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on Industrial Competition |
| By: | Nocke, Volker; Schutz, Nicolas |
| Abstract: | We study welfare distortions in a multiproduct-firm pricing game with constant elasticity of substitution (CES) or multinomial logit (MNL) demand. Using approximations both around small market shares and around monopolistic competition conduct, we identify sufficient statistics to gauge the extent of inefficiencies caused by oligopolistic market power. We find that, at a low order, the oligopoly distortions are proportional to the Herfindahl index of industry concentration. At a higher order, distortions also depend on the cubic Hannah-Kay concentration index. Additionally, we show that the welfare loss from resource misallocation is approximately proportional to the difference between the cubic Hannah-Kay index and the square of the Herfindahl index. |
| Keywords: | Oligopoly pricing; Misallocation; Industry concentration; Herfindahl index; Sufficient statistic |
| JEL: | L13 D43 E20 |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20019 |
| By: | Bontemps, Christian; Gualdani, Cristina; Remmy, Kevin |
| Abstract: | We develop a two-stage game in which competing airlines first choose the networks of markets to serve in the first stage before competing in price in the second stage. Spillovers in entry decisions across markets are allowed, which accrue on the demand, marginal cost, and fixed cost sides. We show that the second-stage parameters are point identified, and we design a tractable procedure to set identify the first-stage parameters and to conduct inference. Further, we estimate the model using data from the domestic US airline market and find significant spillovers in entry. In a counterfactual exercise, we evaluate the 2013 merger between American Airlines and US Airways. Our results highlight that spillovers in entry and post-merger network readjustments play an important role in shaping post-merger outcomes. |
| Keywords: | Endogenous market structure; Networks; Airlines; Oligopoly; Product repositioning; Mergers; Remedies |
| JEL: | C57 D40 L11 L13 L40 L93 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20144 |
| By: | Decarolis, Francesco; Pellegrinetti, Tommaso; Rovigatti, Gabriele; Rovigatti, Michele; Shakhgildyan, Ksenia |
| Abstract: | This paper examines how proprietary algorithms used by dominant digital platforms create informational advantages in search auctions, reshaping market competition. Using experimental evidence and counterfactual simulations, we quantify the impact of algorithmic bidding on auction outcomes and competitive dynamics. Our findings reveal how platforms can leverage superior information to significantly improve their revenues, distorting competition and creating welfare losses for independent advertisers. We also show why platforms prefer selling a bidding algorithm service over directly selling data. These results highlight the need for greater scrutiny of algorithmic decision-making in platform markets, offering new insights for competition policy in digital economies. |
| Keywords: | Collusion |
| JEL: | C73 D82 D83 D18 D44 |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:19983 |
| By: | Schmutzler, Armin |
| Abstract: | This paper provides a simple unified discrete-choice framework for analyzing differentiated duopolies. This framework nests models of horizontal and vertical differentiation, including standard textbook models (Hotelling and Shaked-Sutton). Contrary to these models, it also applies to economic environments where horizontal differentiation coincides with positive correlation of product valuations across consumers, and environments where vertical differentiation coincides with negative correlation. The paper provides an equilibrium characterization that is applicable independently of the type of differentiation and the sign of the valuation correlation. |
| Keywords: | Duopoly; Differentiated products; Price competition |
| JEL: | D43 L13 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20171 |
| By: | Willem Boshoff (University of Stellenbosch) |
| Abstract: | South African competition policy has long pursued industrial-policy objectives alongside its core competition mandate. Public-interest considerations were embedded in merger control from 1998, and the 2018 amendments gave them equal legal status with the competition assessment. These developments preceded the current European debate on using competition policy to advance innovation and other industrial policy objectives in the EU. This paper examines how industrial-policy objectives have been pursued in South African competition policy over the past thirty years. In merger control, these are often advanced through conditions involving ESOPs, HDP ownership commitments, and supplier and enterprise-development funds, as well as through potential-competition theories of merger harm. They are also advanced by similar types of remedies following market inquiries and, increasingly, abuse and cartel investigations. |
| Keywords: | competition policy, industrial policy, merger control, public interest, ownership transformation, market inquiries, South Africa, potential competition |
| JEL: | L40 K21 O25 |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:rza:ersawp:360 |
| By: | Liu, Ernest; Ma, Song; Veldkamp, Laura |
