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on Industrial Competition |
| By: | Axel Gautier; Jean-Christophe Poudou |
| Abstract: | In many industries, platforms compete with incumbents that are open to all consumers, whereas platforms require user affiliation. Consequently, platforms face two layers of competition: for the market, to attract users, and in the market, to compete with incumbents. We develop a dynamic model integrating these layers, showing that as platform affiliation grows, in the market competition intensifies, pushing incumbents toward more aggressive pricing. Conversely, for the market competition diminishes, reducing the platform's incentive to compete aggressively. This interplay generates dynamic pricing behavior that can be non-monotonic over time, capturing the shifting incentives driving platform-incumbent competition across both dimensions. |
| Keywords: | platform competition, Uber economy, competition for the market, market affiliation |
| JEL: | L11 L13 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12218 |
| By: | Azova, Arina; Lukyanov, Georgy |
| Abstract: | We embed observational learning (BHW) in a symmetric duopoly with random arrivals and search frictions. With fixed posted prices, a mixed-strategy pricing equilibrium exists and yields price dispersion even with ex-ante identical firms. We provide closed-form cascade bands and show wrong cascades occur with positive probability for interior parameters, vanishing as signals become precise or search costs fall; absorption probabilities are invariant to the arrival rate. In equilibrium, the support of mixed prices is connected and overlapping; its width shrinks with signal precision and expands with search costs, and mean prices comove accordingly. Under Calvo price resets (Poisson opportunities), stationary dispersion and mean prices fall; when signals are sufficiently informative, wrong-cascade risk also declines. On welfare, a state-contingent Pigouvian search subsidy implements the planner’s cutoff. Prominence (biased first visits) softens competition and depresses welfare; neutral prominence is ex-ante optimal. |
| Keywords: | social learning; informational cascades; price dispersion; search; vertical differentiation. |
| JEL: | C73 D43 D83 L13 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:tse:wpaper:131066 |
| By: | Ciucci, Salvatore |
| 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: | Political Economy, Public Economics |
| Date: | 2025–10–22 |
| URL: | https://d.repec.org/n?u=RePEc:ags:feemwp:373385 |
| By: | Tiago Cavalcanti; Kamiar Mohaddes; Hongyu Nian; Haitao Yin |
| Abstract: | This paper investigates the pass-through of environmental compliance costs along supply chains. We compile a firm-level dataset linking regulated firms in pollution-intensive industries with their top five clients and suppliers. We find that clients of regulated firms invest less in R&D, employ fewer skilled R&D staff, and produce fewer innovations than clients of less regulated firms, while no comparable effects are observed for suppliers. The pass-through is stronger with larger trade volumes, higher input prices faced by clients, and in markets where regulated firms hold greater market power or clients face intense competition. Policy simulations suggest that green technology incentives for regulated firms and R&D subsidies for their clients can mitigate these adverse effects and raise social welfare by enhancing both innovation and environmental quality. |
| Keywords: | environmental compliance, supply chain, pass-through, R&D, innovation |
| JEL: | O30 Q01 Q55 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:een:camaaa:2025-55 |
| By: | Seungwhan Chun; Marco Duarte; Cici McNamara; Jason M. Lindo |
| Abstract: | Are state-imposed behavioral remedies effective substitutes for federal antitrust enforcement? We evaluate state regulation of hospital mergers under Certificates of Public Advantage (COPAs). Using hospital data from 1996-2022, we compare COPA-regulated mergers to unregulated mergers with similar anticompetitive potential. In highly concentrated markets, COPA mergers result in 11.1 p.p. lower price growth but 0.5 p.p. greater increases in 30-day mortality rates. We find a negative correlation between price and mortality effects for COPA mergers, consistent with theoretical predictions that binding price caps exacerbate quality deterioration. Our findings suggest that COPA contracts are poor substitutes for traditional antitrust enforcement. |
| JEL: | G38 I11 K21 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34373 |
| By: | Youngjae Jeong |
