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on Industrial Organization |
| By: | Scott Duke Kominers (Harvard Business School Harvard University; Harvard Business Becker Friedman Institute for Research in Economics University of Chicago; Department of Economics Harvard University); Piotr Dworczak (Northwestern University; Group for Research in Applied Economics (GRAPE)) |
| Abstract: | We propose an economic definition of price gouging: Price gouging occurs in a competitive market when lowering the price from the market-clearing level would increase total Utilitarian welfare. We then use price-theoretic tools to characterize determinants of price gouging in a setting with income heterogeneity and non-quasi-linear preferences that induce a motive to redistribute across agents. The circumstances under which price gouging occurs in our framework align with the contexts covered by existing anti‒price gouging laws. By proposing a definition of price gouging that does not appeal to any non-economic notions of (un)fairness or excess, we hope to provide a pathway for follow-up theoretical and empirical research. |
| Keywords: | price gouging, price control, market design |
| JEL: | D47 D63 D82 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:fme:wpaper:104 |
| By: | Enrico De Monte; Bertrand Koebel |
| 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: | L11 L60 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ulp:sbbeta:2025-01 |
| By: | Junjie Chen; Takuro Yamashita |
| Abstract: | An information broker incentivizes consumers to share their information, while designing an information structure to shape the market segmentation. The information broker is a metaphor for an Internet platform that matches consumers with retailers. We are interested in a market with heterogeneous retailers and heterogeneous consumers. The optimal broking mechanism consists of a simple threshold-based structure where consumers with strong preferences are assigned to the efficient retailer while consumers with weaker preferences are assigned to the inefficient retailer stochastically. Our analysis suggests that the privacy protection policy may have a stronger impact on less competitive retail markets. |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2503.19539 |
| By: | Amarendra Sharma |
| Abstract: | This paper introduces economists to quantum-inspired approaches for modeling firm behavior in a Cournot Duopoly, designed for accessibility and pedagogical use. We present key quantum concepts -- superposition, entanglement, and quantum search algorithms (Grover's and D\"{u}rr-H\o{}yer's) -- in an intuitive manner, tailored for those without a quantum physics background. These concepts are applied to represent uncertainty, interdependence, and optimization in novel ways, offering fresh perspectives on firm decision-making. By incorporating numerical examples, we illustrate how quantum-inspired models differ from classical Cournot outcomes, highlighting potential advantages in capturing complex strategic interactions. The paper aims to bridge quantum computing and economic theory, providing a foundation for teaching and exploring advanced modeling techniques. |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2504.19420 |
| By: | Cole Wittbrodt |
| Abstract: | Search and matching increasingly takes place on online platforms. These platforms have elements of centralized and decentralized matching; platforms can alter the search process for its users, but are unable to eliminate search frictions entirely. I study a model where platforms can change the distribution of potential partners that an agent searches over and characterize search equilibria on platforms. When agents possess private information about their match characteristics and the platform designer acts as a profit maximizing monopolist, I characterize the optimal platform. If match characteristics are complementary and utility is transferable, I show that the solution to this screening problem is efficient, despite the presence of hidden information and market power. Matching under the optimal platform is perfectly assortative -- there is no equilibrium mismatch. |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2505.00205 |
| By: | Ørpetveit, Andreas (Dept. of Business and Management Science, Norwegian School of Economics) |
| Abstract: | Despite extensive evidence of how competition in the mutual fund industry affects fees and performance outcomes, less is known about its effect on the incentives of market participants. This paper examines how competition drives product development in mutual fund families. The results show that greater industry competition encourages fund families to focus more on enhancing product quality than altering the fund base. Quality development increases performance across family-affiliated funds, ultimately benefiting investors. Based on these results, I argue that competition helps mitigate conflicts of interest associated with the family-based structure of the industry. |
| Keywords: | Mutual funds; mutual fund families; competition; product development |
| JEL: | G11 G20 L10 |
| Date: | 2025–05–07 |
| URL: | https://d.repec.org/n?u=RePEc:hhs:nhhfms:2025_013 |
| By: | Arve, Malin (Dept. of Business and Management Science, Norwegian School of Economics); Dyskeland, Ole Kristian (Dept. of Business and Management Science, Norwegian School of Economics); Foros, Øystein (Dept. of Business and Management Science, Norwegian School of Economics) |
| Abstract: | We analyze competition between two digital platforms selling subscriptions for unlimited access to their content catalogs (e.g., streaming and TV broadcasting platforms). A content provider offers additional content to the platforms. The content provider chooses between offering a revenue sharing contract and a per-consumer wholesale pricing contract towards the platforms, thereby endogenously determining whether its content will be distributed non-exclusively (on both platforms) or exclusively (on one platform). Our model yields clear predictions: In markets with low initial exclusivity, the content provider and both platforms prefer per-consumer wholesale pricing to endogenously promote non-exclusive distribution. Platforms set subscription prices that lead to full consumer singlehoming. Conversely, in markets with high initial exclusivity, all market players prefer a revenue-sharing contract that induces exclusive distribution, with platforms setting prices that encourage some consumers to multihome. |
| Keywords: | Multihoming; incremental pricing; content provision |
| JEL: | L13 L14 L82 |
| Date: | 2025–05–13 |
| URL: | https://d.repec.org/n?u=RePEc:hhs:nhhfms:2025_017 |
| By: | Bracco, Jessica; Brambilla, Irene; Cerimelo, Manuela; César, Andrés; Falcone, Guillermo |
| Abstract: | This paper studies concentration and market power in Chile and Colombia and the role that globalization and automation have had in shaping these two phenomena. Using panels of firm surveys, we compute firm-level markups and industry-level concentration measures. Applying a difference in differences methodology that relies on variation across industries in exposure to robotization technology, import competition from China and tariff declines in US markets due to the signature of free trade agreements, we study the causal effects of these shocks on market power and concentration. We find that, while robotization technology has reduced markups on average, it has increased markups and total factor productivity of top industry firms; that the pro-competitive effect of Chinese imports has indeed led to a decrease in market power of domestic firms; and that increased export opportunities due to free trade agreements have led to an increase in market power, with interesting heterogeneities across the two countries. |
| Keywords: | Mark-ups;Market concentration;trade agreements;Robotization |
| JEL: | L11 F14 F61 O33 |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:idb:brikps:14099 |