| Abstract: | We explore indicators of market power in a data market. Markups cannot measure competition, because most data products’ marginal cost is zero, making the markup infinite. Yet, data monopolists may not exert monopoly power because they cannot commit to restricting data sales to future customers. This limited commitment and strategic substitutability of data undermine sellers’ monopoly power. But data subscriptions restore this monopoly power. Evidence from online data markets supports the model's insight that subscriptions indicate market power. Model and evidence reveal that data subscriptions are better for consumers because they sustain the incentive to invest in high-quality data. |
| Keywords: | Data markets; Data economy |
| JEL: | C6 D4 D5 L1 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20120 |
| By: | Victor Aguirregabiria; Alessandro Iaria; Senay Sokullu |
| Abstract: | Firms introduce products in markets where they anticipate stronger demand, using information unobserved by researchers. This creates endogenous selection in demand estimation. In differentiated-product oligopolies, multidimensional demand unobservables and strategic entry can render the ordinary propensity score insufficient for selection correction. Existing approaches either restrict firms' information at entry or jointly estimate demand, pricing, and entry under strong supply-side assumptions. We derive a new mixture representation of the selection-bias function using latent propensity scores: entry probabilities conditional on observables and a latent market state generating dependence across entry decisions. This representation yields a convenient two-step semiparametric estimator that corrects for selection and price endogeneity while accommodating richer information at entry. The approach makes weaker supply-side assumptions and is simpler to implement because it avoids repeatedly solving the full model. Applied to the US airline industry, the method yields more elastic demand and less market power than estimates ignoring endogenous entry. |
| Date: | 2026–01–30 |
| URL: | https://d.repec.org/n?u=RePEc:bri:uobdis:26/844 |
| By: | Jokelainen, Antto; Markkanen, Jaakko; Leppälä, Samuli; Siikanen, Markku; Sipiläinen, Matti; Toivanen, Otto |
| Abstract: | We study entry deregulation in the Finnish pharmacy market where prices, markups, and the number and location of pharmacies are regulated. The number of pharmacies increases substantially with free entry, particularly in urban areas. Although almost all consumers benefit, rural areas and areas with older populations benefit less. The increase in aggregate consumer surplus is dominated by decreases in pharmacy profits and government tax revenue; thus, free entry turns is socially excessive. The prevailing entry restrictions may thus work reasonably well from a total welfare perspective, but with distributional consequences: Incumbent pharmacists benefit at the expense of customers. |
| Keywords: | Entry regulation; Deregulation; Pharmacies; Pharmaceuticals; Welfare |
| JEL: | L43 L81 R12 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20095 |
| By: | Yuan Deng; Yilin Li; Wei Tang; Hanrui Zhang |
| Abstract: | We study the limits of third-degree price discrimination when the production cost is Bayesian and private to the seller, generalizing the seminal work of Bergemann, Brooks and Morris (2015). The rough setup is the following: A monopoly seller sets different prices for buyers in different "segments" of the market so as to maximize seller surplus. Different ways in which the aggregate market is decomposed into segments lead to different welfare outcomes, i.e., (seller surplus, buyer surplus) pairs. When the production cost is Bayesian, the region of achievable welfare outcomes can exhibit complex shapes beyond the clean characterization by Bergemann, Brooks and Morris for the case with a fixed cost. We show that with a Bayesian cost, this region coincides with a proper projection of a polytope defined by a polynomial number of linear constraints, the essential ones of which correspond to flow conservation in a "discounted" flow network. As a result, we give a polynomial-time algorithm that computes optimal market segmentations in terms of any linear combination of the seller surplus and the buyer surplus. En route, we establish the following structural property: Any market can be written as a convex combination of "extremal markets" in a way preserving the seller surplus and the buyer surplus. These extremal markets are piecewise equal-surplus with respect to different possible costs, generalizing a similar notion introduced by Bergemann, Brooks and Morris when the cost is fixed. |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2607.12615 |
| By: | Doerr, Sebastian; Fuster, Andreas |
| 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: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20015 |
| By: | Gödl-Hanisch, Isabel; Pandolfo, Jordan |
| Abstract: | We provide empirical evidence on banks’ market power in financial services and its implications for monetary policy transmission through deposit rates. Banks with market power in financial services charge higher fees for their service and also offer lower deposit rates with less pass-through from monetary policy. We argue that this is the result of product tying: consumers must open a deposit account to access a bank’s financial services. We develop and calibrate a quantitative model of the U.S. banking industry where banks generate non-interest income from services in addition to a standard loan-deposit model. Counterfactuals emphasize the importance of non-interest income for credit supply, financial stability, and deposit pricing. |
| Keywords: | market power |
| JEL: | D43 E44 E52 G21 G51 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20180 |
| By: | Olmstead-Rumsey, Jane; Puglisi, Federico; Wu, Liangjie |
