|
on Industrial Competition |
|
Issue of 2025–11–10
twenty-two papers chosen by Russell Pittman, United States Department of Justice |
| By: | Salvatore Ciucci (Dipartimento di Economia, Università degli Studi della Campania “Luigi Vanvitelli”) |
| Abstract: | There are many evidences which prove that cartels’ price leads to an economic inefficiency, due to the reduced consumers welfare. Antitrust authorities have set up different ways to defeat and prevent collusive agreements, but as widely showed by the literature, deterring collusion may have adverse effects, like higher price in surviving cartels, reduced turnover of firms’ employees, and disincentive for competing firms to cooperate, in the sense that if firms exchange information about the evolution of demand or costs, then they may adopt better choices; moreover, deterring collusion may have even a pro-collusion effect. The paper suggests an additional anti-cartel tool which does not have side effects, and supporting no cost, it can get worse collusion stability. Analysing a supergame of collusion, in a Bertrand duopoly framework in which is run a two-stage lottery, we show that deviation strategy becomes more attractive, even if lottery jackpot tends to zero. |
| Keywords: | Competition policy, Antitrust, Cartel, Collusion, Lottery |
| JEL: | L40 L41 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:fem:femwpa:2025.21 |
| By: | Christos Genakos; Lorien Sabatino; Tommaso Valletti |
| Abstract: | Why book publishing contradicts conventional wisdom about competition. |
| Keywords: | competition, fixed book price, prices, regulation, cultural goods, resale price maintenance, book market |
| Date: | 2025–10–21 |
| URL: | https://d.repec.org/n?u=RePEc:cep:cepcnp:718 |
| By: | Amir Ashour Novirdoust (EWI); Pia Hoffmann-Willers (EWI); Julian Keutz (EWI) |
| Abstract: | This paper develops an analytical model of sequential electricity markets in which renewable and conventional producers compete in two stages. Building on previous work, we introduce risk-averse renewable producers and distinguish between competitive and oligopolistic renewable producers. The model captures strategic bidding behavior under uncertainty in renewable production and limited flexibility of conventional producers in the second stage. Our results show that risk aversion amplifies strategic withholding in oligopolistic settings, thereby increasing the forward premium. This effect intensifies when conventional producers are less flexible. While risk aversion has no impact on welfare under perfect competition or when conventional producers are fully flexible, its interaction with market power and supply-side inflexibility generates welfare losses. In a heterogeneous market structure of renewable producers, competitive producers benefit from higher prices caused by the withholding of oligopolistic producers, particularly when those producers are risk-averse. |
| Keywords: | Sequential Markets; Strategic Bidding; Risk Aversion; Market Power; Renewable Energy |
| JEL: | D43 D81 L13 L94 Q21 |
| Date: | 2025–11–05 |
| URL: | https://d.repec.org/n?u=RePEc:ris:ewikln:021748 |
| By: | Amior, Michael; Manning, Alan |
| Abstract: | If labour markets are competitive, migration can only affect native wages via marginal products. But under imperfect competition, migration may also increase wage mark-downs—if firms have greater monopsony power over migrants than natives, but cannot perfectly wage discriminate. While marginal products depend on relative labour supplies across skill cells, mark-downs depend on migrant concentration within them. This insight can help rationalise empirical violations of canonical migration models. Using US data, we conclude that migration does increase mark-downs: this expands aggregate native income, but redistributes it from workers to firms. Policies which constrain monopsony power over migrants can mitigate these adverse wage effects. |
| JEL: | J31 J42 J61 |
| Date: | 2025–10–21 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:128735 |
| By: | Luca Dedola; Chiara Osbat; Timo Reinelt |
| Abstract: | We study the pass-through of corporate taxes into consumer prices, leveraging 1, 058 municipal tax rate changes affecting 4, 754 German firms. A 1 p.p. increase in a producer’s tax rate raises retail prices by 0.3% on average, consistent with imperfectly competitive producers. Product-level pass-through varies substantially, as it increases in destination-specific product and retailer-category market shares. We find little evidence linking heterogeneous passthrough to differences in retailer efficiency as reflected in relative consumer prices. Instead, our findings align with standard non-CES preferences where pass through increasing with market shares implies weaker strategic complementarities in price setting than when this relationship is reversed. |
