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on Industrial Competition |
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Issue of 2026–01–05
twenty-one papers chosen by Russell Pittman, United States Department of Justice |
| By: | Armstrong, Mark; Vickers, John |
| Abstract: | We study a market in which firms each might supply a number of variants, or "brands", of fundamentally the same product. Consumers differ in the sets of brands they consider, and firms compete using (multi-dimensional) mixed pricing strategies. We show when firms apply uniform pricing across their brands, and when they use segmented pricing so that one "discount" brand is priced below another "premium" brand. We study the case of symmetric brands in particular, and discuss the impact of a firm introducing a new brand, of imposing a requirement to set uniform prices across brands, and of mergers between firms. |
| Keywords: | Price dispersion, price discrimination, multiproduct firms, mixed strategies, oligopoly, multibranding, multi-channel selling. |
| JEL: | C72 D43 D83 L13 M31 |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:127017 |
| By: | Nicholas Economides (Stern School of Business, New York University, New York, NY, USA); Ioannis Lianos (Faculty of Laws, University College London, London, United Kingdom); Christos Makridis (Arizona State University) |
| Abstract: | We examine when interoperability should serve as a structural response to market concentration produced by scaling laws, network effects, and data driven complementarities and capabilities in the digital economy. Digital infrastructures such as operating systems, cloud platforms, payments, and AI systems exhibit superlinear returns to scale that interact with multi-sided feedback loops to generate dominant positions and persistent bottlenecks. However, interoperability can also dilute beneficial complementarities, create security and privacy risks, and in some cases weaken incentives to invest. The paper makes two contributions. First, we develop a conceptual framework that treats digital ecosystems as lattices of complementarities linking users, developers, data, and infrastructure. Scaling laws are empirical signatures of supermodular relationships. Interoperability becomes a lattice restructuring tool that selectively weakens complementarities that entrench market (economic) power while preserving those that support quality, safety, and innovation. Second, we pair this economic account with a comparative analysis of legal and institutional approaches to interoperability. Examples include telecom interconnection, the Microsoft antitrust cases, the EU Digital Markets Act and Data Act, digital health regulation in the EU and the US, and emerging sector specific regimes in blockchain and AI. This comparison clarifies how horizontal and vertical interoperability obligations distribute network (complex systems) complementarities across layers and how ex ante and ex post tools differ in their ability to reshape digital ecosystems. We also argue that interoperability has emerged in the EU as a broader legal principle enshrined across multiple areas of law, including competition law and digital regulation. In sum, we provide a unified view of interoperability as a family of interventions that determine which complementarities are internalized by a single platform and which are shared across rivals and customers. Effective policy requires aligning the locus of interoperability with the structure of complementarities and the risks of fragmentation. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:net:wpaper:2511 |
| By: | Traversa, Marina; Vuillemey, Guillaume |
| Abstract: | We show that adverse selection is a key determinant of banking market structure. Using data on US bank branches over 1981-2016, we study banks' decisions to expand or contract geographically. First, banks are more likely to expand in counties that are similar, in terms of industry shares, to those in which they already have branches. Second, when contracting, banks are more likely to close or sell branches in similar areas. These results suggest that banks value diversification, but that informational barriers prevent them from achieving optimal scale. These findings have implications for banking competition and the rise of fintechs. |
| Keywords: | Banks, Barriers To Entry, Branching, Acquisitions, Diversification, Adverse Selection |
| JEL: | G21 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:safewp:333924 |
| By: | Mohapatra, Debashrita |
| Keywords: | Industrial Organization, Research Methods/Statistical Methods, Demand and Price Analysis |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ags:aaea24:343538 |
| By: | Huiyu Li; Chen Lian; Yueran Ma; Emily Martell |
