|
on Industrial Competition |
|
Issue of 2026–08–17
forty-four papers chosen by Russell Pittman, United States Department of Justice |
| By: | Mei Dong; Janet Hua Jiang; Ling Sun |
| Abstract: | Conventional wisdom suggests that information transparency about prices lowers prices and markups by intensifying seller competition. However, in markets with costly buyer entry, price transparency also draws in more buyers, increasing demand-side competition and putting upward pressure on prices. We show that this buyer entry effect may dominate, and prices and markups may rise with information transparency. |
| Keywords: | Models and tools, Economic models |
| JEL: | D40 D83 L11 |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:bca:bocawp:26-4 |
| By: | Zhang, Rong; Li, Mengjie; Zhang, Yvette |
| Abstract: | This paper examines whether the market dominance of large retail chains is driven by costbased economies of scale or by strategic differences in product assortment and pricing. While large retailers are commonly believed to achieve lower costs and charge lower prices due to scale advantages, observed price differences may also reflect differences in product composition. Using NielsenIQ Retail Scanner Data for the U.S. yogurt market, we combine a reduced-form analysis with a vertical structural model of manufacturer–retailer competition to jointly analyze prices, demand, and costs. We document a “price paradox”: large chains exhibit higher average prices but charge lower prices for identical products relative to smaller retailers. We show that this pattern is driven by a composition effect, as large retailers carry a greater share of premium, high-priced products. On the demand side, raw estimates suggest higher price elasticity at large chains, but this difference disappears after controlling for price levels and product characteristics, indicating similar consumer responsiveness across retailer types. On the supply side, the recovered marginal costs provide no evidence that large retailers enjoy a cost advantage. These findings suggest that the competitive advantage of large retailers arises primarily from strategic assortment and pricing decisions rather than from lower marginal costs. More broadly, the results highlight that price-based measures of competition may be misleading when product composition differs across firms, with implications for how market concentration and retail dominance are evaluated in policy. |
| Keywords: | Industrial Organization |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ags:aaea26:404622 |
| By: | Chiara Fumagalli (Bocconi University [Milan, Italy]); Bruno Jullien (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - Comue de Toulouse - Communauté d'universités et établissements de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Yassine Lefouili (TSE-R - TSE-R Toulouse School of Economics – Recherche - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Michele Polo (Bocconi University [Milan, Italy]) |
| Abstract: | This paper examines merger control in digital markets and the enforcement challenges it raises. We discuss recent developments in the U.S. and the EU and analyze how specific characteristics of digital markets can either enhance or mitigate the exercise of market power. We study the effects of digital mergers on competition both in the market and for the market, and assess their implications for innovation. The paper concludes with policy recommendations aimed at improving enforcers' assessment of digital mergers. |
| Keywords: | Merger control, Market definition, Innovation, Ecosystems |
| Date: | 2026–12 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05686566 |
| By: | Haucap, Justus; Delfs, Tobias; Fritz, Daniel; Thorwarth, Susanne |
| Abstract: | This paper provides an ex-post evaluation of Edeka's acquisition of Kaiser's Tengelmann, one of the most prominent merger cases in German grocery retailing. The transaction is particularly relevant from a competition-policy perspective because it was initially prohibited by the German Federal Cartel Office but was later implemented following ministerial authorisation. We analyse whether the acquisition led to higher consumer prices in local markets in which Edeka had previously faced competition from Kaiser's Tengelmann. The empirical analysis is based on weekly store-product-level price data from Edeka stores in the Rhine-Ruhr region covering the period from 2013 to 2020. We apply a difference-in-differences approach that compares price developments in Edeka stores exposed to Kaiser's Tengelmann before the acquisition with comparable Edeka stores without such local exposure. The results provide no evidence of a statistically significant merger-related increase in consumer prices. This finding is robust to additional specifications accounting for local demand, supply, and competitive conditions, as well as to alternative treatment definitions and sample restrictions. |
| Keywords: | Ex-post merger evaluation, Grocery retail mergers, Merger control, Local retail competition, Difference-in-differences, Consumer prices |
| JEL: | L41 L81 C23 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:dicedp:342558 |
| By: | Sweeting, Andrew; Tao, Xuezhen; Wang, Qian |
| Abstract: | We consider models of repeated oligopoly competition where firms set quantities and one or more firms have private information about their marginal costs. This structure gives rise to strategic incentives to signal information about costs using output choices in order to affect rivals' future outputs. Consistent with the standard intuition from reaction functions, strategic incentives with quantity-setting tend to lead to higher equilibrium output and lower equilibrium prices, which are the opposite changes to those observed in similar models where price-setting is assumed. We emphasize a more surprising, and to the best of our understanding novel, difference: the effects of strategic incentives in quantity-setting games remain substantial, or even become stronger, as market structure becomes less concentrated. In contrast, in price-setting games, we always find smaller effects in less concentrated markets. |
| Keywords: | Oligopoly; Asymmetric information; Signaling; Pooling equilibria; Separating equilibrium; Firm conduct; Pass-through |
| JEL: | L1 L13 L4 |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:19757 |