| Keywords: | Pass-through; Markup adjustment; Market Power; Vertical interactions; Double marginalization |
| JEL: | E31 F45 H25 L11 |
| Date: | 2025–11–06 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedfwp:102055 |
| By: | Lopez, Rigoberto A.; Steinbach, Sandro; Li, Mengjie |
| Keywords: | Agribusiness, Agricultural and Food Policy, Agricultural Finance, Consumer/Household Economics |
| Date: | 2024–02 |
| URL: | https://d.repec.org/n?u=RePEc:ags:aaea23:339614 |
| By: | Francesco Agostinelli; Domenico Ferraro; Giuseppe Sorrenti; Leonard Treuren |
| Abstract: | We ask to what extent the quantification of labor market power depends on the modeling of the long-term worker-firm employment relationship. We develop an oligopsony model with dynamic wage contracts. Workers decide whether and where to work, choosing among firms providing different amenities and solving a dynamic discrete choice labor supply problem with firm-specific human capital. As a result, firms optimally choose wage-tenure contracts to attract and retain workers. We find that such contracts mitigate firms' incentives to impose large instantaneous wage markdowns—compared to standard static wage-setting models—thereby reducing the share of socially inefficient worker-firm separations. As a consequence, we show that the empirical approaches based on "sufficient statistics" tend to overestimate the extent of labor market power: low levels of firm-specific labor supply elasticities do not necessarily indicate rent extraction, but instead reflect firms’ ability to retain workers by offering long-term value through human capital accumulation. |
| JEL: | J0 J42 L10 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34439 |
| By: | López, Rigoberto A.; Seoane, Luis |
| Abstract: | The meatpacking industry is a crucial intermediary between ranchers and the downstream supply chain, and concentration within the industry has significant implications for stakeholders in terms of competition and transmission of efficiencies. Due to constraints on the efficient transportation of live animals over long distances, ranchers primarily operate within regional markets. In this paper we provide new knowledge about the degree of regional concentration in the beef packing industry and propose a model to examine its impact on the wholesale farm-price spread. Findings indicate a significant increase in concentration across all regions, with some regions experiencing up to a 300 percent rise in the Herfindahl index, although concentration levels vary considerably among the different regions. |
| Keywords: | Livestock Production/Industries |
| Date: | 2024–04 |
| URL: | https://d.repec.org/n?u=RePEc:ags:aaea23:341195 |
| By: | Rubik Khachatryan; Georgy Lukyanov |
| Abstract: | We analyze a two-period, two-market chain-store game in which an incumbent's conduct in one market is only sometimes seen in the other. This partial observability generates reputational spillovers across markets. We characterize equilibrium behavior by prior reputation: at high priors the strategic incumbent fights a lone early entrant (and mixes when both arrive together); at low priors it mixes against a single entrant and accommodates coordinated entry. Greater observability increases early fighting yet, because any accommodation is more widely noticed, raises the incidence of later entry. The results are robust to noisy signals and endogenous information acquisition, and extend naturally to many markets. |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2510.21759 |
| By: | Florent Venayre (UPF - Université de la Polynésie Française); Christian Montet (UPF - Université de la Polynésie Française) |
| Abstract: | This article examines Decision No. 2024-DEC-02 of the New Caledonian Competition Authority (ACNC) regarding the proposed relocation and expansion of a Naturalia store in Dumbéa. The case highlights one of the distinctive features of New Caledonian competition law, which requires prior control on retail development projects, even when they have a very limited scope. In this instance, despite a modest extension of only 102 m², the ACNC reviewed the notification under an exceptional procedure triggered by a market share threshold (25% within the relevant catchment area). By equating the relevant market with the catchment area, the Authority likely overestimated the notifying party's market power and underestimated the substitution options available to consumers. This