|
on Industrial Competition |
|
Issue of 2026–03–02
thirty-one papers chosen by Russell Pittman, United States Department of Justice |
| By: | Christoph Carnehl; Anton Sobolev; Konrad Stahl; André Stenzel |
| Abstract: | We study information design in a vertically differentiated market. A third party publicly discloses information about the product qualities of two competing firms. More precise information improves consumer matching but increases perceived differentiation, enabling firms to raise prices. Disclosing the product ranking alone suffices to maximize industry profits in a fully covered market. Consumer surplus, however, is maximized by a rank-preserving policy that withholds any information that overturns the prior ranking, as gains from price competition outweigh losses from allocative inefficiency. The conflict between profit- and consumer-optimal policies persists in settings with endogenous participation and nonlinear or asymmetric costs. |
| Keywords: | Information Design, Vertical Product Differentiation, Quality Rankings, Competition |
| JEL: | D43 D82 L13 L15 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2025_700v2 |
| By: | Martin Peitz; Anton Sobolev; Paul Wegener |
| Abstract: | Advertisers place ads on publishers’ websites to attract the attention of multihoming consumers. Because of competition in the product market, advertisers may have an incentive to partially or fully foreclose their rivals. A gatekeeper may be able to limit publishers’ access to some of the consumers. We fully characterize the equilibrium in which the gatekeeper, publishers, and advertisers make strategic pricing decisions. We show how the presence of the gatekeeper affects the advertisers’ foreclosure decisions and the surplus of the different market participants. |
| Keywords: | gatekeeper, ad-funded media, advertiser competition, ad blocking, uniform pricing, foreclosure, imperfect competition |
| JEL: | L12 L13 L15 M37 |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2025_731 |
| By: | Abramova, Inna; Barrios, John Manuel |
| Abstract: | Private equity (PE) has moved rapidly into professional services, yet its impact on accounting, where licensing regimes, reputational capital, and partnership governance traditionally limit external ownership, remains poorly understood. We examine how PE ownership alters the organization and market structure of accounting firms using data from 1999-2024 that link more than 3, 600 PE transactions to detailed information on mergers and acquisitions (M&A), labor markets, and audit pricing. PE investment increases sharply after 2020 and extends to both CPAlicensed audit firms and non-CPA advisory practices, with most activity in large mid-tier PCAOBregistered firms. After PE entry, firms grow faster: non-audit revenues rise, employment expands, and cross-state M&A accelerates, consistent with platform-building and consolidation. These adjustments have market-level implications. PE investment raises labor-market concentration in key accounting occupations and drives up ERISA audit fees in a standardized setting, as confirmed by a synthetic difference-in-differences design. Our results reveal a key tension at the core of professions: preserving independence and competition in a market increasingly driven by financial capital. |
| Keywords: | Private equity, accounting firms, audits, consolidation, market power, labormarket concentration, M&A, professional services |
| JEL: | G23 G34 L22 L84 M41 M42 J44 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:cbscwp:336743 |
| By: | Jong-Hee Hahn (Yonsei University); Seongkyun Kim (Software Policy & Research Institute) |
| Abstract: | This paper examines the welfare effects of most-favored-nation (MFN) clauses in markets where platforms not only act as intermediaries but also compete to offer auxiliary services such as delivery. Analyzing a linear demand model in which platforms set both transaction and service fees, we show that although MFNs intensify competition for service fees, their tendency to elevate transaction fees dominates, reducing aggregate transaction volume and thereby diminishing consumer surplus and overall welfare. This result holds for asymmetric platforms, provided all remain active in the market, and is robust to changes in the intensity of platform competition. |
| Keywords: | Online platform, MFNs, Price parity, Antitrust, Service competition |
| JEL: | L1 L4 D4 D8 |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:yon:wpaper:2026rwp-281 |
| By: | Van Reenen, John |
| Abstract: | A burgeoning literature in labor economics is focused on modeling employer labor market power, generally finding nontrivial estimates of monopsony power. A smaller literature also simultaneously incorporates product market power. Deb, Eeckhout, Patel, and Warren (2024) is an example of applying an oligopoly‐oligopsony model to the U.S. labor market, arguing for important effects on wage levels and inequality from rising market power. I support combining IO and labor as a fruitful way of studying wages and business dynamism, but argue for looking more broadly at (i) differential degrees of employer power in labor and product markets; (ii) investigating the dynamic sources of markups (e.g., through innovation), and (iii) considering wage bargaining models, not just wage posting models, which have some starkly different implications for wage setting. |