| Abstract: | This paper develops a novel econometric framework for static discrete choice games with costly information acquisition. In traditional discrete games, players are assumed to perfectly know their own payoffs when making decisions, ignoring that information acquisition can be a strategic choice. In the proposed framework, I relax this assumption by allowing players to face uncertainty about their own payoffs and to optimally choose both the precision of information and their actions, balancing the expected payoffs from precise information against the information cost. The model provides a unified structure to analyze how information and strategic interactions jointly determine equilibrium outcomes. The model primitives are point identified, and the identification results are illustrated through Monte Carlo experiments. The empirical application of the U.S airline entry game shows that the low-cost carriers acquire less precise information about profits and incur lower information costs than other airlines, which is consistent with their business model that focuses on cost efficiency. The analysis highlights how differences in firms' information strategies can explain observed heterogeneity in market entry behavior and competition. |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2510.19140 |
| By: | Pedro Bordalo; Giovanni Burro; Nicola Gennaioli; Gad Nacamulli; Andrei Shleifer |
| Abstract: | Why do we see both advertising and powerful consumer habits for well-known and intrinsically similar brands? We offer an explanation based on the idea that, as in Bordalo et al. (2020), a consumer is more likely to demand a good if she recalls the pleasure it gave her in the past. In turn, the consumer is more likely to recall goods that are consumed more frequently and more similar to cues, subject to interference from other goods. Our model yields context-dependent brand habits where ads work as memory cues. It predicts that ads: i) are more effective for more habitual consumers and ii) exhibit spillovers, within and across products, that are stronger for more habitual consumers and for goods with more similar ads. Using data from NielsenIQ and Nielsen we find support for these predictions in 20 undifferentiated and highly advertised product categories. Memory offers new insights on how advertising affects market competition and consumer welfare. |
| JEL: | L0 M37 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34387 |
| By: | Luigi Foscari; Emanuele Guidotti; Nicol\`o Cesa-Bianchi; Tatjana Chavdarova; Alfio Ferrara |
| Abstract: | We study the emergence of tacit collusion between adaptive trading agents in a stochastic market with endogenous price formation. Using a two-player repeated game between a market maker and a market taker, we characterize feasible and collusive strategy profiles that raise prices beyond competitive levels. We show that, when agents follow simple learning algorithms (e.g., gradient ascent) to maximize their own wealth, the resulting dynamics converge to collusive strategy profiles, even in highly liquid markets with small trade sizes. By highlighting how simple learning strategies naturally lead to tacit collusion, our results offer new insights into the dynamics of AI-driven markets. |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2510.15995 |
| By: | Matteo Bizzarri (University of Naples Federico II and CSEF) |
| Abstract: | This paper presents a model of general equilibrium with firm-to-firm trade using double auctions, or competition in supply and demand functions relating quantities to prices. An equilibrium exists for general non-parametric technology, provided the best replies are convex-valued, under suitable regularity and boundedness assumptions. |
| Keywords: | Production networks, Oligopoly, Double Auction, Supply Function Equilibrium, General Equilibrium |
| JEL: | L13 D43 D44 D57 |
| Date: | 2025–10–16 |
| URL: | https://d.repec.org/n?u=RePEc:sef:csefwp:765 |
| By: | Andreas Haupt |
| Abstract: | Algorithmic recommendation based on noisy preference measurement is prevalent in recommendation systems. This paper discusses the consequences of such recommendation on market concentration and inequality. Binary types denoting a statistical majority and minority are noisily revealed through a statistical experiment. The achievable utilities and recommendation shares for the two groups can be analyzed as a Bayesian Persuasion problem. While under arbitrary noise structures, effects on concentration compared to a full-information market are ambiguous, under symmetric noise, concentration increases and consumer welfare becomes more unequal. We define symmetric statistical experiments and analyze persuasion under a restriction to such experiments, which may be of independent interest. |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2510.16972 |
