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on Industrial Competition |
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Issue of 2025–07–14
twenty-one papers chosen by Russell Pittman, United States Department of Justice |
| By: | Bos, Iwan; Cesi, Berardino; Marini, Marco A. |
| Abstract: | This note examines cartel stability in a vertically differentiated duopoly with quality-anchored buyers. It is shown that such buyers are a facilitating factor for collusion. |
| Keywords: | Captive Consumers, Cartel Stability, Collusion, Quality-Anchored Buyers, Ver- tical Product Differentiation. |
| JEL: | C7 C71 C72 D4 D43 L1 L13 |
| Date: | 2025–06–20 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:125064 |
| By: | Jihwan Do (Yonsei University); Nicolas Riquelme (Universidad de los Andes) |
| Abstract: | We revisit Cournot competition with asymmetric demand information by introducing a common input supplier. We characterize a unique equilibrium where information spills over through screening and signaling in vertical contracting. The equilibrium outcomes either coincide with those under complete information or involve quantity distortions. Compared to the independent-supplier case, the presence of the common supplier enhances both consumer and producer surplus under mild downstream competition. Under intense competition, producer surplus can decline, although consumer surplus may still increase. Our findings reveal informational efficiency gains of upstream mergers and the possibility of a welfare improvement even when direct efficiency gains are absent. |
| Keywords: | Cournot competition; Asymmetric information; Common agency; Information transmission; Vertical contracting; Screening; Signaling. |
| JEL: | D82 D86 L13 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:yon:wpaper:2025rwp-251 |
| By: | Jihwan Do (Yonsei University); Jeremy Kettering (Alvernia University) |
| Abstract: | We examine a model of imperfect competition characterized by endogenous entry, where two firms decide whether to enter the market or remain out and subsequently determine their output upon entry. A key aspect of the model is the presence of uncertain market demand, with one firm possessing an informational advantage over its competitor. It is shown that in the unique equilibrium with endogenous entry, informational asymmetry distorts the entry incentives for the better-informed firm, potentially causing it to earn lower profits than its rival. Moreover, market entry may be excessive from a consumer surplus viewpoint, and more precise information can have non-monotonic effects on welfare due to the entry distortions. Within this framework, we also analyze various regulatory measures and policies aimed at enhancing consumer welfare. |
| Keywords: | Oligopoly; Market entry; Asymmetric information; Competition policy; Strategic disadvantage of information |
| JEL: | D43 D82 L13 L50 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:yon:wpaper:2025rwp-253 |
| By: | Giammario Impullitti; Pontus Rendahl |
| Abstract: | Over the past four decades, the United States has seen rising market power, slowing productivity growth and deepening wealth inequality. Giammario Impullitti and Pontus Rendahl explore how declining competition may be the common culprit. |
| Keywords: | market power, growth, heterogeneous agents, wealth distribution |
| Date: | 2025–06–20 |
| URL: | https://d.repec.org/n?u=RePEc:cep:cepcnp:702 |
| By: | Qiuyu Lu (Ph.D. in Economics, Graduate School of Economics, the University of Osaka); Noriaki Matsushima (Osaka School of International Public Policy, the University of Osaka); Shiva Shekhar (Tilburg School of Economics and Management, Tilburg University) |
| Abstract: | This study explores the welfare impact of personalized pricing for consumers in a duopolistic two-sided market, with consumers single-homing and developers affiliating with a platform according to their outside option. Personalized pricing, which is private in nature, cannot influence expectations regarding the network sizes, inducing the platforms to offer lower participation fees for developers. Those lower fees increase network benefits for consumers, allowing the platforms to exploit these benefits through personalized pricing. Personalized prices are higher when the network value for developers is high, benefiting competing platforms at the expense of consumers. These findings offer policy insights on personalized pricing. |
| Keywords: | Personalized pricing, Uniform prices, Two-sided market, Content developers |
| JEL: | L13 D43 M21 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:osp:wpaper:25e003 |
| By: | Rik Rozendaal |
| Abstract: | This paper studies the relationship between climate policy, market power and innovation. Using data on patenting and firms' balance sheets, I document that firms with a higher degree of market power are, on average, more invested in dirty technologies than their direct competitors. I then develop a model of directed technical change with strategic innovation incentives, incorporating the empirical evidence. A carbon tax affects market power and both the intensity and the direction of innovation. In the calibrated model, a carbon tax lowers aggregate markups and increases clean innovation while also increasing dirty innovation by some firms. |
