nep-ind New Economics Papers
on Industrial Organization
Issue of 2025–04–28
seven papers chosen by
Kwang Soo Cheong, Johns Hopkins University


  1. Welfare Implications of Supplier Encroachment with Consumer Shopping Costs By Stéphane Caprice; Shiva Shekhar
  2. Cournot competition with heterogenous firms, welfare and misallocation By De Monte, Enrico; Koebel, Bertrand M.
  3. The Limits of Media See-Saws: Ad-Funded Platform Mergers Can Harm Both Sides By Shiva Shekhar; Radostina Shopova
  4. Privacy Regulations, Consumer Empowerment, and Versioning By Chongwoo Choe; Jiajia Cong; Noriaki Matsushima; Shiva Shekhar
  5. Competition in the Colombian Banking Sector By Perez-Reyna, David; Rodríguez Barraquer, Tomás; Tovar, Jorge
  6. Productivity and Market Power: The Case of Manufacturing Firms of Peru 2002-2019 By Tello, Mario D.; Tello-Trillo, Daniel Sebastian; Rojas Lara, Pablo Enrique
  7. Market Power, Industry Concentration and Trade Liberalization: Evidence from Costa Rica By Córdoba Solano, Daniela; Gomez-Trejos, Felipe; Vindas Quesada, Alberto