| Abstract: | We document new facts that link firms’ markups to borrowing constraints: (1) less constrained firms within an industry have higher markups, especially in industries where assets are difficult to borrow against and firms rely more on earnings to borrow; (2) markup dispersion is also higher in industries where firms rely more on earnings to borrow. We explain these relationships using a standard Kimball demand model augmented with borrowing against assets and earnings. The key mechanism is a two-way feedback between markups and borrowing constraints. First, less constrained firms charge higher markups, as looser constraints allow them to attain larger market shares. Second, higher markups relax borrowing constraints when firms rely on earnings to borrow, as those with higher markups have higher earnings. This two-way feedback lowers TFP losses from markup dispersion, particularly when firms rely on earnings to borrow. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:cen:wpaper:25-75 |
| By: | Rahman, Rajib; Rojas, Christian |
| Keywords: | Industrial Organization, Agricultural and Food Policy, Marketing |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ags:aaea24:344019 |
| By: | Sukjin Han; Kyungho Lee |
| Abstract: | We study the competitive and welfare effects of copyright in creative industries in the face of cost-reducing technologies such as generative artificial intelligence. Creative products often feature unstructured attributes (e.g., images and text) that are complex and high-dimensional. To address this challenge, we study a stylized design product—fonts—using data from the world’s largest font marketplace. We construct neural network embeddings to quantify unstructured attributes and measure visual similarity in a manner consistent with human perception. Spatial regression and event-study analyses demonstrate that competition is local in the visual characteristics space. Building on this evidence, we develop a structural model of supply and demand that incorporates embeddings and captures product positioning under copyright-based similarity constraints. Our estimates reveal consumers’ heterogeneous design preferences and producers’ cost-effective mimicry advantages. Counterfactual analyses show that copyright protection can raise consumer welfare by encouraging product relocation, and that the optimal policy depends on the interaction between copyright and cost-reducing technologies. |
| Date: | 2025–04–02 |
| URL: | https://d.repec.org/n?u=RePEc:bri:uobdis:25/816 |
| By: | Anahit Gasparyan (Central Bank of Armenia); Aleksandr Shirkhanyan (Central Bank of Armenia) |
| Abstract: | This paper estimates structural demand for business loans and household deposits in a small, highly dollarized banking system. Using quarterly bank-level data from Armenia over 2012–2024, we estimate discrete-choice demand models, with a focus on the Random Coefficient Logit specification, to recover product-level own- and cross-price elasticities. These elasticities provide behavioral measures of competition, capturing how borrowers and depositors substitute across banks, currencies, and maturities over time. The results reveal substantial heterogeneity and directional asymmetry in substitution patterns, with systematically stronger price responsiveness in AMD-denominated products: while substitution from AMD to USD lending declines steadily, substitution toward AMD remains comparatively more responsive, particularly during periods of macro-financial stress. Regulatory-driven consolidation in 2015–2016 is associated with a marked reduction in price sensitivity across both loan and deposit markets. Deposit markets are less price-elastic overall, but competitive conditions vary systematically by currency and demographic characteristics, with older and male depositors exhibiting stronger preferences for USD-denominated savings. |
| Keywords: | Banking competition; Demand elasticities; Random coefficient logit; Dollarization; Loan and deposit markets |
| JEL: | G21 L11 D12 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:ara:wpaper:wp-2025-07 |
| By: | Nicholas Li (Department of Economics, Toronto Metropolitan University, Toronto, Canada); Tracey Galloway (Department of Anthropology, University of Toronto, Toronto, Canada) |
| Keywords: | pass-through, retail, pricing, subsidy, nutrition, north, Canada, competition |
| JEL: | H23 L11 D22 Q18 R12 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:rye:wpaper:wp097 |
| By: | Germán Coloma |
| Abstract: | This paper develops a method for market definition using demand-and-supply estimations. That method is then applied to the Argentine dishwashing detergent industry, using data from the years 2022-2024. The results are compared to the ones obtained using only demand estimations, and the conclusion is that the use of supply price equations generates a considerable improvement in those results. Through our empirical estimations, we also find that the dishwashing detergent industry in Argentina seems to be divided in two relevant markets: one that includes the two main detergent brands, and another one that encompasses the remaining brands. |
