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on Industrial Competition |
| By: | Stöhr, Annika; Budzinski, Oliver |
| Abstract: | Identifying the boundaries of a market belongs to the important practices in most areas of antitrust and competition policy. While they are established practices for market definition and delineation, dynamic processes of competition and the new phenomenon of (digital) ecosystems of markets provide new challenges: market boundaries become (i) inherently dynamic and subject to evolutionary change, as well as (ii) subject to the deliberate design of powerful companies. Therefore, the prediction of post-event effects - e.g., competitive effects of a merger or such of an abuse of market power - may fail if they rely on a static or stationary market definition. If market boundaries change inherently through dynamic market competition, identifying these boundaries and their evolution becomes an integral part of a dynamic approach to competition policy - and not just preparatory work. Furthermore, if companies enjoying systemic market power in ecosystems (like e.g., cross-market power) and, thus, the power to shape market boundaries and deliberately change (previous) market delineations, then the identification of market boundaries cannot be viewed independent of the exploitation of market power. Both dynamics of market boundaries require a strongly different approach to market definition than the one of the Commission's 2024 Market Definition Note. |
| Keywords: | dynamic market boundaries, market definition, market delineation, antitrust, competition policy, industrial economics, dynamic competition, digital ecosystems, merger control, systemic market power, cross-market power |
| JEL: | D40 K21 L10 L40 L86 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:tuiedp:335040 |
| By: | Bougette, Patrice; Budzinski, Oliver; Marty, Frédéric |
| Abstract: | Digital platforms, ecosystems, and R&D-intensive sectors pose distinctive challenges for merger control. In these fast-evolving markets, shaped by technological change and shifting competitive dynamics, traditional ex-ante reviews often fall short in anticipating long-term outcomes. This paper proposes a multi-step merger control model that includes a mechanism for remedy revision, allowing authorities to adjust behavioral commitments during their implementation. By embedding structured flexibility into merger decisions, our approach enables remedies to evolve in response to market reconfigurations, strategic conduct, or regulatory insights. The framework aims to ensure that remedies remain proportionate, effective, and legally predictable. By bridging ex-ante assessment and ex-post adaptation, it offers a policy instrument better suited to the uncertainties of dynamic competition. |
| Keywords: | Merger control, merger remedies, dynamic competition, competition policy uncertainties, innovation, digital markets, mergers & acquisitions, merger waves |
| JEL: | K21 L12 L13 L41 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:tuiedp:335044 |
| By: | Stöhr, Annika; Budzinski, Oliver |
| Abstract: | State-owned firms from third countries play an increasingly significant role in international mergers and acquisitions, raising concerns about distortions of competition. These distortions arise from state-backed financial advantages, preferential treatment, and industrial policy objectives, potentially undermining market competition. This paper categorises different forms of competitive distortions, focusing on acquisitions financed by foreign state resources. Through an analysis of German and EU merger control cases (2012-2023), we assess the extent of this phenomenon and the treatment of such transactions by the respective competition authorities. While direct state involvement remains rare, it is prevalent in strategic industries such as energy and transport. We discuss potential policy responses, including expanded notification requirements, revised theories of harm, and stricter intervention criteria. However, we caution against excessive regulatory overreach that could lead to protectionist distortions. Our findings advocate for a nuanced approach to merger control that ensures competitive neutrality while safeguarding against state-driven market distortions. |
| Keywords: | competition policy, state-owned enterprises, merger control, foreign subsidies, EU competition law |
| JEL: | K21 L40 L44 L50 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:tuiedp:335042 |
| By: | Wojciech Olszewski; Yutong Zhang |
| Abstract: | When customers must visit a seller to learn the valuation of its product, sellers potentially benefit from charging a lower price on the first visit and a higher price when a buyer returns. Armstrong and Zhou (2016) show that such price discrimination can arise in equilibrium when buyers learn a seller's pricing policy only upon visiting. We depart from this assumption by supposing that sellers commit to observable pricing policies that guide consumer search and buyers can choose whom to visit first. We show that no seller engages in price discrimination in equilibrium. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2512.08136 |
