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on Industrial Competition |
| By: | Heidelmeier, Lisa; Sahm, Marco |
| Abstract: | We investigate the impact of an environmental award in a Bertrand duopoly with green consumers considering a three-stage game. First, the regulator designs the environmental contest. Second, firms choose their green investments, and the winner of the contest is awarded. Third, firms compete in prices, and consumption takes place. We illustrate that the award not only incentivizes green investments and may thus reduce environmental externalities. As consumers perceive the product of the awarded firm to be of superior quality, it also gives rise to vertical product differentiation. This induces market power, and thus anti-competitive effects: Rents shift from consumers to producers, and consumer surplus may decrease, particularly if marginal investment costs in green technologies are high compared to the strength of environmental damage. |
| Keywords: | Bertrand Competition, Contests, Environmental Award, Green Consumer, Product Differentiation |
| JEL: | D43 H23 L13 L51 Q52 Q58 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:bamber:319885 |
| By: | Roberto Hernán González (BSB Dijon); Praveen Kujal (Middlesex University Business School; Chapman University); Miguel Angel Ropero-García (Universidad de Málaga); Román Fossati (Facultad de Ciencias Económicas, UNICEN) |
| Abstract: | List-pricing and discounting is common in both retail and wholesale markets. Its interpretation amongst competition authorities varies from being procompetitive to collusion facilitating. We experimentally test how list pricing and discounting impact prices in a capacity constrained Bertrand-Edgeworth duopoly with symmetric and asymmetric firms facing constant marginal costs. We find that, relative to the symmetric baseline experiments, list pricing and discounting generate higher equilibrium prices for (symmetric) firms. Prices in the asymmetric-list price duopoly are also higher, however, the effect is much smaller than under symmetry. The introduction of asymmetry results in higher prices. The smaller firms gain more from list pricing and use it to signal price commitment. We also find that the announcement of exactly the same list prices signals sellers´ intentions to set the same market prices. When list prices are different, then the minimum of the list prices works as a coordination device in the market prices stage. Setting the same list prices in the first stage leads to coordination in market prices and to significantly higher prices. |
| Keywords: | List pricing, Discounts, Capacity Constraints, Mixed Strategies, Pure Strategies |
| JEL: | C9 L0 L1 L4 L11 L13 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:chu:wpaper:25-03 |
| By: | Gian Luigi Albano (Consip S.p.A. and LUISS Guido Carli University); Walter Ferrarese (Universitat de les Illes Balears); Roberto Pezzuto (DEF, University of Rome "Tor Vergata") |
| Abstract: | We show that in a single-lot low-price auction, a merger can be simultaneously profitable and increase the buyer’s surplus, even in the absence of cost synergies. Thus the buyer’s purchasing price may go down even when a lower number of bids is submitted. In determining our main result we highlight the role of firms’ cost exhibiting a discontinuity due to short-term capacity constraints or non-linear contractual agreements. The paper contributes to a new strand of literature showing that in bidding markets the lack of merger-induced synergies does not necessarily imply worse outcomes for the buyer. Hence the Authorities need not worry about resorting to possibly convoluted assessment of the attainability of this kind of efficiencies. |
| Keywords: | Horizontal Mergers, Buyer Surplus, Cost Discontinuity |
| JEL: | L11 L23 L51 |
| Date: | 2025–07–09 |
| URL: | https://d.repec.org/n?u=RePEc:rtv:ceisrp:607 |
| By: | Kai Fischer; Simon Martin; Karl Schlag |
| Abstract: | We develop a tractable model of competitive price cycles where prices are chosen alternatingly and consumers have heterogenous information. The model yields sharp empirical predictions about price patterns, impact of captive consumers and pass-through. Using rich station-level price data from the German retail gasoline market, we test these predictions. Consistent with the model, we find price cycles, characterized by frequent small price cuts and infrequent sharp increases. These cycles shorten as costs rise and are more likely to be initiated by firms with more captive consumers. Pass-through of input costs is incomplete, in contrast to alternative theories. |
| Keywords: | price cycles, tacit collusion, coordination, gasoline markets |
| JEL: | D43 D83 L11 L41 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11971 |
| By: | Patrice Bougette (Université Côte d'Azur, CNRS, GREDEG, France); Frédéric Marty (Université Côte d'Azur, CNRS, GREDEG, France); Simone Vannuccini (Université Côte d'Azur, CNRS, GREDEG, France) |
| Abstract: | In abuses of dominance cases, competition authorities typically impose both pecuniary sanctions and behavioural injunctions. These instruments serve distinct but complementary functions: fines primarily deter anti-competitive behaviour; injunctions seek to restore conditions conducive to competition on the merits. Yet, the effectiveness of such behavioural remedies remains contested. They often entail long-term obligations and are vulnerable to strategic circumvention or to uncertainties inherent in competitive and technological dynamics. In this paper, focusing on the European Union (EU)'s context, we propose a two-tiered sanctioning framework that addresses the drawbacks of behavioural injuctions: an initial fine, payable immediately, and a conditional component whose imposition - both in terms of activation and magnitude - would depend on the observed implementation and effects of the behavioural obligations. This structure aims to enhance both the flexibility and credibility of remedies, while preserving deterrence. |
