|
on Industrial Competition |
| By: | de Cornière, Alexandre; Jerath, Kinshuk; Taylor, Greg |
| Abstract: | This paper analyzes seller-side tying on digital platforms, where access to a core intermediation service is conditioned on sellers using an ancillary service (e.g., fulfillment or payments). We model a monopoly platform matching consumers and competing sellers across many product categories, with consumers valuing the ancillary service heterogeneously. When adoption is voluntary, sellers under adopt because asymmetric adoption creates vertical differentiation that softens price competition, raising prices and reducing platform participation. Tying restores high adoption, intensifies competition, and increases consumer surplus. A ban on tying or structural separation lowers adoption and can harm consumers. |
| Date: | 2026–04–09 |
| URL: | https://d.repec.org/n?u=RePEc:tse:wpaper:131671 |
| By: | Marc Deschamps (Université Marie et Louis Pasteur); Dongshuang Hou (Department of Applied Mathematics, Northwestern Polytechnical University); Aymeric Lardon (Université Jean Monnet Saint-Étienne, CNRS, Université Lyon 2, GATE Lyon Saint-Étienne); Christian Trudeau (Department of Economics, University of Windsor) |
| Abstract: | We consider a homogeneous Cournot oligopoly where the inverse demand function is obtained by the utility maximization of a representative consumer, and firms may operate at different marginal costs. Assuming that some firms make a cartel while others remain independent, we introduce three new classes of TU-games, referred to as welfare TU-games, each corresponding to consumer surplus, total profit, and total welfare, respectively. Our results show that the games associated with consumer surplus and total welfare are monotonically decreasing and concave, highlighting a snowball effect of cartel formation on these two welfare measures. In contrast, the game associated with total profit is never superadditive, but it is monotonically increasing and concave when the number of firms is sufficiently small. Furthermore, we apply allocation methods, including the Shapley value and the serial method, to determine ex ante fair fines that firms must pay for participating in the cartel, allowing to differentiate fines both on the order of arrival in the cartel and on the technologies of the firms. For instance, in certain scenarios, some inefficient firms may receive lower fines for joining the cartel due to cost synergies. |
| Keywords: | Cournot competition; Cartel; Welfare; Shapley value; Antitrust. |
| JEL: | C71 D43 K21 L40 |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:wis:wpaper:2601 |
| By: | Panagiotis Kyriazis |
| Abstract: | Economic institutions often influence market outcomes not by directly controlling sellers' menus, but by shaping the market composition sellers face. We study this problem in the canonical monopoly screening model. An upstream actor chooses the distribution of buyer valuations, after which a monopolist offers the optimal quality-price menu. We characterize the optimal market composition and the efficient frontier of consumer surplus and profit. If the upstream actor places at least as much weight on profits as on consumer surplus, the optimal market collapses to the top type. If the weight on consumer surplus is larger than the weight on profits, the optimal market exhibits no exclusion, no interior bunching, and a positive mass at the highest valuation. Under a mild curvature condition, the optimum is unique. As the weight on consumer surplus rises, the optimal market becomes more heterogeneous and less concentrated at the top: the interior expands while the top segment shrinks. Consumer surplus rises, profit falls, and total surplus declines. |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2604.09340 |
| By: | Simone Voigt (first name last name) (Paderborn University) |
| Abstract: | This paper empirically investigates the relationship between market power and female board representation in large commercial banks in the EU-27 from 2020 to 2024. Using the Lerner Index as a proxy for market power and hand-collected data on female board representation, the findings suggest that increasing market power is detrimental to a bank’s likelihood of reaching the 33 percent gender diversity target for the board of directors, as proposed by the EU Directive EU2022/2381. The negative effect is especially pronounced for listed banks and systemically important banks, highlighting the importance of considering banking market structures (market power and competition) when enforcing regulatory diversity standards for those banks in particular. (abstract of the paper) |
| Keywords: | Market Power, Competition, Gender Diversity, Bankking, Female Board Representaton (keywords) |
| JEL: | G21 G34 J71 |
| URL: | https://d.repec.org/n?u=RePEc:pdn:dispap:175 |
| By: | Nigar Hashimzade; Haoran Sun |
