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on Industrial Competition |
| By: | Nocke, Volker; Rhodes, Andrew |
| Abstract: | We develop a framework to study horizontal mergers when the parties can propose remedies to an antitrust authority. Remedies are modeled as asset divestitures, which make the firm receiving the assets more efficient at the expense of the merged firm. We consider both the case where the merger affects a single market and where it affects multiple markets. Solving for the merging firms’ optimal proposal, we investigate when it involves remedies—and if so, which assets should be divested, and to whom, and how this depends on market characteristics such as the level of competitiveness. |
| Keywords: | Antitrust; horizontal mergers; structural remedies; divestitures; data |
| JEL: | L13 L40 D43 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:tse:wpaper:130888 |
| By: | Dmitry Shapiro; Tri Phu Vu |
| Abstract: | This paper studies how noise in certification technology affects seller profits in a duopoly with unobservable product quality. We identify two opposing effects of noisy certification. First, it reduces the informativeness of certification outcomes, homogenizing buyers' beliefs and limiting the scope for vertical differentiation. Second, it introduces randomness into buyer perceptions, endogenously generating differentiation between otherwise similar products. When buyers are risk-neutral, the first effect dominates, reducing seller profits. However, when buyers are loss averse, the negative impact of reduced informativeness is mitigated, and noisy certification can increase profits relative to accurate certification. Experimentally, treatments with inaccurate certification are more profitable than those with accurate certification, particularly in settings with intense competition. |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2509.04146 |
| By: | Rabah Amir; Igor V. Evstigneev; Mikhail V. Zhitlukhin |
| Abstract: | The paper compares two types of industrial organization in the Cournot duopoly: (a) the classical one, where the market players maximize profits and the outcome of the game is a Cournot-Nash equilibrium; (b) a contest in which players strive to win a fixed prize/bonus employing unbeatable strategies. Passing from (a) to (b) leads to a perfect competition with zero profits of the players (Schaffer's paradox). Transition from (b) to (a) results in a substantial decline in the production output, which also seems paradoxical, as it is commonly accepted that competition increases efficiency. We examine these phenomena in two versions of the Cournot model: with a homogeneous good and with differentiated goods. |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2509.00960 |
| By: | Niuniu Zhang |
| Abstract: | The rise of autonomous pricing systems has sparked growing concern over algorithmic collusion in markets from retail to housing. This paper examines controlled information quality as an ex ante policy lever: by reducing the fidelity of data that pricing algorithms draw on, regulators can frustrate collusion before supracompetitive prices emerge. We show, first, that information quality is the central driver of competitive outcomes, shaping prices, profits, and consumer welfare. Second, we demonstrate that collusion can be slowed or destabilized by injecting carefully calibrated noise into pooled market data, yielding a feasibility region where intervention disrupts cartels without undermining legitimate pricing. Together, these results highlight information control as a lightweight yet practical lever to blunt digital collusion at its source. |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2509.02800 |
| By: | Taubman, Dmitriy |
| Abstract: | We introduce a new collection auction mechanism for selling multiple identical items to a single winner—the Prefix-Based Collection Auction. The auction restricts the winner to a prefix of their bids and imposes a payment rule based on both an internal prefix sum and an external second price. This dual structure offers strong protection against both market power and bidder collusion, while maintaining intuitive and truthful bidding behavior. The mechanism is robust, simple to implement, and has potential applications in art-collection markets, online advertising, and other environments where bundle demand is critical. |
| Keywords: | auctions; mechanism design; game theory; collusion resistance; market power; prefix structure |
| JEL: | A10 A11 |
| Date: | 2025–08–21 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:125907 |
| By: | Enache, Andreea; Rhodes, Andrew |
| Abstract: | Many platforms have used a Price Parity Clause (PPC) to prevent sellers charging lower prices on other sales channels. PPCs are often considered anti-competitive and have been banned in some jurisdictions. We provide a novel rationale—centered on how PPCs affect platforms’ data acquisition—for why a complete ban on PPCs may harm buyers and sellers. |
| Keywords: | Price Parity Clauses; Platforms; Data; Product Discovery |
| JEL: | D43 D83 L13 L42 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:tse:wpaper:130889 |
| By: | Liu, Yi; Matsumura, Toshihiro |
| Abstract: | We develop a duopoly model that incorporates fuel diversification, resulting in ex post cost asymmetry between firms. We theoretically examine how common ownership influences welfare. Our findings indicate that welfare decreases (increases) with the degree of common ownership when ex post cost heterogeneity due to fuel diversification is small (large). Furthermore, we identify a potential U-shaped relationship between the degree of common ownership and welfare, an insight not previously documented in the literature. In addition, we demonstrate that common ownership promotes fuel diversification, which may further enhance welfare. |
| Keywords: | overlapping ownership; welfare-improving production substitution; cost asymmetry; fuel choices |
| JEL: | G23 L13 Q42 |
| Date: | 2025–08–14 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:125747 |