| By: | Aggey Simons (Semenov) (Department of Economics, University of Ottawa, Canada); Jean Baptiste Tondji (Department of Economics, The University of Texas Rio Grande Valley, USA) |
| Abstract: | We develop an oligopoly theory of brand authenticity as a belief-based credence attribute valued by only a subset of consumers. Firms choose prices and costly authenticity efforts, while managers may derive private non-pecuniary benefits from being perceived as intrinsically motivated. Heterogeneity in consumer preferences and managerial motivations jointly determines equilibrium authenticity provision, pricing, and consumer sorting. Firms led by more authenticity-driven managers invest more and, under standard complementarity conditions, charge price premia. Authenticity is privately unsustainable when the attentive audience is small, viable when it is large, and fragile at intermediate sizes. In this fragile region, laissez-faire equilibrium exhibits inefficient exit despite socially valuable participation, reflecting an extensive-margin inefficiency that can be addressed by participation support or belief-based certification. |
| Keywords: | Authenticity, Authenticity-Driven Motivations, Market Segmentation, Oligopoly Pricing, Non-price Competition, Welfare |
| JEL: | C72 D21 D42 D60 L13 L15 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ott:wpaper:2601e |
| By: | Liang Chen |
| Abstract: | Platform giants in China have operated with persistently compressed margins in highly concentrated markets for much of the past decade, despite market shares exceeding 60\% in core segments. Standard theory predicts otherwise: either the weaker firm exits, or survivors raise prices to monopoly levels. We argue the puzzle dissolves once firms are viewed as ecosystem optimizers rather than single-market profit maximizers. We develop a dynamic game in which a firm's willingness to subsidize depends on the spillover value its users generate in adjacent markets -- what we call \textit{ecosystem complementarity}. When this complementarity is strong enough, perpetual below-cost pricing emerges as the unique stable equilibrium. The result is not predation in the classical sense; there is no recoupment phase. It is a permanent state of subsidized competition, rational for each firm individually but potentially inefficient in aggregate. We characterize the equilibrium, establish its dynamic stability, and show that welfare losses compound over time as capital flows into subsidy wars rather than innovation. The model's predictions are consistent with observed patterns in Chinese platform markets and suggest that effective antitrust intervention should target cross-market capital flows rather than prices. |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2601.15303 |
| By: | Ma, Yao |
| Keywords: | Industrial Organization, Demand and Price Analysis |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ags:aaea25:360977 |
| By: | Ali, Amjad; Afzal, Muhammad Bilal; Ahmad, Khalil |
| Abstract: | This study investigates how market concentration, specifically, the degree of competition within a sector impacts different innovation strategies, with particular emphasis on the distinction between long-term and short-term innovation approaches adopted by corporations. The research utilizes a dataset comprising an unbalanced panel of U.S based firms. To generate robust and valid conclusions, the analysis incorporates a suite of statistical and econometric methodologies, such as regression analysis, multicollinearity diagnostics, tests for endogeneity, and comprehensive robustness assessments. These tools are employed to examine the connection between market concentration, measured by the Herfindahl-Hirschman Index, and the innovation horizon, defined as the interval between initial research and development investments and the attainment of innovative outcomes. Furthermore, the robustness analyses confirm the reliability of the findings across various modeling specifications, providing empirical evidence that heightened market concentration correlates significantly with a reduced innovation horizon. The results reveal that firms operating in markets characterized by high concentration are inclined toward short-term innovation strategies, likely as a result of intense competitive dynamics among a limited number of dominant players striving to retain market share. These insights advance the understanding of how market structure shapes the strategic timing of innovation within firms, yielding important implications for innovation policy as well as managerial decision-making. |
| Keywords: | Market Competition, Innovation Horizon, Firm Innovation, Herfindahl-Hirschman Index |
| JEL: | M13 O3 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:127526 |
| By: | Bohan Zhang |
