Economics of Antitrust
Paper Session
Sunday, Jan. 8, 2023 10:15 AM - 12:15 PM (CST)
- Chair: Thomas G. Wollmann, University of Chicago
Algorithmic Pricing Facilitates Tacit Collusion: Evidence from E-Commerce
Abstract
As the economy digitizes, menu costs fall, and firms can monitor prices more easily. These trends have led to the rise of automatic pricing tools or ``repricers'. We employ a novel e-commerce dataset to examine the potential implications of these developments on the quality of price competition. We provide evidence from an RDD that the immediate impact of automatic pricing is a significant decline in prices. However, repricers have developed strategies to avoid the stark competitive realities of Bertrand-Nash competition. By employing plausibly exogenous variation in the execution of repricing strategies, we find that ``resetting' strategies (where prices are raised, e.g., at night) effectively coax competitors to raise their prices. While the resulting patterns of cycling prices are reminiscent of Maskin-Tirole's Edgeworth cycles, a model of equilibrium in delegated strategies fits the data better. This model suggests that if the available repricing technology remains fixed, cycling will increase, and prices could rise significantly in the future.Buyer Power in the Beef Packing Industry
Abstract
This paper explores the pricing behavior of beef packers in the United States. We seek to understand an increase in the gap between the prices packers pay to upstream feedlots and the prices they receive from retailers from 2015-2019. We focus on the role of alternative market arrangements (AMAs) that are increasingly used to facilitate transactions between feedlots and packers. These are agreements that packers buy a pre-specified number of cattle at a particular date, with prices tied to the average cash market price near the delivery date. This linkage may depress the price paid for cattle. We provide a spatial differentiation model of price setting that features third degree price discrimination and AMAs and use it to quantify the role of AMAs and multi-plant ownership in determining the packer spread.The Inner Workings of a Hub-and-Spoke Cartel in the Automotive Fuel Industry
Abstract
We analyze a hub-and-spoke cartel in the Brazilian automotive fuel industry. Using the court documents and detailed data on the supply chain we uncover three mechanisms beyond information sharing used by wholesalers (hub) to help retailers (spokes) solve the obstacles of price coordination: vertical transfers across asymmetric spokes; subsidies during punishment; and cost stabilization. We argue that wholesalers benefited from the cartel by being the exclusive supplier during the scheme. We use the synthetic control approach to quantify how successful the cartel was in increasing markups. We find that not only retailers, but wholesalers benefited from the cartel.Discussant(s)
Robert Clark
,
Queen's Universitiy
Zack Brown
,
Michigan University
Jean-François Houde
,
University of Wisconsin-Madison
David P. Byrne
,
University of Melbourne
JEL Classifications
- K21 - Antitrust Law
- L12 - Monopoly; Monopolization Strategies