reasoning led the ACNC to conclude that the planned extension could strengthen a local dominant position. Even if that were true – which is not – it would still need to de demonstrated that this extension is not based on merit. In practice, however, the project was very unlikely to generate significant anticompetitive effects. The risks mentioned – local dominant position or excessive pressure on suppliers – appear overstated, especially since the Authority already has ex post tools to sanction potential abuses. Conversely, blocking the expansion deprives consumers of a broader product offering and risks stifling a dynamic operator in the organic sector. This decision illustrates the potentially counterproductive consequences of ex ante control over retail developments in New Caledonia, and by extension, in French Polynesia. Far from fostering competition, such preventive mechanisms may freeze market structures, discourage investment, and send a negative signal to economic stakeholders. A more effective approach would be to refocus the Authority's action on sanctioning actual abuses of dominant position, rather than on hindering normal internal growth dynamics. |
| Abstract: | Cet article examine la décision n° 2024-DEC-02 de l'Autorité de la concurrence de la Nouvelle-Calédonie (ACNC) concernant le projet de déménagement et d'agrandissement d'un magasin Naturalia à Dumbéa. Cette affaire met en lumière une des spécificités du droit de la concurrence calédonien, qui impose un contrôle préalable des projets d'aménagements commerciaux, y compris lorsqu'ils présentent une portée très limitée. En l'espèce, malgré une extension modeste de seulement 102 m², l'ACNC a examiné la notification dans le cadre d'une procédure dérogatoire déclenchée par un seuil de parts de marché (25% dans la zone de chalandise concernée). En assimilant le marché pertinent à la zone de chalandise, l'Autorité a surestimé le pouvoir de marché de l'entreprise notifiante et sous-estimé les possibilités de substitution offertes aux consommateurs. Ce raisonnement a conduit l'ACNC à conclure que l'extension projetée risquait de renforcer une position dominante locale. Même si cela était vérifié, quod non, encore faudrait-il démontrer que cette extension ne repose pas sur les mérites. En pratique toutefois, l'opération était très peu susceptible de générer des effets anticoncurrentiels significatifs. Les risques évoqués -position dominante locale ou pression excessive sur les fournisseurs apparaissent exagérés, d'autant plus que l'Autorité dispose déjà d'outils ex post pour sanctionner d'éventuels abus. À l'inverse, empêcher cette extension prive les consommateurs d'un élargissement de l'offre et risque de freiner un acteur dynamique du secteur bio. Cette décision illustre les conséquences potentiellement contre-productives du contrôle ex ante des aménagements commerciaux en Nouvelle-Calédonie, et par extension, en Polynésie française. Loin de stimuler la concurrence, de tels mécanismes préventifs peuvent figer les structures de marché, décourager l'investissement et envoyer un signal négatif aux acteurs économiques. Une approche plus efficace consisterait à recentrer l'action des autorités sur la répression des abus effectifs de position dominante plutôt que sur l'entrave aux dynamiques normales de croissance interne. |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05335900 |
| By: | Ohnishi, Kazuhiro |
| Abstract: | We employ a game-theoretic model to analyze five duopoly regimes: (1) state-owned and labor-managed firms, (2) labor-managed firms, (3) state-owned and capitalist firms, (4) capitalist firms, and (5) capitalist and labor-managed firms. We compare the welfare outcomes across these regimes and find that labor-managed firms may not be socially desirable due to their adverse impact on economic welfare. This may help explain why labor-managed firms are relatively rare compared to capitalist firms. |
| Keywords: | Capitalist firm; Cournot model; Economic welfare; Labor-managed firms; State-owned firm |
| JEL: | C72 D21 L32 |
| Date: | 2025–09–15 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:126158 |
| By: | Fabian Raoul Pieroth; Ole Petersen; Martin Bichler |