| Keywords: | bargaining; inequality; Market structure; monopsony |
| JEL: | J1 |
| Date: | 2024–05–01 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:122084 |
| By: | Philippe Bontems (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - Comue de Toulouse - Communauté d'universités et établissements de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Stephen F Hamilton (United States of America); Jason Lepore (United States of America) |
| Abstract: | Multisided platforms have emerged as an increasingly important market structure with the rise of the digital economy. In this paper, we consider sequential price setting behavior by platforms and demonstrate sequential pricing outcomes Pareto dominate simultaneous pricing outcomes in terms of firm and industry profits. We compare policy implications and find prices are more balanced across the platform and average prices are higher under sequential pricing than under simultaneous pricing. We also demonstrate that pricing power can be considered independently on each side of the market under multihoming behavior. |
| Keywords: | Platform competition, Two-sided markets, Network effects |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05513277 |
| By: | Jong-Hee Hahn (Yonsei University); Seongkyun Kim (Software Policy & Research Institute) |
| Abstract: | This paper investigates the welfare effects of price parity (most-favored-nation, MFN) clauses in platform markets characterized by cross-platform investment externalities. Although price parity clauses can reduce fee competition and elevate retail prices, they may also improve efficiency by incentivizing platforms to increase demand-enhancing investments. Using a representative consumer model, we demonstrate that under conditions of substantial investment leakage and moderate marginal investment costs, the efficiency gains from enhanced investment can outweigh the negative impact of higher prices. We derive sufficient conditions under which platform profits, consumer surplus, and overall social welfare are all increased by the presence of price parity clauses. The stronger the platform competition, the greater the likelihood that price parity clauses will reduce consumer welfare. |
| Keywords: | Price parity (MFN) clauses, Investment externalities, Antitrust, Platform |
| JEL: | L1 L4 D4 D8 |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:yon:wpaper:2026rwp-282 |
| By: | Gurkirat Wadhwa |
| Abstract: | In many consumer electronics and appliance markets, manufacturers sell products through competing retailers while simultaneously relying on take-back programs to recover used items for remanufacturing. Designing such programs is challenging when firms compete on prices and consumers differ in their willingness to return products. Motivated by these settings, this paper develops a game theoretic framework to analyze pricing and take-back decisions in a dual-channel closed loop supply chain (CLSC) with two competing manufacturers and two competing retailers. Manufacturers act as Stackelberg leaders, simultaneously determining wholesale prices and consumer take-back bonuses, while retailers engage in Nash competition over retail prices. The model integrates three key elements: (i) segmented linear demand with cross-price effects, (ii) deterministic product returns, and (iii) an inertia responsiveness allocation mechanism governing the distribution of returned products between manufacturers. Closed form Nash equilibria are derived for the retailer subgame, along with symmetric Stackelberg equilibria for manufacturers. We derive a feasibility threshold for take-back incentives, identifying conditions under which firms optimally offer positive bonuses to consumers. The results further demonstrate that higher remanufacturing value or return rates lead the manufacturers to lower wholesale prices in order to expand sales and capture additional return volumes, while high consumer inertia weakens incentives for active collection. Numerical experiments illustrate and reinforce the analytical results, highlighting how consumer behavior, market structure and product substitutability influence prices, bonuses, and return volumes. Overall, the study provides managerial insights for designing effective take-back programs and coordinating pricing decisions in competitive circular supply chains. |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2602.14288 |
| By: | Heiko Karle; Marcel Preuss; Markus Reisinger |