| Abstract: | Should Big Tech firms be banned from acquiring other firms? We address this question by developing a growth model with platform-based consumption. The platform supplies some products in the economy, and startups supply the rest, with the platform intermediating consumption of goods in the digital sector. Acquisitions increase the platform's product offerings and have competing effects on the entry of new startups. Theoretically, an acquisition ban reduces growth in the short run but may increase it in the long run. Calibrating the model to data on U.S. households' time use on digital platforms suggests a small welfare loss from an acquisition ban due to slower growth in both the short and long run. |
| Keywords: | Digital platforms; Endogenous growth; Mergers and acquisitions; Conglomerate mergers; Big tech; Startups |
| JEL: | E20 O41 L40 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20156 |
| By: | Schmutzler, Armin |
| Abstract: | By affecting prices and thereby market shares of green and brown firms, product innovations and process innovations influence industry emissions even when they do not directly affect the emission intensity of the innovating firm. Using a differentiated two-stage duopoly, this paper therefore analyzes the effects of environmental policy on such innovations, and it asks how these effects differ from each other and from those of environmental innovations that directly reduce the emission intensity. The paper investigates the determinants of R&D investments, showing in particular that incentives for certain types of potentially beneficial innovations may be negative. Moreover, it analyzes how suitable policies can foster green innovation. |
| Keywords: | Innovation; Environmental policy; Imperfect competition |
| JEL: | Q55 L13 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20170 |
| By: | Walid Faris; Mr. Etibar Jafarov; Umang Rawat |
| Abstract: | Across much of the Middle East and Central Asia (ME&CA), market competition remains weaker than in other emerging markets, holding back productivity and income growth. Using firm-level data from Orbis for 2002–2021, this paper studies the evolution of market competition in ME&CA economies and examines how trade policy and institutions shape competitive dynamics. We find that market power remains substantial and uneven across ME&CA, with particularly high markups in resource-intensive activities, selected service sectors, and—more recently—manufacturing in the Caucasus and Central Asia (CCA). Higher tariff protection is systematically associated with faster growth in markups, indicating that trade barriers weaken competitive pressure, while improvements in competition policy, anti-corruption frameworks, and property rights are linked to declining market power and hence increasing competition. Although productivity gaps remain large and persistent, stronger competition is associated with faster firm-level productivity growth and higher GDP per capita growth, with these effects particularly pronounced in CCA economies. Overall, the findings highlight the importance of policies aimed at reducing trade barriers and strengthening institutional and competition policy frameworks to foster competition, raise productivity, and support long-term income growth in the ME&CA region. |
| Keywords: | market power; markups; total factor productivity; tariffs; competition policy; Middle East and Central Asia; productivity gaps |
| Date: | 2026–07–10 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2026/143 |
| By: | Camarda, Enrico; Fleitas, Sebastian |
| Abstract: | Price regulation and managed competition are widely used to promote quality in health care markets, where quality is often multidimensional and weakly correlated across dimensions. This paper studies how this multidimensionality affects price regulation, patient allocation, and provider behavior in the England's market for public General Practitioner (GP) services. Using counterfactual simulations, we evaluate reforms reducing quality-related payments. We find that such reductions can improve total welfare, in part because practices re-optimize in line with patient preferences. In absence of externalities, the consumer surplus is maximized at 40% of quality-related payments. Finally, incorporating patient preferences into payment design further enhances welfare. |
| Keywords: | Regulation; Quality of care |
| JEL: | L15 L44 L51 I11 I18 |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20283 |
| By: | Impullitti, Giammario; Rendahl, Pontus |
| Abstract: | In recent decades, the United States has experienced a notable rise in markups, a slowdown in productivity growth, and an increase in wealth inequality. We present a framework that unifies these trends into a common driving force. In particular, increased barriers to entry raises markups and boost corporate profits. Rising profits elevates firm valuations, fuels the demand for capital, and drives up asset returns. At the same time, the reduction in competition stifles overall economic growth. Wealth inequality is shaped by the return gap, r-g, which represents the difference between asset returns and the economy’s growth rate. The rise in capital demand together with a reduction in growth leads to a widening of the return gap, which amplifies inequality by affecting the saving patterns of households in different ways across the wealth distribution, deepening the divide between the rich and the poor. These trends result in substantial welfare losses for the majority of households, while only the top 1%, and especially the top 0.1% experience gains. |
| Keywords: | Growth |
| JEL: | D31 D43 E21 E25 O41 |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:19911 |
| By: | Nicolas Eschenbaum |