| Abstract: | Industrial policy has returned to the centre of economic governance, particularly in the high-tech sectors where positive network externalities in demand make market dominance self-reinforcing. This paper studies the welfare effects of an industrial policy targeting a sector with network externalities in a two-country model with strategic trade and R&D investment. We show how the welfare consequences of this policy are determined by the interaction between the strength of the externality, the type of R&D, and the degree of product differentiation between the home and the imported goods. When externalities are weak or the goods are close substitutes, the business-stealing effect produces a race to the bottom that dissipates more surplus than it creates. Under sufficiently strong externalities and weak substitutability or complementarity of the goods, industrial policy competition can make both countries simultaneously better off compared to the laissez-faire outcome because of the mutual business-enhancement effect. The case is stronger for the product innovation than for the process innovation, as the former directly affects the demand and triggers a stronger network effect than the latter which operates indirectly through the supply. Thus, network externalities create an opportunity for win-win industrial policies, but its realisation depends on the market structure and the nature of innovation. |
| Keywords: | industrial policy, network externalities, R&D subsidies, strategic trade, Cournot competition |
| JEL: | F13 H25 L13 O38 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12592 |
| By: | Panagiotis Kyriazis; Edmund Lou |
| Abstract: | We investigate the relationship between product offerings, information dissemination, and consumer decision-making in a monopolistic screening environment in which consumers lack information about their valuation of quality-differentiated products. An intermediary, who is driven by the objective of maximizing consumer surplus but is also biased towards high-quality products, provides recommendations after the monopolist announces the menu of product choices. We characterize the monopolist's profit-maximizing finite-item menu. Our results show that as intermediaries place greater emphasis on consumer surplus over product quality, sellers are prompted to strategically expand their product range. Intriguingly, this augmented product variety decreases economic efficiency compared to scenarios where direct seller-to-consumer information provision is the norm. The role of information intermediaries proves pivotal in shaping consumer welfare, market profitability, and overarching economic efficiency. Our insights underscore the complexities introduced by these intermediaries that policymakers and market designers must consider when designing policies centered on consumer learning and market information transparency. |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2604.09343 |
| By: | John Fernald; Amit Gandhi; Dimitrije Ruzic; James Traina |
| Abstract: | We review the "production approach" to estimating markups, the ratio of price to marginal cost. The approach is uniquely scalable: it requires no model of consumer demand or market structure and applies broadly across firms, industries, and time. Our organizing insight is that the production-based markup is a residual. Like the Solow residual, it is clean in theory but potentially contaminated by misspecification and mismeasurement. This framing helps explain why small differences in implementation can produce starkly different results from the same data. In some cases, markups have risen sharply. In others, they have not. Despite the disagreements in the literature, the importance of understanding and measuring market power cannot be overstated. We provide conceptual rationales for this disagreement, offer practical guidance on data and estimation, and call for greater transparency about how much of the variation attributed to markups may instead reflect technology. |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2604.13224 |
| By: | Jose Garcia-Louzao; Alessandro Ruggieri |
| Abstract: | We exploit a novel opportunity to study the dynamics of wage inequality and labor market competition over the course of economic development. Our context is Lithuania, where two decades of sustained growth and labor market tightening coincided with a substantial decline in wage inequality. We first fit a two-way fixed-effects model with worker and firm heterogeneity and document that the compression of the variance of firm fixed effects has been the main source of the fall in inequality. Guided by a standard dynamic monopsony model, we then estimate firms' labor supply elasticities and show that labor market competition has increased over the same period. Finally, we construct a shift-share instrument and provide evidence that new job opportunities created by the accession to the European Union in 2004 contributed to the fall in inequality through their impact on labor market competition in Lithuania. |
| JEL: | J31 J42 O15 |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:bge:wpaper:1570 |
| By: | Vera Lubbersen |
