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on Industrial Competition |
| By: | Juan-Jose Ganuza (Comision Nacional de los Mercados y la Competencia (CNMC), Spain); Ivan Rendo (Toulouse School of Economics, Toulouse, France) |
| Abstract: | Piracy is central to digital markets, where identical content can be accessed legally or through unauthorized channels. While easier piracy seems likely to intensify competition and lower prices, it also reduces profitability and discourages entry. We develop a circular-city model with free entry in which consumers jointly choose content and access mode. Stronger enforcement raises prices for a fixed number of firms but also attracts competitors. Prices rise with enforcement in less competitive markets but can follow an inverted U in more competitive markets, where entry eventually pushes prices down. Extensions show that piracy can also weaken competition and raise prices by attracting consumers most willing to switch between legal providers. |
| Keywords: | competition; piracy; entry; digital markets |
| JEL: | L13 L82 K42 D43 |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:net:wpaper:2602 |
| By: | Herbert Dawid; Ali Kashefi; Gerd Muehlheusser |
| Abstract: | Should platforms be held legally responsible for harm caused by products or services offered by third-party sellers? We address this question in a novel setting in which product safety (the likelihood of accidents) is determined by third-party sellers, while the consumer price is set by a monopolistic platform that pays sellers a commission. Relevant examples include platforms providing ride-hailing services (e.g. Uber and Lyft) or health care services (e.g. Teladoc). Sellers decide whether or not to become active on the platform, and consumers' willingness to pay for the platform good increases with the number of active sellers (platform externality). When an accident occurs, the harm is divided between the platform and the respective seller according to a liability rule set ex ante by a welfare-maximizing policymaker. Sellers' incentive to provide high product safety is driven by market demand, which in turn is determined by the platform's pricing scheme, balancing the trade-off between market revenue and expected liability costs. The platform may optimally set a price below the monopoly level to boost demand, thereby triggering active sellers to provide high product safety (market channel). The socially optimal liability rule is dichotomous: it either assigns no liability to the platform, or the maximum liability share for which the platform exploits the market channel to induce high product safety from the sellers. Holding the platform liable is socially desirable only when it induces lower consumer prices. |
| Keywords: | platform liability, consumer pricing, product safety, product liability |
| JEL: | K13 L13 L15 L86 D42 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_13033 |
| By: | Pisch, Frank; Huang, Hanwei; Manova, Kalina; Perello, Oscar |
| Abstract: | How do production networks and market structure interact to shape the effects of trade and competition policy? We develop a model with two-sided firm heterogeneity, matching frictions, and imperfect supplier competition. More productive buyers match with more suppliers, inducing tougher supplier competition, lower input costs, and higher profits. Entry upstream thus benefits high-productivity buyers, while lower trade or matching costs favor mid-productivity buyers. Empirical evidence confirms that larger French and Chilean firms import higher quantities at lower prices as more Chinese suppliers enter, and that suppliers charge diversified buyers lower markups. We adapt methods for combinatorial, discrete-choice problems to estimate the model and perform counterfactuals. The interaction of endogenous networks and markups significantly amplifies the gains from policies that facilitate supplier entry or firm matching, and from deep trade agreements that combine tariff cuts with such policies. Fixed networks dampen while fixed markups amplify the gains from traditional tariff liberalization. |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:dar:wpaper:162612 |
| By: | Vladimir Asriyan; William Fuchs; Caio Lorecchio |
| Abstract: | We study dynamic monopoly pricing with multiple buyers whose valuations are privately known and correlated, so that one buyer 's purchase reveals information about the valuations of others. Without seller commitment, these information spillovers alter future pricing incentives and feed back into current demand. We show that they generate strategic complementarities in buyers' purchase decisions, making demand non-monotone and giving rise to equilibrium multiplicity. Information spillovers can either strengthen or weaken the seller 's effective commitment power, implying that seller revenue, buyer surplus, and total welfare are generically non-monotonic in the strength of spillovers. We characterize when these spillovers encourage data investment and experimentation, as well as facilitate coordination that mitigates hold-up. |
| Keywords: | commitment, dynamic monopoly pricing, equilibrium multiplicity, information spillovers, strategic complementarities |
| JEL: | D42 D82 D83 |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:bge:wpaper:1598 |
