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on Industrial Competition |
| By: | Frédéric Marty; Thierry Warin |
| Abstract: | This article examines the competitive implications of algorithmic pricing in digital markets. While algorithmic pricing can enhance market efficiency through real-time adjustments, personalized offers, and inventory optimization, it also raises substantial risks, including tacit collusion, discriminatory pricing, market segmentation, and exploitative consumer manipulation. Drawing on theoretical models, simulations, and emerging empirical evidence, the brief explores how algorithmic strategies may lead to supra-competitive prices without explicit coordination, particularly in oligopolistic or data-rich environments. It also highlights how common algorithm providers, shared data sources, and learning dynamics can undermine competition. Special attention is given to the challenges posed by loyalty penalties, ecosystem lock-in, and granular predatory pricing. The paper concludes with a set of policy recommendations emphasizing updated enforcement tools, transparency mechanisms, ex ante regulation for dominant platforms, and a coordinated approach to digital market oversight that balances innovation with consumer protection. Cet article examine les implications concurrentielles de la tarification algorithmique sur les marchés numériques. Si la tarification algorithmique peut améliorer l'efficacité du marché grâce à des ajustements en temps réel, des offres personnalisées et une optimisation des stocks, elle présente également des risques importants, notamment la collusion tacite, la tarification discriminatoire, la segmentation du marché et la manipulation abusive des consommateurs. S'appuyant sur des modèles théoriques, des simulations et des données empiriques émergentes, cet article explore comment les stratégies algorithmiques peuvent conduire à des prix supraconcurrentiels sans coordination explicite, en particulier dans les environnements oligopolistiques ou riches en données. Il souligne également comment les fournisseurs d'algorithmes communs, les sources de données partagées et la dynamique d'apprentissage peuvent nuire à la concurrence. Une attention particulière est accordée aux défis posés par les pénalités de fidélité, le verrouillage de l'écosystème et les prix prédateurs granulaires. L'article conclut par un ensemble de recommandations politiques mettant l'accent sur la mise à jour des outils d'application, les mécanismes de transparence, la réglementation ex ante des plateformes dominantes et une approche coordonnée de la surveillance du marché numérique qui concilie innovation et protection des consommateurs. |
| JEL: | L41 D43 L13 K21 G18 |
| Date: | 2025–08–04 |
| URL: | https://d.repec.org/n?u=RePEc:cir:circah:2025pr-09 |
| By: | Karamik, Yasemin; Reif, Simon |
| Abstract: | Maternity unit closures are increasingly common in areas with low birth rates, resulting in diminished competition between units. We examine how competition affects the quality and amenities of the remaining maternity units in Germany. To address potential endogeneity in the level of competition, we exploit the unpopularity of maternity unit closures and instrument competition with the tightness of past regional elections. Our findings indicate that while low competition does not significantly affect the quality of care, it leads to reduced availability of additional services potentially used to attract patients in the higher competitive market. |
| Keywords: | Maternity unis, hospital competition, healthcare quality, non-price amenities |
| JEL: | I11 I18 L13 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:zewdip:319895 |
| By: | Zack Cooper; Stuart V. Craig; Aristotelis Epanomeritakis; Matthew Grennan; Joseph R. Martinez; Fiona Scott Morton; Ashley T. Swanson |
| Abstract: | This paper empirically analyzes the effects of mergers between complementary firms on competition and pricing. As these non-horizontal mergers have become more common, there is increasing interest in evaluating both potential efficiencies such as eliminating double marginalization and potential anticompetitive effects such as foreclosure and recapture. The mergers we study – hospital acquisitions of physician practices – have reshaped the $1 trillion US physician industry, nearly doubling the share of physicians working for hospitals between 2008 and 2016. We combine novel data and machine learning algorithms to identify a large number of integration events, spanning a wide range of markets with different competitive circumstances. We merge the integration events with claims data from a large national insurer to study their effects on prices. Focusing on childbirths, the most ubiquitous admission among the privately insured, we find that, on average, these mergers led to price increases for hospitals and physicians of 3.3% and 15.1%, respectively, with no discernible effects on quality measures. Using demand estimation to characterize substitution patterns for both physicians and hospitals, we construct tests that demonstrate price increases are larger among transactions with greater scope for foreclosure and recapture. Our estimates suggest that the costs of these mergers of hospitals and physicians have been substantial, and our mechanism tests offer guidance in predicting where the anticompetitive effects of non-horizontal mergers are likely to be strongest. |
| JEL: | D4 I11 L1 L4 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34039 |
| By: | Tomaso Duso; Joseph E. Harrington Jr.; Carl Kreuzberg; Geza Sapi |
