Browsing by Person "Trost, Michael"

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The collusive efficacy of competition clauses in Bertrand Markets with capacity-constrained retailers
(2021) Trost, Michael
We study the collusive efficacy of competition clauses (CC) such as the meeting competition clause (MCC) and the beating competition clauses (BCC) in a general framework. In contrast to previous theoretical studies, we allow for repeated interaction among the retailers and heterogeneity in their sales capacities. Besides that, the selection of the form of the CC is endogeneized. The retailers choose among a wide range of CC types - including the conventional ones such as the MCC and the BCCs with lump sum refunds. Several common statements about the collusive (in)efficacy of CCs cannot be upheld in our framework. We show that in the absence of hassle costs, MCCs might induce collusion in homogeneous markets even if they are adopted only by few retailers. If hassle and implementation costs are mild, collusion can be enforced by BCCs with lump sum refunds. Remarkably, these fundings hold for any reasonable rationing rule. However, a complete specification of all collusive CCs is in general impossible without any further reference to the underlying rationing rule.
The whole is greater than the sum of its parts – pricing pressure indices for mergers of vertically integrated firms
(2018) Trost, Michael
The paper analyzes gross upward pricing pressure indices called iGUPPI to assess the effects of a merger between vertically integrated firms where in the downstream market also independent rivals are active. Such indices could be used e.g. to screen mergers between mobile network operators which compete with mobile virtual network operators in the downstream retail market. It is shown that the iGUPPI for the downstream market corresponds to the sum of two well-known upward pricing pressure indices, the GUPPI concept of Salop/Moresi (2009) and the vGUPPI concept of Moresi/Salop (2013). Such a simple decomposition however does not hold for the upstream market a priori. Here, additional effects arise which are not included by the two concepts. Further assumptions on the price reactions of the downstream divisions to increases in the input prices are imposed so that the iGUPPI for the upstream market allows for a decomposition into an upstream market version of the GUPPI and the vGUPPI.
Unraveling the spreading pattern of collusively effectivecompetition clauses
(2022) Trost, Michael
Meanwhile, the Industrial Organization literature gives several reasons why retailers adopt competition clauses (CCs) such as price matching or price beating guarantees. The motivations underlying the CCs might affect their forms and spread. In this paper, we unravel the spreading pattern of CCs in markets where they are used as a device to facilitate tacit collusion. It turns out that in homogeneous markets with capacity-constrained retailers, the retailers with the largest capacities are most inclined to adopt CCs. Our finding is in line with results of earlier studies on the formation of price leadership, which suggest that the retailers with the largest capacities take on the leadership position. On the other side, we find that in some market instances, retailers have to resort to CCs of non-conventional forms (i.e., of forms uncommon in real commercial life) to induce the most robust collusion. However, it turns out that this peculiar finding can be resolved for markets with additional characteristics. For example, if there exist market dominant retailers or the residual market demand is specified by efficient rationing, the most resilient collusion can also be enforced by CCs of conventional forms.