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on Industrial Competition |
| By: | Tabuchi, Takatoshi; Wang, Congcong; Zhu, Xiwei |
| Abstract: | Abstract We consider that heterogeneous firms take one of the following strategies: over-the-counter sales, multiple regions, and delivery in a monopolistically competitive market in a two-region economy. Our findings indicate that the most efficient firms choose to operate in multiple regions, the second most efficient firms choose to deliver, the third most efficient firms choose to sell over-the-counter to consumers in two regions, and the least efficient firms choose to sell over-the-counter to consumers in one region. We show that technological progress increases the share of multiregional firms whose headquarters are located in each region and that the social welfare is higher in a larger region, where a larger market size leads to greater product variety and lower prices. Through numerical simulations, we demonstrate that multiregional firms tend to locate in regions with smaller populations to avoid intense competition and that delivery via spatial price discrimination results in lower welfare than over-the-counter sales by mill pricing, contrary to the literature. |
| Keywords: | multiregional firms, delivery, over-the-counter sales, monopolistic competition, procompetitive effect |
| JEL: | D1 R00 |
| Date: | 2026–05–07 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:129009 |
| By: | Salvador Candelas; Nicole Immorlica; Brendan Lucier |
| Abstract: | We study markets where firms compete for consumer attention by subsidizing costly product inspection. These subsidies do not change product quality, but they alter the order in which consumers search by lowering inspection costs. We establish a subsidy-sorting principle: in any equilibrium, higher-quality firms provide weakly larger subsidies, leading consumers to search in descending subsidy order. A unique equilibrium survives forward-induction reasoning in the spirit of the Intuitive Criterion: low-quality firms are never inspected, intermediate-quality firms separate with strictly increasing subsidies, and high-quality firms pool at the full subsidy. This equilibrium maximizes information revelation among all possible outcomes and ensures efficient inspection. We then extend the analysis to AI-mediated platforms that can create and price inspection tokens. The platform's optimal linear pricing leads to excessive inspection relative to the social optimum. While this distortion does not reduce consumer welfare, it reallocates surplus from sellers to the platform and consumers. |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2605.28985 |
| By: | Atz, Ulrich (Bocconi University); Eliason, Blake (University of Utah); Lipsitz, Michael (University of Pennsylvania); Norlander, Peter (Loyola University Chicago); Pinto, Sérgio (OECD); Steinbaum, Marshall (University of Utah) |
| Abstract: | We measure how the contractual balance of power between franchisors and franchisees has shifted over 2009-2024 by analyzing a large corpus of Franchise Disclosure Documents and surveying over 300 franchisees. Coding more than 20 provisions across 4, 500 chains, we find that franchisee autonomy declined systematically: exclusive territories fell from a majority of chains to around 20\%, while restrictions on pricing, sourcing, product offerings, and post-term competition each rose to near-universal prevalence. Franchisees appear not to have been compensated for this loss of autonomy: franchise fees rose with franchisor control, chain growth did not increase, and complaint rates to the Federal Trade Commission did not decline. We additionally find that chains that adopt franchisor-favoring provisions became 2-5 percentage points more likely to be acquired by private equity within five years. We interpret this finding as one plausible explanation for reductions in franchisee autonomy. |
| Keywords: | vertical restraints, franchising, text analysis, survey |
| JEL: | J42 K21 L42 J31 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp18660 |
| By: | Leonardo Bursztyn (University of Chicago & NBER); Jan Fasnacht (University of Chicago); Bejamin Handel (University of California Berkeley & NBER); Rafael Jiménez-Durán (Bocconi University, IGIER, CEPR, CESifo, & Stigler Center); Aaron Leonard (University of Chicago); Filip Milojević (University of Chicago); Christopher Roth (University of Cologne, ECONtribute, NHH Norwegian School of Economics, MPI for Behavioral Economics, & CEPR); Cass R. Sunstein (Harvard Law School) |
