|
on Industrial Competition |
| By: | Bradley Setzler |
| Abstract: | Existing structural analyses of the harmful effects of market consolidation focus on either product or labor markets in isolation, ignoring that product market competitors often compete for workers as well. This paper develops a unified framework for merger evaluation, finding that firms' simultaneous exercise of oligopoly power in the product market and oligopsony power in the labor market amplifies the harm from mergers to both consumers and workers. The model also demonstrates how merger-induced gains in labor market power incentivize firms to reduce product quality, highlighting an additional channel for consumer harm. The model's predictions are tested and quantified in the context of the recent consolidation of the US hospital industry. Linking panel data from several sources on all US hospitals from 1996-2022, a difference-in-differences design is estimated for nearly 150 high-concentration within-market mergers. Hospital mergers significantly reduce patient volume, increase prices, reduce employment, lower wages, and deteriorate quality of care, resulting in higher patient mortality. After recovering the structural parameters, the estimated model replicates observed merger impacts. Counterfactual exercises reveal that ignoring increased labor (product) concentration would lead one to under-predict the harm of mergers to consumers (workers). |
| Keywords: | labor market power, endogenous quality, mergers and antitrust, hospital industry |
| JEL: | J42 L41 I11 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:crm:wpaper:2561 |
| By: | Pignatti, Clemente,; Ananian, Sévane, |
| Abstract: | This paper examines the relationship between labour market concentration and wage inequality using global survey data for the period 2006–2022. The results show that higher labour market concentration is associated with higher wage inequality, especially in the top half of the wage distribution. However, labour market institutions such as trade unions, collective bargaining and minimum wages appear to mitigate this trend. Finally, the study finds that the association between labour market concentration and wage inequality is stronger in developing countries than in developed countries. |
| Keywords: | wage differential, economic concentration, merger., collective bargaining, minimum wage |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ilo:ilowps:995696272802676 |
| By: | Eric Bartelsman (Vrije Universiteit Amsterdam); Sabien Dobbelaere (Vrije Universiteit Amsterdam); Alessandro Zona Mattioli (University of Amsterdam) |
| Abstract: | This paper develops a micro-founded framework linking price-cost and wage markups to intangible assets. Intangible assets, once created, are a source of firm rents. Owing to limits to enforceable ownership and the non-rival nature of knowledge, these rents can be both retained by the origin firm and transferred to a competitor through poaching of workers. Search and matching frictions affect labor mobility and result in bargaining over rents between the firm and the worker. This environment generates hold-up in intangible asset creation and motivates rent sharing. Under non-compete agreements, poached workers face start delays that weaken outside options. Using microdata from the Netherlands, we document higher price-cost and wage markups in more intangible-intensive firms and lower wages for workers with non-compete agreements, consistent with the model. |
| Keywords: | Price-cost markups, wage markups, rent sharing, intangibles, non-compete agreements |
| JEL: | J41 L10 O30 |
| Date: | 2026–02–26 |
| URL: | https://d.repec.org/n?u=RePEc:tin:wpaper:20260008 |
| By: | María del Carmen Dircio Palacios Macedo (Department of Economics, Universitat Jaume I, Castellón, Spain); Paula Cruz-García (Department of Economic Analysis, Universitat de Valencia, Spain); Fausto Hernández-Trillo (Center for Research and Teaching in Economics (CIDE), Mexico); Emili Tortosa-Ausina (IVIE, Valencia and IIDL and Department of Economics, Universitat Jaume I, Castellón, Spain) |
| Abstract: | Traditional competition analysis typically relates the exercise of market power in an industry to structural characteristics of a market, such as concentration, barriers to entry, and factor and demand conditions. However, this analysis is incomplete if we do not consider the effects of contact among firms across markets. The objective of this paper is to empirically examine the effect of multimarket contact and of intensity of multimarket contact on bank competition in Mexico for the period of 2011 to 2023, using information at the bank and municipal market level. The Mexican case provides a valuable context for analyzing the relationship between market power and multimarket contacts, given the several regulatory reforms that have occurred in recent years and that have eliminated entry barriers to new competitors, as well as the trend toward consolidation of the banking sector. The main results suggest a positive relationship between market power and the quantity and intensity of multimarket contacts. In this context, the hypothesis of "mutual forbearance" in the Mexican banking sector could not be rejected. These findings have relevant implications for competition policy, suggesting that regulators should account multimarket contact structures when assessing competitive dynamics in the banking sector. |