| Abstract: | Predatory pricing -- where a firm strategically lowers prices to undermine competitors -- is a contentious topic in dynamic oligopoly theory, with scholars debating practical relevance and the existence of predatory equilibria. Although finite-horizon dynamic models have long been proposed to capture the strategic intertemporal incentives of oligopolists, the existence and form of equilibrium strategies in settings that allow for firm exit (drop-outs following loss-making periods) have remained an open question. We focus on the seminal dynamic oligopoly model by Selten (1965) that introduces the subgame perfect equilibrium and analyzes smooth market sharing. Equilibrium can be derived analytically in models that do not allow for dropouts, but not in models that can lead to predatory pricing. In this paper, we leverage recent advances in deep reinforcement learning to compute and verify equilibria in finite-horizon dynamic oligopoly games. Our experiments reveal two key findings: first, state-of-the-art deep reinforcement learning algorithms reliably converge to equilibrium in both perfect- and imperfect-information oligopoly models; second, when firms face asymmetric cost structures, the resulting equilibria exhibit predatory pricing behavior. These results demonstrate that predatory pricing can emerge as a rational equilibrium strategy across a broad variety of model settings. By providing equilibrium analysis of finite-horizon dynamic oligopoly models with drop-outs, our study answers a decade-old question and offers new insights for competition authorities and regulators. |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2510.27008 |
| By: | Holmberg, P.; Ruddell, K.; Willems, B. |
| Abstract: | We characterize Nash equilibria in multi-product markets in which producers commit to vectors of supply functions contingent on all prices. The framework accommodates (dis)economies of scope in production, and goods may be substitutes or complements in demand. We show that equilibrium allocations of underlying goods and payoffs are invariant under bundling. With quadratic costs and linear demand, this invariance reduces the multi-product problem to an equivalent set of single-product markets that can be analyzed independently. We introduce Lerner and pass-through matrices to capture markups and welfare losses; their eigenvalues summarize fundamental market properties, remain invariant under bundling, and lend themselves to comparative statics analysis. |
| Keywords: | Supply Function Equilibrium, Multi-Product Pricing, Divisible-Good Auction, Bundling, Pass-Through, Welfare |
| JEL: | C62 C72 D43 D44 L94 |
| Date: | 2025–09–24 |
| URL: | https://d.repec.org/n?u=RePEc:cam:camdae:2565 |
| By: | Simplice A. Asongu (Johannesburg, South Africa); Emeride F. Kayo (Yaoundé, Cameroon); Vanessa S. Tchamyou (Yaoundé, Cameroon); Therese E. Zogo (Yaoundé, Cameroon) |
| Abstract: | Purpose – This article analyses the effect of bank concentration on women's political empowerment in 80 developing countries over the period 2004-2020. Design/methodology/approach – Banking concentration (BC) is measured by the assets held by the three largest commercial banks as a percentage of total commercial bank assets in a country. We use several indices to measure political empowerment, namely: the political empowerment index, composed of three indices (i.e., the women's civil liberties index, the women's participation in civil society index and the women's political participation index). The empirical evidence is based on the Ordinary Least Squares (OLS) and Fixed Effects (FE) techniques. Findings – The following findings are established. Banking concentration reduces women's political empowerment. Furthermore, information sharing offices (i.e. public credit registries and private credit bureaus) mitigate the negative effect of bank concentration on women’s political empowerment. Information sharing thresholds that are needed to completely dampen the negative effect of bank concentration on women’s political empowerment are provided. Policy implications are discussed, notably: (i) that governments in developing countries increase competition by easing barriers to entry for potential banks, to facilitate the transition from confiscatory concentration to distributive concentration favorable to all stakeholders; and (ii) information sharing offices should be consolidated beyond the established thresholds in order to completely crowd-out the unfavorable effect of bank concentration of women’s political empowerment. Originality/value – The paper provides new empirical evidence that helps to advance the debate on the effects of banking concentration and information sharing in the banking sector on women's political empowerment in developing countries. |
| Keywords: | Banking concentration; women political empowerment; OLS; Fixed Effects. |
| Date: | 2024–01 |
| URL: | https://d.repec.org/n?u=RePEc:dbm:wpaper:24/024 |
| By: | Markus Dertwinkel-Kalt; Hans-Theo Normann; Jan-Niklas Tiede; Tobias Werner |