| By: | Heng-fu Zou |
| Abstract: | This paper embeds yardstick competition in a dynamic mean field a mean game (MFG) framework to analyze the regulation of industries with a continuum of cost-reducing firms. Each firm faces a stochastic cost process -- modeled explicitly as Ornstein-Uhlenbeck (OU), Cox-Ingersoll-Ross(CIR), or Geometric Brownian Motion(GBM)-and chooses continuous-time effort to lower cost. A regulator sets each firm's price equal to the contemporaneous mean cost of the population. We formulate and solve the coupled Hamilton-Jacobi-Bellman and Fokker-Planck system describing this economy, prove existence and uniqueness of equilibrium using the Lasry-Lions monotonicity framework, and show that the yardstick mech anism achieves the social first best in closed form. For each diffusion process we derive fully explicit formulas for equilibrium effort, mean cost paths, adjustment speeds, and welfare, allowing complete comparative statics and shock analysis without numerical simulation. The model pro- vides a tractable and policy-ready extension of Shleifer's (1985) original insight, demonstrating that yardstick competition yields robust, efficient incentives even in large dynamic industries subject to stochastic shocks. |
| Date: | 2025–09–20 |
| URL: | https://d.repec.org/n?u=RePEc:cuf:wpaper:796 |
| By: | Adrian Düll; Heiko Karle; Simon Martin; Heiner Schumacher |
| Abstract: | The classic search models assume that consumers adhere to a particular method of search (sequential or non-sequential) and that they know the true price distribution. In this paper, we evaluate how well the search cost estimates from classic models predict search outcomes - the amount of search and purchase prices - when these assumptions are violated. To this end, we conduct an online experiment in which we vary searchers' information about the price distribution of a homogeneous good. For each treatment, we (i) estimate search costs, (ii) fit each model to the estimated search cost distribution to obtain in- and out-of-sample predictions about outcomes, and (iii) compare predicted and realized outcomes. We find that the prediction performance of each model is largely robust to violations of the informational assumption. Further, the prediction performance of the sequential and non-sequential search model are similar, despite the fact that the search environment strongly favors sequential search. |
| Keywords: | online search, search costs, search cost estimation |
| JEL: | C90 D12 D83 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12221 |
| By: | Roberto Corrao; Joel P. Flynn; Karthik Sastry |
| Abstract: | We introduce a model of incentive contracting in which the principal, in addition to writing contracts, must engage in contractibility design: creating an evidence structure that allows them to prove when the agent has breached the contract. Designing an evidence structure entails both (i) front-end costs borne ex ante, such as those of drafting contracts, and (ii) back-end costs borne ex post, such as those of generating evidence. We find that, under even small front-end costs, optimal contracts are coarse, specifying finitely many contingencies out of a continuum of possibilities. In contrast, under even large back-end costs, optimal contracts are complete. Applied to the design of procurement contracts, our results rationalize: (i) the discreteness of contracts, (ii) the presence of similarly vague contracts in low-stakes and high-stakes settings, and (iii) the discontinuous adjustment of contracts to changes in the economic environment. |
| JEL: | D82 D86 K0 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34379 |
| By: | Ilona Dielen (Université Paris-Est Créteil, ERUDITE, France; Université Côte d’Azur, CNRS, GREDEG, France); Jeanne Mouton (European Commission, Brussels) |
| Abstract: | This study assesses the effect of Directive 2014/104/EU on the likelihood of success of private actions for damages related to abuse of a dominant position. Based on an original database of 194 decisions between 1988 and 2022 in France, Italy and the United Kingdom, the analysis is based on an identification by difference in differences with fixed country and sector effects. The effect is estimated by targeting the cases most likely to be affected by the Directive, namely stand-alone actions for damages. The results reveal a significant differential effect of the Directive, contributing to the empirical assessment of its impact on the effectiveness of the right to compensation in private competition litigation. |