| Keywords: | bank competition, multimarket contact, mutual forbearance, Mexico |
| JEL: | G21 C33 L40 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:jau:wpaper:2026/07 |
| By: | Hanming Fang; Soo Jin Kim |
| Abstract: | We analyze the effects of data neutrality regulations on downstream market competition, the incentive of the platform to produce data, and consumer welfare. In our framework, data neutrality requires that firms seeking access to the platform’s data be treated equally, irrespective of whether they are affiliated with the platform. We consider two forms of regulation. Under weak data neutrality, the platform must provide the same amount of data to affiliated and unaffiliated sellers; under strong data neutrality, it must also charge the same price. We show that weak data neutrality can be largely ineffective, as the platform may restore exclusion through discriminatory pricing. Strong data neutrality is more consequential, but it does not necessarily raise welfare. Although it broadens access and intensifies downstream competition, it also reduces the incentive of the platform to refine and produce data. Consequently, data neutrality can reduce the equilibrium amount of data available in the market, and this data-reduction effect can dominate its benefits, which enhance competition. These findings suggest that regulating access to platform data requires balancing fair competition against the incentive to generate valuable data inputs. |
| JEL: | D4 L1 L4 L5 |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35159 |
| By: | Mark Glick (University of Utah); Gabriel A. Lozada (University of Utah); Darren Bush (University of Houston Law School) |
| Abstract: | We compare the Consumer Welfare Standard (CWS) and the Protect Competition Standard (PCS) in antitrust. While the two standards are often viewed as mutually exclusive alternatives, there is a larger overlap between the two standards than is usually acknowledged. We first delineate each, recount their respective origins and identify the main supporters of each view. We then compare the two standards across several dimensions: we analyze the practical differences between the two standards in merger and monopolization cases; analyze their fidelity to Congressional intent and to Supreme Court precedent; and discuss how the two standards are connected to normative economic theory. Finally, we discuss the social welfare implications of the differing goals of the two standards. It is our hope that this piece may assist policy makers, courts, and antitrust practitioners better understand the two standards and how they can be more effectively and conscientiously applied. |
| Keywords: | Antitrust Standards, Consumer Welfare Standard, Protect Competition Standard, New Brandeis School, Chicago Antitrust. |
| JEL: | K21 L41 |
| Date: | 2026–04–02 |
| URL: | https://d.repec.org/n?u=RePEc:thk:wpaper:inetwp248 |
| By: | Lindhe, Adam (Royal Institute of Technology (KTH)); Orrenius, Johan (Research Institute of Industrial Economics (IFN)) |
| Abstract: | We introduce a choice-set approach to defining markets and a novel method to empirically recover geographic markets using machine learning, Spatial and Categorical Bayesian Clustering (SCBC). SCBC leverages the identity of the seller for each observation to capture market structures in a novel way that is not captured by purely distance-based methods. Applied to real estate agents in Stockholm (Sweden), SCBC classifies sales more accurately than the baseline K-means algorithm. Finally, we investigate the correct number of clusters and find that the optimal number of clusters is close to the validation set based on industry knowledge. |
| Keywords: | Industrial organization; Competition policy; Market regulations |
| JEL: | C60 D47 L10 |
| Date: | 2026–04–29 |
| URL: | https://d.repec.org/n?u=RePEc:hhs:iuiwop:1558 |
| By: | Harold Houba (Vrije Universiteit Amsterdam); Evgenia Motchenkova (Vrije Universiteit Amsterdam) |
| Abstract: | Advances in data collection enable firms to use consumer information for personalized pricing. In Clavorà Braulin's (2023) symmetric two-dimensional model, this reduces prices and profits, while partial privacy yields the highest profits. Extending the model to asymmetric firms and vertically differentiated products, we show that these results are not robust under sizable asymmetries. Partial privacy may harm both firm and industry profits, while no privacy can outperform other regimes. Consumer welfare also depends on asymmetry: when large, partial privacy maximizes consumer surplus. These findings challenge prior literature and inform the design of privacy protection regulations. |
| Keywords: | Personalized Prices, Price Discrimination, Consumer Information, Privacy |
| JEL: | D4 D18 L13 |
| Date: | 2025–12–11 |
| URL: | https://d.repec.org/n?u=RePEc:tin:wpaper:20250072 |
| By: | Ernst Fehr; Keyu Wu |