| Abstract: | Competition authorities increasingly rely on economic screening tools to identify markets where firms deviate from competitive norms. Traditional screening methods assume that collusion occurs through secret agreements. However, recent research highlights that firms can use public announcements to coordinate decisions, reducing competition while avoiding detection. We propose a novel approach to screening for collusion in public corporate statements. Using natural language processing, we analyze more than 300, 000 earnings call transcripts issued worldwide between 2004 and 2022. By identifying expressions commonly associated with collusion, our method provides competition authorities with a tool to detect potentially anticompetitive behavior in public communications. Our approach can extend beyond earnings calls to other sources, such as news articles, trade press, and industry reports. Our method informed the European Commission’s 2024 unannounced inspections in the car tire sector, prompted by concerns over price coordination through public communication. |
| Keywords: | Communication, Collusion, NLP, Screening, Text Analysis |
| JEL: | C23 D22 L1 L4 L64 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:diw:diwwpp:dp2131 |
| 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 |
| Date: | 2025–07–11 |
| URL: | https://d.repec.org/n?u=RePEc:ete:msiper:768578 |
| By: | Martin Obradovits; Markus Walzl |
| Abstract: | Consumers increasingly value the environmental and social responsibility of the production processes used by firms, yet these processes often remain unobservable, even after consumption. In this paper, we develop a simple model to examine firms’ technology choices and subsequent price competition in markets for such label credence goods with hidden process attributes. Using a multi-sender signaling framework, we show that in the payoff-dominant equilibrium, firms can partially signal their production choices and avoid Bertrand competition when at least one firm adopts a green technology. Surprisingly, increasing consumers’ environmental concern or eliminating the information asymmetry may reduce social welfare by discouraging green production. |
| Keywords: | label credence goods, technology choice, asymmetric information, price competition, signaling, green production |
| JEL: | D82 D83 L13 L15 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:jku:econwp:2025-11 |
| By: | Patrick Kline (University of California-Berkeley) |
| Abstract: | This chapter reviews the theory of monopsonistic wage setting, its empirical implications, and some puzzles the framework has struggled to explain. We begin by examining the fundamentals of monopsonistic wage determination. The core of the theory is a mapping from the distribution of worker outside options to wages. We study non-parametric shape restrictions that ensure this mapping is unique. Building on these results, we introduce a menu of tractable parametrizations of labor supply to the firm, some of which are shown to emerge naturally from equilibrium search models. Next, we review why wage markdowns do not necessarily signal inefficiency and discuss some criteria for assessing misallocation in a monopsony model with search frictions. Turning to the model’s empirical implications, we examine how the magnitude of productivity-wage passthrough depends on the super-elasticity of labor supply to the firm and establish that compensating differentials for firm amenities depend on the curvature of the outside option distribution. We show that firm-specific shifts in either productivity or amenities can be used as instruments to identify labor supply elasticities and review strategies for estimating non-constant elasticities. We then consider extensions of the basic model involving third-degree wage discrimination and examine their ability to rationalize patterns of worker-firm sorting. Monopsony models traditionally assume that firms commit to posted wages. Relaxing this assumption, we develop a connection between the first-order conditions of the monopsony model and models of bargaining with incomplete information. These models explain why bilateral inefficiencies may persist in the presence of negotiation, yield predictions about the response of within-firm wage dispersion to productivity shocks, and suggest reasons why some productivity shifters may not constitute excludable instruments. Next, we endogenize productivity by allowing for efficiency wages, non-constant returns to scale, and price-cost markups. Empirical monopsony estimates often suggest that firms enjoy implausibly large profit margins. We argue that allowing for non-constant labor supply elasticities and firm adjustment costs can potentially resolve this difficulty. Finally, we review why the strong passthrough of minimum wages to product prices presents a challenging puzzle for standard monopsony models and discuss potential reconciliations to this puzzle involving firm heterogeneity, quality upgrading, and lumpy price adjustment. |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:crm:wpaper:2536 |
| By: | Levy, Daniel; Chen, Haipeng (Allan); Ray, Sourav; Charette, Elliot; Ling, Xiao; Zhao, Weihong; Bergen, Mark; Snir, Avichai |
| 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; Unemployment; Recessions; Expansions |
| JEL: | D11 D21 D80 D91 E31 E32 L11 L16 M31 |
| Date: | 2025–06–11 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:125129 |
| By: | Michael D. Frakes; Melissa F. Wasserman |
