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on Industrial Competition |
| By: | Martin Beraja; Francisco J. Buera |
| Abstract: | Are competition policies designed for static industries suitable for innovative industries where dynamic competition for the market is key? If not, how should policies differ? We develop a model of the life-cycle of an oligopolistic industry: a version of Jovanovic and MacDonald (1994) with a finite number of firms. The equilibrium features a period of intense entry, followed by a shakeout and eventual industry concentration as some firms scale through innovation while most exit. We analyze the second-best problem of a government subsidizing small firms to promote competition. Innovation and dynamic competition do not necessarily justify intervention, as the equilibrium can still be second best. In general, the optimal policy depends on the nature of competition. Firms primarily compete for the market when innovation leads to large differences in scale. The government can wait to intervene in this case; committing to do whatever it takes to promote competition if and when the industry concentrates excessively. Subsidies early in the life-cycle are unnecessary. These results contrast with calls for aggressive ex-ante regulation in highly innovative industries, suggesting a wait-and-see approach may be preferable. We apply these insights to digital and AI industries in the U.S. using data on venture-backed firms. |
| JEL: | E0 L0 O3 |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34770 |
| By: | Patrice Bougette (Université Côte d'Azur, CNRS, GREDEG, France); Frédéric Marty (CNRS, GREDEG, Université Côte d'Azur, France) |
| Abstract: | This article examines the Structure-Conduct-Performance (SCP) paradigm that dominated U.S. antitrust policy until the 1970s, before being displaced by the Chicago School and, from the 1980s onwards, by Post-Chicago analysis, i.e., modern industrial organization. Long portrayed as indifferent to firms' conduct and to economic efficiency, structuralism has been subject to a persistent "black legend." This contribution reassesses that critique by examining: (i) the evolution of structuralism between the 1940s and the 1970s; (ii) the influence of a deconcentrationist perspective embedded in a particular legal interpretation of U.S. antitrust rules; (iii) the implications of the digital economy for contemporary analyses of market structures; and (iv) the SCP paradigm's legacy in Neo-Brandeisian and conservative antitrust thought. |
| Keywords: | Structure-Conduct-Performance (SCP) paradigm; Structuralism; U.S. antitrust; Chicago School; Post-Chicago industrial organization; Merger control; Digital markets; Neo-Brandeisian antitrust; Market structure; Structural remedies |
| JEL: | L10 L12 L13 L41 |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:gre:wpaper:2026-03 |
| By: | Ruibing Su; Chenyu Yang; Andrew Sweeting |
| Abstract: | We estimate a dynamic model of the U.S. space launch industry. The model allows past launches to improve rocket reliability and lower launch costs. It also allows the government to make forward-looking procurement choices. We use the model to analyze policy-relevant issues in the recent history of the industry: the 2006 United Launch Alliance “merger-to-monopoly” and the effects of efficiencies in the form of learning synergies; innovations, such as SpaceX's Falcon 9 and ULA's recent introduction of Vulcan Centaur; the costs and benefits of forward-looking procurements; and, the trade-offs between the advantages of centralized control and possible inefficiencies. |
| JEL: | C73 D21 D43 L13 L41 |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34766 |
| By: | Christos Genakos; Themistoklis Kampouris |
| Abstract: | This paper examines the "right" geographic definition of relevant markets by analyzing how excise tax pass-through varies with local competition in the retail gasoline market of a large metropolitan city. Using a natural experiment from three unanticipated and exogenous fuel tax hikes and detailed station-level price data, we show that average pass-through is invariant to the number of nearby competitors across various geographic definitions. This contrasts with theoretical predictions and prior island-based evidence, suggesting that the entire metropolitan area functions as a single market. Our findings challenge standard isodistance- or isochrone-based market delineations used in academic research and competition policy. |
| Keywords: | geographic market definition, gasoline market, competition, pass-through, market structure |
| Date: | 2026–02–04 |
| URL: | https://d.repec.org/n?u=RePEc:cep:cepdps:dp2149 |
| By: | Schmal, W. Benedikt |
