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on Industrial Organization |
By: | Yi-Chun Chen; Zhengqing Gui |
Abstract: | We apply marginal analysis \`a la Bulow and Roberts (1989) to characterize the revenue-maximizing selling mechanism for a multiproduct monopoly. Specifically, we derive the revenue change due to a price perturbation on any subset of bundles holding the prices of other bundles fixed. In an optimal mechanism, total revenue must not increase with any small price change for bundles with positive demand, nor with a small price decrease for bundles with zero demand. For any symmetric two-dimensional type distribution satisfying mild regularity conditions, the marginal analysis fully characterizes the optimal mechanism, whether the buyer's valuations are additive or exhibit complementarity or substitutability. For general type distributions, the analysis identifies which bundles must carry positive or zero demand and provides conditions under which randomization is necessary. |
Date: | 2025–06 |
URL: | https://d.repec.org/n?u=RePEc:arx:papers:2506.06763 |
By: | Nicolas Schutz; Anton Sobolev |
Abstract: | We study the competitve effects of dual pricing, a vertical restraint that involves charging a distributor different prices for units intended to be resold online versus offline. We develop a model in which a manufacturer contracts with hybrid retailers selling both in-store and online. We find that, by eliminating wasteful price dispersion, dual pricing allows the manufacturer to induce the industry monopoly outcome, whereas uniform pricing does not. Despite this, a ban on dual pricing has negative welfare effects if the online market is small, if the offline consumers' search costs are high, and if the monopoly pass-through is high. |
Keywords: | dual pricing, price dispersion, consumer search, vertical restraints |
JEL: | L13 L42 D43 D83 |
Date: | 2025–03 |
URL: | https://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2025_678v2 |
By: | Robert Clark; Jean-François Houde; Xinrong Zhu |
Abstract: | Previous research highlights persistent differences in national brand market shares across regions, driven by geographic consumer preferences and early entry advantages (Bronnenberg et al. 2007, 2009). This study investigates the extent to which long-term vertical contracts can explain the observed geographic dispersion and persistence of national brand dominance. Using NielsenIQ data from the same product categories as Bronnenberg et al. (2007), we follow Abowd et al. (1999) to decompose the variance in brand shares into Brand × Retailer and Brand × Market effects. Results show that 50% of the variance is explained by retailer effects, compared to 20% by market effects. This suggests that some retailers use vertical contracts that favor a specific brand across all markets in which they compete, such as exclusive-dealing, slotting allowances, or category-captaincy contracts, and that these play a key role in sustaining national brand dominance documented in prior literature. By emphasizing how retailer-specific factors drive observed patterns, we complement demand-side explanations and shift attention to supply-side factors that could affect competition. |
JEL: | L42 L81 |
Date: | 2025–06 |
URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33906 |
By: | Basak, Debasmita |
Abstract: | It is commonly believed that common ownership deters entry by internalizing market competition which warrants pro-competitive entry regulations. Using a successive oligopoly model with common ownership, we challenge this conventional wisdom. We show that if the downstream sector alone operates under common ownership, entry is always socially excessive, i.e., more firms enter the market than is socially optimal. In contrast, when the upstream sector alone operates under common ownership, entry is socially excessive (insufficient) if the degree of common ownership in the upstream market is reasonably low (high). Finally, when both sectors are characterized by common ownership, entry is socially excessive if the degree of ownership in the downstream market is stronger than that in the upstream market. Therefore, our findings provide a rationale for anti-competitive, rather than pro-competitive entry regulations. |
Keywords: | Common Ownership, Excessive Entry, Insufficient Entry, Successive Oligopoly |
JEL: | D43 L11 L13 L22 |
Date: | 2025 |
URL: | https://d.repec.org/n?u=RePEc:zbw:esprep:319538 |
By: | Daron Acemoglu; Asuman Ozdaglar; James Siderius |
Abstract: | We consider the political consequences of the use of artificial intelligence (AI) by online platforms engaged in social media content dissemination, entertainment, or electronic commerce. We identify two distinct but complementary mechanisms, the social media channel and the digital ads channel, which together and separately contribute to the polarization of voters and consequently the polarization of parties. First, AI-driven recommendations aimed at maximizing user engagement on platforms create echo chambers (or “filter bubbles”) that increase the likelihood that individuals are not confronted with counter-attitudinal content. Consequently, social media engagement makes voters more polarized, and then parties respond by becoming more polarized themselves. Second, we show that party competition can encourage platforms to rely more on targeted digital ads for monetization (as opposed to a subscription-based business model), and such ads in turn make the electorate more polarized, further contributing to the polarization of parties. These effects do not arise when one party is dominant, in which case the profit-maximizing business model of the platform is subscription-based. We discuss the impact regulations can have on the polarizing effects of AI-powered online platforms. |
JEL: | L10 M37 P40 |
Date: | 2025–06 |
URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33892 |
By: | Shirsho Biswas; Hema Yoganarasimhan; Haonan Zhang |