| Abstract: | Biological drugs account for just two percent of prescriptions filled in the U.S. but fifty percent of prescription-drug spending. To explore the role patents play in explaining high biologics prices, we build the first comprehensive database of patents associated with all FDA-approved biologics. We first establish that much of what drives biologic patenting is the desire to block entry by competing biosimilars. For these purposes, we estimate the response to a 2010 Act that created an abbreviated pathway for biosimilars to receive FDA approval. We then document robust evidence consistent with two patenting strategies that may block biosimilar competition: thicketing and evergreening, whereby firms supplement primary patents with a dense web of later-expiring patents on secondary drug features. We conduct various exercises to suggest that these behaviors are undertaken with exclusionary purposes that go beyond the traditional justifications of the patent system. We then set forth various descriptive statistics surrounding biosimilar entry to suggest that these patenting strategies are, in fact, effective at delaying biosimilar entry. Finally, we simulate the degree to which biologics patent portfolios are impacted by policy proposals currently under consideration to address thicketing and evergreening. |
| JEL: | K0 L50 L65 O34 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34024 |
| By: | Peter Achim (University of York); Willy Lefez (HU Berlin) |
| Abstract: | We study a static bilateral trade setting with moral hazard, where a seller privately chooses quality and a buyer may pay to verify it. We show that buyer-side information acquisition can lead to informational hold-up through a mechanism wecall surplus squeezing: precise verification enables the seller to extract all buyer surplus, deterring inspection and causing trade to unravel. When verification is noisy, uncertainty preserves buyer surplus and sustains trade. Our framework highlights how strategic responses to learning can distort investment incentives, offering a new perspective on the limits of information precision in mitigating moral hazard. |
| Keywords: | surplus squeeze; informational hold-up; buyer learning; costly information; |
| JEL: | D82 D83 |
| Date: | 2025–07–22 |
| URL: | https://d.repec.org/n?u=RePEc:rco:dpaper:538 |
| By: | IMANI, Yusuke; MINAMI, Koutaroh |
| Abstract: | In a financial system where the bank loan share ranking in a firm’s borrowing portfolio holds strategic importance, changes in ranking due to bank mergers can incur additional costs for firms and banks. Using a large megabank merger in the 2000s, we find that (1) merged bank adjusts lending volume downward after the merger to avoid being top loan share ranking, but (2) this reduction does not harm the firm’s investment and funding since the top share bank at the pre-merger increases its lending. Based on the findings of the lending adjustment by the merged bank, we employ a fuzzy bunching estimator to quantify the net adjustment costs, reaching up to 4.5% of the profit on the margin. Our results reveal a new mechanism by which bank mergers generate costs and who bears those costs. |
| Keywords: | Bank merger, Main bank, Borrowing portfolio, Bunching estimator |
| JEL: | G21 G34 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:hit:hcfrwp:g-1-29 |
| By: | Moure, Christopher; Gorsky, Shai |
| Abstract: | This paper tries to answer the question: in what ways does the logic of capital accumulation shape the organization of hospital care in the US - a sector characterized by a preponderance of both public and private "not-for-profit" institutions? Rather than taking different hospital ownership types as our analytical starting point, to answer this question, we approach the dynamics of the sector as a struggle between "capitalized care" and organized resistance to it. Taking inspiration from the capital as power political economic approach, we define "capitalized care" as a system of health care in which care is subordinated to the ongoing accumulation of power and profit. We map our investigation of organized power onto four empirical dimensions, focusing on the years 2011-2021: organized resistance to capitalized care; distribution of hospitals by ownership type; relative size and concentration of hospital systems; and relative inflation of price markups. We find that these dimensions are closely connected, suggesting that the hospital sector at large is deeply caught up in the logic of capital accumulation. While marginal, organized resistance to capitalized care continues to shape the other dimensions of the hospital landscape - namely, the balance of power between for-profit (FP) and not-for-profit (NFP) hospital systems, the profitability and concentration of large hospital systems, price inflation and medical debt. Not just FP hospitals, but also public and NFP hospitals have become tightly integrated into an overall logic of capitalist accumulation within the sector, leading to increasing consolidation, price inflation, health care inequality, and paradoxically, a large and growing public cost of healthcare. |
| Keywords: | capital as power, concentration, health, hospitals, inequality, inflation, markup profit, United States |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:capwps:323238 |
| By: | Yasuyuki Kusuda |
| Abstract: | This study examines the dynamics of customer behavior with trial and return options in omnichannel retailing, where retailers face challenges in integrating physical and online stores. Recently, major retailers have begun offering customers the option of trying eligible items for a set period and returning unwanted products free of charge. However, existing research has not fully explored the temporal dynamics of customer return behaviors. This study investigates how temporal dynamics affect customer return behaviors and decision-making during trial periods. Using a theoretical game structure framework, this study explores customer decision patterns regarding store visits, product trials, and returns, while examining the strategic role of store clerks in encouraging product trials. The findings suggest that retailers can maximize profit through trial and return options when product fit probability is low, emphasizing the importance of maintaining complementary physical and online channels. We also found that store clerks play a critical role in encouraging customers to try misfit products. The results further reveal that return cost coverage policies may not significantly impact customer behavior or retailer profit. |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2505.15597 |