| Abstract: | Can monopoly rents fuel innovation or do they entrench dominance? This paper explores the tension between two competing visions of antitrust: the US model, which rewards entrepreneurial disruption through monopoly rents, and the EU model, which aims to prevent gatekeeping by preserving structural competition. At the heart of this debate lies the distinction between circumvention innovation, where challengers bypass incumbents with radical new paradigms, and gatekeeper regulation, which enforces contestability within existing markets. While the US approach has produced breakthrough innovations, it depends on open access to capital, talent, and markets, i.e., conditions increasingly threatened by geopolitical fragmentation and economic decoupling. In contrast, the EU's more restrained model may lack raw disruptive power, but appears more resilient in the face of shocks. This paper argues that antitrust must evolve: resilient innovation requires not just market incentives, but institutional frameworks capable of withstanding a more fractured global economy. |
| Abstract: | Können Monopolrenten Innovation fördern oder zementieren sie lediglich Marktmacht? Dieser Beitrag untersucht die Spannungen zwischen zwei konkurrierenden wettbewerbspolitischen Modellen: dem US-amerikanischen Ansatz, der unternehmerische Disruption durch Monopolgewinne belohnt, und dem europäischen Modell, das durch strukturelle Wettbewerbssicherung gezielt Gatekeeping verhindern will. Im Zentrum steht der Gegensatz zwischen Umgehungsinnovation, bei der Herausforderer etablierte Firmen mit radikal neuen Ansätzen umgehen, und Gatekeeper-Regulierung, die Wettbewerb innerhalb bestehender Märkte durchsetzt. Während der US-Ansatz disruptive Innovationen hervorgebracht hat, beruht er auf offenen Kapital-, Personal- und Absatzmärkten, also Voraussetzungen, die zunehmend durch geopolitische Fragmentierung und wirtschaftliche Entkopplung bedroht sind. Demgegenüber mag das europäische Modell weniger auf Durchbruchsinnovationen ausgerichtet sein, scheint jedoch widerstandsfähiger gegenüber externen Schocks. Der Beitrag argumentiert, dass sich die Wettbewerbspolitik weiterentwickeln muss: Resiliente Innovation benötigt nicht nur Marktanreize, sondern auch institutionelle Rahmenbedingungen, die in einer fragmentierten Weltwirtschaft tragfähig bleiben. |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:lefpps:336634 |
| By: | Mr. Damien Capelle |
| Abstract: | This paper develops a theory of how investors’ tastes are transmitted to aggregate investment through the market structure of financial intermediation. Whether tastes affect equilibrium capital allocation depends on where they originate—from households or from intermediaries—and on the degree of competition and segmentation in funding markets. Strong competition amplifies the pass-through of households’ tastes for amenity assets, but arbitrages away intermediaries’ own tastes. The same forces shape the effectiveness of financial-sector policies targeting households or intermediaries. I apply and quantify the framework in the context of green finance. |
| Keywords: | taste-based investing; bank; capital allocation; market structure; competition; financial intermediation; green finance |
| Date: | 2026–01–30 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2026/019 |
| By: | Victor Aguirregabiria; Hui Liu; Yao Luo |
| Abstract: | We propose a fast algorithm for computing the GMM estimator in the BLP demand model (Berry, Levinsohn, and Pakes, 1995). Inspired by nested pseudo-likelihood methods for dynamic discrete choice models, our approach avoids repeatedly solving the inverse demand system by swapping the order of the GMM optimization and the fixed-point computation. We show that, by fixing consumer-level outside-option probabilities, BLP's market-share to mean-utility inversion becomes closed-form and, crucially, separable across products, yielding a nested pseudo-GMM algorithm with analytic gradients. The resulting estimator scales dramatically better with the number of products and is naturally suited for parallel and multithreaded implementation. In the inner loop, outside-option probabilities are treated as fixed objects while a pseudo-GMM criterion is minimized with respect to the structural parameters, substantially reducing computational cost. Monte Carlo simulations and an empirical application show that our method is significantly faster than the fastest existing alternatives, with efficiency gains that grow more than proportionally in the number of products. We provide MATLAB and Julia code to facilitate implementation. |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2602.05137 |
| By: | Lauren Falcao Bergquist (Yale University); Danial Lashkari (New York Federal Reserve Bank); Eric Verhoogen (Columbia University) |