| Abstract: | Platforms that provide product recommendations to consumers, such as marketplaces like Amazon or online travel agencies like Expedia, govern a substantial part of transactions in many markets. In addition to selling via platforms, most firms, however, also operate a direct channel. This paper investigates how the interaction between the platform channel and the firms’ direct channel affects platform design and firms' pricing incentives. We provide a rich game-theoretic model in which platforms give recommendations to consumers about products with high match value and facilitate consumer search, but charge sellers commission rates, whereas sellers compete in prices to balance demand across both channels. We show that the interaction between the channels gives rise to novel mechanisms that have counterintuitive effects. First, higher platform fees induce sellers to prioritize their direct channel—where consumers have lower expected match values and are thus more price-sensitive—leading to lower equilibrium prices. Second, improvements in recommendation quality can paradoxically reduce seller prices by intensifying the competitive pressure on the direct channel. Third, we show that for the platform, the quality of recommendations and the commission rate are strategic substitutes, that is, providing better recommendations should optimally be coupled with lower commission rates. This occurs because both instruments have potentially negative effects on seller prices. Finally, we evaluate recent policy interventions within our framework. We find that fee caps and measures that facilitate transactions on the direct channel can have unintended consequences and reduce consumer surplus by distorting the pricing incentives inherent in the dual-channel structure. |
| Keywords: | platform pricing, recommendation quality, consumer search |
| JEL: | D83 L15 L86 M31 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12465 |
| By: | Alviarez, Vanessa; Fioretti, Michele; Kikkawa, Ken; Morlacco, Monica |
| Abstract: | This paper derives a closed-form expression linking aggregate markups on imported inputs to concentration in a model of firm-to-firm trade with two-sided market power. Our theory extends standard oligopoly insights in two dimensions. First, it reveals that markups increase with exporter concentration and decrease with importer concentration, reflecting the balance of oligopoly and oligopsony forces. Second, it adapts conventional market definitions to reflect rigid trading relationships, yielding new concentration measures that capture competition in firm-to-firm trade. Analysis of Colombian transaction-level import data shows these differences are key to understanding markup dynamics in international trade. |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:cbscwp:336734 |
| By: | Matthias Lang (LMU Munich); Cédric Wasser (University of Basel) |
| Abstract: | We study the welfare effects of ambiguous product information for a buyer with α-max-min preferences and a price-setting seller. The buyer privately receives information about her valuation. We show that the seller or the buyer can benefit when this information is ambiguous, and we characterize all possible combinations of producer and consumer surplus, as evaluated under ambiguity-sensitive preferences. Ambiguity concerning the valuation perceived by the buyer when making the purchase decision can induce the seller to change the price. Before receiving information, ambiguity concerning the purchase decision can make the buyer optimistic about buying only for high valuations, which relaxes the participation constraint. |
| Keywords: | Ambiguity; uncertainty; information design; bayesian persuasion; strategic learning; pricing; bargaining; |
| JEL: | D42 D81 D82 D83 L12 |
| Date: | 2026–02–12 |
| URL: | https://d.repec.org/n?u=RePEc:rco:dpaper:564 |
| By: | Yusuke Ikuta (Department of Business Administration, Osaka Sangyo University) |
| Abstract: | This paper studies how pricing structures shape AI investment incentives in datadriven markets. We develop a Hotelling model in which effective mismatch costs are jointly determined by firm investment and consumer disclosure. Firms compete either under symmetric personalized pricing or under an asymmetric structure in which one firm personalizes while its rival sets a uniform price. Under symmetric personalized pricing, allocation follows effective costs, and investment affects welfare only through technological improvements. Private and socially second-best incentives therefore coincide. Under asymmetric pricing, however, allocation is governed by total prices. Investment shifts the market boundary and induces strategic price responses by the uniform-price rival, generating a distortion wedge between private and social incentives. The direction of this wedge determines whether investment is socially insufficient or excessive. Our findings show that the welfare consequences of AI investment depend fundamentally on the pricing structure through which competition operates. JEL Classification: L13, L86, D82, O33 |
| Keywords: | Personalized pricing; Data disclosure; Strategic investment; Digital markets |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:koe:wpaper:2602 |
| By: | Markus Pasche (Friedrich Schiller University Jena) |
| Abstract: | It is shown that staggered and sticky price adjustment is possible without ad hoc frictions, and without suspending full price flexibility. I consider an oligopoly with n price-setting firms which can strategically choose the timing of price decisions and thus the stage in a n-stage Stackelberg oligopoly game. After a shock, firms can credibly signal to delay their price adjustment for some time to (re-)establish a leader-follower structure. From the calculus behind this decision, it is derived which firm will adjust at which time and henceforth stage of the game. The delays are in general asymmetric with respect to direction and size of the shock, and they depend on market power, making the model consistent with a variety of empirical observations. Strategically delayed adjustment of firm prices implies also inertia in aggregated price level adjustment which plays a key role in macroeconomics. |
