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on Industrial Competition |
| By: | Broso, Matteo; Valletti, Tommaso |
| Abstract: | We study the impact of mergers on quid-pro-quo lobbying and elections in a political agency model. Two incumbent firms can lobby an incumbent politician to block a pro-competitive reform. The politician’s type determines whether they are susceptible to the firms’ influence or not. A representative voter tries to infer the politician’s type monitoring the policy-making process. We show that lobbying increases when firms merge because rents from political protection are not dissipated by price competition. While greater market concentration may increase prices and political influence, it also improves voters’ ability to screen bad politicians by observing distorted policy outcomes. This generates a novel trade-off: mergers can harm consumers through market and political power, yet improve selection of politicians. We characterize when standard consumer welfare–based merger control is too lenient or too strict once these political economy effects are taken into account. |
| Keywords: | Mergers; Lobbying; Consumer welfare standard; Antitrust policy; market power; Political economy of competition policy |
| JEL: | D72 D43 L41 L13 K21 |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:21420 |
| By: | Kichko, Sergey; Marini, Marco; Saulle, Ricardo; Thisse, Jacques-François |
| Abstract: | This paper extends the CES model of monopolistic competition to the case where varieties are both horizontally and vertically differentiated. A distinctive feature of our model is the presence of a network externality, which operates through the number of varieties available at each quality level. Depending on the quality gap, there are corner equilibria in which consumers purchase only high-quality or low-quality varieties, or an interior equilibrium in which consumers are split between the two qualities. Unlike the CES model of monopolistic competition, the equilibrium is never efficient and the market may even select the outcome with the lowest surplus. |
| Keywords: | Monopolistic competition; Vertical differentiation; Horizontal differentiation |
| JEL: | D42 D43 L1 L12 L13 L41 |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:21305 |
| By: | Pietola, Matias; Tarantino, Emanuele; Zenger, Hans |
| Abstract: | We study how mergers affect innovation and buyer surplus when suppliers invest before competing for a contract awarded to the best supplier. The merger’s effect on innovation decomposes into a Schumpeterian effect (larger profit base) and an Arrowian effect (lost rivalry). Without synergies, these cancel exactly: the merger is innovation neutral and harms the buyer by the merger premium. Private and social investment incentives are aligned, so merger specific synergies always increase total welfare. However, the buyer benefits only indirectly, through competitive pressure the stronger merged entity exerts on outsiders, and only if the innovation gain exceeds the merger premium. In the presence of external spillovers the merger can be more detrimental to welfare. A joint venture that coordinates investment while preserving competition avoids the premium and, in our numerical analysis, benefits the buyer more than the merger across all specifications. |
| JEL: | D44 L41 O31 G34 L13 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:21529 |
| By: | ALEKSENKO, STEPAN; Miklos-Thal, Jeanine |
| Abstract: | We analyze the effects of information sharing in oligopoly when firms outsource pricing to a common third-party pricing algorithm developer. In a model where algorithms tailor prices to high-frequency demand shocks, we compare regimes that allow or prohibit conditioning on rival-specific shocks. Information sharing makes algorithmic prices more sensitive to seller-specific demand shocks---own and rival---and more correlated across sellers. These effects are stronger under common third-party algorithm design than under independent design because the third party's objective generates greater strategic complementarity in pricing than independent profit maximization. Information sharing harms expected consumer surplus more under common third-party design than under independent design, and its welfare effects are reversed across the two cases: information sharing lowers expected welfare under common third-party design while raising it under independent design. Our findings provide theoretical support for recent antitrust scrutiny of common third-party pricing algorithms that incorporate competitor data. |
| Keywords: | Algorithmic pricing; Information sharing; Antitrust; Oligopoly; Third-party sharing |
| JEL: | L13 L41 L42 D43 L86 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:21452 |
| By: | Bedre Defolie, Ozlem; Biglaiser, Gary; Jullien, Bruno |
| Abstract: | We study a startup’s choice of its "direction of innovation, " how well the technology fits alternative acquirers, and the effects on acquisition outcomes and market dominance. Two horizontally differentiated firms bid to acquire the innovation and then compete in the product market. Firms differ in initial quality stock and in "absorption capabilities, " how effectively the acquired innovation is integrated into their stock. The innovator designs the innovation to intensify bidding by putting firms on a more equal footing, thereby favoring the initially lower-quality firm. As a result, "increasing dominance" is less likely than under exogenous fit. The winner of the innovation is driven primarily by relative absorption capabilities rather than initial quality: the firm with higher absorption capability is more likely to win. The equilibrium innovation direction minimizes industry profit and consumer surplus. In a two-period model, decreasing dominance becomes more likely when the low-quality firm has stronger absorption capabilities. |
| Keywords: | Startup Acquisitions; Direction of Innovation; Decreasing Dominance |
| JEL: | L13 L15 L24 |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:21361 |
| By: | Dirk Bergemann (Department of Economics, Yale University); Tibor Heumann (Instituto de Econom’a, Pontificia Universidad Cat—lica de Chile); Michael C. Wang (Department of Economics, Yale University) |
| Abstract: | We analyze consumer surplus when a monopolist can adjust both prices and product qualities across segments, engaging in second- and third-degree price discrimination simultaneously. We characterize the consumer-optimal segmentation and show that it has a striking structure: consumers with the same value receive the same quality in every segment, though prices differ. Under mild conditions, any segmentation harms consumers if and only if demand is sufficiently more elastic than supply. Hence, potential benefits for consumers depend critically on demand and supply elasticities. These findings have implications for regulatory policy regarding price discrimination and market segmentation. |
