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on Industrial Competition |
| By: | Brianna Alderman (Harvard University); Roger Blair (University of Florida); Javier Donna (University of Miami) |
| Abstract: | We study the Microsoft-Activision acquisition through the lens of a complementary-product merger. When two complementary good producers consolidate, the merger is not horizontal because the two firms do not produce substitutable goods. Nor is the merger vertical, as neither firm supplies the other. We develop an economic model to study these types of mergers that allows for the possibility of rivals exiting the market. Three main conclusions flow from our analysis. (1) The welfare effects of the Microsoft-Activision acquisition are ambiguous; they depend on several industry factors. (2) One will not obtain the correct welfare effects using an incorrect vertical structure; harm to consumers will typically be larger in a complementary-product merger relative to a vertical one. (3) Consumer harm associated with rivals’ exit due to the merger might substantially reduce welfare even if it is a welfare-enhancing merger absent exit. Our analysis provides an analytical roadmap for the antitrust enforcement authorities regarding the theories of harm in complementary-good mergers. |
| Keywords: | Antitrust, Competition Policy, Regulation, Complementary Mergers, Vertical Mergers, Merger Identification. |
| JEL: | K21 K41 L13 L42 L44 L52 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:aoz:wpaper:359 |
| By: | Kory Kroft; Yao Luo; Magne Mogstad; Bradley Setzler |
| Abstract: | Existing work on imperfect competition typically focuses on either the labor market or the product market in isolation. In contrast, we analyze imperfect competition in both markets jointly, showing theoretically and empirically that focusing on one market in isolation may result in a limited or misleading picture of the degree and impacts of market power. Our empirical setting is the US construction industry. We develop, identify and estimate a model where construction firms imperfectly compete with one another for workers in the labor market and for projects in both the private market and the government market, where government projects are procured through auctions. Our analyses combine the universe of business and worker tax records with newly collected records from government procurement auctions. We use the estimated model to quantify the markdown of wages and the markup of prices, to show that the impacts of an increase in market power in one market are attenuated by the existence of market power in the other market, and to quantify the rents, rent-sharing, and incidence of procurements in the US construction industry. |
| Keywords: | Imperfect Competition; Monopsony; Wage setting; Rent sharing; Procurement auctions; Construction industry |
| JEL: | D44 J31 J42 L11 |
| Date: | 2025–04–15 |
| URL: | https://d.repec.org/n?u=RePEc:tor:tecipa:tecipa-799 |
| By: | Hiroshi Kitamura; Noriaki Matsushima; Misato Sato; Wataru Tamura |
| Abstract: | We experimentally investigate exclusive-offer competition between two existing upstream firms. In theory, when upstream firms make exclusive offers to a downstream monopolist, both exclusion and non-exclusion can be equilibrium outcomes. By varying key parameters, we explore how bargaining power and product differentiation affect the likelihood of exclusion outcomes. We experimentally find that exclusion is more likely to be observed when the upstream firms have stronger bargaining power or when they produce more differentiated products; paradoxically, the higher upstream firms' profits from cooperatively offering unattractive exclusive contracts, the more likely they are to fall into intense exclusive-offer competition. |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:dpr:wpaper:1281 |
| By: | Gagnepain, Philippe; Martimort, David |
| Abstract: | We explore empirically the impact of the market sharing collusive practices that were implemented in the French public transportation industry between 1994 and 1999. We build a structural model of bidding markets where innovating firms compete for the market and have the ability to spread the benefits of their innovation through all markets on which they are active. Each local competitive environment shapes the distribution of the prices (the bids) paid by public authorities to transport operators. We recover empirically the distribution of prices and innovation shocks and we show that collusive practices had overall a limited impact on prices. Firms were in reality more interested in avoiding significant financial risks inherent to the activity, as well as the high cost of preparing a tender proposal. As a by-product, we perform a counterfactual analysis that allows us to simulate how an increase in firms’ innovation reduces prices significantly. |
| Keywords: | Bidding Markets; Market Sharing; Collusion; Innovation; Public Transport |
| JEL: | D22 D44 K21 L9 |
| Date: | 2025–03–31 |
