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on Industrial Competition |
| By: | Max Riegel |
| Abstract: | I study how consumer preferences for one-stop-shopping affect the resource allocation of multiproduct firms. In many markets, consumers prefer to buy multiple products at a single seller. At the same time, multiproduct firms have to split their resources between their products, for instance by allocating R&D budgets or shelf space. One-stop-shoppers treat firms’ products as if offered as bundles. If there are only one-stop-shoppers, firms therefore cannot gain from a comparative advantage over a particular product. I show that firms become more inclined to specialize in different products and gain market power, as the share of one-stop-shoppers decreases. Thereby, industry profits rise, potentially to the detriment of consumers. |
| Keywords: | one-stop-shopping, specialization, multiproduct competition |
| JEL: | D43 L13 L81 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2025_701 |
| By: | Charles Taragin; Benjamin Wallace; Eddie Watkins |
| Abstract: | We study how corporate debt influences the competitive outcomes of horizontal and conglomerate mergers. In contrast to standard models where debt does not affect pricing, our framework shows that mergers can spread fixed debt obligations across a broader product portfolio, creating an "insurance effect" against adverse demand shocks. This effect interacts with the traditional recapture effect from reduced competition. Using numerical simulations and a case study of a major casino merger, we find that debt can either dampen or amplify post-merger price increases, depending on the merger's structure and the market environment. |
| Keywords: | Financial structure; Merger simulation; Horizontal markets |
| JEL: | L41 L13 K21 G32 G34 |
| Date: | 2025–09–19 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedgfe:2025-80 |
| By: | Normann, Hans-Theo; Martin, Simon; Püplichhuisen, Paul; Werner, Tobias |
| JEL: | C73 D43 L13 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:vfsc25:325405 |
| By: | Frédéric Marty (Université Côte d'Azur, GREDEG, CNRS, France); Thierry Warin (HEC Montréal; CIRANO, OBVIA, GPAI/CEIMIA) |
| Abstract: | Digital markets are increasingly dominated by entities that leverage technical specificities such as network effects, economies of scale, and scope, as well as significant advantages in data access and critical infrastructure, including computing power and cloud capacities. The advent of generative artificial intelligence (AI) marks a potential inflection point in this landscape. In this context, the primary barriers to entry are no longer merely data and open source foundation models but the availability of large, high-quality datasets and substantial computing power. This paper examines whether these barriers will entrench the dominant positions of Big Tech companies or if they will catalyze a reshuffling of competitive dynamics. By focusing on the dual challenges of data and computing power, this study identifies the key factors that will shape the future competitive landscape of the generative AI industry. This article contributes to the ongoing debate in industrial economics and strategic management regarding the potentially disruptive effects of generative AI on the market power of Big Tech firms. Can this technological shift recalibrate competitive dynamics, or will it ultimately serve to entrench existing power structures? At its core, the article seeks to interrogate a prevailing narrative - namely, the notion that innovation inherently sustains competitive processes, even in the face of short-term lock-in effects. |
| Keywords: | Generative AI, data-based advantage, digital ecosystems, Big Techs |
| JEL: | K21 L12 L13 L41 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:gre:wpaper:2025-38 |
| By: | Herold, Daniel; Lüke, Daniel |
| JEL: | L42 L13 K21 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:vfsc25:325429 |
| By: | Karamik, Yasemin; Reif, Simon |
| JEL: | I11 I18 L13 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:vfsc25:325464 |
| By: | Gaétan de Rassenfosse (Ecole polytechnique federale de Lausanne); Ling Zhou (Ecole polytechnique federale de Lausanne); |
| Abstract: | A patent system is a central tool in innovation policy. The prospect of monopolistic pricing supposedly encourages firms to innovate. However, there is scant empirical evidence supporting the existence of higher markups for patent-protected products. Using an original dataset that links consumer products to the patents that protect them, we study the impact of patent protection on product prices. Exploiting exogenous variations in patent status, we find that a loss of patent protection leads to an 8–10 percent drop in product prices. The price drop is larger for more important patents and is more pronounced in more competitive product markets. |
| Keywords: | innovation; markup; patent system; product; R&D incentive |
| JEL: | O31 O34 L11 D42 K11 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:iip:wpaper:29 |
| By: | Jakob Beuschlein; Jósef Sigurdsson; Horng Chern Wong |