| Keywords: | Abuses of dominant position, fines, behavioural injunctions, market dynamics, incentives |
| JEL: | K21 L41 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:afd:wpaper:2506 |
| By: | Charles Taragin; Marco Taylhardat |
| Abstract: | We propose a simple algorithm for defining merger-specific geographic antitrust markets based on merging firm proximity. Applying it to over a thousand hypothetical bank mergers, we compare concentration measures in our markets to those defined by the Federal Reserve, which are not merger-specific, finding broad agreement but also offering potential improvements upon current definitions. |
| Keywords: | Market definition; Bank mergers; Computational methods |
| JEL: | G34 L40 C63 |
| Date: | 2025–07–08 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedgfe:2025-51 |
| By: | Nicholas Bloom; Jonathan S. Hartley; Raffaella Sadun; Rachel Schuh; John Van Reenen |
| Abstract: | We show better-managed firms are more dynamic in plant acquisitions, disposals, openings, and closings in U.S. Census and international data. Better-managed firms also birth better-managed plants and improve the performance of the plants they acquire. To explain these findings, we build a model with two key elements. First, management is a combination of firm-level management ability (e.g. CEO quality), which can be transferred to all plants, and plant-level management practices, which can be changed through intangible investment (e.g. consulting or training). Second, management both raises productivity and also reduces the operational costs of dynamism: buying, selling, opening, and closing plants. We structurally estimate the model on Census microdata, fitting our key dynamic moments, and then use it to establish three additional results. First, mergers and acquisitions raise economy-wide management and productivity by reallocating plants to firms with higher management ability. Banning M&A would depress GDP and management by about 15 percent. Second, greater product market competition improves both management and productivity by reallocating away from badly managed plants. Finally, management practices account for about a fifth of the cross-country productivity differences with the U.S. |
| Keywords: | Management practices; mergers and acquisitions; productivity; competition |
| JEL: | L2 M2 O32 O33 |
| Date: | 2025–07–01 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fednsr:101259 |
| By: | Julien Ancel (LGI - Laboratoire Génie Industriel - CentraleSupélec - Université Paris-Saclay, CEC - Chaire Economie du Climat - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres, ENPC - École nationale des ponts et chaussées) |
| Abstract: | Time-varying retail tariffs play a key role in activating demand-side flexibility in power systems.In retail markets, such tariffs compete with constant-in-time, or flat, tariffs. We investigate how the coexistence of these two tariff types influences their respective pricing levels and adoption rates among a diverse consumer base. To this end, we propose a multi-leader-followers model featuring a continuum of consumers characterized by their penalization of responding to price changes at the lower level and two competing retailers at the upper level. One retailer offers a time-varying tariff and the other a flat one. We derive the equilibria of the retail market under various assumptions about each retailer's responsiveness to the other's decisions, and compare the outcomes with those under a regulated monopolist retailer. We then provide a numerical application of the results based on the French electricity retail market. At equilibrium, the time-varying tariff's dynamics is dampened relative to the first-best real time price due to competitive pressure from the flat tariff and the distribution of consumers. When the time-varying tariff is known ex-ante, competition leads to lower or more uncertain adoption of the time-varying tariff compared to a monopolistic retailer offering both tariffs. When it is not, the monopolistic retailer option seems less attractive in terms of mobilized demand-side flexibility than retail competition, notably if consumers overestimate electricity prices on average. In that case, less flexible consumers bear the cost of imperfectly forecasting the tariff levels. |
| Keywords: | Power retail, Price competition, Dynamic tariffs, Demand response |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05100663 |
| By: | Willy Lefez (Humboldt Universität) |
| Abstract: | We study price discrimination by a monopolistic seller that endogenously produces a market segmentation at a cost, and question the efficiency of the production of market segmentations led by private incentives. We show that the efficient market segmentation gives all the gains in total surplus to the buyer, and the seller profit stays at the uniform profit level. Our result suggests that the private production of information by sellers to price discriminate is significantly inefficient. |
| Keywords: | Price Discrimination, Cost of Information, Production of Information.; cost of information; production of information; |