| Keywords: | Competition law, damages actions, private remedies, abuse of dominant position, EU directive, impact assessment, law economy |
| JEL: | K21 K41 C21 H83 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:gre:wpaper:2025-42 |
| By: | Heng-fu Zou (Institute for Advanced Study, Wuhan University) |
| Abstract: | This paper develops a continuous-time model of contracting between a principal and many agents under moral hazard, linking dynamic contract theory to the mean field game (MFG) framework. Outputs depend on effort, competition, and both idiosyncratic and common shocks. The principal designs contracts using filtered signals that benchmark agents against peers. We show that the first-order approach remains valid: effort is linear in exposure with slope determined by the informativeness of filtered outputs. The Hamilton-Jacobi-Bellman equation implies that optimal incentives depend jointly on marginal revenue, signal variance, and intertemporal insurance. The optimal filter is the generalized least squares residual, which asymptotically eliminates common shocks as group size grows. In a linear-quadratic specialization, equilibrium exists, is unique, and is globally stable, with the uniqueness result coinciding with the Lasry-Lions MFG fixed-point condition. The framework unifies tournaments, RPE, and dynamic contracts, and explains empirical puzzles in executive pay, sales teams, and finance. |
| Date: | 2025–10–22 |
| URL: | https://d.repec.org/n?u=RePEc:cuf:wpaper:797 |
| By: | KOIKE-MORI, Yasutaka; OKUMURA, Koki |
| Abstract: | This paper investigates how production networks shape firms’ R&D decisions and the resulting aggregate inefficiencies. We develop a dynamic model in which firms form supply chains through a persistent matching process and rely on those links to trade both existing products and newly developed products from R&D. The model features two sources of misallocation: market-power distortions and a network-formation externality. The second novel externality leads firms to fail to internalize that their R&D makes them more attractive to potential partners. We estimate the model using Japanese firm-to-firm transaction and patent data and show that the first-best allocation lies close to the decentralized outcome. Market-power corrections raise R&D incentives for older firms by relieving double marginalization along their long supply chains. Instead, internalizing the network-formation externality tilts R&D toward younger firms that expand their supply chains rapidly. These opposing forces largely offset each other, leaving the planner’s allocation near the decentralized one. |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:hit:tdbcdp:e-2025-01 |
| By: | Alex Haag |
| Abstract: | Global competition in artificial intelligence (AI) has intensified in recent years. Some assessments emphasize US exceptionalism, while others argue that China is eroding US dominance. By contrast, the progress of other advanced foreign economies (AFEs) receives far less attention. |
| Date: | 2025–10–06 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedgfn:2025-10-06 |
| By: | Mathilde Aubouin (GAEL - Laboratoire d'Economie Appliquée de Grenoble - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - UGA - Université Grenoble Alpes - Grenoble INP - Institut polytechnique de Grenoble - Grenoble Institute of Technology - UGA - Université Grenoble Alpes); Paolo Melindi-Ghidi (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique); Jean-Philippe Nicolaï (GAEL - Laboratoire d'Economie Appliquée de Grenoble - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - UGA - Université Grenoble Alpes - Grenoble INP - Institut polytechnique de Grenoble - Grenoble Institute of Technology - UGA - Université Grenoble Alpes) |
| Abstract: | This paper revisits the question of whether fixed and mobile Internet expenditures are substitutable or complementary. We estimate a demand system using French household expenditure data to compute price elasticities for different categories of goods. The results indicate that fixed and mobile Internet expenditures are complementary in France. This complementarity effect increases with income level. We then develop a simple theoretical model showing that depending on the characteristics of fixed and mobile data tariffs, fixed and mobile Internet expenditures can exhibit non-substitutability or even complementarity. |
| Keywords: | QUAIDS demand system, Household behavior, Internet expenditure |
| Date: | 2025–09–30 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05319883 |