| Date: | 2026–06–24 |
| URL: | https://d.repec.org/n?u=RePEc:cwl:cwldpp:2498r1 |
| By: | Bontems, Philippe |
| Abstract: | This paper studies symmetric oligopoly when marginal cost is not constant. In this environment, the Lerner index is not a sufficient measure of profitability: firms’ relevant margin is the contribution margin, defined relative to variable cost. The paper introduces a contribution margin index and relates it to the Lerner index through a profitability factor. This factor captures the wedge between local markups and average profitability. It also governs comparative statics for cost pass-through, market expansion, entry, profits, and concentration. The framework nests the constant marginal cost benchmark and shows how cost curvature changes the interpretation of standard oligopoly statistics. |
| Keywords: | Pass-through; Cost Structure; Contribution Margin; Oligopoly |
| JEL: | D21 H22 H32 L13 L51 |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:tse:wpaper:131904 |
| By: | Shintaro Minamoto (Graduate School of Economics, The University of Osaka) |
| Abstract: | Original equipment manufacturing (OEM) agreements between competing firms play a significant role in improving production efficiency through scale economies. At the same time, however, they can also reduce market competition. This study empirically examines the effects of OEM agreements on competition and welfare in the Japanese automobile industry. I develop and estimate structural models incorporating OEM agreements, market competition, and scale economies. The results indicate that efficiency improvements lead to significant welfare gains, even when these agreements reduce competition. These findings provide empirical insights into the trade-off involved in such agreements and contribute to competition policy regarding modern supply chains. |
| Keywords: | OEM, horizontal subcontracting, scale economies, vertical relationships |
| JEL: | L13 L22 L62 |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:osk:wpaper:2607 |
| By: | Borsenberger, Claire; Cremer, Helmuth; Joram, Denis; Lozachmeur, Jean-Marie; Malavolti, Estelle |
| Abstract: | We study environmental policy in imperfectly competitive markets where firms differ in their objectives. Alongside standard profit-maximizing firms, we consider welfare-oriented firms that partially or fully internalize environmental externalities but are subject to financial viability constraints. We develop a Cournot model in which production generates emissions and firms may differ in the extent to which they account for environmental damages. We characterize market equilibria and examine the effects of environmental taxes and output subsidies on emissions, output, profits, and welfare. Our analysis shows that standard Pigouvian prescriptions are modified by the presence of market power and by the break-even constraints faced by welfare-oriented firms. While emissions taxes reduce environmental damages, they may also exacerbate underproduction and threaten the viability of socially responsible firms. Conversely, output subsidies may improve welfare despite increasing emissions. The welfare ranking of policy instruments depends critically on the interaction between environmental externalities, imperfect competition, and firms' financial constraints. These findings suggest that environmental policy design should account not only for emissions reduction, but also for the market structure and sustainability of firms with socially oriented objectives. |
| Keywords: | Environmental policy; Pigouvian taxation |
| JEL: | H23 L13 D62 Q58 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:21500 |
| By: | Gaston Llanes; Martin Peitz |
| Abstract: | We study a platform that interacts with a major content provider, a long tail of independent providers, and consumers who allocate attention across competing content. By designing independent-provider compensation, the platform endoge nously shapes its outside option and disciplines the major. This strategic use of long-tail compensation distorts entry relative to the first best. Allowing the platform to steer consumer attention improves entry incentives conditional on compensation, but affects bargaining incentives, and may thus increase or de crease welfare. We then consider regulation, showing that conservative minimum compensation floors robustly improve welfare, while non-discrimination policies have ambiguous welfare effects. |
| Keywords: | streaming platform, Nash bargaining, royalty negotiation, free entry, consumer steering |
| JEL: | L14 L82 L86 D43 D44 |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2025_766 |
| By: | Philipp Strack (Department of Economics, Yale University); Kai Hao Yang (School of Management, Yale University) |
| Abstract: | A monopolist offers personalized prices to consumers with unit demand. Consumers differ in their values, costs, and protected characteristics such as race or gender. The seller is subject to a non-discrimination constraint: consumers with the same cost, but different protected characteristics must face identical price distributions. Such regulations are present in markets like credit or insurance. We characterize the optimal pricing rule. Under this rule, surplus accrues to both protected groups, but only to those with intermediate values. Strengthening the constraint to cover transaction prices redistributes surplus, harming the low-value group and benefiting the high-value group. Meanwhile, prohibiting the use of protected characteristics as pricing inputs instead of regulating outputs harms the low-value group. |
| Keywords: | Price discrimination, personalized pricing, discrimination, market segmentation, protected characteristics, optimal transport |
| Date: | 2026–05–28 |
| URL: | https://d.repec.org/n?u=RePEc:cwl:cwldpp:2447r1 |
| By: | Bergemann, Dirk; Bonatti, Alessandro; Smolin, Alex |
| Abstract: | We develop a framework for the optimal pricing and product design of LLMs in which a provider sells menus of token budgets to users who differ in their valuations across a continuum of tasks. Under a homogeneous production technology, we show that users' high-dimensional type profiles are summarized by a scalar index, reducing the seller's problem to one-dimensional screening. The optimal mechanism takes the form of committed-spend contracts: buyers pay for a budget that they allocate across token classes priced at marginal cost. We extend the analysis to environments with multiple differentiated models and to competition between a proprietary leader and an open-source fringe, showing that competitive pressure reshapes both the intensive and extensive margins of compute provision. Each element of our theory (token-budget menus, maximum- and minimum-spend plans, multi-model versioning, and linear API pricing) has a direct counterpart in the observed pricing practices of providers such as Anthropic, OpenAI, and GitHub. |
