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on Industrial Organization |
| By: | Volker Nocke; Andrew Rhodes |
| Abstract: | This paper studies optimal merger remedies when an antitrust authority has a consumer surplus standard. Remedies are modeled as asset divestitures which make the firm receiving the assets more efficient, at the expense of the merged firm. If a merger affects only a single market, asset divestitures on their own are not sufficient for the merger to be implemented--synergies are also required. As the market becomes less competitive, it is less likely that any merger is implemented; conditional on implementing one, it is more likely that divestitures are used to create a new competitor. If instead a merger affects several different markets, and the authority cares about consumer surplus aggregated over all markets, then it is optimal to divest as many assets as feasible in some markets and no assets in all remaining markets. The optimal merger proposal is more likely to entail divestitures in more competitive markets. |
| Keywords: | Horizontal mergers, divestitures, Cournot, merger control |
| JEL: | L13 L40 D43 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2025_680 |
| By: | Maggie E.C. Jones; Trevon D. Logan; David Rosé; Lisa D. Cook |
| Abstract: | This paper studies consumer discrimination while taking into consideration the role of competition between firms, providing one of the first large-scale comprehensive analyses of consumer discrimination and market forces. We formally model consumer discrimination, where some majority-group members dislike consuming alongside minorities. In equilibrium, the non-discriminatory-to-discriminatory firm ratio is proportional to the minority-to-majority consumer ratio. Empirically, we examine how local changes in the composition of consumers altered business incentives to discriminate during the decades leading up to the passage of the Civil Rights Act of 1964. Using a nationwide data source of non-discriminatory businesses in three different industries and a research design that leverages two sources of exogenous variation in the ratio of Black-to-White consumers, we find that increases in non-discrimination were concentrated in the least competitive markets, where the threat of defection by White consumers to competing firms was lowest. We assemble new data on over 25, 000 prices charged at establishments by discriminatory status and show that non-discriminatory firms charged higher prices than discriminatory firms in the same local market. Consistent with our theoretical model, this finding arises because the effects of greater competition among the more numerous discriminatory firms outweighed the discrimination markup. The results imply that monopoly power blunted the influence of consumer preferences and that Black consumers were harmed through higher prices in the non-discriminatory market. |
| JEL: | L11 L83 N32 N82 |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33547 |
| By: | Eric Darmon; Thomas LE TEXIER; Zhiwen LI; Thierry Pénard |
| Abstract: | Antitrust authorities are concerned with the dominant market position of Tech Giants such as Google, Meta, or Amazon. These digital conglomerates are characterized by platform-based business models and multimarket contact (MMC). In traditional one-sided markets, theory and empirical evidence show that MMC tends to relax competition. In this paper, we revisit this result in the context of platform competition with competitive bottleneck and cross-market externalities, and provide new insights into the impact of MMC on platform competition. In this context, when platforms charge the two groups of users (bilateral pricing), we find that MMC always decreases the profitability of platforms regardless of the nature and magnitude of cross-market externalities. Then we consider the case in which platforms can only charge one group of users (unilateral pricing). When platforms charge the side on which they are not directly competing for users (i.e. the side that is not the competitive bottleneck), MMC may relax competition only if cross-group externalities and cross-market externalities are both sufficiently small. From a competition policy perspective, our paper provides insights into how antitrust authorities should review conglomerate mergers in digital markets and assesses the effects of the diversification strategies of digital platforms in the context of cross-market externalities and competitive bottleneck. |
| Keywords: | two-sided markets, platform competition, digital markets, multimarket contact, cross-market externalities, competitive bottleneck, competition policy |
| JEL: | D43 L13 L41 L86 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:drm:wpaper:2025-22 |
| By: | Roxana Mihet (Swiss Finance Institute - HEC Lausanne); Kumar Rishabh (University of Lausanne - Faculty of Business and Economics (HEC Lausanne); University of Basel, Faculty of Business and Economics); Orlando Gomes (Lisbon Polytechnic Institute - Lisbon Accounting and Business School) |
| Abstract: | Artificial intelligence (AI) is transforming productivity and market structure, yet the roots of firm dominance in the modern economy remain unclear. Is market power driven by AI capabilities, access to data, or the interaction between them? We develop a dynamic model in which firms learn from data using AI, but face informational entropy: without sufficient AI, raw data has diminishing or even negative returns. The model predicts two key dynamics: (1) improvements in AI disproportionately benefit data-rich firms, reinforcing concentration; and (2) access to processed data substitutes for compute, allowing low-AI firms to compete and reducing concentration. We test these predictions using novel data from 2000–2023 and two exogenous shocks—the 2006 launch of Amazon Web Services (AWS) and the 2017 introduction of transformer-based architectures. The results confirm both mechanisms: compute access enhances the advantage of data-intensive firms, while access to processed data closes the performance gap between AI leaders and laggards. Our findings suggest that regulating data usability—not just AI models—is essential to preserving competition in the modern economy. |
| JEL: | L13 L41 O33 D83 E22 L86 |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:chf:rpseri:rp2537 |
| By: | Dongjin Hwang; Ilwoo Hwang |
