Antitrust & Competition Policy Blog

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

Friday, May 31, 2019

Cheap talk, monitoring and collusion

By: David Spector (PSE - Paris-Jourdan Sciences Economiques - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique)
Abstract: Many collusive agreements involve the exchange of self-reported sales data between competitors, which use them to monitor compliance with a target market share allocation. Such communication may facilitate collusion even if it is unverifiable cheap talk and the underlying information becomes publicly available with a delay. The exchange of sales information may allow firms to implement incentive-compatible market share reallocation mechanisms after unexpected swings, limiting the recourse to price wars. Such communication may allow firms to earn profits that could not be earned in any collusive, symmetric pure-strategy equilibrium without communication.
   
URL: http://d.repec.org/n?u=RePEc:hal:psewpa:halshs-01983037&r=com

May 31, 2019 | Permalink | Comments (0)

Striking a Balance of Power between the Court of Justice and the EU Legislature: The Law on Competition Damages Actions as a Paradigm

By: Jens-Uwe Franck
Abstract: The framework of EU law on cartel damages actions consists in part of rules established by the ECJ based on arts 101 and 102 TFEU in conjunction with the principle of effectiveness. These rules are an integral part of EU primary law. The notion of institutional balance, however, requires the Court to consider its own inherent limits on democratic legitimacy, accountability and expertise. In particular, the Court has to ensure that adequate scope remains for the EU legislature to exercise its legislative power pursuant to art.103 TFEU. It is argued that the ECJ has disregarded these restrictions and overstretched the principle of effectiveness––for instance, in its adjudication on liability for umbrella pricing and on access to leniency files, respectively. Consequently, the EU legislature must not consider itself bound by these standards.
   
   
   
URL: http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2018_037&r=com

May 31, 2019 | Permalink | Comments (0)

Internal versus External Growth in Industries with Scale Economies: A Computational Model of Optimal Merger Policy

By: Ben MermelsteinVolker NockeMark A. SatterthwaiteMichael D. Whinston
Abstract: We study optimal merger policy in a dynamic model in which the presence of scale economies implies that firms can reduce costs through either internal investment in building capital or through mergers. The model, which we solve computationally, allows firms to invest or propose mergers according to the relative profitability of these strategies. An antitrust authority is able to block mergers at some cost. We examine the optimal policy for an antitrust authority who cannot commit to its future policy rule and approves or rejects mergers as they are proposed, considering both consumer value and aggregate value as its possible objectives. We find that the optimal policy can differ substantially from what would be best considering only welfare in the period the merger is proposed. In general, antitrust policy can greatly affect firms' optimal investment behavior, and firms' investment behavior can in turn greatly affect the antitrust authority's optimal policy. Moreover, externalities imposed by mergers on rivals can have significant effects on firms' investment incentives and thereby shape the optimal policy.
   
   
   
URL: http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2018_038&r=com

May 31, 2019 | Permalink | Comments (0)

Thursday, May 30, 2019

The Effect of Horizontal Mergers, When Firms compete in Prices and Investments

By: Massimo MottaEmanuele Tarantino
Abstract: We study the effects of mergers when firms offer differentiated products and compete in prices and investments. Since it is in principle ambiguous, we use aggregative game theory to sign the net effect of the merger: We find that only if it entailed sufficient efficiency gains, could the merger raise total investments and consumer surplus. We also prove there exist classes of models for which the results obtained with cost-reducing investments are equivalent to those with quality-enhancing investments. Finally, we show that, from the consumer welfare point of view, a R&D cooperative agreement is superior to any consumer-welfare reducing merger.
   
   
   
URL: http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2018_056&r=com

May 30, 2019 | Permalink | Comments (0)

Price Dispersion and Informational Frictions: Evidence from Supermarket Purchases

By: Pierre DuboisHelena Perrone
Abstract: Traditional demand models assume that consumers are perfectly informed about product characteristics, including price. However, this assumption may be too strong. Unannounced sales are a common supermarket practice. As we show, retailers frequently change position in the price rankings, thus making it unlikely that consumers are aware of all deals o¤ered in each period. Further empirical evidence on consumer behavior is also consistent with a model with price information frictions. We develop such a model for horizontally di¤erentiated products and structurally estimate the search cost distribution. The results show that in equilibrium, consumers observe a very limited number of prices before making a purchase decision, which implies that imperfect information is indeed important and that local market power is potentially high. We also show that a full information demand model yields severely biased price elasticities.
   