| Abstract: | This chapter, prepared for the Handbook of Development Economics (Vol. 6), reviews recent microeconomic evidence on the causes of resource misallocation in developing countries. It distinguishes between ÒtechnologicalÓ and ÒdistortionaryÓ wedges, develops a unified theoretical framework linking market power, taxes, financial frictions, and firm dynamics, and summarizes empirical findings from the Òdirect approachÓ to misallocation. The authors emphasize how wedges vary by firm size and discuss policy implications for improving allocative efficiency. |
| Date: | 2026–01–05 |
| URL: | https://d.repec.org/n?u=RePEc:cwl:cwldpp:2482 |
| By: | Kolagani Paramahamsa |
| Abstract: | We investigate a seller's revenue-maximizing mechanism in a setting where a desirable good is sold together with an undesirable bad (e.g., advertisements) that generates third-party revenue. The buyer's private information is two-dimensional: valuation for the good and willingness to pay to avoid the bad. Following the duality framework of Daskalakis, Deckelbaum, and Tzamos (2017), whose results extend to our setting, we formulate the seller's problem using a transformed measure $\mu$ that depends on the third-party payment $k$. We provide a near-characterization for optimality of three pricing mechanisms commonly used in practice -- the Good-Only, Ad-Tiered, and Single-Bundle Posted Price -- and introduce a new class of tractable, interpretable two-dimensional orthant conditions on $\mu$ for sufficiency. Economically, $k$ yields a clean comparative static: low $k$ excludes the bad, intermediate $k$ separates ad-tolerant and ad-averse buyers, and high $k$ bundles ads for all types. |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2601.22404 |
| By: | Asena Caner (TOBB University of Economics and Technology (TOBB ETÜ)); Belgi Turan (TOBB University of Economics and Technology (TOBB ETÜ)); Berna Tari Kasnakoglu (TOBB University of Economics and Technology (TOBB ETÜ)); Yenal Can Yigit (TOBB University of Economics and Technology (TOBB ETÜ)); Donald S. Kenkel (TOBB University of Economics and Technology (TOBB ETÜ)); Donald S. Kenkel (TOBB University of Economics and Technology (TOBB ETÜ)); Alan D. Mathios (TOBB University of Economics and Technology (TOBB ETÜ)) |
| Abstract: | This study examines consumer preferences for manufactured cigarettes, roll-your-own cigarettes, and e-cigarettes in Türkiye, focusing on the impact of product attributes—such as price, legal status of e-cigarettes, and flavor availability—on consumer choices. Using a discrete choice experiment (DCE) embedded in an online survey, the research analyzes how these attributes influence decisions among Turkish adults, with a particular emphasis on the implications of regulations like e-cigarette bans. The findings reveal significant price sensitivity, both regarding the own price of products and the prices of substitute products. Additionally, the results suggest that regulatory measures, especially those targeting legal status, play a crucial role in shaping public health outcomes and consumer behavior. |
| Date: | 2025–08–20 |
| URL: | https://d.repec.org/n?u=RePEc:erg:wpaper:1791 |
| By: | Jean-Marie Baland (Development Finance and Public Policies, University of Namur); Cédric Duprez (National Bank of Belgium); Wouter Gelade (Economics and Research Department, National Bank of Belgium, University of Mons); François Woitrin (Development Finance and Public Policies, University of Namur) |
| Abstract: | In this paper, we develop a model of North-South trade to investigate the impact of Fair Trade. In the absence of a label, Southern producers are exploited by monopsonisitic traders who export to Northern markets. The Fair Trade label, given to some existing traders, certifies the adoption of high labour standards or the payment of fair prices to producers in the South.We first show that such a label is never Pareto improving: the welfare of unlabeled and some label led producers in the South falls while the welfare of Northern consumers increases. An expansion of Fair Trade tends to exacerbate those effects. We also show that the consequences of fair trade are systematically dampened in environments where traders enjoy more market power. We also explore an alternative setting in which new Fair Trade cooperatives are introduced alongside private traders. The cooperatives maximize the welfare of the producers they trade with. We show that our main results also apply in this context. |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:nam:defipp:2602 |
| By: | Arinc, Ibrahim Said (SOCAR Türkiye) |