  1. By: Stéphane Caprice; Shiva Shekhar
    Abstract: In this paper, we study supplier encroachment in competition with multi-product retailers and its effects on retail profits under endogenous consumer shopping behavior. We find that supplier encroachment (weakly) increases both supplier and retailer profits, as the retailer benefits from better consumer segmentation and price discrimination despite (weakly) higher wholesale prices. The effect of encroachment on consumers is more nuanced: when the competitive product’s value is high, consumers benefit. Instead, when the value of the competitive product is low, consumers buying exclusively from the multi-product retailer are worse off while consumers who mix and match across stores are better off. Overall, supplier encroachment can improve market outcomes if the value of the supplier’s product offering is sufficiently high.
    Keywords: supplier encroachment, vertical contracting, downstream competition, consumer shopping costs.
    JEL: L13 L22 L42 L81
    Date: 2025
    URL: https://d.repec.org/n?u=RePEc:ces:ceswps:_11767
  2. By: De Monte, Enrico; Koebel, Bertrand M.
    Abstract: This paper characterizes the short- and long-run Cournot equilibrium with heterogeneous firms and stochastic technological change. In our model, firms have different technologies with heterogeneous fixed and variable costs and various degrees of markups. In a framework with homogeneous firms, Mankiw and Whinston (1986) show that the long-run Cournot equilibrium may be inefficient due to too many entries. We extend their result to the case of heterogeneous firms and show that higher industrial concentration of production is welfare improving. Using administrative data for French manufacturing firms, we estimate a wide degree of unobserved heterogeneity in both fixed and variable costs, and find a negative correlation between both. Our simulation results show that markups surprisingly only induce slight inefficiencies in the allocation of output, implying that it is almost compatible with welfare maximisation. Instead, firms' choice to employ heterogeneous and often inefficient technologies turns out to harm more substantially welfare and aggregate output.
    Keywords: cost function, fixed cost, marginal cost, returns to scale, technological change, misallocation, markups, nonlinear least squares, panel data
    JEL: C33 L11 L60
    Date: 2025
    URL: https://d.repec.org/n?u=RePEc:zbw:zewdip:312579
  3. By: Shiva Shekhar; Radostina Shopova
    Abstract: We study the welfare effects of a merger between ad-funded platforms facing elastic consumer demand. We show that advertising fees as well as quality investment levels by the platforms fall post-merger. Interestingly, despite the lower advertising fees, advertisers may be worse off when their value of interacting with consumers is high enough. The intuition for this result is that the decrease in quality investments post-merger reduces overall consumer participation. Thus, studying innovation incentives is important in these ad-funded markets as the well-known surplus see-saw result may not hold making both sides of the markets worse while the merged entity emerges as the sole winner.
    Keywords: Ad-funded platforms, two-sided markets, horizontal mergers, innovation, quality.
    JEL: D42 D43 L12 L13 L22 L86
    Date: 2025
    URL: https://d.repec.org/n?u=RePEc:ces:ceswps:_11768
  4. By: Chongwoo Choe; Jiajia Cong; Noriaki Matsushima; Shiva Shekhar
    Abstract: Privacy regulations like the General Data Protection Regulation aim to empower consumers with greater transparency and control over their personal data. In response, firms may exercise price discrimination in the form of versioning. This paper studies how these two aspects of privacy regulation—consumer empowerment and versioning—affect market outcomes and welfare. We develop a model where firms earn revenue from sales of service and data monetization, and consumers differ in their preferences for the service and privacy costs incurred when sharing data with the firm. In a monopoly, the firm is better off after regulation because its ability to price discriminate outweighs the effects of increased consumer empowerment. In a duopoly, however, greater consumer choice after regulation intensifies competition, as firms have more ways to deviate from mutually beneficial outcomes. This results in the firm with more data monetization earning smaller profit, while the firm with less data monetization earns larger profit. However, the industry profit as a whole decreases and consumer surplus increases after the regulation. Therefore, the regulation’s impact is nuanced and depends on the market structure. We also examine the regulatory impact on firms’ optimal data-driven revenue models and market entry.
    Keywords: privacy regulation, privacy management, versioning, monopoly, competition.
    JEL: D18 D61 K24 L12 L51 L86
    Date: 2025
    URL: https://d.repec.org/n?u=RePEc:ces:ceswps:_11769
  5. By: Perez-Reyna, David; Rodríguez Barraquer, Tomás; Tovar, Jorge
    Abstract: In this paper, we analyze the competition in the Colombian banking sector using bank-level monthly balance sheet information. We estimate the changes in measures of market power due to the exogenous introduction of a liquidity regulation. Our results suggest that introducing a net stable funding ratio increased the Lerner index in the short term, thus signaling a higher exercise of market power. We rationalize these changes in a simple theoretical model that allows us to analyze the tightening of liquidity requirements for banks. Our empirical results are consistent with banks with higher market power in the loan market than in the deposit market.
    Keywords: Competition;Banking sector;Liquidity regulation
    JEL: E44 G21 L13
    Date: 2025–03
    URL: https://d.repec.org/n?u=RePEc:idb:brikps:14045
  6. By: Tello, Mario D.; Tello-Trillo, Daniel Sebastian; Rojas Lara, Pablo Enrique
    Abstract: This paper uses seven standard market power indicators (price-cost margin, and six drawn upon the production approach) to estimate the effect market power on the rate of change of total factor productivity for a sample of formal manufacturing firms of Peru for the period 2002-2019. After applying exogeneity tests and implementing panel data with fixed effects instrumental variable method, the results are not clear about the causal relationship between market power and firms' TFP. However, when the Double-Debiased machine learning (DML) causal method is applied for fixed effects panel data with and without instruments, firms market power robustly seems not to affect their respective total factor productivity regardless of the market power indicators and instruments used. The paper also presents four examples which are consistent with this causal result suggesting that the relationship between market power and productivity needs to be analyzed on a case-by-case basis considering the product development of sectors, the influence and activities of firms and economic groups in the domestic economy and foreign markets, and the level of development of the country's productive structure.
    Keywords: Market power;total factor productivity;Causal machine learning
    JEL: D24 L11 L60
    Date: 2025–03
    URL: https://d.repec.org/n?u=RePEc:idb:brikps:14044
  7. By: Córdoba Solano, Daniela; Gomez-Trejos, Felipe; Vindas Quesada, Alberto
    Abstract: Research about trade liberalization's impact on markups has focused on manufacturing due to data availability considerations. How do these effects vary across sectors? Which industries become more and less competitive as trade barriers are eliminated? We leverage firm-level tax records from the universe of formal-sector businesses in Costa Rica with the 2009 trade liberalization as a natural experiment to evaluate its industry-specific effects on markups across all industries. We find negative effects on markups in agriculture, mining, electricity, water supply, and business services. Alternatively, the reform led to markup increases in accommodations and food services, information and communications, real estate, finance and insurance, and education, health, and social work. We do not observe statistically significant effects in manufacturing, transportation and storage, construction, and wholesale and retail trade. Our findings represent a more comprehensive evaluation of the potential pro-competitive effects from trade liberalization than existing studies exclusively focusing on manufacturing firms.
    JEL: D22 L11 F13 F14
    Date: 2025–02
    URL: https://d.repec.org/n?u=RePEc:idb:brikps:14003

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