Abstract: | The rapid rise of e-commerce has transformed consumer behavior, prompting questions about how online adoption influences offline shopping. We examine whether consumers who adopt online shopping with a retailer become more price-sensitive in their subsequent offline purchases with that retailer. Using transaction-level data from a large Brazilian pet supplies retailer operating both online and offline, we compare ''adopters'' - customers who began shopping online after a period of offline-only purchasing - with ''non-adopters'' who remained offline-only. We estimate a discrete choice logit model with individual-level heterogeneity, using a novel algorithm to handle high-dimensional fixed effects and address price endogeneity. We then apply a staggered difference-in-differences approach to the estimated price elasticities and obtain the Average Treatment Effect on the Treated (ATT). We find that offline price sensitivity increases significantly after online adoption in three out of four product categories, particularly in items with low switching costs, such as pet hygiene. Counterfactual pricing simulations show that incorporating these behavioral spillovers into pricing strategies can increase firm profits by up to 4.1%. These results underscore the importance of recognizing cross-channel effects in consumer behavior and contribute to the literature on pricing and multichannel retailing by identifying online adoption as a key driver of offline price sensitivity. |
Date: | 2025–06 |
URL: | https://d.repec.org/n?u=RePEc:arx:papers:2506.15103 |
By: | Kiho Yoon |
Abstract: | With a multilateral vertical contracting model of media markets, we examine upstream competition and contractual arrangements in content provision. We analyze the trade of content by the Nash bargaining solution and the downstream competition by the Hotelling location model. We characterize the equilibrium outcomes and the contractual arrangements for various vertical structures. We show that the possibility of exclusive contracts rises when the value of the premium content increases, the degree of horizontal differentiation in the downstream market decreases, the importance of advertising revenue decreases, and the relative bargaining power of upstream firm decreases. |
Date: | 2025–06 |
URL: | https://d.repec.org/n?u=RePEc:arx:papers:2506.15063 |
By: | Yang Xiao; Hisashi Kurata; Ting Wang |
Abstract: | Dual-channel closed-loop supply chains (DCCLSCs) play a vital role in attaining both sustainability and profitability. This paper introduces a game-theoretic model to analyze optimal pricing strategies for primary and replacement customers within three distinct recycling frameworks: manufacturer-led, retailer-led, and collaborative recycling. The model identifies equilibrium pricing and subsidy decisions for each scenario, considering the primary customer's preference for the direct channel and the specific roles in recycling. The findings indicate that manufacturers tend to set lower prices in direct channels compared to retailers, aiming to stimulate demand and promote trade-ins. Manufacturer-led recycling initiatives result in stable pricing, whereas retailer-led recycling necessitates higher subsidies. Collaborative recycling strategies yield lower prices and an increase in trade-ins. Primary customers' preference for the direct channel significantly impacts pricing strategies, with a stronger preference leading to lower direct-channel prices and higher manufacturer subsidies. This paper contributes to the field by incorporating primary customer channel preferences and diverse recycling frameworks into DCCLSC pricing models. These insights assist manufacturers and retailers in adjusting pricing strategies and trade-in incentives according to primary customer preferences and associated costs, thereby enhancing profitability and recycling efficiency within DCCLSCs. |
Date: | 2025–05 |
URL: | https://d.repec.org/n?u=RePEc:arx:papers:2505.21787 |
By: | Shinnosuke Kawai; Kuninori Nakagawa |
Abstract: | This paper explores price competition with exogenous product differentiation in a spatial model similar to that of Nakagawa (2023). Nakagawa examines product differentiation within the framework of Varian (1980). Nakagawa integrates Varian's concept of uninformed consumers, who lack complete price information, into a spatial model based on Hotelling (1929). While Nakagawa placed informed consumers at the center of the Hotelling line and used quadratic transportation costs, our study employs a uniform distribution of informed consumers and linear transportation costs. This approach enables a more direct comparison with established spatial competition literature, particularly Osborne and Pitchik (1987). We classify equilibrium candidates and characterize the parameter regions corresponding to each equilibrium. There is no pure equilibrium in the region where we construct mixed strategy equilibria. Furthermore, we compare the expected profit in the equilibrium of our model with the findings of Osborne and Pitchik (1987). Finally, we discuss the impact of captive buyers on the nature of spatial competition. |
Date: | 2025–05 |
URL: | https://d.repec.org/n?u=RePEc:arx:papers:2505.06961 |
By: | Wu, Shuping (Beijing Jiaotong University); Stevenson, Simon (Strome College of Business, Old Dominion University); Young, James (University of Oklahoma); Yang, Zan (Department of Real Estate and Construction Management, Royal Institute of Technology) |
Abstract: | Urban land in China is state-owned and primarily allocated by the government via a two-stage auction process. Compared with auction mechanisms in other markets and countries, China’s two-stage land auctions have a unique structure in that the first stage is an open-bid survival auction with a fixed deadline. This paper uses bid history data for land auctions in Beijing to analyze jump bidding behavior, investigating its effects on subsequent bidding and the final sale price achieved. We find that jump bidding increases the likelihood that the next bid is also a jump bid and that it accelerates the bid submission process in the first stage. Furthermore, jump bidding generates two-way effects on the land price. While it prevents lower-value bidders from entering the second stage, it can also trigger a ‘jump war’ between higher-value bidders. The findings in this paper suggest alternative bidding strategies within the two-stage auction structure and also provide an auction-based behavioral explanation for urban land price dynamics in China. |
Keywords: | land price; land auction structure; jump bidding; sniping; bid history data |
JEL: | D44 L11 R32 |
Date: | 2025–06–25 |
URL: | https://d.repec.org/n?u=RePEc:hhs:kthrec:2025_005 |