| By: | Anton Cheremukhin; Paulina Restrepo-Echavarria |
| Abstract: | We develop a search model of international trade where buyers allocate costly cognitive attention across suppliers. Suppliers exploit the cost of shifting attention to extract markups, giving dominant firms the cushion to absorb cost shocks while marginal suppliers pass them on. Validating this mechanism with U.S. tariff data, we estimate a highly concentrated U.S. domestic market. Consequently, while targeted tariffs spur offshore substitution, blanket tariffs force buyers toward captive domestic monopolies. Incumbents’ growing market power raises markups and halves the aggregate macro elasticity relative to micro estimates. Integrating endogenous market-power-dependent elasticity along the path to autarky more than doubles the U.S. gains from trade compared with standard constant-elasticity predictions. |
| Keywords: | trade elasticity; targeted search; rational inattention; gravity; market power; pass-through; gains from trade |
| JEL: | F10 F11 F13 D83 L13 |
| Date: | 2026–09–21 |
| URL: | https://d.repec.org/n?u=RePEc:fip:feddwp:103847 |
| By: | Crescioli, Tommaso; Van Overbeke, Toon |
| Abstract: | How does market power affect the political behavior of small business owners? As the growing market power of large multinational firms has fundamentally changed the opportunity structure for small businesses and their beneficiaries, we try to understand how those economic developments influence European democracies. We argue that growing market power lowers small business owners’ trust in key democratic institutions and the functioning of markets, driving them to reject incumbents and shift their support to radical right parties. We employ firm-level, individual-level, and regional-level data on fourteen European countries to test this argument. Our findings indicate that rising market power, measured by combining mergers and increases in market concentration, is associated with the declining economic performance of micro-firms. In turn, mergers and the declining economic share of these firms are robust predictors of anti-incumbent and increased radical right voting both at the individual and constituency levels. This article provides the first analysis of the effect of market concentration on rich democracies and, in doing so, offers a novel explanation for the surprising radical right support among small business owners in Europe. |
| Keywords: | market power;political economy;voting behavior;radical right;democratic institutions |
| JEL: | D72 D74 L12 |
| Date: | 2026–10–04 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:141231 |
| By: | Juan Camilo Castillo (Department of Economics, University of Pennsylvania, Philadelphia, Pennsylvania, and NBER); Alejandro Sabal (Department of Economics, University of Chicago, Chicago, Illinois); Jaume Vives-i-Bastida (Department of Economics, New York University, New York, New York) |
| Abstract: | Delivery platforms provide an easy way for small restaurants to reach a large customer base with little upfront investment. However, small restaurants often face high commissions, while large, anchor restaurants receive preferential rates. We study competition in the delivery app industry and the economic forces behind this market structure. We develop a model in which platforms set commissions for small restaurants and negotiate over listing and commissions with anchor restaurants. Restaurants then set prices, and consumers choose which platforms to install and which restaurants to order from. We estimate our model using order-level data from a major European delivery app. We then run counterfactual simulations to understand what drives high commissions, measure how surplus is split among market participants, and evaluate the effects of additional platform entry. |
| Keywords: | delivery platforms; two-sided markets; bargaining; exclusivity; anchor restaurants |
| JEL: | L14 L83 L86 C78 |
| Date: | 2026–10 |
| URL: | https://d.repec.org/n?u=RePEc:net:wpaper:2606 |
| By: | Goraya, Sampreet Singh (House of Sustainable Society (HoSS)); Srhoj, Stjepan (University of Split); Zrnc, Jurica (Croatian National Bank) |
| Abstract: | This paper studies how government demand affects the labor share of income. Winning a procurement contract lowers a firm’s labor share. The decline is driven by higher revenue per worker with limited pass-through to wages, and these revenue productivity gains reflect rising firm-level markups rather than improvements in physical efficiency. The effects are strongest for firms winning contracts as the only bidder. Evidence from bids, award prices, and political connections points to limited competition in procurement as the driving force. Government demand thus shapes the division of income between firm owners and workers, with implications for inequality. |
| Keywords: | public procurement; market power; labor share; competition; political connections |
| JEL: | D24 D43 H57 L11 L22 |
| Date: | 2026–09–28 |
| URL: | https://d.repec.org/n?u=RePEc:hhs:hamisu:2026_005 |
| By: | Byung-Cheol Kim (Culverhouse College of Business, University of Alabama, Tuscaloosa, AL, USA); Keeyoung Rhee (Department of Economics, Sungkyunkwan University, Seoul, Korea) |