| Keywords: | Large Language Models |
| JEL: | D47 D82 D83 |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:21275 |
| By: | Moraga-González, José-Luis; Motchenkova, Evgenia; Hoà ng, Long |
| Abstract: | This paper analyzes a monopoly platform’s joint pricing and investment decisions in the canonical two-sided market model of Armstrong (2006). Participants are heterogeneous in outside options and derive both stand-alone benefits from joining the platform, and network benefits from interacting with the opposite side. The platform sets participation prices on both sides and chooses investments that enhance user experience. We characterize monopoly distortions in participation, pricing, and investment relative to a social planner. Taking investment as given, the monopoly outcome features under-participation on both sides, yet participation prices need not transparently reflect these participation distortions. We show that at least one participation price is excessively high relative to the social optimum. Equivalently, while one side’s participation price may be inefficiently low, participation prices that are too low on both sides are impossible. When investment enhances network benefits, marginal returns are proportional to interaction volume; since the planner induces greater participation and therefore more interactions, the monopoly underinvests on both sides. By contrast, when investment enhances stand-alone benefits, marginal returns scale with own-side participation, so investment distortions may be asymmetric across sides, although overinvestment on both sides is ruled out. An application to app platforms, with user-side device pricing and developer-side commissions on in-app purchases, yields sharp predictions for device price, commission and investment distortions, as well as for the effects of commission caps on buyer and seller surplus. |
| JEL: | D42 L12 L14 L40 |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:21336 |
| 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: | Competition |
| JEL: | D4 L1 L5 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:21454 |
| By: | Zhang, Dayin; Han, Lu; Barwick, Panle; Kroah, Jon |
| Abstract: | Despite intense competition among mortgage lenders, borrowers continue to face elevated rate spreads and substantial price dispersion. We argue that realtor–loan officer referral networks are a key source of lender market power: by steering homebuyers toward a limited set of loan officers, these networks restrict effective borrower choice even in otherwise competitive markets. Using a novel dataset linking 81, 306 realtors to 102, 860 loan officers in 41 states, we document that such networks are both pervasive and highly concentrated: 85% of realtors direct over 40% of their clients to fewer than four loan officers. Strikingly, the lender concentration among realtors persists and even increases in markets with more lenders, suggesting that referrals constrain choices regardless of market structure. IV estimates indicate that borrowers working with referred loan officers pay 18.6 basis points higher interest rates, equivalent to $2, 609 in upfront costs for the average loan of $306k. The referral premium is nearly three times as high for Hispanic borrowers as for White borrowers, and is systematically higher for Black borrowers and financially constrained households. On average, referral lending raises rate spreads by 36.5% and explains half of the (residual) standard deviation of rate spreads after controlling for lender, market, and time fixed effects. We identify two mechanisms: referrals reduce borrowers' search intensity for lenders, and referred loan officers exercise pricing power relative to other officers within the same lending institution. Efficiency arguments (faster processing) and mediation of denial risks don't fully justify the referral premium. Our findings reveal referral networks as a hidden source of market power, imposing substantial financial costs and raising equity concerns for borrowers. |
| JEL: | D40 G21 L14 L85 R31 |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:21406 |
| By: | Elsas-Nicolle, Ambre; Genakos, Christos; Kretschmer, Tobias |
| Abstract: | Can entire markets strategically confuse consumers to raise market prices? Using a detailed dataset covering virtually all mobile phone tariffs and their handsets in the United Kingdom between January 2010 and September 2012, we study the evolution of quality adjusted prices and find that they increased until December 2010, even though the industry was mature, technologically homogeneous, and competitive. Upon exploring the role of several salient factors, such as differentiation and product proliferation by firms that may have affected this evolution, we argue that the primary driver is the implementation of obfuscation strategies by firms. The observed price increase is significantly correlated with the rate at which operators implemented dominated tariffs (i.e., tariffs for which there is a cheaper alternative from the same operator), indicating that firms use obfuscation strategies to reduce product transparency, thereby elevating overall prices. Importantly, the presence of dominated tariffs raises not only the prices of these contracts but also those of efficient ones, distinguishing our findings from a behavioral price discrimination strategy that would only affect inattentive consumers. Our exploratory study is one of the first to offer suggestive evidence of obfuscation as an industry-wide supply-side phenomenon. |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:21320 |
| By: | Li, Chengqing; Zenou, Yves; Zhou, Junjie |
| 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. |
| Keywords: | Social Networks; Competitive equilibrium; Externalities; Welfare |
| JEL: | D50 D62 D85 C63 Z13 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:21517 |
| By: | Simone Voigt (first name last name) (Paderborn University); André Uhde (first name last name) (Paderborn University) |
| Abstract: | This paper empirically examines the relationship between market power and Environmental, Social, and Governance (ESG) scores of banks in Europe and North America from 2010 to 2021, focusing separately on loan and deposit markets. Employing the Lerner Index as a non-structural measure of market power, our findings suggest that the impact of banking market power on ESG scores varies by region and the respective loan or deposit market. We find a negative effect of loan and deposit market power on ESG scores of European banks whereas the opposite effect can be observed for North American banks exhibiting loan market power. Further sensitivity analyses reveal that factors such as banks being Global Systemically Important (G-SIBs), and different ESG-related events like the Paris Agreement, the reemergence of the #MeToo movement and the COVID-19 pandemic may also explain the relationship between bank market power and ESG scores. Overall, our results underline that banking market power plays a pivotal role in enforcing ESG commitments in banking, offering key insights for policymakers, regulators, and banking stakeholders. (abstract of the paper) |
