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on Industrial Competition |
| By: | O'Connell, Martin; Smith, Howard; Thomassen, Oyvind |
| Abstract: | We quantify changes in concentration, market power and welfare in the UK grocery retail sector from 2002 to 2021. We document that an expansion of discounter-format retailers coincided with declining retail and manufacturer concentration across most narrowly defined product categories. We develop an equilibrium model that incorporates consumer choice over retailers and products with Nash-in-Nash bargaining between manufacturers and retailers. Applying this model to the breakfast cereals market, we find that discounter expansion—through store openings, efficiency gains and changes to products—reduced concentration and average prices, increased consumer and total surplus, and especially benefited households near newly opened stores. |
| Keywords: | Discounters; Concentration; Distributional effects |
| JEL: | D12 L11 L13 L81 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20568 |
| By: | Carnehl, Christoph; Sobolev, Anton; Stahl, Konrad; Stenzel, André |
| Abstract: | We study information design in a vertically differentiated market. Two firms offer products of ex-ante unknown qualities. A third party designs a system to publicly disclose information. More precise information guides consumers toward their preferred product but increases expected product differentiation, allowing firms to raise prices. Full disclosure of the product ranking alone suffices to maximize industry profits. Consumer surplus is maximized, however, whenever no information about the product ranking is disclosed, as the benefit of competitive pricing always dominates the loss from suboptimal choices. The provision of public information on product quality becomes questionable. |
| Keywords: | Information design; Vertical product differentiation; Quality rankings; Competition |
| JEL: | D43 D82 L13 L15 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20537 |
| By: | Reisinger, Markus; Zenger, Hans |
| Abstract: | This paper provides a full characterization of the competitive effects of horizontal mergers in the Cournot model with heterogeneous firms and constant marginal costs. We show that price effects depend only on the smaller merging firm's market share and the number of firms but are independent of the distribution of market shares among other firms. Standard concentration measures, instead, are often misleading. We also provide simple---yet general---closed-form solutions for merger effects based on pre-merger parameters. Moreover, we extend the model to study the combination of output and input market power and relate our results to the Merger Guidelines. |
| Keywords: | Cournot competition; Mergers; Demand curvature; Merger guidelines |
| JEL: | D43 K21 L13 L41 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20649 |
| By: | Jolian McHardy (School of Economics, University of Sheffield, Sheffield S10 2TU, UK) |
| Abstract: | Discount pricing is widely observed in network industries based on complementary products, yet little is known about the incentives governing firms’ choice of pricing structure. This paper develops a tractable n-firm model of endogenous pricing-regime adoption that yields closed-form equilibrium outcomes for all asymmetric adoption configurations. The analysis identifies a pricing-regime Prisoner’s Dilemma. Although universal undiscounted pricing maximises welfare, consumer surplus and, over a wide range of parameter values, aggregate industry profit, individually profitable discount adoption drives the industry towards universal discounting as the unique equilibrium despite its inferior welfare properties. Each adoption benefits the adopting firm at the expense of every rival firm, creating a negative profit externality that progressively reduces welfare and consumer surplus. Policies restricting discount pricing increase welfare, but their incidence depends critically on scope: narrow interventions disadvantage regulated firms, whereas broader restrictions can coordinate firms on a more efficient pricing regime. The results show that pricing structures are themselves strategic objects of competition and that expanding firms’ pricing opportunities can leave both firms and consumers collectively worse off. |
| Keywords: | network industries; pricing regimes; discount pricing; endogenous adoption; Prisoner’s Dilemma. |
| JEL: | D43 L11 L13 L41 |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:shf:wpaper:2026006 |
| By: | Janssen, Maarten; Mauring, Eeva |
| Abstract: | Consumers search on a platform to find a product they like. The platform observes which products consumers inspect and buy. Based on these observations it ranks products to maximally learn, in the long term, which product consumers like. We find that a monopoly platform first experiments with rankings and later only ranks products that early consumers bought. This guarantees that later consumers are pickier, helping the platform to learn what consumers really like. The more dissimilar consumer tastes, the more consumers search themselves and the platform learns about products. Competition restricts what platforms learn. |
| Keywords: | Learning; Consumer search; product rankings; Steering |
| JEL: | D40 D83 L10 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20381 |
| By: | Schutz, Nicolas; Sobolev, Anton |
| Abstract: | We study the competitive effects of dual pricing, a vertical restraint that involves charging a distributor different prices for units intended to be resold online versus offline. We develop a model in which a manufacturer contracts with hybrid retailers selling both in-store and online. We find that, by eliminating wasteful price dispersion, dual pricing allows the manufacturer to induce the industry monopoly outcome, whereas uniform pricing does not. Despite this, a ban on dual pricing has negative welfare effects if the online market is small, if the offline consumers' search costs are high, and if the monopoly pass-through is high. |