| Abstract: | We review an emerging literature on how non-user externalities—the benefits or harms that product adoption imposes differentially on non-users versus users—shape market outcomes. We first present a unified framework that distinguishes non-user externalities from network effects and classic externalities, such as pollution. A key distinction is that those harmed by classic externalities cannot mitigate harm by joining the externality-producing activity, whereas those harmed by negative non-user externalities can—simply by becoming users. This can expand the harm borne by remaining non-users, generating cascade dynamics that can culminate in product market traps: situations in which individuals would prefer the product not to exist, yet nonetheless choose to adopt it rather than remaining non-users. Using new survey evidence covering 25 product markets, we document that negative non-user externalities are pervasive, that the mechanisms behind them differ systematically across products, and that they generate adoption pressure on non-users. We then discuss how non-user externalities affect welfare analysis, firms’ strategic incentives, and market structure. We conclude by discussing policy responses, including design regulation and collective coordination mechanisms. |
| Keywords: | Non-User Externalities, Welfare, Product Markets, Social Economics |
| JEL: | D62 L14 D61 D91 |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:ajk:ajkdps:415 |
| By: | Beyer, Jürgen |
| Abstract: | This paper reinterprets the emergence of the digital winner-takes-all economy through Mahoney’s concept of the reactive sequence. Rather than treating digital concentration as the natural result of network effects, scale economies, or technological lock-in, it argues that these mechanisms became decisive only within a historically specific institutional trajectory. The early internet was constituted as a non-commercial sphere shaped by gift exchange, hacker ethics, open sharing, and community-oriented practices. As these norms diffused into mass usage, they were simplified into low willingness to pay and expectations of free access. Digital firms reacted by monetizing other market sides, especially advertisers, sellers, and platform-dependent businesses. This adaptation intensified network effects, weakened price differentiation, and privileged market leaders. Over time, observed concentration became generalized into a winner-takes-all expectation and institutionalized through venture-capital strategies, rapid scaling norms, and founder self-understandings. The essay extends this sequence to contemporary AI firms and their emerging wealth elites. |
| Date: | 2026–06–06 |
| URL: | https://d.repec.org/n?u=RePEc:osf:socarx:zaq7w_v2 |
| By: | Ethan Bueno de Mesquita; Wioletta Dziuda; Mattias Polborn |
| Abstract: | Concerns about the race to artificial general intelligence often assume that competition and resources increase risk by accelerating development. We study a model in which firms allocate scarce resources between speed and safety. Speed increases a firm's chance of reaching AGI first but leaves fewer resources for safety; safety lowers doom risk but slows arrival. Fragmentation increases total speed and conditional doom risk by shifting a fixed industry resource pool toward speed. The model also identifies a critical market size: below it, firms have positive expected payoff from achieving AGI, while above it, firms race even though achieving AGI has negative expected value. More per-firm resources always accelerate expected arrival, but their effect on conditional doom risk changes sign at this cutoff. Policy affects risk by changing equilibrium incentives: consolidation, resource regulation, commitment devices, and cautious public entry can improve welfare in some environments. The results show that AGI risk depends not only on technical considerations, but also on market structure, resource constraints, and institutions that shape the equilibrium allocation between speed and safety. |
| JEL: | D0 D20 D21 O3 O30 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35276 |
| By: | Guillermo Marshall; Alvaro Parra (University of British Columbia, Sauder School of Business; Dalhousie University, Department of Economics) |
| Abstract: | Why have firms chosen to self-impose a carbon tax where governments have failed to act? We provide an answer to this question by highlighting a novel mechanism in which a firm can use a self-imposed carbon tax to relax the intensity of price competition with its rivals, making it a profitable strategy. The mechanism we highlight does not depend on the self-imposed carbon tax shifting demand or yielding marketing benefits (e.g., making the firm’s products more attractive to consumers because they are considered “green†). We discuss implications for market efficiency and the interaction of this mechanism with opportunities to invest in emission abatement technology. |
| Date: | 2026–05–27 |
| URL: | https://d.repec.org/n?u=RePEc:dal:wpaper:daleconwp2026-03 |
| By: | Yuxin Liu; M. Amin Rahimian |
