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on Industrial Competition |
| By: | Robin Ng |
| Abstract: | This paper examines how two-sided platforms develop their recommender systems to be precise about value-for-money. On each platform, more precise recommendations generate ranking and screening effects: they steer demand toward high value-for-money products, intensifying price competition among firms which drives out lower-quality firms. Thus, more precise recommendations benefit consumers but reduce platform’s per-transaction revenue. A monopolist platform still prefers precise recommendations, as this expands demand. Competing platforms choose even more precise recommendations. However, when consumers search across platforms or recommender systems are overly complex, recommendations become less precise. This shows that market power is only one potential explanation for 'ensh*ttification'. |
| Keywords: | Digital economy, Recommender systems, Two-sided platforms |
| JEL: | D21 L10 L86 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2025_718 |
| By: | Li, Mengjie; Lopez, Rigoberto A.; Mohapatra, Debashrita; Steinbach, Sandro |
| Keywords: | Agribusiness, Agricultural and Food Policy, Industrial Organization |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ags:aaea24:343666 |
| By: | Hans Jarle Kind; Dirk Schindler; Guttorm Schjelderup |
| Abstract: | Digital Services Taxes (DSTs) and the OECD/G20 BEPS reforms are central pillars of current efforts to tax multinational digital platforms, yet their joint effects remain poorly understood. We develop a model of a platform that sells hardware to consumers and advertising to firms, with the two markets connected through cross-group network externalities. We show that a DST can have counterproductive effects: it may lower tax revenue in the implementing country, weaken downstream price competition, and reduce consumer surplus by inducing the platform to shift activity toward the untaxed side of the market. We further show that stricter transfer pricing regulation - a core element of BEPS - can paradoxically increase profit shifting when network effects are strong. |
| Keywords: | digital platforms, digital services tax, BEPS, profit shifting |
| JEL: | F23 H26 H25 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12302 |
| By: | Hong Lee (Korea Institute for Industrial Economics and Trade) |
| Abstract: | Over the last three decades, global airlines have joined hands in cooperative efforts that have transformed the industry. Code sharing opened the door to the formation of broader alliances; these groups eventually sought and obtained antitrust immunity (ATI) to lawfully coordinate pricing and schedules on international routes. Today, the apotheosis of industrial collaboration is represented by an especially integrated form of cooperation known as the profit‑sharing, metal‑neutral joint venture (JV).<p> Typically, national competition authorities review the legality of these schemes on a case-by-case basis. JVs allow partners to coordinate fares, schedules, and capacity across routes in a manner that, in some markets, approximates the competitive consequences of a merger, while also promising greater efficiencies in terms of network alignment.<p> Theoretically, the net pro- or anti-competitive effect of any given JV is ambiguous. On the one hand, coordination can reduce costs and resolve double marginalization on connecting itineraries: when two carriers price sequential segments without coordination, each imposes a markup on the through itinerary; a JV internalizes this externality and can lower end‑to‑end fares.<p> On the other hand, joint control over schedules and capacity on overlapping routes can soften competition and allow for higher prices, particularly on gateway‑to‑gateway corridors with concentrated supply. The empirical literature reflects this ambiguity, with studies reporting both fare decreases on connecting flows and fare increases on nonstop overlaps. A key reason for the mixed evidence is methodological: most studies take the JV as a single binary treatment, implicitly averaging over distinct mechanisms that work in opposite directions. This paper opens the black box by separating shared marketing from shared operations at the itinerary level and estimating their separate effects on fares.<p> Using a difference‑in‑differences (DiD) design on transatlantic two‑segment connecting itineraries observed before (2004 to 2006) and after (2014 to 2016) the wave of JV approvals that occurred from 2008 to 2010, we find that each additional JV‑marketing segment is associated with a fare reduction from roughly 8.4 to 10.6 percent, whereas each additional JV‑operating segment is associated with a fare increase from 4.5 to 8.1 percent. In a typical case, where one segment is both marketed and operated within a JV, the implied net effect is a decrease of three to four percent. These mechanism‑specific results explain why average JV effects vary across contexts and provide a more robust foundation for antitrust scrutiny. |
| Keywords: | joint ventures; airline industry; antitrust immunity; ATI; competition policy; monopoly policy; collusion; price collusion; fair competition; South Korea |
