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on Industrial Competition |
| By: | Antoine Dubus; Patrick Legros |
| Abstract: | Firms may share data to discover potential synergies between their data sets and algorithms, eventually leading to more efficient mergers and acquisitions (M&A) decisions. However, data sharing also modifies the competitive balance when firms do not merge, and a companymay be reluctant to share data with potential rivals. Under general conditions, we show thatfirms benefit from (partially) sharing data. By doing so, they can merge conditionally basedon high synergies. Compared to a laissez-faire situation, the presence of a regulator allowingor refusing the M&A may increase or decrease data sharing, with a concomitant increaseor decrease in consumer surplus. Hence, regulation can lower the surplus of consumers it iswilling to protect. We revisit the Google/Fitbit acquisition through the lens of this interplaybetween strategic data sharing and antitrust policy. |
| Keywords: | artificial Intelligence; Synergies; Mergers and Acquisition; incomplete Information; Antitrust |
| JEL: | G34 K21 L10 L21 L24 L50 L86 |
| Date: | 2026–02–05 |
| URL: | https://d.repec.org/n?u=RePEc:eca:wpaper:2013/403154 |
| By: | Loren Brandt; Feitao Jiang; Yao Luo; Yingjun Su |
| Abstract: | This paper examines how the geographic distribution of supply and demand shapes market power in the Chinese steel industry. Drawing on novel data, we develop and estimate an equilibrium model that accommodates spatial demand variations and rich firm heterogeneity—encompassing differences in location, product quality, production coefficients, and cost efficiencies. Using this framework, we simulate the impact of shifts in downstream demand and evaluate the welfare implications of mergers under various market frictions—an issue central to China’s industrial policy. We show that consolidation design is central to welfare outcomes: mergers led by more efficient firms and confined within regions generate substantially larger gains than nationally coordinated consolidation centered on large incumbents. The realized 2018–2024 merger wave achieved only a fraction of attainable welfare improvements. Our simulation results also suggest that as the geographic locus of demand evolves, the effects of industrial reorganization hinge critically on how supply adjusts across regions. |
| Keywords: | Spatial Differentiation, Capacity Misalignment, Market Power, Merger Analysis, Sales Aggregation |
| JEL: | G34 L13 L61 R12 |
| Date: | 2026–02–25 |
| URL: | https://d.repec.org/n?u=RePEc:tor:tecipa:tecipa-820 |
| By: | Takanori ADACHI; Naoshi DOI |
| Abstract: | How does a change in marginal costs affect the final consumer price in imperfectly competitive markets, where price-setting firms can also adjust product quality? In this paper, we study cost pass-through in such an environment. For both symmetric and heterogeneous firms, we show that pass-through for price and quality can be derived in terms of sufficient statistics that do not depend on any particular demand specification-namely, the first- and second-order elasticities of market demand, the Lerner index of market power, and equilibrium prices and quality choices. In addition, we obtain explicit pass-through formulas under firm symmetry. We then argue that under multinomial and random-coefficient logit demand systems, firms may respond to an increase in operational marginal costs by both lowering prices and reducing product quality when the number of symmetric firms is sufficiently small. Overall, our numerical analysis suggests that the random-coefficient logit model is more flexible than the multinomial logit model in that it allows price pass-through to exceed one, which is not possible under the multinomial logit. In addition, quality pass-through can be positive under random-coefficient logit demand. |
| Keywords: | Endogenous quality; Pass-through; Sufficient statistics; Oligopoly. |
| JEL: | D43 H22 L11 L13 |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:kue:epaper:e-25-013 |
| By: | Ian Ball; Deniz Kattwinkel; Jan Knoepfle |
| Abstract: | Two horizontally differentiated firms compete for consumers who are partially informed about their future preferences. The firms screen consumers by offering menus of option contracts. Each consumer enters contracts with both firms and then, after learning his preferences, purchases one product. We characterize the unique equilibrium. Consumption is distorted because each consumer is endogenously locked into one firm. Nevertheless, with sufficiently early contracting, consumer surplus is higher than under spot pricing because competition is stiffer when consumers are less informed, hence less differentiated; this reverses the conclusion in the monopoly case. Exclusive contracting further benefits consumers by intensifying competition. |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2602.08144 |
| By: | Benjamin T. Leyden |
