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on Industrial Competition |
| By: | Éric Darmon (EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique); Thomas Le Texier (CREM - Centre de recherche en économie et management - UNICAEN - Université de Caen Normandie - NU - Normandie Université - UR - Université de Rennes - CNRS - Centre National de la Recherche Scientifique); Zhiwen Li (Southeast University [Jiangsu]); Thierry Pénard (CREM - Centre de recherche en économie et management - UNICAEN - Université de Caen Normandie - NU - Normandie Université - UR - Université de Rennes - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | Antitrust authorities are concerned with the dominant market position of Tech Giants such as Google, Meta, or Amazon. These digital conglomerates are characterized by platform-based business models and multimarket contact (MMC). In traditional one-sided markets, theory and empirical evidence show that MMC tends to relax competition. In this paper, we revisit this result in the context of platform competition with competitive bottleneck and cross-market externalities, and provide new insights into the impact of MMC on platform competition. In this context, when platforms charge the two groups of users (bilateral pricing), we find that MMC always decreases the profitability of platforms regardless of the nature and magnitude of cross-market externalities. Then we consider the case in which platforms can only charge one group of users (unilateral pricing). When platforms charge the side on which they are not directly competing for users (i.e. the side that is not the competitive bottleneck), MMC may relax competition only if cross-group externalities and cross-market externalities are both sufficiently small. From a competition policy perspective, our paper provides insights into how antitrust authorities should review conglomerate mergers in digital markets and assesses the effects of the diversification strategies of digital platforms in the context of cross-market externalities and competitive bottleneck. |
| Keywords: | Two-sided markets, Platform competition, Digital markets, Multimarket contact, Cross-market externalities, Competitive bottleneck, Competition policy |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05107385 |
| By: | Sindri Engilbertsson (University of Amsterdam); Sander Onderstal (University of Amsterdam and Tinbergen Institute); Leonard Treuren (KU Leuven) |
| Abstract: | Competition authorities impose substantial penalties on firms engaging in illegal price-fixing. We examine how basing cartel fines on either revenue, profit, or price overcharge influences cartel and market prices, as well as cartel incidence and stability. In an infinitely repeated Bertrand oligopoly game, we show that revenue-based fines incentivize firms to charge prices above the monopoly price, whereas only overcharge-based fines encourage prices below the monopoly price. Cartels are stable for a smaller range of discount factors when fines are based on overcharges rather than other bases. We test these predictions in a laboratory experiment where subjects can form cartels, which allows them to discuss pricing at the risk of being detected and fined. By equalizing expected fines across treatments, we isolate the effect of the fine's base. We find that market prices are lowest under overcharge-based fines and highest under revenue-based fines. Variation in market prices across treatments is fully driven by cartel prices. While these results align with the theoretical predictions, cartel incidence remains unchanged across regimes. Our results suggest competition authorities could improve enforcement by shifting from revenue-based fines to profit- or overcharge-based fines. |
| Date: | 2025–02–21 |
| URL: | https://d.repec.org/n?u=RePEc:tin:wpaper:20250012 |
| By: | Sampi, James; Vostroknutova, Ekaterina |
| Abstract: | This paper examines the impact of two interventions by Colombia's competition authority to enforce competition in the sugar market on firm performance in downstream sectors. Using an exogenous identification strategy, the analysis finds that following the competition authority’s intervention against collusion in 2015, downstream firms expanded production but did not increase productivity or profitability margins, consistent with the removal of supply constraints imposed by cartelization. In contrast, the 2011 intervention against abuse of dominance increased the profitability margins of downstream firms, without altering production scale or labor intensity, consistent with input price reductions and stable consumer demand. Robustness checks, including propensity score matching, confirm the reliability of these findings. The results show that antitrust enforcement works through different channels, depending on the type of anti-competitive behavior. The results also highlight the importance of targeted and continuous antitrust enforcement in addressing market distortions. |
| Date: | 2025–06–26 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:11155 |
| By: | Jan Malek; Jo Seldeslachts; Reinhilde Veugelers |