| Abstract: | We study the effects of corporate acquisitions on workers using Swedish administrative data and document substantial, persistent earnings losses following acquisitions. These losses reflect both displacement and wage cuts among stayers from target firms. We find no evidence that increased monopsony power accounts for these wage cuts. Instead, they are concentrated in acquisitions where the acquiring-firm CEO sat on the board of the target prior to the transaction. Such acquisitions increase acquiring-firm profits and CEO pay, without affecting total employment or revenue, consistent with rent redistribution. Overall, acquisitions reduce wages and disrupt employment, with profit gains partly extracted from workers. |
| Keywords: | mergers and acquisitions, wages, layoffs, monopsony, firm performance, managers |
| JEL: | G34 J23 J31 J42 J63 L25 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12162 |
| By: | Heiny, Friederike; Li, Tianchi; Tolksdorf, Michel |
| JEL: | C91 D11 D43 L13 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:vfsc25:325415 |
| By: | Fugger, Nicolas; Gillen, Philippe; Gretschko, Vitali; Kokott, Gian-Marco; Riehm, Tobias |
| Abstract: | We investigate how buyer-supplier communication affects procurement prices, comparing auctions without direct communication to negotiations allowing it. In controlled experiments involving students and procurement professionals, we find communication increases prices, disadvantaging buyers. Negotiation analyses show lower initial offers, negotiation-focused dialogue, and emphasizing competition help reduce prices. Contrary to conventional wisdom, auctions without communication often yield better procurement outcomes, especially in competitive markets. Our results suggest managers should reconsider assumptions about experienced negotiators achieving superior deals and instead favor procurement auctions with limited communication to secure lower prices. |
| Keywords: | Auctions, Negotiations, Procurement, Experiment |
| JEL: | D44 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:zewdip:327107 |
| By: | Ehrhart, Karl-Martin; Eicke, Anselm; Hirth, Lion; Ocker, Fabian; Ott, Marion; Schlecht, Ingmar; Wang, Runxi |
| Abstract: | This paper proposes a game-theoretic model to analyze the strategic behavior of inc-dec gaming in market-based congestion management (redispatch). We extend existing models by considering incomplete information about competitors' costs and a finite set of providers. We find that inc-dec gaming is also a rational behavior in markets with high competition and with uncertainty about network constraints. Such behavior already occurs in our setup of two regions. Comparing market-based redispatch with three theoretical benchmarks highlights a lower efficiency level of market-based redispatch and inflated redispatch payments. Finally, we study seven variations of our basic model to assess whether different market fundamentals or market design changes mitigate incdec gaming. None of these variations eliminate inc-dec gaming entirely. |
| Keywords: | Energy market, Game theory, Auctions/bidding, Congestion management, Inc-dec gaming |
| JEL: | D43 D44 L13 Q41 Q48 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:zewdip:327112 |
| By: | Tino, Stephen |
| Abstract: | This paper examines the importance of labor market power and firm productivity for understanding the immigrant-native pay gap. Using matched employer-employee data from Canada, I estimate a wage-posting model that incorporates two-sided heterogeneity and strategic interactions in wage setting. In the model, firms mark down wages below the marginal revenue product of labor (MRPL), and the equilibrium immigrantnative pay gap arises from differences in wage markdowns and MRPL. The findings suggest that immigrants earn 77% of their MRPL on average, compared to 84% for natives. I also decompose the immigrant-native pay gap using counterfactual exercises that account for general equilibrium responses of workers and firms. The results of the counterfactuals suggest that (i) differences in labor supply curves contribute significantly to earnings inequality between immigrants and natives; (ii) immigrants tend to work at more productive firms, driven by their tendency to work in cities where firms are more productive on average; and (iii) heterogeneity in firm productivity magnifies the contribution of labor supply differences to the immigrant-native pay gap, highlighting the importance of interaction effects. |
| Keywords: | Immigration, inequality, monopsony, firm productivity, immigrant-native earnings differential |
| JEL: | J01 J15 J23 J31 J42 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:clefwp:327118 |
| By: | Linnenbrink, Daniel |
| JEL: | C72 D44 D47 D82 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:vfsc25:325443 |
| By: | Francesc Dilmé; Aaron Kolb |