| Abstract: | Firms increasingly outsource innovation to AI platforms serving their competitors, allowing one client's problem solving to improve what the platform delivers to another. We study a duopoly in which firms choose between in-house innovation and a shared AI platform. Cross-client learning occurs when both firms use the platform. Stronger learning can initially support joint use, yet eventually destabilize it as each firm's problem solving increasingly benefits its rival. Too many or too few firms may adopt the platform relative to a coordinated benchmark that maximizes their combined payoff subject to symmetric effort. Blocking cross-client learning can reduce competitive harm yet leave the firms collectively worse off. |
| Keywords: | shared AI platforms; outsourcing; coopetition; cross-client learning; technology adoption |
| JEL: | D43 L22 L24 O32 |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:net:wpaper:2601 |
| By: | Joan Calzada (Universitat de Barcelona, Spain); Néstor Duch-Brown (Joint Research Centre (JRC)); Xavier Fageda (Universitat de Barcelona, Spain); Nicandro Quirós (Universitat de Barcelona, Spain) |
| Abstract: | This paper examines the impact of Google’s Search Engine Results Page (SERP) redesign on web traffic to airline and flight comparison websites. Google implemented the redesign on March 6, 2024, in response to the Digital Markets Act (DMA). The reform removed the Google Flights module from the main results page and introduced two new sections — “Airline Options” and “Flight Sites”— aimed at reducing self-preferencing and increasing the visibility of third-party services. Using a Synthetic Difference-in-Differences (SDiD) approach and domain-level data for four EU countries, with the United Kingdom and the United States as control markets, we estimate the causal effects of the redesign from November 2023 to December 2024. We find that the reform reallocated organic search traffic toward airline and comparison websites with smaller market shares. On desktop devices, organic traffic to low-cost and network airlines increased by 15 percent and 5.5 percent, respectively, while no significant effects are detected on mobile. Traffic to flight comparison websites increased by 20 percent on desktop and 19 percent on mobile, with gains concentrated among smaller platforms. By contrast, we find no detectable effects for large incumbents such as Skyscanner, Booking.com, and Expedia. Overall, the redesign relaxed visibility constraints for smaller market participants, suggesting that digital market regulation can increase contestability at the margin without necessarily altering the position of large incumbents. |
| Keywords: | Digital Markets Act; Self-preferencing; Google, SERP; Air Travel Market |
| JEL: | D40 L41 L86 L93 K21 |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:net:wpaper:2604 |
| By: | Miguel Risco (IGIER, Bocconi University, Milan, Italy) |
| Abstract: | Interoperability has been proposed to make social media contestable. But platforms are no longer purely network-based: personalization algorithms select much of what users see beyond their network, and an interoperability mandate opens the network but not the discovery layer. We study two platforms, each allocating resources between its network and discovery layers. A reciprocal mandate can raise the leading platform's size even if it is more productive in both, because its comparative advantage in discovery makes the challenger the network specialist, whose specialty the mandate opens. This effect can reverse once investment adjusts. Opening only the leader's network lowers its size, so any increase in concentration under a reciprocal mandate comes from opening the challenger's network. Concentration, challenger profit and user surplus can diverge. Whether recommendation technology, now largely driven by artificial intelligence, becomes a commodity or a moat determines whether the mandate reaches the source of the leader's advantage. |
| Keywords: | interoperability; social media; discovery; recommender systems; platform competition |
| JEL: | L13 L41 L51 L86 |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:net:wpaper:2605 |
| By: | Julien Monardo |
| Abstract: | The answers to many economic questions depend on the slope and curvature of demand. Estimating demand for differentiated products entails a trade-off between flexibility and scalability. Existing nonparametric approaches face a curse of dimensionality in the number of products. I develop a scalable nonparametric approach using market-level data that overcomes this curse through economically motivated restrictions embedded in many standard models. Simulations and an application to the U.S. beer market demonstrate flexibility in demand slope and curvature, with consequential differences in counterfactual price responses. Estimation in the application takes seconds, versus several hours for a random coefficient nested logit model. |
| Date: | 2026–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2610.08467 |
| By: | Jonathan Becker; Corina Boar; Virgiliu Midrigan |
