Competition policy

Guangyu Cao, Ginger Jin, Xi Weng, Li-An Zhou, 09 November 2018

Positive network effects may lead to winner-takes-all in some markets. The column analyses dockless bike-sharing in China to show instead how an incumbent can benefit from positive spillovers from a competitor’s entry. In the case of bike-sharing, consumers multi-home, the market exhibits positive network effects, and investment by two firms is more cost-efficient than investment by one. 

Vsevolod Grabar, Konstantin Sonin, 20 October 2018

UEFA’s Financial Fair Play regulations, which aim to “introduce more discipline and rationality in club football finances”, have attracted significant criticism, with claims that their effect on competitive balance is uncertain and that they will deprive new clubs of a chance to take off. This column provides a theoretical argument to show that regulations such as salary caps or Financial Fair Play improve investors' incentives to bring money to clubs other than those in the top financial tier, helping to level the playing field.

Esteban Rossi-Hansberg, Pierre-Daniel Sarte, Nicholas Trachter, 19 October 2018

Recent literature has documented increasing US product-market concentration at the national level. This column argues that when measured at the more relevant local level, concentration has actually decreased over the last 25 years on average and in all major sectors. In the many industries with diverging national and local trends, top firms are bringing down local concentration even as they increase national concentration. These findings support the idea that top firms expand their national market share by opening establishments in new locations, thereby increasing local competition. 

Meng Liu, Erik Brynjolfsson, Jason Dowlatabadi, 12 October 2018

Most of us have taken a taxi that increased the fare by taking the long route. The column compares matched pairs of taxi and Uber journeys in New York City to investigate how often drivers took unnecessary detours. Uber drivers were less likely to do this, suggesting that Uber's innovations in fare structure and digital feedback have reduced moral hazard.

Øystein Foros, Mai Nguyen-Ones, Frode Steen, 11 October 2018

Many markets exhibit saw-tooth pricing, with retailers regularly cutting and restoring prices. The column uses the discounting pattern of Norwegian gas stations, which uniformly raise prices on two days a week, to show the effect on consumer behaviour and firm profits. When more consumers spend effort on when to buy rather than where to buy, competition softens.

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