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on Industrial Competition |
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Issue of 2025–11–24
twenty-one papers chosen by Russell Pittman, United States Department of Justice |
| By: | Paul S. Koh (Yonsei University) |
| Abstract: | Antitrust authorities routinely rely on market concentration measures to assess the potential adverse effects of mergers on consumer welfare. Using a first-order approximation argument with logit and CES demand, I derive the relationship between the welfare effect of a merger on consumer surplus and the change in the Herfindahl-Hirschman Index (HHI). My results suggest that merger harm is correlated with the merger-induced change in HHI, and the proportionality coefficient depends on the price responsiveness parameter, market size, and the distribution of market shares within and across the merging firms. I present numerical validation of my formula along with an empirical illustration. |
| Keywords: | Merger, Herfindahl-Hirschman index, consumer surplus, upward pricing pressure |
| JEL: | D43 L13 L41 L44 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:yon:wpaper:2025rwp-266 |
| By: | Martin Peitz; Anton Sobolev |
| Abstract: | A firm may decide to make total-surplus-reducing purchase recommendations in response to consumer heterogeneity in an experience good setting. First, we show under which conditions the firm chooses to make such biased recommendations in a monopoly setting. Second, we propose a duopoly model with differentiated products in which single-product firms compete in uniform prices and recommendation policies. We provide conditions under which both firms choose to bias their recommendations, whereas the bias would be absent if products were more differentiated or one of the two products were withdrawn from the market. |
| Keywords: | recommendation bias, recommender system, competition |
| JEL: | L12 L13 L15 D21 D42 D43 M37 |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2025_715 |
| By: | Aline Blankertz; Brianna Rock; Nicholas Shaxson |
| Abstract: | This paper presents striking new data about the scale of Google's involvement in the global digital and corporate landscape, head and shoulders above the other big tech firms. While public attention and some antitrust scrutiny has focused on these firms' mergers and acquisitions (M&A) activities, Google has also been amassing an empire of more than 6, 000 companies which it has acquired, supported or invested in, across the digital economy and beyond. The power of Google over the digital markets infrastructure and dynamics is likely greater than previously documented. We also trace the antitrust failures that have led to this state of affairs. In particular, we explore the role of neoclassical economics practiced both inside the regulatory authorities and by consultants on the outside. Their unduly narrow approach has obscured harms from vertical and conglomerate concentrations of market power and erected ever higher hurdles for enforcement action, as we demonstrate using examples of the failure to intervene in the Google/DoubleClick and Google/Fitbit mergers. Our lessons from the past failures can inform the current approach towards one of the biggest ever big tech M&A deals: Google's $32 billion acquisition of the Israeli cloud cybersecurity firm Wiz. |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2511.02931 |
| By: | Christopher Teh (Toulouse School of Economics, France & School of Economics); Chengsi Wang (Department of Economics and Monash Digital Lab, Monash University) |
| Abstract: | This survey explores how startup acquisitions influence innovation and competition. We review two key streams of literature: post-acquisition innovation, which examines whether incumbents develop or terminate acquired projects, and pre-acquisition innovation, which investigates how the prospect of acquisition shapes startups’ and incumbents’ incentives and innovation strategies. We also assess the implications for merger policy design, highlighting recent competition authority responses and dynamic considerations. Our work provides insights into the ongoing debate on how competition policy should regulate startup acquisitions in fast-evolving and uncertain markets. |
| Keywords: | acquisition, innovation, merger policy, startup |
| JEL: | G34 L12 L41 O3 |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:mos:moswps:2025-14 |
| By: | Paolo Bertoletti |
| Abstract: | In a setting with Hotelling differentiation and (weak) network effects, when the market is already covered duopoly adoption of compatibility leads to anti-competitive effects and tends to be welfare excessive. We show that the latter result is reversed if the market is not assumed to be covered even under incompatibility (a condition which depends on the value of the intrinsic/stand-alone beneÂ…ts). |