| Keywords: | oligopoly, leader-follower structures, price dispersion, delayed price adjustment, cost shock, aggregated price dynamics, inflation |
| JEL: | D21 D43 L11 L16 E31 |
| Date: | 2026–02–11 |
| URL: | https://d.repec.org/n?u=RePEc:jrp:jrpwrp:2026-002 |
| By: | Yannis S. Katsoulacos (AUEB - Athens University of Economics and Business); Marc Ivaldi (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - Comue de Toulouse - Communauté d'universités et établissements de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement) |
| Abstract: | Collusion remains a strong undercurrent of business practice despite anti-cartel enforcement being a top priority of competition authorities. Alongside active prosecution of cartels, the study of cartels is a vibrant area of research for economic and legal scholars. A challenge for both practice and scholarship is that cartels evolve, as colluding firms continuously devise new methods to circumvent competition. Cartels Diagnosed presents twelve gripping cartel case studies of collusion from key business sectors such as the airline industry, the gasoline industry, and big pharma. Written by renowned economists, these concise and accessible case studies deliver novel insights into cartel formation, facilitating practices, cartels' modus operandi, and the efficacy of cartels. Assisting in understanding new cartel mechanisms and their effects, developing new policies to deter and destabilize cartels, and measuring harm, this volume on cartel morphology is an invaluable reference for supporting public and private enforcers in detecting and prosecuting cartels. Expands the reader's knowledge of why and how cartels form, better equipping them to predict where cartels will form offers case studies of cartel practices, explaining how to detect collusion and devise policies to make them less effective. Explains how and when cartels are most effective and the harm created by collusion |
| Keywords: | Steel, Price parallelism, Price screens, Imports |
| Date: | 2025–01 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05162653 |
| By: | Alviarez, Vanessa; Fioretti, Michele; Kikkawa, Ken; Morlacco, Monica |
| Abstract: | This paper develops a theory of bargaining in firm-to-firm trade with two-sided market power. The framework accommodates flexible market structures, yielding analytical expressions for pair-specific markups and pass-through elasticities. In U.S. import data, we estimate strong importer bargaining power and an upward-sloping export supply curve, consistent with oligopsony power. Pass-through of the 2018 tariffs in firm-to-firm relationships is incomplete, in contrast to product-level studies, primarily due to exporter cost reductions driven by falling demand from dominant buyers. Our study highlights how bargaining and network rigidities shape price outcomes, with implications for markup dispersion and shock propagation in global value chains. |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:cbscwp:336733 |
| By: | Ville Korpela (Turku School of Economics, University of Turku, Finland); Eero Mäkynen (Turku School of Economics, University of Turku, Finland) |
| Abstract: | Business dynamism has been slowing globally over the last several decades. In a recent study, Akcigit and Ates (2023) examine the relative importance of different channels behind this development and highlight weakened knowledge diffusion from the technology frontier to followers as a dominant force.1 Their study also suggests that diffusion may weaken endogenously as the technology gap widens and market power accumulates, raising the question of how innovation policy can strengthen diffusion without reducing welfare. In this paper we study leader-to-follower licensing as a policy-relevant diffusion margin, and evaluate licensing subsidies relative to direct R&D subsidies. We develop an endogenous-growth general equilibrium model in which firms compete in prices and invest in R&D; the technology leader endogenously chooses whether to license to the follower, trading off higher static profits against faster follower catch-up through knowledge diffusion. We calibrate the model to Finnish data from 2014–2019. Our first exercise evaluates whether allowing licensing is desirable by shutting down the licensing channel in the calibrated economy. In the Finnish benchmark, shutting down licensing lowers growth but increases consumption-equivalent welfare, because the level effects of reduced concentration dominate the diffusion benefits of licensing. We then vary the diffusion rate through licensing and product substitutability to characterize when licensing becomes welfare-improving. In that region, solving the policymaker’s problem shows a non-trivial interaction: higher R&D subsidies can reduce equilibrium licensing by moving leaders more quickly into the monopoly-pricing states where licensing is privately unattractive, so the optimal policy mix augments R&D support with a non-negligible licensing subsidy to sustain diffusion. |