| Abstract: | This paper develops a theoretical model of platform competition where user-generated content (UGC) quality arises endogenously from the composition of the user base. Users differ in their relative preferences for content quality and network size, and platforms compete by choosing advertising intensity, which affects user utility through perceived quality. We characterize equilibrium platform choice, identifying conditions under which equilibria are stable. The model captures how platforms' strategic decisions shape user allocation and market outcomes, including coexistence and dominance scenarios. We consider two types of equilibria in advertising levels: Nash equilibria and Stackelberg equilibria, and discuss the industry and policy implications of our results. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2512.08876 |
| By: | Hey, Florian; Zombek, Max |
| Abstract: | The automotive industry is undergoing a fundamental transformation driven by digitization, enabling original equipment manufacturers (OEMs) to exert increasing control over vehicle functions, data, and - consequently - aftersales markets. Despite high relevance for consumers, regulatory scrutiny remains limited. This paper examines whether these developments constitute digital gatekeeping in a functional sense, and whether they justify increased regulatory attention. We show that OEMs' digital strategiesreinforce their dominance in secondary markets, particularly repair and maintenance. We assess the current European regulatory framework, focusing on the European Motor Vehicle Block Exemption Regulation (MVBER), and argue that it has not kept pace with the realities of software-defined vehicles. The planned MVBER review provides an opportunity to reassess legacy privileges and adapt competition rules to the digital age. We discuss potential reforms, including improved data access, stronger interoperability standards, and a broader definition of aftermarket components. We also examine supplementary measures such as a Right to Repair regime and self-regulation. Our analysis concludes that OEMs increasingly act as digital gatekeepers and that existing frameworks inadequately address the resulting risks. Regulatory recalibration is needed to safeguard innovation, consumer welfare, and long-term market openness. |
| Keywords: | aftermarket, antitrust, car data, competition policy, connected car, data governance, digital ecosystems, Digital Markets Act (DMA), extended vehicle, gatekeeping, interoperability, Motor Vehicle Block Exemption Regulation (MVBER), non-discriminatory terms, Original Equipment Manufacturer (OEM), rent seeking, Right to Repair, software defined vehicle |
| JEL: | D72 K21 L40 L42 L50 L51 L62 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:tuiedp:335043 |
| By: | Chevalier-Roignant, Benoît; Villeneuve, Stéphane |
| Abstract: | We study the effect of upstream competition and supply shocks on a buyer’s investment decisions, under demand uncertainty. Imperfect upstream competition leads to double marginalization. This effect is mitigated if the supplier pool is larger (when production costs are linear or in case of diseconomies of scale): The resulting lower equilibrium input price ultimately benefits the buyer and makes it more likely to invest sooner. A supply shock—that shrinks the supplier base—may increase the market power of the remaining suppliers and exacerbate double marginalization. Such a shock may arise either exogenously (due to a sudden external event) or endogenously (when profitability upstream is reduced). An exogenous shock, which leads to higher input prices and lower order quantities, reduces the profitability of the buyer, which is then less inclined to invest if more suppliers are affected by it. When the shock arises endogenously, the buyer may be better off and invest sooner if it subsidizes its supplier base as a way to maintain more competition upstream. |
| Keywords: | Supply shock; supply chain; real options; |
| Date: | 2026–01–22 |
| URL: | https://d.repec.org/n?u=RePEc:tse:wpaper:131302 |
| By: | Li, Mengjie; Lopez, Rigoberto |
| Keywords: | Industrial Organization, Demand and Price Analysis |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ags:aaea25:360964 |
| By: | Jan De Loecker; Catherine Fuss; Nathan Quiller-Doust; Leonard Treuren |
| Abstract: | We separately observe variable input expenditure and expenditure on fixed inputs in novel firm-level data covering the Belgian manufacturing sector over the last decades. This permits a deeper investigation of two potential drivers of the globally observed widening gap between firms’ revenue and variable input expenditure: technology and market power. Across the board, cost structures have become less reliant on variable input expenditure over time, while expenditure on fixed inputs or overhead costs has increased in prominence. We relate these changes in firms’ cost structures to performance measures and document that markups and gross profit rates increase substantially as the role of variable costs in production diminishes. Profit rates net of fixed input expenditure also increase, but by substantially less than gross profit rates. Our results suggest that technological change can explain a considerable portion of the widening gap between revenue and variable input expenditure, but that markups increase by more than necessary to break even, and that this phenomenon operates remarkably similarly across different firms and industries. |