| Keywords: | Compatibility; Network e¤ects; Hotelling differentiation |
| JEL: | D43 L15 L22 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:mib:wpaper:560 |
| By: | Tobias R. Rebholz; Maxwell Uphoff; Christian H. R. Bernges; Florian Scholten |
| Abstract: | As algorithms increasingly mediate competitive decision-making, their influence extends beyond individual outcomes to shaping strategic market dynamics. In two preregistered experiments, we examined how algorithmic advice affects human behavior in classic economic games with unique, non-collusive, and analytically traceable equilibria. In Experiment 1 (N = 107), participants played a Bertrand price competition with individualized or collective algorithmic recommendations. Initially, collusively upward-biased advice increased prices, particularly when individualized, but prices gradually converged toward equilibrium over the course of the experiment. However, participants avoided setting prices above the algorithm's recommendation throughout the experiment, suggesting that advice served as a soft upper bound for acceptable prices. In Experiment 2 (N = 129), participants played a Cournot quantity competition with equilibrium-aligned or strategically biased algorithmic recommendations. Here, individualized equilibrium advice supported stable convergence, whereas collusively downward-biased advice led to sustained underproduction and supracompetitive profits - hallmarks of tacit collusion. In both experiments, participants responded more strongly and consistently to individualized advice than collective advice, potentially due to greater perceived ownership of the former. These findings demonstrate that algorithmic advice can function as a strategic signal, shaping coordination even without explicit communication. The results echo real-world concerns about algorithmic collusion and underscore the need for careful design and oversight of algorithmic decision-support systems in competitive environments. |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2511.09454 |
| By: | Thierry Blayac (CEE-M, Univ Montpellier, CNRS, INRAE, Institut Agro, Montpellier, France); Patrice Bougette (Université Côte d'Azur, CNRS, GREDEG, France); Jules Duberga |
| Abstract: | This paper investigates the pricing strategies used in long-distance carpooling in France. We investigate how several factors affect carpooling prices using a comprehensive dataset of BlaBlaCar trips combined with sociodemographic and intermodal competition data. The analysis identifies two distinct pricing patterns within the platform: one characterized by standardized and consistent pricing, and another marked by more flexible, market-responsive price setting. By focusing on price per minute, we examine how trip characteristics, competitive conditions, and demand heterogeneity affect these pricing behaviors. The results show that variables such as the number of stopovers, trip length, airport or cross-border connections, and the presence of alternative transport modes influence pricing, but with contrasting effects across the two patterns. The standardized approach tends to reflect cost-sharing principles and reinforces network effects, while the more flexible approach adapts dynamically to local competition and demand. |
| Keywords: | Carpooling, pricing strategy, platforms, intermodal competition, travel behavior |
| JEL: | D43 L11 L91 R41 R48 |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:gre:wpaper:2025-47 |
| By: | Rapold, Ingo |
| Abstract: | This revised version corrects minor errors in the mathematical equations of the previous version (MPRA Paper No. [126467]). The theoretical argument and main conclusions remain unchanged. The paper examines quality uncertainty as a source of market failure and analyzes the resulting adjustment mechanisms and regulatory implications. This dissertation analyzes market failure under quality uncertainty and develops the goodwill approach as an alternative to signalling models in information economics. The study focuses on the existence of irreversible entry costs that arise endogenously from informational frictions rather than from explicit expenditures such as advertising or introductory pricing. The central idea is that new entrants in markets with incomplete consumer information cannot immediately sell their profit-maximizing output at the prevailing market price, because consumers initially lack sufficient trust in their product quality. As a result, newcomers must operate temporarily at higher average costs than established firms. Market entry therefore continues only as long as incumbent suppliers earn