| URL: | https://d.repec.org/n?u=RePEc:tse:wpaper:130478 |
| By: | Hiroshi Kitamura; Noriaki Matsushima; Misato Sato; Wataru Tamura |
| Abstract: | This study constructs a model of exclusive-offer competition between two existing upstream firms. Under exclusive-offer competition, the upstream firm's profit depends on the rival's exclusive offer. If the rival makes an exclusive offer acceptable for the downstream firm, the upstream firm is excluded unless it succeeds in exclusion. Consequently, the upper bound of exclusive offers becomes higher than when one of the upstream firms is a potential entrant that cannot make any exclusive offer. Thus, the exclusion of the existing upstream firm can be an equilibrium outcome even in the case where the potential entrant is never excluded. |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:dpr:wpaper:1280 |
| By: | Adriana Alventosa (ERI-CES, Universitat de València); José Manuel Ordóñez-de-Haro (Departamento de Teoría e Historia Económica. Universidad de Málaga.); Javier Rodero Cosano (Smart Decision Lab, Departamento de Teoría e Historia Económica. Universidad de Málaga.) |
| Abstract: | This paper develops a dynamic discrete-time model of collusive behaviour in which firms can apply for leniency to reduce fines. We propose a sequential-move game inspired by the centipede game, capturing firms' incentives to be the first to self-report a cartel. The model examines cartel formation, stability, and recidivism, assuming that fines apply to the undiscovered record of collusion, not just current conduct. We find that when collusion is attractive but the leniency programme is not sufficiently generous, firms form a single cartel without self-reporting. However, when collusion is highly attractive and the leniency programme sufficiently generous, it can destabilize cartels but also foster recidivism: firms use leniency to ``clean the slate'' and restart collusion at a lower expected cost. This equilibrium behaviour may help explain the empirically observed prevalence of short-lived cartels and repeat offenders under existing leniency regimes. |
| Keywords: | Antitrust; Cartels; Recidivism; Leniency; Dynamic Games |
| JEL: | D43 K21 K42 L40 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:mal:wpaper:2025-2 |
| By: | Dodini, Samuel (Federal Reserve Bank of Dallas); Willén, Alexander (Dept. of Economics, Norwegian School of Economics and Business Administration) |
| Abstract: | This paper examines the relationship between labor market power and employer discrimination, providing new causal evidence on when and where discriminatory outcomes arise. We leverage job displacements from mass layoffs and firm closures as a source of exogenous job search and combine this with an exact matching approach. We compare native–immigrant worker pairs who held the same job at the same firm, in the same occupation, industry, location, and wage prior to displacement. By tracking post-displacement outcomes across labor markets with differing levels of employer concentration, we identify the causal effect of labor market power on discriminatory behavior. We document four main findings. First, wage and employment discrimination against immigrants is substantial. Second, discrimination is amplified in concentrated labor markets and largely absent in highly competitive ones. Third, product market power has no independent effect, consistent with the idea that wage-setting power is necessary for discriminatory outcomes. Fourth, observed gaps fade with sustained employer–immigrant interactions, consistent with belief-based discrimination and employer learning. Together, these findings show that discrimination is not fixed, but shaped by market structure and firm-level dynamics. |
| Keywords: | Discrimination; Immigration; Market Power |
| JEL: | J17 J42 J61 J63 |
| Date: | 2025–04–07 |
| URL: | https://d.repec.org/n?u=RePEc:hhs:nhheco:2025_010 |
| By: | Qazi Haque; Oscar Pavlov; Mark Weder |
| Abstract: | Recent decades have seen a rise in the market power of large firms. We propose a theory in which their technology involves the ability to produce multiple products. Large firms interact with smaller competitors and market share reallocations via product creation generate heterogeneous markup dynamics across the firm types. Higher market shares of large firms increase the parameter space for macroeconomic indeterminacy. Bayesian estimation of the general equilibrium model suggests the importance of the endogenous amplification of the product creation channel and animal spirits play a non-trivial role in driving U.S. business cycles. |
| Keywords: | indeterminacy, business cycles, multi-product firms, animal spirits, Bayesian estimation |
| JEL: | E32 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:een:camaaa:2025-20 |
| By: | Bruno Deffains (CRED - Université-Paris-Panthéon-Assas); Frédéric Marty (CNRS GREDEG, Université Côte d'Azur) |
