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on Industrial Competition |
| By: | Mertens, Matthias; Mottironi, Bernardo |
| Abstract: | Combining financial statements with firm-level product prices, we find that larger firms exhibit lower markups, although they are overcompensated by substantially higher wage markdowns. We explain our divergence from prior results by highlighting how labor market power affects markup estimates. |
| Keywords: | firm size; markdowns; market power; markups |
| JEL: | L11 L13 L25 J42 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:128958 |
| By: | Qing Hu (Kansai University); Tomomichi Mizuno (Kobe University) |
| Abstract: | Even though the welfare-reducing effects of common ownership have been emphasized in the established researches, we challenge this well-known result by considering a model of two symmetric supply chains, each composed of a manufacturer and its firm-specific input supplier. The common ownership exists in the downstream market. We find that if the degree of common ownership is high, the demand for input becomes elastic, intensifying input price competition. Therefore, the consumer and total surpluses will increase with the degree of common ownership. |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:koe:wpaper:2521 |
| By: | Philippe Choné; Laurent Linnemer |
| Abstract: | Sellers face a critical choice: run competitive auctions or strike exclusive deals with preferred buyers. Contrary to conventional wisdom that sellers should rely on open competition, we show that a powerful seller optimally commits to a sequential `flexclusivity' arrangement - a strategic mix of exclusivity and competitive bidding. Under broad conditions, the seller chooses with positive probability to disregard alternative buyers entirely. We demonstrate, in a parsimonious model, that simple option contracts implement flexclusivity efficiently, increasing the expected joint profit of the contracting parties. When a preferred buyer declines the option, this credibly signals his weakness, allowing the seller to extract more rent from stronger buyers in subsequent auctions. The joint gain from such arrangements can represent as much as 75% of what vertical integration would achieve, without requiring commitment beyond the initial contracting stage. |
| Keywords: | selling mechanism, exclusivity, revenue-maximizing auction, option contract, vertical integration |
| JEL: | D44 D82 D86 L22 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12134 |
| By: | Kohei Daido (Kwansei Gakuin University); Keizo Mizuno (Kwansei Gakuin University) |
| Abstract: | We examine duopolistic competition within a real options framework, where two firms provide horizontally differentiated core goods along with vertically differentiated add-on services. Focusing on consumer savviness regarding the quality of add-on services, we analyze its impact on prices, investment timing, and social welfare. Our analysis yields three main findings. First, the price of a core good with high-quality add-on services is lower (resp. higher) than that of a core good with low-quality add-on services when the proportion of non-savvy consumers in the population is high (resp. low). Second, both firms are incentivized to invest preemptively when the proportion of non-savvy consumers is high or the quality difference in add-on services is small; however, when the proportion of non-savvy consumers is low or the quality gap is significant, only the firm offering high-quality add-on services retains this incentive. Third, as the proportion of non-savvy consumers decreases, the flow of social surplus increases; nonetheless, the overall expected social welfare may decline due to a delay in the follower's investment and a prolonged monopoly duration. This suggests a need for a policy mix that combines consumer protection with the encouragement of market entry. |
| Keywords: | add-on service, consumer savviness, real options, investment timing, delay. |
| JEL: | D90 L22 L24 M21 O31 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:kgu:wpaper:298 |
| By: | Basihos, S. |
| Abstract: | This study investigates the role of firm-specific productivity shocks from mergers and acquisitions (M&A) in explaining aggregate fluctuations. I isolate these shocks by estimating a covariate-adjusted latent factor model on U.S. public firm data (1978–2023) under an event study approach. M&A activity generates significant short-run fluctuations in firm productivity, typically characterized by an initial decline, a rebound to a higher level, and eventual stabilization. A firm-size-weighted average of these shocks explains roughly one-fifth of variations in U.S. economic growth. This result is robust across multiple empirical validations and is not driven by merger waves or prevailing macroeconomic conditions. |