| Abstract: | Payment card markets are globally dominated by a few large card networks, which give significant rebates to issuing banks. Policy makers are concerned about rising merchant fees and the overreliance on these networks’ payment services. A common assumption is that profitable entry is blockaded by the entry costs to set up the payment system and network, resulting in a monopolistic or duopolistic market structure. The question analyzed in this paper is under which conditions a card network sets rebates at a higher level such that competitors cannot profitably enter the market. Deterrence becomes more profitable for a large card network when transaction benefits increase - especially if issuing banks pass rebates through to cardholders. At the same time, entry becomes more blockaded if issuing banks face costs to switch their card issuance to a different card network - indicating that large card networks may use rebates to increase switching costs. These lock-in effects explain why domestic card networks are pushed aside and new card networks struggle to gain ground and may have important implications for payment regulation. |
| Keywords: | Payment cards; Rebates; Entry deterrence; Interchange fee; Card networks |
| JEL: | L12 L13 L14 L20 L21 |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:dnb:dnbwpp:856 |
| By: | Sebastiano Della Lena; Alessio Muscillo; Paolo Pin |
| Abstract: | Consumers discover their preferences through experience, yet the sequence and composition of those experiences are often designed by firms, digital platforms, or policymakers. We introduce a ``data-design'' framework for preference discovery, in which the structure of consumption data shapes learning. Bundling generates correlated exposure across goods, so utility surprises propagate through the co-consumption network. When estimation errors are known, bias-targeted design can shut down learning and amplify misperceptions. Conversely, robust design uses only the geometry of past co-consumption: popularity-biased bundles slow learning, while correlation-breaking bundles accelerate preference discovery. The framework thus explains how dominant platforms can sustain biased demand through exposure design, and why effective regulation may need to intervene on the structure of exposure itself rather than only on prices or market shares. |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2604.14260 |
| By: | Pragya Kakani; Eric Yde; Genevieve Kanter; Richard G. Frank; Amelia M. Bond |
| Abstract: | We provide evidence of strategic transfer pricing by vertically integrated health care firms in response to insurer profit regulations. Insurers increased prices at vertically integrated pharmacies by 9.5% following the introduction of caps on insurer profits in Medicare Part D. We detect larger price increases by insurers that were at greatest risk of exceeding the allowable profit level. More than one-fifth of these higher prices were borne by the federal government. Our analysis illustrates that vertically integrated firms can evade profit regulation by “tunneling” profits to unregulated subsidiaries, undermining regulatory intent and increasing health care spending. |
| JEL: | I11 I13 I18 L14 L22 L41 L51 |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35043 |
| By: | Stephen W. Salant; Diego S. Cardoso; Julien Xavier Daubanes |
| Abstract: | To reduce Russia's ability to fund its war in Ukraine, Western governments imposed a price ceiling on Russian seaborne oil exports. Policy-makers sought a ceiling level to lower Russia's oil profits without raising excessively the world price buyers pay for oil. Previous analyses have explored this problem using simulations and, with a single exception, have treated the non-Russian supply response as exogenous. We pose the problem theoretically as a constrained minimization problem of the policy maker and solve it, treating Russia as either a monopolist or an oligopolist facing heterogeneous rivals with endogenous supply. |
| Keywords: | price cap, oil price, strategic supply |
| JEL: | L13 Q41 D78 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12608 |
| By: | Markus Lill (LMU Munich); Nastasia Gallitz (LMU Munich); Lucas Stich (University of Wuerzburg); Martin Spann (LMU Munich) |
| Abstract: | Platform endorsement badges (e.g., Amazon's Choice) are widely believed to shape consumer decisions, yet their effectiveness in complex retail environments---where endorsements compete with rankings, ratings, and other signals---remains not well understood. This article examines Amazon's product-level endorsements using a multi-method approach combining (1) a 50-day large-scale audit of more than 200, 000 search results spanning over 90, 000 products and (2) a lab-in-the-field experiment that manipulates badge visibility and placement in consumers' natural shopping context. The audit reveals that endorsements are rare (~1.3% of products) and disproportionately assigned to products with lower prices, higher ratings, and those sold or fulfilled by Amazon; receiving a badge is associated with greater search visibility and improved sales performance. The experiment shows that displaying the badge tends to increase click-through and add-to-cart likelihoods, whereas reassigning or masking it tends to reduce these behaviors; however, these effects---while economically meaningful---are estimated with uncertainty, consistent with a multi-cue environment in which endorsement competes with other signals such as search rank and Prime eligibility. Together, the findings indicate that platform endorsement badges shape consumer search and choice behavior even in information-rich retail settings. Implications are discussed for platform design, seller strategy, and regulatory oversight. |