| Keywords: | Market Power, ESG scores, Eurpean and North American banking markets (keywords) |
| JEL: | G21 G28 |
| URL: | https://d.repec.org/n?u=RePEc:pdn:dispap:174 |
| By: | He, Zhiguo; Huang, Jing; Parlatore Siritto, Cecilia |
| Abstract: | We develop a credit market competition model that distinguishes between information span (breadth) and signal precision (quality), capturing the rise of fintech/non-bank lending where traditionally subjective (“soft†) information is transformed into objective (“hard†) data. Borrower quality depends on multidimensional fundamentals, assessed through hard or soft signals. Two banks observe private hard signals, but only the specialized bank receives a soft signal. Expanding the span of hard information enables the non-specialized bank to evaluate characteristics previously only available to the specialist, and reducing its winner’s curse. By contrast, greater precision of hard signals strengthens the specialized bank’s informational advantage. |
| Keywords: | Banking competition; Information technology; Fintech; Specialized Lending; Winner's curse |
| JEL: | G21 L13 L52 O33 O36 |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:21310 |
| By: | Alviarez, Vanessa; Fioretti, Michele; Kikkawa, Ken; Morlacco, Monica |
| Abstract: | We develop and estimate a structural model of bargaining in firm-to-firm trade to study the determinants of tariff pass-through. The model features oligopoly and oligopsony power and yields analytical expressions for bilateral markups and pass-through based on two sufficient statistics: the supplier's share in the buyer's purchases and the buyer's share in the supplier's output. Using U.S. import data, we find substantial importer bargaining power and steep export supply curves. These primitives imply that cost changes, rather than markup adjustments, dominate pass-through, accounting for the bulk of incomplete pass-through of the 2018 U.S. tariffs and its heterogeneity across buyer-supplier links. |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:21530 |
| By: | Dubois, Pierre; Pakes, Ariel |
| Abstract: | Direct-to-consumer advertising (DTCA) of prescription drugs may expand treatment access but also risks promoting overuse and business stealing without generating welfare gains. Among developed nations, only the United States and New Zealand permit DTCA, whereas detailing - promotion aimed at prescribers - is widely practiced. This paper analyzes the impact of DTCA on profits by modeling a counterfactual environment in which DTCA is banned. This is implemented through a dynamic equilibrium framework that adapts the Experience-Based Equilibrium (Fershtman and Pakes, 2012) for empirical analysis. EBE incorporates constraints on the cognitive abilities of decision-makers and mitigates researchers’ computational concerns. Using data from four therapeutic markets, we first validate the EBE's ability to replicate observed advertising patterns, then simulate counterfactual DTCA bans. Both the data and our empirical work indicate that DTCA and detailing are strong complements, and our results illuminate the need to account for this when evaluating the ban. The ban leads firms to reduce detailing and has a negative effect on profits in all markets, but the magnitude of the effect varies from under 5% in the market for Ulcer to 27.5% for Asthma medications. |
| JEL: | D21 L1 I10 M37 |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:21332 |
| By: | Drugov, Mikhail; Jeon, Doh-Shin |
| Abstract: | This paper studies the incentives of a subscription-funded platform that offers both proprietary and third-party content to bias its recommendations about which content users should consume. Consistent with Netflix’s practice, we consider fixed-fee bargaining between the platform and a content provider, which eliminates any static incentive to bias recommendations. However, our dynamic model identifies two distinct incentives to bias recommendations: improving the platform’s future bargaining position and increasing users’ expected surplus. The former favors first-party content, while the latter favors the ex ante superior content. As a result, biased recommendations may lead to either self-preferencing or third-party preferencing. |
| Keywords: | Platform |
| JEL: | D83 L42 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:21451 |
| By: | Bontems, Philippe |
| Abstract: | This paper develops a tractable framework for monopoly and monopolistic com-petition with non-constant marginal costs. Flexible cost structures are summarized by sufficient statistics: the contribution margin, a profitability scale factor, and a composite curvature index. The scale factor measures the elasticity of operating profits to market size and governs the wedge between the contribution margin and the Lerner index. The framework delivers pass-through formulas for cost shocks and links its objects to accounting, demand, production, and pass-through data. Applied to market expansion, it shows how flexible costs can amplify, dampen, or overturn Matthew effects (“Rich get richer, poor get poorer"). |
| Keywords: | Cost Pass-Through; Cost Structure; Heterogeneous Firms; Globalization |
| JEL: | D21 F12 F61 |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:tse:wpaper:131905 |
| By: | Maximilian Schaefer; Kevin Ducbao Tran |
| Abstract: | Using data from Paris in 2017, we estimate demand for short-term accommodations, explicitly accounting for localized variation in demand across the city. Our counterfactual simulations show that Airbnb increases total consumer surplus by 924 million euros, affords Airbnb hosts a surplus of 21 million euros, while reducing total hotel profits by 778 million euros, resulting in an overall welfare gain of 167 million euros. Airbnb’s value to consumers is highest when demand is high and hotels operate close to capacity constraints. The impact of Airbnb on consumers and hotels is heterogeneous across the city: Hotels in outer districts would gain most from a ban of Airbnb. Conversely, consumer surplus would be reduced the most from a ban of Airbnb in these outer districts. |
| Date: | 2026–01–30 |
| URL: | https://d.repec.org/n?u=RePEc:bri:uobdis:26/837 |
| By: | Dan Andrews; Andrea Garnero; Sara Holttinen |