| Keywords: | dual pricing; Price dispersion; Consumer search; Vertical restraints |
| JEL: | L13 L42 D43 D83 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20367 |
| By: | Xiaoming Cai; Pieter Gautier; Ronald Wolthoff; Pieter A. Gautier |
| Abstract: | We study a monopoly platform that sets meeting rates between buyers and two seller types: niche sellers, whose higher-quality good appeals to only some buyers, and mass-market sellers, whose good appeals to all. Sellers compete by posting prices à la Burdett and Judd (1983), so buyer surplus requires competition, while platform revenue requires seller rents. This tension creates a systematic distortion: as search capacity grows, the platform keeps niche exposure just past the saturation point---where extra attention erodes rents---and diverts the rest to mass-market sellers. Applied to Amazon product search and Google passage-ranking data, the model indicates buyer-surplus losses of 63 and 44 percent of the planner's benchmark, respectively. Letting buyer participation respond to the platform's recommendations disciplines it and shrinks this loss. |
| Keywords: | attention allocation, Recommendation systems, search frictions, two-sided markets, enshittification of internet |
| JEL: | D62 D83 L12 L40 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12760 |
| By: | Domenico DeGiovanni (Aarhus University School of Business and Social Sciences; Universita degli Studi della Calabria); Richard R. Ruble (EM Lyon (Ecole de Management de Lyon)); Dimitrios Zormpas (University of Macedonia Department of Economics) |
| Abstract: | We show how common ownership fundamentally transforms entry in an uncertain market from sequential preemption into a regime of coordination with contest-like dynamics. We do this by studying an industry with three firms facing a stochastically evolving demand that internalize the effect of their entry and output decisions on rivals. Equilibrium exhibits an accordion effect with respect to internalization: common ownership softens the last entry, intensifies competition at the duopoly stage, and ultimately slows down first market entry, reducing overall dynamism. But unlike in two-firm industries, a coordination equilibrium emerges at the duopoly stage if option value is high enough. The contest-like dynamics in this equilibrium accelerate first entry and raise welfare. |
| Keywords: | accordion effect; business dynamism; common ownership; investment underuncertainty; preemption games; real options |
| JEL: | D25 G32 L13 |
| Date: | 2026–11 |
| URL: | https://d.repec.org/n?u=RePEc:mcd:mcddps:2026_11 |
| By: | Weiming Li; Jing Sun; Xinxi Song; Bin Wu |
| Abstract: | We study how interoperability reshapes competitive price discrimination when consumers are embedded in a social network. Two differentiated platforms set personalized prices; consumers benefit from neighbors' consumption of the same platform and, under interoperability, of the rival. Equilibrium prices obtain in closed form for arbitrary networks and contain a network-position term, proportional to Katz-Bonacich centrality, whose sign is determined by whether interoperability exceeds product substitutability. Below this threshold, platforms contest central consumers and grant centrality discounts; above it, central consumers become gateways to a shared cross-platform network and pay premia; at the threshold, prices are independent of network position. Interoperability softens price competition, can make platforms favor denser consumer networks, and reverses which side of the market gains from price discrimination. |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2607.09269 |
| By: | Nocke, Volker; Rhodes, Andrew |
| Abstract: | We develop a framework to study horizontal mergers when the parties can propose remedies to an antitrust authority. Remedies are modeled as asset divestitures, which make the firm receiving the assets more efficient at the expense of the merged firm. We consider both the case where the merger affects a single market and where it affects multiple markets. Solving for the merging firms' optimal proposal, we investigate when it involves remedies---and if so, which assets should be divested, and to whom, and how this depends on market characteristics such as the level of competitiveness. |
| Keywords: | Antitrust; Horizontal mergers; Structural remedies; Divestitures; Data |
| JEL: | L13 L40 D43 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20573 |
| By: | Anderson, Simon; Bedre Defolie, Ozlem |
| Abstract: | We develop a tractable model of a platform, like an app store, where heterogeneous sellers and consumers interact. Sellers vary in quality and face entry costs, while consumers differ in valuation for quality and usage intensity. The platform sets a consumer participation fee and an ad valorem commission on sellers. Two endogenous aggregates—the stock of seller quality and the value of participating consumers—create cross-side network effects. We characterize the equilibrium allocations and fees, and illustrate a key ratio of seller revenue to consumer surplus governing distortions in seller and consumer participation. The framework delivers sharp implications for current policy debates on app store regulation: commission caps or third-party payment mandates can reduce consumer surplus by raising consumer fees. If the platform owns some high-quality apps, it sets a lower commission and a higher consumer fee, reducing consumer participation. Our model also incorporates ad-financed apps, membership-financed apps, and other digital ecosystems. |
| Keywords: | digital platform pricing |