| By: | Isabel Gödl-Hanisch; Jordan Pandolfo |
| 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. |
| JEL: | D43 E44 E52 G21 G51 |
| Date: | 2025–04–25 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedkrw:101732 |
| By: | Georgy Lukyanov; Ariza Azova |
| 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. |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2509.01263 |
| By: | Georgy Lukyanov; Konstantin Shamruk; Ekaterina Logina |
| Abstract: | We study a dynamic reputation model with a fixed posted price where only purchases are public. A long-lived seller chooses costly quality; each buyer observes the purchase history and a private signal. Under a Markov selection, beliefs split into two cascades - where actions are unresponsive and investment is zero - and an interior region where the seller invests. The policy is inverse-U in reputation and produces two patterns: Early Resolution (rapid absorption at the optimistic cascade) and Double Hump (two investment episodes). Higher signal precision at fixed prices enlarges cascades and can reduce investment. We compare welfare and analyze two design levers: flexible pricing, which can keep actions informative and remove cascades for patient sellers, and public outcome disclosure, which makes purchases more informative and expands investment. |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2508.20539 |
| By: | Silliman, Mikko (Aalto University); Willén, Alexander (Norwegian School of Economics) |
| Abstract: | This paper reconsiders how labor market competition shapes skill development --- integrating the perspectives of both firms and workers. We show that competition serves as a catalyst for learning. It creates outside opportunities which incentivize workers to invest in their own skills, and it imposes innovation pressure that raises the value of training for firms. Using linked Norwegian survey and administrative data together with vignette experiments, we find that workers in more competitive markets accumulate skills faster than workers in concentrated markets—primarily through informal learning—and that these gains are concentrated in higher-order, transferable skills. Firms in competitive environments also invest more in formal training, treating it as a strategic necessity rather than a dispensable cost. Experimental evidence complements these findings by showing that both workers and managers expect greater returns to learning and human capital investments in competitive markets. Together, these results challenge the canonical view of competition as a source of market failure in training and instead highlight its role in facilitating both worker-led and firm-led investments in human capital. |
| Keywords: | human capital, competition, skills |
| JEL: | J24 J31 J42 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp18109 |
| By: | Bouvard, Matthieu; Jullien, Bruno |
| Abstract: | We consider the price-cap regulation of a monopolistic network operator when the regulator has limited commitment. Operating the network requires xed investments and the regulator has the opportunity to unilaterally revise the price cap at random times. When the regulator maximizes consumer surplus, he has an incentive to lower the price cap once the operator's xed investments are sunk. This hold-up problem gives rise to two types of ineciencies. In one type of equilibrium, the operator breaks even but strategically under-invests to induce the regulator to maintain the price cap. In another type of equilibrium the operator makes strictly positive prots and periods of high investment and high prices are followed by periods of low prices and capacity decline. Overall, the model suggests that the regulator's lack of commitment limits the deployment of network infrastructures. |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:tse:wpaper:130871 |
| By: | Chengqing Li; Junjie Zhou |
| Abstract: | We examine price regulation for monopolists in networks with demand spillovers. The Pareto frontier of the profit-surplus set is characterized using a centrality-based price family. Under typical price regulation policies, regulated outcomes are generically Pareto inefficient at fixed spillover levels but become neutral as spillovers grow, with relative profit loss and surplus changes vanishing. Welfare impacts of banning price discrimination under strong spillovers depend solely on the correlation between intrinsic values and network summary statistics. In networks with two node types (e.g., coreperiphery or complete bipartite), intrinsic value averages across node types suffice for welfare comparisons. |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2508.17301 |
| By: | Simon Finster (FAIRPLAY - IA coopérative : équité, vie privée, incitations - CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - GENES - Groupe des Écoles Nationales d'Économie et Statistique - X - École polytechnique - IP Paris - Institut Polytechnique de Paris - ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique - GENES - Groupe des Écoles Nationales d'Économie et Statistique - IP Paris - Institut Polytechnique de Paris - CNRS - Centre National de la Recherche Scientifique - IP Paris - Institut Polytechnique de Paris - Criteo AI Lab - Criteo [Paris] - Centre Inria de l'Institut Polytechnique de Paris - Centre Inria de Saclay - Inria - Institut National de Recherche en Informatique et en Automatique, CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - GENES - Groupe des Écoles Nationales d'Économie et Statistique - X - École polytechnique - IP Paris - Institut Polytechnique de Paris - ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique - GENES - Groupe des Écoles Nationales d'Économie et Statistique - IP Paris - Institut Polytechnique de Paris - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | We consider a package assignment problem with multiple units of indivisible items. The seller can specify preferences over partitions of their supply between buyers as packaging costs. We propose incremental costs together with a graph that defines cost interdependence to express these preferences. This facilitates the use of linear programming to characterize Walrasian equilibrium prices. Firstly, we show that equilibrium prices are uniform, anonymous, and linear in packages. Prices and marginal gains exhibit a nested structure, which we characterize in closed form for complete graphs. Secondly, we provide sufficient conditions for the existence of package-linear competitive prices using an ascending auction implementation. Our framework of partition preferences ensures fair and transparent dual pricing and admits preferences over the concentration of allocated bundles in the market. |