| Abstract: | This paper provides empirical evidence on which M&A deals spur innovation, and which stifle it. To do so, we consider not only the product market position of the acquiring firm, but also the position of both target and acquirer in the technology space. Focusing on the antidiabetic drugs market, our dataset tracks the lifecycle and patenting of all individual antidiabetic projects in development between 1997 and 2017. We show that most terminations of acquired projects occur while the projects are still far from product market entry. Nevertheless, a number of these early-stage acquisitions have a positive impact on innovation. These cases arise when incumbents acquire projects close to their own projects in product markets, but only if these projects are also close in technology markets. Those deals are associated with increased subsequent patenting, which is consistent with the exploitation of technological synergies. Our results point to the crucial role of combining both product market and technology market positions in assessing the innovation effects of pharmaceutical M&As. |
| Keywords: | M&As, innovation, R&D, pharmaceutics, technology, novelty, patents |
| JEL: | L41 L65 O31 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:diw:diwwpp:dp2128 |
| By: | Conteduca, Francesco Paolo; Panon, Ludovic |
| Abstract: | Can firm-level markup adjustments affect the aggregate cost of large, localized shocks? Using firm-level data from Italy, we show that natural disasters lead to a persistent decline in markups among affected manufacturing firms, especially for high-productivity ones. We implement an oligopolistic competition model with idiosyncratic shocks directly on firm-level data and invert it to recover productivity for firms impacted by the 2012 Northern Italy earthquake. We then quantify how markup adjustments shape aggregate manufacturing productivity and welfare. Our baseline results suggest that markup changes amplified the aggregate productivity and welfare losses of the earthquake by approximately 20%. |
| Keywords: | Natural Disasters, Markups, Oligopolistic Competition, Aggregate Productivity, Misallocation, Firm Heterogeneity |
| JEL: | D22 D43 O47 Q54 |
| Date: | 2024–12–17 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:125324 |
| By: | Barigozzi, Francesca; Cremer, Helmuth; Canta, Chiara |
| Abstract: | This paper studies how firms’ ownership choices and workers’ intrinsic motivation jointly shape service quality and market outcomes in labor-intensive, mission-driven sectors. Two organizations first choose whether to operate as standard for-profit or as mission-oriented firms, and then compete in both the labor and the user markets. Mission-oriented firms have higher unit costs but attract better-motivated workers. Service quality is endogenously determined through the sorting of intrinsically motivated workers and depends on the firm’s ownership type. We show that all market structures—standard, mission-oriented, or mixed— can arise in equilibrium, and that mixed structures can be Pareto superior by efficiently allocating the most motivated workers to the mission-oriented firm while preserving the cost advantage of the other firm. While equilibrium outcomes generally diverge from the social optimum due to externalities and lack of coordination, they are both driven by the trade-off between cost-efficiency and motivation. The model helps explain the coexistence of heterogeneous ownership structures observed in some sectors—such as the nursing homes sector—and identifies conditions under which such diversity is welfare-enhancing. |
| Keywords: | mission-driven sectors; mission-oriented firms; workers’ motivation; endogenous; market structure; welfare. |
| JEL: | J21 L13 L31 |
| Date: | 2025–07–18 |
| URL: | https://d.repec.org/n?u=RePEc:tse:wpaper:130749 |
| By: | Graef, Inge (Tilburg University, School of Economics and Management); Laitenberger, Ulrich (Tilburg University, School of Economics and Management); Prüfer, Jens (Tilburg University, School of Economics and Management) |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:tiu:tiutis:c56b0190-4900-4f47-b5ee-4d5dc0f9bc9d |
| By: | Hugo Molina (UMR PSAE - Paris-Saclay Applied Economics - AgroParisTech - Université Paris-Saclay - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement) |
| Abstract: | La grande distribution occupe une place centrale dans l'économie française, représentant 65 % des ventes de produits alimentaires en 2018, soit un marché d'environ 126 milliards d'euros. Ce secteur est dominé par un nombre restreint d'acteurs, tels que Leclerc, Carrefour, Intermarché, Groupe U, Auchan, Lidl, Casino, Aldi et Cora-Louis Delhaize, qui détiennent ensemble plus de 96 % du marché en valeur. La formation récente de nouvelles centrales d'achat ainsi que d'importantes opérations de concentration, comme le rachat de plus de 400 hypermarchés et supermarchés Casino par Intermarché, Auchan et Carrefour en 2024, ou l'acquisition des magasins Cora et Match par Carrefour la même année, ont suscité d'importantes préoccupations. Plus précisément, l'enjeu est d'évaluer les effets de cette concentration croissante du secteur sur les prix, les rapports de force dans les négociations avec les industriels, et la répartition de la valeur entre distributeurs, producteurs et consommateurs. En nous appuyant sur la littérature économique, nous apportons différents éclairages sur les effets économiques des deux principales formes de concentration : les centrales d'achat et les fusions entre enseignes de distribution. |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05128727 |
| By: | Mulyukova, Alina |