| By: | Peitz, Martin; Sato, Susumu |
| Abstract: | We propose a tractable model of asymmetric platform oligopoly with logit demand in which users from two distinct groups are subject to within-group and cross-group network effects and decide which platform to join. We characterize the equilibrium when platforms manage user access by setting participation fees for each user group. We explore the effects of platform entry, a change of incumbent platforms’ quality under free entry, and the degree of compatibility. We show how the analysis can be extended to partial user participation. |
| Keywords: | Oligopoly theory; Aggregative games; Network effects; Two-sided markets; Two-sided single-homing; Entry |
| JEL: | L13 L41 D43 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:19584 |
| By: | Domenico Delli Gatti; Andrea Coletta; Aldo Glielmo; Filippo Gusella; Enrico Maria Turco; Alessia Lo Turco |
| Abstract: | In canonical macroeconomic agent-based model (ABM), firms pursue behavioural (non-optimal) price and quantity strategies, that take the form of heuristics. In this paper we incorporate reinforcement learning (RL) into an otherwise standard ABM by replacing a fraction of heuristic-using firms with RL agents that learn profitmaximizing strategies through repeated interaction with the economic environment. When RL agents adopt a shared Q-function, they endogenously converge to one of three distinct strategic regimes – market power, predatory pricing, or quasi-perfect competition – with the prevailing equilibrium depending on the degree of market competition and the share of RL agents. Under independent Q-functions, agents spontaneously segregate into heterogeneous strategies, yielding higher aggregate market power and producer surplus without explicit coordination. The prevalence of RL agents shapes aggregate output and volatility in a non-monotonic way. To rationalize these findings, we develop a stylized theoretical framework that links the competition intensity between RL and non-RL agents with the prevailing optimal pricing strategies. |
| Keywords: | macroeconomics, agent-based modelling, reinforcement learning |
| JEL: | C63 D21 E37 L13 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12862 |
| By: | Pandey, Aarni; Ganjoo, Ananta |
| Abstract: | The rapid proliferation of digital platforms has fundamentally disrupted the competitive landscape, exposing the structural inadequacies of traditional antitrust reforms that were designed for industrial-era markets. This paper examines the evolving intersection of antitrust law, technological advancement and innovation policy in the context of modern digital economies. Drawing on a comprehensive review of regulatory developments across major jurisdictions, including the United States, the European Union, China and India, the study analyses how legacy antitrust doctrines have struggled to address the complex characteristics of digital markets, including network effects, data-driven market power, zero-price services, and winner-takes-all dynamics. The paper identifies a critical tension at the heart of digital antitrust reform: the imperative to prevent monopolistic entrenchment by dominant gatekeepers, while simultaneously preserving the conditions for dynamic innovation that drives technological progress. Through an analysis of four core themes: the Regulation of Antitrust Laws in Digital Economies, Impact of Antitrust reforms on innovation, Evolution of Antitrust reforms with technological advancement and What adaptive regulation looks like, this paper constructs a multi-layered understanding of what antitrust reform looks like. The findings suggest that ex-ante regulatory instruments, such as the EU Digital Markets Act, represent a paradigm shift from reactive, litigation-based enforcement towards forward-looking structural obligations on designated gatekeepers. While such mechanisms offer greater predictability and speed, they also risk over-regulation and innovation deterrence if not calibrated with precision. The paper argues for a hybrid regulatory architecture, one that combines robust ex-ante obligations with flexible ex-post enforcement, interoperability standards, and evidence-based threshold criteria to achieve a sustainable equilibrium between competitive markets and an innovation-enabling environment. |
| Date: | 2026–07–27 |
| URL: | https://d.repec.org/n?u=RePEc:osf:lawarc:dk8sp_v1 |
| By: | Rusakov, Alexey; Kretschmer, Tobias |
| Abstract: | First-party complements both create and capture value in platform markets. Which of these motives dominates depends on the platform’s competitive position on the user and the complementor side. We posit that platform owners release more first-party complements in product categories with a high share of users compared to competing platforms. Conversely, platform owners release more first-party complements if the platform is in a weak competitive position in terms of its complements. This suggests that platforms release first-party complements to create value if they are weak on the complementor side, and to capture value if they are strong on the user side. Using data from video game consoles, we find our hypotheses confirmed and integrate competition between platforms with competition between first-party and third-party complements. |
| JEL: | L82 L86 L22 L24 |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:19687 |
| By: | Anna D’annunzio (UNINT - Università degli Studi Internazionali di Roma = University of International Studies of Rome); Yassine Lefouili (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - Comue de Toulouse - Communauté d'universités et établissements de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Bruno Jullien (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - Comue de Toulouse - Communauté d'universités et établissements de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Leonardo Madio (Unipd - Università degli Studi di Padova = University of Padua) |
| Abstract: | This paper examines how horizontal mergers affect firms' incentives to invest in R&D leading to the development of new products. We characterize the impact of a merger to monopoly and a 3-to-2 merger on equilibrium innovation efforts and consumer surplus, absent efficiency gains and spillovers. We show that a 3-to-2 merger directly alters the outsider's innovation incentives by shifting its best-response function upward, and we analyze how this mechanism affects merger outcomes for innovation and consumer surplus. Finally, we examine how efficiency gains and remedies modify post-merger innovation efforts. |