| Keywords: | Antitrust Policy, Business Dynamism, Endogenous Growth, Innovation Policy, Licensing, Technology Diffusion |
| JEL: | E22 L10 L41 O33 O34 |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:tkk:dpaper:dp174 |
| By: | Bukvić, Rajko |
| Abstract: | Russian. В статье исследуется конкуренция и доминирование на страховом рынке Сербии (за исключением Косово и Метохии). Был применен метод матрицы SV (Strength vs Variety), причем необходимые показатели рассчитаны на основе общей суммы страховых премий, собранных страховыми компаниями, согласно данным Национального банка Сербии за период 2010–2024 годов. Результаты показали относительно высокую общую степень концентрации (CRSV), а также относительно низкую дифференциацию внутри доминирующей группы (HTSV). Согласно результатам, сектор позиционировался в квадрантах RO (в годах 2010, 2011, 2015 и 2016) и B4 в остальных годах, с исключением 2012, когда обрелся в квадранте G. Кроме того, в последние несколько лет (начиная с 2020 г.) наблюдается явная тенденция снижения обоих ключевых показателей, определяющих матрицу SV: CRSV и HTSV, что свидетельствует о приближении к RO-квадранту рынка SV, т.е. усилении роли конкуренции как внутри доминирующей группы, так и по отношению к другим участникам рынка. English. The article investigates competition and dominance in the insurance market in Serbia (excluding Kosovo and Metohia). The SV (Strength vs Variety) matrix method was applied, and the required indicators were calculated based on the total insurance premiums collected by insurance companies, according to data from the National Bank of Serbia for the period 2010–2024. The results showed a relatively high overall degree of concentration (CRSV), as well as relatively low differentiation within the dominant group (HTSV). According to the results, the sector was positioned in the RO quadrant (in the years 2010, 2011, 2015 and 2016) and B4 in the remaining years, with the exception of 2012, when it fell into the G quadrant. In addition, in last few years (since 2020) it is observed a clear tendency to decrease in both key indicators that define the SV matrix: CRSV and HTSV, which shows an approach to the RO quadrant of the SV market, i.e. a strengthening of the role of competition both within the dominant group and in relation to other market participants. |
| Keywords: | концентрация, конкуренция, страховое дело, ljvbhbyjdfybt? Сербия, число компаний, эквивалентное число, concentration, competition, SV matrix, domination, Serbia, insurance sector, number of companies, equivalent number |
| JEL: | C38 D43 G22 L11 L84 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:128075 |
| By: | Francesco Androni (Gran Sasso Science Institute); Andrea Ascani (Gran Sasso Science Institute); Alberto Marzucchi (Gran Sasso Science Institute) |
| Abstract: | The phenomenon of zombie firms has been increasing through time in the last decades. Prior re search has extensively examined the role of zombie firms in credit misallocation and weak insolvency regimes However, limited attention is paid to how the competitive environment has influenced its surge. The study aims at linking the diffusion of zombie formation with the field of industrial dynam ics. The analysis focuses on whether the intensity of competition influences the diffusion of zombie f irms, by assessing competition forces such as firm entry and innovation intensity. We use micro aggregated data at the region-sector level to analyse the diffusion of zombie firms in Italy for the years from 2014 to 2020, and identify a substantive role of reallocation forces in driving the shares of zombie firms. Competition in the form of entry and, albeit more weakly, innovation intensity reduces the diffusion of zombie firms, ultimately showing that a decrease in competition intensity is part of the phenomenon. This research contributes to understanding the relationship between zombie firms and sluggish economic activity, describing further factors that affect their formation and persistence. |
| Keywords: | Zombie firms; competition; firm entry; innovation; industrial dynamics |
| JEL: | O33 O31 L25 R11 |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:ahy:wpaper:wp65 |
| By: | Patrick Rey (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - Comue de Toulouse - Communauté d'universités et établissements de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Yossi Spiegel (TAU - Tel Aviv University); Ernst Konrad Stahl (University of Mannheim = Universität Mannheim) |
| Abstract: | We study the feasibility and profitability of predation in a dynamic environment, using a parsimonious infinite-horizon, complete information setting in which an incumbent repeatedly faces potential entry. When a rival enters, the incumbent chooses whether to accommodate or predate it; the entrant then decides whether to stay or exit. We show that there always exists a Markov perfect equilibrium, which can be of three types: accommodation, monopolization, and recurrent predation. We then analyze and compare the welfare effects of different antitrust policies, accounting for the possibility that recurrent predation may be welfare improving. |
| Keywords: | arkov perfect equilibrium, legal rules, entry, accommodation, predation |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05483810 |