| JEL: | D42 L12 L13 L40 H25 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20700 |
| By: | Duso, Tomaso; Harrington, Jr, Joseph E.; Kreuzberg, Carl; Sapi, Geza |
| Abstract: | Competition authorities increasingly rely on economic screening tools to identify markets where firms deviate from competitive norms. Traditional screening methods assume that collusion occurs through secret agreements. However, recent research highlights that firms can use public announcements to coordinate decisions, reducing competition while avoiding detection. We propose a novel approach to screening for collusion in public corporate statements. Using natural language processing, we analyze more than 300, 000 earnings call transcripts issued worldwide between 2004 and 2022. By identifying expressions commonly associated with collusion, our method provides competition authorities with a tool to detect potentially anticompetitive behavior in public communications. Our approach can extend beyond earnings calls to other sources, such as news articles, trade press, and industry reports. Our method informed the European Commission’s 2024 unannounced inspections in the car tire sector, prompted by concerns over price coordination through public communication. |
| Keywords: | Communication; Collusion; Screening |
| JEL: | C23 D22 L1 L4 L64 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20490 |
| By: | Aguirre, Iñaki |
| Abstract: | We study the strategic choice of spatial price policy (uniform pricing versus spatial price discrimination) in a linear city with quadratic transport costs and endogenous locations, under two alternative three-stage game orderings (following Eber, 1997). The asymmetric subgame (in which one firm discriminates while the other prices uniformly) is solved via the mixed-strategy Nash equilibrium under simultaneous price competition, replacing the Stackelberg standard of Thisse and Vives (1988). In Game I (location-pricing policy-prices), the policy game is a coordination game: both are Nash equilibria but mutual uniform pricing Pareto dominates mutual discrimination. This overturns the Prisoner’s Dilemma that arises under the Stackelberg standard, in which price discrimination is a dominant strategy. In Game II (pricing policy-location-prices), mutual uniform pricing is the unique equilibrium. |
| Keywords: | Price Discrimination, Prisoner’s Dilemma, Location Choice, Mixed-Strategy Nash Equilibrium. |
| JEL: | D43 L13 R32 |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:129636 |
| By: | Choné, Philippe; Linnemer, Laurent |
| Abstract: | Sellers face a critical choice: run competitive auctions or strike exclusive deals with preferred buyers. Contrary to conventional wisdom that sellers should rely on open competition, we show that a powerful seller optimally commits to a sequential `flexclusivity' arrangement --a strategic mix of exclusivity and competitive bidding. Under broad conditions, the seller chooses with positive probability to disregard alternative buyers entirely. We demonstrate, in a parsimonious model, that simple option contracts implement flexclusivity efficiently, increasing the expected joint profit of the contracting parties. When a preferred buyer declines the option, this credibly signals his weakness, allowing the seller to extract more rent from stronger buyers in subsequent auctions. The joint gain from such arrangements can represent as much as 75% of what vertical integration would achieve, without requiring commitment beyond the initial contracting stage. |
| JEL: | D44 D82 D86 L22 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20620 |
| By: | Akhil Rao |
| Abstract: | Over the last 15 years the number of U.S. orbital launches has grown by roughly an order of magnitude. About three-quarters of those launches were on SpaceX's Falcon 9 vehicle, and roughly three-fifths of those Falcon launches deployed SpaceX's own Starlink constellation. A back-of-envelope Wright's law calculation suggests this increase in experience should have driven the Falcon 9's real launch cost down by roughly 70\% over 2012--2026. Yet over the same period the advertised price fell by less than 6\% in real terms. Why? I develop a simple model of competition and vertical integration between launchers and constellations. The launch market is Bertrand; the constellation services market is Cournot; one launcher is integrated with its captive constellation. Three results follow. First, the removal of double marginalization raises the captive constellation's equilibrium size. If the integrated launcher obtains cost reductions from this experience, they are captured as capacity rent rather than passed through to external buyers. Second, the integrated launcher prices launches to be indifferent between serving internal and external demand, leaving more residual demand for a competing launcher to monopolize and pushing the equilibrium launch price up. Third, the same capacity rent that holds the equilibrium launch price up can attract entry to the launch segment, while the expansion of the captive constellation deters entry on the constellation side. |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2607.10385 |
| By: | Leonardo Madio; Fabio M. Manenti; Massimo Motta |
| Abstract: | We study on-platform tying by a dominant platform that controls a primary access point and operates an adjacent specialised service. A rival service can reach users both through the dominant platform and through a direct channel. In a two-sided market where platforms charge sellers and seller participation affects consumer demand, tying improves the integrated service, but also shifts demand away from the rival. We show that lower mediated demand reduces seller participation on the rival platform, weakening the rival also for users who access it directly. As a result, tying can reduce consumer surplus and welfare once the direct channel is sufficiently large. We also compare tying with demotion and with a common-access policy, and show that our main insights carry over to a one-sided model in which network effects operate among consumers who pay directly for the specialised service. |