| Abstract: | Competing firms increasingly delegate pricing and bidding decisions to algorithms supplied by the same third-party providers. We study whether a shared algorithm leads competitors to internalise one another's profits, using data from the Australian National Electricity Market, where every battery's bids are observed at 5-minute frequency and can be linked to an identifiable autobidding provider. Bids constructed by the same provider co-move, and do so more strongly after a disclosure reform made the common scarcity state easier to observe: the same information that steers batteries towards efficient arbitrage also synchronises the bids of competitors who share a provider. To separate co-movement due to shared information from joint profit maximisation, we estimate each battery's dynamic value of stored energy and reclear the market under counterfactual bids. Owner-level profits cannot rationalise observed bidding: batteries forgo profitable dispatch where it would depress the prices earned by same-provider batteries owned by rival firms, and the estimated weight on those rivals' profits is close to one. We find evidence of this conduct only where a provider's share of near-margin battery capacity exceeds roughly 30%, corresponding to an installed share of roughly 20%. The identified conduct costs consumers an annualised $5.5 million on the current fleet, and it arises at the level of the algorithm provider rather than the asset owner, a layer that ownership-based concentration screens do not capture. |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2607.13002 |
| By: | Abebe, Girum; Caria, Stefano; Dupas, Pascaline; Fafchamps, Marcel; Getahun, Tigabu |
| Abstract: | We experimentally test two seminal hypotheses on the impact of competition on firms' management upgrading. In a first experiment, we protect firms from labor market competition by reducing the risk that a freshly trained manager would be poached by a rival firm. We find that this protection does not increase firms' investment in management training. In a second suite of experiments, we boost perceived product market competition by informing firms either that rival firms have received management training or that foreign firms are gaining easier access to the domestic market. Again, we find no evidence that this increases firms' average willingness to invest in management training. To explain why firms do not feel threatened by competition, we present evidence suggesting that, in contrast to commonly held assumptions, firm managers in our setting hold a mental model of competition that posits positive---instead of negative---spillovers, arising primarily from differentiation. |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20306 |
| By: | Ge, Houtian; Gomez, Miguel; Jablonski, Rebecca; Nie, Xiaodong |
| Abstract: | Public food procurement contracts are commonly awarded through competitive sealed-bid procedures in which vendors strategically determine bid prices while competing for institutional food supply contracts. However, procurement outcomes depend not only on underlying costs but also on strategic vendor responses within competitive bidding environments. This paper develops an integrated empirical and structural framework to analyze strategic bidding behavior in public lettuce procurement. First, a lognormal bid-distribution model is estimated in which conditional bid distributions vary according to procurement costs, local sourcing status, vendor size, and lettuce product category. Second, the estimated probability density and cumulative distribution functions are incorporated into a Bayes Nash equilibrium model of first-price procurement auctions to derive optimal equilibrium bid prices under alternative competition scenarios. Results indicate substantial cost pass-through into submitted bids and significant heterogeneity across vendor types and lettuce categories. Small vendors submit substantially higher bids than comparable large vendors. Local sourcing is associated with modestly higher bid prices, although the estimated effect is not statistically significant after controlling for procurement costs, vendor size, and product categories. Increased bidder participation substantially reduces equilibrium markups through intensified competitive pressure. More broadly, the study demonstrates how empirically estimated bid distributions can be integrated with structural auction theory to evaluate strategic vendor behavior in public food procurement markets. The paper contributes an empirically calibrated Bayes Nash equilibrium framework for analyzing strategic bidding behavior and equilibrium pricing in first-price public food procurement auctions. |
| Keywords: | Agricultural and Food Policy |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ags:aaea26:404368 |
| By: | Bergemann, Dirk; Bonatti, Alessandro; Wu, Nick |
| Abstract: | In digital advertising, auctions determine the allocation of sponsored search, sponsored product, or display advertisements. The bids in these auctions for attention are largely generated by auto-bidding algorithms that are driven by 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 platform revenue while ensuring that all advertisers continue to participate. |
| Keywords: | Data; Advertising; Competition; Auctions |
| JEL: | D44 D82 D83 |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20263 |
| By: | Chengcheng Wang; Zexin Ye |