| Keywords: | climate policy, market power, innovation, directed technical change |
| JEL: | O30 O44 Q55 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11938 |
| By: | Jihwan Do (Yonsei University); Jeanine Miklos-Thal (University of Rochester) |
| Abstract: | The cloud services industry, which is currently dominated by a few large providers, has come under scrutiny from antitrust authorities worldwide. One concern is that "egress fees"—charges for transferring data out of a provider's cloud-could harm competition and welfare by discouraging multi-clouding, whereby a user combines services from several providers. Motivated by this policy concern, we analyze the effects of banning price discrimination against multi-stop shoppers in a market where multi-product firms sell complementary goods to buyers with elastic demands, and multi-stop shoppers impose higher service costs than one-stop shoppers. We find that if buyers are locked into a specific product combination, then a ban on price discrimination against multi-stop shoppers raises social welfare for a wide range of demand functions. If product choices are endogenous and buyers' product preferences are weak, however, then a ban on price discrimination tends to harm social welfare. |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:yon:wpaper:2025rwp-250 |
| By: | Rabah Amir (University of Iowa); Adriana Gama (El Colegio de Mexico) |
| Abstract: | This paper provides a thorough characterization of the properties of Cournot’s complementary monopoly model (or oligopoly with perfect complements) in a general setting, including existence, uniqueness and the comparative statics effects of entry. As such, this serves to unify various results from the extant literature that have typically been derived with limited generality. In addition, several studies have suggested that Cournot’s complementary monopoly model is the dual problem to the standard Cournot oligopoly model. This result crucially relies on the assumption that the firms have no production costs. This paper shows that if the production costs of the firms are different from zero, the nice duality between these two oligopoly settings breaks down. One implication of this breakdown is that, in contrast to the Cournot model, oligopoly with perfect complements can be a game of strategic complements in a global sense even in the presence of production costs. |
| Keywords: | oligopoly with perfect complements, price competition, horizontal integration, supermodularity |
| JEL: | C72 D43 L13 |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:emx:ceedoc:2025-04 |
| By: | McLaughlin, Eoin; Moro, Mirko; de Vries, Frans P. |
| Abstract: | The regulatory shift by competition and antitrust authorities, allowing limited industry collusion in sustainability-related investments to align markets with broader environmental and social objectives, suggests a re-evaluation of competition as a mechanism for promoting collective welfare. Drawing on Adam Smith's classical works as presented in The Wealth of Nations and The Theory of Moral Sentiments, this paper explores this issue through a historical lens while at the same time showing how this innately connects to the established literature on sustainable development, in particular justice and inclusive wealth. Combined, we discuss the role of modern competition policy in adjudicating and evaluating trade-offs in societies' overall welfare function that comprises negative externalities and natural capital. |
| Keywords: | Wealth of Nations, Justice, Investment collusion, Antitrust, Sustainable development |
| JEL: | B21 D63 K21 L41 Q01 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:hwuaef:320415 |
| By: | James R. Boohaker |
| Abstract: | When competitors compete in more than one market they are said to have multi-market contact (MMC). Firms with MMC are more likely collude to avoid cross-market retaliation. This paper investigates the impact of MMC among U.S. battery exporters on the prices they set in foreign markets using confidential export transaction data provided by the U.S. Census Bureau. The ability of firms to exploit MMC for collusive gain in international markets can be both detrimental to import-dependent consumers and harder for anti-trust authorities to detect. Motivated by litigation finding evidence of collusive behavior by multi-national battery manufacturers, MMC has an upward effect on export prices set by U.S. battery exporters. These results are robust across different panel regression specifications using different measures of MMC. |
| Keywords: | multi-market contact, oligopoly, export prices, collusion |
| JEL: | D43 F12 F13 F14 L13 L14 L40 L63 |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:cen:wpaper:25-32 |
| By: | Durrmeyer, Isis; D'Haultfoeuille, Xavier; Fournel, Jean-François; Iaria, Alessandro |