prices that at least compensate these initial cost disadvantages. In equilibrium, price premia for high-quality products persist even under free market entry. These equilibrium premia provide the incentive for established firms to maintain product quality: as long as the present value of future price premia exceeds the potential short-term gain from hidden quality deterioration, quality will be sustained. Non-cost-covering introductory prices or advertising expenses are not essential components of the goodwill model but represent optional instruments to reduce the irreversible costs of market entry. Beyond this theoretical contribution, the dissertation discusses the resulting implications for competition policy and regulation in markets characterized by persistent quality uncertainty. |
| Keywords: | Quality uncertainty; Goodwill; Market failure; Information economics; Asymmetric information; Reputation; Entry costs; Regulatory policy |
| JEL: | D82 H42 L15 |
| Date: | 2025–10–12 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:126777 |
| By: | Christopher Teh (Toulouse School of Economics, 31000 Toulouse, France & School of Economics,); Chengsi Wang (Department of Economics and Monash Digital Lab, Monash University) |
| Abstract: | This article critically examines recent economic theories on the relationship between startup acquisitions and innovation. We argue that the prevalence of killer acquisitions is likely overstated, even from a purely theoretical perspective. We further show that the entry-for-buyout effect may not always hold: relaxing merger control does not necessarily lead startups to invest more or pursue more disruptive innovation. Effective merger policy must adopt a dynamic perspective, balancing short-term competitive harms against long-terminnovation benefits. The article concludes with practical policy recommendations for the design and enforcement of merger control. |
| Keywords: | acquisition, innovation, merger policy, startup |
| JEL: | G34 L12 L41 O3 |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:mos:moswps:2025-15 |
| By: | Malik Curuk; Jérôme Héricourt; Gonzague Vannoorenberghe |
| Abstract: | Estimating the effects of goods and labor market power on firm pricing behavior is difficult since firm-level output and employment are jointly determined. We exploit the variation in the sets of destination countries across exporting firms, which enables us to separately identify the effects of goods and labor market power on pass-through rates by reducing the comovement of firm size across specific sales markets and in its local labor market. We present a theoretical framework in which multi-destination exporters are oligopolists in their goods markets and oligopsonists in their local labor market. Combining firm-level trade data per product-destination with establishment-level balance sheet data and employment zone identifiers for the universe of French firms from 1995 to 2015, we construct theoretically sound proxies for labor and goods market power and jointly estimate their effects on export prices using exchange rate shocks as the source of identifying variation in firm demand. Consistent with the model's predictions, we provide robust evidence that firms with stronger labor market power have a lower pass-through of changes in their effective exchange rate into export prices conditional on their goods market power. The findings indicate a sizable degree of labor market power for French exporters. |
| Keywords: | Labor Market Power;Goods Market Power;Exchange Rate;Pass-through |
| JEL: | F16 F31 J42 |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:cii:cepidt:2025-15 |
| By: | Chen, Yuran; Duan, Dongni; Mao, Yidan; Zhang, Lingli |
| Abstract: | Using Chinese A-share listed data from 2007 to 2020, we reveal that increased competition in the banking system impairs the audit quality of banks’ credit clients, which is attributed to the loss of bank supervision. For firms with poor corporate governance or information quality, firms that hire auditors with low independence or high catering motivation, or firms in an immature external environment, such negative effect is more prominent. Furthermore, we indicate that firms are prone to shop for favorable audit opinions under high banking competition. Overall, we illustrate the negative effect of banking competition on auditors and provide meaningful implications. |
| Keywords: | regional banking competition; emerging market; auditor conservatism; Regional banking competition; AAM requested |
| JEL: | M42 G21 |
| Date: | 2024–12–30 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:123656 |
| By: | David P. Brown (University of Alberta); Andrew Eckert (University of Alberta); Douglas Silveira (Federal University of Juiz de Fora) |