| Abstract: | As firms increasingly adopt AI-powered pricing algorithms, a key and urgent policy concern is how to regulate the potential algorithmic collusion. This paper approaches the regulatory question through the lens of information design and examines how different disclosure rules, committed to by a third-party intermediary, shape learning outcomes when firms delegate pricing to Q-learning algorithms under stochastic demand. We analyze three disclosure rules: no disclosure, full disclosure, and upper censorship. Upper censorship, which truthfully reveals low-demand states while pooling high-demand ones, delivers higher profits than full disclosure, consistent with theoretical predictions. However, we uncover a profit reversal: when the discount factor is high, no disclosure yields higher profits than full disclosure, whereas when the discount factor is low, full disclosure performs better. This pattern is exactly the opposite of what classical collusion theory predicts. Overall, these findings show that Q-learning agents respond systematically to the information structure and further suggest that restricting information sharing may backfire when algorithms are sufficiently patient, highlighting the need to reassess regulatory approaches in AI-mediated markets. |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2607.04345 |
| By: | David Imhof; Thierry Madi\`es; Martin Huber |
| Abstract: | This paper analyzes the internal organization and economic effects of a bid-rigging cartel in the road construction sector of the Swiss canton of Ticino, active from 1999 to 2005. Using exceptionally rich documentary evidence, we reconstruct how cartel members coordinated bids and allocated contracts under a formal agreement known as the 'convention'. We show that, despite the absence of side payments, the cartel implemented a cost-based allocation mechanism that closely approximated the first-best collusive outcome. Regression and machine-learning analyses indicate that observable cost proxies systematically predict both winning bids and bid rankings. The evidence further suggests that cartel members strategically mimicked competitive bidding behavior, allowing them to evade standard econometric detection methods. Using double machine learning, we estimate average overcharges of at least 45\%, and potentially substantially higher, highlighting the significant financial harm caused by this sophisticated form of collusion. |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2606.30470 |
| By: | Bergemann, Dirk; Bonatti, Alessandro; Smolin, Alex |
| Abstract: | We develop an economic framework to analyze the optimal pricing and product design of Large Language Models (LLM). Our framework captures several key features of LLMs: variable operational costs of processing input and output tokens; the ability to customize models through fine-tuning; and high-dimensional user heterogeneity in terms of task requirements and error sensitivity. In our model, a monopolistic seller offers multiple versions of LLMs through a menu of products. The optimal pricing structure depends on whether token allocation across tasks is contractible and whether users face scale constraints. Users with similar aggregate value-scale characteristics choose similar levels of fine-tuning and token consumption. The optimal mechanism can be implemented through menus of two-part tariffs, with higher markups for more intensive users. Our results rationalize observed industry practices such as tiered pricing based on model customization and usage levels. |
| Keywords: | Large Language Models |
| JEL: | D47 D82 D83 |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20226 |
| By: | Tian, Yixin; Shanoyan, Aleksan |
| Abstract: | Economic theory suggests that processor concentration typically harms agricultural producers through buyer monopoly power. However, long-run models indicate that highly concentrated processors may act as a buffer during severe supply chain disruptions. The low water levels on the Mississippi River in the fall of 2022 led to a significant decline in barge capacity, disrupting export channels for inland farms. This provided a natural experiment to test this theoretical trade-off. Using weekly county-level panel data on corn basis differentials across seven U.S. states during harvest weeks from 2018 to 2024, we employ a difference-in-differences approach to isolate the impact of local ethanol processor concentration, represented by the Herfindahl-Hirschman Index (HHI), during the shock period. The model strictly controls for distance from the Mississippi River and local drought severity to ensure that the HHI mechanism operates independently. We find strong evidence of a buffering effect: during the crisis, a 5, 000-point increase in the HHI was associated with an increase of approximately $0.04 per bushel in the basis. This effect exhibits significant spatial heterogeneity: it is dominant in states deep inland (Kansas, NorthDakota, SouthDakota, Nebraska); in river in estates (Missouri, Oklahoma, Texas), the basis is primarily influenced by distance from the river. However, tests of the transmission mechanism using farm-level panel data from Kansas indicate that this loca lprice buffer did not translate into higher net farm income. In particular, for corn-dependent farms, drought-induced yield losses ultimately offset the price gains from the basis phase. Ultimately, these findings provide key parameters regarding the benefits of price buffering that are currently missing from the antitrust framework. This suggests that highly concentrated processors in inland regions actually serve as a critical regional buffer. Antitrust policymakers should consider the positive impact of processor concentration on supply chain resilience, especially in the inland states. |
| Keywords: | Agribusiness |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ags:aaea26:404321 |
| By: | David B. Huffman; Lamar Pierce; Alex Rees-Jones; Germán J. Reyes |
