investment, collusion, multimarket contact, cross hauling of FDI, price competition, homogenous good.
JEL: D43 F12 F15 F21 F23 L13 L41
Date: 2018–12
URL: http://d.repec.org/n?u=RePEc:cde:cdewps:295&r=com

April 26, 2019 | Permalink | Comments (0)

Firms’ Markup, Cost, and Price Changes when Policymakers Permit Collusion: Does Antitrust Immunity Matter?

By: Gayle, PhilipXie, Xin
Abstract: Airlines wanting to cooperatively set prices for their international air travel service must apply to the relevant authorities for antitrust immunity (ATI). Whether consumers, on net, benefit from a grant of ATI to partner airlines has caused much public debate. This paper investigates the impact of granting ATI to oneworld alliance members on their price, markup, and various measures of cost. The evidence suggests that implementation of the oneworld alliance without ATI did not have a statistically significant impact on the markup of products offered by the members, and there is no evidence that the subsequent grant of ATI to various members resulted in higher markups on their products. We find evidence suggesting that the grant of ATI facilitated a decrease in partner carriers’ marginal and fixed costs. Furthermore, member carriers’ price did not increase (decreased) in markets where their services do (do not) overlap, implying that consumers, on net, benefit from the grant of ATI in terms of price changes.
Keywords: Airline Competition; Strategic Alliances; Antitrust Immunity
JEL: L13 L40 L93
Date: 2018–11–09
URL: http://d.repec.org/n?u=RePEc:pra:mprapa:89914&r=com

April 26, 2019 | Permalink | Comments (0)

Thursday, April 25, 2019

Inequality and market concentration, when shareholding is more skewed than consumption

By: Joshua GansAndrew LeighMartin SchmalzAdam Triggs
Abstract: Economic theory suggests that monopoly prices hurt consumers but benefit shareholders. But in a world where individuals or households can be both consumers and shareholders, the impact of market power on inequality depends in part on the relative distribution of consumption and corporate equity ownership across individuals or households. The paper calculates this distribution for the United States, using data from the Survey of Consumer Finances and the Consumer Expenditure Survey, spanning nearly three decades from 1989 to 2016. In 2016, the top 20 percent consumed approximately as much as the bottom 60 percent, but had 13 times as much corporate equity. Because ownership is more skewed than consumption, increased mark-ups increase inequality. Moreover, over time, corporate equity has become even more skewed relative to consumption.
Keywords: Monopoly, market power, inequality
JEL: D42 D43 D61 D63
Date: 2018–12
URL: http://d.repec.org/n?u=RePEc:een:camaaa:2018-62&r=com

April 25, 2019 | Permalink | Comments (0)

Very Simple Markov-Perfect Industry Dynamics: Empirics

By: Abbring, Jaap H. (Tilburg University); Campbell, Jeffrey R. (Federal Reserve Bank of Chicago); Tilly, Jan (QuantCo, Inc.); Yang, Nan (National Univerrsity of Singapore)
Abstract: This paper develops an econometric model of firm entry, competition, and exit in oligopolistic markets. The model has an essentially unique symmetric Markov-perfect equilibrium, which can be computed very quickly. We show that its primitives are identified from market-level data on the number of active firms and demand shifters, and we implement a nested fixed point procedure for its estimation. Estimates from County Business Patterns data on U.S. local cinema markets point to tough local competition. Sunk costs make the industry's transition following a permanent demand shock last 10 to 15 years.
Keywords: demand uncertainty; dynamic oligopoly; firm entry and exit; nested fixed point; estimator; sunk costs; toughness of competition; counterfactual policy analysis; Markov process
JEL: C25 C73 L13
Date: 2018–07–24
URL: http://d.repec.org/n?u=RePEc:fip:fedhwp:wp-2018-17&r=com

April 25, 2019 | Permalink | Comments (0)

Pre-ICN Event: Competition, Data Portability, and Data Interoperability (Tuesday May 14, Cartagena)

CEDEC Invite for Sokol d


The link to RSVP is here.