| JEL: | D43 D62 |
| Date: | 2025–10–31 |
| URL: | https://d.repec.org/n?u=RePEc:ris:kieter:021805 |
| By: | Anna Ignatenko; Pierre Cariou; Haiying Jia; Francois-Charles Wolff |
| Abstract: | We separate the effects of market power and capacity constraints in transportation. A simple model shows imperfect competition—not capacity constraints—generates differential freight price changes across buyers following a demand shock. Consistent with this, difference-in-differences estimates reveal, after COVID-19 demand surge, freight forwarders faced a 30 pp larger increase in base freight rates than direct shippers despite identical contract terms. This reflects rising carrier markups that disproportionately burden smaller firms and explain at least 35% of freight price growth and 16% of U.S. import price inflation. Thus, competition in transportation is crucial for supplychain resilience and macroeconomic stability |
| Keywords: | market power, transportation, price discrimination, trade costs, inflation, intermediaries |
| JEL: | F1 L2 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12293 |
| By: | Michale R. Baye; Dan J. Kovenock; Casper G, de Vries |
| Abstract: | We show that MRPM can increase manufacturer profits and total output even in the absence of traditional justifications based on point-of-sale services, retailer effort, or free-riding. The key insight is that MRPM mitigates channel conflict by altering how retailers balance extracting surplus from loyal customers and competing for price-sensitive shoppers. When a manufacturer optimally chooses a wholesale price and MRPM policy, this can intensify competition and create systematic distributional effects: prices fall for loyal consumers but rise for shoppers, and the profits of smaller, shopper-dependent retailers decline. We characterize the conditions under which MRPM raises output, benefits a majority of consumers, and reallocates surplus among the manufacturer, retailers, and different consumer segments. The model helps explain why the political economy of MRPM varies across jurisdictions: even when it increases output, it creates predictable winners and losers, and there is no guarantee that the median consumer or retailer - or the median voter - benefits when minimum resale prices are imposed. These results suggest that the welfare and distributional effects of MRPM are inherently context-dependent and that its legal evaluation is best approached through a rule-of-reason framework that accounts for demand structure, retailer asymmetries, and the composition of consumer types. |
| Keywords: | resale price maintenance, vertical restraints, price competition |
| JEL: | D4 D8 M3 L13 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12299 |
| By: | Herrera Caicedo, Alejandro (University of Wisconsin-Madison); Jeffers, Jessica (HEC Paris); Prager, Elena (University of Rochester) |
| Abstract: | This paper studies whether common leadership, defined as two firms sharing executives or board directors, contributes to collusion. Using an explicit measure of labor market collusion from unsealed court evidence, we find that the probability of collusion between two firms increases by 12 percentage points after the onset of common leadership, compared to a baseline rate of 1.2 percent in the absence of common leaders. These results are not driven by closeness of product or labor market competition. Our findings are consistent with the increasing attention toward common leadership under Clayton Act Section 8. |
| Keywords: | Leadership; Clayton Act Section 8 |
| JEL: | D20 |
| Date: | 2025–06–02 |
| URL: | https://d.repec.org/n?u=RePEc:ebg:heccah:1580 |
| By: | Sriram Tolety |
| Abstract: | We study whether large language models acting as autonomous bidders can tacitly collude by coordinating when to accept platform posted payouts in repeated Dutch auctions, without any communication. We present a minimal repeated auction model that yields a simple incentive compatibility condition and a closed form threshold for sustainable collusion for subgame-perfect Nash equilibria. In controlled simulations with multiple language models, we observe systematic supra-competitive prices in small auction settings and a return to competitive behavior as the number of bidders in the market increases, consistent with the theoretical model. We also find LLMs use various mechanisms to facilitate tacit coordination, such as focal point acceptance timing versus patient strategies that track the theoretical incentives. The results provide, to our knowledge, the first evidence of bidder side tacit collusion by LLMs and show that market structure levers can be more effective than capability limits for mitigation. |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2511.21802 |
| By: | Davide Del Prete (the University of Naples Parthenope); Aminur Rahman (Asian Development Bank); Edoardo Tolva (University of Lisbon ISEG) |