| Abstract: | We examine a choice between bonus contracts offered to dealers of a U.S. auto manufacturer. In our data, dealers select the non-profit-maximizing option in 20 percent of observations, costing the mistaken dealers $18, 453 per year on average. We examine how the propensity to make this mistake varies with competition, identified both cross-sectionally and within dealers over time. Both analyses show that greater competition substantially lowers the rate of mistakes. However, even in the most competitive markets, consequential mistakes persist. Our results suggest that competition disciplines mainly through within-dealer changes in behavior rather than entry and exit. |
| JEL: | D03 M52 |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35454 |
| By: | Kim, Y.; Mayer, S.; Wang, T.; Yannelis, C. |
| Abstract: | This paper studies, both theoretically and empirically, how competition among private equity (PE) sponsors for leveraged buyout (LBO) targets shapes deal outcomes. Empirically, we document that sponsor competition and deal multiples have increased over time. We further show that greater competition is associated with a shift toward smaller but higher-quality targets, characterized by lower default risk, stronger operating performance, and lower leverage. In a search-and-matching model of the LBO market, we show that greater competition raises acquisition prices, making low-quality deals more costly to pursue and strengthening sponsors' incentives to screen targets. It also pushes sponsors toward less-contested pools of smaller firms, while encouraging greater specialization and more intensive post-buyout engagement. A calibrated version of the model quantifies how the rise in competition over recent decades has significantly reduced PE returns. |
| Date: | 2026–07–31 |
| URL: | https://d.repec.org/n?u=RePEc:cam:camdae:2664 |
| By: | Vourazeris, Kelsey; Richards, Timothy; Schmitz, Troy |
| Abstract: | This paper examines how trade policy and technological change have jointly shaped competition in the U.S. fresh tomato market. Since 1996, the U.S.–Mexico Tomato Suspension Agreements have imposed minimum reference prices on Mexican tomato exports, while Mexico has simultaneously expanded greenhouse production through sustained investment in protected agriculture. Using weekly product-level data from the USDA Agricultural Marketing Service (AMS) Terminal Market and Movement reports from 1998 to 2025, we first document that suspension-agreement price floors bind frequently, with binding episodes occurring in approximately two out of every five weeks over the sample period. We show that these binding episodes disproportionately constrain lower-priced open-field products while greenhouse tomatoes, which command higher prices, are less frequently affected. This creates incentives for compositional shifts toward greenhouse production and higher-value export categories. To evaluate these mechanisms, we estimate a structural model of differentiated tomato demand that allows substitution across products defined by origin, production technology, variety, and organic status. The model incorporates heterogeneous preferences for greenhouse production and recovers implied marginal costs and markups under Bertrand competition. We then use the estimated framework to evaluate counterfactual policy scenarios involving tariffs on Mexican imports, reductions in marginal costs associated with Mexican greenhouse investment, and comparable subsidies for U.S. greenhouse producers. The preliminary results suggest that price-based trade protection primarily redistributes surplus, whereas technological change and greenhouse expansion have played a more important role in reshaping market structure, trade composition, and welfare outcomes in U.S. tomato markets. The paper contributes to the literature on non-tariff barriers by showing how differentiated price floors interact with production technology and quality differentiation in agricultural trade. |
| Keywords: | Agricultural and Food Policy |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ags:aaea26:404366 |
| By: | Enache, Andreea; Rhodes, Andrew |
| Abstract: | We consider a setting in which a platform matches buyers and sellers, who then wish to transact with each other multiple times. The platform charges fees for hosting transactions, but also offers convenience benefits. We consider two scenarios. In one scenario, all transactions must occur on the platform; in the other scenario, buyers and sellers can disintermediate the platform after the first transaction, and do subsequent transactions offline. We find that the platform reacts to disintermediation by using a ``front-loaded'' pricing scheme, whereby it charges more for earlier transactions. We also show that sometimes the platform is better off when disintermediation is possible---because it can use disintermediation to screen users' private information about their convenience benefits. Buyers are not necessarily better off when they can disintermediate, due to the way in which the platform adjusts its fees. |
| Keywords: | Platforms |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20298 |
| By: | Ervi Kosta (Institute of Economic Studies, Charles University, Prague, Czech Republic) |
