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on Industrial Competition |
| By: | Cave, Martin |
| Abstract: | This paper gives a short overview of the impact which digitalisation has had over recent decades on selected cases of economic regulation, and of the changes it has brought and might bring, noting the need for the continuous adaptation of regulation in the public interest. It begins with an account of the role of digitalisation in the two most widely discussed sectors in recent decades: first, how incentive regulation using price controls in traditional utility sectors has recently incorporated piecemeal elements of digitalisation within a broadly unchanged framework; second, in the case of the more recently emerged digital platform sector, how a major fissure is observed between the EU's severe regulation of the largest platforms under the 2002 Digital Markets and Digital Services Acts, and USA's continuing reliance on competition law. It then considers the ongoing economy-wide pervasive spread of digitalisation via the use of Artificial Intelligence, the likelihood of its competitive supply and the nature of the case for its economic regulation. Finally, we note the likely use of AI in the very process of regulating both the two above-noted and other sectors and markets, and the implications of a possible ‘arms race’ between regulators and regulated firms in its use. |
| Keywords: | AI in the regulatory process; anti-monopoly regulation; digitalisation; regulation of platforms; role of artificial intelligence |
| JEL: | L51 L86 L43 |
| Date: | 2026–06–30 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:138010 |
| By: | Jackie Baek; Vivek F. Farias; Farrell Wu |
| Abstract: | We study whether simple algorithmic pricing systems can systematically produce collusive-like prices in multi-firm markets. We consider firms using an explore-then-exploit pipeline: they randomize prices during an initial exploration phase, then estimate demand from their own historical data and set prices myopically thereafter. The estimation step relies on a misspecified, monopoly-style model that omits competitors' prices. We characterize when this pipeline converges to supra-competitive prices above the Nash equilibrium, via a fluid-limit ordinary differential equation analysis. We show that supra-competitive prices arise when firms explore within similar price ranges on the same side of the Nash price. Moreover, prices can be substantially above the Nash price; we show that prices can reach monopoly levels under symmetric exploration. Simulations calibrated to a real multifamily rental market confirm that supra-competitive outcomes arise robustly beyond our theoretical assumptions, including under finite horizons, heterogeneous products, and nonlinear logit demand. |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2605.16064 |
| By: | Joshua S. Gans |
| Abstract: | Entrepreneurs learn by experimenting, but experiment choices are often public. A closed beta, private pilot, or public launch not only generates evidence; it also reveals what kind of entrepreneur would choose that action. We develop a dynamic model in which a founder chooses between stealthy and public experiments while potential entrants infer from both actions and outcomes. Public outcomes are modelled as garblings of the founder's private experimental evidence, so public leakage informs outsiders without giving the founder information beyond the private signal already observed. The key state variable is competitive exposure: the public runway before entry becomes attractive. Exposure is depleted by two forces, leakage burn from public outcomes, and action burn from public inference about experiment choice. This distinction implies that competition can distort experiment design without forcing earlier scale: lower-confidence founders choose stealthier tests, while higher-confidence founders spend exposure to obtain faster private learning through more public tests. Scale is accelerated only when exposure reduces the value of waiting more than it reduces the value of scaling. Finally, exogenous funding gates make observable scale more selective and, therefore, more informative to entrants. The analysis shows that entrepreneurial experimentation is not merely private learning under uncertainty; it is public action under competitive inference. |
| JEL: | O30 O33 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35172 |
| By: | Green, R.; Newbery, D. M. |