| Abstract: | The extent of real-time information disclosure in electricity markets has been a longstanding debate. Regulators have the difficult task of striking a careful balance between transparency to improve market outcomes under uncertainty while limiting the potential for coordinated action. We consider the case of Alberta’s electricity market where, until 2017, firms observed anonymized price-quantity offers in the wholesale market in near-real-time. We empirically evaluate the role that this information played in improving firms’ abilities to forecast wholesale prices, a key argument raised by stakeholders for this information to be published. While we find that this information improved firms’ abilities to forecast wholesale prices under certain market conditions, we present evidence to suggest that the economic significance of this improvement is minimal. We point to other types of near-real-time information that could help improve expectations of future market outcomes and provide suggestions on information disclosure policies that aim to strike a balance on motivating efficient outcomes, while reducing the risk of coordination. |
| Keywords: | Machine Learning; Electricity; Price Forecasting; Competition Policy |
| JEL: | D43 L13 L50 L94 Q40 |
| Date: | 2025–10–26 |
| URL: | https://d.repec.org/n?u=RePEc:ris:albaec:021762 |
| By: | Yusuke Takahashi (Bank of Japan); Kazuki Otaka (Bank of Japan); Naoya Kato (Bank of Japan) |
| Abstract: | In this article, we present some preliminary analyses in which Large Language Models (LLMs) are used as economic agents in simulations, as an example of utilizing Generative AI in economic analysis. Existing research reports that Generative AI provides responses consistent with predictions suggested in fields like behavioral economics. There are also some studies which have applied Agent-Based Models (ABM) by treating Generative AI as "players" in a market. However, even though Generative AI exhibits behavior similar to actual economic agents, in reality, it is merely outputting statistically consistent responses based on patterns found in its training data. Therefore, whether the results of simulations that treat Generative AI as economic agents are consistent with economic theory depends crucially on the AI's training data. In this article, we conduct simple ABM simulations to demonstrate how Generative AI can be applied, and examine whether its responses are aligned with intuition and economic theory. Our results are consistent with economic theory: (1) consumers adjust their spending in response to real wage fluctuations; and (2) firms find it easier to pass costs on to consumers in a monopoly market compared to a duopoly market. We conclude that it is necessary to continue verifying through other economic analyses whether simulations using Generative AI consistently lead to conclusions congruent with economic theory. |
| Keywords: | Generative AI; Agent-Based Model; Consumer Behavior; Price Setting Behavior |
| JEL: | C63 D11 D40 |
| Date: | 2025–11–13 |
| URL: | https://d.repec.org/n?u=RePEc:boj:bojlab:lab25e01 |
| By: | Tiziano de Angelis (UNITO - Università degli studi di Torino = University of Turin); Fabien Gensbittel (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - Comue de Toulouse - Communauté d'universités et établissements de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Stéphane Villeneuve (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - Comue de Toulouse - Communauté d'universités et établissements de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement) |
| Abstract: | We construct Nash equilibria in feedback form for a class of two-person stochastic games of singular control with absorption, arising from a stylized model for corporate finance. More precisely, the paper focusses on a strategic dynamic game in which two financially-constrained firms operate in the same market. The firms distribute dividends and are faced with default risk. The strategic interaction arises from the fact that if one firm defaults, the other one becomes a monopolist and increases its profitability. The firms choose their dividend distribution policies from a class of randomised strategies and we identify two types of equilibria, depending on the firms' initial endowments. In both situations the optimal strategies and the equilibrium payoffs are found explicitly. |
| Keywords: | Nash Equilibrium, Dividend problem, Free boundary problems, Randomised strategies, Nonzero-sum games, Singular controls |
| Date: | 2025–09–23 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05345639 |
| By: | Comisión Nacional de los Mercados y la Competencia (CNMC) (Comisión Nacional de los Mercados y la Competencia (CNMC)) |
