Softening Competition by Enhancing Entry: An Example from the Banking Industry

We show that competing firms relax overall competition by lowering future barriers to entry. We illustrate our findings in a two-period model with adverse selection where banks strategically commit to disclose borrower information. By doing this, they invite rivals to enter their market. Disclosure of borrower information increases an entrant’s second-period profits. This dampens competition for serving the first-period marketbarriers to entry, asymmetric information, switching costs, banking competition.

Opt In Versus Opt Out: A Free-Entry Analysis of Privacy Policies

There is much debate on how the flow of information between firms should be organized, and whether existing privacy laws should be amended. We offer a welfare comparison of the three main current policies towards consumer privacy — anonymity, opt in, and opt out — within a two-period model of localized competition. We show that when consumers find it too costly to opt in or opt out, privacy policies shape firms’ ability to collect and use customer information, and affect their pricing strategy and entry decision differently. The free-entry analysis reveals that social welfare is non-monotonic in the degree of privacy protection. Opt out is the socially preferred privacy policy while opt in socially underperforms anonymity. Consumers never opt out and choose to opt in only when its cost is sufficiently low. Only when opting in is cost-free do the opt-in and opt-out privacy policies coincide.privacy, price discrimination, monopolistic competition, welfare

Sequential reciprocity in two-player, two-stage games: An experimental analysis.

We experimentally test Dufwenberg and Kirchsteiger’s (2004) theory of sequential reciprocity in a sequential prisoner’s dilemma (SPD) and a mini-ultimatum game (MUG). Data on behavior and first- and second-order beliefs allow us to classify each subject’s behavior as a material best response, a reciprocity best response, both, or none. We found that in both games the behavior of about 80% of the firstmovers was a material best response, a reciprocity best response, or both. The remaining 20% of first-movers almost always made choices that were “too kind” according to the theory of reciprocity. Secondmover behavior, in both games, was fully in line with the predictions of the theory. The average behavior and beliefs across subjects were compatible with a sequential reciprocity equilibrium in the SPD but not in the MUG. We also found first- and second-order beliefs to be unbiased in the SPD and nearly unbiased in the MUG.Sequential reciprocity; Sequential prisoner’s dilemma; Mini-ultimatum game;

Softening Competition by Enhancing Entry: An Example from the Banking Industry

We show that competing firms relax overall competition by lowering future barriers to entry. We illustrate our findings in a two-period model with adverse selection where banks strategically commit to disclose borrower information. By doing this, they invite rivals to enter their market. Disclosure of borrower information increases an entrant's second-period profits. This dampens competition for serving the first-period market.barriers to entry; asymmetric information; switching costs; banking competition

Enhancing Market Power by Reducing Switching Costs

Competing firms often have the possibility to jointly determine the magnitude of consumers’ switching costs. Examples include compatibility decisions and the option of introducing number portability in telecom and banking. We put forward a model where firms jointly decide to reduce switching costs before competing in prices during two periods. We demonstrate that the outcome hinges crucially on how the joint action reduces consumers’ switching costs. In particular, firms will enhance their market power if they implementmeasures that reduce consumers’ switching costs by a lump sum. Conversely, they willpreserve market power by not implementing actions that reduce switching costsproportionally. Hence, when policy makers design consumer protection policies, they should not always adopt a favourable attitude towards efforts by firms to reduce switching costs.switching costs, market power, welfare

Price Discrimination Bans on Dominant Firms

Competition authorities and regulatory agencies sometimes impose pricing restrictions on firms with substantial market power — the “dominant” firms. We analyze the welfare effects of a ban on behaviour-based price discrimination in a two-period setting where the market displays a competitive and a sheltered segment. A ban on “higher-prices-to-sheltered-consumers” decreases prices in the sheltered segment, relaxes competition in the competitive segment, increases the rival’s profits, and may harm the dominant firm’s profits. We show that a ban on “higher-prices-to-sheltered-consumers” increases the dominant firm’s share of the first-period market. A ban on “lower-prices-to-rival’s-customers” decreases prices in the competitive segment, lowers the rival’s profits, and augments the consumer surplus. In particular, while second-period competition is relaxed by a ban on “lower-prices-to-rival’s-customers”, first-period competition is intensified substantially, which leads to lower prices “on-average” over the two periods. Our findings indicate that a dynamic two-period analysis may lead to conclusions opposite to those drawn from a static one-period analysis.dominant firms, price discrimination, competition policy, regulation

Bertrand competition with an asymmetric no-discrimination constraint.