| Abstract: | This paper provides new evidence on the prevalence and potential effects of non-compete and related clauses in Canada using OECD surveys of workers and firms. It finds that these clauses are widespread, increasingly used, and often applied beyond roles where they are most justified. Many appear overly broad and legally weak, yet a substantial share of workers report having been prevented from changing jobs or starting a business. Their impact is reinforced by behavioural factors, including reputational and ethical concerns. The findings also bring into closer focus the use of (firm-to-firm) no-poaching and wage fixing agreements that restrict labour market competition and, thus, raise broader concerns for the Canadian Competition Bureau. |
| Keywords: | job mobility, labour market competition, Non-compete clauses |
| JEL: | J62 K31 L41 |
| Date: | 2026–07–13 |
| URL: | https://d.repec.org/n?u=RePEc:oec:ecoaaa:1872-en |
| By: | Dominika Langenmayr; Rohit Reddy Muddasani |
| Abstract: | Firms in the digital economy often pay little tax in the countries where their customers are based. In response, market countries have introduced digital service taxes on the revenue of these firms to indirectly tax their profits. We study the incidence of these taxes using data on Amazon, the largest online retailer. We find that in most countries, Amazon increased its fees by roughly the amount of the digital service tax. Firms using Amazon as a platform have largely passed these increased fees on to consumers. Large digital firms thus bear only a small part of the tax burden, but the tax may nevertheless succeed in making them less competitive relative to brick-and-mortar retailers. |
| Keywords: | tax incidence, digital service taxes, two-sided markets, platforms |
| JEL: | H22 D40 L50 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12713 |
| By: | Casi, Elisa (Dept. of Business and Management Science, Norwegian School of Economics); Cincotta, Costanza (Dept. of Economics, CUNEF Universidad); Koester, Allison (McDonough School of Business, Georgetown University) |
| Abstract: | We investigate the competitive consequences of government financial assistance by examining non-assisted firms operating in the same product market as assisted firms. Using a novel dataset of U.S. federal, state, and local government assistance to U.S. public firms, we find that increases in government assistance to competitors are associated with a 12.2% decrease in nonassisted firms’ financial performance. The decline in financial performance is driven by decreasing revenues and increasing research and development expenses. Results are more pronounced for financially constrained firms, and concentrated in permanent government assistance in the form of cash grants, cost reimbursements, and tax abatements/credits (rather than temporary assistance in the form of loans). We further show that greater competitor assistance is associated with a 5.1% decline in market share, particularly in less competitive markets. Overall, the evidence indicates that government assistance generates negative competitive externalities for non-assisted firms - a potentially unintended and previously unexplored consequence of government intervention that benefits some firms at the competitive expense of others. |
| Keywords: | Government financial assistance; competitive externalities; product market competition |
| JEL: | D40 H25 H71 L22 M48 |
| Date: | 2026–06–25 |
| URL: | https://d.repec.org/n?u=RePEc:hhs:nhhfms:2026_008 |
| By: | Bisceglia, Michele; Israel, Mark; Piccolo, Salvatore; Ramezzana, Paolo |
| Abstract: | When a manufacturer distributes its products through both a direct sales channel and an independent retailer, a fundamental tension arises between the efficiencies of direct distribution and the need to incentivize the retailer. To induce the retailer to undertake noncontractible actions that enhance demand, such as pre- and post-sale assistance, the manufacturer must grant it a high gross margin. This, however, creates incentives for the manufacturer to undercut the retailer ex post through its direct channel. We show that a retail price parity (RPP) policy, which requires identical retail prices across the direct and independent channels, can increase industry profits. By allowing the manufacturer to commit not to undercut the retailer, RPP strengthens the retailer's incentives to undertake valuable noncontractible actions and enables supply contracts that increase joint profits. Because higher effort improves service quality, RPP may also increase consumer welfare even when it leads to higher monetary retail prices. These findings offer guidance for managers designing dual distribution strategies and inform policy discussions on the competitive effects of price-parity clauses. |
| JEL: | L22 L42 L81 M31 |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:21240 |
| By: | Marc Filser (CREGO - Centre de Recherche en Gestion des Organisations - Université de Haute-Alsace (UHA) - Université de Haute-Alsace (UHA) Mulhouse - Colmar - UB - Université de Bourgogne - UBFC - Université Bourgogne Franche-Comté [COMUE] - UMLP - Université Marie et Louis Pasteur - UBFC - Université Bourgogne Franche-Comté [COMUE]); Gilles Paché (CERGAM - Centre d'Études et de Recherche en Gestion d'Aix-Marseille - AMU - Aix Marseille Université - UTLN - Université de Toulon) |
| Abstract: | This paper revisits the fundamentals of Big Middle theory in the retail sector, emphasizing its value as a framework for analyzing the evolution of companies in highly competitive markets. Initially, new retail formats differentiate themselves by offering low prices, but over time, they tend to broaden their service offerings, which increases costs and brings them closer to traditional models. According to Big Middle theory, large retailers then aim to strike a balance between competitive pricing and service differentiation to appeal to a wider audience, rather than focusing exclusively on one strategy. The purpose of this paper is to explore the relevance of applying Big Middle theory to retail logistics, an area that has yet to be thoroughly examined. The key idea is that large retailers navigate varying levels of logistical performance to meet customer expectations for both cost-efficiency and responsiveness. The primary risk, however, is that they may become trapped in a middle-ground strategy, offering a compromise between cost and logistical service that tries to meet conflicting objectives but fails to fully achieve either. |
| Keywords: | competition, cost/service, differentiation, retail logistics, Big Middle |
| Date: | 2025–10–09 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05480120 |
| By: | Elsas-Nicolle, Ambre; Li, Shiyuan; Verboven, Frank |