   
   
URL: http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2018_047&r=com

May 30, 2019 | Permalink | Comments (0)

Patent Pools, Vertical Integration, and Downstream Competition

By: Markus ReisingerEmanuele Tarantino
Abstract: Patent pools are commonly used to license technologies to manufacturers. Whereas previous studies focused on manufacturers active in independent markets, we analyze pools licensing to competing manufacturers, allowing for multiple licensors and non-linear tariffs. We find that the impact of pools on welfare depends on the industry structure: Whereas they are procompetitive when no manufacturer is integrated with a licensor, the presence of vertically integrated manufacturers triggers a novel trade-off between horizontal and vertical price coordination. Specifically, pools are anticompetitive if the share of integrated firms is large, procompetitive otherwise. We then formulate information-free policies to screen anticompetitive pools.
   
   
   
URL: http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2018_057&r=com

May 30, 2019 | Permalink | Comments (0)

Wednesday, May 29, 2019

Exchange Competition, Entry, and Welfare

By: Giovanni CespaXavier Vives
Abstract: We assess the consequences for market quality and welfare of different entry regimes and exchange pricing policies in a context of limited market participation. To this end we integrate a two-period market microstructure model with an exchange competition model with entry in which exchanges supply technological services, and have market power. We find that technological services can be strategic substitutes or complements in platform competition. Free entry of platforms delivers a superior outcome in terms of liquidity and (generally) welfare compared to the case of an unregulated monopoly. Controlling entry or, even better typically, platform fees may further increase welfare. The market may deliver excessive or insufficient entry. However, if the regulator is constrained to not making transfers to platforms then there is never insufficient entry.
   
   
   
URL: http://d.repec.org/n?u=RePEc:ces:ceswps:_7432&r=com

May 29, 2019 | Permalink | Comments (0)

Size, Efficiency, Market Power, and Economies of Scale in the African Banking Sector

By: Simplice A. Asongu (Yaoundé/Cameroon); Nicholas M. Odhiambo (Pretoria, South Africa)
Abstract: There is a growing body of evidence that interest rate spreads in Africa are higher for big banks compared to small banks. One concern is that big banks might be using their market power to charge higher lending rates as they become larger, more efficient, and unchallenged. In contrast, several studies found that when bank size increases beyond certain thresholds, diseconomies of scale are introduced that lead to inefficiency. In that case, we also would expect to see widened interest margins. This study examines the connection between bank size and efficiency to understand whether that relationship is influenced by exploitation of market power or economies of scale. Using a panel of 162 African banks for 2001–2011, we analyzed the empirical data using instrumental variables and fixed effects regressions, with overlapping and non-overlapping thresholds for bank size. We found two key results. First, bank size increases bank interest rate margins with an inverted U-shaped nexus. Second, market power and economies of scale do not increase or decrease the interest rate margins significantly. The main policy implication is that interest rate margins cannot be elucidated by either market power or economies of scale. Other implications are discussed.
Keywords: Sub-Saharan Africa; banks; lending rates; efficiency; Quiet Life Hypothesis
   
   
URL: http://d.repec.org/n?u=RePEc:agd:wpaper:18/056&r=com

May 29, 2019 | Permalink | Comments (0)

Consumer Preferences and Market Structure in Credit Card Markets: Evidence from Turkey

By: G. Gulsun Akin (Bogazici University); Ahmet Faruk AysanEzgi ÖzerLevent Yildiran
Abstract: Using a discrete choice random utility model and unique data from a nationwide consumer survey, we show that consumers view credit cards as highly differentiated products with both bank-level and card-level nonprice features. They select their credit cards by predominantly considering these nonprice features. Although they charge higher prices, the majority of consumers choose private banks as issuers due to their bank-level and card-level nonprice benefits. Consumers who prioritize prices tend to choose participation or public banks. Product differentiation and bundling seem to underlie banks’ market power in the Turkish credit card market. Large private banks and public banks reap the benefits of bundling more than the other banks. Of card-level nonprice features, installments, bonuses/rewards/miles, and the prestige of the card seem to be particularly effective in consumers’ decisions. We argue that this highly differentiated nature of credit cards can be an alternative explanation for the credit card pricing puzzles.
   
URL: http://d.repec.org/n?u=RePEc:erg:wpaper:1258&r=com

May 29, 2019 | Permalink | Comments (0)

Who Does India’s Draft Enabling Framework for Regulatory Sandbox actually Enable?