| Keywords: | supply-and-demand estimation, market definition, Argentina, detergent. |
| JEL: | C3 L4 L6 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:cem:doctra:913 |
| By: | Mert Demirer; Andrey Fradkin; Nadav Tadelis; Sida Peng |
| Abstract: | We document six facts about the structure and dynamics of the LLM market using API usage data from OpenRouter and Microsoft Azure. First, we show rapid growth in the number of models, creators, and inference providers, driven by open-source entrants. Second, we show price declines and persistent price heterogeneity across and within intelligence tiers, with open-source models being 90% cheaper than comparable closed-source models of the same intelligence. Third, we document market dynamism, with frequent turnover among leading models and creators. Fourth, we present evidence of horizontal and vertical differentiation, with no single model dominating across use cases, and demand for intelligence varying widely across applications. Fifth, we estimate preliminary short-run price elasticities just above one, suggesting limited scope for Jevons-Paradox effects. Finally, we show that although the share of firms that use multiple models increased over time, most firms concentrate their use on a single model, consistent with experimentation rather than persistent reliance on multiple models. |
| JEL: | L0 L10 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34608 |
| By: | Jan H. R. Dressler; Peter Kurz; Winfried J. Steiner |
| Abstract: | Despite a substantial body of theoretical and empirical research in the fields of conjoint and discrete choice analysis as well as product line optimization, relatively few papers focused on the simulation of subsequent competitive dynamics employing non-cooperative game theory. Only a fraction of the existing frameworks explored competition on both product price and design, none of which used fully Bayesian choice models for simulation. Most crucially, no one has yet assessed the choice models' ability to uncover the true equilibria, let alone under different types of choice behavior. Our analysis of thousands of Nash equilibria, derived in full and numerically exact on the basis of real prices and costs, provides evidence that the capability of state-of-the-art mixed logit models to reveal the true Nash equilibria seems to be primarily contingent upon the type of choice behavior (probabilistic versus deterministic), regardless of the number of competing firms, offered products and features in the market, as well as the degree of preference heterogeneity and disturbance. Generally, the highest equilibrium recovery is achieved when applying a deterministic choice rule to estimated preferences given deterministic choice behavior in reality. It is especially in the latter setting that incorporating Bayesian (hyper)parameter uncertainty further enhances the detection rate compared to posterior means. Additionally, we investigate the influence of the above factors on other equilibrium characteristics such as product (line) differentiation. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2512.22864 |
| By: | Alex Nery Caetité; Renato Dias de Brito Gomes |
| Abstract: | This study assesses the effects of a sequence of acquisitions in the investment platform market on charged commissions and investor returns. The results reveal that platform commissions increase approximately 100 days after the concentration event, remaining on average 0.33 pp higher for platforms involved in acquisitions (treatment) compared with those not involved (control). As commissions increase, issuers subsequently reduce the yield on the securities. The incidence on issuers and investors is, however, asymmetric, with issuers absorbing around 85% of the additional distribution cost. This impact is mitigated by greater issuer concentration: the higher the intraplatform concentration, the smaller the reduction in investor returns resulting from the increase in commissions. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:bcb:wpaper:641 |
| By: | Parcell, Joe; Franken, Jason |
| Abstract: | Price dynamics are evaluated to assess evidence of alleged price fixing collusion by the four largest U.S. beef packers starting in 2015. Initial variance screens find that during the period in question retail and boxed beef cutout prices increase and stabilize relative to fed cattle prices, consistent with collusive behavior, but on a much smaller scale than a benchmark case of documented collusion in fish fillet pricing. Boxed beef cutout and Kansas fed cattle prices are cointegrated. Speed of adjustment coefficients from VEC models indicate faster and more significant adjustment of boxed beef cutout prices to Kansas fed cattle prices at rates that remain consistent before and during the period of alleged collusion, while the Kansas fed cattle price adjusts slower to the boxed beef cutout price if at all but improves modestly in the period of alleged collusion Overall, the effects of the Covid-19 pandemic on price dynamics are much larger, and the results suggest collusive behavior to be minimal if any and short lived. |