We study the competitive and welfare consequences when only one firm must commit to uniform pricing while the competitor's pricing policy is left unconstrained. The asymmetric no-discrimination constraint prohibits both behaviour-based price discrimination within the competitive segment and third-degree price discrimination across the monopolistic and competitive segments. We find that an asymmetric no-discrimination constraint only leads to higher profits for the unconstrained firm if the monopolistic segment is large enough. Therefore, a regulatory policy objective of encouraging entry is not served by an asymmetric no-discrimination constraint if the monopolitic segment is small. Only when the monopolistic segment is small and rivalry exists in the competitive segment does the asymmetric no-discrimination constraint enhance welfare.

Entry and Strategic Information Display in Credit Markets

The Riegle-Neal Act in the US and the Economic and Monetary Union in Europe are recent initiatives to stimulate financial integration. These initiatives allow new entrants to "poach" the incumbents' clients by offering them attractive loan offers. We show that these deregulations may be insufficient since asymmetric information seriously hampers the integration of credit markets. Moreover, banks may strategically display some information hindering the scale of entry when asymmetric information is moderate. We also show that voluntary information sharing emerges only when asymmetric information is low.financial integration, banking competition, asymmetric information, barriers to entry

Bertrand Competition with an Asymmetric No-discrimination Constraint. Bruges European Economic Research (BEER) 23/June 2012

Regulators and competition authorities often prevent firms with significant market power or dominant firms from practicing price discrimination. The goal of such an asymmetric no- discrimination constraint is to encourage entry and serve consumers’ interests. This constraint prohibits the firm with significant market power to practice both behaviour-based price discrimination within the competitive segment and third-degree price discrimination across the monopolistic and competitive segments. We find that this constraint hinders entry and reduces welfare when the monopolistic segment is small

A 3-year prospective study on a porcine-derived acellular collagen matrix to re-establish convexity at the buccal aspect of single implants in the molar area : a volumetric analysis

Background: Xenogeneic soft tissue substitutes are currently being investigated as an alternative to subepithelial connective tissue grafts (CTG) with the intention to avoid postoperative morbidity associated with autologous grafting. The aim of the present study was to volumetrically evaluate the effectiveness and mid-long-term stability of a porcine-derived collagen matrix (PDCM) (Mucoderm (R), Botiss gmbh, Berlin, Germany) in increasing soft tissue volume at the buccal aspect of molar implant sites. Methods: Periodontally healthy non-smoking patients with a single tooth gap in the molar area were selected for a prospective case series. All sites had a bucco-oral bone dimension of at least 8 mm and demonstrated a horizontal alveolar defect. A wide diameter implant was placed under the elevated buccal flap and a PDCM was applied. The primary outcome was the linear increase in buccal soft tissue profile (BSP) within a well-defined area of interest. This was performed with designated software (SMOP; Swissmeda AG, Zurich, Switzerland) on the basis of superimposed digitalized study casts taken before surgery (T0), immediately after surgery (T1), at three months (T2), one year (T3) and three years (T4). Secondary outcomes were alveolar process deficiency and clinical parameters. Results: Fourteen out of 15 treated patients attended the three-year re-assessment (four females; mean age 51.4 years). Mean linear increase in BSP at T1 was 1.53 mm (p = 0.001). The PDCM showed substantial resorption at T2 (1.02 mm or 66.7%) (p = 0.001). Thereafter, a 0.66 mm volume gain was observed (p = 0.030), possibly due to the installation of a permanent crown displacing the soft tissues to the buccal aspect. This resulted in a linear increase in BSP of 1.17 mm (76.5%) at T4. Alveolar process deficiency significantly reduced over time (p = 0.004). However, 50% of patients still demonstrated a slight (6/14) or obvious (1/14) alveolar process deficiency at study termination. Implants demonstrated healthy clinical conditions. Conclusions: The PDCM demonstrated marked resorption during the early stages of healing. Due to the matrix thickening the tissues, and the permanent crown displacing the tissues, 76.5% of the initial increase in BSP could be maintained over a three-year period. Half of the patients failed to show perfect soft tissue convexity at the buccal aspect