| Abstract: | This article surveys Britain’s groping attempts at delivering adequate volumes of RES at an acceptable system cost, and proposes reforms to support design and transmission charging. Littlechild as the first electricity regulator oversaw the first auctions for renewable electricity contracts. Renewable Obligation certificates added a premium to the market price and accelerated deployment at high cost, until replaced by Contracts for Difference for wind and solar PV, now auctioned. Firm access and locational transmission pricing can work if support is suspended in negative price periods and transmission charges for new entrants are based on marginal expansion costs. The proposed new subsea HVDC links from Scotland would require new windfarms to have capacity f actors of 50% to compete with windfarms in England of 34% capacity factors, while onshore links would deliver at current modest transmission charges. |
| Keywords: | Renewable Electricity Support Schemes, Auctions, Curtailment, Locational Pricing |
| JEL: | L94 Q28 Q42 Q48 |
| Date: | 2026–03–18 |
| URL: | https://d.repec.org/n?u=RePEc:cam:camdae:2636 |
| By: | Joachim Hubmer (University of Pennsylvania); Lukas Nord (University of Pennsylvania) |
| Abstract: | The allocation of demand across firms determines aggregate productivity. Firms affect allocations through prices and non-price investment in demand. We develop a framework with search frictions and dynamic customer relationships in which demand investment shapes allocations directly by matching customers to suppliers and indirectly by driving price competition. A quantitative version matches key facts on how firms compete for customers. In equilibrium, markup distortions and business-stealing externalities induce misallocation and demand over-investment. Equilibrium interactions between demand investment and pricing create policy complementarities. Rising demand investment can raise concentration without raising market power, while reducing firms’ intangible value through equilibrium effects. |
| Date: | 2026–04–30 |
| URL: | https://d.repec.org/n?u=RePEc:pen:papers:26-006 |
| By: | Chengqing Li; Yves Zenou; Junjie Zhou |
| Abstract: | We study an Arrow-Debreu economy with externalities generated by multiplex networks. Market equilibrium prices reflect both the preferences and scarcity of goods, consumers' network centralities arising from goods' externalities, as well as linkages across goods (layers) through the budget constraint. Despite the presence of externalities, competitive markets can still be efficient: the First and Second Welfare Theorems hold if either all networks are regular or all layers share the same network structure. When markets allocate goods inefficiently, a Lindahl equilibrium-implemented through personalized prices-can restore efficiency, but may leave some consumers worse off. |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2605.21117 |
| By: | Akio Kawasaki (Faculty of Economics, Oita University); Noriaki Matsushima (Osaka School of International Public Policy, the University of Osaka) |
| Abstract: | Digital entrants in health care and health insurance often compete against public or mission-oriented organizations rather than only against private rivals. We develop a Hotelling model of mixed competition in which a private data-rich firm chooses the scope of consumer-data collection and then uses the acquired information to personalize offers. The rival supplies a standard service and is either a welfare-maximizing public firm or a profit-maximizing private firm. We characterize equilibrium data collection, prices, consumer surplus, profits, and social welfare. The private digital firm chooses a wider data-harvesting range when its rival is private than when its rival is public, because a public rival uses welfare-oriented pricing to discipline the induced market allocation rather than to maximize its own profit. The welfare ranking is non-monotonic in the value created by personalization. When the benefit from personalization is either small or large, competition against a public rival yields higher welfare; when the benefit is intermediate, competition against a private rival can dominate because it induces a broader rollout of personalized service. These results highlight that the welfare effects of digital entry depend jointly on data-driven personalization and the ownership objective of incumbent health-sector organizations. |
| Keywords: | digital services, personalized pricing, public entities, health services |
| JEL: | I13 L13 D43 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:osp:wpaper:26e005 |
| By: | De Jonghe, Olivier; Huylebroek, Cédric |