| Keywords: | STG/23/026#57790427 |
| Date: | 2024–10–10 |
| URL: | https://d.repec.org/n?u=RePEc:ete:ceswps:779663 |
| By: | Iacopo Varotto (BANCO DE ESPAÑA) |
| Abstract: | I study how firms’ defensive investments affect aggregate total factor productivity in a general-equilibrium model where incumbents invest both to raise productivity and to deter entry or imitation; entry occurs either by new firms into existing markets or by leading firms in entirely new product lines. Calibrating the model to US firm size, productivity, and market share distributions, I find that cracking down on defensive investments increases TFP by 1.9 percent, about three-quarters of which reflects higher technical efficiency, driven mainly by improved firm-level productivity. This gain is substantially offset by reduced product variety; absent this loss, the TFP effect would be more than four times as large. Profit taxes targeted at high-productivity leaders – those most prone to block imitation – can stimulate frontier innovation while limiting variety losses. Firm-level US evidence supports these mechanisms. |
| Keywords: | defensive investment, total factor productivity, firm dynamics, competition policy |
| JEL: | E22 D23 D43 L11 L13 L60 O33 O43 |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:bde:wpaper:2601 |
| By: | Keita Kuwahara |
| Abstract: | This note revisits the analysis of third-degree price discrimination developed by Bergemann et al. (2015), which characterizes the set of consumer-producer surplus pairs that can be achieved through market segmentation. This was proved by means of market segmentation with random prices, but it was claimed that any segmentation with possibly random pricing has a corresponding direct segmentation, where a deterministic price is charged in each market segment. However, the latter claim is not correct under the definition of market segmentation given in the paper, and we provide counterexamples. We then propose an alternative definition to resolve this issue and examine the implications of the difference between the two definitions in terms of the main result of their paper. |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2601.07452 |
| By: | Budzinski, Oliver; Stöhr, Annika |
| Abstract: | Since Mario Draghi's 2024 report on "The Future of European Competitiveness", identifying European (i) weaknesses in global innovation and, consequently, in global market impact, as well as (ii) regulatory overburden, the term competitiveness has been propelled into massive popularity. For instance, competitiveness has been established as a core guiding principle for the work of the European Commission (the competitiveness compass as a new roadmap for EU economic policy. But what does competitiveness exactly mean and how does it relate to competition? This contribution addresses possible concepts of competitiveness and their relationship with concepts of competition. Furthermore, we compare current narratives surrounding the competition-competitiveness interrelation with stylized academic empirical evidence. We conclude that (i) it should always be explicitly specified which notion and concept of the term competitiveness is referred to, (ii) effective competitiveness policies must be competition-based (i.e., promote competitiveness through competition), (iii) a selective firmor industry-focused competitiveness policy is likely to decrease welfare in a world where lobbyism, rent-seeking, and imperfect political incentives are prevalent, (iv) narratives that we have experienced a specifically competition-centric era during the last decades are not supported by scientific findings, and (v) competition policy and merger control should be reinvigorated to promote public interest goals such as social welfare and economic resilience. |
| Keywords: | competitiveness, competition, antitrust, industrial policy, resilience, lobbyism, locational competition, innovation, rent-seeking |
| JEL: | L40 L50 L52 F13 K21 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:tuiedp:335048 |
| By: | Ester Faia; Benjamin Lochner; Benjamin Schoefer |
| Abstract: | This paper presents the first direct test of two interlinked predictions at the core of the monopsony theory of the labor market: (i) that firms exploit wage-setting power by marking down wages below the marginal revenue product of labor, and (ii) that exogenous wage constraints, if binding, eliminate markdowns. Our research design revisits the 2015 introduction of a high minimum wage in Germany. Drawing on a monopsony model, we derive an empirically tractable difference-in-differences specification that provides a quantitative benchmark for the firm-level markdown response. Our main result is that empirical markdowns respond only 0–25% as much as the monopsony model would have predicted. Hence, at least for the labor market segment we study, (i) markdowns largely reflect other distortions than monopsony, (ii) markdowns are mismeasured, (iii) minimum wages induce widespread labor shortages, or (iv) the standard monopsony model does not provide a full, realistic account of the labor market. |