| Abstract: | We investigate the welfare consequences of introducing an online distribution channel in the French car industry, where most sales take place in person through car dealers relying on third-degree price discrimination. We estimate a structural model of demand with unobserved third-degree price discrimination and transportation costs related to visiting car dealers. In counterfactuals, we introduce an online distribution channel in which prices are uniform and consumers benefit from lower transportation costs. When both distribution channels are available, firms charge low online prices to attract internet-savvy consumers online, while continuing to price discriminate the less internet-savvy consumers in person. The online channel is profitable for firms, and the more it reduces transportation costs, the more profitable it is. However, the costs and benefits of the online channel are unevenly distributed among consumers, with older, wealthier, and internet-savvy consumers obtaining most of the benefits. |
| Date: | 2025–07–08 |
| URL: | https://d.repec.org/n?u=RePEc:tse:wpaper:130672 |
| By: | Philipp Strack (Yale University); Kai Hao Yang (Yale University) |
| Abstract: | A monopolist offers personalized prices to consumers with unit demand, heterogeneous values, and idiosyncratic costs, who differ in a protected characteristic, such as race or gender. The seller is subject to a non-discrimination constraint: consumers with the same cost, but different characteristics must face identical prices. Such constraints arise in regulated markets like credit or insurance. The setting reduces to an optimal transport, and we characterize the optimal pricing rule. Under this rule, consumers may retain surplus, and either group may benefit. Strengthening the constraint to cover transaction prices redistributes surplus, harming the low-value group and benefiting the high-value group. |
| Date: | 2025–06–26 |
| URL: | https://d.repec.org/n?u=RePEc:cwl:cwldpp:2447 |
| By: | Juan Ortner (Boston University); Sylvain Chassang (Princeton University); Kei Kawai (University of California Berkeley and& University of Tokyo); Jun Nakabayashi (Kyoto University) |
| Abstract: | Auctioneers suspecting bidder collusion often lack the formal evidence needed for legal recourse. A practical alternative is to design auctions that hinder collusion. Since Abreu et al. (1986), economic theory has emphasized imperfect monitoring as a constraint on collusion, but evidence remains scarce on whether: (i) information frictions meaningfully limit real-world collusion; and (ii) auctioneers can effectively exploit these frictions. Indeed, transparency concerns prevent the introduction of explicit randomness in auction design. We make progress on this issue by studying the impact of subjective scoring in auctions run by Japan’s Ministry of Land, Infrastructure, and Transportation. The adoption of scoring auctions significantly reduced winning bids in ways inconsistent with competition. Model-based inference suggests that the cartel’s dynamic obedience constraints were binding and tightened by imperfect monitoring. Subjective scoring can successfully leverage imperfect monitoring frictions to reduce the scope of collusion. |
| Keywords: | procurement, scoring, cartel discipline, imperfect monitoring |
| JEL: | D44 |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:pri:cepsud:342 |
| By: | Borys Grochulski; Zhu Wang |
| Abstract: | We build a model to explain the 6 percent real estate broker commission observed in the U.S. In our model, brokers operate a two-sided platform for trading homes. Using small-value handouts and exclusive buyer representation contracts, the platform captures the vast majority of buyers, thereby gaining a monopolist's position vis-á-vis the sellers. Home sellers' only outside option is to move while retaining ownership of their homes. Absentee homeownership, however, entails costs. As a monopolist, the platform sets its commission fee equal to the costs of absentee ownership. With these costs proportional to the home's value, the platform's optimal commission rate is the same for all homes, and remains insensitive to fluctuations in home valuations, while the platform's profit is pro-cyclical. The commission rate is also insensitive to reductions in underlying search costs because the seller's outside option does not involve selling the home. The model implies that commission rates should be higher where price rent ratios are higher—a prediction we verify in the data. We also consider optimal regulation: a ban on exclusive buyer representation contracts implements a second-best optimal allocation, in which the platform charges lower commissions that are sensitive to both home valuations and search costs. |
| Keywords: | real estate brokers; broker commission; two-sided platforms; monopolist pricing |
| JEL: | D42 L12 L85 |
| Date: | 2025–06–25 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedrwp:101191 |
| By: | Bukvić, Rajko |
| Abstract: | Serbian abstract: Еквивалентни број као реципрочна вредност Хиршман-Херфиндаловог индекса концентрације полазна је основа за формулисање индекса монополисаности тржишта, који показује нормализовану разлику између стварног и ефективног броја учесника на тржишту. Теоријско разматрање овог индекса илустровано је примером обрачуна степена монополисаности тржишта осигурања у Србији (без Косова и Метохије) у периоду 2010–2022. English abstract: The numberс-equivalent as the reciprocal value of the Hirschman-Herfindahl concentration index is the starting point for formulating the market monopolization index, which shows the normalized difference between the real and effective number of market participants. The theoretical consideration of this index is illustrated by an example of calculating the degree of monopolization of the insurance market in Serbia (without Kosovo and Metohija) in the period 2010-2022. |