| Keywords: | Agricultural and Food Policy, Demand and Price Analysis |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ags:nccc24:379010 |
| By: | Dongkyu Chang (City University of Hong Kong); Duk Gyoo Kim (Yonsei University); Wooyoung Lim (The Hong Kong University of Science and Technology) |
| Abstract: | In the standard dynamic screening problem between an uninformed seller and a privately informed buyer, theory suggests that the presence (absence) of the buyer's outside option leads to a substantial surplus for the seller (buyer). This outcome arises from contrasting unraveling processes that theory predicts: negative selection occurs in the absence of an outside option, while positive selection occurs in the presence of it. We examine the validity of these contrasting unraveling processes and report laboratory data that qualitatively deviate from theoretical predictions. We found that the seller's profit ranking was reversed between the two environments. In particular, in the presence of an outside option, the buyer frequently rejected current-round offers, leading to pervasive delays; and the seller's reported beliefs about the buyer's type were qualitatively more consistent with the negative selection than with the theoretically predicted positive selection. |
| Keywords: | Positive Selection, Outside Options, Laboratory Experiments |
| JEL: | C78 C91 D03 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:yon:wpaper:2025rwp-272 |
| By: | Adam N. Elmachtoub; Kumar Goutam; Roger Lederman |
| Abstract: | We describe a novel framework for discrete choice modeling and price optimization for settings where scheduled service options (often hierarchical) are offered to customers, which is applicable across many businesses including some within Amazon. In such business settings, the customers would see multiple options, often substitutable, with their features and their prices. These options typically vary in the start and/or end time of the service requested, such as the date of service or a service time window. The costs and demand can vary widely across these different options, resulting in the need for different prices. We propose a system which allows for segmenting the marketplace (as defined by the particular business) using decision trees, while using parametric discrete choice models within each market segment to accurately estimate conversion behavior. Using parametric discrete choice models allows us to capture important behavioral aspects like reference price effects which naturally occur in scheduled service applications. In addition, we provide natural and fast heuristics to do price optimization. For one such Amazon business where we conducted a live A/B experiment, this new framework outperformed the existing pricing system in every key metric, increasing our target performance metric by 19%, while providing a robust platform to support future new services of the business. The model framework has now been in full production for this business since Q4 2023. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2512.22271 |
| By: | Lu, Yue; Ma, Minghui; Liu, Kehan; Tang, Yao |
| Abstract: | Using a two-country Melitz model, we analyze how China's massive railway expansion generates trade gains via vertical linkages. Domestic gains stem from both a composition effect in which improved domestic market access enabled by railway encourages downstream firms to source more inputs domestically and hence raise the domestic value added ratio (DVAR), and a scale effect in which better market access boosts the output level. Intermediate good producers in the foreign country also benefit despite the composition effect, as the scale effect associated with expanded demand from Chinese firms dominates. We test the theoretical predictions with panel data on Chinese manufacturing firms in 2000-2007, addressing endogeneity using a control function approach. Our main empirical findings confirm: (1) Improved upstream access increases exporters' DVAR (explaining 11.57% of its interquantile variation) along with higher value added and revenue; (2) Better access to downstream buyers boosts upstream intermediate producers' value added, profits, and revenue; (3) Foreign intermediate good producers benefit from increased import varieties and quantities of Chinese firms. |
| Keywords: | railway infrastructure, domestic value added ratio, intermediate inputs |
| JEL: | F1 R4 |
| Date: | 2025–10–28 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:126901 |
| By: | Kala, Namrata (MIT Sloan School of Management; BREAD; CEPR; J-PAL; NBER); Haseeb, Muhammad (University of Bristol); Fenske, James (University of Warwick) |