| Keywords: | Aggregate Fluctuations, Granularity, Mergers and Acquisitions, Productivity |
| JEL: | D22 E32 G34 |
| Date: | 2025–08–18 |
| URL: | https://d.repec.org/n?u=RePEc:cam:camjip:2523 |
| By: | Philipp Strack; Kai Hao Yang |
| 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 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2506.20925 |
| By: | Mikko Silliman; Alexander L.P. Willén |
| Abstract: | This paper reconsiders how labor market competition shapes skill development --- integrating the perspectives of both firms and workers. While existing models often predict that firms will underinvestment in training due to a fear of poaching, we show that competition can instead serve as a catalyst for learning. It creates outside opportunities which incentivize workers to invest in their own skills, and it imposes innovation pressure that raises the value of training for firms. Using linked Norwegian survey and administrative data together with vignette experiments, we find that workers in more competitive markets accumulate skills faster than workers in concentrated markets—primarily through informal, self-directed learning—and that these gains are concentrated in higher-order, transferable skills. Firms in competitive environments also invest more in formal training, treating it as a strategic necessity rather than a dispensable cost. Experimental evidence complements these findings by showing that both workers and managers expect greater returns to learning and human capital investments in competitive markets. Together, these results challenge the canonical view of competition as a source of market failure in training, and instead highlight its role in facilitating both worker-led and firm-led investments in human capital. |
| Keywords: | competition, human capital, skills, learning |
| JEL: | J24 J31 J42 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12114 |
| By: | Gurkirat Wadhwa; Akansh Verma; Veeraruna Kavitha; Priyank Sinha |
| Abstract: | In competitive supply chains (SCs), pricing decisions are crucial, as they directly impact market share and profitability. Traditional SC models often assume continuous pricing for mathematical convenience, overlooking the practical reality of discrete price increments driven by currency constraints. Additionally, customer behavior, influenced by loyalty and strategic considerations, plays a significant role in purchasing decisions. To address these gaps, this study examines a SC model involving one supplier and two manufacturers, incorporating realistic factors such as customer demand segmentation and discrete price setting. Our analysis shows that the Nash equilibria (NE) among manufacturers are not unique, we then discuss the focal equilibrium. Our analysis also reveals that low denomination factors can lead to instability as the corresponding game does not have NE. Numerical simulations demonstrate that even small changes in price increments significantly affect the competitive dynamics and market share distribution. |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2506.17239 |
| By: | Aldric Labarthe; Yann Kerzreho |
| Abstract: | We introduce a new microeconomic model of horizontal differentiation that unifies and extends previous developments inspired by the seminal work of Hotelling (1929). Our framework incorporates boundedly rational consumers, an unlimited number of firms, and arbitrary differentiation spaces with Riemannian manifolds. We argue that Riemannian geometry provides a natural and powerful tool for analyzing such models, offering fresh insights into firm behavior and market structure with complex products. |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2507.01985 |
| By: | Quentin Hoarau; Jean-Pierre Ponssard |
| Abstract: | This paper studies the adoption of clean technology in an oligopolistic setting, focusing on carbon capture and storage (CCS) in the cement sector. Firms can choose between two technologies: a carbon-intensive ("dirty") technology and a low-carbon ("clean") one. Initially, all firms operate with the dirty technology, whose variable cost increases over time with the social cost of carbon, following Hotelling’s rule. Clean technology has a constant marginal cost but requires a sunk investment cost. Firms engage in short-term Cournot competition, and the adoption decision is modeled as a dynamic game in continuous time. We show that imperfect competition leads to inefficiently delayed adoption due to preemption incentives, with firms eventually coordinating on a late joint adoption equilibrium. We propose two corrective public policies: a fixed-cost subsidy and a time-dependent subsidy on profit flows. Calibrating our model to the cement industry, assuming five competitors, we find that without policy intervention, CCS adoption would occur in 2042 rather than the socially optimal date of 2030. Obtaining optimal timing requires either a 70% fixed-cost subsidy or a time-dependent subsidy equivalent to 20% of that amount, although it requires more information for implementation. |