| JEL: | E0 J0 L0 |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34699 |
| By: | Jiaming Wei; Dihan Zou |
| Abstract: | We study monopoly regulation under asymmetric information about costs when subsidies are infeasible. A monopolist with privately known marginal cost serves a single product market and sets a price. The regulator maximizes a weighted welfare function using unit taxes as sole policy instrument. We identify a sufficient and necessary condition for when laissez-faire is optimal. When intervention is desired, we provide simple sufficient conditions under which the optimal policy is a progressive price cap: prices below a benchmark face no tax, while higher prices are taxed at increasing and potentially prohibitive rates. This policy combines delegation at low prices with taxation at high prices, balancing access, affordability, and profitability. Our results clarify when taxes act as complements to subsidies and when they serve only as imperfect substitutes, illuminating how feasible policy instruments shape optimal regulatory design. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2512.06525 |
| By: | Budzinski, Oliver; Kunz-Kaltenhäuser, Philipp |
| Abstract: | The so-called 50plus1-rule in German football is a controversially discussed institution that regulates the investment behavior of professional football teams. This paper provides an empirical analysis of its effects. We gathered panel data on 47 teams in the German Major League Football ("Erste Bundesliga") from the seasons 1989/90 until 2018/2019. This paper applies a Difference-in-Differences approach to examine investment behavior in budgets, as well as sporting success between impacted competitors and those exempted from the rule. Our results do not suggest any equalizing properties of the regulation. By contrast, we find anticompetitive effects and distorting properties of the current regulation. |
| Keywords: | 50plus1-rule, football, sports economics, financial regulation, investment, sport finance, soccer, competition economics, sports antitrust |
| JEL: | Z23 Z21 Z2 J83 L11 L50 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:tuiedp:335039 |
| By: | Liran Einav; Mariana D. Guido; Peter J. Klenow |
| Abstract: | We define the concept of customer overlap of product j with product k as the share of j's customers who buy k. We then argue that, in appropriate contexts, customer overlaps are an excellent proxy for diversion ratios, a useful and popular way to summarize competition between sellers of substitute products. Unlike diversion ratios, which are often challenging to estimate, customer overlaps are straightforwardly observed in many data sets. We show theoretically, and then validate empirically, the close connection between customer overlaps and diversion ratios. We then illustrate the potential use of customer overlap in contexts where estimation of diversion ratios could be prohibitive. |
| JEL: | L40 L44 |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34693 |
| By: | Jaeyeon Kim (Department of Legal, Economics, Accounting and Finance, Shannon School of Business at Cape Breton University, Sydney, Nova Scotia); Frank Stahler (School of Business and Economics, University of Tubingen, Tubingen, Germany); Halis Murat Yildiz (Department of Economics, Toronto Metropolitan University, Toronto, Canada); |
| Abstract: | This paper investigates the equilibrium entry mode of a foreign firm into a domestic market that can export, do a greenfield investment or acquire one or two domestic firms. We also scrutinize the optimal merger policy of the host country and whether it can induce the most preferred entry mode. We find that acquisitions are more likely with sufficiently large economies of scale, and this is also the endogenous outcome of optimal merger policies. Furthermore, the host government can induce the most preferred market structure if and only if the foreign firm always wants to acquire at least one domestic firm. Our findings suggest that a strict merger policy is more likely to be optimal as the greenfield investment cost rises. Finally, the national merger policy can be excessive as monopolization may raise aggregate world welfare if the benefits from economies of scale are substantial. |
| Keywords: | Foreign direct investment, market entry, oligopoly, merger policy, economies of scale |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:rye:wpaper:wp099 |
| By: | Dipankar Das |