| Keywords: | R&D Investments, Amp, Product Innovation, Horizontal Mergers |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05680914 |
| By: | Parakhonyak, Alexei; Rhodes, Andrew |
| Abstract: | We consider a model in which consumers wish to buy a product repeatedly over time, but need to engage in costly search to learn prices and find a product that matches them well. The optimal search rule has two reservation values, one for newly-searched products, and another for products that were searched in the past. Depending on the search cost, firms either keep price steady over time, or gradually raise price to take advantage of a growing pool of high-valuation repeat customers. The model generates rich search and purchase dynamics, as consumers may optimally ``stagger'' search over time, initially trying different products, settling on one and buying it for a while, before choosing to search again for something better. We also show that consumers may be better off when firms can offer personalized prices based on their search history. |
| Keywords: | Consumer search |
| JEL: | D43 D83 L13 |
| Date: | 2025–01 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:19853 |
| By: | Hongyu Xiao; Robert Petrunia; Sarah Lucky |
| Abstract: | We study the accessibility and competitive structure of Canadian retail banking and cash services in rural, localized markets using the Bresnahan-Reiss entry threshold framework. We estimate population thresholds required to support a given number of establishments in two segments of the financial industry: retail banking services (financial institution branches) and cash services (branches and ATMs). The first retail banking services branch requires about 500 residents in an average market, whereas the first cash services location requires about 80 residents. Our estimates indicate that retail banking-services markets become effectively competitive once three branches are present, whereas additional cash-service locations may be spatially differentiated for price-insensitive consumers. We also find meaningful regional heterogeneity: public banking is associated with greater access to retail banking services, while stricter regulatory requirements are associated with reduced access to cash services. |
| Keywords: | Financial system, Financial institutions and intermediation, Financial system regulation and oversight, Money and payments, Cash and bank notes |
| JEL: | D14 G21 L10 L13 |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:bca:bocawp:26-19 |
| By: | Heidhues, Paul; Johnen, Johannes; Köszegi, Botond |
| Abstract: | We investigate the effects of consumer-protection regulations limiting post-purchase harm when there are many markets and consumers have limited attention to examine prices or product features. Such regulation lowers the attention necessary for valuable purchases, which can allow a consumer to purchase in more markets, or serve to induce competition. The first benefit is most important when few markets are regulated, while the second emerges when regulatory scope is sufficiently broad to create “spare†— i.e., in equilibrium unused — attention. Because little spare attention can enforce competition in many markets, consumer welfare can be highly non-linear in regulatory scope. The benefits of regulating a market often accrue in other markets, and there is a sense in which overly tight regulation outperforms overly lax regulation. Broad consumer protection can help the economy reach productive efficiency, and when this is achieved less regulation may suffice. |
| Keywords: | Consumer protection; Regulation; Competition; Participation; Limited attention |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:19560 |
| By: | Youming Liu; Francisco Rivadeneyra; Edona Reshidi |
| Abstract: | We study competition between a welfare-maximizing public platform and a profit-maximizing private platform in a two-sided payment market. We characterize the public platform’s optimal pricing and show that it balances the benefits of increased competition against the welfare costs of network fragmentation. While introducing a public platform generally raises aggregate welfare and financial inclusion, the competing private platform may respond by raising its fees, disadvantaging merchants that continue to accept payments from the private platform. Finally, we show that cost-recovery and zero-fee mandates constrain public pricing, making welfare improvements uncertain and conditional on network effects, user switching behavior, and the degree of platform differentiation. |
| Keywords: | Money and payments, Digital assets and fintech, Payment and financial market infrastructures, Retail payments |
| JEL: | D4 E42 E58 |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:bca:bocawp:26-10 |
| By: | Peitz, Martin; Sobolev, Anton |
| Abstract: | A seller can offer an experience good directly to consumers and indirectly through an intermediary. When selling indirectly, the intermediary provides recommendations based on the consumer’s match value and the prices at which the product is sold. The intermediary faces the trade-off between extracting rents from consumers who strongly care about the match value versus providing less informative recommendations but also serving consumers who do not. We analyze the allocative and welfare effects of prohibiting price parity clauses and/or regulating the intermediary’s recommender system. Prohibiting price parity clauses is always welfare decreasing in our model. |
| Keywords: | E-commerce |
| JEL: | L12 L15 D21 D42 M37 |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:19659 |
| By: | Bornstein, Gideon; Peter, Alessandra |