Crowd-Driven Competitive Intelligence: Understanding the Relationship Between Local Market Competition and Online Rating Distributions

By: Dominik Gutt (Paderborn University); Philipp Herrmann (Consultant); Mohammad S. Rahman (Purdue University)
Abstract: In this paper, we analyze how changes in local market structure affect the properties of a market’s mean rating distribution. To this end, we combine demographic, socioeconomic, and Yelp restaurant review data for 372 isolated markets in the United States. Our empirical estimates demonstrate that an increase in overall competition – measured as total number of businesses in a market – leads to a broader range and to a decrease in the average of a market’s mean rating distribution. The implication is that a larger market has proportionately more lower rated restaurants, whereas higher rated restaurants have relatively fewer comparable substitutes and face less competition in such a market. These effects are particularly pronounced when the analysis is limited to specific cuisine types where vertical differentiation is more natural or when we control for city-specific unobserved heterogeneity. Our findings highlight that practitioners and scholars using online mean ratings of businesses from disparate markets should account for the local market structure to judiciously analyze the relative market power of a business.
Keywords: Local Market Competition, Online Ratings, Online Offline Interplay, Geographic
   
   
URL: http://d.repec.org/n?u=RePEc:pdn:dispap:41&r=com

May 29, 2019 | Permalink | Comments (0)

Tuesday, May 28, 2019

Collusion with capacity constraints under a sales maximization rationing rule

By: Takaomi Notsu (Graduate School of Economics, Kyoto University)
Abstract: In this paper, we study full collusion (total payoff maximization) in the repeated Bertrand duopoly with capacity constraints. Instead of a standard rationing rule, Efficient rule (E rule), we introduce a sales maximization rationing rule. Under this rule, when the demand of a firm with a lower price exceeds its capacity, the consumers who are willing to buy at that price are rationed to that firm according to their unwillingness to buy. Then, we investigate whether the full collusion can be sustained or not by an equilibrium under our rule. We have four main results. First, we find that unless each firm's capacity is too large, an asymmetric price pair maximizes one shot total payoffs and the maximum total payoff is strictly greater than the one under E rule. Second, we explicitly find a minimum discount factor under which the full collusion can be sustained along a simple path such that the firms alternate two asymmetric price pairs. Third, we find that there exists a range of capacity constraints within which the minimum discount factors above which the full collusion can be sustained are lower under our rule than under E rule. This implies that the payoff of the full collusion, which is greater than under E rule, can be sustained within a wider range of discount factors rather than under E rule. Fourth and finally, we show that there exists the interior optimal capacity which maximizes the total payoffs of the full collusion, and the total payoff is strictly greater than the profit of a monopolist with aggregate capacities. This implies that sufficiently patient rms intend to reduce their capacities to just the optimal level when they have extra capacities, and that each middle-size firm prefers to be independent, instead of being horizontally integrated.
   
   
URL: http://d.repec.org/n?u=RePEc:kyo:wpaper:990&r=com

May 28, 2019 | Permalink | Comments (0)

Internet of things (IoT) platform competition: consumer switching versus provider multihoming

By: Basaure, ArturoVesselkov, Alexandr
Abstract: Platforms that are understood as a place or system coordinating the interaction of different stakeholders (e.g., service consumers and providers) may enable widespread adoption of IoT services and applications. However, the lack of interoperability between platforms may inhibit the diffusion of IoT services by preventing reaching a critical mass and reducing competition as it makes consumer switching and service provider multihoming prohibitively expensive. Moreover, network effects inherent in multisided platforms may lead to a monopoly power in IoT market. This paper analyzes the effect of consumer switching costs and provider multihoming on market structure and competition by means of agent-based modelling. Simulation results suggest that service provider multihoming plays a key role in increasing market competition when switching costs decrease due to, for example, consumer data portability.
   
   
URL: http://d.repec.org/n?u=RePEc:zbw:itsb18:190352&r=com

May 28, 2019 | Permalink | Comments (0)

New Frontiers of Antitrust, Friday 14 June, from 8:30am to 7:00pm

Concurrences Review, will hold the 10th edition of its annual conference “New Frontiers of Antitrust" on Friday 14 June, from 8:30am to 7:00pm, at the Ministry of French Ministry for the Economy and Finance, 139 rue de Bercy, Paris.

 

This edition marks the 10 year anniversary of this leading antitrust event.