| Abstract: | Importers are few and large, have higher labor productivity and pass through cost changes to prices incompletely. We study optimal tariffs in a model consistent with these facts. Firms pay a fixed cost to import and charge markups that increase with size. Market power implies that importers are too few and too small relative to the efficient allocations. Tariffs amplify this distortion. We derive a formula that relates the optimal tariff not only to the foreign export supply elasticity but also to how much distortions amplify the effect of trade costs on welfare. In our calibrated economy the optimal tariff is negative and decreases with country size. |
| JEL: | E10 F12 F13 L11 |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35829 |
| By: | Dean Corbae; Pablo D'Erasmo |
| Abstract: | We develop a simple model of banking industry dynamics to study the relation between market structure and financial stability. Motivated by data, we analyze an environment where a small number of dominant (nonatomistic) banks strategically interact with a large number of small (atomistic) banks. A nontrivial endogenous bank size distribution arises out of entry and exit in response to aggregate and regional shocks to borrowers’ production technologies and banks’ idiosyncratic deposit inflows. Since the model has nonatomistic banks that generate granular spillovers from idiosyncratic shocks and pose systemic risk, we use the model to study the implications of too-big-to-fail policies. |
| Keywords: | Macroprudential policy; bank size distribution; industry dynamics with imperfect competition |
| JEL: | E44 G21 L11 |
| Date: | 2026–10–01 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedpwp:103867 |
| By: | TAGASHIRA, Takumi; SADAKANE, Hitoshi; MIZUTA, Seichiro |
| Abstract: | Firms increasingly seek alternative suppliers to enhance supply-chain flexibility and resilience, yet maintaining such outside options may weaken incumbent suppliers’ incentives to undertake relationship-specific investments. This creates a governance challenge: how can firms preserve the adaptive benefits of alternative suppliers while sustaining the investments required for joint value creation? We develop a theoretical model that integrates buyers’ outside options, suppliers’ relationship-specific investment, and relational safeguards expressed through buyers’ bargaining behavior. We focus on warmth-oriented communication, defined as a negotiation style characterized by attentive listening, friendliness, politeness, and tolerance. The model predicts that stronger outside options reduce incumbent suppliers’ investment incentives when buyers are less tolerant in negotiation, whereas warmth-oriented communication attenuates this adverse effect by softening the exercise of bargaining power. We test these predictions using survey data on 360 procurement transactions involving engineered components from Japanese manufacturing firms. The empirical results are consistent with the model: potential suppliers reduce relationship-specific investment when warmth-oriented communication is low, while this negative effect is mitigated as communication becomes warmer. Our findings identify negotiation conduct as a behavioral governance mechanism that helps firms reconcile supply-chain flexibility with relationship-specific investment. More broadly, the study contributes to research on interfirm governance by showing that the consequences of outside options depend on how bargaining power is exercised, thereby revealing an important boundary condition in the relationship between alternative partners and relationship-specific investment. |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:hit:tdbcdp:e-2026-02 |
| By: | HARA, Yasushi |
| Abstract: | This paper examines M&A, representative changes, and business activity changes among Japanese firms in construction, manufacturing, retail, and agriculture using corporate data-based panel summaries and regression results. Firms with M&A experience are larger on average in the pooled descriptive data, but these differences are not exclusively pre-treatment comparisons. Descriptive Kaplan–Meier curves show no uniform M&A survival advantage: company-disappearance profiles differ in manufacturing and retail, while the displayed bankruptcy log-rank tests do not reject equality at the 5% level in any sector. Event-study regressions report cohort-specific coefficients for sales, employment, and customer counts in levels, with firm and year fixed effects and two-way clustered standard errors. The estimated trajectories vary across cohorts and outcomes, and some pre-event differences call for caution in causal interpretation. Conditional Cox models associate M&A with lower exit hazards across all four sectors. The separate counterparty turnover analysis demonstrates qualitative network upgrading rather than mere link-count contraction: in construction, newly added customers exhibit significantly higher capital scale and sales than discontinued partners. Pair regressions identify sector-specific distance and capital associations, and the executive-age analysis finds an M&A-probability discontinuity at absolute age 70 in retail, which disappears when centered around industry retirement peaks. These results distinguish conditional hazards and counterparty restructuring from unadjusted survival comparisons and gross customer counts. |
| Keywords: | Business succession, Mergers and acquisitions, Small and medium-sized enterprises, Firm survival, Firm performance, Interfirm transaction networks, Japan |
| JEL: | G34 L25 L14 |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:hit:tdbcdp:e-2026-03 |