| Keywords: | abuse of dominance, digital platforms, network effects, self-preferencing, tying |
| JEL: | D42 K21 L12 L41 |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:bge:wpaper:1585 |
| By: | Sadun, Raffaella; Schuh, Rachel; Hartley, Jonathan; Van Reenen, John; Bloom, Nicholas |
| Abstract: | We show better-managed firms are more dynamic in plant acquisitions, disposals, openings and closings in U.S. Census and international data. Better-managed firms also birth better-managed plants and improve the performance of the plants they acquire. To explain these findings we build a model with two key elements. First, management is a combination of firm-level management ability (e.g. CEO quality), which can be transferred to all plants, and plant-level management practices, which can be changed through intangible investment (e.g. consulting or training). Second, management both raises productivity and also reduces the operational costs of dynamism: buying, selling, opening and closing plants. We structurally estimate the model on Census microdata, fitting our key dynamic moments, and then use it to establish three additional results. First, mergers and acquisitions raise economy-wide management and productivity by reallocating plants to firms with higher management ability. Banning M&A would depress GDP and management by about 15%. Second, greater product market competition improves both management and productivity by reallocating away from badly managed plants. Finally, management practices account for about 20% of the cross-country productivity differences with the US. |
| Keywords: | Management; Mergers and acquisitions; Productivity; Competition |
| JEL: | L2 M2 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20602 |
| By: | Decarolis, Francesco; Li, Muxin |
| Abstract: | We study a two-sided platform where a dominant gatekeeper supplies both a primary product and a competing ancillary service. By degrading outcomes for users of rival ancillary services, the gatekeeper engages in cross-market self-preferencing. Our theoretical model identifies when such behavior raises or lowers welfare, depending on buyers’ and sellers’ preferences and the platform’s pricing instruments. Analyzing a recent antitrust case against Google, we show that remedies targeting only one side can misalign incentives between different user groups, reducing welfare. Counterfactual simulations highlight when alternative behavioral or structural interventions realign incentives and improve market efficiency. |
| JEL: | L21 L40 L51 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20668 |
| By: | Legros, Patrick; Newman, Andrew |
| Abstract: | The value principle in organizational economics states that the net market value of the goods that a firm sells is a key determinant of its organizational design. We survey and extend some recent developments in the theoretical literature at the nexus of organizational and industrial economics, focusing on this precept as the unifying theme. Under perfect competition, we study how market price influences the use of scarce professional management and the degree of organizational heterogeneity in an industry. In a more general setting, we show how changes in demand influence not only the use of professional management, but also the size and the market power of firms. And we show how prices can affect the internal control structure of firms, sometimes in highly distorted ways. We discuss applications to comparative industrial organization and to technological diffusion. |
| JEL: | D2 D4 L1 L2 O14 O3 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20627 |
| By: | Bar-Isaac, Heski; Deb, Rahul; Mitchell, Matthew |
| Abstract: | We introduce a model of content moderation for sale, where a platform can channel attention in two ways: direct steering that makes content visible to consumers and certification that controls what consumers know about the content. The platform optimally price discriminates using both instruments. Content from higher willingness-to-pay providers enjoys higher quality certification and more views. The platform cross-subsidizes content: the same certificate is assigned to content from low willingness-to-pay providers that appeals to consumers and content from higher willingness-to-pay providers that does not. Cross-subsidization can benefit consumers by making content more diverse; regulation enforcing accurate certification may be harmful. |
| Keywords: | Steering; Certification; Nonlinear pricing; Social media; Digital platforms; platform regulation |
| JEL: | D82 D42 L40 L51 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20348 |
| By: | Giovannetti, Emanuele |
| Abstract: | This paper examines how the digitalisation of energy markets, driven by smart meter data and Energy Data Spaces, is reshaping competition in retail electricity services. It analyses the implications for market power, consumer outcomes, and data sovereignty, highlighting the regulatory challenges posed by data-driven business models that operate across national boundaries. |
| JEL: | R14 J01 L81 |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:138550 |
| By: | OECD |