 

https://new-frontiers-of-antitrust-2019.eventbrite.fr

 

Speakers include:

 

- Virginie Beaumeunier, Director-General, DGCCRF

- Sir Christopher Bellamy QC, Chairman of the Global Competition Practice, Linklaters

- Paul Csiszar, Director - Basic industries, Manufacturing and Agriculture, DG COMP

- Christian D'Cunha, Head of Private Office, EDPS

- Isabelle de Silva, President, Autorité de la concurrence 

- Simon Evenett, Professor of International Trade and Economic Development, University of St. Gallen

- Daniel Fasquelle, MP for Pas-de-Calais & Vice President of the Economic Affairs Committee, French National Parliament - Professor, University of Boulogne-sur-Mer

- Laurence Idot, Professor, University Paris II Panthéon-Assas

- Frédéric Jenny, Chairman, OECD Competition Committee - Professor of Economics, ESSEC, Paris

- Thomas Kramler, Head of Unit, DG COMP

- Cecilio Madero, Deputy Director-General, DG COMP

- Richard Panquiault, Director-General, ILEC

- Nicolas Petit, Professor, University of Liège 

- Alvaro Ramos, Senior Director - Head of Global Antitrust, Qualcomm

- Arno Rasek, Chief Economist, Bundeskartellamt

- Sébastien Soriano, President, ARCEP

- Wouter Wils, Hearing Officer, European Commission - Visiting Professor, King's College London

 

 

The conference will focus on 5 topics:

 

- Which competition and industrial policies for Europe?

- Beyond ALSTOM-SIEMENS: Is there a need to revise competition law goals?

- Competition authorities: Which judicial review?

- Restrictive trade practices in the food and retail sector: Is the end near, truly?

- Business & Personal data: Should access be shared? Should collection be confined?

 

You can find the detailed program on the dedicated website:

https://new-frontiers-of-antitrust-2019.eventbrite.fr

May 28, 2019 | Permalink | Comments (0)

Submission Reminder for the 12th Annual FTC Microeconomics Conference

The submission deadline for the Twelfth Annual Federal Trade Commission Microeconomics Conference is quickly approaching. The FTC Microeconomics Conference will bring together scholars working in areas related to the FTC’s antitrust, consumer protection, and public policy missions on November 14-15, 2019, in Washington, D.C. The Scientific Committee for the conference consists of Panle Jia Barwick (Cornell University), Mark Schankerman (London School of Economics), and Joel Sobel (University of California, San Diego). Submit your paper to BE-Micro@ftc.gov by June 21, 2019. Visit www.ftc.gov/microeconomics to see the Call for Papers and additional conference details.

May 28, 2019 | Permalink | Comments (0)

Cartel Stability under Quality Differentiation

By: Iwan BosMarco Marini
Abstract: This note considers cartel stability when the cartelized products are vertically differentiated. If market shares are maintained at pre-collusive levels, then the firm with the lowest competitive price-cost margin has the strongest incentive to deviate from the collusive agreement. The lowest-quality supplier has the tightest incentive constraint when the difference in unit production costs is sufficiently small.
   
URL: http://d.repec.org/n?u=RePEc:arx:papers:1812.10293&r=com

May 28, 2019 | Permalink | Comments (0)

Fireside Chat with Michael Grenfell of the CMA, 11AM EDT June 05, 2019

The CMA has suggested a number of changes to the UK's competition law regime. This program provides a fireside chat with Michael Grenfell, Executive Director, Enforcement, of the CMA. Dr. Grenfell will discuss the proposed changes in an informal setting, followed by Q&A from those on the call.

 
$25
NON-MEMBERS
$10
MEMBERS
$0
SECTION MEMBERS
Register Now *Additional discounts may apply at checkout
 
 

Moderator:

Daniel Sokol, University of Florida

Speaker:

Michael Grenfell, CMA

Explore Section benefits or call 1-800-285-2221 to join. To learn more visit: https://www.americanbar.org/groups/antitrust_law/

May 28, 2019 | Permalink | Comments (0)

HKU-Lingnan-Florida Platform Competition Conference June 20-21, 2019 (Thursday & Friday), Hong Kong

See here for details.