| Abstract: | We study how private equity (PE) buyouts propagate through supply chains using unique firm-to-firm transactions data from Belgium. In normal times, suppliers of PE-backed firms outperform their peers by 5%–10% in employment and sales growth, primarily due to increased input demand from PE-backed customers rather than knowledge spillovers or other mechanisms. In economic downturns, however, this outperformance is attenuated and suppliers compress markups by around 8% as PE investors intensify bargaining pressure and reconfigure supply chains to extract cost savings. Beyond the direct effects on suppliers, we show that as PE-backed firms absorb supplier capacity, they crowd out competitors that rely on the same suppliers. Overall, our findings underscore that supply chains are central to how PE investors create and redistribute value. JEL Classification: D22, D24, G32, G34 |
| Keywords: | bargaining power, firm growth, private equity, spillover effects, supply chains, switching costs |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbwps:20263234 |
| By: | Benjamin T. Leyden |
| Abstract: | I evaluate the competitive effects of four major U.S. airline mergers (2008-2013) using a continuous difference-in-differences model. Standard merger retrospectives typically rely on binary treatment classifications that collapse important variation in competitive exposure. I construct three continuous route-level exposure measures — simulated ∆HHI (direct competitive overlap), merger share (the merging carriers' combined presence), and non-overlap merger share (merger share on routes where only one merging carrier operated) — and estimate dose-response curves for each. Results reveal substantial heterogeneity both across mergers and within each merger across the exposure distribution, with the three measures yielding different conclusions, as each captures a distinct competitive channel. |
| Keywords: | airline mergers, continuous difference-in-differences, merger retrospective |
| JEL: | L41 L93 C21 L13 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12669 |
| By: | Robert D. Metcalfe; Alexandre B. Sollaci; Chad Syverson |
| Abstract: | Mergers are commonly evaluated by weighing their expected market power effects against any efficiency gains they create. The larger the market power effect of a proposed merger, the larger must be any efficiencies for it to raise social welfare. We show selection into merger proposal distorts the observed relationship between market power and efficiency effects. Even if market power and efficiency gains are independent (or even positively correlated) across all potential mergers, they will generally be negatively related among proposed mergers. This is because parties propose to merge only if the merger’s expected profitability exceeds a threshold, so the underlying components of profitability become substitutes in clearing that hurdle. It does not rely on managerial bias, behavioral frictions, or strategic misrepresentation. We demonstrate this negative correlation is present under very general conditions when the two effects are uncorrelated among all mergers. We also characterize conditions where this still holds even in the presence of positive underlying correlations and firms’ uncertainty about their own merger’s profitability. Policies that might raise the selection hurdle for proposed mergers do not alleviate the negative correlation; indeed, they would exacerbate it. Our analysis has direct implications for interpreting empirical merger retrospectives and for evaluating efficiency defenses in antitrust policy. |
| JEL: | L0 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35221 |
| By: | Zhang, Y. |
| Abstract: | Many products generate network spillovers: a user’s value of such a product is higher when her contacts also use it. This paper studies competition between an entrant and an incumbent selling such products. In the model, the firms set personalised prices (for example, via targeted discounts), and consumers embedded in a network choose which product to buy. The pattern of equilibrium consumption is shown to be the same as if firms were to charge a price of 0 to all consumers. The equilibrium prices reflect incumbent advantage and depend on the network structure in nuanced ways. The equilibrium characterisation provides the foundation for studying the profitability of entry and the effects of anti-trust tools in such markets. A key structural feature of the network is found to be cohesiveness – the extent to which consumers within a group are densely connected to one another. Firms are more likely to enter if they have a consumer base that is cohesive and influential. While regulators use interoperability as a tool to improve market contestability, I show that interoperability can actually discourage entry depending on the cohesiveness of consumer bases. |
| Date: | 2026–04–17 |
| URL: | https://d.repec.org/n?u=RePEc:cam:camdae:2634 |
| By: | Pan, Xiaojun |