| Keywords: | linear programming, value graph, partition preferences, Walrasian equilibrium, non-linear pricing, package assignment |
| Date: | 2025–07–07 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05233957 |
| By: | Simon Finster (FAIRPLAY - IA coopérative : équité, vie privée, incitations - CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - GENES - Groupe des Écoles Nationales d'Économie et Statistique - X - École polytechnique - IP Paris - Institut Polytechnique de Paris - ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique - GENES - Groupe des Écoles Nationales d'Économie et Statistique - IP Paris - Institut Polytechnique de Paris - CNRS - Centre National de la Recherche Scientifique - IP Paris - Institut Polytechnique de Paris - Criteo AI Lab - Criteo [Paris] - Centre Inria de l'Institut Polytechnique de Paris - Centre Inria de Saclay - Inria - Institut National de Recherche en Informatique et en Automatique, CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - GENES - Groupe des Écoles Nationales d'Économie et Statistique - X - École polytechnique - IP Paris - Institut Polytechnique de Paris - ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique - GENES - Groupe des Écoles Nationales d'Économie et Statistique - IP Paris - Institut Polytechnique de Paris - CNRS - Centre National de la Recherche Scientifique); Paul W Goldberg (Departement of Computer of Science University of Oxford - University of Oxford); Edwin Lock (Departement of Computer of Science University of Oxford - University of Oxford, Department of Economics - University of Oxford - University of Oxford) |
| Abstract: | In markets with budget-constrained buyers, competitive equilibria need not be efficient in the utilitarian sense, or maximise the seller's revenue. We consider a setting with multiple divisible goods. Competitive equilibrium outcomes, and only those, are constrained utilitarian efficient, a notion of utilitarian efficiency that respects buyers' demands and budgets. Our main contribution establishes that, when buyers have linear valuations, competitive equilibrium prices are unique and revenue-optimal for a zero-cost seller. |
| Keywords: | budget constraints, Fisher markets, product-mix auctions, arctic auction, market design, efficiency, revenue maximisation, competitive equilibrium |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05234001 |
| By: | Philippe Aghion; Antonin Bergeaud; Timo Boppart; Peter J. Klenow; Huiyu Li |
| Abstract: | Firm price-cost markups may reflect (a) bigger step sizes from quality innovations that confer significant knowledge spillovers onto other firms, and/or (b) higher process efficiency than competing firms or other factors which bear no obvious knowledge externality. We write down an endogenous growth model with innovation step size and process efficiency as alternative sources of markup heterogeneity. Compared with the laissez-faire equilibrium, the social planner wants to reallocate research towards high step size firms but not high process efficiency firms. We then use price and productivity data across firms in French manufacturing to infer firm step sizes and process efficiency. We find that the planner could achieve faster growth by reallocating research toward high step size firms, and more so if high step size firms could freely license their innovations to high process efficiency firms. |
| JEL: | O31 O38 O41 O52 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34190 |
| By: | Alonso Alfaro-Ureña (Department of Economic Research, Central Bank of Costa Rica); Paolo Zacchia (Charles University, Czech Academy of Sciences, IZA) |
| Abstract: | We build a model of production network formation that enables econometric estimation of the determinants of supplier choice, like trade costs or matching frictions. The model informs an estimator obtained from a transformation of the multinomial logit likelihood function that conditions on two network statistics: the out-degree of sellers (a sufficient statistic for the seller marginal costs) and the in-degree of buyers (which is pinned down by technology and by “make-or-buy” decisions). In an empirical application about the network effects of a major Costa Rican highway, this estimator registers much smaller estimates than those of a (biased) naive multinomial logit. ***Resumen: Desarrollamos un modelo de formación de redes de producción que permite la estimación econométrica de los determinantes en la elección de proveedores, tales como los costos de comerciar o las fricciones de emparejamiento. El modelo guía un estimador obtenido a partir de una transformación de la función de verosimilitud del logit multinomial, que está condicionado por dos estadísticas de red: el grado de salida de los vendedores (una estadística suficiente para los costos marginales del vendedor) y el “grado de entrada” (in-degree) de los compradores (determinado por la tecnología y las decisiones de “hacer o comprar”). En una aplicación empírica sobre los efectos en red de una importante carretera en Costa Rica, este estimador arroja estimaciones considerablemente menores que las de un logit multinomial ingenuo (y sesgado). |
| Keywords: | Production network, Supplier choice, Conditional logit, Infrastructures, infraestructura, logit condicional, elección de proveedores, redes de producción |
| JEL: | C25 L11 R12 R15 |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:apk:doctra:2502 |