| Abstract: | The implementation of generative artificial intelligence in legal services offers undeniable efficiency gains, but also raises fundamental issues for law firms. These challenges can be categorised along a broad continuum, ranging from changes in business lines to changes in the competitive environment and the internal organisation of law firms. This paper considers the risks that law firms face in terms of both the quality of the services they provide and perceived competition, both horizontally and vertically, considering possible relationships of dependency on suppliers of large language models and cloud infrastructures. |
| Keywords: | Generative artificial intelligence, legal services, accountability, competition, vertical relationships |
| JEL: | L42 L86 |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:afd:wpaper:2503 |
| By: | Frédéric Marty (CNRS GREDEG, Université Côte d'Azur) |
| Abstract: | La loi du 21 mai 2024 visant à sécuriser et à réguler l’espace numérique a intégré en droit français les règlements européens sur les marchés numériques et sur les services numériques. Elle a distribué les responsabilités nouvelles liées à l’application de ces textes entre des autorités de régulation à compétence horizontale (telle l’Autorité de la concurrence) et des autorités de régulation à compétence verticale (à l’instar de l’Arcom et de la CNIL). Ce chapitre se propose d’analyser ce nouveau cadre institutionnel et pour éclairer les dynamiques qui peuvent en résulter pour la garantie de l’ordre concurrentiel et de l’ordre public économique face aux enjeux posés par les grands écosystèmes numériques et les manipulations dont ils peuvent être les vecteurs. |
| Keywords: | Digital ecosystems, competition, personal data protection, platforms regulation |
| JEL: | K21 K23 K42 L40 L50 |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:afd:wpaper:2502 |
| By: | Genakos, C.; Pagliero, M.; Sabatino, L.; Valletti, T. |
| Abstract: | Fixed book price (FBP) agreements are a form of resale price maintenance applied to books in various countries. FBP restricts retail price competition with the aim of promoting book production variety. Yet, despite its popularity and adoption in many countries, there is no empirical evidence on its effects. We offer systematic evidence on the impact of FBP on book variety and prices using a detailed new dataset from Italy that includes the universe of books published and bought, before and after the introduction of FBP. Our results indicate that FBP raises prices without significantly affecting the number of new books published in the marketplace. However, it also increases considerably the variety of books actually bought, especially from independent bookstores. We estimate a structural demand model that accounts for both effects, finding that consumers overall benefit from the regulation. |
| Keywords: | Cultural Goods, Resale Price Maintenance, Book Market, Ex-post Policy Evaluation |
| JEL: | L10 L40 L50 Z10 |
| Date: | 2025–03–18 |
| URL: | https://d.repec.org/n?u=RePEc:cam:camdae:2514 |
| By: | Uribe-Terán, Carlos; Grijalva, Diego F.; Gachet, Iván |
| Abstract: | This paper examines the impact of safeguard import tariffs on market diversity in Ecuador from 2015 to 2017. Using firm-level data, we estimate the effects of tariffs on revenue and market shares in the Manufacturing and Wholesale & Retail (W&R) sectors with a Quantile Treatment Effect on the Treated (QTT) estimator. We also assess firm exit probabilities and pass-through effects on prices through a difference-in-differences approach. By linking firm-level QTT estimates to industry-level diversity measures, we construct counterfactual revenue distributions to quantify the effect on market concentration. We find that tariffs disproportionately reduced revenue and market shares for smaller firms, significantly increasing exit rates and reducing market diversity, with stronger effects in W&R. While tariffs did not generate broad inflationary pressures, they induced short-term pass-through effects that further strained smaller firms. These sector-specific price responses reinforced market consolidation, accelerating the decline in market diversity. |
| Keywords: | market structure;trade policy;Protectionism;emerging markets |
| JEL: | D40 F13 F14 O24 O54 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:idb:brikps:14063 |
| By: | Dirk Bergemann (Cowles Foundation, Yale University); Tibor Heumann (Pontificia Universidad Catolica de Chile); Stephen Morris (Dept. of Economics, MIT) |
| Abstract: | We analyze a nonlinear pricing model where the seller controls both product pricing (screening) and buyer information about their own values (persuasion). We prove that the optimal mechanism always consists of finitely many signals and items, even with a continuum of buyer values. The seller optimally pools buyer values and reduces product variety to minimize\ informational rents. We show that value pooling is optimal even for finite value distributions if their entropy exceeds a critical threshold. We also provide sufficient conditions under which the optimal menu restricts offering to a single item. |