| By: | Bruce I. Carlin; Tingting Liu; Micah S. Officer; Agathe Pernoud; Danni Tu |
| Abstract: | Allocation mechanisms in M&A deals are complex, but a main feature is that a target board controls who to invite to the sale. In a theoretical model, we show that it is optimal for the target to invite fewer potential acquirers when they are more homogeneous (i.e., when their values for the target are more correlated). Furthermore, greater correlation (and hence a smaller optimal bidder pool) yields the target a higher surplus from the sale (i.e., higher premium). We test the model empirically and show that M&A deals with smaller bidder pools are associated with higher target returns. This is not a result of synergies in the deals: the target's share of the surplus is simply higher in deals with smaller bidder pools. Finally, we show that cash deals are associated with larger, whereas stock deals have smaller, pools of bidders. |
| JEL: | G34 |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34846 |
| By: | Alaa Elgayar (HU Berlin); Daniel Guhl (HU Berlin); Lucas Stich (University of Würzburg); Martin Spann (LMU Munich) |
| Abstract: | Mystery products deliberately hide key attributes until after purchase and have become a common strategy in retail and services, yet systematic evidence on how to design them effectively remains limited. This research studies two managerial levers---outcome-set composition and uncertainty framing (risk vs. ambiguity)---in two incentive-aligned choice experiments: an induced-value lab study with vertically differentiated outcomes and a large-scale choice-based conjoint on apparel with horizontally differentiated brands. Willingness-to-pay is shaped primarily by the structure of the outcome set: when a dominant outcome is included, consumers discount the mystery product; when outcomes are similar in value, a premium can emerge. Ambiguity reduces valuation primarily when outcome differentiation is high, and it shifts attention away from brand and ``mystery'' cues toward tangible attributes such as fit and color. In market simulations, mystery products are more price-elastic than fully specified alternatives and shift profits toward participating brands, especially weaker ones, while non-participants lose. Overall, the results inform when and how designed uncertainty can be used as a marketing instrument. |
| Keywords: | mystery products; choice-based conjoint; hierarchical bayes; market simulation; price competition; |
| JEL: | D81 D12 C25 |
| Date: | 2026–02–14 |
| URL: | https://d.repec.org/n?u=RePEc:rco:dpaper:565 |
| By: | Sharat Ganapati; Colin Hottman |
| Abstract: | Transaction-level quantity discounts are a pervasive feature of US trade, shaping both price variation and tariff incidence. Using administrative microdata, we show that these discounts reflect transaction-level scale economies rather than market power. Accounting for these micro-level economies resolves a key puzzle: while observed import prices rose one-for-one with 2018-2019 US tariffs, we show this was driven by the loss of scale economies as transaction sizes collapsed. Controlling for this scale effect, the strategic pass-through of tariffs to scale-free prices falls to 60 percent, implying foreign exporters absorbed a significant share of the burden through reduced markups. |
| Keywords: | tariffs, markups, pass-through |
| JEL: | F1 F13 F14 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12500 |
| By: | Jean-Marie Baland (Development Finance and Public Policies, University of Namur); Giorgio Ferroni (Development Finance and Public Policies, University of Namur) |
| Abstract: | Dewatripont and Tirole (2024) show that firms’ moral conduct in the market is independent of competitive pressure. We argue that such a result critically hinges on the assumption of perfect information about the firms’ moral actions —an assumption that is, in general, unlikely to hold. Specifically, the number of firms and their size matter if consumers have only a general perception of morality in the market. In such a setting, morality becomes a public good: firms bear the full cost of their moral behaviour while capturing only a fraction of the benefits from increased consumer willingness to pay. |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:nam:defipp:2603 |
| By: | Christian Montet (UPF - Université de la Polynésie Française); Véronique Sélinsky (Barreau de Montpellier); Florent Venayre (UPF - Université de la Polynésie Française) |
| Abstract: | The article assesses whether competition authorities in New Caledonia and French Polynesia are the appropriate bodies to regulate network industries such as energy and telecommunications. Noting the longstanding shortcomings of regulation by local executive branches, it examines proposals to broaden the mandates of the Polynesian and Caledonian competition authorities. Drawing on economic theory and international experience, the study shows that combining regulatory and competition functions weakens the agencies' independence, clarity of remit, and overall effectiveness. It argues that, in small island economies, any potential cost savings are minimal compared with the governance risks involved. The authors ultimately advocate for strengthened cooperation with France's national energy and telecommunications regulators rather than pursuing local institutional integration. |