| Abstract: | The port system is of great importance for the transport of goods and passengers both nationally and internationally, with implications for consumers and all productive sectors. To identify problems of efficiency and competition and make recommendations for improvement, this study examines the framework in Spain of the technical-nautical services of pilotage, towing and mooring and unmooring; the collection of ship-generated waste and cargo residues (or MARPOL) and the bunkering service. It is recommended, first, to improve the framework applicable to the provision of services, adapting the specifications and the mechanisms of concessions and licenses to a competitive approach, establishing appropriate incentives and considering the creation of an independent supervisor. Second, to promote a regime of competition in access to the pilotage service. Third, to promote competition in the towing service. Fourth, to make the provision of the collection of ship-generated waste and cargo residues service more flexible in terms of the waste and ports that can be selected to provide the service, defining the charges and the use of surpluses in a way that is appropriate for competition. Finally, a framework of transparency and competition in the fuel supply service is recommended. |
| Keywords: | Competition, Efficiency, Regulation, Pilotage, Towing, Mooring, Unmooring, Collection of ship-generated waste and cargo residues, Fuel supply, Ports |
| JEL: | K23 L43 L51 L92 R4 |
| Date: | 2025–09–17 |
| URL: | https://d.repec.org/n?u=RePEc:awo:epaper:e/cnmc/004/24_eng |
| By: | Comisión Nacional de los Mercados y la Competencia (CNMC) (Comisión Nacional de los Mercados y la Competencia (CNMC)) |
| Abstract: | The port system is of great importance for the transport of cargo and passengers nationally and internationally, with implications for consumers and all productive sectors. This study examines the cargo handling and the passenger port services in Spain in order to identify efficiency and competition issues and make recommendations for improvement. It is recommended, first, to promote a transparent, efficient and pro-competitive institutional and regulatory framework, to strengthen the calculation of maximum charges and transparency, to establish incentives for efficiency, to update the Specific Terms and Conditions and to consider creating an independent supervisor. Second, for the cargo handling, it is recommended to facilitate access to the profession, to promote efficiency in the provision of workers through a regime based on direct hiring or temporary employment of workers, to promote automation, to strengthen the efficiency of the PIFs and to promote more competition in concessions. Finally, it is recommended to propose guidelines on the different models of operation of the passenger service. |
| Keywords: | Cargo, Passengers, Competition, Efficiency, Stowage, Concession, Terminal, Ports |
| JEL: | K23 L43 L51 L92 R40 |
| Date: | 2025–09–17 |
| URL: | https://d.repec.org/n?u=RePEc:awo:epaper:e/cnmc/005/24_eng |
| By: | Silvia Leoni; Marco Catola |
| Abstract: | The debate on environmental policy increasingly focuses on aligning private incentives with social objectives in imperfectly competitive markets. While traditional literature has centred on public-based mechanisms like taxes and subsidies, a growing strand emphasizes private-based mechanisms, particularly green consumerism, where consumer preferences can drive firms’ adoption of clean technologies. Recent game-theoretic analysis shows that consumers’ willingness-to-pay can lead to various market equilibria, from all-green to all-brown outcomes. This paper complements this analytical approach by developing an agent-based model (ABM) to study the dynamic evolution of a spatial market where firms, based on relative performance, decide whether to supply brown or green products to heterogeneous consumers. Our computational simulations confirm that all three market structures—all-brown, all-green, and mixed—can endogenously emerge depending on average green consumer preferences. Furthermore, we evaluate the effectiveness of three policy instruments: an environmental tax, a subsidy to green firms, and a subsidy to green consumers. We find that supply-side policies are more effective than demand-side subsidies. Specifically, an environmental tax ensures the fastest convergence to an all-green market, while a production subsidy is most effective at reducing the share of brown firms and consumers in mixed-market scenarios. By bridging game-theoretic insights with agent-based computational analysis, this paper provides a dynamic and policy-relevant perspective on the transition to sustainable markets. |