| Abstract: | This study examines the relationship between income diversification, market concentration, and bank performance using a panel of 73 commercial banks from six Western Balkan countries over the period 2011 to 2024. Bank and year fixed effects models are employed to estimate conditional associations between diversification, market structure, profitability, risk-adjusted performance, and stability. Three main findings emerge. First, a higher share of net interest income is associated with lower contemporaneous returns on assets and equity. Second, larger banks show stronger performance in three of the four outcome specifications. Third, market concentration, measured by the five-bank concentration ratio (CR5), is negatively and significantly associated with return on equity and negatively but only marginally with return on assets, whereas the Herfindahl Hirschman Index (HHI) and the HHI-based income diversification measure do not show robust relationships with profitability, risk-adjusted performance, or stability across four alternative inference methods. Overall, the results suggest that simple measures of banks' income structure and market concentration provide greater explanatory power than composite diversification indices in relatively underdeveloped banking systems. These findings should be interpreted as conditional associations rather than causal effects and indicate that competitive market conditions, rather than income diversification policies, are more relevant for understanding bank performance in the Western Balkans. |
| Keywords: | income diversification, market concentration, bank profitability, risk-adjusted performance, bank stability, Western Balkans |
| JEL: | G11 G21 G32 L11 |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:fau:wpaper:wp2026_20 |
| By: | Gambacorta, Leonardo; Shreeti, Vatsala |
| Abstract: | The rapid advancement of artificial intelligence (AI) relies on a complex supply chain comprising five key layers: hardware, cloud infrastructure, training data, foundation models and AI applications. This paper examines the market structure of each layer and highlights the economic forces shaping them: rapid technological change, high fixed costs, economies of scale, network effects and, in some cases, strategic behaviour by dominant firms. We also highlight the expanding influence of big tech companies across the AI supply chain. We discuss the challenges for consumer choice, innovation, operational resilience, cyber security and financial stability. |
| Keywords: | Market structure; Competition; Artificial intelligence; Financial stability; Cyber risk; Big tech; Generative AI |
| JEL: | E31 J24 O33 O40 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:20143 |
| By: | Berardi, Nicoletta; Ravenna, Federico; Samano, Mario |
| Abstract: | Using a novel dataset from a large grocery retailer in a European country that never engages in temporary sale promotions, we establish that prices behave very similarly to regular prices set by retailers engaging in temporary promotional sales. We find evidence of state-dependent price setting in a multi-product firm when estimating the responsiveness of prices to exogenous demand shifts. The 'everyday regular prices' dataset is characterized by a more than trivial share of small price changes, and low synchronization of price changes across items. Price rigidity, selection and the extent of state-dependence are heterogeneous across items. Pricing of top sales items is more flexible and state-dependent compared to items that represent a small share of total revenues, a result consistent with price setting in a multi-product firm characterized by rational inattention. This result implies that inferences about firm-level price setting mechanisms from price microdata may be inaccurate if heterogeneity in price setting within the same firm is not taken into account. |
| Keywords: | Price-setting; Multi-product firms; State-dependence; Synchronization; Rational inattention |
| JEL: | E31 D22 E4 E32 |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:19921 |
| By: | Lindenlaub, Ilse; Oh, Ryungha; Peters, Michael |
| Abstract: | Using administrative data from Germany, we document that high-wage locations have substantially lower labor shares and higher wage dispersion. We show that a parsimonious model, in which firm monopsony power stems from search frictions in local labor markets, can explain these facts as long as “superstar†firms sort into productive locations. This positive sorting, which emerges as the unique equilibrium if firm and location productivity are sufficient complements or labor market frictions are sufficiently large, steepens the local wage ladder in productive locations and leads to not only higher wages, but also greater wage inequality. At the same time, positive firm sorting reduces local labor shares in prosperous places because more productive firms have more monopsony power. Our estimated model indicates that firm sorting can rationalize the lower local labor shares in regions with endogenously higher wages and can account for 40% of their increased wage dispersion. In spatial firm sorting, we thus highlight a new source of disparities in local labor market outcomes. |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:19958 |
| By: | Natasha Aggarwal (TrustBridge Rule of Law Foundation); Amol Kulkarni (TrustBridge Rule of Law Foundation); Shruti Aji Murali (Axiom5); Bhavin Patel (TrustBridge Rule of Law Foundation); Vishnu Suresh (TrustBridge Rule of Law Foundation) |