| Abstract: | I study how third-party firms respond when a platform owner enters its own marketplace, analyzing Apple's entries into App Store submarkets from 2016-2021. Using text embeddings to define markets and a staggered difference-in-differences design, I find that Apple's entry deters new competitors and shifts incumbents' monetization strategies, but effects vary widely: many markets show no meaningful response, while others move in opposing directions across a host of monetization and quality outcomes. Responses depend on how Apple enters and apps' competitive proximity to Apple. This heterogeneity suggests targeted oversight rather than categorical restrictions on platform-owner entry. |
| Keywords: | digital marketplaces, platform-owner entry, app store, platform regulation |
| JEL: | L13 L86 L40 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12512 |
| By: | David P. Brown (University of Alberta); Mar Reguant (Northwestern University) |
| Abstract: | This paper examines how the rapid expansion of wind and solar generation in Spain has reshaped wholesale electricity prices, ancillary service (AS) market costs, and market structure. Using an empirical strategy that exploits exogenous variation in renewable potential, we estimate how market outcomes would have differed under lower renewable capacity (and subsequently, renewable output). We find that rising wind and solar output substantially reduced wholesale prices. However, these reductions are partially offset by increases in AS market procurement and the associated operating costs driven by congestion and other operational challenges of variable generation. We show that while renewable growth reduces concentration in the wholesale market, AS markets remain highly concentrated, with limited scope for competition in key market segments. Our results highlight both the substantial net consumer benefits of renewable expansion on final prices (wholesale plus AS markets), while demonstrating the need for AS market reforms to reduce market concentration and cost-effectively manage increasing levels of renewable generation. |
| Keywords: | Electricity Markets; Energy Transition; Intermittency; Market Power |
| JEL: | L13 L50 L94 Q40 |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:ris:albaec:022362 |
| By: | Philip Z. Maymin |
| Abstract: | I prove that competitive market outcomes require computational intractability. If P = NP, firms can efficiently solve the collusion detection problem, identifying deviations from cooperative agreements in complex, noisy markets and thereby making collusion sustainable as an equilibrium. If P != NP, the collusion detection problem is computationally infeasible for markets satisfying a natural instance-hardness condition on their demand structure, rendering punishment threats non-credible and collusion unstable. Combined with Maymin (2011), who proved that market efficiency requires P = NP, this yields a fundamental impossibility: markets can be informationally efficient or competitive, but not both. Artificial intelligence, by expanding firms' computational capabilities, is pushing markets from the competitive regime toward the collusive regime, explaining the empirical emergence of algorithmic collusion without explicit coordination. |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2602.20415 |
| By: | Jiayi Hou; Xuan Teng; Xuan Wang |
| Abstract: | This paper studies how commission rates affect app entry across platforms. We examine an increase in Android game commission rate from 30% to 50% in China in 2014 and its impact on Android and iOS app stores, separately, in a difference-in-differences framework. We find a direct negative entry effect on Android by 47%. Meanwhile, the number of new games on the iOS App Store significantly decreased by 30% due to the higher Android commission rate, implying a negative cross-platform spillover effect. Moreover, the share of high-quality new games significantly decreased by 12%, indicating that higher commission rates discourage developers’ quality provision. |
| Keywords: | platform competition, commission rate, complementarity, entry, quality, app stores, mobile applications |
| JEL: | K21 L11 L42 L86 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12378 |
| By: | Ari Hyytinen (Hanken School of Economics and Helsinki GSE); Jan Jääskeläinen (Finnish Consumer and Competition Authority); Antti Sieppi (Finnish Consumer and Competition Authority); Vesa-Heikki Soini (Hanken School of Economics and University of Turku); Janne Tukiainen (Department of Economics, University of Turku) |
| Abstract: | Limited competition in public procurement remains a persistent concern, yet the reasons for low participation are not well understood. We conduct a conjoint survey experiment that targets both potential and actual bidders in Finland. We present real firms with hypothetical tender scenarios, randomly varying key attributes values, asking which tender they would enter. The time required to prepare a bid is the most significant entry barrier. Moreover, tenders evaluated solely on the lowest price, those involving cross-border participation, and higher expected competition reduce entry. Uncertainty over the number of competitors deters entry as much as for certain facing high competition. |
| Keywords: | Entry, Conjoint Experiment, Public Procurement |
| JEL: | C83 D44 H57 L22 |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:tkk:dpaper:dp176 |
| By: | Kan Kuno |