| Abstract: | Consumers often face products sold as lotteries rather than fixed outcomes. A prominent case is the loot box in video games, where players pay for randomized rewards. We investigate how presentation formats shape consumer beliefs and willingness to pay. In an online experiment with 802 participants, sellers could frame lotteries using two common manipulations: censoring outcome probabilities and selectively highlighting rare successes. More than 80\% of sellers adopted such deceptive frames, particularly when both manipulations were available. These choices substantially inflated buyer beliefs and increased willingness to pay of up to six times the expected value. Sellers anticipated this effect and raised prices accordingly. Our results show how deceptive framing systematically shifts consumer beliefs and enables firms to extract additional surplus. For marketing practice, this highlights the strategic value of framing tools in probabilistic selling models; for policy, it underscores the importance of transparency requirements in protecting consumers. |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2511.01597 |
| By: | James Heintz (Department of Economics, University of Massachusetts, Amherst); William Milberg (Department of Economics, New School for Social Research) |
| Abstract: | The question of how value is distributed within global value chains (GVCs) is one of the central questions in contemporary research on trade and development and an analysis of power is central to understanding this issue. This paper extends existing research on distribution within global value chains by focusing on the issue of power in both product markets and supplier markets. We present a formal model in which lead firms capture a larger share of value-added, either through higher mark-ups – monopoly power – or lower unit costs goods purchased from suppliers – monopsony power. Maintaining or expanding this market power involves costly investments in intangible assets, with the nature of that investment depending on the characteristics of the GVC. This framework provides new insights into the distributive dynamics of value chains, including reputation effects tied to corporate social responsibility. In this way, the paper presents an innovative way of theorizing international trade, inspired by the unequal exchange tradition, that can be extended in future research. |
| Keywords: | Global value chains, market power, distribution, intangible assets, corporate social responsibility |
| JEL: | F12 L13 L14 J80 |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:new:wpaper:2516 |
| By: | Bailey, Ralph W. (Department of Economics, University of Birmingham, UK); Kozlovskaya, Maria (Economics, Finance and Entrepreneurship Department, Aston Business School, Aston University, UK); Ray, Indrajit (Cardiff Business School, Cardiff University) |
| Abstract: | We study mixed-strategy equilibria in a two-good buy-and-sell strategic market game à la Shapley–Shubik. We show that expected utility need not be quasiconcave in strategies, creating difficulties for characterising mixed equilibria. We prove that any mixed Nash profile in which each player mixes over only two positive bids is purifiable and the implied outcome is a mixture over pure equilibria. |
| Keywords: | Mixed bids; Mixed strategy Nash equilibrium; Strategic market games |
| JEL: | C72 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:cdf:wpaper:2025/21 |
| By: | Konstantin von Beringe; Mark Whitmeyer |
| Abstract: | We study welfare analysis for policy changes when supply behavior is only partially known. We augment the robust-demand approach of Kang and Vasserman (2025) with two supply primitives--intervals of feasible pass-through and conduct (market-power) parameters--applied to two equilibrium snapshots. A simple accounting identity distills the supply-side contribution to welfare to a simple integral expression. From there, we deduce that the bounds are produced by a single-threshold "bang-bang" inverse pass-through function. This, plus a modification of Kang and Vasserman's (2025) demand-side characterization, delivers simple bounds for consumer surplus, producer surplus, tax revenue, total surplus, and deadweight loss. We also study an ad valorem extension. |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2510.26387 |
| By: | Klajdi Hoxha |