| Keywords: | imperfect competition, innovation, cement, carbon capture and storage |
| JEL: | L13 O31 Q5 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12127 |
| By: | Fabian Alex |
| Abstract: | We build a signaling game model of a firm’s decision to acquire a costly green label which enables it to emit a green bond. A greenium may compensate it for the incurred cost. That cost is higher for non-green firms. With an investor that prefers a clean environment and dislikes being fooled into believing in a fabricated green label, there are equilibria featuring green bonds by either both firm types, only the green firm or neither. Allowing side payments undermines stability of all equilibria where a green label is acquired. A neutral rather than a green investor considerably decreases the number of conceivable equilibria, as does uncertainty about the investor type. The equilibria of the baseline model are preserved if we allow two investors, a green and a neutral one, to decide on their respective purchase of the bond sequentially. Lastly, if investors hold all market power, no green labels will be observed at all. |
| Keywords: | Environment, Environmental Economics, Green Economics, Game Theoretic, Game Theory, Two Player, Strategic Game, Signaling Game |
| JEL: | C72 D21 Q5 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:bav:wpaper:242_alex.rdf |
| By: | Gimenez Perales, Victor; Mulyukova, Alina |
| Abstract: | We study how liberalization and competition affect firms' output and product scope depending on management practices. In a model of multi-product firms, we show that firms with better management practices specialize in fewer products with lower marginal costs. The model predicts that, under increased competition, firms with better management practices are less adversely affected by competition, especially in heterogeneous sectors. Evidence from India's de-reservation policy supports these predictions. Our simulations estimate a 0.29% welfare gain in India from the policy. The same policy could increase welfare by 0.39% in an environment with better management practices, such as the US, highlighting the management practices' role in liberalization outcomes. |
| Keywords: | management practices, multi-product firms, de-reservation policy |
| JEL: | F61 D24 L25 O12 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:ifwkwp:325492 |
| By: | Kiyoyasu TANAKA |
| Abstract: | Cross-border mergers and acquisitions (M&A) are a prominent mode of foreign direct investment. However, there remains mixed and inconclusive evidence for the impact of foreign acquisition on acquired domestic firms. This paper contributes to the literature by employing a staggered difference-in-differences approach to address the timing variation in foreign acquisitions and constructing a novel panel dataset on Japanese firms that precisely captures the post-acquisition period for acquired firms. The results show statistically insignificant estimates for the aggregate effects of foreign acquisition on the post-acquisition productivity, suggesting neither productivity gains nor adverse effects for acquired firms. Even after accounting for general acquisition effects, foreign ownership changes have no influence on post-acquisition productivity. By contrast, canonical two-way fixed effects regressions yield significantly positive estimates, highlighting the need for methodological refinement in the literature to address heterogeneous treatment effects of foreign acquisition. |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:eti:dpaper:25085 |
| By: | Kenta YAMANOUCHI; Kaoru HOSONO; Miho TAKIZAWA |
| Abstract: | We examine how the global market power of multinational firms has evolved and what factors have driven this evolution. To this end, we estimate the markups of foreign subsidiaries and their parent firms using a matched subsidiary-parent dataset of Japanese multinational firms covering the period from 2001 to 2018. Our main findings are as follows. First, the markups of foreign subsidiaries did not exhibit a long-run upward trend. Second, sales growth among foreign subsidiaries tended to be concentrated in firms with lower markups, contributing to a decline in the aggregate markup. Third, the parent firms’ markups had a sizable positive effect on the markups of their foreign subsidiaries. Fourth, certain host-country characteristics, such as GDP and the rule of law, were also associated with subsidiaries’ markups. |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:eti:dpaper:25082 |
| By: | Weber, Jan David |