| Abstract: | Artificial intelligence (AI) can reshape markets, yet its implications for competition remain underexplored. This paper develops a conceptual framework distinguishing AI users from developers, and generative (GenAI) from non-generative AI, showing how competitive mechanisms differ across these dimensions. Using multiple microdata sources, the analysis documents several findings. Adoption of non-GenAI is not associated with significant increases in market power. Descriptive evidence on firms’ exposure to GenAI suggests opportunities for smaller firms alongside advantages for firms with stronger existing capabilities. Concentration in AI innovation is correlated with higher sales concentration. AI-related patenting is associated with faster markup growth, particularly in the ICT sector, where AI is an output. The AI start-up ecosystem is dynamic and attracts substantial venture capital, but start-ups are frequently acquired by large incumbents. Overall, the evidence points to a dynamic yet uneven landscape, underscoring the need for continued monitoring as AI diffusion progresses. |
| Keywords: | AI, Artificial Intelligence, Competition |
| Date: | 2026–07–30 |
| URL: | https://d.repec.org/n?u=RePEc:oec:comaaa:64-en |
| By: | Peitz, Martin; Sobolev, Anton |
| Abstract: | We consider a monopolist selling a product to differentially informed consumers: some consumers are uncertain about their tastes, whereas other consumers are perfectly informed. The monopolist sets a uniform price and can make personalized product recommendations. We characterize conditions under which the monopolist biases its recommendations – that is, some consumers with values below the marginal cost follow the recommendation to buy the product or some consumers with values above the marginal cost follow the recommendation not to buy the product. |
| JEL: | L12 L15 D21 D42 M37 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20368 |
| By: | Domenico DeGiovanni (Aarhus University School of Business and Social Sciences; Universita degli Studi della Calabria); Richard R. Ruble (EM Lyon (Ecole de Management de Lyon)); Dimitrios Zormpas (University of Macedonia Department of Economics) |
| Abstract: | We introduce overlapping ownership into a sequential move duopoly and find conditions where internalization has positive welfare effects in contrast with other standard oligopoly models. Internalization of rival profits softens follower output and entry decisions, inducing more aggressive leader behavior. In Stackelberg equilibrium follower internalization raises total output and welfare provided the follower is active. The effect is stronger if demand is more convex which makes the follower less responsive. In an entry deterrence setting, higher symmetric internalization that shifts equilibrium from accommodation to deterrence raises welfare relative to a benchmark with independent firms. Product differentiation attenuates the first effect but is necessary for the second effect if firms compete in prices. |
| Keywords: | entry deterrence; overlapping ownership; Stackelberg; |
| JEL: | D25 G32 L13 |
| Date: | 2026–10 |
| URL: | https://d.repec.org/n?u=RePEc:mcd:mcddps:2026_10 |
| By: | Pallavi Pal |
| Abstract: | When a parent company acquires a horizontal competitor on the same side of a multi-sided market, it must decide whether to fully integrate the acquired platform or keep it as a separate brand. We study this in the context of Uber’s acquisition of Postmates, using novel consumer receipt data that tracks food delivery spending. Employing an Age–Period–Cohort (APC) decomposition, we isolate the merger’s effect on consumer spending while controlling for lifecycle and cohort effects. We find that Postmates users sharply reduced their spending on the platform after the merger, but spending shifted not only to UberEats, but also to competitors like DoorDash and Grubhub. Consumers who used multiple platforms and had low pre-merger activity on Postmates were more "sticky", showing little change. Comparing our APC results with a standard Difference-in-Differences (DiD) design, we find the DiD underestimates the merger’s total impact by missing market-wide effects. Our findings suggest that in multi-sided markets, keeping acquired platforms separate can be beneficial; dissolving them may push demand to competitors, and some sticky multihoming users may not shift spending at all. |
| Keywords: | platform , merger |
| JEL: | D43 L11 L42 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12754 |
| By: | Koessler, Frédéric; Renault, Régis |
| Abstract: | A buyer can learn about a product through search or seller-disclosed information. We examine how lower search costs or better seller disclosure affects this interaction. Whereas a drop in search costs improves consumer surplus and decreases profit when the seller can resort to an optimal disclosure strategy, its impact is ambiguous if the seller is unable to provide information. When it is unlikely that the buyer's valuation is below marginal cost, the buyer does not benefit from optimal information disclosure if search costs are high. With such high search costs and no disclosure both parties can be better off than with lower search costs and optimal information disclosure. The seller then adopts a mass market strategy where she posts a low enough price so the buyer always purchases the product without search. By contrast, if it is sufficiently likely that the buyer's valuation is below marginal cost, then the buyer can benefit from sophisticated information disclosure for relatively low search costs. The corresponding outcome is better for both parties than an environment with higher search costs and no information disclosure. The optimal seller strategy targets a niche of high-valuation buyers and prevents wasteful search by buyers with low valuations. |
| Keywords: | Information design; Information acquisition; Advertising; Consumer search |
| JEL: | D42 D82 D83 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20694 |
| By: | Malek, Jan; Seldeslachts, Jo; Veugelers, Reinhilde |