| Abstract: | Can observable managerial incentive contracts substitute for price transparency as a commitment device in two-sided platforms? Extending the framework of Hagiu and Halaburda (2014), we show that under monopoly, two-dimensional public delegation precisely reproduces the transparent-equilibrium allocation. Under Hotelling competition, a network-effect symmetry threshold partitions the parameter space: in the tool region (approximately symmetric network effects), delegation Pareto-dominates no delegation; in the trap region (highly asymmetric), the classical Fershtman-Judd dilemma re-emerges. Total social welfare under delegation equals that under transparency in both regions. Policy implication: in asymmetric markets, restricting asymmetric incentive contracts can resolve the dilemma among platform owners, although the restriction lowers consumer and total welfare relative to the unrestricted equilibrium. |
| Keywords: | Two-sided platforms, strategic delegation, managerial incentive contracts, information transparency, platform regulation |
| JEL: | D43 D82 D86 L13 L86 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:esprep:341118 |
| By: | Sirui Li; Jing Su |
| Abstract: | This paper studies how consumers’ concerns about fairness interact with third-degreeprice discrimination of a two-sided monopoly platform. We show that the presenceof fairness concerns creates a negative demand externality from low-willingness-to-payto high-willingness-to-pay consumers, that is, charging less to the former reduces thelatter’s demand. With this novel externality, price-discriminating among consumerstriggers fairness concerns, which lowers consumer-side demand and ultimately restrictsthe platform’s profit exploitation from the seller side. Hence, a platform whose profitpotential from sellers is larger would take consumers’ fairness concerns more seriouslyand price-discriminate less. The results can explain why some major online platforms—despite the huge profit potential of targeting prices—shy away from price discriminationin response to consumers’ fairness concerns, while others care little about unfairnesscomplaints when price-discriminating among consumers. |
| Keywords: | fairness concerns; price descrimination; two-sided markets |
| JEL: | D42 D91 L11 L86 |
| Date: | 2026–05–11 |
| URL: | https://d.repec.org/n?u=RePEc:eca:wpaper:2013/406859 |
| By: | Winston Wei Dou; Wei Wang; Wenyu Wang |
| Abstract: | Distressed firms need urgent financing to preserve operations and avoid inefficient liquidation, but they borrow in concentrated markets shaped by existing-creditor blocking power and a small group of specialized lenders. We show that these borrowers pay exceptionally high loan spreads even after removing compensation for credit risk, liquidity risk, and non-risk loan-making costs. To quantify and decompose lender market power, we develop and estimate a dynamic game-theoretic model of distressed lending with latent demand heterogeneity, endogenous lender participation, creditor blocking power, and tacit collusion sustained by repeated syndication. Using granular facility-level data on debtor-in-possession (DIP) loans and highly speculative loans, we find that lender market power explains 533 bps of risk-adjusted spreads in the DIP loan market and 300 bps in the highly speculative loan market, including about 140 bps from tacit collusion in each market. Lender market power is therefore a major source of financial distress costs, reducing survival-critical liquidity by 16–20% and thereby worsening asset-value destruction. |
| JEL: | C11 D43 G12 G18 G2 G21 G23 G28 K21 L13 L4 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35206 |
| By: | Massey, Patrick |
| Abstract: | This paper analyses the decision of Ireland’s Competition and Consumer Protection Commission (CCPC) in relation to a merger between two veterinary practice groups. Several aspects of the CCPC’s analysis in the case are highly unsatisfactory. Based on the information contained in the CCPC Determination, there is a relative high probability that the CCPC decision constitutes a Type II (false positive) error, i.e. the CCPC failed to identify a potentially anti-competitive merger. The CCPC decision in this case adds to list of cases involving potential Type I and Type II errors, raising serious questions about the quality of the CCPC’s merger analysis and internal quality control procedures. It also suggests that lessons have not been learned from previous cases. |
| Keywords: | Merger Control; Market Definition; Type II error; substantial lessening of competition; Catchment Areas; Closeness of competition. |
| JEL: | K21 L13 L40 |
| Date: | 2026–05–12 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:129081 |
| By: | Pan, Xiaojun |