| Abstract: | Firms are not abstract, profit-seeking units as often assumed in neoclassical models, but historically situated, socially embedded, and organizationally adaptive entities. Firms evolve through continuous interaction with their environment, shaped by routines, bounded rationality, and the co-development of institutions and technologies. This comprehensive lens provides a richer understanding of firm behavior, accounting for the observed diversity across firms, the persistence of structural asymmetries, and the heterogeneous conditions under which firms grow, stagnate, or exit the market. These firm-level dynamics unfold within markets that are themselves evolving systems. Rather than tending toward a stable equilibrium, markets are shaped by feedback loops, path dependencies [path dependency], and innovation-driven competition. Entry and exit, firm growth, and shifts in market structure are not merely responses to price signals but outcomes of learning processes, strategic interactions, and institutional arrangements [Institutions]. As a result, market outcomes reflect complex adaptive dynamics rather than simple allocative efficiency. In this view, successful industrial policy is not limited to correcting market failures or achieving short-term efficiency gains. Rather, industrial policy is a dynamic and systemic process. This process contributes to long-term learning, structural transformation, and the strategic capacities of economies. Effective policies must therefore be reflexive, transparent, and collaborative, evolving alongside the systems they intend to shape. |
| Keywords: | Firm Size, Industrial Policy, Firm Activity |
| JEL: | D83 L11 O25 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:ifsowp:325500 |
| By: | Martin, Ralf; Solorzano Mosquera, Jenniffer; Thomas, Catherine; Verhoeven, Dennis |
| Abstract: | We examine the relationship between firms' markups and the economic value of their innovation, including both the private value captured by the innovating firm and the knowledge spillovers that benefit other firms. Using a sample of over 14, 500 EU firms and 2, 400 US firms granted patents between 2005 and 2014, we find that innovation by high-markup firms is more valuable privately and also creates more external value. These associations are robust to controlling for the stock of past innovation and to estimating innovation value in various ways. |
| JEL: | D24 L11 O31 O33 |
| Date: | 2025–09–30 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:129003 |
| By: | Bijan Aghdasi; Abhijit Tagade |
| Abstract: | Do markets price knowledge spillovers? We show that patent grants influence the stock returns of firms that are connected through technological knowledge dependencies. Using directed patent citations among publicly listed companies in the United States, we construct a granular measure of each firm's exposure to new patents granted to its technologically upstream firms. Patents granted to these upstream companies significantly boost its abnormal stock returns during the week of the grant. We find that these financial spillovers are predominantly localized within a firm's immediate technological connections. Additionally, we provide a novel empirical decomposition of financial spillovers generated from patent grants, by distinguishing those spillovers emerging from sources of technological knowledge, from those emerging from product market rivals (negative effect) and suppliers (positive effect). Our findings are robust to alternative specifications and placebo tests, and they suggest that technological knowledge spillovers create important market-priced ties between firms that are not fully captured by traditional product market relationships. |
| Keywords: | innovation, networks, spillovers, patents, stock returns, supply chains |
| Date: | 2025–08–13 |
| URL: | https://d.repec.org/n?u=RePEc:cep:cepdps:dp2117 |
| By: | Manuel Hidalgo Pérez (Universidad Pablo de Olavide); Natalia Collado (Universidad de Comillas); Ángel Martínez Jorge (AFI) |
| Abstract: | The outbreak of the COVID-19 pandemic and Russia’s invasion of Ukraine in early 2022 severely disrupted energy markets, triggering a spike in global oil prices. To mitigate the impact on consumers, Spain introduced a fuel discount of 20 cents per liter, effective until the end of 2022. This study assesses the pass-through of the discount to retail prices using a combination of regression discontinuity (RD), difference-in-differences (DiD), and quantile regression approaches with daily data from over 11, 000 Spanish petrol stations. We analyze how different types of operators—vertically integrated, branded, and independent—responded to the policy and examine its impact on the retail price distribution. The results reveal a negative relationship between a station’s initial price and the pass-through of the discount, with lower-priced stations raising