| Abstract: | L'article évalue si les autorités de concurrence de Nouvelle-Calédonie et de Polynésie française constituent des instances appropriées pour réguler les industries de réseau telles que l'énergie et les télécommunications. Constatant les insuffisances persistantes de la régulation par les exécutifs locaux, il examine les propositions visant à élargir les mandats des autorités de concurrence polynésienne et calédonienne. S'appuyant sur la théorie économique et l'expérience internationale, l'étude montre que la combinaison des fonctions de régulation et de concurrence affaiblit l'indépendance, la clarté du mandat et l'efficacité globale de ces agences. Elle soutient que, dans les petites économies insulaires, les économies potentielles sont minimes au regard des risques de gouvernance qu'elles impliquent. Les auteurs plaident finalement pour un renforcement de la coopération avec les régulateurs nationaux français de l'énergie et des télécommunications plutôt que pour une intégration institutionnelle locale. |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05508291 |
| By: | Gaston Besanson; Marcelo Celani |
| Abstract: | As generative AI commercializes, competitive advantage is shifting from one-time model training toward continuous inference, distribution, and routing. At the frontier, large-scale inference can function as cognitive infrastructure: a bottleneck input that downstream applications rely on to compete, controlled by firms that often compete downstream through integrated assistants, productivity suites, and developer tooling. Foreclosure risk is not limited to price. It can be executed through non-price discrimination (latency, throughput, error rates, context limits, feature gating) and, where models select tools and services, through steering and default routing that is difficult to observe and harder to litigate. This essay makes three moves. First, it defines cognitive infrastructure as a falsifiable concept built around measurable reliance, vertical incentives, and discrimination capacity, without assuming a clean market definition. Second, it frames theories of harm using raising-rivals'-costs logic for vertically related and platform markets, where foreclosure can be profitable without anticompetitive pricing. Third, it proposes Neutral Inference: a targeted, auditable conduct approach built around (i) quality-of-service parity, (ii) routing transparency, and (iii) FRAND-style non-discrimination for similarly situated buyers, applied only when observable evidence indicates functional gatekeeper status. |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2602.22750 |
| By: | Andrea Guccione; Pau Roldan-Blanco |
| Abstract: | Firms' innovation outcomes depend on their ability to attract and retain talented inventors. What market frictions prevent the sorting between firms with high innovation potential and high-productivity inventors? How does this sorting impact aggregate innovation, growth and welfare? We address these questions both empirically and theoretically. Empirically, we show that firms facing strong competition in the product market employ more productive inventors, while less productive inventors tend to be allocated in concentrated industries. Theoretically, we embed a frictional labor market for inventors into an endogenous-growth model of strategic innovation. In line with the data, the model predicts that high-productivity inventors are disproportionately employed in firms that operate in competitive industries. We then use the model to quantify the growth and welfare implications of this inventor sorting. Our results show that matching frictions in the market for inventors impede the allocation of high- productivity inventors to firms with high implementation intensity, and are responsible for a 32% loss in economic growth. Industrial policies that subsidize R&D spending relax these frictions by boosting inventor productivity, helping high-quality inventors reallocate to firms with high implementation incentives. Under optimal subsidies, growth increases as much as 74 basis points, closing most of the gap in missing growth caused by frictions in the market for inventors. |
| Keywords: | innovation, inventors, R&D productivity, search |
| JEL: | L16 J6 O3 O4 |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:bge:wpaper:1562 |
| By: | Kirill Borusyak; Jiafeng Chen; Peter Hull; Lihua Lei |
| Abstract: | We study identification of differentiated product demand from market-level data when product characteristics can be endogenous. Past work suggests nonparametric identification may be impossible: that is, in addition to standard price instruments, exogenous characteristic-based instruments are essentially necessary to identify sufficiently flexible demand models with standard index restrictions. We show, however, that price counterfactuals are nonparametrically identified using recentered instruments—which combine exogenous price instruments with possibly endogenous product characteristics—under a weaker index restriction and a new condition we term faithfulness. We argue that faithfulness, like the usual completeness condition for nonparametric instrumental variable identification, is best viewed as a technical requirement on the strength of identifying variation rather than a substantive economic or statistical restriction. We show the two conditions are closely related, though generally distinct. We conclude with several practical implications for the parametric estimation of demand counterfactuals. |
