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on Industrial Competition |
| By: | Afonso Rodrigues |
| Abstract: | This paper develops a linear-demand framework to investigate endogenous product design. The key assumption is that the same product characteristics which drive goods utility also (at least partially) shape competitive interactions across products. I model this relationship allowing for differences in each characteristic's relevance to competition, their absolute intensity per good, and correlations to other characteristics. The framework is novel in its broad applicability to settings with any finite number of goods, firms, and attributes, allowing for both vertical and horizontal differentiation, all in an empirically testable model. Under Bertrand price competition I show that across different market structures, a pattern emerges: product differentiation along product attributes that firms control is primarily vertical, with horizontal differentiation only in latent attributes. Counter to standard intuition, simulations show that allowing for endogenous design can imply higher consumer surplus under monopoly than under competition, as monopoly's stronger incentives for attribute investment translate into higher effective quality. |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2602.02833 |
| By: | Rodríguez Núñez, Juan Bautista |
| Abstract: | This paper presents a review of the Dominican empirical literature on market concentration indicators, with the aim of characterizing the competitive structure of different sectors of the Dominican economy. To this end, a documentary review of academic studies, technical reports, and institutional publications is conducted. The results show that the earliest recorded estimates of market concentration date back to the mid-1980s, and that the Herfindahl–Hirschman Index (HHI) has been the most widely used indicator, followed by concentration measures based on market shares (Ck indices). In addition, the evidence indicates that public institutions have produced the majority of these estimates, most notably the General Directorate of Internal Taxes (DGII) and the National Commission for the Defense of Competition (PRO-COMPETENCIA). |
| Keywords: | Concentration indicators; HHI; Ck index; market Structure. |
| JEL: | L1 L41 L43 L50 L60 L70 L80 L90 |
| Date: | 2026–02–16 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:128068 |
| By: | Renuka M. Diwan; Paul J. Eliason; Riley League; Jetson Leder-Luis; Ryan C. McDevitt; James W. Roberts |
| Abstract: | Governments rely on private firms to provide public goods and services. Although competition among these firms reduces prices and the costs of procurement, it has an ambiguous effect on fraud: competition can both dissipate the rents that attracted fraudulent firms to the market while at the same time reducing margins to the point where legitimate firms no longer remain viable. We study this tradeoff in the government’s procurement of durable medical equipment. Following Medicare’s switch from regulated prices to competitive bidding, we find that fraudulent firms’ cost advantage allowed them to gain market share as legitimate firms exited the market. |
| JEL: | D22 D73 H41 I18 K42 |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34802 |
| By: | Yutong Zhang |
| Abstract: | I introduce and study a nested search problem modeled as a tree structure that generalizes Weitzman (1979) in two ways: (1) search progresses incrementally, reflecting real-life scenarios where agents gradually acquire information about the prizes; and (2) the realization of prizes can be correlated, capturing similarities among them. I derive the optimal policy, which takes the form of an index solution. I apply this result to study monopolistic competition in a market with two stages of product inspection. My application illustrates that regulations on drip pricing lower equilibrium price and raise consumer surplus. |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2602.03720 |
| By: | Cagin Keskin |
| Abstract: | Horizontal expansion through an expanding product portfolio lies at the core of modern endogenous growth literature. However, evidence remains limited on how diversification across industries influences a firm's trade-off between generating social surplus and maximizing private returns. To investigate this, I categorize intangible assets by their spillovers: transferable intangibles (patents, software) generate social surplus, whereas embedded intangibles (organizational capital, brand value) primarily yield private returns. I document that diversified firms reallocate investment toward embedded intangibles, while at the same time having lower markups and productivity, as well as less competitive threats. Motivated by this evidence, I extend a canonical endogenous-growth framework to endogenize firms'allocations between transferable and embedded intangibles, allowing for both horizontal and vertical expansion. A key prediction of the model is that embedded intangibles are freely mobile across a firm's production lines; therefore, this mobility generates increasing returns to scale as the firm diversifies, which also raises entry barriers for competitors and decreases the social surplus, rather than promoting long-run growth. Thus, a shift in innovative effort ultimately sacrifices economy-wide growth for firm-level market advantages, and quantitative analysis indicates that size-dependent taxes can substantially improve welfare. |
| Keywords: | Schumpeterian growth, step-by-step innovation, intangibles, firm dynamics, span of control |
| JEL: | E22 O31 O32 O33 O34 |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:cer:papers:wp811 |
| By: | Jorge Ale-Chilet (UANDES - Universidad de los Andes [Santiago]); Cuicui Chen (SUNY - State University of New York); Jing Li (Tufts University [Medford]); Mathias Reynaert (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - Comue de Toulouse - Communauté d'universités et établissements de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement) |