prices more in response to the policy. This pattern is particularly pronounced for diesel and among independent and retailer-managed branded stations, which captured a larger share of the subsidy. The quantile regressions further highlight that price increases were concentrated in the lower end of the price distribution, amplifying differences across station types. However, our DiD analysis shows that these effects were temporary, with price differentials gradually converging after approximately 36 to 43 days. Overall, the findings highlight how generalized public discounts can temporarily distort market dynamics and affect competitive conditions in the market. The study offers insights for the design of future subsidy programs, particularly regarding the role of market structure and financial constraints in shaping pass-through. |
| Keywords: | pass-through, discount, retail fuel prices, market structure, regression discontinuity, DiD, quantile regression. |
| JEL: | D12 Q41 Q48 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:pab:wpaper:25.01 |
| By: | Giorgio Fabbri (Univ. Grenoble Alpes, CNRS, INRA, Grenoble INP, GAEL, Grenoble, France); Davide Fiaschi (Universtiy of Pisa, Dipartimento di Economia e Management, Pisa, Italy); Cristiano Ricci (Universtiy of Pisa, Dipartimento di Economia e Management, Pisa, Italy) |
| Abstract: | We develop a multi-sector competitive economy where firms reallocate across sectors under myopic profit-seeking behaviour and quadratic reallocation costs. The dynamic path, formalised as a gradient flow in Wasserstein space, unfolds as a sequence of short-run competitive equilibria converging to a globally stable long-run competitive equilibrium. Two emergent properties arise: (i) decentralised and uncoordinated decisions of consumers and firms can be interpreted as solving a sequence of optimisation problems on aggregate consumption, which increases monotonically along the path; (ii) the long-run competitive equilibrium is efficient, as the distribution of firms maximises aggregate consumption and profit rates are equalised across sectors. These results are robust to extensions such as asymmetric preferences, labour immobility, and mild intrasectoral externalities, though they may fail under fixed reallocation costs. Using EU firm-level data (2018–2023), we find convergence in sectoral profit rates but not in labour productivity, indicating limited labour mobility. We also document moderate substitutability among goods, small intrasectoral externalities, and no significant fixed reallocation costs. |
| Keywords: | out-of-equilibrium dynamics, positive general equilibrium theory, multi-sector economy, myopic firms, firm heterogeneity, intra-industry reallocation, Wasserstein space, gradient flow |
| JEL: | D50 D92 C62 D24 C61 |
| Date: | 2025–09–08 |
| URL: | https://d.repec.org/n?u=RePEc:ctl:louvir:2025013 |
| By: | Takafumi KAWAKUBO; Takafumi SUZUKI |
| Abstract: | This study examines how becoming a supplier to a newly established large-scale plant influences the performance of incumbent small plants. Exploiting detailed plant-level data, records of new large-plant openings, and supply chain information, we construct a quasi-experimental setting based on the spatial distribution of new entrants. Our event-study estimates show that while local supplier plants benefit significantly—both statistically and economically—from large-scale plants, non-supplier plants in the same region face negative impacts, likely due to intensified competition spurred by the newly-contracted suppliers. The results underscore that such entries create “winners and losers†not only across different regions but also within the same locality. From a policy perspective, these insights highlight the importance of facilitating effective partnerships between large-scale entrants and local suppliers, as well as offering support to disadvantaged non-supplier firms. Overall, our findings illuminate the nuanced local economic consequences of large-scale plant entries and offer guidance for future industrial and regional policies. |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:eti:dpaper:25083 |
| By: | Asena Caner; Belgi Turan; Berna Tari Kasnakoğlu; Yenal Can Yiğit; Donald S. Kenkel; Alan D. Mathios |