| Abstract: | This paper analyzes Türkiye's natural gas market reform through the lens of institutional path dependence, demonstrating the failure of textbook liberalization strategies in a system marked by embedded support structures and geopolitical constraints. The delayed restructuring of BOTAŞ and the absence of a clear segmentation framework prevented the emergence of a well-functioning domestic market, constraining price formation and liquidity, and ultimately hindering Türkiye's hub potential. To address this structural gap, this study proposes a unique hybrid institutional pathway operationalized through a novel Dual-Ring Model. This model segments gas supply between a regulated Guardian Ring (for vulnerable consumers) and a market-based Competitive Ring, fostering traded liquidity and authentic benchmark pricing. Drawing on the "second-best" institutional approach and the principle of "embedded autonomy", the framework argues against full liberalization. The AggregateTR procurement mechanism coordinates strategic state bargaining power, notably leveraging the critical 2026–2030 contract rollover period, with transparent competitive allocation. Two original Structural Market Indicators (SSDI and TVR) monitor support targeting and traded liquidity. Scenario-based analysis demonstrates how disciplined segmentation and phased support recalibration, including the strategic release of Sakarya Domestic Gas Production into the Competitive Ring, progressively balance supply security, affordability, and benchmark credibility. This framework provides a resilient hybrid gas market architecture grounded in Türkiye's structural context, offering actionable insights for the critical 2026–2030 contract rollover window and the subsequent post-2030 market design. The approach offers replicable lessons for other gas import-dependent emerging economies, reconciling liberalization with strategic state coordination. |
| Date: | 2026–01–19 |
| URL: | https://d.repec.org/n?u=RePEc:osf:socarx:sg9ym_v1 |
| By: | Fateh Saci (CHROME - Détection, évaluation, gestion des risques CHROniques et éMErgents (CHROME) - Nîmes Université - UNIMES - Nîmes Université, UMay - Université de Mayotte (UMay)); Sajjad M. Jasimuddin (Kedge BS - Kedge Business School) |
| Abstract: | The purpose of this paper is to empirically study the stakes of Fintech and competition with traditional banks. Through interviews with 18 specialists working in various fintechs, the empirical results show that most of the fintechs elaborate on their in-house technology available via an online customizable platform, while other functionalities considered as out of the core Fintech activities are developed via external outsourcing. Fintechs face significant systemic challenges, including an evolving regulatory framework that can constrain ambitions and the need for rigorous compliance processes. Protecting personal data against hackers is also vital for these start-ups. The paper further shows that banks are not fundamentally threatened by fintech, given their essential role in the economy, especially credit intermediation. The relationship between the two appears more cooperative than competitive, with growing momentum for banks to acquire fintechs to accelerate digitalization and foster innovation. The scientific novelty lies in framing dual tech as a common operating pattern and showing that banks and fintechs are complementary through partnerships and acquisitions. |
| Keywords: | financial innovation, digitalization, competition, traditional banks, fintech |
| Date: | 2025–11–12 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05462400 |
| By: | Elias Asproudis (Swansea University, School of Social Sciences, Department of Economics, UK); Eleftherios Filippiadis (Department of Economics, University of Macedonia, Greece) |
| Abstract: | This paper examines how environmental taxes, abatement effort, and green trade unions interact within a differentiated duopoly under decentralised and centralised wage setting structures. We show that trade union environmental awareness acts as a substitute for environmental taxation: as unions internalize local damages in wage negotiations, the regulator optimally chooses a lower emissions tax. Centralised wage bargaining leads to higher wages and lower emissions, while decentralised bargaining yields higher output, profits, and social welfare. From a policy perspective, we argue that incorporating green trade unions’ environmental preferences into environmental governance can improve efficiency of the environmental policy taxation. |
| Keywords: | environmental tax, abatement effort, green trade unions, environmental damages, labour market structure |
| JEL: | Q5 L13 D43 J5 H2 |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:mcd:mcddps:2026_03 |