| Abstract: | This paper studies the effect of nonlinear pricing on markups and misallocation. We develop a general equilibrium model of firms that are allowed to set a quantity-dependent pricing schedule—contrary to the typical assumption in macroeconomic models. Without the restriction to linear pricing, markup heterogeneity is no longer a sign of misallocation. Larger firms charge higher markups, yet the allocation of resources across firms is efficient. Further, we point to a new source of misallocation. In general equilibrium, high-taste consumers are allocated too much of each good, low-taste consumers too little. When labor supply is elastic, firms’ market power depresses aggregate labor, but this effect is independent of the level of the aggregate markup in the economy. Using micro data from the retail sector, we show that nonlinear pricing is prevalent and quantify the model. We find that the welfare losses from misallocation across consumers under nonlinear pricing are substantially larger than those from misallocation across firms under linear pricing. |
| Keywords: | Markups; Misallocation |
| JEL: | D4 E2 L1 |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:19672 |
| By: | Nicolas Eschenbaum; Janusz M. Meylahn |
| Abstract: | Detecting algorithmic collusion is challenging because regulators often have limited access to firms' algorithms, training data, and market information. We study an intermediate-information regime in which an auditor can query firms' frozen pricing policies and construct the induced strategy graph. Using a complete characterization of Nash equilibria in a repeated pricing game, we identify graph-theoretic features of strategy graphs that are associated with collusive reward-and-punishment schemes, including maximum betweenness, attractor in-degree, and average path length. We then test these metrics on policies learned by decentralized Q-learning and the Q-learning algorithm of Calvano et al. (2020). We find that especially the maximum betweenness and attractor in-degree are strongly correlated with the standard profit-based Collusion Index. Importantly, the proposed metrics rely only on the unlabeled topology of strategy graphs and require neither price histories, demand estimates, nor competitive and monopoly benchmarks. Our results suggest that the structure of frozen pricing policies contains robust signals of collusion among reinforcement learning algorithms and provides a promising basis for auditing algorithmic pricing systems under limited information. |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2608.07098 |
| By: | Jaumandreu, Jordi |
| Abstract: | The production function is an engineering relationship, but recent estimators use firm’s optimal choices that depend on market power. Researchers often become puzzled: the estimator dynamic panel (DP), which is robust to market power because it does not use any FOC, often produces unsatisfactory outcomes; the estimators known as OP/LP, which are deemed inconsistent in the presence of market power, typically improve. We prove that the coincidence of DP and OP/LP, except by sampling error, is a necessary condition for consistency, and show how the improvements relate to the production function specification. We derive a novel estimator, robust to arbitrary forms of market power, based on a version of OP/LP that proxies for MC. Using this estimator, we propose a test for market power and a test for the specification, the latter based on the smaller set of assumptions used by DP. |
| Keywords: | market power |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:19677 |
| By: | De Loecker, Jan; Fuss, Catherine; Quiller-Doust, Nathan; Treuren, Leonard |
| Abstract: | We separately observe variable input expenditure and expenditure on fixed inputs in novel firm-level data covering the Belgian manufacturing sector over the last decades. This permits a deeper investigation of two potential drivers of the globally observed widening gap between firms’ revenue and variable input expenditure: technology and market power. Across the board, cost structures have become less reliant on variable input expenditure over time, while expenditure on fixed inputs or overhead costs has in- creased in prominence. We relate these changes in firms’ cost structures to performance measures and document that markups and gross profit rates increase substantially as the role of variable costs in production diminishes. Profit rates net of fixed input ex- penditure also increase, but by substantially less than gross profit rates. Our results suggest that technological change can explain a considerable portion of the widening gap between revenue and variable input expenditure, but that markups increase by more than necessary to break even, and that this phenomenon operates remarkably similarly across different firms and industries. |
| Keywords: | Markups; Technology |
| JEL: | D2 D4 L1 O4 |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:19641 |
| By: | Wang, Yi; Sesmero, Juan; Ma, Meilin |
| Abstract: | The U.S. Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) provides free infant formula to low-income households, serving around 39% of U.S. infants. As WIC’s single most expensive benefit, infant formula accounts for around half of the total WIC food costs. To reduce government costs, WIC awards exclusive contracts to manufacturers offering the lowest net price (i.e., wholesale price minus rebate) to the government in each state via public auction, effectively creating monopolies in the WIC market. The broader implications of this policy hinge on vertical relationships between manufacturers and retailers, which remain poorly understood. I identify the vertical relationship as best characterized by two-part tariffs (TPT), where retailers decide retail prices and pay fixed fees to manufacturers and wholesale markups are zero. This finding challenges the common but untested resale price maintenance (RPM) assumption in the literature. Counterfactual simulations show that TPT is more efficient than RPM, yielding higher consumer and total surplus while reducing government costs through lower total markups at equivalent net prices. Specifically, under RPM, average retail prices would be 3.8% higher, consumer surplus would be 7.4% lower, and producer surplus would be 2.2% higher under the current design of WIC. These findings demonstrate that conduct assumptions critically shape welfare outcomes. |
| Keywords: | Industrial Organization |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ags:aaea26:404621 |
| By: | Mertens, Matthias; Schoefer, Benjamin |