| Abstract: | Industrial internet platforms reshape both the digital infrastructure and the internal governance of downstream firms. This paper shows that platform enablement can trap firms in a doubly-nested prisoner's dilemma: access decisions (whether to join the platform) and delegation decisions (whether to hire a manager) simultaneously yield Nash equilibria that are strictly Pareto-dominated by the joint non-access, non-delegation optimum, with joint profit losses of approximately 3.2 percent. Unlike single-decision platform traps (Hagiu and Wright, 2026), our dilemma arises from the interaction between two distinct firm-level decisions, each generating its own Pareto-suboptimal equilibrium. Within a three-tier platform-duopoly-consumers Bertrand game, we obtain three results. First, platform-enhanced network externalities shift the sales-oriented delegation threshold downward by an amount equal to the platform's network-enhancement parameter, pushing firms from defensive profit-oriented to offensive sales-oriented incentive contracts. Second, the dilemma is sustained by a division of roles within the platform's two-part tariff: the fixed fee absorbs network premia through a threat-point channel, while the usage fee distorts marginal incentives. Third, the dilemma forms a structural ridge along the Choi-Lee threshold, occupying approximately 18 percent of the relevant differentiation-network parameter space. Because the equilibrium violates neither per se collusion nor abuse-of-dominance prohibitions, conventional antitrust is structurally inadequate; mandatory data interoperability, by raising non-accessing firms' outside option, emerges as a targeted instrument. |
| Keywords: | Industrial Internet Platform, Strategic Delegation, Network Externalities, Two-Part Tariff, Prisoner's Dilemma, Platform Regulation |
| JEL: | D43 L13 L51 L86 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:esprep:341117 |
| By: | Veronica Leoni; David Boto-Garcia; Roberto Patuelli |
| Abstract: | This paper examines the interplay between spatial and temporal dimensions of price competition in the hotel industry, where services are non-storable and consumers must book in advance. We study how spatial price competition among hotels evolves across different booking horizons. Using a panel dataset of hotels in Venice covering daily asking prices, we estimate spatial price reaction functions for multiple booking lead times using Spatial Durbin Models. We find heterogeneous spatial price mimicking across booking horizons, with spatial dependence peaking at mid-range lead times and weakening at short lead times. Furthermore, hotels with greater room variety are able to charge higher prices, while greater variety among nearby rivals exerts downward pressure on prices. These findings reveal that the strength of spatial competition is not constant but jointly shaped by timing of booking and seasonal demand, offering new insights into intertemporal pricing and strategic interactions in perishable service markets. |
| JEL: | L83 D22 L11 R32 C23 D40 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:bol:bodewp:wp1225 |
| By: | Bartelsman, Eric J.; Dobbelaere, Sabien; Zona Mattioli, Alessandro |
| 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: | intangibles, non-compete agreements, price-cost markups, rent sharing, wage markups |
| JEL: | J41 L10 O30 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:iwhdps:341089 |
| By: | Dongwoo Kim; Kyoo il Kim; Pallavi Pal |
| Abstract: | This paper extends the incomplete model of Haile and Tamer (2003) from static English auctions to sequential English auctions. Because bidders may wait for future opportunities, the static condition that bidders do not let rivals win at beatable prices need not hold. We replace it with a dynamic opportunity-cost restriction, yielding nonparametric valuation bounds without solving a dynamic equilibrium. Sharp bounds are also characterized. We propose a novel moment-condition inversion estimator that pools auctions with heterogeneous bidder counts, mitigating finite-sample instability of order statistics approaches and admitting analytical standard errors and smooth confidence intervals. Applications to Korean wholesale used-car auctions and Cars and Bids online auctions deliver informative bounds. Counterfactual analyses show that the option to wait lowers first-period revenue by 8–11% in the Korean market, that increasing effective competition from 8 to 20 serious bidders in Cars and Bids raises seller revenue by 40–65%, and that maximin reserve prices vary substantially across vehicle clusters. |
| Date: | 2026–05–14 |
| URL: | https://d.repec.org/n?u=RePEc:azt:cemmap:08/26 |
| By: | Jorge Florez-Acosta; Margarita María Gáfaro-González; Alejandra Ximena González-Ramírez; Juan Sebastián Vélez-Velásquez |