| Abstract: | U.S.--China trade tensions have led to sanctions on major Chinese firms, with potential spillovers to third-country markets. We study the effects of U.S. restrictions on Huawei's access to key U.S. technologies in smartphone markets in the United States and Europe. Using product-level data, we show that the sanctions substantially reduced Huawei's sales and prices, consistent with a negative demand shock. To quantify equilibrium effects, we develop a differentiated-products oligopoly model in which the sanctions degrade two key Huawei product attributes: access to Google Mobile Services and 5G chipsets. We find that the sanctions were effective in reducing Huawei's profits, despite its divestiture of Honor to mitigate losses. While U.S. consumers are largely unaffected, European consumers experience considerable welfare losses. These findings indicate that firm-targeted sanctions can shift welfare losses away from the sanctioning country and onto third-country consumers. |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:21405 |
| By: | Coen, Jamie; Gavazza, Alessandro; Gottlieb, Daniel; Ramadorai, Tarun |
| Abstract: | We develop a theoretical model and test its predictions using granular search, choice, and pricing data from the UK motor insurance market around the introduction of price walking regulation. Before the policy, insurers attracted new customers with low prices while raising prices for existing customers. After regulation, introductory discounts to likely inactive customers fell, but insurers responded by proliferating products and segmenting the market more finely. Inactive customers therefore still pay a substantial price penalty relative to active searchers, through different mechanisms. Our findings illustrate how firms can redesign products in ways that blunt even well-designed regulation. |
| Keywords: | Insurance; Financial regulation |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:21357 |
| By: | Minnich, John |
| Abstract: | When do firms trade technology for market access? Theories of foreign investment typically frame host state bargaining power in terms of domestic characteristics like market size. This article examines how the structure of global markets in which firms are embedded and the inter-firm competition this generates shape firm-state bargaining over technology in ways not reducible to host state attributes. I argue that as the number of firms in an industry rises and global market shares become less evenly divided among them, weak market players face strong incentives to transfer technology in return for access to new markets. In this context, host states can “divide and conquer” investors to secure better terms of trade and investment. Case studies of technology transfer in commercial aircraft manufacturing and semiconductor design and fabrication in China show how industry market structure shapes firm-state bargaining over entry terms both across and within industries. |
| Keywords: | technology transfer; market structure; foreign direct investment; China |
| JEL: | F3 G3 R14 J01 |
| Date: | 2026–09–30 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:138366 |
| By: | Sandra Bilek-Steindl; Susanne Bärenthaler-Sieber (WIFO); Julia Bock-Schappelwein; Michael Peneder |
| Abstract: | In light of the widespread use of digital platforms, this paper addresses the question of whether and how firms derive benefit from their use and aims to estimate the contributing factors. Using data from a newly implemented enterprise survey in Austria, we evaluate both individual survey results and a combined measure of the effects on revenues, costs and selling prices. Logistic regressions reveal significant differences in the impact of digital platforms on firms depending on the firm characteristics and the business domains, like for sales, in which the platforms are used. Their application also has effects for the business partners of the firms. Empirical results find a predominantly positive impact of platform use on the firms' customers, consisting of firms (B2B) and consumers (B2C), with respect to quality and product variety. |
| Keywords: | Digital platforms, Enterprise survey, Technological impact, Network effects |
| Date: | 2026–04–23 |
| URL: | https://d.repec.org/n?u=RePEc:wfo:wpaper:y:2026:i:728 |
| By: | Dan Andrews; Tito Boeri; Andrea Garnero; Sindri Engilbertsson; Sara Holttinen; Lorenzo G. Luisetto |
| Abstract: | Non-compete clauses can protect firms’ legitimate interests such as trade secrets or training investments, but they can also hinder worker mobility, wage growth, and innovation. Therefore, the way these clauses are regulated is central to balancing business needs with labour market dynamism. This paper provides the first cross-country analysis of non-compete regulatory regimes in OECD countries. It documents the main legal dimensions that govern their enforceability, and it develops a new index that captures regulatory strictness and structure. This extends earlier work on the United States. By systematically mapping these frameworks, the paper helps to fill a significant knowledge gap and supports policymakers in evaluating the effectiveness of current regulations in balancing the protection of firms with the fostering of competitive and innovative labour markets. |
| Keywords: | Job Mobility, Non-Compete Clauses, Regulation |
| JEL: | J41 J62 K31 |
| Date: | 2026–06–29 |
| URL: | https://d.repec.org/n?u=RePEc:oec:elsaab:332-en |
| By: | Imahie, Satoshi |
| Abstract: | Why do uninformed consumers pay more? A long-standing answer is market unfamiliarity. Yet how much it contributes to information frictions, and whether it fades with experience, have not been directly measured. I answer these questions using millions of fuel purchases by Japanese drivers. Identification exploits two kinds of variation in familiarity, from travel and relocation. Comparing the same driver across markets, I find that unfamiliarity accounts for 62% of the price gap between informed and uninformed consumers, while persistent individual differences explain the rest. This unfamiliarity-driven gap (the experience premium) declines with repeated purchases, consistent with learning in consumer search. |
| Keywords: | Consumer Search; Information Friction; State Dependence; Learning, Gasoline |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:tse:wpaper:131884 |
| By: | Li Li |
| Abstract: | Since the 1980s, the entry and exit rates of firms have declined significantly worldwide, including in Canada and the United States, signalling a reduction in business dynamism. This paper builds on a study by MacDonald (2014) by extending the analysis of Canadian entry and exit trends from 1983 to 2012 up to 2021 and comparing these results with those from the United States. While Canadian entry and exit rates previously declined more sharply than those in the United States, this decline largely ceased in the late 2010s, with rates approaching levels similar to their U.S. counterparts. The Canadian declines are not attributable to sectoral shifts but rather affect all sectors. This paper further finds that sector-specific increases in industrial concentration do not appear to explain the decline in Canadian entry and exit rates. |