| Abstract: | E-commerce platforms are rolling out ambitious targeted advertising initiatives that rely on merchants sharing customer data with each other via the platform. Yet current platform designs fail to address participating merchants' concerns about customer poaching. This paper proposes a model of designing targeted advertising platforms that incentivizes merchants to voluntarily share customer data despite poaching concerns. I characterize the optimal mechanism that maximizes a weighted sum of platform's revenues, customer engagement and merchants' surplus. In sufficiently large platforms, the optimal mechanism can be implemented through the design of three markets: $i)$ selling market, where merchants can sell all their data at a posted price $p$, $ii)$ exchange market, where merchants share all their data in exchange for high click-through rate (CTR) ads, and $iii)$ buying market, where high-value merchants buy high CTR ads at the full price. The model is broad in scope with applications in other market design settings like the greenhouse gas credit markets and reallocating public resources, and points toward new directions in combinatorial market exchange designs. |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2510.27112 |
| By: | David Andrés-Cerezo (Universitat Autònoma de Barcelona and BSE); Natalia Fabra (CEMFI, Centro de Estudios Monetarios y Financieros) |
| Abstract: | Decarbonizing the power sector requires major investments in renewables and storage. Though often seen as complementary, these technologies can act as substitutes from an economic perspective. When renewable output correlates positively with demand and capacity is low, storage may lower renewable profits, and viceversa, especially with strategic thermal producers. In markets with negatively correlated renewable availabilities, like solar and wind, storage can benefit one while disadvantaging the other. These findings inform policies on the timing and effectiveness of mandates or subsidies, suggesting that solar investments may need an initial push before supporting storage. Simulations of the Spanish market show that, at high solar penetration, storage boosts solar but reduces wind profits. |
| Keywords: | Energy storage, renewable energy, mandates, market power, transmission constraints, electricity markets. |
| JEL: | L94 Q40 Q42 Q48 Q50 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:cmf:wpaper:wp2025_2522 |
| By: | Robert M. Anderson; Haosui Duanmu; M. Ali Khan; Metin Uyanik |
| Abstract: | This paper establishes the existence of equilibrium in an economy with production and a continuum of consumers, each of whose incomplete and price-dependent preferences are defined on commodities they may consider deleterious, bads which cannot be freely disposed of, and each of whom takes into account the productions of all firms and the consumptions of all other consumers. This result has proved elusive since Hara (2005) presented an example of an atomless measure-theoretic exchange economy with bads (but no externalities) that has no equilibrium. The result circumvents Hara's example by showing that, in the presence of bads and externalities, natural economic considerations imply an integrable bound on the consumption of bads. The proofs make an essential use of nonstandard analysis, and the novel techniques we offer to handle comprehensive externalities expressed as an equivalence class of integrable functions may be of independent methodological interest. |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2511.00478 |
| By: | Natalia Fabra (CEMFI, Centro de Estudios Monetarios y Financieros); Gerard Llobet (CEMFI, Centro de Estudios Monetarios y Financieros) |
| Abstract: | This paper investigates the implications of counterparty risk - stemming from potential defaults or renegotiations by buyers - on long-term contract markets. It develops a theoretical model highlighting how opportunistic buyer behavior leads to higher contract prices and underinvestment, potentially leading to the collapse of the contract market. The paper also evaluates public-policy interventions, including public subsidies, financial guarantees, regulator-backed contracts, and collateral requirements. While these measures can reduce price-related inefficiencies and promote investment, they involve trade-offs such as moral hazard or the reliance on costly public funds. These findings are particularly relevant for sectors with capital-intensive, long-lived assets exposed to price volatility, especially electricity markets, where underinvestment in renewable energy could delay the energy transition and hinder carbon-abatement goals. Simulations using data for the Spanish electricity market are used to quantify the theoretical predictions of the model. |
| Keywords: | Imperfect contract enforcement, counterparty risk, renewable investments, bilateral contracts, vertical integration, dynamic incentives. |
| JEL: | L13 L94 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:cmf:wpaper:wp2025_2523 |