| Abstract: | This paper estimates the transmission of materials price shocks to producer and consumer prices in the processed food industry in Colombia between 2016 and 2023. Using monthly sector-level data for 9 food-processing sectors in Colombia, and an empirical strategy that exploits variation in both time-series and cross-sectoral exposureto materials price shocks, we estimate reduced form effects on prices along the production and retail stages of the supply chain. We find that a 1% increase in materialsprices raises producer prices by about 0.6% and consumer prices by 0.3%. These effects materialize gradually, which is consistent with frictions in price adjustment. We also find that transmission rates are lower in more concentrated sectors of the food industry, consistent with theoretical predictions linking market power and incomplete pass-through. Our findings provide new evidence on the role of materials price shocks and their interaction with market structure in shaping food prices in developing countries. ***RESUMEN: Este documento cuantifica la transmisión de choques en los costos de los insumos a los precios al productor y al consumidor en la industria de alimentos procesados en Colombia entre 2016 y 2023. Utilizando datos mensuales a nivel sectorial para 9 sectores que procesan alimentos y una estrategia empírica que explota la variación tanto temporal como entre sectores en la exposición a choques en los precios de los insumos, estimamos efectos de forma reducida a lo largo de los segmentos de producción y comercialización de la cadena valor de los alimentos procesados. Encontramos que un aumento del 1% en los precios de los insumos incrementa los precios al productor 0, 6%, y los precios al consumidor en 0, 3%. Estos efectos se materializan de manera gradual, lo que es consistente con la presencia de fricciones en el ajuste de precios. Por último, mostramos que las tasas de transmisión son menores en los sectores más concentrados de la industria de alimentos, en línea con las predicciones teóricas que vinculan el poder de mercado con una transmisión incompleta de los costos. Nuestros hallazgos aportan nueva evidencia para países en desarrollo sobre la importancia de los choques en los precios de los insumos—y su interacción con la estructura de mercado—en la determinación de los precios de los alimentos.. |
| Keywords: | Materials prices, Costs tramisision, Processed food, Food Inflation, Precios de las materias primas, Transmisión de costos, Alimentos procesados, Inflacion de alimentos |
| JEL: | E31 L66 L16 Q18 L13 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:bdr:borrec:1353 |
| By: | Dongwoo Kim; Kyoo il Kim; Pallavi Pal |
| Abstract: | This paper extends the incomplete model of Haile and Tamer (2003) from static English auctions to sequential English auctions. Because bidders may wait for future opportunities, the static condition that bidders do not let rivals win at beatable prices need not hold. We replace it with a dynamic opportunity-cost restriction, yielding nonparametric valuation bounds without solving a dynamic equilibrium. Sharp bounds are also characterized. We propose a novel moment-condition inversion estimator that pools auctions with heterogeneous bidder counts, mitigating finite-sample instability of order statistics approaches and admitting analytical standard errors and smooth confidence intervals. Applications to Korean wholesale used-car auctions and Cars and Bids online auctions deliver informative bounds. Counterfactual analyses show that the option to wait lowers first-period revenue by 8--11% in the Korean market, that increasing effective competition from 8 to 20 serious bidders in Cars and Bids raises seller revenue by 40--65%, and that maximin reserve prices vary substantially across vehicle clusters. |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2605.14400 |
| By: | Ikonnikova, Svetlana; Steinbuks, Jevgenijs |
| Abstract: | This study introduces a novel quantitative method to assess the willingness to pay for emerging technologies, such as hydrogen, as substitutes for fossil fuels in industrial production. A three-step framework is developed to derive the willingness-to-pay function based on industrial competition and market entry theory, relying exclusively on pre-entry market information. First, a system of equations is specified linking domestic consumption, production, and prices to fossil input prices, which proxy marginal production costs. Second, the market equilibrium parameters required for numerical willingness-to-pay estimation are empirically estimated using industry-level data. Third, an industrial competition model incorporating entry by producers adopting new technology is constructed, allowing willingness to pay to be expressed as a function of conventional input costs, operational efficiency, and demand conditions. The framework is applied to hydrogen use in ammonia production, using consumption and trade data from 2000–24 for 16 major fertilizer-producing countries across four regions. The results highlight substantial cross-country heterogeneity, a binding hydrogen price threshold for large-scale adoption, and the limited effectiveness of carbon policies in accelerating hydrogen uptake. |