| Abstract: | Information sharing among competing suppliers can improve decision-making under uncertainty, yet strategic concerns regarding rival exploitation often deter voluntary disclosure. We study information-sharing mechanisms in a Cournot oligopoly with uncertain demand, where a platform aggregates suppliers' signals through privacy-preserving channels and may also possess an exogenous external signal. The central challenge is to balance strategic safety with informational utility: privacy noise reduces the exposure of individual signals, but also lowers the value of the shared information pool. We first characterize a baseline setting in which access to aggregated information is contingent on participation. In a two-firm market without an external signal, firms refuse to share regardless of the privacy level. In an \(n\)-firm market, sharing may arise even without privacy safeguards because non-participating firms lose access to the aggregated signal. Building on this baseline, we show that privacy protection alone is insufficient to incentivize disclosure; it must be combined with a sufficiently informative external signal. We further show that firms with more accurate private signals require stronger privacy protection. Overall, our results characterize the sharing-feasible region and highlight the complementarity between privacy design and the external information environment. |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2606.02348 |
| By: | Gregory J. Martin; Shoshana Vasserman; Cameron Pfiffer |
| Abstract: | Using a novel dataset covering the complete history of individual-level web traffic and digital subscriptions from a major metropolitan newspaper in the United States between 2020 and 2024, we investigate consumers' willingness to pay for different categories of news content, with particular focus on the kinds of coverage believed to generate civic externalities. Our identification strategy relies on the quasi-random arrival of paywall events which force consumers to subscribe if they wish to continue reading. Using this variation, we estimate a model of consumer demand and construct the optimal staff allocation for the paper under different counterfactual revenue models: a fully subscription-based model and a fully ad-supported model. Our results suggest that readers are willing to pay for local reporting, and that measures of demand based only on time-use substantially underestimate the value of “hard” news coverage on topics like local politics and public health. However, digital subscription revenues alone are insufficient to cover staff costs even at the highest revenue-generating sections of the paper. We use our model to estimate the subsidy required to expand the newspaper's production of investigative coverage. |
| JEL: | L23 L82 P0 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35289 |
| By: | Miquel Noguer i Alonso; Iro Tasitsiomi |
| Abstract: | Ownership concentration is not a scalar. For a normalized investor-stock matrix $A$, it has three irreducible layers: concentration across investors, concentration across stocks, and dependence in the joint assignment of investors to stocks. This paper develops a unified quadratic framework for those layers and shows that the same residual operator that measures static overlap also governs linearized market transmission. Raw micro concentration $M(A) = \sum_{i, j} A_{ij}^2$ admits exact row and column decompositions, support bounds, and fixed-marginal extremal characterizations on the transportation polytope. Benchmark-adjusted dependence $\mathcal{X}(A) = \sum_{i, j} (A_{ij} - p_i s_j)^2 / (p_i s_j)$ admits two exact decompositions: it is a size-weighted average of investor-level deviations from the market portfolio and, symmetrically, of stock-level deviations from the investor base. The paper also proves a multiscale aggregation law: under any partition of investors, total dependence splits exactly into between-group dependence and within-group heterogeneity. Spectrally, $\mathcal{X}(A)$ equals the sum of squared nontrivial singular values of the whitened matrix $D_p^{-1/2} A D_s^{-1/2}$. The residual operator $L$ then yields two dynamic consequences: idiosyncratic fire-sale vulnerability is bounded by the dominant overlap mode $\rho(A)$, while aggregate benchmark-relative alpha variance has worst-case capacity $\rho(A)^2$ and isotropic average-case capacity $\mathcal{X}(A)$. The fixed-marginal geometry also motivates a feasible-range sparsity score that benchmarks observed micro concentration against the sharp minimum and maximum implied by the marginals. The resulting framework separates scale concentration, feasible sparsity, overlap, and linear transmission in a way that is mathematically transparent and empirically usable for work on crowding, fragility, and systemic risk. |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2605.26740 |