| Abstract: | This paper investigates the impact of services sector liberalization on product innovation of downstream manufacturing firms. Leveraging firm-product panel data from India and employing a shift-share research design, I find that services liberalization significantly increases firms' product portfolio. Allowing foreign investments in the banking sector decreases firm's credit-constraint and increases the amount of interest payments on short-term loans. This shows that services liberalization reduces firms' fixed costs of product innovation. Firms diversify into input-similar industries which changes the distribution of sales across products with the core product experiencing the most pronounced decline in the sales share. |
| Keywords: | Product mix, services liberalization, India |
| JEL: | F10 F61 D22 L8 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:ifwkwp:320414 |
| By: | Emilio Colombo; Luca Michele Portoghese; Patrizio Tirelli |
| Abstract: | What is the relationship between internet (broadband) connectivity shocks, markups, and fixed costs? We address the issue by exploiting a large dataset based on balance sheets of European firms. Broadband shocks raise sales, profits-to-sales ratios, fixed costs, and markups of firms that are large, are more efficient (high TFP) and already bear large fixed costs. For these firms, the shock therefore is expansionary, and firms exploit it to raise profit margins. Firms at the opposite tails of the distribution exhibit a substantially muted response. Our results hint that the shock lowers the cost of entering new markets, inducing some firms to bear larger fixed costs as part of their profit-maximizing strategy. |
| JEL: | L9 L16 L25 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:dis:wpaper:dis2505 |
| By: | Friberg, Richard (Dept. of Economics, Stockholm School of Economics); Halseth, Emil M. S. (Dept. of Economics, Norwegian School of Economics and Business Administration); Steen, Frode (Dept. of Economics, Norwegian School of Economics and Business Administration); Ulsaker, Simen A. (Faculty of Social Sciences, OsloMet) |
| Abstract: | This paper examines how consumer price knowledge affects shopping behavior and the prices consumers pay in grocery markets. We combine survey-based price recall data from over 2000 Norwegian households — yielding over 70 000 price recalls across two grocery chains and 24 products—with 18 months of of linked individual-level transaction histories. Better-informed consumers—those who recall prices more accurately—pay lower prices by timing purchases to coincide with sales. A 10 percentage point increase in price knowledge (approximately the interquartile range) is associated with a 1:3 percentage point reduction in prices paid. Our results provide direct support for the central mechanism in Varian’s (1980) model of sales: that informed consumers pay lower prices by exploiting temporary discounts. We also find that consumers who are more active in seeking information about prices have higher price knowledge. Taken together, and with the caveat that we are only considering consumer responses here, our results suggest that policies or tools that help consumers learn about prices may be effective in enhancing competition. Our findings also speak to a marketing literature that seeks to measure and explain consumer price knowledge. By linking survey data to actual shopping behavior, we contribute to this literature by demonstrating that shopping behavior and attitudes are stronger predictors of price knowledge than demographic characteristics. |
| Keywords: | Price Knowledge; Price learning effort; Price Competition; Sales Utilization; Search costs |
| JEL: | D83 L10 L66 |
| Date: | 2025–07–14 |
| URL: | https://d.repec.org/n?u=RePEc:hhs:nhheco:2025_015 |
| By: | Ivaldi, Marc; Cherbonnier, Frédéric; Muller-Vibes, Catherine; Van Der Straeten, Karine |
| Abstract: | This study estimates the impact of a carbon tax on welfare, considering modal shifts to less carbon-intensive transport, as well as its effects on environmental and fiscal externalities. We calibrate a modal competition model using logit demand functions for a specific long-distance connection in France and simulate the introduction of a Pigouvian tax. Our key findings are: First, a €190/tCO2 carbon tax is nearly welfare-neutral but significantly detrimental to consumer surplus; Second, rail price regulation has the side effect of reducing greenhouse gas emissions by subsidizing the cleanest transport mode; Third, the widespread adoption of electric vehicles enhances overall welfare without significantly harming consumer surplus. |
| Keywords: | Modal competition; environmental externalities; carbon tax; high-speed rail |
| JEL: | D43 L91 R40 Q51 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:tse:wpaper:130752 |
| By: | Leon, Giovanny; Gonzalez-Pier, Eduardo; Kanavos, Panos; Ruiz de Castilla, Eva Maria; Machinicki, Gerardo |
