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on Industrial Competition |
| By: | Axel Gautier; Leonardo Madio; Shiva Shekhar |
| Abstract: | We consider a market in which a platform hosts third-party monopolistic complementors. Users are segmented into single-use and multi-use consumers, and services exhibit network externalities. In the agency model, the presence of multi-use consumers leads complementors to set inefficiently high prices, reducing demand and the platform’s profits. Platform entry can resolve these pricing inefficiencies by targeting multi-use consumers with a bundled offering, but it then fragments the market, diminishing network benefits for consumers. We find that the platform opts to enter only when it has committed to a low commission fee, and network benefits are modest. Integration with a complementor reduces prices for consumers and enhances network benefits, thereby improving consumer welfare, but the pricing inefficiency is only partially mitigated. |
| Keywords: | platform, network externalities, platform strategy, hybrid business model |
| JEL: | L22 L86 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11711 |
| By: | Canoy, Marcel; Kamphorst, Jurjen J.A.; Tichem, Jan |
| Abstract: | True pricing has progressed from an abstract notion to a real life phenomenon as a way to make consumers aware of the genuine costs to society of products. Our paper analyzes the impact of true prices on competition. Our model uses a straightforward differentiated Bertrand set-up where consumers can choose to pay the true price or the normal price. There are consumers who strongly prefer not to cause externalities. These consumers will opt to pay the true price. Other consumers receive less disutility of causing externalities. They will pay the normal price. Our findings are that setting the true price can be an equilibrium strategy for one or both firms. True prices can be welfare enhancing, but it comes at a cost. True prices harm consumers that do not value external effects as it raises the normal price. A comparison of true prices with taxation of the external effect shows that both can be socially optimal. Taxation is better because it covers both types of consumers, and worse because it overcorrects in the presence of market power. The paper demonstrates the value of analyzing competitive effects of environmental initiatives. |
| Keywords: | True Price, Sustainability, Industrial Organization |
| JEL: | D62 D64 Q56 |
| Date: | 2025–03–01 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:124417 |
| By: | Zikun Liu (Yale University); Jiwoong Shin (Yale University); Jidong Zhou (Yale University) |
| Abstract: | The growing availability of big data enables firms to predict consumer search outcomes and outside options more accurately than consumers themselves. This paper examines how a firm can utilize such superior information to offer personalized buy-now discounts intended to deter consumer search. However, discounts can also serve as signals of attractive outside options, potentially encouraging rather than discouraging consumer search. We show that, despite the firmÕs ability to tailor discounts across a continuum of consumer valuations, the firm-optimal equilibrium features a simple two-tier discount scheme, comprising a uniform positive discount when the consumer outside option is intermediate and no discount when the outside option is low or high. Furthermore, compared to a scenario where the firm lacks superior information, we find that the firm earns lower profits, consumers search more while their welfare remains unchanged, and total welfare declines. |
| Date: | 2025–04–22 |
| URL: | https://d.repec.org/n?u=RePEc:cwl:cwldpp:2440 |
| By: | Sebastian G. Kessing |
| Keywords: | global public goods, market power, climate policy, global warming, terms-of-trade, China, Inflation Reduction Act, Net-Zero Industry Act |
| JEL: | H41 D60 Q54 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:sie:siegen:198-25 |
| By: | Patrice Bougette (UniCA - Université Côte d'Azur, GREDEG - Groupe de Recherche en Droit, Economie et Gestion - UNS - Université Nice Sophia Antipolis (1965 - 2019) - CNRS - Centre National de la Recherche Scientifique - UniCA - Université Côte d'Azur); Frédéric Marty (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - UNS - Université Nice Sophia Antipolis (1965 - 2019) - CNRS - Centre National de la Recherche Scientifique - UniCA - Université Côte d'Azur) |
| Abstract: | Self-preferencing is widely perceived as a threat to competition. Within the European Union, it has led to prohibition decisions, such as the Google Shopping case in 2017, commitment-based decisions, such as the Amazon case in 2022, and regulatory initiatives, notably the Digital Markets Act (DMA). Self-preferencing can be understood as a form of discrimination and manifests in two primary ways. First, a dual-role platform may prioritize its own services, potentially foreclosing rivals or entrenching its dominance. Second, a non-vertically integrated platform may favor a specific downstream player to maximize fee-based revenues, thereby distorting competition. This contribution emphasizes four key points. First, economic literature suggests that the competitive impact of self-preferencing is highly context-dependent. Second, a case-by-case approach is crucial for effective competition law enforcement. Third, shifting the burden of proof onto the accused firm could enhance enforcement efficiency. Fourth, outright prohibiting platforms from operating as dual-role entities may generate excessive welfare costs; instead, compliance obligations – such as transparent access rules – could mitigate litigation risks while preserving competitive dynamics. |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:halshs-04982587 |
| By: | Alfred A. B. Mayaki |
| Abstract: | Prior literature on two-firm two-market and two-stage extended dynamic models has introduced what Guth (2016) succinctly terms a social dilemma. A state in which conglomerate firms competing in a Bertrand duopoly consider jointly optimizing profits under a tacit self-enforcing agreement to deter market entry. This theoretical article reinterprets the social dilemma highlighted by Guth (2016) not only in the context of allocation but also through the lens of competition where entry must legally be permitted even if cooperative signalling would otherwise sustain joint profitability. This study explores the significance of a sufficiency condition on each firms non-instantaneous reaction function requiring the maintenance of a stable long-run equilibrium through retaliative restraint characterized by either two negative eigenvalues or a saddle-path trajectory. |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2503.22825 |