| Keywords: | long-run evolution, business entry and exit, rates |
| JEL: | J23 M21 |
| Date: | 2025–09–24 |
| URL: | https://d.repec.org/n?u=RePEc:stc:stcp8e:202500900001e |
| By: | Rupert Allen; Jenny Watt |
| Abstract: | Despite the involvement of the Canadian government in the video game industry, there is relatively little publicly available information about the types of firms populating this industry. This article provides new statistics on the video game industry across the Canadian provinces from 2013 to 2022, focusing on three main areas of interest. First, it examines changes in firm counts, revenue and jobs across several dimensions: ownership (Canadian- or foreign-owned), activity (design or publishing), size and geographic region. Second, it presents statistics on the percentage of women employees and the percentage of employee compensation paid to women over time. Third, it compares entry and exit rates for video game firms with entry and exit rates for all private employer firms in Canada. The article illuminates several changes to the video game industry over time, including a rapid increase in the number of small Canadian-owned firms, a shift away from video game publishing towards video game design, and an increasing proportion of women employees and employee compensation paid to women. |
| Keywords: | video games, firm dynamics, women employees |
| JEL: | J23 M21 |
| Date: | 2025–08–27 |
| URL: | https://d.repec.org/n?u=RePEc:stc:stcp8e:202500800001e |
| By: | Tin Cheuk Leung (Wake Forest University); Shi Qi (William & Mary); Koleman Strumpf (Wake Forest University) |
| Abstract: | This paper studies self-preferencing in subscription video streaming. We assemble a new dataset linking Netflix's U.S. catalog, Top 10 rankings, Wikipedia page views, and device-level streaming records. Conditional on external popularity and other observables, Netflix Originals are significantly more likely to appear in the Top 10 than comparable non-original titles, especially among series. Using a matched staggered difference-indifferences design around first Top 10 entry, we show that Top 10 placement causally increases subsequent viewership. The effect is weaker among devices with extensive prior Netflix viewing, consistent with personalized recommendations substituting for generic rankings. These findings provide evidence of platform gatekeeping in digital media |
| Keywords: | Self-Preferencing; Netflix; Digital Platforms; Platform Bias |
| JEL: | D22 K21 L40 L82 M21 |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:ris:wfuewp:023017 |
| By: | Propper, Carol |
| Abstract: | In the last two decades European policy makers have sought to increase the use of market mechanisms in the delivery of healthcare. These reforms introduce competition and choice into previously heavily constrained environments. This leads to a set of interesting economic issues that have been addressed in a range of papers, both theoretical and empirical. This paper examines whether this popular reform model has resulted in improvements in outcomes for patients and/or taxpayers. It synthesises the existing economic analyses, highlights what is known and what is not, and signals potential next steps for economic research. |
| Keywords: | Choice |
| JEL: | I11 I18 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:21559 |
| By: | Campbell, James |
| Abstract: | A video game developer can monetize its content (maps, themes, modes) in two ways: upfront pricing, a single high up-front price for the game with all content included, or in-game purchases, a free or cheap base with each content piece sold separately. We model this as a choice between bundling and separately selling a content stream and ask when in-game purchases dominate. Upfront pricing wins when content tastes are dispersed and weakly correlated; in-game purchases win when tastes are strongly correlated or pieces differ in appeal, when risk-averse players face uncertain content, and when players are present-biased or impulsive. A simulation with all forces active shows that bundling is the benchmark optimum and that each friction shifts the boundary toward in-game purchases, with behavioral forces moving it most. The framework explains why premium console and PC games are still sold up front, while long-lived games, especially mobile games, rely on in-game purchases. |
| Date: | 2026–06–16 |
| URL: | https://d.repec.org/n?u=RePEc:osf:socarx:c7ebt_v1 |
| By: | Motonori Ishii (Waseda University, Graduate School of Economics) |
| Abstract: | The purpose of this paper is to reinterpret F. A. Hayek's theory of prices within the context of British classical economics (hereinafter referred to as "the Classical School"). Although Hayek hailed from the Austrian School, which was founded on a critique of the Classical School, he viewed modern economics—from the Marginal Revolution onward—as an economics in which subjectivism had been grafted onto the Classical School. In fact, Hayek reinterpreted the concept of the "natural price" in the Classical School—a price determined in light of social and historical circumstances and converging toward that level through competition. Hayek interpreted this as a system of negative feedback and recognized Smith as its pioneer. Hayek's interest lay in elucidating why markets move toward equilibrium even though people possess only fragmentary and unsystematized knowledge; he identified conventions—which stabilize people's expectations—as the key factor. Hayek defended the natural price as a price supported by convention, and in that sense, his theory of prices owes much to Smith's theory of the natural price. |
| Keywords: | Hayek, Classical Economics, Austrian School, Marginal Revolution, Natural Price |
| JEL: | B12 B13 B31 |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:wap:wpaper:2608 |
| By: | Arnaud WITTMER |
| Abstract: | This article examines wage inequalities induced by firm-level collective agreements. While European literature on firm-level collective bargaining often identifies a wage premium associated with firm-level agreements, we seek to go beyond this finding by studying the effects on the distribution of wages within and between firms. To do so, we use the AKM (Abowd-Kramarz-Margolis) estimation method, previously applied by Song et al. (2018) and Babet, Godechot, and Palladino (2025), who studied the variance of individual log hourly wages. Our indicator for firm-level agreement presence carries no direct explanatory power in the year the agreement is signed. However, wage inequalities are systematically higher in firms that have signed a wage agreement over the full sample period, reaching 0.0195 for firms with 50–99 employees, 0.0284 for firms with 100–249 employees, and 0.0487 for firms with 500 or more employees. This difference is driven primarily by the within-firm component of wage inequality, which is higher in firms signing FLAs (Firm-Level-Agreements) and increases further with firm size. These findings suggest that the culture of negotiation within companies, rather than the act of signing an agreement itself, can contribute to a raise of wage inequalities in companies signing FLAs. |
