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on Industrial Competition |
| By: | Nicolas Pasquier |
| Abstract: | Traditional firms competing in a primary market may expand into a secondary market that generates user data and enhances the quality of the primary product. This paper examines how competition between such rival ecosystems affects market outcomes and welfare. Using a Hotelling framework with two symmetric ecosystems that each offer a primary product and a secondary data-rich product, I show that the size of the secondary market is key. When the secondary market is small, ecosystems invest less in quality than in a benchmark with only a primary market and earn higher profits at the expense of consumers. As the secondary market grows, quality investment rises and the welfare ranking can reverse. I further show that expansion into a secondary market need not create a trade-off between profits and consumer surplus: when the ecosystems’ secondary products are sufficiently differentiated, both profits and consumer surplus can exceed their benchmark levels. These findings inform policy debates on digital adoption, market structure, and ecosystem regulation. |
| Keywords: | Competing Ecosystems, Quality Investment, Data-Driven Quality |
| JEL: | L13 L51 D43 O31 Q16 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:gbl:wpaper:2026-03 |
| By: | Gabszewicz, Jean J. (Université catholique de Louvain, LIDAM/CORE, Belgium) |
| Abstract: | This book provides a comprehensive exploration of product differentiation, blending insights from industrial organization, spatial economics, and game theory. In modern economies, nearly every product—from consumer electronics to household goods—comes in multiple variants, reflecting firms' strategic efforts to differentiate their offerings. But why do firms differentiate their products? How do they set prices for these variants? And does this process lead to an efficient market outcome? It examines both horizontal and vertical differentiation, investigating how firms compete not only on price but also on product characteristics such as location, quality, and perceived value. Special attention is given to the role of network effects, industry structure, and monopolistic competition, shedding light on how differentiation influences market dynamics. |
| Keywords: | Industrial Organization ; Market Structure and Economic Design ; Regulation and Industrial Policy ; Spatial Economics ; Conceptual Foundations in Marketing Theory |
| Date: | 2026–01–01 |
| URL: | https://d.repec.org/n?u=RePEc:cor:louvrp:3354 |
| By: | Karissa Moothoo Padayachie Nair (University of Johannesburg); Reena Das Nair (University of Johannesburg) |
| Abstract: | Kenya, often referred to as Africa’s “Silicon Savannah”, has rapidly evolved to become the regional digital business hub in East Africa. While Kenya’s approach to regulation has led to some market-driven competition, it faces similar competition-related challenges that many jurisdictions around the world face in the constantly evolving digital markets landscape. There have been competition concerns raised by entrepreneurs and businesses with respect to accessing markets and competing against the large domestic and global players that have already entered and taken up lead positions in Kenya’s digital ecosystem. This led to the Competition Authority of Kenya (CAK) introducing the Competition Amendment Bill in 2024 which is targeted at addressing platform dominance in digital ecosystems. South Africa adopted a different approach to regulating the digital economy using market inquiries as the primary tool to address potential harm to competition. The market inquiries highlighted concerns surrounding platform dominance and barriers to entry in e-commerce, amongst other concerns. |
| Keywords: | Digital platforms, Competition Policy, Digital Market regulation |
| JEL: | L41 K21 O33 |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:rza:ersawp:338 |
| By: | Chang-Koo Chi (Yonsei University); Jay Pil Choi (Michigan State University); Jong-Hee Hahn (Yonsei University); Seongkyun Kim (Yonsei University) |
| Abstract: | This paper studies self-preferencing incentives by vertically integrated platforms that operate both marketplaces and affiliated retail businesses. We show that self-preferencing and transaction fees are substitute instruments for profit extraction, implying that restrictions on self-preferencing may induce offsetting increases in transaction fees and thereby generate unintended consequences for consumer welfare. We characterize the platform’s optimal choice of self-preferencing and transaction fees and evaluate the welfare effects of behavioral and structural remedies. We also extend the analysis to settings with platform competition and consumer search, examining how market forces shape self-preferencing incentives and evaluating the robustness of our main results. |
| Keywords: | self-preferencing, vertically integrated platforms, transaction fees, regulation, hierarchical Hotelling model, search |
| JEL: | L2 L5 D2 D8 |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:yon:wpaper:2026rwp-294 |
| By: | Aigerim Yergabulova (Nazarbayev University, Graduate School of Business) |
| Abstract: | A high price-cost margin is commonly read as evidence of market power. We show that where production is concentrated in capital-intensive sectors, this reading conflates two distinct objects: the coverage of fixed costs and residual economic rent. Using confidential firm-level microdata from Kazakhstan over 2009-2023 and a within-margin decomposition, we find an aggregate price-cost margin of 62 percent, roughly 2.4 times a mature-economy benchmark. Fixed costs absorb about 91 percent of that gap, and the residual excess-profit share, +5.5 percent, is statistically above zero but not distinguishable from the benchmark. The high aggregate margin reflects the capital intensity of production rather than economy-wide rent. The rent that does exist is concentrated in mining and foreign-controlled extractive firms rather than spread across the economy. Where production is capital intensive, high price-cost margins need not indicate economy-wide rent extraction. |
| Keywords: | markups, price-cost margin, market power, Solow residual, fixed costs, transition economies |
| JEL: | D24 D43 L11 L40 P23 P52 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:asx:nugsbw:2026-10 |