| Abstract: | We study a model of competitive information design in an oligopoly search market with heterogeneous consumer search costs. A unique class of equilibria -- upper-censorship equilibria -- emerges under intense competition. In equilibrium, firms balance competitive pressure with local monopoly power granted by search frictions. Notably, firms disclose only partial information even as the number of firms approaches infinity. The maximal informativeness of equilibrium decreases under first-order shifts in the search cost distribution, but varies non-monotonically under mean-preserving spreads. The model converges to the full-disclosure benchmark as search frictions vanish, and to the no-disclosure benchmark as search costs become homogeneous. |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2504.04659 |
| By: | Brayan S. Diaz; Andrea Neyra Nazarrett; Julian Ramirez; Raffaella Sadun; Jorge A. Tamayo |
| Abstract: | Training investments are essential for improving worker and firm productivity, yet their implementation is often hindered by low participation rates and insufficient worker engagement. This study uses data from three firms—a car manufacturer, a quick-service restaurant chain, and a retail company—to show that variation in training participation among employees is closely tied to differences in middle managers’ behavior and practices. Middle managers who actively engage with their employees and emphasize their well-being and development are associated with significantly higher participation in training programs. These managerial differences significantly influence employee performance and absenteeism, especially during periods of organizational change. Together, these findings underscore the importance of middle managers in bridging the gap between centrally designed HR policies and their effective on-the-ground execution. |
| JEL: | J24 L23 M12 M53 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33670 |
| By: | Leonardo Bursztyn (University of Chicago & NBER); Matthew Gentzkow (Stanford University & NBER); Rafael Jiménez-Durán (Bocconi University, IGIER, CESifo, & Chicago Booth Stigler Center); Aaron Leonard; Filip Milojević (University of Chicago); Christopher Roth (University of Cologne, NHH Norwegian School of Economics, Max Planck Institute for Research on Collective Goods, CESifo, & CEPR) |
| Abstract: | Market definition is essential for antitrust analysis, but challenging in settings with network effects, where substitution patterns depend on changes in network size. To address this challenge, we conduct an incentivized experiment to measure substitution patterns for TikTok, a popular social media platform. Our experiment, conducted during a time of high uncertainty about a potential U.S. TikTok ban, compares changes in the valuation of other social apps under individual and collective TikTok deactivations. Consistent with a simple framework, the valuations of alternative social apps increase more in response to a collective TikTok ban than to an individual TikTok deactivation. Our framework and estimates highlight that individual and collective treatments can even lead to qualitatively different conclusions about which alternative goods are substitutes. |
| Keywords: | Markets, Network Goods, Coordination, Collective Interventions |
| JEL: | D83 D91 P16 J15 |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:ajk:ajkdps:363 |
| By: | Ashish Arora; Sharique Hasan; William D. Miles |
| Abstract: | Solving complex problems- in medicine, engineering, and other technological domains- often requires exploring multiple approaches, particularly when significant uncertainty exists about which one will lead to success. Conventional wisdom assumes that having many experimenters independently decide which approaches to pursue increases diversity and, thus, also the chances of finding a solution. However, if experimenters herd toward the most promising approach, this convergence may reduce diversity and thus the likelihood of solving the problem. In this paper, we develop a simple model to show that, holding the total number of experiments constant, markets dominated by a few large-scale experimenters- firms conducting multiple experiments- explore more diverse approaches than markets with many single-shot experimenters. Single-shot experimenters tend to converge on the most promising approach, while multi-experimenters are more likely to diversify to avoid the correlation inherent in pursuing multiple experiments within the same approach. We test our model's predictions using data from pharmaceutical R&D. Our analysis shows that increasing the average number of experiments per firm by one unit raises target diversity by over three standard deviations. In turn, a one-standard deviation increase from the mean in target diversity boosts the likelihood of at least one experiment reaching Phase 1 clinical trials by 25.9 percentage points. Our findings inform policies for the optimal allocation of experiments across firms to maximize approach diversity and market-level success. |
| JEL: | L1 L2 O31 O32 O33 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33682 |
| By: | Domnisoru, Ciprian (Aalto University); Miller, Robert A. (Carnegie Mellon University) |
| Abstract: | Sons succeed their exiting CEO parents more often than daughters. How do entrepreneurial families reach this gender imbalance, and how does it affect the prospects of their firms and their offspring? Using Finnish administrative data on firms linked to population register data on shareholders and their extended families, we trace the steps leading to the succession decision, and its outcomes. We examine fertility patterns, finding evidence of son preference in natural births and adoptions by entrepreneurs. In families that appear to follow son-biased fertility stopping rules, we also find noticeable differences in human capital accumulation between sons and daughters. The transmission of human capital is also mediated by the extent to which women are employed in the industry of the entrepreneur parent. Gaps in income, board membership, and share ownership between sons and daughters of exiting CEOs emerge well before succession. Turning to firm outcomes, we find evidence that other family members, but not the children of exiting CEOs, appear to diminish firm performance relative to the results of professional CEOs. Overall, our results show family succession is a protracted process that begins with the birth of the first child. |
| Keywords: | gender differences, CEO transition, son preference, family firms, human capital |
| JEL: | G32 L25 J13 J24 |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17800 |