April 25, 2019 | Permalink | Comments (0)

Optimal leniency programe for cartel abuses - an US and European perspective

By: Aleksander Maziarz (Kozminski University)
Abstract: Leniency is a program which gives immunity from fines or reduction of fines in cartel cases for those companies which decide to cooperate with antitrust agencies. The leniency program significantly reduces the difficulties, time and administrative costs of evidence of cartel violations, as the antitrust bodies receives assistance through leniency applications and further cooperation of cartel participant during the administrative procedure. Thanks to this, the antitrust bodies can detect and punish more cartels focusing on other abuses.Recently leniency programs are being misused because the same companies apply for leniency many times without being punished. Therefore, the program needs changes. The paper analyses US and European leniency programs and tries to find optimal solution for elimination of misuse of leniency.
Keywords: cartel, restrictive agreement, leniency, immunity form fines
JEL: K21 K22
Date: 2018–10
URL: http://d.repec.org/n?u=RePEc:sek:iacpro:6709856&r=com

April 25, 2019 | Permalink | Comments (0)

Wednesday, April 24, 2019

Price Discrimination in International Airline Markets

By: Gaurab Aryal (Department of Economics, University of Virginia); Charles Murry (Department of Economics, Boston College); Jonathan W. Williams(Department of Economics, University of North Carolina - Chapel Hill)
Abstract: We develop a model of inter-temporal and intra-temporal price discrimination by airlines to study the ability of different discriminatory mechanisms to remove sources of inefficiency and the associated distributional implications. To estimate the model’s multi-dimensional distribution of preference heterogeneity, we use unique data from international airline markets with flight-level variation in prices across time and cabins, and information on passengers’ reason for travel. We find that current pricing practices grant late-arriving business passengers substantial informational rents and yield 81% of first-best welfare, with stochastic demand and asymmetric information accounting for 65% and 35% of the gap, respectively.
Keywords: dynamic pricing, screening, perishable goods
JEL: L00 D42 L93
Date: 2018–11–26
URL: http://d.repec.org/n?u=RePEc:boc:bocoec:968&r=com

April 24, 2019 | Permalink | Comments (0)

Market Structure and Competition in Airline Markets

By: Ciliberto, FedericoMurry, CharlesTamer, Elie
Abstract: We provide an econometric framework for estimating a game of simultaneous entry and pricing decisions in oligopolistic markets while allowing for correlations between unobserved fixed costs, marginal costs, and demand shocks. Firms' decisions to enter a market are based on whether they will realize positive profits from entry. We use our framework to quantitatively account for this selection problem in the pricing stage. We estimate this model using cross-sectional data from the US airline industry. We find that not accounting for endogenous entry leads to overestimation of demand elasticities. This, in turn, leads to biased markups, which has implications for the policy evaluation of market power. Our methodology allows us to study how firms optimally decide entry/exit decision in response to a change in policy. We simulate a merger between American and US Airways and we find that the post-merger market structure and prices depend crucially on how we model the characteristics of the post-merger firm as a function of the pre-merger firms' characteristics. Overall, the merged firm has a strong incentive to enter new markets; the merged firm faces a stronger threat of entry from rival legacy carriers, as opposed to low cost carriers; and, post-merger entry mitigates the adverse effects of increased concentration.
Keywords: Entry; market power; market structure; merger; multiple equilibria; oligopoly; Self-selection
JEL: C35 C51 D43 L13 L41 L44
Date: 2018–11
URL: http://d.repec.org/n?u=RePEc:cpr:ceprdp:13346&r=com

April 24, 2019 | Permalink | Comments (0)

Inventory Behavior, Demand, and Productivity in Retail

By: Maican, FlorinOrth, Matilda
Abstract: This paper studies the factors underlying the heterogeneity in inventory behavior and performance across retail stores. We use a dynamic model of multi-product retailers and local competition to estimate store productivity and consumers' perceived quality of the shopping experience, and we analyze their relationship with inventory behavior and product variety. Using novel and detailed data on Swedish stores and their products, we find that stores learn from demand to improve future productivity. Store productivity is the main primitive that increases inventory turnover and product variety, and this increase is larger for stores with already high inventory turnover. Stores in small markets with intense competition from rivals have higher inventory turnover. Consumers in large markets and markets with large investments in technology benefit from a broader product variety. Counterfactual experiments show that the increase in inventory turnover due to innovations in productivity is three times greater when uncertainty in demand is reduced by 30 percent. Our analysis highlights important trade-offs between productivity and demand that allow retailers to reach high levels of inventory turnover and offer a broad product variety to consumers.
Keywords: inventory performance; product variety; productivity; supply chain management
JEL: L11 L13 L25 L81 M21
Date: 2018–11
URL: http://d.repec.org/n?u=RePEc:cpr:ceprdp:13308&r=com

April 24, 2019 | Permalink | Comments (0)