| By: | Yoshiaki Ogura (Waseda University) |
| Abstract: | We investigate the effect of regional bank mergers in Japan since the 2000s by applying the DID-event study design. From the estimation we find the following tendency. First, any type of merger reduces costs. Second, no competition reduction effects are found both in loan markets and deposit markets in any type of merger. Third, the cost reduction effect is passed through to users by reducing borrowing costs in any type of merger. Fourth, the cost reduction effect is larger in full-spec mergers than BHC establishments. These findings imply that the regional bank consolidations in Japan reduced operating costs of the regional banking sector without reducing competition. This implies that the regional bank consolidations were beneficial mainly for users. |
| Keywords: | regional banks, bank consolidations, bank holding companies |
| JEL: | G21 G34 L22 |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:wap:wpaper:2533 |
| By: | Hendrik Theine (Institute for Comprehensive Analysis of the Economy, Johannes Kepler University Linz, Austria; Socio-Ecological Transformation Lab, Johannes Kepler University Linz, Austria; Darmstadt University of Applied Sciences, Germany); Steffen S. Bettin (Department of Socioeconomics, Vienna University of Economics and Business, Vienna, Austria) |
| Abstract: | Generative AI presents a puzzle for political economy. Leading firms accumulate structural advantages, lock in users, and shape technical standards at unprecedented speed, while unit economics remain negative and no clear path to profitability has emerged. This puzzle, we argue, can only be made sense of through an explicit analysis of corporate power, for which mainstream frameworks centred on market concentration alone are ill-equipped. Drawing on heterodox economics and cultural political economy (Boyer, 2022; Galbraith, 1984; Rothschild, 2002; Sum and Jessop, 2013), we develop a multi-dimensional heuristic distinguishing market power, as strategic control within markets, from the power to shape the wider cultural political economy. The rules of the game and the relationship to the state. We map market concentration across three layers of the genAI stack (GPU infrastructure, hyperscalers, foundation models), examine its distinctive cost structure, and analyse the emerging state–capital configuration. High costs and negative unit economics generate strong concentration, pointing toward an AI oligopoly. Politically and culturally, firms deploy the familiar Big Tech playbook (lobbying, academic capture, hegemony production), recruited around two narratives: AI nationalism and the AGI imaginary. Yet we identify a structural break from the platform era. Where platform firms sought to bypass the state, frontier AI firms actively court state procurement and patronage. What is emerging, we argue, is a state project in the making: a configuration in which states adopt the survival and dominance of specific AI firms as their own objectives. |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:set:wpaper:6 |
| By: | Zhicheng Du; Hu Fu; Ying Qin; Zihe Wang |
| Abstract: | Advertisements often strategically disclose information to consumers who make decisions on further information acquisition and eventual purchase. Anderson and Renault (2006) model this problem using an information design framework, where the advertiser acts as a sender and the consumer as a receiver. We extend this model to a competitive setting with horizontally differentiated senders competing for a unit-demand receiver. Under costly inspection, the receiver's optimal sequential search action is given by Weitzman's Index Algorithm. We give a method, based on duality arguments, to verify whether a sender's given information strategy constitutes a best response against his competitors (other senders). We establish the existence of an equilibrium in the game among senders when the prior distributions have no mass; we also illustrate that such equilibria may exhibit intricate behaviors. Finally, we meticulously characterize symmetric equilibria played by the senders for cases when the prior distributions have monotone increasing densities, while offering economic intuitions behind the insightful equilibrium structure. |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2606.03527 |
| By: | Jamie Tucker-Foltz; Richard Zeckhauser |
| Abstract: | A single seller offers one or more goods to a single buyer. The buyer's values and the seller's costs are private information. Each player has a commonly known prior over the other player's value or cost, supported on a finite set. What is the optimal selling mechanism? We argue that, despite this question's importance and apparent simplicity, prior work offers no satisfactory answer. If the seller simply chooses an optimal menu given her realized costs, she fails to exploit her informational advantage. At the other extreme, the optimal trade mechanism that satisfies IC/IR constraints for both parties fails in practice, as it conditions prices on the seller's unknown costs in an unenforceable way. The seller's realistic capabilities lie somewhere in between: she may leverage private information but lacks unlimited commitment power. To bridge this gap, we consider a solution concept built on the realistic assumption that the seller can commit to prices but nothing more. Similar -- albeit technically distinct -- solution concepts have been studied in the context of auctions with multiple buyers. Our concept proves surprisingly rich even with a single buyer. In our model, the buyer and seller engage in multiple rounds of cheap talk before the seller posts a menu of priced bundles. The buyer then purchases. We measure value as profit for the seller and consumer surplus for the buyer. We prove that with a single good cheap talk cannot help either party, but show that it creates value in any extension of this canonical setting: multiple goods, multiple units, interdependent values, or repeated play. We also show that multiple rounds of communication can yield strictly higher expected profit than a single round. Finally, we discuss how realistic factors beyond our stripped-down model combine with cheap talk to enhance this value even further. |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2606.01250 |