| Abstract: | We document and dissect a new stylized fact about firm growth: the shift from labor to intermediate inputs. This shift occurs in input quantities, cost and output shares, and output elasticities. We establish this fact using German firm-level data and replicate it in administrative firm data from 11 additional countries. We also document these patterns in micro-aggregated industry data for 20 European countries (and, with respect to industry cost shares, for the US). We rationalize this novel regularity within a parsimonious model featuring (i) an elasticity of substitution between intermediates and labor that exceeds unity, and (ii) an increasing shadow price of labor relative to intermediates, due to monopsony power over labor or labor adjustment costs. The shift from labor to intermediates accounts for one half to one third of the decline in the labor share in growing firms (the remainder is due to wage markdowns and markups) and rationalizes most of the labor share decline in growing industries. |
| JEL: | J00 L00 E2 |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:19719 |
| By: | Ferrari, Alessandro; Queiros, Francisco |
| Abstract: | We study how firm heterogeneity and market power affect macroeconomic fragility, defined as the probability of long slumps. We propose a theory in which the positive interaction between firm entry, competition and factor supply can give rise to multiple steady-states. We show that when firms are highly heterogeneous in terms of productivity, even small temporary shocks can trigger firm exit and make the economy spiral in a competition-driven poverty trap. We calibrate our model to incorporate the well-documented trends on rising firm heterogeneity in the US economy, and show that they significantly increase the likelihood and length of slow recoveries. We use our framework to study the 2008\textendash{}09 recession and show that the model can rationalize the persistent deviation of output and most macroeconomic aggregates from trend, including the behavior of net entry, markups, and the labor share. Post-crisis cross-industry data corroborates our proposed mechanism. We conclude by showing that firm subsidies can be powerful in preventing long slumps and can lead to welfare gains between 10% and 45%. |
| Keywords: | Firm heterogeneity; Market power in the aggregate economy; Poverty traps; Great recession |
| JEL: | E22 E24 E25 E32 L16 |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:19692 |
| By: | Emmanuel Dhyne; Amil Petrin; Frederic Warzynski |
| Abstract: | This paper studies how the removal of price regulation was associated with changes in quality, efficiency, and welfare in the Belgian bread and cake industry. In the summer of 2004, price controls on bread were abolished. Because most firms in this industry produce both bread and cakes, the reform provides a useful setting in which to examine both direct changes in the deregulated market and spillovers to a related product line. We use detailed firm-product-level information on values and physical quantities to estimate product quality, technical efficiency, marginal costs, markups, and welfare. We find that deregulation was associated with substantial improvements in both quality and efficiency. Welfare increased through gains in consumer surplus and producer surplus, and the gains were not confined to bread. We also find evidence of spillovers to cake production, suggesting that deregulation encouraged technological upgrading that affected firms' broader production process. |
| Keywords: | multi product firms, efficiency, cost estimation, markups, spillovers, welfare |
| JEL: | L11 L25 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12900 |
| By: | Galeotti, Andrea; Golub, Benjamin; Goyal, Sanjeev; Talamas, Eduard; Tamuz, Omer |
| Abstract: | A large differentiated oligopoly yields inefficient market equilibria. An authority with imprecise information about the primitives of the market aims to design tax/subsidy interventions that increase efficiency robustly---i.e., with high probability. We identify a condition on demand that guarantees the existence of such interventions, and we show how to construct them using noisy estimates of demand complementarities and substitutabilities across products. The analysis works by deriving a novel description of the incidence of market interventions in terms of spectral statistics of a Slutsky matrix. Our notion of recoverable structure ensures that parts of the spectrum that are useful for the design of interventions are statistically recoverable from noisy demand estimates. |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:19574 |
| By: | Friberg, Richard |
| Abstract: | This paper provides an overview of the theoretical and empirical literatures on the effect of algorithm use on prices, focusing on the type of algorithms relevant for gasoline markets. Against this background we examine pricing and algorithm use on the Swedish gasoline market 2021-2023, relying on detailed information of what algorithms that are used by what station at what time. Only a handful of stations are using AI. Pricing at these AI stations change markedly when AI is adopted, resulting in many more price changes. On average margins are somewhat lower with AI but AI stations charge relatively higher prices during the afternoon peak in demand. In contrast use of rule-based pricing algorithms is pervasive and three out of the four major chains use rule-based algorithms from external algorithm providers. Examining of duopoly markets (stations with only one competitor within a 10-minute drive) suggest that algorithms are faster to respond to price decreases than manual pricing. |
| Keywords: | Algorithmic pricing |
| JEL: | D22 D43 L13 L71 |
| Date: | 2025–01 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:19830 |
| By: | Doyle, Christopher |