| Abstract: | This paper studies how international buyers’ market power and transport mode shape the pass-through of exchange rate shocks to export prices. Using transaction level customs data from the Bangladeshi garment sector, we first document substantial buyer market power and the concentration of export activity in key trade hubs that shape transport decisions. We then show that large buyers leverage both their market power and their reliance on air freight to mitigate the impact of exchange rate fluctuations. Taken together, our findings highlight how buyer characteristics shape exporters’ adjustment to external shocks, with broader implications for regional economic resilience. |
| Keywords: | Bangladesh;exchange rate;global value chain;market power;transport mode |
| JEL: | D22 D43 E31 F10 L14 L22 |
| Date: | 2025–11–28 |
| URL: | https://d.repec.org/n?u=RePEc:ris:adbewp:021792 |
| By: | Xiao Ling; Sourav Ray; Daniel Levy |
| Abstract: | Much like small ripples in a stream, which get lost in the larger waves, small changes in retail prices often fly under the radar of public perceptions, while large price changes appear as marketing moves associated with demand and competition. Unnoticed, these could increase consumers out of pocket expenses. Indeed, retailers could boost their profits by making numerous small price increases or by obfuscating large price increases with numerous small price decreases, thereby bypassing the consumers full attention and consideration, and triggering consumer fairness concerns. Yet only a handful of papers study small price changes. Extant results are often based on a single retailer, limited products, short time span, and legacy datasets dating back to the 1980s and 1990s, leaving their current practical relevance questionable. Researchers have also questioned whether the reported observations of small price changes are artifacts of measurement errors driven by data aggregation. In a series of analyses of a large dataset containing almost 79 billion weekly price observations from 2006 to 2015, covering 527 products, and about 35, 000 stores across 161 retailers, we find robust evidence of asymmetric pricing in the small, where small price increases outnumber small price decreases, but no such asymmetry is present in the large. We also document the reverse phenomenon, where small price decreases outnumber small price increases. Our results are robust to several possible measurement issues. Importantly, our findings indicate a greater current relevance and generalizability of such asymmetric pricing practices than the existing literature recognizes. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2512.02564 |
| By: | Hang Wu; Qin Wu; Yue Liu; Mengmeng Shi |
| Abstract: | The rapid expansion of digital commerce platforms has amplified the strategic importance of coordinated pricing and inventory management decisions among competing retailers. Motivated by practices on leading e-commerce platforms, we analyze a sequential duopolistic newsvendor game where retailers first publicly set prices and subsequently make private inventory decisions under demand uncertainty. Our theory predicts that higher profit margins and demand uncertainty intensify price competition, while optimal inventory responses to demand uncertainty are shaped by profit margins. Laboratory evidence, however, reveals that participants are generally reluctant to compete on price, frequently coordinating on salient focal (reserve) prices, particularly in low-margin settings, and show little sensitivity to demand uncertainty in pricing. On the inventory side, participants' order quantities are largely insensitive to chosen prices and continue to exhibit well-documented Pull-to-Center biases. These findings reveal a disconnect between pricing and inventory decisions under competition and highlight the importance of accounting for persistent behavioral tendencies in retail operations. |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2512.00994 |
| By: | Çakir, Metin; Li, Qingxiao; Zhang, Xiaowei; Gregory, Christian A. |
| Keywords: | Food Consumption/Nutrition/Food Safety, Industrial Organization |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ags:aaea24:344056 |
| By: | Jaime Alonso-Carrera (Universidade de Vigo); María Jesús Freire-Serén (Universidade de Vigo); Xavier Raurich (Universitat de Barcelona) |
| Abstract: | We measure sectoral price markups, elasticities of substitution between capital and labor, and rates of factor-augmenting technical change in the United States from 1947 to 2010. Our approach utilizes the user cost of capital to decompose firms' operating surplus into capital payments and profits, enabling a direct computation of sectoral price markups. The results reveal that these markups are time-varying and exhibit a positive trend since 1980 in both manufacturing and services, mirroring the observed behavior of markups in the aggregate economy. Additionally, we estimate the elasticities of substitution and the rates of technical progress for each sector. We find that the estimated values of these technological parameters vary significantly depending on the assumption regarding the market structure of sectoral goods: perfect or imperfect competition. |
| Keywords: | Price markups, sectoral productivity, elasticity of substitution, factor-augmenting technical change |
| JEL: | O11 O41 O47 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ewp:wpaper:483web |