| Abstract: | This paper studies bargaining when buyers can continue searching for alternative sellers while negotiating, which limits their commitment to complete a transaction. Using transaction level data from a Japanese online marketplace, I document frequent post-agreement nonpurchase and show that buyers who explicitly pledge immediate payment are more likely to have their offers accepted, renege less often, and complete transactions faster. I develop and estimate a dynamic bargaining model with buyer search and limited commitment. Counterfactuals that restrict search during bargaining show that increased buyer commitment can reduce total welfare. Sellers especially those with higher valuations benefit from the elimination of delays and walkaways and respond by raising list prices. This reduces buyer welfare by lowering the option value of search and increasing expected list prices. Platform revenue also declines because buyer behavior shifts away from counteroffers and negotiated prices fall. |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2602.13707 |
| By: | Hugo Hopenhayn; Maryam Saeedi |
| Abstract: | We study optimal simple rating systems that partition sellers into a finite number of tiers. We show that optimal ratings must be threshold partitions, and that for linear supply and Cournot competition with constant marginal cost, optimal thresholds solve a k-means clustering problem requiring only the quality distribution. For convex (concave) supply functions, optimal thresholds are higher (lower) than the k-means solution. For log-concave distributions, two-tier certification captures at least 50 percent of maximum welfare gains from full disclosure, with five tiers typically achieving over 90 percent. Applications to eBay and Medicare Advantage data illustrate our method. |
| JEL: | D21 D47 D60 D82 L11 |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34889 |
| By: | Federico A. Bugni; Joel L. Horowitz; Linqi Zhang |
| Abstract: | The BLP model is the workhorse framework in empirical IO and enables estimation of demand models for differentiated products using aggregate product shares. In practice, however, the share of the outside good is often unobserved. This paper studies identification and inference in the BLP model when the share of the outside good is unobserved. We show that the model is partially identified, and we derive sharp identified sets for structural parameters and equilibrium objects. We also develop inference procedures based on moment inequalities that deliver valid confidence sets for these structural parameters and equilibrium objects. |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2602.19154 |
| By: | Beknazar-Yuzbashev, George (University of Chicago,); Jimenez-Duran, Rafael (Bocconi University, IGIER, Stigler Center, CESifo, and CEPR); Simonov, Andrey (Columbia University and CEPR); Mateusz Stalinsk, Mateusz (University of Warwick and CAGE) |
| Abstract: | Most digital platforms are funded through advertising rather than direct payments. Why? We argue that three main factors could explain this prevalence: users are more sensitive to monetary prices than to ad loads, microtargeting improves the match quality between users and ads, and platforms can personalize ad loads and thus price discriminate. We conduct a field experiment on Facebook with 1, 810 users who install a browser extension that (i) hides nearly all ads or (ii) replaces microtargeted ads with untargeted ones. We find that hiding 82% of ads increases time on the platform by only 6%, showing that users are highly insensitive to ad loads. Removing targeting sharply reduces ad clicks and long-run engagement, indicating that targeting increases the match quality between users and ads. Finally, two-thirds of ad-load variation occurs across users, consistent with ad-load discrimination. Counterfactual simulations indicate that an ad-funded model performs at least as well as a subscription model i terms of profits and delivers higher consumer surplus. The key mechanism is that users are much less sensitive to ad loads than to monetary prices, making advertising a relatively efficient revenue source. |
| Keywords: | social media platforms ; online advertisement ; user engagement ; field experiment |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:wrk:warwec:1602 |
| By: | Emin Dinlersoz; Timothy Dunne; John C. Haltiwanger; Veronika Penciakova |
| Abstract: | The business entry literature typically observes firms only at the first hire. We provide a new perspective using linked administrative microdata tracking the universe of U.S. business applications and their transition into employer firms. We model entry as a two-stage process: pursuit of a business idea (proxied by a business application) and implementation (transition). Results show these margins are distinct and associate differently with local conditions. While both margins matter, high-startup locations are characterized by high application intensity, whereas low-startup locations exhibit low transition rates, suggesting geographic disparities in entry arise from different dynamics at each stage of the entrepreneurial process. |
| JEL: | L26 M13 R12 |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34881 |