| Abstract: | Capacity markets are increasingly used to secure electricity-system reliability, but their auction designs raise persistent concerns about market power. This paper examines strategic capacity withholding in the British Capacity Market, which procures future capacity through a three-stage process: pre-qualification, disclosure of aggregate qualified supply, and a descending-clock auction with a uniform clearing price. We develop a formal model in which a small number of large portfolio bidders interact with a competitive fringe of uncertain size. The central result is that the same auction rule generates different observable forms of market power depending on bidders’ information about fringe supply: under full information, strategic bidders withhold capacity ex ante by limiting entry at pre-qualification, with no subsequent withdrawal; under imperfect information, capacity may instead be withdrawn after disclosure or during the clock auction as bidders update beliefs about market tightness. The absence of visible in-auction withdrawal is therefore consistent with maximal strategic withholding rather than competitive behaviour. We further derive a closed-form threshold for the per-unit cost of withdrawal: withholding remains profitable even under substantial institutional frictions, and the threshold rises with portfolio size and with the spread between clearing prices in tight and loose market conditions, so strategic withholding is strongest precisely when reliability conditions are most stressed. We relate the framework to recent GB auction outcomes and develop a stage-specific policy taxonomy, highlighting the role of contestability-enhancing reforms alongside direct auction mitigation. |
| Keywords: | auction design;capacity markets;capacity withholding;descending clock auctions;market power;electricity market regulation |
| JEL: | D44 L94 Q41 |
| Date: | 2026–10–31 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:139055 |
| By: | Ichihashi, Shota; Jeon, Doh-Shin; Kim, Byung-Cheol |
| Abstract: | We study a mechanism design problem of a monopoly platform that matches content of varying quality, ads with different ad revenues, and consumers with heterogeneous tastes for content quality. The optimal mechanism balances revenue from advertising and revenue from selling access to content: Increasing advertising revenue requires serving content to more consumers, which may reduce access revenue. Contrary to the standard monopolistic screening, the platform may serve content to consumers with negative virtual values while, to reduce information rents, limiting their access to higher-quality content. Then, an increase in ad profitability reduces its incentive to invest in content quality. |
| JEL: | D42 D82 L15 O31 |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:19675 |
| By: | Atella, Vincenzo; Ceschin, Nicola; Decarolis, Francesco |
| Abstract: | This paper quantifies the price effects of a merger between two major producers of orthopedic prostheses. It shows that, in the public procurement markets where these products are purchased, the effect of the merger hinges on the characteristics of both the procurement design and the organizational structure of the buyers. Using data from all public procurement events in Italy between 2012 and 2019, and exploiting a difference-in-differences model where pacemakers play the role of the control group, we find that the merger led to a 7.6% increase in prices and that this effect is concentrated in the first three years post-merger. Further insights are: (i) a heterogeneous impact among gender and age groups such that most of the burden is on female patients aged 65 and above; (ii) short term quality does not change, but patenting activity declines; (iii) there is no evidence of the merger triggering ex post coordinated effects in the form of bidding and entry patterns compatible with firm collusion. |
| JEL: | I18 J18 C21 |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:19737 |
| By: | Heiland, Inga |
| Abstract: | Firms under common ownership have incentives to internalize the consequences of their behavior on each other, potentially resulting in less competition. I exploit unique data from Norway to document the economy-wide extent of common ownership, covering private and public firms and the universe of shareholders. Using exogenous variation in common ownership at the firm-household level due to marriages among large individual shareholders, I provide causal evidence on the effect of common ownership on profit margins. I find that firms experiencing an increase in common ownership due to a marriage increase profit margins by 7 to 16 percentage points, compared to firms that are affected by similar marriages but do not experience a change in common ownership. |
| Keywords: | Common ownership; Private firms; Corporate governance |
| JEL: | G32 L22 L26 |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:19662 |
| By: | Ackerberg, Daniel; De Loecker, Jan |
| Abstract: | The presence of imperfect competition introduces distinct challenges when identifying, and estimating, production functions. We start by highlighting that some existing approaches to production function estimation cannot completely abstract away from the presence of imperfect competition in the product market. We then extend these existing approaches to accommodate some additional oligopoly models commonly used in empirical work by using a sufficient statistic approach, and show that the presence of such strategic interactions has important benefits in that they introduces additional exogenous variation that can help identify production functions. We study how to optimally leverage this exogenous variation, both with and without direct data on a firm’s competitors, and use Monte-Carlo experiments to 1) verify that the existence of strategic interactions can identify production functions that would not otherwise be identified, and 2) assess the extent to which what applied researchers observe about competition affects the precision of estimates based on this variation. |
| Keywords: | Identification |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:19640 |
| By: | Miravete, Eugenio |
| Abstract: | Third-degree price discrimination increases output and welfare if certain local demand curvature conditions hold. These curvature conditions, known for nearly a century, have never been evaluated empirically before. To successfully evaluate the output and welfare effects of third-degree price discrimination, demand specification must be sufficiently flexible to allow for curvature heterogeneity across local markets. Otherwise, demand specification bakes-in empirical output and welfare predictions of price discrimination. I show that with the notable exception of logit demand, most other demands families predict output and welfare reductions as their elasticity and curvature are negatively correlated. I use supermarket scanner data to evaluate demand curvature conditions nonparametrically for thousands of chain-store-product combinations and show that, more often than not, third-degree price discrimination (local store pricing) decreases output and welfare relative to uniform pricing (chain-store pricing). Furthermore, I show that using output as a proxy for welfare as Robert Bork suggested overstates potential gains and understates potential damages of price discrimination. |