| By: | Stephan Heblich; Dávid Krisztián Nagy; Alex Trew; Yanos Zylberberg |
| Abstract: | Does industrial concentration shape the life and death of cities? We identify settlements from historical maps of England and Wales (1790–1820), isolate exogenous variation in their late 19th-century size and industrial concentration, and estimate the causal impact of size and concentration on later dynamics. Industrial concentration has a negative effect on long-run productivity—independent of industry trends and consistent with cross-industry Jacobs externalities. A spatial model quantifies the role of fundamentals, industry trends, and Jacobs externalities in shaping industry-city dynamics and isolates a new, dynamic trade-off in the design of place-based policies. |
| JEL: | F63 N93 O14 R13 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34029 |
| By: | Tojal Ramos Dos Santos, Carolina; Morais Guidetti, Bruna |
| Abstract: | This paper investigates strategies to expand piped water and sewer through private providers. Using billing data from a major provider in Brazil and a structural model of consumer sanitation demand and service expansion, we assess the viability of connection targets and the welfare effects of connection subsidies and price incentives. We find that universal connection targets are largely unfeasible due to low sewer take-up. Combining connection subsidies with higher sewer prices boosts expansion and adoption but requires government funding. Charging consumers upon sewer availability is self-sustaining and promotes adoption and expansion, but it shifts costs to households. |
| JEL: | L95 Q25 L51 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:idb:brikps:14191 |
| By: | Zhicheng Du; Wei Tang; Zihe Wang; Shuo Zhang |
| Abstract: | In digital advertising, online platforms allocate ad impressions through real-time auctions, where advertisers typically rely on autobidding agents to optimize bids on their behalf. Unlike traditional auctions for physical goods, the value of an ad impression is uncertain and depends on the unknown click-through rate (CTR). While platforms can estimate CTRs more accurately using proprietary machine learning algorithms, these estimates/algorithms remain opaque to advertisers. This information asymmetry naturally raises the following questions: how can platforms disclose information in a way that is both credible and revenue-optimal? We address these questions through calibrated signaling, where each prior-free bidder receives a private signal that truthfully reflects the conditional expected CTR of the ad impression. Such signals are trustworthy and allow bidders to form unbiased value estimates, even without access to the platform's internal algorithms. We study the design of platform-optimal calibrated signaling in the context of second-price auction. Our first main result fully characterizes the structure of the optimal calibrated signaling, which can also be computed efficiently. We show that this signaling can extract the full surplus -- or even exceed it -- depending on a specific market condition. Our second main result is an FPTAS for computing an approximately optimal calibrated signaling that satisfies an IR condition. Our main technical contributions are: a reformulation of the platform's problem as a two-stage optimization problem that involves optimal transport subject to calibration feasibility constraints on the bidders' marginal bid distributions; and a novel correlation plan that constructs the optimal distribution over second-highest bids. |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2507.17187 |
| By: | Vincent Meisner (HU Berlin); Pascal Pillath (HU Berlin) |
| Abstract: | We design profit-maximizing mechanisms to sell an excludable and non-rival good with positive and/or negative network effects. Buyers have heterogeneous private values that depend on how many others also consume the good. In optimum, an endogenous number of the highest types consume the good, and we can implement this allocation in dominant strategies. We apply our insights to digital content creation, and we are able to rationalize features seen in monetization schemes in this industry such as voluntary contributions, community subsidies, and exclusivity bids. |
| Keywords: | mechanism design; non-rival goods; club goods; network effects; digital content; creator economy; |
| JEL: | D82 |
| Date: | 2025–07–30 |
| URL: | https://d.repec.org/n?u=RePEc:rco:dpaper:541 |
| By: | Kenneth R. Ahern |
| Abstract: | Multinational firms play a pivotal role in the global economy, yet economic and finance research has largely examined them in isolation. Economic theory focuses on trade and multinational activity but gives relatively little attention to cross-border mergers, while finance research emphasizes empirical studies of mergers but rarely integrates broader economic theories. This chapter aims to synthesize these two literatures into a unified framework for understanding multinational firms and cross-border mergers. The discussion is organized around the decision-making process of multinational firms, from choosing to operate internationally to selecting between greenfield investment and mergers. This framework reveals the theoretical and empirical evidence on the drivers of multinational production, including productivity gains, knowledge transfers, and market frictions. The findings highlight the commonality between the two literatures, but also suggests that greater integration between economic theory and finance research will generate a deeper understanding of the role of multinational firms in the global economy. |
| JEL: | F10 F12 F14 F23 G34 G41 L41 L44 O32 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34067 |