| Keywords: | labour market, collective bargaining, wage inequalities |
| JEL: | D30 D33 J31 J52 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ulp:sbbeta:2026-20 |
| By: | Gehrig, Thomas; Stenbacka, Rune |
| Abstract: | We characterize strategic investments in supply chain resilience when facing endogenously generated supply disruptions by an adversarial foreign rival in a geopolitical duopoly. The resilience investment has a strategic deterrence effect on rival investments in disruption. However, the domestic firm has insufficient incentives to invest in supply chain resilience, thereby justifying a subsidy policy. We characterize the optimal subsidy policy and show that it depends on the effectiveness of the interference technology available to the rival in the autocratic country if this interference operates through the market channel but not if it operates through the cost channel. |
| Keywords: | supply chain resilience; Strategic investment; Subsidy policies |
| JEL: | L13 D43 F12 F61 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:21507 |
| By: | Reka Juhasz (UBC, NBER, CEPR); David Krisztian Nagy (CREI, CEPR); Claudia Steinwender (LMU Munich, CEPR); Woan Foong Wong (University of Oregon, NBER, CEPR) |
| Abstract: | Maritime transport remains the backbone of global trade, yet the port and shipping network that carries it has been transformed by containerization and related technological advances. Drawing on newly available granular data—digitized historical shipping records, georeferenced ship movements, and shipment-level routing information—we present five stylized facts on the structure and evolution of the maritime network. Global shipping activity is highly concentrated among a changing lineup of dominant top ports even as lower-ranked ports disperse, while state-owned Chinese port terminal operators increasingly account for these global volumes, boosting overall port operations while delivering efficiency gains mostly to Chinese vessels. We use these facts to organize a synthesis of a fast-growing literature: containerization reshaped which port cities could expand, reinforced hub-and-spoke concentration that yields large but localized welfare gains, embedded ports in multimodal networks that amplify the returns to infrastructure, and generated market power, congestion, and environmental costs. Together, this evidence shows how evolving maritime technologies simultaneously deepen global integration and heighten the economic and geopolitical importance of critical nodes in the transport network—and of who controls them. |
| Keywords: | transport networks; ports; international trade; trade costs; containerization; geoeconomics; |
| JEL: | F13 F14 R41 R42 |
| Date: | 2026–07–02 |
| URL: | https://d.repec.org/n?u=RePEc:rco:dpaper:579 |
| By: | Amin, Mohammad; Rodriguez Cuniolo, Eugenia Aurora |
| Abstract: | This paper investigates the impact of informal competition—defined as competition faced by formal firms from informal enterprises—on the firm-provided worker training among formal manufacturing small and medium-sized enterprises. Using a representative dataset of small and medium-sized manufacturing firms in 23 Sub-Saharan African countries, a sizable negative impact is found. A one-standard-deviation increase in informal competition reduces the probability that a firm offers training to its workers by 8.7 to 12.9 percentage points, relative to the sample mean of firms that offer training of approximately 25 percent. Comparable declines are observed in the share of workers receiving training. To address potential endogeneity, the paper employs several complementary strategies. First, an instrumental-variables strategy leverages variation in the number of children aged 0–4 and 5–9 years per working-age woman to generate exogenous shifts in informal competition. Second, heterogeneity is examined through tests derived from the “legalist” view of informality, which predicts bigger adverse effects of informal competition in environments characterized by a weaker rule of law and more stringent business regulations. Third, information about firms in other world regions is used to construct out-of-sample predictions of informal competition at the sector level. The findings sugge st that informal competition is a substantial constraint on the training investments of formal firms, underscoring the need for policy responses that mitigate its adverse consequences. |
| Date: | 2026–06–29 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:11420 |
| By: | Ruimeng Hu; Byungdoo Kong |
| Abstract: | We study endogenous reinsurance pricing in a competitive insurance market with one strategic reinsurer and many heterogeneous insurers. The reinsurer acts as a Stackelberg leader by choosing a common premium rate and an investment strategy, while insurers decide how much risk to retain and how to invest, taking into account their own performance, their performance relative to the insurer population, and common insurance-claim and financial-market noise. This creates a feedback loop absent from standard reinsurance models with exogenous premiums: a premium change affects insurers directly through the cost of reinsurance, and indirectly through the population's aggregate exposure to common insurance-claim risk. For a fixed premium, we characterize the insurers' equilibrium retention through a scalar fixed point and establish its monotone premium response. This characterization reveals a spillover mechanism generated by relative performance concerns and leads to a threshold structure in which insurers move from full cession to partial retention and then to full retention as the premium increases. Using this structure, we reduce the reinsurer's premium problem to a one-dimensional optimization over a compact premium interval and characterize Stackelberg equilibria in both finite-player and mean field models. In the finite-player case, we develop an efficient threshold continuation procedure that determines equilibrium premiums without enumerating all retention configurations. We also prove convergence from finite-player equilibria to mean field equilibria without requiring the mean field equilibrium premium to be unique. Numerical illustrations show how relative performance concerns amplify spillover effects and can induce retention even when reinsurance remains actuarially favorable. They also demonstrate that Stackelberg equilibria need not be unique in either setting. |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2606.27150 |