| JEL: | D42 L12 L66 |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:19742 |
| By: | Boeri, Tito; Crescioli, Tommaso; Garnero, Andrea; Luisetto, Lorenzo G. |
| Abstract: | Can collective bargaining mitigate monopsony power? This paper studies the extent to which collective agreements regulating employee noncompete clauses affect firm-level markdowns in French manufacturing. Using a staggered difference-in-differences design, we find that such regulation reduces markdowns by 1.3%–2.2% on average. The effects increase over time and are stronger among smaller, less productive, low-wage firms. Leveraging a French Court of Cassation ruling requiring financial compensation for enforceable noncompetes, we show complementarity between national regulations and sectoral bargaining. By strengthening compliance and adding limitations, collective bargaining emerges as an effective regulatory tool shaping firms' use of noncompete agreements. |
| Keywords: | collective bargaining;monopsony;noncomplete agreements;unions |
| JEL: | J42 J51 J53 J58 J31 |
| Date: | 2026–07–27 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:140384 |
| By: | Gorkem Celik; Roland Strausz |
| Abstract: | This paper studies monopolistic certification in markets where sellers possess partial private information about product quality. A certifier can provide information through two channels: screening sellers’ private information (soft information) and acquiring new quality data (hard information). We prove that any certification menu achieving less than maximal screening is Pareto dominated by one with full screening. Among Pareto-efficient menus, the certifier’s profit-maximising menu provides maximal soft information while restricting hard information provision. The two channels diverge because screening creates value the certifier can fully capture, whereas hard information amplifies costly information rents. Using power value functions, we derive comparative statics showing that information restrictions target low-quality sellers when information value is moderate, but high-quality sellers receive perfect quality revelation when information value is high. |
| Keywords: | certification, disclosure, screening, information acquisition, monopolistic distortions |
| JEL: | D82 |
| Date: | 2026–07–13 |
| URL: | https://d.repec.org/n?u=RePEc:bdp:dpaper:0104 |
| By: | Motta, Massimo; Polo, Michele |
| Abstract: | The paper analyzes the design of industrial policies, in the form of subsidies to innovation activity or to local production, when domestic firms are inefficient and there is a risk of supply-chain disruption. We first establish a case for research subsidies, since private investment (to improve the inferior technology) is lower than the socially optimal one. We next show the equivalence with subsidies to (inefficient) local production in case of intertemporal economies of scale. Then, within a general framework, we analyze profit and welfare maximizing investments and optimal subsidies in case of segmented markets and an integrated market organized as a duopoly, a monopoly or a research joint-venture. We show that research joint ventures or a public research center socially outperform the other environments since they benefit from a larger integrated market and a wider circulation of the innovation while preserving a competitive market. Finally, in large markets with significant technology gaps, it may be convenient to concentrate all the research in a single lab while maintaining a competitive market. |
| Keywords: | Resilience; Industrial policy; Mergers; Innovation |
| JEL: | L40 L52 O31 O32 |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:19699 |
| By: | Harhoff, Dietmar; Heller, David; Momtaz, Paul |
| Abstract: | We show that firm and industry, rather than inventor and invention factors, explain more than half of the variation in inventor returns in administrative employer-inventor-patent-linked data from Germany. Between-firm variation in inventive rents is strongly associated with inventor mobility. Inventors are more likely to make a move just before a patent is filed than shortly thereafter and benefit from their move through a mobility-related marginal inventor return. Employers that pay inventor returns in excess of the expected return gain a favorable position in the market for inventive labor with subsequent increases in patent quality and quantity. Consistent with theoretical arguments, effect sizes also depend on employer-inventor technological complementarity, degree of competition, and invention quality. |
| JEL: | O31 J24 J62 |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:19681 |
| By: | Doshi, Samir; Hoolohan, Vicky; Lewis, Tabitha; Schneebacher, Jakob |
| Abstract: | Accurate market definitions are important for competition agencies, but traditional survey based measures are costly, time-consuming and noisy at low aggregations. This paper explores the use of consumer card spending data to improve the timeliness and accuracy of retail market estimates. With the help of a standard machine-learning algorithm, we cluster spending flows from cardholder postcode sectors to merchant postcode sectors for detailed categories of retail merchants in the UK at a monthly frequency. To decide the thresholds for the clustering algorithm, we use estimates of average distance travelled from traditional survey tools. We find geographical retail markets that differ systematically by merchant good category and across space. Market size is also predicted by demographic and economic characteristics. Over time, market size is relatively stable but shrinks during periods of pandemic-induced travel restrictions. Markets for different retail goods are spatially correlated in predictable ways. Beyond applications to competition agency casework, this method allows researchers to investigate local competition and the impact of technology and government policies on spatial consumer search and purchasing behaviour. |
| Keywords: | market definitions; consumer behaviour; real-time data; economic data science |
| JEL: | D40 L10 L81 R12 |
| Date: | 2024–11–18 |
| URL: | https://d.repec.org/n?u=RePEc:eoe:escoed:escoe-dp-2024-16 |
| By: | Madarász, Kristóf; Pycia, Marek |