| Keywords: | platform endorsements; consumer decision-making; digtial platforms; e-commerce experimentation; |
| JEL: | D12 D83 L86 M31 |
| Date: | 2026–04–01 |
| URL: | https://d.repec.org/n?u=RePEc:rco:dpaper:569 |
| By: | Xiaolan Zhou (School of Economics, Shandong University); Yasuyuki Sawada (Asian Development Bank Institute and Faculty of Economics, University of Tokyo); Elaine S. Tan (Economic Research and Development Impact Department, Asian Development Bank) |
| Abstract: | Using proprietary data from Alibaba, we estimate a structural model for the digital food delivery platform and quantify the welfare effects of shop-type strategies. We find that shops with higher net gross merchandise value (GMV), multi-app stores, and chain stores exhibit larger cross-network effects on both consumers and couriers. These types of shops are more effective in driving the expansion of the platform’s market size and contribute more significantly to the platform’s net GMV. The magnitudes of these effects are amplified in a dynamic setting due to the positive direct network effects at the platform level. Specifically, platforms' strategy of prioritizing top merchants over supporting a multitude of mid-tier merchants proves more effective in the fresh food sector than in the cooked food sectors characterized by greater product heterogeneity. |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:tky:fseres:2026cf1270 |
| By: | Xiao Dong; Paul Koh; Devesh Raval; Dominic Smith; Brett Wendling |
| Abstract: | Antitrust authorities frequently rely on structural divestitures to address competitive concerns raised by mergers. Using census-level establishment data and proprietary transaction records from the U.S. grocery sector, we provide systematic evidence on the long-run effects of such remedies. Divested stores experience an average 31 percent decline in employment over five years, driven by elevated exit rates and persistent contraction among surviving establishments. Sales similarly decline. Transaction-level evidence indicates that divested assets are systematically weaker and are often transferred to lower-capability buyers. These findings suggest that structural remedies may be less effective when the implementation of divestitures allows merging parties substantial discretion over the assets and buyers involved. |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2604.15045 |
| By: | Hiroshi IYETOMI; Yuta ARAI; Yuichi IKEDA |
| Abstract: | The ongoing geopolitical tensions between the United States and China are reshaping global production networks, particularly in the electronics industry, where East Asia serves as a central manufacturing hub. This study empirically examines Japan's position within the evolving East Asian electronics value chain using firm-level supply chain data. We construct a global supply chain network consisting of 15, 292 nodes (firms) and 27, 751 links (transactional relationships), centered on the electronics industry along with its two closely related sectors: the automotive and aerospace-defense industries. Our findings indicate that Japan continues to occupy an important upstream position, particularly in electronic components, manufacturing equipment, and precision instruments. However, a decline in the relative market share and network centrality of Japanese firms in the mainstream semiconductor industry suggests a departure from Japan's former dominance. In contrast, we identify a distinct automotive cluster in which Japanese firms remain highly competitive. The analysis also reveals an aerospace and defense community dominated by U.S. and European firms, characterized by limited participation from Japanese firms and the potential strategic exclusion of China. Furthermore, we uncover a separate cluster linking electronics, automation, and utilities, where Japanese firms play a prominent role with a 58% share. This cluster highlights a unique structural feature of industrial organization in Japan. |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:eti:dpaper:26025 |
| By: | Alexandre Gohin (SMART - Structures et Marché Agricoles, Ressources et Territoires - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - Institut Agro Rennes Angers - Institut Agro - Institut national d'enseignement supérieur pour l'agriculture, l'alimentation et l'environnement) |
| Abstract: | The margin levels of French food retailers are debated at every farm crisis. The main objective of this article is to statistically identify the eventual existence of market powers of these retailers. In order to overcome missing data on their distribution costs, we develop an original framework of the French system of temporary limits on margins in case of a market crisis. Our econometric results conducted on two fruit and vegetable products indicate that this system is effective with significant reductions of these margins during market crises. Above all, our statistical results indicate that the French food retailers simultaneously modify their margins on other products, attesting the presence of market powers to the detriment of the organic sectors. |
| Keywords: | Food retailing, Market powers, Organic markets, Distribution alimentaire, Pouvoir de marché, Filières biologiques |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05583696 |