| By: | Takeshi Fukasawa |
| Abstract: | This study empirically investigates firms' incentives on the choice of product durability, and its social optimality, by developing a dynamic structural model of durable goods with forward-looking consumers and oligopolistic multi-product firms. Based on the observations of the light bulb market, it specifies a model where firms produce multiple products with different durability levels and set product prices based on dynamic incentives. It proposes and applies novel estimation algorithms that alleviate the computational burden and data requirement for estimating demand and marginal cost parameters of dynamic demand models. Using light bulb market data in Japan, structural parameters are estimated. This study obtains the following results. First, large firms have incentives to collude to eliminate high durability incandescent lamps, though it is profitable to sell them for each firm. In contrast, when they can collude on prices, they don't have incentives to eliminate high durability bulbs. Second, eliminating high durability incandescent lamps leads to larger producer and total surplus, though it leads to lower consumer surplus. |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2503.23792 |
| By: | Benjamin Montmartin (SKEMA Business School, Université Côte d'Azur (GREDEG)); Mathieu Lambotte (Université de Rennes, CNRS, CREM, France) |
| Abstract: | This paper proposes a structural econometric approach to examine how individual decisions are influenced by various sources of interaction, modeled through a multiplex network. Specifically, we develop a binary choice model under incomplete information that captures two distinct micro-founded interaction mechanisms: spatial competition and conformity to social norms. We apply our game theoretical framework to analyze the choices made by private physicians regarding the adoption of a new pricing scheme in France, designed to enhance patient access to care while being economically beneficial for most physicians. Our analysis utilizes a unique geolocalized dataset that covers the entire population of physicians across three medical specialties. We find compelling evidence of a significant preference for conformity, while competitive interactions in physician decision appear minimal. These findings largely explain the low adoption rates of the new pricing scheme, as simulations and counterfactual analyses suggest that a substantially higher uptake rate would occur if physicians operated in isolation or were indifferent to conformity. Lastly, we discuss the implications of neglecting relevant sources of interaction in a structural model, which can lead to ineffective policy design. |
| Keywords: | binary choice, competition, social interactions, pricing scheme, physicians |
| JEL: | D04 I11 I18 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:gre:wpaper:2025-17 |
| By: | Markus Dertwinkel-Kalt; Christian Wey |
| Abstract: | To support the green transition in the automotive sector, the EU has introduced CO2 emission performance standards, also known as the excess emissions premium (EEP) regulation, which will tighten until 2035. Manufacturers exceeding their average fleet emission targets must pay a penalty. The regulation also allows pooling of fleets, enabling manufacturers to combine fleets. We analyze how this affects market outcomes. The EEP creates a positive externality of electric on conventional cars. Pooling eases compliance but may weaken competition among existing market players, while simultaneously encouraging the entry of electric-only manufacturers into the EU. |
| Keywords: | green regulation, automotive industry, excess emissions premium |
| JEL: | D04 L11 L50 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11762 |
| By: | Emily E. Cook; Emily Cook |
| Abstract: | State governments provide grants to students to subsidize college attendance. In response, colleges can adjust their tuition, aid policies, and admission standards, affecting equilibrium enrollment and pass-through of aid to students. To quantify demand- and supply-side responses, I develop a model that incorporates the geographic nature of the market and strategic competition between individual colleges. Simulations demonstrate that college responses are meaningful: when students receive $1, 000 to attend in-state public colleges, these colleges absorb over 40% of the subsidy on average and raise admissions standards, reducing the enrollment effect of the policy. Close competitors see enrollment declines of 2-3%. |
| Keywords: | college choice, college admission, college enrollment, financial aid, mixed oligopoly, non-profit firms, demand estimation |
| JEL: | I23 I28 L13 L31 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11733 |
| By: | Sydney Eck; Trang T. Hoang; Devashish Mitra; Hoang Pham |
| Abstract: | Many developing and developed countries have experienced a declining labor share of national output in recent decades (Karabarbounis and Neiman, 2014). Some blame the decline on globalization, although it is surprisingly unclear whether and how globalization is a key contributing factor (Grossman and Oberfield, 2022). |
| Date: | 2025–03–31 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedgfn:2025-03-31-1 |
| By: | Francesco Bonfiglio (DYNAMO - DYNAMO CLOUD - DYNAMO); Francisco L. CONDIS Y TROYANO (Professeur honoraire des Universités - M.E.N.E.S.R. - Ministère de l'Education nationale, de l’Enseignement supérieur et de la Recherche, UCL - Université Catholique de Louvain = Catholic University of Louvain) |
| Abstract: | Comparative advantage is today a fundamental parameter for the survival of companies in a context of globalization and imperfect competition in particular in the digital market where information becomes the essential issue. Here we discuss the emergence and outlines of this concept on which the survival of many businesses in Europe and thousands of jobs depends. |
| Date: | 2024–06–20 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-04674582 |