HKU FBE
 

HKU-Lingnan-Florida
Platform Competition Conference

June 20-21, 2019 (Thursday & Friday)

KK315, 3/F, K.K. Leung Building,
The University of Hong Kong

CPD points have been applied for this event with The Law Society of Hong Kong

 
   Welcome message

Welcome to HKU and to the online platforms conference. The first day of the conference is geared to practitioners and policy questions while the second day focuses on bridging the understanding of online platforms across academic disciplines. Competition analysis of online markets is a hot topic around the world. In a number of jurisdictions, online markets already have been subject to competition law review in merger or conduct cases. In other jurisdictions, these issues are in a nascent stage of policy. A number of lessons can be learned from the cases to date involving online markets with regard to optimal competition policy. What these cases tend to share are some basic features as to how online markets work. Some jurisdictions understand the particular dynamics of multi-sided online markets. Other competition authorities sometimes may misidentify these markets and the market dynamics therein. We will explore both what is known and the gaps in knowledge to better understand these market dynamics.

Conference conveners:

Yuk-fai FONG, The University of Hong Kong
Ping LIN, Lingnan University
D. Daniel SOKOL, University of Florida
 
   Programme 

June 20, 2019 (Thursday) - Practitioners’ Conference
KK315, 3/F, K.K. Leung Building, The University of Hong Kong

Time

Session Details

Venue

8:15 - 8:50

Registration & Coffee

KK315

8:50 - 9:00

Welcoming Remarks
by Dean Hongbin CAI, Faculty of Business and Economics,
The University of Hong Kong

KK315

9:00 - 9:30

Opening Keynote
by Xuan WANG, Principal Staff Member of Anti-monopoly Bureau, State Administration for Market Regulation
(市场监督管理总局反垄断局垄断协议调查处处长 王轩先生)

KK315

9:30 - 10:45

Panel 1: Enforcement in Multisided Platforms

Moderators:
Wing SUEN, Chair of Economics, The University of Hong Kong
Auraellia WANG, Senior Competition Counsel APAC, Google

Speakers:
Na DAWSON, Vice President, Analysis Group, Inc
Youngjin JUNG, Attorney, Kim & Chang
Alexander OKULIAR, Partner, Orrick, Herrington & Sutcliffe LLP
Sadaaki SUWAZONO, Deputy Secretary General for International Affairs, Japan Fair Trade Commission

KK315

10:45 - 11:15

Coffee break

KK315

11:15 - 12:30

Panel 2: Mergers in the Digital Economy

Moderator:
Andrew FOSTER, Partner, Skadden, Arps, Slate, Meagher & Flom

Speakers:
Herbert FUNG, Senior Director (Business and Economics),
Competition and Consumer Commission of Singapore
Wayne LEACH, Partner, King & Wood Mallesons
Wesley WANG, Senior Associate, T&D Associates
Jason WU, Senior Vice President, Compass Lexecon

KK315

12:30 - 14:00

Chinese lunch

Senior Common Room

14:00 - 14:30

Keynote
Brent SNYDER, CEO, Hong Kong Competition Commission

KK315

14:30 - 15:45

Panel 3: Big Data and AI

Moderator:
Ruth CHEN, Associate General Counsel, Regulatory, Facebook

Speakers:
John CHOI, Senior Foreign Attorney (Partner), Shin & Kim
Patricia GALVAN, Assistant Director, US Federal Trade Commission
Atsushi YAMADA, Partner, Anderson Mori & Tomotsune

KK315

15:45 - 16:15

Coffee break

KK315

16:15 - 17:30

Panel 4: Platforms in e - commerce and Fintech

Moderator:
Knut FOURNIER, Regional Counsel APAC, StubHub (eBay)

Speakers:
Karen LEUNG, Counsel, Uber
Chen LIN, Associate Dean (Research and Knowledge Exchange),
Professor of Finance, The University of Hong Kong
Daniel SOKOL, University of Florida Research Foundation
Professor of Law and Term Professor of Law, University of Florida Levin College of Law

KK315

17:30

Dinner (by invitation)

Le Méridien Cyberport

June 21, 2019 (Friday) - Academic Conference
KK315, 3/F, K.K. Leung Building, The University of Hong Kong

Time

Session Details

Venue

8:30 - 8:50

Registration & Coffee

KK315

8:50 - 9:00

Opening Remarks
by Yuk-fai FONG, Professor of Management and Strategy,
Professor of Economics, The University of Hong Kong