| Abstract: | Effective regulatory design requires an understanding of how regulatory burden affects regulated entities. Using novel data on all applications for environmental permits in five Indian states and a natural experiment, we estimate how regulatory burden of environmental permitting affects firms. Difference-in-difference estimates show that deregulation induces smaller firms to enter and increases entry. Standard data sources would miss these substantial effects, underscoring the importance of collecting data across the firm size distribution. We also use full texts of permit certificates to create novel measures of regulatory burden. Firms in industries with reduced regulations face fewer, less stringent, permit conditions. |
| Keywords: | JEL Classification: |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:cge:wacage:784 |
| By: | Dipankar Das |
| Abstract: | Traditional auction theory posits that bid value exhibits a positive correlation with the probability of securing the auctioned object in ascending auctions. However, under uncertainty and incomplete information, as is characteristic in real-time advertising markets, truthful bidding may not always represent a dominant strategy or yield a Pure Strategy Nash Equilibrium. Real-Time Bidding (RTB) platforms operationalize impression-level auctions via programmatic interfaces, where advertisers compete in first-price auction settings and often resort to bid shading, i.e., strategically submitting bids below their private valuations to optimize payoff. This paper empirically investigates bid shading behaviors and strategic adaptation using large-scale RTB auction data from the Yahoo Webscope dataset. Integrating Minority Game Theory with clustering algorithms and variance-scaling diagnostics, we analyze equilibrium bidding behavior across temporally segmented impression markets. Our results reveal the emergence of minority-based bidding strategies, wherein agents partition hourly ad slots into submarkets and place bids strategically where they anticipate being in the numerical minority. This strategic heterogeneity facilitates reduced expenditure while enhancing win probability, functioning as an endogenous bid shading mechanism. The analysis highlights the computational and economic implications of minority strategies in shaping bidder dynamics and pricing outcomes in decentralized, high-frequency auction environments. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2512.15717 |
| By: | M. Sadra Heydari; Zafer Kanik; Santiago Montoya-Bland\'on |
| Abstract: | We introduce heterogeneous R&D productivities into an endogenous R&D network formation model, generalizing the framework in Goyal and Moraga-Gonzalez (2001). Heterogeneous productivities endogenously create asymmetric gains for connecting firms: the less productive firm benefits disproportionately, while the more productive firm exerts greater R&D effort and incurs higher costs. For sufficiently large productivity gaps between two firms, the more productive firm experiences reduced profits from being connected to the less productive one. This overturns the benchmark results on pairwise stable networks: for sufficiently large productivity gaps, the complete network becomes unstable, whereas the Positive Assortative (PA) network -- where firms cluster by productivity levels -- emerges as stable. Simulations show that the PA structure delivers higher welfare than the complete network; nevertheless, welfare under PA formation follows an inverted U-shape in the fraction of high-productivity firms, reflecting crowding-out effects at high fractions. Altogether, a counterintuitive finding emerges: economies with higher average R&D productivity may exhibit lower welfare through (i) the formation of alternative stable R&D network structures or (ii) a crowding-out effect of high-productivity firms. Our findings highlight that productivity-enhancing policies should account for their impact on endogenous R&D alliances and effort, as such endogenous responses may offset or even reverse the intended welfare gains. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2512.23337 |
| By: | Julien Monardo |
| Abstract: | Discrete choice demand models are commonly used to answer various economic questions. This paper develops a representation theorem that establishes the necessary and sufficient functional form and shape restrictions characterizing a large family of discrete choice demand models extending beyond the traditional additive random utility framework. The representation theorem yields three significant empirical implications. First, it provides economic intuition for (parameter) restrictions commonly imposed on some popular discrete choice models. Second, it offers a specification toolfor building demand models that satisfy mild and easily verifiable properties while being consistent with utility maximization and accommodating rich substitution patterns, including complementarity in demand. Third, it provides an efficient numerical algorithm for demand inversion, a crucial step in the demand estimation procedure. |
| Date: | 2025–04–02 |
| URL: | https://d.repec.org/n?u=RePEc:bri:uobdis:25/813 |