| Abstract: | This study investigates consumer stated preferences for manufactured cigarettes, roll-your-own tobacco, and vapes in Türkiye, with a focus on how product attributes shape choices of adult consumers. A discrete choice experiment embedded in an online survey examines the role of prices of these products, flavor availability, and most importantly the legal status of vapes. Results indicate strong price sensitivity, both to own prices and to the prices of substitutes. In addition, legal status emerges as a critical factor that shapes stated preferences: consumers exhibit a marked aversion to products that are banned or sold illegally. However, scenario analyses suggest that vapes would capture a substantial market share even under strict prohibition. The hypothetical scenario of a complete ban would likely have a modest effect on the cessation of nicotine products while shifting choices toward traditional combustible tobacco products. These findings highlight the limits of prohibition and underscore the importance of regulatory design. In particular, the treatment of legal status, together with pricing and taxation policies, plays a decisive role in shaping consumer behavior and public health outcomes. |
| JEL: | I12 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34201 |
| By: | Ewan McGaughey |
| Abstract: | Is public ownership or privatisation better, and when? The 20th century was like a pendulum, swinging between narratives that we must abolish private ownership in the means of production, to saying there 'are virtually no limits on what can be privatised', and hovering as if ready to swing again. By contrast, this paper shows that outcomes improve and costs decrease when enterprises are publicly owned, if property is 'non-accessible'. Otherwise private ownership is better. Property is 'non-accessible' if an enterprise is a skill-based, natural, or network monopoly. Property is 'accessible' if people can buy land or capital, source materials or vehicles, or get skills or knowledge to start up a business. Then, competition channels private greed into the public good. This paper contends that data lets us move beyond ideological clash, and gives answers that practically assist policy, to fill the gaps in human rights and market failure frameworks. For example, water is 90% publicly owned in wealthy countries, with lower bills and better outcomes. For rail, fares are lower with greater electrification if tracks and operators are public. For electricity, bills are lower with more renewables if grids and a retail option are public. For telecom networks, public ownership tends to reduce bills and raise internet speed. Most wealthy countries hold non-accessible property in public hands, and do better for it. Three further principles are crucial if circumstances change. First, technology can change what is accessible property, such as renewables making electricity generation competitive, or big tech data creating new monopolies. So, law must respond to tech. Second, there may be good non-economic reasons, such as protecting democracy and the environment, to change the public/private balance. Third, good governance is distinct from wise ownership choices, and generally supports voice for workers, as well as investors, and service-users where competition fails. Together, good governance and wise ownership socialise the nature of all property, and internally transform the public-private divide. Policymakers should base decisions on the evidence of what works, and this theory helps make those decisions. |
| Keywords: | Privatisation, nationalisation, socialism, capitalism, water, health, electricity, rail, education, media, internet, market failure, property, production, non-accessible, monopoly, democracy, technology, governance |
| JEL: | I28 J10 K11 K22 K23 K32 L12 L21 L22 L32 L43 L51 L53 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:cbr:cbrwps:wp545 |
| By: | Lo Prete, Chiara; Palmer, Karen (Resources for the Future); Robertson, Molly (Resources for the Future) |
| Abstract: | Existing wholesale electricity market designs are poorly suited to address challenges associated with the evolving resource mix. For example, recent scarcity events in the United States show that reliability challenges in renewable- and gas-dominated electric power systems arise not from the lack of generation capacity to serve peak customer demand, but from the lack of available capacity to provide the requisite energy at times of need. We review 11 proposed electricity market designs for the clean energy transition and compare them based on 10 criteria. Enhancing reliability in electric power systems with a significant amount of variable renewable energy requires incentivizing resource flexibility, both in investment and in operation. Electricity market structures should allow resources needed for reliability to earn adequate revenues to recover their variable and fixed costs. Good market designs also enable low-cost financing to support investments in capital-intensive resources that are instrumental in meeting decarbonization objectives. An additional property of well-designed markets is promoting short-run efficiency by reducing incentives to exercise market power and supporting efficient renewable curtailment outcomes. Besides achieving reliability, long-run efficiency, and short-run efficiency, some proposals in our review seek to achieve energy affordability objectives and integration with clean energy goals. Our evaluation highlights several open questions and directions for future research: the determination of mandatory purchase obligations of load-serving entities and associated enforcement mechanisms; the interplay between long-term hedging requirements and incentives for demand participation in real time; and the compatibility between long-term contract design and efficient operations in short-term energy markets. |