| JEL: | D42 D83 L12 |
| Date: | 2025–07–02 |
| URL: | https://d.repec.org/n?u=RePEc:rco:dpaper:535 |
| By: | Jeremy Pearce; Liangjie Wu |
| Abstract: | This paper studies the relationship between market concentration and aggregate productivity when firm-level demand emerges from past marketing investments. Granular firms may invest in demand both to complement their productivity and to amplify market power—this second force can create persistent mismatch between customer capital and productivity. The importance of this mismatch depends on the relative persistence of productivity and demand. Empirically, we find that demand is more persistent than productivity, implying a sizable role for mismatch. This leads to sluggish demand-side adjustment in the face of productivity shocks in the quantified model. Policies targeting static markup distortions—such as production subsidies—can exacerbate excessive marketing and thus are subject to a tradeoff between static gains and dynamic losses. |
| Keywords: | firm dynamics; productivity; demand; customer capital; market concentration; competition; innovation |
| JEL: | O31 O32 O34 O41 D22 D43 |
| Date: | 2025–07–01 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fednsr:101336 |
| By: | Miguel Antón; Florian Ederer; Mireia Giné; Guillermo Ramirez-Chiang |
| Abstract: | We study common ownership in 49 countries from 2005 to 2019 and show that it is pervasive and rising around the world. However, despite this global growth, common ownership is still considerably lower in all countries compared to the United States. It is particularly high and growing rapidly among the largest firms, a trend observed across all countries and regions. The rise of common ownership stems not only from increased institutional investment but also from its growing concentration, a development in which the Big Three (BlackRock, Vanguard, State Street) play a dominant role, particularly in the United States. Although non-Big Three institutional investors remain important in other countries, the significant increase in common ownership in many countries is primarily attributable to the breadth, size, and growth of Big Three holdings. We also investigate how common ownership is related to legal, institutional, and market characteristics such as investor protection laws, competition laws, mandatory ESG disclosure, and labor market frictions across firms and countries. |
| JEL: | F65 G32 K21 L40 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33965 |
| By: | Claude d'Aspremont; Rodolphe Dos Santos Ferreira |
| Abstract: | We consider the concept of Cournotian monopolistic competition equilibrium as a tractable way of taking the strategic behaviour of large firms into account in a general equilibrium framework. Existence is obtained under simple assumptions, ensuring in particular uniqueness of Cournot equilibrium for each group of firms. An extension of the concept, allowing intrasectoral competitive behaviour to vary in intensity is also examined. |
| Keywords: | Oligopolistic and monopolistic competition. Uniqueness of Cournot equilibrium. |
| JEL: | D43 D51 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ulp:sbbeta:2025-21 |
| By: | Kyle F. Herkenhoff; Josh Lerner; Gordon M. Phillips; Francisca Rebelo; Benjamin Sampson |
| Abstract: | We measure the real effects of private equity buyouts on worker outcomes by building a new database that links transactions to matched employer-employee data in the United States. To guide our empirical analysis, we derive testable implications from three theories in which private equity managers alter worker outcomes: (1) exertion of monopsony power in concentrated markets, (2) breach of implicit contracts with targeted groups of workers, including managers and top earners, and (3) efficient reallocation of workers across plants. We do not find any evidence that private equity-backed firms vary wages and employment based on local labor market power proxies. Wage losses are also very similar for managers and top earners. Instead, we find strong evidence that private equity managers downsize less productive plants relative to productive plants while simultaneously reallocating high-wage workers to more productive plants. We conclude that post-buyout employment and wage dynamics are consistent with professional investors providing incentives to increase productivity and monitor the companies in which they invest. |
| JEL: | G20 G34 L1 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33942 |
| 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. |
| JEL: | E22 E23 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33960 |
| By: | Pinka Chatterji; Chun-Yu Ho; Wenqing Li |
| Abstract: | This paper tests whether mergers between nursing home chains and independent facilities affect quality of care using facility-level data from 1999-2019. Staggered difference-in-differences estimates suggest that acquired facilities experience a 5% reduction in health deficiency citations 2 years post-merger. This improvement relies on the continuous supply of efficiency from chains; persists for four years; and is specific to mergers between chains and independent homes. Quality effects are driven by mergers involving smaller, higher-quality and non-private-equity-owned chains. A structural model suggests that the quality effect is generated by enhanced cost efficiency achieved by facilities serving larger numbers of residents after mergers. |
| JEL: | I11 L11 L15 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33967 |