| Abstract: | This paper provides empirical evidence on which M&A deals spur innovation, and which stifle it. To do so, we consider not only the product market position of the acquiring firm, but also the position of both target and acquirer in the technology space. Focusing on the antidiabetic drugs market, our dataset tracks the lifecycle and patenting of all individual antidiabetic projects in development between 1997 and 2017. We show that most terminations of acquired projects occur while the projects are still far from product market entry. Nevertheless, a number of these early-stage acquisitions have a positive impact on innovation. These cases arise when incumbents acquire projects close to their own projects in product markets, but only if these projects are also close in technology markets. Those deals are associated with increased subsequent patenting, which is consistent with the exploitation of technological synergies. Our results point to the crucial role of combining both product market and technology market positions in assessing the innovation effects of pharmaceutical M&As. |
| Keywords: | Patents |
| JEL: | L41 L65 O31 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20468 |
| By: | Fernald, John; Gandhi, Amit; Ruzic, Dimitrije; Traina, James |
| Abstract: | We review the "production approach" to estimating markups — the ratio of price to marginal cost. Paired with increasingly rich microdata and advances in production-function estimation, the method enables scalable analysis of markups across firms, industries, and time. We survey what economists need to know about the production approach, emphasizing both its promise and its fragility. Conceptually, empirically, and econometrically, the production-based markup is a residual — absorbing model misspecification, data limitations, and unobserved frictions. These challenges help explain why empirical results often diverge, including on whether markups have risen sharply in recent decades. We outline practical guidance for researchers and highlight directions for future work: improving transparency in reporting, validating production-based markups against demand-based and quasi-experimental estimates, and integrating firm-level heterogeneity into macroeconomic models. The production approach is not a finished product, but it remains a uniquely powerful tool for studying market power and its implications for productivity, welfare, and macroeconomic dynamics. |
| Keywords: | Production-based markups; market power; Production function estimation; Firm heterogeneity; Micro-to-macro linkages |
| JEL: | D43 E22 E23 L11 L16 O33 O47 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20628 |
| By: | Van Biesebroeck, Johannes; Verboven, Frank |
| Abstract: | We review the flourishing literature on the automobile industry since the seminal work of Berry, Levinsohn and Pakes (1995), or briefly BLP. Their work has provided a structural equilibrium framework that forms a basis for conducting policy counterfactuals in several key areas of interest: competition policy and antitrust, trade policy, and taxation and environmental policy. The demand side of the ‘BLP framework’ is micro-founded and allows for rich consumer heterogeneity to generate flexible substitution patterns between products. The supply side specifies marginal costs and accounts for imperfect competition. Our analysis focuses on two main questions. First, how has the framework been tailored to specific situations and how convincingly has it been evaluated to generate trust in the empirical findings and policy conclusions? Second, what has been learned about policy issues relevant in the automotive industry using the BLP equilibrium framework? |
| JEL: | L10 L62 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20397 |
| By: | Marko Družić (Ekonomski fakultet Sveučilišta u Zagrebu) |
| Abstract: | This paper examines the activity efficiency of competition authorities in Central and Eastern European countries by developing a simple, externally verifiable fine-to-budget indicator. The study focuses on the directly measurable segment of competition authority activity: competition-related fines imposed in the areas of abuse of dominance, cartels, and merger violations, relative to the budget allocated to competition-related activities. Using a novel dataset constructed from national competition authority reports and OECD submissions, the paper compares seven CEE countries - Croatia, Czechia, Latvia, Lithuania, Poland, Slovakia, and Slovenia - over the period 2014–2023. The results reveal substantial heterogeneity across the region. Croatia and Slovenia display low fine-based activity-efficiency levels, while Czechia, Poland, and Slovakia exhibit relatively high and stable performance. Latvia and Lithuania also show high average ratios, but with greater variability, indicating more episodic enforcement patterns. |
| Keywords: | competition authority, enforcement activity, fine-to-budget ratio, competition policy, CEE countries, institutional efficiency |
| JEL: | L4 K21 |
| Date: | 2026–07–21 |
| URL: | https://d.repec.org/n?u=RePEc:zag:wpaper:2604 |
| By: | Beuschlein, Jakob Elias; Sigurdsson, Jósef; Wong, Horng Chern |
| Abstract: | We study the effects of corporate acquisitions on workers using Swedish administrative data and document substantial, persistent earnings losses following acquisitions. These losses reflect both displacement and wage cuts among stayers from target firms. We find no evidence that increased monopsony power accounts for these wage cuts. Instead, they are concentrated in acquisitions where the acquiring-firm CEO sat on the board of the target prior to the transaction. Such acquisitions increase acquiring-firm profits and CEO pay, without affecting total employment or revenue, consistent with rent redistribution. Overall, acquisitions reduce wages and disrupt employment, with profit gains partly extracted from workers. |
| Keywords: | Mergers and acquisitions |
| JEL: | G34 J23 J31 J42 J63 L25 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20685 |