| Abstract: | This paper presents the Sequential Rationality Hypothesis, which argues that consumers are better able to make utility-maximizing decisions when products appear in sequential pairwise comparisons rather than in simultaneous multi-option displays. Although this involves higher cognitive costs than the all-at-once format, the current digital market, with its diverse products listed by review ratings, pricing, and paid products, often creates inconsistent choices. The present work shows that preparing the list sequentially supports more rational choice, as the consumer tries to minimize cognitive costs and may otherwise make an irrational decision. If the decision remains the same on both offers, then that is a consistent preference. The platform uses this approach by reducing cognitive costs while still providing the list in an all-at-once format rather than sequentially. To show how sequential exposure reduces cognitive overload and prevents context-dependent errors, we develop a bounded attention model and extend the monotonic attention rule of the random attention model to theorize the sequential rational hypothesis. Using a theoretical design with common consumer goods, we test these hypotheses. This theoretical model helps policymakers in digital market laws, behavioral economics, marketing, and digital platform design consider how choice architectures may improve consumer choices and encourage rational decision-making. |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2601.15332 |
| By: | Debasis Mishra; Sanket Patil; Alessandro Pavan |
| Abstract: | We study procurement design when the buyer is uncertain about both the value of the good and the seller's cost. The buyer has a conjectured model but does not fully trust it. She first identifies mechanisms that maximize her worst-case payoff over a set of plausible models, and then selects one from this set that maximizes her expected payoff under the conjectured model. Robustness leads the buyer to increase procurement from the least efficient sellers and reduce it from those with intermediate costs. We also study monopoly regulation and identify conditions under which quantity regulation outperforms price regulation. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2512.08177 |
| By: | Yueran Ma; Mengdi Zhang; Kaspar Zimmermann |
| Abstract: | We collect new data to document the long-run evolution of the firm size distribution in ten market-based economies in Asia, Europe, North America, and Oceania, where we can obtain comprehensive coverage of the population of firms. Around the world, we observe prevalent increases in the concentration of sales, net income, and equity capital over the past century. These trends hold in the aggregate and at the industry level. Meanwhile, employment concentration has been stable over the long run in most cases. The evidence shows that the rising dominance of large firms is a pervasive phenomenon, not limited to the recent decades or the United States, and that large firms often achieve greater scale without proportionally more workers. |
| JEL: | E01 L1 N1 |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34711 |
| By: | Yukun Zhang; Tianyang Zhang |
| Abstract: | This paper develops a micro-founded economic theory of the AI industry by modeling large language models as a distinct asset class-Digital Intelligence Capital-characterized by data-compute complementarities, increasing returns to scale, and relative (rather than absolute) valuation. We show that these features fundamentally reshape industry dynamics along three dimensions. First, because downstream demand depends on relative capability, innovation by one firm endogenously depreciates the economic value of rivals' existing capital, generating a persistent innovation pressure we term the Red Queen Effect. Second, falling inference prices induce downstream firms to adopt more compute-intensive agent architectures, rendering aggregate demand for compute super-elastic and producing a structural Jevons paradox. Third, learning from user feedback creates a data flywheel that can destabilize symmetric competition: when data accumulation outpaces data decay, the market bifurcates endogenously toward a winner-takes-all equilibrium. We further characterize conditions under which expanding upstream capabilities erode downstream application value (the Wrapper Trap). A calibrated agent-based model confirms these mechanisms and their quantitative implications. Together, the results provide a unified framework linking intelligence production upstream with agentic demand downstream, offering new insights into competition, scalability, and regulation in the AI economy. |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2601.12339 |
| By: | Rui Xu |
| Abstract: | The rise of fintech lenders has intensified competition in the banking industry. This study utilizes Brazilian bank-level data to examine the causal impact of increased competition on commercial banks’ lending rates and profitability. Employing a bank-specific Bartik exposure, constructed from comprehensive credit and balance sheet information across all Brazilian banks and fintech lenders, the analysis reveals that commercial banks sustained their loan portfolios primarily by lowering lending rates. Specifically, a one standard deviation increase in fintech competition exposure corresponds to a 3.7 percentage point reduction in average lending rates at commercial banks. Banks’ operational efficiency increased due to heightened competition, but their net interest margins narrowed, adversely affecting overall profitability. Between 2018 and 2024, fintech competition is estimated to have lowered banks’ average lending rates by 2.7 percentage points and reduced traditional banks' net interest margins by 0.9 percentage points. |