| Abstract: | In many markets, firms increase product complexity through add-on features, which can make the evaluation and comparison of products difficult and thus increase buyers' search cost. Does this product obfuscation limit buyers' search behavior and induce them to buy overpriced products? And if so, why does competition not eliminate obfuscated products? We show - based on competitive experimental markets - that if add-ons merely complicate the products without generating additional surplus, obfuscation via product complexity indeed becomes fragile because buyers display an aversion against complex products. However, in the presence of surplus-enhancing add-ons, obfuscation via product complexity becomes a stable market feature that severely constrains the depth and breadth of buyers' search. Sellers anticipate and take advantage of this by making unfavorable product features less visible and selling add-ons persistently above marginal cost. Even the most favorably priced product in the market is offered above marginal cost, and buyers persistently fail to find the best product such that inferior products have a good chance of being bought, leading to enduring price dispersion. Surplus-enhancing obfuscation opportunities are the causal driver of persistent profits and price dispersion because if we remove these opportunities, overall prices quickly converge to marginal cost. |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:crm:wpaper:2559 |
| By: | Florian Heine (Vrije Universiteit Amsterdam); Jasper Sluijs (Utrecht University) |
| Abstract: | State ownership is increasingly positioned as a policy tool for governments towards strategic autonomy and sustainability transition. A possible side effect is the creation or strengthening of dominant state-owned enterprises (SOEs), which theory suggests may engage in exclusionary (predatory) pricing. Disagreement remains, however, over the price thresholds for which exclusionary pricing should be unlawful. We run a laboratory duopoly with a dominant incumbent and a non-dominant entrant across three treatments: a private baseline market; a mixed market with an inefficient SOE incumbent (Mixed–Efficiency); and a mixed market where the SOE incumbent pursues social welfare (Mixed–Social). We measure exclusionary pricing below variable cost, below own break-even level, and above the competitor’s break-even level. We find pervasive exclusionary pricing followed by the competitor's exit in both private and mixed markets. Moreover, after exclusion monopoly pricing by the remaining competitor lowers consumer surplus and total surplus. This finding is remarkable given the professed rarity of exclusionary pricing in previous experimental research. Above break-even exclusion appears in Mixed–Social; below-cost exclusion occurs in all treatments. We observe mirrored outcomes across mixed markets: in Mixed–Efficiency the more efficient private entrant withstands exclusion and eventually displaces the SOE, whereas in Mixed–Social the SOE’s social welfare objective function supports more aggressive pricing that prompts entrant exit. These results argue for more vigilant monitoring of SOEs’ competition-law compliance and for entry-safeguarding policies when creating or strengthening dominant SOEs. |
| Keywords: | Exclusionary Pricing, Predatory Pricing, State-Owned Enterprises, Experiment, Mixed Markets |
| JEL: | C91 L13 L32 |
| Date: | 2026–04–23 |
| URL: | https://d.repec.org/n?u=RePEc:tin:wpaper:20260017 |
| By: | Choi, Jay Pil; Jeon, Doh-Shin; Menicucci, Domenico |
| Abstract: | This paper examines how competition affects the timing of AI deployment under safety risk. We show that competition can generate two distortions relative to joint–profit maximization: a race to the bottom and insufficient entry. A race to the bottom arises when first-mover advantages induce premature deployment and is more likely as technological correlation (homogenization) increases. Conversely, firms may delay entry to free-ride on rivals’ experimentation, leading to insufficient entry. Even when private incentives under joint–profit maximization are aligned with social incentives, competition can still induce socially inefficient early deployment. We discuss policy implications for improving deployment timing. |
| Keywords: | AI, Competition, Optimal Deployment Time, Race to the Bottom. |
| JEL: | D4 L1 L5 |
| Date: | 2026–05–07 |
| URL: | https://d.repec.org/n?u=RePEc:tse:wpaper:131711 |
| By: | Hyungsik Roger Moon; Matthew Shum; Martin Weidner |
| Abstract: | We extend the Berry, Levinsohn and Pakes (BLP, 1995) random coefficients discrete-choice demand model, which underlies much recent empirical work in IO. We add interactive fixed effects in the form of a factor structure on the unobserved product characteristics. The interactive fixed effects can be arbitrarily correlated with the observed product characteristics (including price), which accommodates endogeneity and, at the same time, captures strong persistence in market shares across products and markets. We propose a two-step least squares-minimum distance (LS-MD) procedure to calculate the estimator. Our estimator is easy to compute, and Monte Carlo simulations show that it performs well. We consider an empirical illustration to US automobile demand. |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2605.00602 |
| By: | Mark Shepard; Jacob Wallace |