| Abstract: | A privately-informed buyer takes an action that impacts the distribution of information between her and the seller. The available actions differ in both content (what information is revealed and what remains hidden) and costs. For a large class of trading environments where buyers can choose from an arbitrary set of dynamic signal-generating processes and the costs of these processes can depend on the buyer’s private information, we establish a "cost-over-content" theorem: buyers will only choose least expensive processes. We explore implications for data trade, market power, and the power of setting a default information structure in trade regulation. |
| Date: | 2025–01 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:19902 |
| By: | Otsu, Taisuke; Pesendorfer, Martin |
| Abstract: | This paper introduces a novel method for assessing conduct and welfare in demand/supply product markets, departing from conventional supply-side assumption and embracing a mechanism design approach. Our proposed measures are robust to assumptions about the details of the market game being played and the strategic choice variable. To evaluate the effectiveness of our method, we examine the soft drink market, benchmarking it against (i) markup estimates from accounting data and (ii) the pass-through estimates from the difference-in-difference literature. We show that our cost estimates are inline with the benchmarks. Finally, we show that the resulting welfare estimates are significantly lower than those obtained using the traditional Bertrand or Cournot models. |
| JEL: | D12 D90 D91 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:19567 |
| By: | Hector Chade (Arizona State University); Victoria Marone (Yale University); Amanda Starc (Northwestern University); Jeroen Swinkels (Northwestern University) |
| Abstract: | We analyze a multidimensional screening model in which a principal offers a menu of quality-price pairs to a consumer with multiple dimensions of private information and a quasilinear utility function. We derive necessary conditions for optimality, and use them to provide insight into optimal exclusion, positive trade, and screening. We then recast the problem in terms of incremental quality levels and prices, the so-called demand-profile approach (DPA). Under DPA, the problem decouples across increments and can be solved one at a time. We provide novel conditions under which DPA recovers the solution to the full problem exactly or approximately, and which make the necessary conditions sufficient for optimality: essentially, valuations must be sufficiently correlated across quality increments. Applied to empirical estimates of demand for health insurance, we show that DPA is approximately valid, and we apply it to understand equilibrium outcomes in a monopoly insurance market. |
| Date: | 2026–06–30 |
| URL: | https://d.repec.org/n?u=RePEc:cwl:cwldpp:2541 |
| By: | Carol Propper |
| 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, competition, healthcare markets, policy reform |
| JEL: | I11 H42 H44 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12852 |
| By: | Markovich, Sarit; Rayo, Luis |
| Abstract: | We consider a monopolistic platform who offers a menu of products differing in quality, such as their level of data privacy. Because of network externalities, the adoption of these products is subject to equilibrium multiplicity, which we handle using a novel notion of focality able to accommodate menus. The optimal menu depends critically on the platform’s focality, with a focal platform trading too little, and a nonfocal one too much, relative to the social optimum. This is because the nonfocal platform relies on consumers with the highest willingness to trade—such as those with the least privacy concerns—to build its network. |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:19792 |
| By: | Dirk Bergemann (Yale University); Yang Cai (Yale University); Jinzhao Wu (Yale University); Konstantin Zabarnyi (Yale University) |
| Date: | 2026–07–29 |
| URL: | https://d.repec.org/n?u=RePEc:cwl:cwldpp:2534 |
| By: | Cowgill, Bo (University of Toronto); Freiberg, Brandon (INSEAD); Starr, Evan (University of Maryland) |
| Abstract: | We study worker noncompete clauses in a large field experiment with two finance firms. Across ~14, 000 job offers to freelance recruiters on short-term contracts, we randomize wages and the presence, salience, and duration of noncompetes (all contracts also included a nondisclosure agreement). Removing a noncompete increases mobility between competing employers by 36--52% and raises workers' total earnings from the two firms by 12--17%. We find no evidence---rejecting even small effects---that removing noncompetes generates secret leakage. We also find no evidence that workers choose noncompete jobs for higher pay. Many workers appear unaware of noncompetes before firms' post-employment communication. The results align with a model of inattention and uncertainty about enforcement. |
| Keywords: | noncompete clauses, earnings, knowledge diffusion, mobility, contracting, inattention, enforcement risk |
| JEL: | J42 M5 J31 J41 K31 L41 C93 |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp18820 |
| By: | Lafontaine, Francine; Saattvic, Saattvic; Slade, Margaret |
| Abstract: | No-poaching clauses (NPCs) have recently come under scrutiny due to their potentially anti-competitive impact on wages. However they can also enhance efficiency. We use data from the US chain restaurant industry to assess the effect that such clauses have on wages and we find robust evidence of a negative impact. Specifically, the legal cases, proposed legislation, and negative attention surrounding NPCs, which led many chains to remove such clauses from their contracts, caused wages in those chains to rise by about 5% relative to chains that did not have NPCs. We show that the impact of removal is greater for franchisors with larger shares of the job ad market, which is a measure of the job opportunities that are denied to their employees under NPCs. We also find that the effect of the clauses on the wages of managers is not statistically different from the effect on the wages of workers. We attribute these wage effects to the removal of frictions and barriers to labor mobility. |
| Keywords: | Franchising |
| JEL: | J31 J43 J63 K21 L43 L83 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:19548 |