| Abstract: | Objectives: The World Health Organization provides 10 specific guidelines for managing the prices of pharmaceutical products. Many of those are widely known and used such as reference pricing, value-based pricing, price transparency, and tendering. Less attention and knowledge is concentrated in markup regulation across the pharmaceutical supply chain and distribution and in tax exemptions or reductions. This article quantifies the impact of these price components in the Latin American (LatAm) region and places the findings in the context of economic theory and international policy experiences. Methods: 2020 retail pharmaceutical sales data from 8 major LatAm markets covered in the IQVIA database were decomposed into ex-factory, distributor markups, and taxes using price build up information and the Price Decipher Methodology developed by the Novartis Global Pricing Governance and Negotiation team. The findings were reviewed by an international panel representing academia, health policy, health economics, patient, and industry. Results: The ex-factory market value of the analyzed markets was $49 billion. Distribution markups added $20 billion and taxes a further $10.5 billion. This represented a 63% increase over ex-factory prices, considered high if compared with 24% for an international benchmark of 35 ex-LatAm countries. Reducing markups for these LatAm countries to 24% would represent up to $19 billion in savings for payers and patients. Conclusions: There is potential for significant cost reductions associated with tax and distribution markup refinements in the LatAm retail pharmaceutical market. National policies should be informed by additional context-specific research for effective implementation. |
| Keywords: | ex-factory prices; national pharmaceutical policy; pharmaceutical distribution; retail prices; taxation of prescription pharmaceuticals |
| JEL: | H20 |
| Date: | 2024–11–01 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:124210 |
| By: | Paulina Restrepo-Echavarria |
| Abstract: | Why do some firms seem to pay workers less than what their labor is worth? An economic model gives insights into how wage-setting power arises in modern labor markets. |
| Keywords: | labor markets; wages; firms; workers |
| Date: | 2025–07–17 |
| URL: | https://d.repec.org/n?u=RePEc:fip:l00001:101337 |
| By: | Daniel Levy (RCEA - Rimini Center for Economic Analysis, Emory University [Atlanta, GA], Bar-Ilan University [Israël], ISET - International School of Economics at TSU, ICEA - International Centre for Economic Analysis); Haipeng Allan Chen (University of Iowa [Iowa City]); Sourav Ray (University of Guelph [Guelf, Ontario, Canada]); Elliot Charette (UMN - University of Minnesota System); Xiao Ling (Central Connecticut State University); Weihong Zhao (UMD - University of Maryland [College Park] - University System of Maryland); Mark Bergen (UMN - University of Minnesota System); Avichai Snir (Bar-Ilan University [Israël]) |
| Abstract: | Studies of micro-level price datasets find more frequent small price increases than decreases, which can be explained by consumer inattention because time-constrained shoppers might ignore small price changes. Recent empirical studies of the link between shopping behavior and price attention over the business cycle find that consumers are more (less) attentive to prices during economic downturns (booms). These two sets of findings have a testable implication: the asymmetry in small price changes should vary over the business cycle-it should diminish during recessions and strengthen during expansions. We test this prediction using a large US store-level dataset with more than 98 million weekly price observations for the years 1989-1997, which includes an 8-month recession period, as defined by the NBER. We compare price adjustments between periods of recession (high unemployment) and expansion (low unemployment). Focusing on small price changes, we find, consistent with our hypothesis, that there is a greater asymmetry in small price changes during periods of low unemployment compared to the periods of high unemployment, implying that firms' price-setting behavior varies over the business cycle. |
| Keywords: | Asymmetric Price Adjustment, Small Price Changes, Consumer Inattention, Price Rigidity, Sticky Prices, Business Cycles and Aggregate Fluctuation, Unemployment Models, Recessions, Expansions |
| Date: | 2025–06–11 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05109808 |
| By: | Jade Leroueil (GRANEM - Groupe de Recherche Angevin en Economie et Management - UA - Université d'Angers - Institut Agro Rennes Angers - Institut Agro - Institut national d'enseignement supérieur pour l'agriculture, l'alimentation et l'environnement) |
| Abstract: | Technological development consumes energy, depletes natural resources and generates significant carbon emissions and environmental damage (IPCC, 2023). For this reason, and in view of an effective ecological transition, it is essential that industry leaders commit themselves and steer their companies towards a development that is consistent with the challenges of sobriety. Based on qualitative research, this article aims to shed light on the contradictions between environmental objectives and sector managers' "cowboy" vision, particularly regarding their view of competition. Interviews reveal a Darwinian approach to competition, with the underlying idea that there is no monopoly. A logic of conquest, of "always more, " drives this vision. This article discusses the role of democratic institutions and legal frameworks in changing tech leaders' attitudes from a Wild West vision of unlimited resources to one of responsibility to society, especially in facing environmental challenges (Boulding 1966). |
| Keywords: | climate change, antitrust policy, ideology, institutional economics |
| Date: | 2025–05–29 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05146308 |