| Abstract: | The Competition Commission of India (CCI) operates under significant capacity constraints, with nearly half its sanctioned posts vacant and a growing backlog of pending cases. The efficiency with which it allocates scarce resources in its thresholdstage screening function under Section 26(2) of the Competition Act, 2002 therefore assumes considerable importance. We analyse a sample of 111 Section 26(2) orders issued between 2014 and 2024, interview practitioners and CCI officials, and survey screening practices across six jurisdictions. We find that approximately 42% of the orders in our dataset arise from "peripheral matters", that is, complaints falling outside competition law's scope or unsupported by evidence, which are nonetheless processed through the same institutional procedures as substantive complaints, with a median disposal time of 30 days. Werecommend a layered approach, including clearer public guidance, guided digital filing mechanisms, AI-assisted review tools, and statutory prioritisation frameworks, to improve resource allocation while preserving access to competition law enforcement. |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:bjd:wpaper:21 |
| By: | Civel, Edouard; Creti, Anna; Fack, Gabrielle; Herrera-Araujo, Daniel |
| Abstract: | In this paper, we investigate the relationship between competition and certification quality in the Energy Performance Certificates (EPCs) market, which provides mandatory information on the energy performance of dwellings in European countries. Using French administrative data, we present evidence that the distribution of EPCs exhibits bunching at the cut-off points between energy performance classes, suggesting that some certificates are manipulated to secure a more favorable label. Our empirical analysis shows that the likelihood of manipulation increases when certifiers face heightened competition. This effect can be explained by the fact that certifiers, who are paid by potential sellers, are incentivized to issue more lenient certifications to attract clients. Additionally, we demonstrate that labels indicating higher energy efficiency are associated with significant house price premiums. As a result, manipulation has distributional effects, increasing sellers’ gains at buyers’ expense. |
| Keywords: | Competition; Energy efficiency; Housing markets |
| JEL: | L51 Q5 R31 |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:19992 |
| By: | Juan De Dios Tena; ; |
| Abstract: | This paper estimates the causal impact of entry regulation on organisational behaviour and market outcomes by exploiting two natural experiments in professional football. It examines the consequences of transitioning between a promotion-and-relegation system and a closed league in Mexico’s Liga MX and South Korea’s K-League 1. Using a difference-in-differences strategy, the analysis compares the evolution of match-level outcomes in the treated leagues with those in suitable control groups—Brazil’s Brasileirão and Japan’s J-League. Closing the league in Liga MX reduced competitive balance—matches became, on average, less close—lowered stadium attendance by around 40%, and decreased global search interest by about 8 Google Trends points, while also making managerial replacements less effective. Introducing promotion and relegation in the K-League 1 increased competitive intensity and enhanced the efficacy of managerial changes. Together, these findings provide the first causal evidence on how league design shapes incentives and behaviour in professional sports, with broader implications for industries where performancebased entry rules influence organisational strategy. |
| Keywords: | Entry regulation, Promotion and relegation, Organisational behaviour, Professional football, Natural experiment, Difference-in-differences |
| JEL: | L83 L51 D22 C23 |
| URL: | https://d.repec.org/n?u=RePEc:liv:livedp:202506 |
| By: | Jarkko Harju; Ida Kankaanranta; Kaisa Kotakorpi |
| Abstract: | We study the effects of taxi market deregulation in Finland, which removed price controls and lowered barriers to entry. The reform led to a surge in firm entry and a modest increase in exit, indicating substantial changes in market structure. Average taxi prices increased slightly according to price indices, while monthly firm-level reported sales and VAT declined by over 10 percent. Operating costs and mileage remained largely unchanged, suggesting limited demand responses. These findings point to increased tax evasion following deregulation. Consistent with this interpretation, we document a small rise in property crime, with no effects on other criminal offenses. |
| Keywords: | taxi market, deregulation, prices, sales, mileage, exit, entry, tax evasion, crime |
| JEL: | L52 L91 L98 H26 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12819 |
| By: | Natasha Aggarwal (TrustBridge Rule of Law Foundation); Amol Kulkarni (TrustBridge Rule of Law Foundation); Shruti Aji Murali (Axiom5); Bhavin Patel (TrustBridge Rule of Law Foundation); Vishnu Suresh (TrustBridge Rule of Law Foundation) |
| Abstract: | The Competition Commission of India (CCI) exercises significant discretion in its preliminary screening function under Section 26(2) of the Competition Act, 2002. These orders close proceedings at the threshold stage without directing investigation, are appealable, and determine the rights of the informant. This paper assesses the completeness of the CCI's order-writing in S. 26(2) matters and the adequacy of the statutory framework governing this discretionary power. We evaluate a random sample of 111 S. 26(2) orders issued between 2014 and 2024 using customised Good Order Writing indicators and examine appellate outcomes. This was supplemented with semi-structured interviews with practitioners and CCI officials. We find that orders are generally complete, with an average score of 59.51%, and perform well in appeal. However, we find that the statutory factors under Ss. 19(3) and 19(4) are applied inconsistently. We recommend incremental improvements in order-writing alongside the development of a dedicated framework for thresholdstage determinations under S. 26(2). |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:bjd:wpaper:20 |