| By: | Casas-Arce, Pablo; Martinez-Jerez, Asis; Perrone, Helena |
| Abstract: | We examine how retailers can strategically influence demand toward higher-margin products at the expense of manufacturers’ and consumers’ interests. Specifically, we focus on an understudied mechanism as a tool for demand steering: stockouts. Our empirical evidence suggests that retailers make strategic restocking decisions, putting less effort into restocking low-margin products and prompting consumers to shift purchases towards high-margin products. The analysis uses a unique dataset where we observe both sales and latent demand, i.e., how many sales a certain product lost when it was out of stock. By exploiting variation in product availability, we recover preference parameters in a setting where prices vary infrequently. Estimated diversion ratios are high across products within the retailer and low towards outside retailers. We also recover manufacturers’ marginal costs and perform counterfactual exercises to measure the welfare effects of demand steering on consumers and manufacturers. Results indicate that while welfare losses are economically relevant on average, retailers and some manufacturers benefit from strategic stockouts. Our paper sheds light on the challenges of detecting demand steering in habitual contexts and the market inefficiencies arising from downstream moral hazard. |
| JEL: | D22 D43 L13 L4 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20708 |
| By: | Kretschmer, Tobias; Rasch, Alexander; Shekar, Shiva; Wenzel, Tobias |
| Abstract: | We study the effects of mandating interoperability in a network market. We model competition between an incumbent service that employs a data-driven business model in exchange for ’free’ access to the service and a privacy-preserving entrant. On the user side, there are direct network effects and users are privacy conscious. We characterize market outcomes with and without interoperability and find that interoperability may induce data or privacy spillovers as user data are transferred across different services. Because mandating interoperability results in higher data collection levels, it can hurt user welfare if these privacy spillovers are sufficiently large. Moreover, the entrant’s market share also decreases when privacy spillovers are large, that is, contestability is limited. |
| JEL: | L13 L15 L96 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20383 |
| By: | Nocke, Volker; Schutz, Nicolas |
| Abstract: | We develop a potential games approach to multiproduct-firm pricing games. We introduce the concept of transformed potential and characterize classes of demand systems that give rise to pricing games admitting such a potential. The resulting demand systems may contain nests (of closer substitutes) or baskets (of products that are purchased jointly), or combinations thereof. These demand systems allow for flexible substitution patterns, and can feature product complementarities arising from joint purchases and substitution away from the outside option. Combining the potential games approach with a competition-in-utility approach, we derive powerful results on existence and uniqueness of a pure-strategy Nash equilibrium. |
| Keywords: | Multiproduct firms; potential game |
| JEL: | L13 D43 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20527 |
| By: | Aryal, Gaurab; Chattopadhyaya, Anirban; Ciliberto, Federico |
| Abstract: | We bridge quasi-experimental and structural approaches to develop a robust method for retrospective merger evaluation. First, we show that the standard difference-indifferences estimation equation can be interpreted as a “reduced form†of our structural equations, formally bridging these methodologies. Demand and cost parameters enable the construction of a robust measure of the merger price effect that remains identified even when the difference-in-differences approach is not, and can be decomposed into efficiency gains versus conduct changes among the remaining firms. Second, we enhance the structural approach by weighting each market’s contribution to the moment conditions using market- and time-specific synthetic weights when the number of treated markets is limited. Applying this methodology to three major airline mergers, we find that modest efficiency gains are entirely offset by increased coordination, particularly in later mergers. The synthetic GMM refinement sharpens these findings, uncovering anti-competitive effects that standard approaches miss. |
| JEL: | L40 L41 D43 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20683 |
| By: | Borsenberger, Claire; Cremer, Helmuth; Joram, Denis; Lozachmeur, Jean-Marie; Malavoltl, Estelle |
| Abstract: | The concept of Corporate Social Responsibility (CSR) has evolved since Milton Friedman’s 1970 assertion that a business’s sole responsibility is profit. Today, global frame-works like the UN Global Compact and EU regulations emphasize corporate account-ability, particularly regarding social and environmental impacts. Corporate Social Responsibility (CSR) has become central in discussions of firm behavior, governance, and public goods provision. CSR however varies across firms. Some adopt basic strategic CSR (b-CSR), considering social and environmental issues only to the extent that they affect consumer demand and profitability. Others practice environmentally committed CSR (e-CSR), internalizing the full social cost of emissions. A few pursue fully committed CSR (w-CSR), aiming to maximize overall social welfare. The paper analyzes CSR’s effects on firm behavior through economic modeling. It first examines a single firm producing CO2 emissions, where reducing emissions increases costs but appeals to environmentally conscious consumers. Three firm types — b-CSR, e-CSR, and w-CSR — are considered. The study then extends to a competitive market with two firms engaged in Cournot competition. It examines scenarios where firms have different CSR commitments, analyzing how competition, emissions, and profits are affected. Finally, the paper compares these outcomes to an ideal scenario where firms are regulated to maximize social welfare. |