| Keywords: | Brazil; fintech lenders; digital banks; commercial banks; competition; lending rates; profitability; operational efficiency. |
| Date: | 2026–01–16 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2026/007 |
| By: | Budzinski, Oliver; Stöhr, Annika |
| Abstract: | Algorithm- and data-based recommendation systems (DARS) have become a central component of the digital economy, shaping how users access, evaluate, and consume information and goods. These systems encompass both search rankings tailored to estimated user preferences and direct recommendations such as "watch next" or "users also bought". Their growing influence has prompted regulatory interest worldwide, with debates centering on their economic, social, and cultural implications. Drawing on attention economics and behavioral insights, the paper highlights the functional necessity of pre-selection mechanisms in information-overload environments. Personalized DARS improve preference matching, expand the diversity of content receiving attention, and tend to intensify competition - particularly in comparison to one-size-fits-all or editorially curated systems. However, DARS also carry significant risks: they may reinforce biases through self-preferencing, amplify echo chambers, limit exposure to diverse viewpoints, and raise privacy concerns due to their reliance on granular behavioral data. Based on these challenges, this paper provides a comparative institutional analysis of regulatory options for DARS, evaluated through a modern, economicsbased framework. It examines regulatory effects across three key dimensions: (i) preference fit, (ii) information transparency, and (iii) competition intensity. The paper evaluates a range of regulatory strategies, such as transparency obligations, interoperability obligations, randomized rankings, editorial curation, and structural interventions. While each option addresses specific risks, the analysis shows that more interventionist regimes often come at the cost of reduced competition and diminished content diversity. The paper concludes that effective regulation should avoid substituting personalized DARS altogether and instead focus on addressing core pitfalls - particularly those arising from vertical integration and opacity - without eroding the systems' welfare-enhancing functions. |
| Keywords: | recommender systems, attention economics, institutional economics, regulation, competition, algorithms, data, digital economy, privacy |
| JEL: | B52 D02 D80 K20 L51 L81 L82 L86 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:tuiedp:335046 |
| By: | Laurenz Marstaller (University of Bonn) |
| Abstract: | Heterogeneous search costs enable price discrimination, which I study in the canonical Wolinsky (1986) sequential search setting. Firms observe a public signal of a consumer’s search cost before posting a personalized price. The welfare effects of search-cost-based price discrimination depend on the distribution of search costs. For sufficiently small search costs, all consumers participate, and price discrimination reduces consumer surplus. When search costs are sufficiently dispersed, price discrimination reduces participation; its effect on consumer surplus is ambiguous and decomposed into three forces. This decomposition guides optimal information design: the consumer-surplus-maximizing policy is a binary signal that separates low- and high-search-cost consumers. |
| Keywords: | Privacy, Price Discrimination, Search Costs, Consumer Search Market |
| JEL: | D83 L13 D18 D43 |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:ajk:ajkdps:387 |
| By: | Budzinski, Oliver |
| Abstract: | Commercial sports belong to the biggest entertainment industries in the world and, at the same time, are regularly raising antitrust concerns. This is partly due to the omnipresence of powerful market-internal regulators. These sport governing bodies set, implement, and enforce the rules and additionally engage in commercial activities. In a series of four judgments within less than a year, the European Court of Justice found (potential) antitrust violations in cases of deterring market entry, distorting competition, and exploiting players. This contribution adds economic comments to the predominantly legal literature on these judgements. It concludes that despite important steps in the right direction, more antitrust enforcement is necessary to protect competition in this unique entertainment industry vis-à-vis the presence of market-internal, private regulators. Next to limiting their scope (where the court provided progress), also the incentives for anticompetitive conduct must be addressed. |
| Keywords: | sport markets, sport governance, competition policy, antitrust, sports associations, institutions, market-internal regulators, European Court of Justice, competition economics, sports economics |
| JEL: | K21 L40 L50 L83 Z20 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:tuiedp:335047 |