| Abstract: | We study collusion among firms against imperfectly monitored environmental regulation. Firms increase variable profits by violating regulation and reduce expected noncompliance penalties by violating jointly. We consider a case of three German automakers colluding to reduce the effectiveness of emissions control technology. By estimating a structural model of the European automobile industry from 2007 to 2018, we find that collusion lowers expected noncompliance penalties substantially and increases buyer and producer surplus. Due to increased pollution, welfare decreases by €1.57–5.57 billion. We show how environmental policy design and antitrust play complementary roles in preventing noncompliance. |
| Keywords: | noncompliance, automobile market, pollution, regulation, collusion |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05492381 |
| By: | Johannes Loh (VU - Vrije Universiteit Amsterdam [Amsterdam]); Ambre Elsas-Nicolle (CERNA i3 - Centre d'économie industrielle i3 - Mines Paris - PSL (École nationale supérieure des mines de Paris) - PSL - Université Paris Sciences et Lettres - I3 - Institut interdisciplinaire de l’innovation - CNRS - Centre National de la Recherche Scientifique, Mines Paris - PSL (École nationale supérieure des mines de Paris) - PSL - Université Paris Sciences et Lettres) |
| Abstract: | We study how the entry of a rival platform affects the strategies of the incumbent's complementors. The latter face a trade-off: While the entry threatens their benefits from indirect network effects, it also allows them to escape intense within-platform competition. Studying Epic Games' entry into the PC video game market - until then dominated by Steam - we show that this trade-off does not resolve uniformly, driving heterogeneity in strategic reactions. Complementors with weaker strategic resources (independent developers) were more likely to multihome and became less responsive to the incumbent's attempts to orchestrate collective action through platform-wide sales promotions. In contrast, complementors more reliant on indirect network effects (multiplayer developers) were less likely to multihome and became more responsive to orchestration attempts. |
| Keywords: | Platform competition, Complementors, Multihoming, Ecosystem orchestration, Market entry |
| Date: | 2026–02–07 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05358065 |
| By: | Ryotaro Todoroki (Bank of Japan); Kazuki Otaka (Bank of Japan) |
| Abstract: | This study examines the dynamics of demand functions for a wide range of consumer products in Japan over the past three decades. Using highly granular point-of-sale (POS) data and machine learning techniques, we estimate key demand function parameters, namely price elasticity and demand curvature, from which we also derive markups for each market and period. We find that while the aggregate-level median price elasticity and markups remained relatively stable over the long term, with substantial cross-product heterogeneity underlying this stability, recent years have seen a modest decrease in the absolute value of median price elasticity and a corresponding increase in markups. Furthermore, our analysis shows that demand curvature increased until the mid-2010s and subsequently declined. Importantly, our panel analysis reveals a significant relationship between the estimated demand function parameters and key factors, including labor force participation and market concentration. In particular, we identify the rise in female labor force participation as a key driver of the recent decline in both absolute price elasticity and demand curvature. These findings suggest that these shifts in socio-economic factors, such as increased labor participation, might have altered consumer behavior, leading to diminished price sensitivity. |
| Keywords: | Consumer behavior; Kinked demand curve; Markups; Machine learning |
| JEL: | C55 D12 D43 L11 L13 L16 |
| Date: | 2026–02–12 |
| URL: | https://d.repec.org/n?u=RePEc:boj:bojwps:wp26e02 |
| By: | De Ridder, Maarten; Grassi, Basile; Morzenti, Giovannie |
| Abstract: | Macroeconomic outcomes depend on the distribution of markups across firms and over time, making firm‐level markup estimates key for macroeconomic analysis. Methods to obtain these estimates require data on the prices that firms charge. Firm‐level data with wide coverage, however, primarily come from financial statements, which lack information on prices. We use an analytical framework to show that trends in markups over time or the dispersion of markups across firms can still be well‐measured with such data. Measuring the average level of the markup does require pricing data, and we propose a consistent estimator for such settings. We validate the analytical results using simulations of a quantitative macroeconomic model and offer supporting evidence from firm‐level administrative production and pricing data. Our analysis supports the use of financial data to measure trends in aggregate markups. |
| Keywords: | production functions; competition; Macroeconomics; markups |
| JEL: | J1 F3 G3 |
| Date: | 2026–02–03 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:129556 |
| By: | Daeyoung Jeong (Yonsei University); Jeong Yeol Kim (KDI School of Public Policy and Management) |
| Abstract: | We study cartel detection when two public authorities operate separate leniency programs within the same jurisdiction, as in Korea. We develop a simple repeated-game model to compare single-agency enforcement with dual-agency enforcement, to distinguish independent operation from cooperation, and to examine how the structure of leniency relief affects reporting incentives. When the two programs operate independently and do not recognize each other's leniency status, firms may have weaker incentives to self-report, and reporting can become concentrated in only one program. Cooperation that recognizes leniency rank across authorities restores a race to report and can make self-reporting attractive under a broader range of enforcement environments. The analysis also shows that cooperation is most reliable when early applicants receive comparable treatment across authorities: when second-in-line relief is available only in the administrative program, stronger criminal exposure can reduce the effectiveness of cooperation by raising the residual risk borne by non-first applicants. The policy implication is that effective dual-agency leniency can be achieved through a narrow form of coordination that verifies marker status and aligns the relief structure across authorities while preserving confidentiality. |