| Date: | 2026–03–19 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:11338 |
| By: | Aroon Narayanan; Tavneet Suri; Prashant Bharadwaj |
| Abstract: | We study Kenya’s 2016 interest-rate regulation, which capped bank lending rates but left one digital platform, called M-Shwari, exempt on the lending side while imposing a deposit-rate floor across all lenders in the market. Using borrower-level administrative data, survey data, and an RD around the implementation date, we show three main results. First, lending on the exempt platform rose, but with the safest borrowers substituting away toward cheaper capped credit. Second, riskier borrowers increase their savings to build up their credit limits. Third, on the supply side, M-Shwari raises the limits for the safest borrowers in an attempt to retain them. We build and estimate a simple model of screening and credit limit-setting to interpret these reallocations and compute welfare. The observed carve-out for M-Shwari preserves access for high-risk borrowers but yields a slight aggregate welfare decline relative to pre-policy. However, a uniform (across all lenders) interest rate cap counterfactual generates substantially larger welfare losses by entirely eliminating credit for high-risk borrowers. |
| JEL: | G51 L13 O55 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35166 |
| By: | Fabian Herweg (University of Bayreuth); Botond Köszegi (University of Bonn); Klaus M. Schmidt (LMU Munich) |
| Abstract: | Policymakers seek to reduce environmentally harmful production by leveraging consumers' demand for low-externality products. Should the exchange of such products be organized under the standard principle of ``one market for one good", creating a separate market for green goods and integrating regional green markets? We show that this reduces harmful production if and only if green demand is sufficiently strong relative to green supply. Otherwise, a ``demand displacement effect" arises: stronger demand for green goods induces substitution toward brown goods, thereby increasing externalities. This effect interacts with other policy instruments. |
| Keywords: | green markets; socially responsible consumers; externalities; market segmentation; demand displacement; environmental policy; |
| JEL: | D62 D64 Q58 |
| Date: | 2026–05–11 |
| URL: | https://d.repec.org/n?u=RePEc:rco:dpaper:572 |
| By: | Vaibhav Rangan |
| Abstract: | I study coordination failures in housing development markets with network effects, where the value of building depends on aggregate supply. When network effects are sufficiently strong and convex, multiple equilibria arise: a low-supply coordination failure and a high-supply outcome. Without a coordination mechanism, equilibrium is indeterminate. I introduce a large developer who moves first in a Stackelberg game, committing to housing supply before atomistic developers make entry decisions. The main result is that the large developer always commits at least to the high-supply equilibrium, eliminating the coordination failure by pushing past the unstable threshold that separates the low and high outcomes. The result is unconditional; it holds for general demand functions and cost distributions, and does not depend on which stable continuation equilibrium materializes. The leader's commitment inverts standard monopoly intuition: first-mover commitment can improve welfare by resolving a coordination problem that atomistic markets cannot solve on their own. I also characterize when the developer builds beyond the high equilibrium into a monopoly region, and show that the market underprovides housing relative to the social optimum. |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2605.12559 |
| By: | Carrillo, Paul (George Washington University); Donaldson, Dave (Massachusetts Institute of Technology and NBER); Pomeranz, Dina (University of Zurich); Singhal, Monica (University of California, Davis, and NBER) |
| Abstract: | This paper develops new tools to study misallocation that do not require assumptions about the heterogeneity of firms’ technologies. We show how features of the distribution of marginal products can be identified from exogenous variation in firms’ input use and used both to test for misallocation and to quantify its resulting welfare losses. We apply this method to a setting with exogenous demand shocks from public procurement contracts for construction services in Ecuador. Our results reject the null of efficiency but our estimates of the resulting welfare losses from misallocation are small. |
| Keywords: | procurement, misallocation, firms |