| Keywords: | Nonlinear Pricing, Screening, Bayesian Persuasion, Finite Menu, Second-Degree Price Discrimination, Recommender System |
| JEL: | D44 D47 D83 D84 |
| Date: | 2025–03–06 |
| URL: | https://d.repec.org/n?u=RePEc:cwl:cwldpp:2338r3 |
| By: | Sebastian Doerr; Andreas Fuster |
| Abstract: | Policy makers place high hopes in manufactured homes - the largest source of unsubsidized affordable housing in the US - to alleviate housing supply shortages. This paper shows that high market concentration in the multi-billion-dollar manufactured home loan market allows lenders to charge significantly higher interest rates than for site-built homes. Loan-level data indicate that borrowers in counties with higher lender concentration face significantly higher rates. Evidence from bunching at the regulatory HOEPA rate threshold, an instrumental variable analysis, and a difference-in-differences analysis around HOEPA's introduction suggests a causal link. We further show that integrated lenders, which play an outsized role in the manufactured home loan market, charge particularly high rates, and we provide evidence suggesting that these lenders exploit their market power over borrowers. |
| Keywords: | manufactured homes, mortgage market, competition, household finance, HOEPA |
| JEL: | G21 G23 L13 R31 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:bis:biswps:1255 |
| By: | Sanyyam Khurana (Ashoka University) |
| Abstract: | In this paper, we consider resale in efficient auctions. The potential gains from trade arise from a delay in resale which reduces the bidders’ values. We consider two information states during resale: (a) complete information where all the bids are revealed and (b) incomplete information where no bids are revealed. Under complete information, we establish revenue equivalence between the first- and second-price auction for a family of trade rules where the market power is distributed between the reseller and buyer. We also show that, if all the market power lies with the reseller (resp., buyer), it is optimal (resp., not) to reveal information. |
| Keywords: | efficiency; information revelation; private value; resale; symmetry; time delay |
| Date: | 2024–10–14 |
| URL: | https://d.repec.org/n?u=RePEc:ash:wpaper:128 |
| By: | Michael Peneder; Sandra Bilek-Steindl; Susanne Bärenthaler-Sieber (WIFO); Julia Bock-Schappelwein; Alexandros Charos (WIFO) |
| Abstract: | Online platforms have evolved into powerful programmable architectures that enable heterogeneous groups of autonomous but interdependent users to interact. Based on a stratified sample of 1, 380 companies from a newly developed enterprise survey in Austria, the analysis aims to reduce the lack of comprehensive empirical research of the general patterns and regularities of business use of online platforms across different markets and industries. We conduct a comprehensive set of (ordered) probit estimations on the determinants of platform adoption, their interaction with platform competition, their joint impact on platform users, and their overall satisfaction and willingness to pay (more) for platform services. The analysis provides ample empirical evidence of the importance of rivalry between platforms for delivering its value proposition to all participants: for instance, the estimates show that more competing platforms imply (i) greater ease of switching, (ii) a greater likelihood of negotiable and favourable terms of use, and (iii) associate positively with a greater impact on the number of business partners, revenue per customer or product variety. In turn, (iv) better impacts for business users go hand in hand with their higher satisfaction, which directly links to (v) a higher willingness to pay (more) for platform services. Conversely, the ease of switching to an alternative platform associates with a significantly lower willingness to pay (more). Competition between platforms thus increases the bargaining power of users and allows them to claim a larger share of the platform's value proposition. |
| Date: | 2025–04–06 |
| URL: | https://d.repec.org/n?u=RePEc:wfo:wpaper:y:2025:i:701 |
| By: | Müller, Lars (Center for Mathematical Economics, Bielefeld University); Karos, Dominik (Center for Mathematical Economics, Bielefeld University) |
| Abstract: | This paper analyzes the welfare effects of private and unilateral disclosure of sensi- tive information in a sequential bargaining context. We consider a model where two sellers each propose a take-it-or-leave-it price for a homogeneous good to a single buyer. The buyer accepts or rejects the first seller’s offer before the second seller proposes her price. Crucially, the second seller might learn the first seller’s price and whether it was accepted, allowing her to update her belief about the buyer’s willingness to pay and optimize her pricing strategy. The welfare effects caused by this information exchange are evaluated under general conditions. We show that it benefits the buyer if a rejection is revealed but might harm him if an acceptance is revealed. Additionally, the information exchange improves the societal welfare by reducing inefficiencies and promoting additional trade. This paper strengthens the theoretical framework for assessing the welfare effects of information exchanges by offering new insights and providing tools to assess causality for alleged damages. |