| JEL: | C14 C36 L13 |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34842 |
| By: | Maria Andraos; Mario Ghossoub; Bin Li; Benxuan Shi |
| Abstract: | We study Stackelberg Equilibria (Bowley optima) in a monopolistic centralized sequential-move insurance market, with a profit-maximizing insurer who sets premia using a distortion premium principle, and a single policyholder who seeks to minimize a distortion risk measure. We show that equilibria are characterized as follows: In equilibrium, the optimal indemnity function exhibits a layer-type structure, providing full insurance over any loss layer on which the policyholder is more pessimistic than the insurer's pricing functional about tail losses; and no insurance coverage over loss layers on which the policyholder is less pessimistic than the insurer's pricing functional about tail losses. In equilibrium, the optimal pricing distortion function is determined by the policyholder's degree of risk aversion, whereby prices never exceed the policyholder's marginal willingness to insure tail losses. Moreover, we show that both the insurance coverage and the insurer's expected profit increase with the policyholder's degree of risk aversion. Additionally, and echoing recent work in the literature, we show that equilibrium contracts are Pareto efficient, but they do not induce a welfare gain to the policyholder. Conversely, any Pareto-optimal contract that leaves no welfare gain to the policyholder can be obtained as an equilibrium contract. Finally, we consider a few examples of interest that recover some existing results in the literature as special cases of our analysis. |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2602.16401 |
| By: | Kirill Borusyak; Jiafeng Chen; Peter Hull; Lihua Lei |
| Abstract: | We study identification of differentiated product demand from market level data when product characteristics can be endogenous. Past work suggests nonparametric identification may be impossible: that is, in addition to standard price instruments, exogenous characteristic-based instruments are essentially necessary to identify sufficiently flexible demand models with standard index restrictions. We show, however, that price counterfactuals are nonparametrically identified using recentered instruments—which combine exogenous price instruments with possibly endogenous product characteristics—under a weaker index restriction and a new condition we term faithfulness. We argue that faithfulness, like the usual completeness condition for nonparametric instrumental variable identification, is best viewed as a technical requirement on the strength of identifying variation rather than a substantive economic or statistical restriction. We show the two conditions are closely related, though generally distinct. We conclude with several practical implications for the parametric estimation of demand counterfactuals. |
| Date: | 2026–02–24 |
| URL: | https://d.repec.org/n?u=RePEc:azt:cemmap:02/26 |
| By: | Jason Hartline |
| Abstract: | This brief note clarifies that the scenario described in Arunachaleswaran et al. (2025) -- titled `Algorithmic Collusion without Threats' -- is not one of collusion, but one where one player is behaving non-competitively and the other is behaving competitively. |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2602.22232 |
| By: | Cheng Guo; Lauren Henderson; Ryan Cory-Wright; Boshi Yang |
| Abstract: | Nonconvexities in markets with discrete decisions and nonlinear constraints make efficient pricing challenging, often necessitating subsidies. A prime example is the unit commitment (UC) problem in electricity markets, where costly subsidies are commonly required. We propose a new pricing scheme for nonconvex markets with both discreteness and nonlinearity, by convexifying nonconvex structures through a semidefinite programming (SDP) relaxation and deriving prices from the relaxation's dual variables. When the choice set is bounded, we establish strong duality for the SDP, which allows us to extend the envelope theorem to the value function of the relaxation. This extension yields a marginal price signal for demand, which we use as our pricing mechanism. We demonstrate that under certain conditions-for instance, when the relaxation's right hand sides are linear in demand-the resulting lost opportunity cost is bounded by the relaxation's optimality gap. This result highlights the importance of achieving tight relaxations. The proposed framework applies to nonconvex electricity market problems, including for both direct current and alternating current UC. Our numerical experiments indicate that the SDP relaxations are often tight, reinforcing the effectiveness of the proposed pricing scheme. Across a suite of IEEE benchmark instances, the lost opportunity cost under our pricing scheme is, on average, 46% lower than that of the commonly used fixed-binary pricing scheme. |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2602.15722 |