| Keywords: | Motivation and sustainability of CSR under competition; mission oriented firms |
| JEL: | H23 L13 G50 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20380 |
| By: | Yu-Ting Ho |
| Abstract: | We study competition among multiple firms that offer differentiated varieties of the same good to a unit-demand agent. The agent has heterogeneous valuations for goods from different firms. Firms do not observe the agent's exact valuations, but they know their distribution. Firms simultaneously post menus of contracts, after which the agent chooses a firm and one of its contracts to maximize her utility. This defines a game in which firms aim to maximize expected revenue. We introduce a sufficient condition, density-regularity, under which each firm's best response to any arbitrary menu profile posted by its opponents is equivalent to posting a menu that contains only a posted-price contract. Our result is not a direct extension of the canonical Myersonian model with a single seller. The standard argument in the literature breaks down once heterogeneous preferences and competition are introduced. We therefore adopt an optimal-control approach, in which the density-regularity condition is essential for establishing the optimality of posted prices. When this condition fails, posted prices may fail to be a best response. |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2606.22720 |
| By: | Cho, Thummim; Grotteria, Marco; Kremens, Lukas; Kung, Howard |
| Abstract: | We introduce a present-value identity relating a firm’s market value to expected future markups, output growth, discount rates, and investments. Distinguishing current from expected markups reveals five empirical facts: (i) Expected markups account for half the rise in U.S. firm values since 1980. (ii) The rise in aggregate expected markups reflects market-share reallocation towards high-expected-markup firms and within-firm increases. (iii) Expected markups are linked to intangible investments. (iv) They relate negatively to discount rates over time but (v) positively to abnormal returns across firms. Finally, variation in long-term expected markups is primarily associated with asset prices rather than current markups. |
| Keywords: | market power; Valuation |
| JEL: | G12 G14 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20540 |
| By: | Daniele Natalizi; Vatsala Shreeti |
| Abstract: | Retail payments have digitalised rapidly in both advanced economies and emerging market and developing economies.Digitalisation has altered the competitive landscape, with new entrants (eg fintechs and big techs) and new technologies, yet incumbent banks and card networks retain their dominant position in key markets.In their role as operators, overseers and catalysts in payment systems, central banks support competition in diverse ways, depending on their mandates and institutional arrangements. |
| Date: | 2026–07–13 |
| URL: | https://d.repec.org/n?u=RePEc:bis:bisblt:127 |
| By: | David Huffman; Lamar Pierce; Germ\'an Reyes; Alex Rees-Jones |
| Abstract: | We examine a choice between bonus contracts offered to dealers of a U.S. auto manufacturer. In our data, dealers select the non-profit-maximizing option in 20 percent of observations, costing the mistaken dealers $18, 453 per year on average. We examine how the propensity to make this mistake varies with competition, identified both cross-sectionally and within dealers over time. Both analyses show that greater competition substantially lowers the rate of mistakes. However, even in the most competitive markets, consequential mistakes persist. Our results suggest that competition disciplines mainly through within-dealer changes in behavior rather than entry and exit. |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2606.32011 |
| By: | DADAKPETE, David; DOSSA, Moïse |
| Abstract: | Often described as a powerful strategy in inter-firm competition, innovation remains a timeless topic in economics. Although a large body of empirical literature finds evidence for an “innovation premium” (Cefis and Marsili, 2005) associated with better survival prospects for firms, numerous studies highlight the inherent risks associated with innovation activity, which could shorten a firm’s market longevity ("liability of innovativeness"(Deng et al., 2014)). This paper investigates whether the “innovation premium” or “liability of innovativeness” prevails among young French firms during their first five years. According to our estimates, the two effects seem to offset each other in most cases. Indeed, for three (process, product, organization) of the four types of innovation considered, no significant effect on firm survival is observed. However, for marketing innovation, the “liability of innovativeness” appears to prevail. Our estimates suggest that firms introducing marketing innovation upon market entry face an 11.3% higher risk of closure. |
| Keywords: | Innovation, Firm survival, Duration models |
| JEL: | L25 L26 O3 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:127936 |
| By: | Enache, Andreea; Rhodes, Andrew |
| Abstract: | Many platforms have used a Price Parity Clause (PPC) to prevent sellers charging lower prices on other sales channels. PPCs are often considered anti-competitive and have been banned in some jurisdictions. We provide a novel rationale---centered on how PPCs affect platforms' data acquisition---for why a complete ban on PPCs may harm buyers and sellers. |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20535 |