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on Industrial Organization |
| By: | Khan, Abhimanyu; Pradhan, Sheersh |
| Abstract: | Empirical studies on the effect of internet on market prices report that market prices have not always reduced in response to increased competition that is induced by the easily and relatively costlessly available market information. In this paper, we provide an explanation for why prices of all goods may not reduce, and in fact, price of some goods may even increase in presence of more market information. Market information not only induces stiffer competition amongst sellers but also makes for better matches between consumers and producers. While the former feature has a tendency to reduce prices, the latter feature may in fact cause prices to rise. The direction in which prices change as more information becomes available depends on the balance of these forces. We analyse this in context of a differentiated market, and characterise how prices change in response to freely available market information. |
| Keywords: | price competition, product match, information, differentiated market |
| JEL: | D43 L13 |
| Date: | 2025–02–01 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:123522 |
| By: | Rhodes, Andrew; Zhou, Jidong; Zhou, Junjie |
| Abstract: | This paper provides a framework in which a multiproduct ecosystem competes with many single-product firms in both price and innovation. The ecosystem is able to use data collected on one product to improve the quality of its other products. We study the impact of data regulation which either restricts the ecosystem’s cross-product data usage, or which requires it to share data with small firms. Each policy induces small firms to innovate more and set higher prices; it also dampens data spillovers within the ecosystem, reduces the ecosystem’s incentive to collect data and innovate, and potentially increases its prices. As a result, data regulation has an ambiguous impact on consumers, and is more likely to benefit consumers when small firms are relatively more efficient in innovation. A data cooperative among small firms, which helps them to share data with each other, does not necessarily benefit small firms and can even harm consumers. |
| Keywords: | digital ecosystems; innovation; data regulation; data cooperative |
| JEL: | D43 L13 L51 |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:tse:wpaper:130354 |
| By: | Ke Yuan; Yaoxin Liu; Shriyesh Chandra; Rishav Roy |
| Abstract: | This project focuses on analyzing retail market trends using historical sales data, search trends, and customer reviews. By identifying the patterns and trending products, the analysis provides actionable insights for retailers to optimize inventory management and marketing strategies, ultimately enhancing customer satisfaction and maximizing revenue. |
| Date: | 2025–01 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2502.00024 |
| By: | Maryam Farboodi; Nima Haghpanah; Ali Shourideh |
| Abstract: | We ask when additional data collection by a monopolist to engage in price discrimination monotonically increases or decreases weighted surplus. To answer this question, we develop a model to study endogenous market segmentation subject to residual uncertainty. We give a complete characterization of when data collection is good or bad for surplus, which consists of a reduction of the problem to one with only two demand curves, and a condition for the two-demand-curves case that highlights three distinct effects of information on welfare. These results provide insights into when data collection and usage for price discrimination should be allowed. |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2502.03641 |
| By: | Koetter, Michael; Nguyen, Huyen; Uzonwanne, Sochima |
| Abstract: | This paper examines how firms' exposure to supply chain disruptions (SCD) affects firm outcomes in the European Union (EU). Exploiting heterogeneous responses to workplace closures imposed by sourcing countries during the pandemic as a shock to SCD, we provide empirical evidence that firms in industries relying more heavily on foreign inputs experience a significant decline in sales compared to other firms. We document that external finance, particularly bank financing, plays a critical role in mitigating the effects of SCD. Furthermore, we highlight the unique importance of bank loans for small and solvent firms. Our findings also indicate that highly diversified firms and those sourcing inputs from less distant partners are less vulnerable to SCD. |
| Keywords: | bank debt, external finance, firm sales, supply chains, supply chain disruptions |
| JEL: | D22 F14 G21 L14 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:iwhdps:311193 |
| By: | Alex Chernoff; Allen Head; Beverly Lapham |
| Abstract: | We study the determination of market power at the firm and industry levels when heterogeneous firms compete for sales to ex ante homogeneous buyers in a market with both directed and random search and free entry of firms that differ in productivity. Search and the distribution of productivity across active firms generate distributions of equilibrium prices and markups that we relate to variation in the elasticity of demand at the firm level. With directed search at the outset, a shock that raises the matching rate for buyers improves conditions for them and tends to lower markups. Random matching follows sequentially, and the same shock can lower the productivity threshold for operation, pushing up prices and markups for all firms. The net effect on market power can be ambiguous depending on the forces driving matching rates. The distributions of prices and markups respond in equilibrium to changes in common and firm-specific costs, consumption utility, and fixed costs of both entry and operation. We characterize the differential pass-through of these changes to prices and markups at both the firm and market levels. |
| Keywords: | Inflation and prices; Service sector |
| JEL: | D21 D43 E31 L11 |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:bca:bocawp:25-7 |
| By: | Winston Wei Dou; Shane A. Johnson; Wei Wu |
| Abstract: | Using local natural disasters as a quasi-experimental setting, we show that heightened distress risk in shocked firms drives both these firms and their unshocked competitors to cut profit margins by about 0.8 percentage points. These reductions stem from predatory pricing, inventory liquidation, and weakened tacit collusion in product markets. Distress propagates horizontally as unshocked competitors rationally respond almost 1-for-1 with profit-margin cuts, significantly increasing their distress risk. Spillovers are more pronounced in tradable industries or those with higher barriers to leadership, larger inventories, greater price flexibility, or tighter financial constraints, revealing a novel channel for distress propagation across the economy. |
| JEL: | G32 G33 L11 |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33463 |
| By: | Jackie M.L. Chan; Michael Irlacher; Michael Koch; Luca Macedoni |
| Abstract: | This paper reveals a new determinant of wage markdowns at the firm level, namely, the product scope. Using matched employer-employee data on Danish manufacturing firms, we document a negative elasticity between wages and firm scope, which is of a similar magnitude but opposite sign as the firm-size wage premium. We rationalize the wage discount using a theory where workers value the opportunity to switch product lines as an amenity. Multiproduct firms exercise their monopsony power to offer lower wages. Our findings have important implications for understanding labor market dynamics in times of rising concentration from the contribution of large multiproduct firms. |
| Keywords: | multiproduct firms, monopsony power, wages, amenities, labor share |
| JEL: | J31 J42 L25 D21 F10 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11674 |
| By: | Silva, Jose I.; Okabe, Tomohito; Urzay, Sergi |
| Abstract: | This study examines the relationship between firms’ market power, captured by product markups and labor markdowns, and the labor share within European firms. Using firm-level data from the CompNet database, we develop a microeconomic framework linking the labor share to firms’ market power. Empirical results show that labor markdowns reduce the labor share, while product markups have a hump-shaped effect on it. Specifically, moderate increases in product markups initially lead to a rise in the labor share. However, as markups reach higher levels, firms with significant pricing power increasingly exercise monopsony power over their workers, amplifying markdowns and suppressing labor costs. Additionally, the analysis uncovers substantial cross-country heterogeneity in the relationship between markups, markdowns, and the labor share. |
| Keywords: | product markup, labor markdown, firms’ labor share. |
| JEL: | D21 D22 J31 L12 |
| Date: | 2025–01–24 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:123442 |