| Date: | 2024–06–25 |
| URL: | https://d.repec.org/n?u=RePEc:rff:report:rp-24-09 |
| By: | Anderson, Ronald W.; Jõeveer, Karin |
| Abstract: | We consider the determinants of pay in US banks since 1986 using a new structural model in which banking firms are matched in rank order with management teams of varying talent. We calibrate the model to data from US bank holding companies focussing on labor’s share of bank value-added, the level of bankers’ pay and its sensitivity to bank performance. We find that three changes in banking regulation have shaped bankers’ pay in the last three decades: (1) removal of obstacles to interstate banking set off a process of banking consolidation in the 1990s, (2) deregulation at the end of the 1990’s allowing banks to pursue non-interest income has driven a trend toward higher pay and higher incentive pay, (3) tougher regulations following the financial crisis imposing an implicit tax on size and complexity has moderated pay in large banks but in so-doing has allowed smaller banks to take on business outside of standard credit intermediation resulting higher pay in those banks. Taking these structural changes into account we find a tendency over three decades for a decline in labor’s share, in line with superstar effects implied by our structural model. |
| Keywords: | executive compensation; banking industry structure; rent extraction; superstar firms; regulation |
| JEL: | F3 G3 J1 |
| Date: | 2025–11–30 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:129436 |
| By: | Nikhil Kumar |
| Abstract: | This paper presents a social learning model where the network structure is endogenously determined by signal precision and dimension choices. Agents not only choose the precision of their signals and what dimension of the state to learn about, but these decisions directly determine the underlying network structure on which social learning occurs. We show that under a fixed network structure, the optimal precision choice is sublinear in the agent's stationary influence in the network, and this individually optimal choice is worse than the socially optimal choice by a factor of $n^{1/3}$. Under a dynamic network structure, we specify the network by defining a kernel distance between agents, which then determines how much weight agents place on one another. Agents choose dimensions to learn about such that their choice minimizes the squared sum of influences of all agents: a network with equally distributed influence across agents is ideal. |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2507.00249 |
| By: | Yi Chen; Fabiano Dal-Ri; Thomas Jungbauer; Daniela Scur |
| Abstract: | This paper presents a model of employee poaching with asymmetric employer learning. Firms poach managers not only due to their track record but also for their personnel-specific information about workers. In equilibrium, more productive firms poach managers, whose compensation increases in the quality of their information about workers. While poaching reassigns more able workers to more productive firms, efficiency does not obtain due to information frictions. Drawing on the universe of contracts in Brazil's formal labor market, we test implications of our model and show they are consistent with manager and worker movements and their compensation histories. |
| Keywords: | poaching, asymmetric learning, managerial compensation, Brazil |
| Date: | 2025–08–13 |
| URL: | https://d.repec.org/n?u=RePEc:cep:cepdps:dp2118 |
| By: | Anil K. Jain; Siddharth Kothari |
| Abstract: | Poorer countries (and poorer states within India) have a larger share of manufacturing employment in small plants. This paper presents empirical evidence and a theoretical model to show that this relationship is driven by greater demand for lower quality goods in poorer regions, which can be produced efficiently in small plants. First, using data for India, we show that richer households buy higher price goods and larger plants produce higher price products. Second, we develop a model that matches these facts. Finally, we find that our model explains about forty percent of the cross-state variation in the size distribution of manufacturing plants in India. |
| Keywords: | Firm size distribution; Product quality; India |
| JEL: | O11 O16 O17 |
| Date: | 2025–08–25 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedgif:1417 |