| JEL: | D24 C14 O12 H57 D61 |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp18612 |
| By: | OECD |
| Abstract: | This paper examines how subsidies affect competitive outcomes in the global steel industry. Using firm-level data from the OECD MAGIC database covering 2006–2022, the analysis assesses the relationship between government support and market-share developments across steel producers worldwide. Econometric results indicate that subsidies increase recipients’ global market share at the expense of less-subsidised competitors. Firms receiving larger support through cash grants and below-market borrowings tend to gain market share even when they exhibit weaker productivity, cost efficiency and financial performance: subsidies weaken the normal link between firm performance and market-share gains. The analysis also identifies negative spill-overs on competing firms, implying that support granted to some producers can reduce rivals’ market shares and discourage investment by unsubsidised firms. The results are consistent across OECD Members and partner economies, although subsidisation levels are significantly higher in the latter and hence the dampening of market signals is even more pronounced there. Overall, the evidence suggests that subsidies contribute to resource misallocation, persistent steel excess capacity and shifts in global competitive positions. These findings highlight the importance of greater transparency in industrial support and stronger international cooperation to reduce distortions and support a more level playing field in the global steel sector. |
| Keywords: | below-market finance, cash grants, distortions, excess capacity, government ownership, market share, steel industry |
| JEL: | H25 H32 L52 L61 |
| Date: | 2026–05–18 |
| URL: | https://d.repec.org/n?u=RePEc:oec:stiaac:191-en |
| By: | Madjid Eshaghi Gordji; Esmaiel Abounoori; Mohamadali Berahman |
| Abstract: | We extend the concept of meta-Nash equilibrium, introduced by Eshaghi Gordji and Bagha [2026] for complete-information games, to environments with incomplete information. We define a meta-Bayesian Nash equilibrium as a profile of type-dependent mixed meta-strategies together with an environmental move such that no player type can profitably deviate and the environment cannot improve its expected payoff. For each transformed game, meta-payoffs are determined by the unique Bayesian Nash equilibrium of that game. Using Kakutani's fixed point theorem, we establish existence under finiteness assumptions on type spaces, meta-actions, and transformations, together with the assumption that each transformed game admits a unique Bayesian Nash equilibrium. Several illustrative examples, including adaptive subsidy competition, cybersecurity protocol selection, and platform rule formation, demonstrate that private information at the meta-level plays an essential role in endogenous game transformation. The framework contains both classical Bayesian games and complete-information meta-games as special cases. |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2605.16926 |
| By: | Koichiro Ito; James M. Sallee; Jonathan (Andrew) Smith |
| Abstract: | How should policymakers evaluate policy impacts when firms design products for global markets? Standard economic analyses typically focus on domestic outcomes, implicitly assuming that policies affect only the jurisdiction in which they are enacted. Yet multinational firms often harmonize product design across markets, creating the potential for policies implemented in one country to generate global spillovers through changes in product attributes. We call this phenomenon "attribute propagation" and develop a framework to measure and assess its quantitative importance. Applying this framework to an environmental policy affecting automobiles, we find that a fuel-economy subsidy in Japan led to significant improvements in the fuel economy of vehicles sold in the United States. We then develop a model of multinational automobile markets featuring cross-market cost complementarity as a key mechanism driving attribute propagation. Using the estimated model, we conduct counterfactual simulations to quantify environmental benefits accounting for the policy’s global spillover effects. We find that global spillover effects are first-order—a majority of the CO2 emissions reductions induced by the Japanese policy arise through its impact on the U.S. automobile market. These findings suggest that standard economic analyses that abstract from attribute propagation can substantially understate the full policy impact. More broadly, attribute propagation provides a new lens for evaluating environmental, safety, antitrust, and technology policies in a global economy. |
| JEL: | L0 Q4 Q5 R4 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35197 |