| Keywords: | agent-based modelling, pollution abatement, green technology, environmental policy |
| JEL: | C63 D43 H23 L13 L51 |
| Date: | 2025–11–01 |
| URL: | https://d.repec.org/n?u=RePEc:pie:dsedps:2025/326 |
| By: | Silvio Sorbera |
| Abstract: | In this paper, we analyze a model of competing sealed-bid first-price and second-price auctions where bidders have unit demand and can bid on multiple auctions simultaneously. We show that there is no symmetric pure equilibrium with strategies that are increasing in the lowest type, unlike in standard auction games. However, for a two-player game a symmetric mixed-strategy equilibrium exists, and bidders place bids on all available auctions with probability one. This holds true for any mixed equilibrium and for any number of bidders. We then solve the case of two auctions and two bidders. Analyzing the case of binary type space, we are able to identify mixed strategy equilibria and analyze the consequences of discrete bid spaces. |
| Keywords: | Simultaneous bidding, concurrent auctions, sealed-bid auctions, first-price auction, second-price auction |
| JEL: | C72 D44 |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2025_713 |
| By: | Xiaomeng Ding; Simon Weidenholzer; Boyu Zhang |
| Abstract: | We study evolutionary dynamics in which firms endogenously revise the behavioral rules that govern strategy revisions in symmetric Cournot oligopoly. Specifically, we consider two principles that guide rule revision, No-Birth and Survival-of-the-Fittest, both grounded in imitation-based heuristics. We show that, under these principles, all firms eventually adopt the same behavioral rule. Focusing on two classical rules, myopic best response and imitation, we demonstrate that rule revision plays a crucial role in determining long-run equilibria in Cournot oligopoly. The set of long-run equilibria includes the state where all players use best response learning and choose the Nash equilibrium quantities and states where all firms use imitation learning and choose specific symmetric quantities which include (but are not necessarily restricted to) Walrasian quantities. Our results extend to more general aggregative games. |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2511.09839 |
| By: | Okada, A.; Sabourian, H. |
| Abstract: | This paper addresses the relationship between cheap talk negotiation and collusion/efficiency in repeated games by explicitly modelling the negotiation. At each date, players bargain over how to play the continuation game and thereafter they play a stage game G. We consider equilibria that are measurable with respect to the latest agreement - as they are salient/focal features of the past. We show equilibrium payoffs are bounded below by that of a Nash equilibrium of G and are weakly renegotiation-proof. Our main results are: a non-babbling efficient equilibrium exists in many games if the discount factor δ is high, and every equilibrium payoff is either babbling or efficient in the limit as δ → 1. Finally, we check the robustness of the latter result to two perturbations: complexity costs and trustworthy/honourable players. Equilibria that survive the former perturbation are efficient or induce one-shot Nash equilibria and equilibria that survive the latter are efficient. |
| Keywords: | Repeated Games, Cheap Talk Negotiation, Efficiency, Babbling Equilibrium, Complexity Cost, Commitment Type |
| Date: | 2025–11–15 |
| URL: | https://d.repec.org/n?u=RePEc:cam:camdae:2575 |
| By: | Comisión Nacional de los Mercados y la Competencia (CNMC) (Comisión Nacional de los Mercados y la Competencia (CNMC)) |
| Abstract: | Behavioural economics has great potential to enhance the effectiveness and efficiency of regulations, public policies, and supervision, thereby benefiting the proper functioning of markets, consumers, and the economy. These instruments are flexible, respect freedom of choice, and are very low-cost. Therefore, many countries use these instruments systematically. To promote their use in Spain, the CNMC recommends creating a regulatory framework on the subject, including behavioural units, networks of experts, human capital, and integration into international forums. Second, adopting behavioural economics in the design and evaluation of regulations and public policies, promoting guidance documents, transparency, experimentation, and a sandbox. Third, introducing a behavioural approach into the work of supervisors, also promoting prevention and awarenessraising measures, and fostering collaboration between institutions. |
| Keywords: | Regulation, Supervision, Competition, Behavioural economics, Cognitive biases, Heuristics, Nudges |
| JEL: | C9 D9 K23 L4 L51 |
| Date: | 2025–07–08 |
| URL: | https://d.repec.org/n?u=RePEc:awo:epaper:e/cnmc/002/23_eng |