| Abstract: | We revisit the classic chain-store paradox by introducing a novel element: the arrival of exogenous, public signals about the incumbent’s private type over time. As the horizon lengthens, two opposing forces come into play. On one hand, standard reputational incentives grow stronger; on the other, the increasing availability of information makes it more difficult to sustain a reputation. We show that full deterrence can still emerge as the horizon grows arbitrarily long, though not always, and we provide a complete characterization of the conditions under which it arises. |
| Keywords: | Entry deterrence, reputation, chain-store parardox |
| JEL: | C72 C73 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2025_704 |
| By: | Schulte, Elisabeth; Friehe, Tim |
| JEL: | K13 L15 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:vfsc25:325372 |
| By: | Kevin He (University of Pennsylvania); Jonathan Libgober (University of Southern California) |
| Abstract: | We study misperceptions of private-signal correlation in an incomplete-information Cournot duopoly game. Exaggerating the correlation between players’ demand signals is beneficial when agents hold flexible beliefs about price elasticity, but harmful when their beliefs are dogmatically correct. For agents with flexible beliefs who learn elasticity by observing prices, correlation misperceptions indirectly distort behavior through elasticity misinference. If agents know the true elasticity, this learning channel is eliminated. Correlation misperceptions have opposite direct and indirect effects on behavior, so the presence of elasticity inference can reverse an error’s viability. |
| Date: | 2025–08–27 |
| URL: | https://d.repec.org/n?u=RePEc:pen:papers:25-018 |
| By: | Nobuhiro Abe (Bank of Japan); Yuto Ishikuro (Bank of Japan); Koki Nakayama (Bank of Japan); Yutaro Takano (Bank of Japan) |
| Abstract: | Do heterogeneity and competition among banks matter for the macroeconomy? To address this question, we develop a Heterogeneous Bank New Keynesian (HBANK) model that incorporates oligopolistic competition among banks in both loan and deposit markets into an otherwise canonical New Keynesian model. We calibrate model parameters for the cost structure and demand for loans and deposits using data of the 170 largest banks in the U.S. Differences in the parameter values reflect differences among banks in the size of duration risk they take, markups of loan rates, and markdowns of deposit rates. Based on simulation exercises, we show that aggregate lending becomes more responsive to monetary and productivity shocks in our HBANK model than in a Representative Bank New Keynesian model (RBANK), primarily because of heterogeneity in duration risk and the responsiveness of loan markups among banks. |
| Keywords: | banking, business cycles |
| JEL: | E32 E43 E44 E52 G21 |
| Date: | 2025–09–29 |
| URL: | https://d.repec.org/n?u=RePEc:boj:bojwps:wp25e09 |
| By: | Frédéric Marty (Université Côte d'Azur, GREDEG, CNRS, France) |
| Abstract: | La réflexion sur l'ouverture de l'économie calédonienne et sur la révision des protections de marché peut s'alimenter de nombreux retours d'expériences quant à la justification d'interventions publiques en présence de défaillances ou de distorsions de marché et d'une analyse de la situation actuelle des conditions du commerce international. Une première source de réflexion est liée à l'encadrement des aides d'Etat. Elles peuvent, en effet, se concevoir comme des mesures de protection de marché dont il s'agit d'apprécier la nécessité, la proportionnalité et l'effet incitatif. L'exemple de l'encadrement en vigueur dans l'Union européenne et le nouveau cadre mis en place au Royaume-Uni peuvent constituer des parangons pertinents. Une seconde source de réflexion procède des mesures de protections des marchés prises par de nombreux états, ces dernières années, à l'instar des règlements européens de 2019 sur le filtrage des investissements étrangers et de 2023 sur les subventions étrangères. L'intérêt spécifique du second dispositif pour notre propos tient à l'homogénéité, avec celles des règles de concurrence, des procédures sur lesquelles il repose pour examiner si des firmes candidates à l'attribution de marchés publics ou de contrats de concession ou encore engagées dans des opérations de fusion-acquisition ne disposent pas de soutiens publics qui les placeraient dans des conditions que ne pourraient répliquer leurs concurrentes dans le cadre d'une concurrence par les mérites. L'intérêt d'analyser ces dispositifs est à la fois interne et externe. Ils permettent tout d'abord d'infuser une culture de concurrence conduisant à jauger les mesures d'aides ou de protection de marché à l'aune de leur effet net. Ils permettent ensuite de garantir à nos partenaires commerciaux que le traitement de leurs entreprises n'est en rien discrétionnaire mais s'appuie sur des règles prenant en considération des objectifs de concurrence non faussée ou sur des procédures transparentes de défense des intérêts stratégiques. |
| Keywords: | Concurrence, commerce international, concurrence à égalité des armes, aides publiques, contrôle des concentrations, protectionnisme |
| JEL: | F13 F15 K21 L52 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:gre:wpaper:2025-37 |