| Keywords: | Antitrust, Cartel Detection, Collusion, Dual-agency Enforcement, Leniency Program |
| JEL: | K21 K42 L41 L44 |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:yon:wpaper:2026rwp-276 |
| By: | Pietro Dall'Ara; Elia Sartori |
| Abstract: | A defining feature of digital goods is that replication and degradation are costless: once a high-quality good is produced, low-quality versions can be created and distributed at no additional cost. This paper studies quality-based screening in markets for digital goods, exploring how the insights of the canonical model of Mussa and Rosen (1978) change when production costs are nonseparable and, instead, depend only on the highest quality developed. The monopolist allocation exhibits two interdependent inefficiencies. First, a productive inefficiency arises: the monopolist underinvests in the highest quality relative to the efficiency benchmark. Second, due to a distributional inefficiency, certain buyers receive degraded versions of the produced good. Competition exacerbates productive inefficiency, but improves distributional efficiency relative to monopoly. |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2602.13014 |
| By: | Jihwan Joo (Koea Institute for Industrial Economics and Trade) |
| Abstract: | The petrochemicals and steel industries are currently experiencing oversupply conditions, which are expected to persist over the medium term. In South Korea, business conditions have cast a spotlight on the Special Act on Corporate Revitalization, and specifically its provisions that support corporate restructuring. At present, small and medium-sized enterprises (SMEs) actively utilize the program.<p> However, current economic conditions require fundamental pan-industrial structural transformation, and such a transformation must feature participation by large enterprises and mid-sized firms in addition to SMEs. It is essential to reform relevant laws and institutional frameworks and to strengthen practical incentives to encourage participation by large enterprises or mid-sized firms and enhance the overall effectiveness and industrial impact of the restructuring program.<p> To achieve this, the government should offer more customized support for large enterprises, promote cooperative partnerships between large and small firms, and launch a foundation designed to facilitate collaborative business restructuring efforts as well as mergers and acquisitions. |
| Keywords: | corporate restructuring; Special Act on Corporate Revitalization; SACR; oversupply; South Korea |
| JEL: | K22 K23 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ris:kieter:022206 |
| By: | Denuit, Michel (Université catholique de Louvain, LIDAM/ISBA, Belgium); Trufin, Julien (ULB) |
| Abstract: | We revisit the area between the concentration and Lorenz curves (ABC) criterion for model assessment in supervised learning. Insurance pricing is considered throughout the paper to illustrate the concepts but the results apply to any other setting where the mean of a response must be estimated from data. Building on the characterization of these curves, we provide new equivalent formulations for the case where the ABC vanishes. First, we characterize a vanishing ABC as the absence of correlation between pricing error and the ranks induced by the candidate premiums, making the link with Gini and Co-Gini coefficients. Inboth the discrete and continuous cases, we then show that a vanishing ABC corresponds toglobal balance in a modified portfolio that overweights lower premium classes. These results complement existing work on auto-calibration and contribute to a better understanding of ABC as a diagnostic tool in insurance pricing and related applications. |
| Keywords: | Insurance pricing ; Lorenz curve ; concentration curve ; area between the curves |
| Date: | 2025–12–11 |
| URL: | https://d.repec.org/n?u=RePEc:aiz:louvad:2025026 |
| By: | Carlos Castro Iragorri (Universidad del Rosario); Juan Camilo Medellín Martínez (Universidad del Rosario) |
| Abstract: | This paper examines the role of deposit franchise in mitigating interest rate risk among Latin American commercial banks over the period 2005–2023. Using individual bank estimates and a panel dataset across multiple countries, we estimate expense betas—the sensitivity of funding costs to policy rate changes—as a measure of franchise strength. We find that Latin American banks exhibit average betas of 10%, significantly lower than the 35-40% observed in U.S. and European banks, indicating strong franchise effects. We find that overhead costs and market power, rather than bank size, explain beta variation. While interest rate increases reduce deposit and loan volumes, they have limited effects on income, underscoring the franchise’s stabilizing role. |
| Keywords: | Maturity transformation; Deposit franchise; Net interest margins; Market power |
| JEL: | G21 E43 L22 |
| Date: | 2025–05–13 |
| URL: | https://d.repec.org/n?u=RePEc:col:000092:022157 |
| By: | Claire Greene; Oz Shy; Joanna Stavins |
| Abstract: | This paper investigates the degree to which merchants influence consumers' choice of how they pay for transactions. Using data from the Survey and Diary of Consumer Payments Choice, we examine consumers' adherence to their preferred payment method when making in-person transactions. We also investigate whether merchants are able to steer consumers away from their preferred payment method. We characterize preferences for paying with cash or cards according to consumers' income, level of education, and employment status. We find that consumers make most payments with their preferred method. When consumers pay with a nonpreferred method, it is due only in small part to merchants' refusal to accept that payment method. If a merchant accepts card payments, consumers who prefer paying with cards are not likely to pay with cash for large-value transactions or for gas or groceries. Discounts on cash purchases do not affect the probability of consumers deviating from using cards and paying with cash. Finally, the paper identifies “inertia” effects, which lead consumers to use the same payment method for consecutive purchases. |
| Keywords: | consumer payments; consumer payment preferences; merchant steering; discounts; surcharges |
| JEL: | E42 |
| Date: | 2026–02–17 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedawp:102535 |