| Keywords: | Information Exchange, Collusion, Unawareness |
| Date: | 2025–04–16 |
| URL: | https://d.repec.org/n?u=RePEc:bie:wpaper:703 |
| By: | Dirk Bergemann (Yale University); Alessandro Bonatti (Massachusetts Institute of Technology); Nicholas Wu (Yale University) |
| Abstract: | In digital advertising, the allocation of sponsored search, sponsored product, or display advertisements is mediated by auctions. The generation of bids in these auctions for attention is increasingly supported by auto-bidding algorithms and platform-provided data. We analyze the equilibrium properties of a sequence of increasingly sophisticated auto-bidding algorithms. First, we consider the equilibrium bidding behavior of an individual advertiser who controls the auto bidding algorithm through the choice of their budget. Second, we examine the interaction when all bidders use budget-controlled bidding algorithms. Finally, we derive the bidding algorithm that maximizes the platformÕs revenue while ensuring all advertisers continue to participate. |
| Date: | 2025–03–02 |
| URL: | https://d.repec.org/n?u=RePEc:cwl:cwldpp:2429 |
| By: | Arthur Campbell (Department of Economics, Monash University, Australia); Geoffrey Go (Commonwealth Treasury, Australia); Chengsi Wang (Department of Economics, Monash University, Australia) |
| Abstract: | Content creators produce original work, while digital platforms share secondary versions to generate ad revenue, often without compensating them. This imbalance may reduce incentives for creating high-quality content, leading to government interventions aiming to re-balance the bargaining strengths. This paper examines how enhancing content creators' bargaining strength affects investments in primary and secondary content and subscription prices. While it directly boosts secondary content quality, the intervention's impact on primary content is ambiguous due to the opposite awareness and pricing effects. Cannibalization between primary and secondary contents may contribute to or impede quality improvement. These dynamics hold across subscription and advertising-based models and the analysis extends to two-sided investments. |
| Keywords: | advertising, online platforms, content sharing, journalism. |
| JEL: | L52 L82 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:mos:moswps:2025-04 |
| By: | Martin Ruckes; Konrad Stahl |
| Abstract: | A worker’s productivity is only imperfectly revealed when employed to perform a particular task: the match could be imperfect, and her productivity dependent on that of other workers in the team she is working in. We embed both elements of informational imperfection in combination, within a parsimonious parametric model that involves horizontally differentiated skills, as well as firms varying in size and structure of tasks from specialized to diversified. The typical worker’s productivity is revealed only via that of her team, the firm. The team’s productivity can be improved upon by frictionless re-matching within the internal labor market. Any misalignment between the distribution of skills and tasks can be removed only by external labor market actions constrained by informational frictions. There are two parts. In part 1, we analyze internal market equilibrium, but assume for the external market that firms can realize their desired demand. In part 2, we realistically consider labor supply in the external market as furnished by separations, and structured by signals involving the typical worker’s employment history. We demonstrate generic opposite effects involving internal and external market activities. In the internal market, constrained efficient re-matching yields the average productivity of firms to increase in size and diversity of structure. Beyond that, the cumulative distributions of firms by productivity are stochastically dominant across firms by increasing degree of diversification. While with the satisfaction of desired demand in the external market the firms improve in expected productivity, the strength of improvement decreases in firm size and diversity of structure. Productivity gains via re-matching in the internal market may be overturned by the losses due to imprecise matches of hires from the external market: The more internal rematching leads to leftward skewness in the distribution of firms towards higher productivity, the less informative is the specification of desired demand (and, as we show in part 2: in the supply) in the external market. |
| Keywords: | Internal Labor Markets, Horizontal Differentiation of Labor |
| JEL: | J21 J23 J62 L23 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2025_679 |