| Keywords: | еквивалентни број, монополисаност тржишта, Хиршман-Херфиндалов индекс, Србија, тржиште осигурања, number-equivalent, market monopolization, Hirschman-Herfindahl index, Serbia, insurance market |
| JEL: | C38 D43 G22 L11 L84 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:123110 |
| By: | Heski Bar-Isaac; Rahul Deb; Matthew Mitchell |
| Abstract: | We introduce a model of content moderation for sale, where a platform can channel attention in two ways: direct steering that makes content visible to consumers and certification that controls what consumers know about the content. The platform optimally price discriminates using both instruments. Content from higher willingness-to-pay providers enjoys higher quality certification and more views. The platform cross-subsidizes content: the same certificate is assigned to content from low willingness-to-pay providers that appeals to consumers and content from higher willingness-to-pay providers that does not. Cross-subsidization can benefit consumers by making content more diverse; regulation enforcing accurate certification may be harmful. |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2506.12604 |
| By: | Nils H. Lehr (International Monetary Fund); Pascual Restrepo (Yale University) |
| Abstract: | Leading AI firms claim to prioritize social welfare. How should firms with a social mandate price and deploy AI? We derive pricing formulas that depart from profit maximization by incorporating incentives to enhance welfare and reduce labor disruptions. Using US data, we evaluate several scenarios. A welfarist firm that values both profit and welfare should price closer to marginal cost, as efficiency gains outweigh distributional concerns. A conservative firm focused on labormarket stability should price above the profit-maximizing level in the short run, especially when its AI may displace low-income workers. Overall, socially minded firms face a trade-off between expanding access to AI and the resulting loss in profits and labor market risks. |
| Date: | 2025–05–20 |
| URL: | https://d.repec.org/n?u=RePEc:cwl:cwldpp:2445 |
| By: | Kyle Herkenhoff; Josh Lerner; Gordon M. Phillips; Francisca Rebelo; Benjamin Sampson |
| Abstract: | We measure the real effects of private equity buyouts on worker outcomes by building a new database that links transactions to matched employer-employee data in the United States. To guide our empirical analysis, we derive testable implications from three theories in which private equity managers alter worker outcomes: (1) exertion of monopsony power in concentrated markets, (2) breach of implicit contracts with targeted groups of workers, including managers and top earners, and (3) efficient reallocation of workers across plants. We do not find any evidence that private equity-backed firms vary wages and employment based on local labor market power proxies. Wage losses are also very similar for managers and top earners. Instead, we find strong evidence that private equity managers downsize less productive plants relative to productive plants while simultaneously reallocating high-wage workers to more productive plants. We conclude that post-buyout employment and wage dynamics are consistent with professional investors providing incentives to increase productivity and monitor the companies in which they invest. |
| Keywords: | Private equity, employment, wages, monopsony, market power, productivity |
| JEL: | G20 G34 L1 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:cen:wpaper:25-37 |
| By: | Jihwan Do (Yonsei University); Lining Han (Wuhan University); Xiaoxi Li (Wuhan University) |
| Abstract: | This paper studies the monopoly data seller's problem when users are connected through an information-sharing network. When users' prior information is sufficiently noisy, the seller's optimal strategy targets a maximum independent set - the largest subset of users with no direct links. In this regime, data precision falls as the network becomes denser, yet we show - using the Caro–Wei bound, a classical result in graph theory - that it remains strictly above the socially efficient level in most networks. Further, any core-periphery network is Pareto-efficient, and any Pareto-efficient network exhibits a quasi-core-periphery structure. When users can coordinate network formation, the resulting equilibrium network also takes this form. Finally, we quantify the value of network information by comparing the seller profit to that with a misbelief. |
| Keywords: | Information markets, information-sharing network, monopolistic pricing, maximum independence set |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:yon:wpaper:2025rwp-249 |
| By: | Thanawat Sornwanee |
| Abstract: | We introduce a new microeconomics foundation of a specific type of competitive market equilibrium that can be used to study several markets with information asymmetry such as commodity market, credit market, and insurance market. |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2505.08425 |
| By: | Crémer, Jacques |
| Date: | 2025–07–02 |
| URL: | https://d.repec.org/n?u=RePEc:tse:wpaper:130643 |