KK315

9:00 - 11:00

Paper Session 1

Kenneth CHENG, John B Higdon Eminent Scholar Chair,
University of Florida
Ruomeng CUI, Assistant Professor, Department of Information System & Operations Management, Goizueta Business School, Emory
Sunny HUANG, Assistant Professor, Department of Economics,
The Hong Kong University of Science and Technology
Angela ZHANG, Associate Professor, Faculty of Law,
The University of Hong Kong

KK315

11:00 - 11:30

Coffee break

KK315

11:30 - 13:00

Paper Session 2

Hung Hao CHANG, Professor, Department of Agricultural Economics,
National Taiwan University
Chiara FARRONATO, Assistant Professor of Business Administration,
Harvard Business School
Alex YANG, Associate Professor of Management Science and Operations, London Business School

KK315

13:00 - 14:00

Lunch buffet

KK603 - 604

14:00 - 15:30

Paper Session 3

Wesley KOO, Assistant Professor of Strategy, INSEAD
Kelvin KWOK, Assistant Professor, Faculty of Law, The University of Hong Kong
Steven XU, Associate Professor of Economics, The University of Hong Kong

KK315

15:30 - 16:00

Coffee break

KK315

16:00 - 18:00

Paper Session 4

Ramnath CHELLAPPA, Professor and Associate Dean, Emory
Jay CHOI, University Distinguished Professor, Michigan State University
Guofu TAN, Professor of Economics, University of Southern California
Richard XU, Ph.D. Student in Economics, University of Southern California

KK315

18:00 - 19:00

Cocktail reception

KK603 - 604

 
 
 
 
 

May 28, 2019 | Permalink | Comments (0)

On the difficulty of collusion in the presence of a more efficient outsider

By: Guillaume Cheikbossian (CEE-M - Centre d'Economie de l'Environnement - Montpellier - FRE2010 - INRA - Institut National de la Recherche Agronomique - UM - Université de Montpellier - CNRS - Centre National de la Recherche Scientifique - Montpellier SupAgro - Institut national d’études supérieures agronomiques de Montpellier); Philippe Mahenc (CEE-M - Centre d'Economie de l'Environnement - Montpellier - FRE2010 - INRA - Institut National de la Recherche Agronomique - UM - Université de Montpellier - CNRS - Centre National de la Recherche Scientifique - Montpellier SupAgro - Institut national d’études supérieures agronomiques de Montpellier)
Abstract: We study the ability of several identical firms to collude in the presence of a more efficient firm, which does not take part in their collusive agreement. The cartel firms adopt stick-and-carrot strategies, while the efficient firm plays its one-period best-response function, regardless of the history of play. We characterize the most collusive symmetric punishment, which maximizes the scope for collusion. We then find that either a lower cost disadvantage or a smaller cartel size facilitates collusion. Finally, we compare our results with those obtained in the standard setup where all firms participate in the collusive agreement.
   
   
URL: http://d.repec.org/n?u=RePEc:hal:journl:hal-01950057&r=com

May 28, 2019 | Permalink | Comments (0)

Monday, May 27, 2019

Not all price endings are created equal: Price points and asymmetric price rigidity

 

Not all price endings are created equal: Price points and asymmetric price rigidity
 
By: Daniel Levy (Department of Economics, Bar-Ilan University, Israel; Department of Economics, Emory University, USA; Rimini Centre for Economic Analysis); Avichai Snir (Department of Banking & Finance, Netanya Academic College, Israel); Alex Gotler (Department of Education and Psychology, Open University, Israel); Haipeng (Allan) Chen (Gatton College of Business and Economics, University of Kentucky, USA)
Abstract: We document an asymmetry in the rigidity of 9-ending prices relative to non-9-ending prices. Consumers have difficulty noticing higher prices if they are 9-ending, or noticing price-increases if the new prices are 9-ending, because 9-endings are used as a signal for low prices. Price setters respond strategically to the consumer-heuristic by setting 9-ending prices more often after price-increases than after price-decreases. 9-ending prices, therefore, remain 9-ending more often after price-increases than after price-decreases, leading to asymmetric rigidity: 9-ending prices are more rigid upward than downward. These findings hold for both transaction-prices and regular-prices, and for both inflation and no-inflation periods.
Keywords: Asymmetric Price Adjustment, Sticky/Rigid Prices, 9-Ending Prices, Psychological Prices, Price Points, Regular/Sale Prices
   
   
URL: http://d.repec.org/n?u=RePEc:rim:rimwps:19-02&r=com

May 27, 2019 | Permalink | Comments (0)