| Abstract: | Medicaid is one of the largest public programs in the United States — providing health insurance to over 75 million low-income Americans — and over three quarters of its enrollees receive care via private “managed care” insurers. In this summary article, we make three central points about the economics of contracting out Medicaid to private insurers. First, the empirical evidence on Medicaid privatization is mixed: contracting out has not meaningfully reduced public costs or improved quality of care. Second, we propose a framework, which we call “procured competition, ” to describe the unique structure of Medicaid managed care as a hybrid of public procurement and regulated competition. Third, we discuss the key policy levers across procurement, competition, and consumer choice in this model. Throughout, we highlight open research questions, arguing that the enormous variation in how states design these programs — combined with limited evidence on what works — represents a promising area for high-impact scholarship. |
| JEL: | H0 I11 I13 L0 |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35146 |
| By: | Perekhozhuk, Oleksandr |
| Abstract: | This study estimates China’s buyer market power in the international pork market using monthly data from 2010 to 2024. Single- and multi-equation residual supply elasticity (RSE) models are estimated via two-stage (2SLS) and three-stage least squares (3SLS) for six major exporters: Brazil, Canada, Denmark, Germany, Spain, and the United States. Results indicate substantial oligopsony power in China’s import market, with estimated price markdowns ranging from 7% to 29%, showing significant variation across exporters. Brazil exhibits the highest markdowns, reflecting its growing dependence on the Chinese market, whereas Germany exhibits the lowest. These findings underscore China’s dominant role in international pork trade and have important implications for trade and competition policy. The study contributes to the literature by applying RSE models to estimate oligopsony power in international pork markets, where empirical evidence on buyer power remains limited. |
| Keywords: | Livestock Production/Industries |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:ags:aes026:397886 |
| By: | Zhiming Feng |
| Abstract: | This paper develops a decomposition methodology for common agency games in which each principal's payoff depends on her own outcome and the agent's type, but not on rivals' outcomes. The key step reduces each principal's best-response problem to a standard screening problem defined over the agent's indirect utility -- the upper envelope of her payoff over rivals' offerings. Individually best-responding mechanisms then assemble into a pure-menu perfect Bayesian equilibrium when a compatibility condition (utility-preserving recombination) ensures aligned tie-breaking across principals. Under a non-indifference condition, the decomposition recovers all equilibria except those sustained by menu items that no type of the agent actually selects but which nevertheless discipline the rival's screening problem. When principals' payoffs depend on the full allocation profile, the decomposition adapts only under substantive regularity conditions on the agent's off-path choice behavior, one of which coincides with Luce's choice axiom. I apply the methodology to two settings. In a quadratic-loss delegation model, equilibria feature one principal offering a finite menu of discrete ``regimes'' while the other receives piecewise full delegation within each regime. In a competitive bundling duopoly under intrinsic common agency, the decomposition yields equilibria exhibiting market splitting, in which firms specialize in complementary bundles, and asymmetric equilibria with a take-it-or-leave-it base contract paired with a nested or tree menu of upgrades. |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2604.23971 |
| By: | Andre, Peter; Heidhues, Paul; Kőszegi, Botond; Murooka, Takeshi |
| Abstract: | We develop a model of price competition with procrastinating consumers in which market discipline is supposed to arise from both the initial selection of providers and the possibility of switching providers. As in other theories, consumers may forego large gains by sticking with their initially chosen offer, so competition at the switching stage is weak. Unlike in other theories, consumers - who falsely expect to switch soon - may also fail to select the best starting offer, so competition at the initial stage is weak as well. This mechanism can translate temporary product differentiation into permanently high prices, greatly enhance the price effect of persistent differentiation, or generate high markups even with perfect substitutes. Reflecting the same mechanism, sign-up deals do not serve their classically hypothesized role of returning ex-post profits to consumers, but instead often exacerbate the failure of price competition. We complement our analysis with a tailored survey of consumers, confirming the logic of procrastination underlying our model. Consumer procrastination thus emerges as a novel source of competition failure that applies where other theories do not, helping to explain high average prices in many markets with switching costs. |
| Keywords: | procrastination, price competition, competition failure, switching, subscription markets, present bias |
| JEL: | L11 L13 D11 D41 D43 D91 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:safewp:340830 |