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on Industrial Organization |
| By: | Frédéric Marty; Thierry Warin |
| Abstract: | This article examines the competitive implications of algorithmic pricing in digital markets. While algorithmic pricing can enhance market efficiency through real-time adjustments, personalized offers, and inventory optimization, it also raises substantial risks, including tacit collusion, discriminatory pricing, market segmentation, and exploitative consumer manipulation. Drawing on theoretical models, simulations, and emerging empirical evidence, the brief explores how algorithmic strategies may lead to supra-competitive prices without explicit coordination, particularly in oligopolistic or data-rich environments. It also highlights how common algorithm providers, shared data sources, and learning dynamics can undermine competition. Special attention is given to the challenges posed by loyalty penalties, ecosystem lock-in, and granular predatory pricing. The paper concludes with a set of policy recommendations emphasizing updated enforcement tools, transparency mechanisms, ex ante regulation for dominant platforms, and a coordinated approach to digital market oversight that balances innovation with consumer protection. Cet article examine les implications concurrentielles de la tarification algorithmique sur les marchés numériques. Si la tarification algorithmique peut améliorer l'efficacité du marché grâce à des ajustements en temps réel, des offres personnalisées et une optimisation des stocks, elle présente également des risques importants, notamment la collusion tacite, la tarification discriminatoire, la segmentation du marché et la manipulation abusive des consommateurs. S'appuyant sur des modèles théoriques, des simulations et des données empiriques émergentes, cet article explore comment les stratégies algorithmiques peuvent conduire à des prix supraconcurrentiels sans coordination explicite, en particulier dans les environnements oligopolistiques ou riches en données. Il souligne également comment les fournisseurs d'algorithmes communs, les sources de données partagées et la dynamique d'apprentissage peuvent nuire à la concurrence. Une attention particulière est accordée aux défis posés par les pénalités de fidélité, le verrouillage de l'écosystème et les prix prédateurs granulaires. L'article conclut par un ensemble de recommandations politiques mettant l'accent sur la mise à jour des outils d'application, les mécanismes de transparence, la réglementation ex ante des plateformes dominantes et une approche coordonnée de la surveillance du marché numérique qui concilie innovation et protection des consommateurs. |
| JEL: | L41 D43 L13 K21 G18 |
| Date: | 2025–08–04 |
| URL: | https://d.repec.org/n?u=RePEc:cir:circah:2025pr-09 |
| By: | Kenneth R. Ahern |
| Abstract: | Multinational firms play a pivotal role in the global economy, yet economic and finance research has largely examined them in isolation. Economic theory focuses on trade and multinational activity but gives relatively little attention to cross-border mergers, while finance research emphasizes empirical studies of mergers but rarely integrates broader economic theories. This chapter aims to synthesize these two literatures into a unified framework for understanding multinational firms and cross-border mergers. The discussion is organized around the decision-making process of multinational firms, from choosing to operate internationally to selecting between greenfield investment and mergers. This framework reveals the theoretical and empirical evidence on the drivers of multinational production, including productivity gains, knowledge transfers, and market frictions. The findings highlight the commonality between the two literatures, but also suggests that greater integration between economic theory and finance research will generate a deeper understanding of the role of multinational firms in the global economy. |
| JEL: | F10 F12 F14 F23 G34 G41 L41 L44 O32 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34067 |
| By: | Martin Obradovits; Markus Walzl |
| Abstract: | Consumers increasingly value the environmental and social responsibility of the production processes used by firms, yet these processes often remain unobservable, even after consumption. In this paper, we develop a simple model to examine firms’ technology choices and subsequent price competition in markets for such label credence goods with hidden process attributes. Using a multi-sender signaling framework, we show that in the payoff-dominant equilibrium, firms can partially signal their production choices and avoid Bertrand competition when at least one firm adopts a green technology. Surprisingly, increasing consumers’ environmental concern or eliminating the information asymmetry may reduce social welfare by discouraging green production. |
| Keywords: | label credence goods, technology choice, asymmetric information, price competition, signaling, green production |
| JEL: | D82 D83 L13 L15 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:jku:econwp:2025-11 |
| By: | Tomaso Duso; Joseph E. Harrington Jr.; Carl Kreuzberg; Geza Sapi |
| Abstract: | Competition authorities increasingly rely on economic screening tools to identify markets where firms deviate from competitive norms. Traditional screening methods assume that collusion occurs through secret agreements. However, recent research highlights that firms can use public announcements to coordinate decisions, reducing competition while avoiding detection. We propose a novel approach to screening for collusion in public corporate statements. Using natural language processing, we analyze more than 300, 000 earnings call transcripts issued worldwide between 2004 and 2022. By identifying expressions commonly associated with collusion, our method provides competition authorities with a tool to detect potentially anticompetitive behavior in public communications. Our approach can extend beyond earnings calls to other sources, such as news articles, trade press, and industry reports. Our method informed the European Commission’s 2024 unannounced inspections in the car tire sector, prompted by concerns over price coordination through public communication. |
| Keywords: | Communication, Collusion, NLP, Screening, Text Analysis |
| JEL: | C23 D22 L1 L4 L64 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:diw:diwwpp:dp2131 |
| By: | Victor (Xucheng); CHEN |
| Abstract: | This study investigates the relationship between innovation activities and firm-level productivity among early-stage high-tech startups in China. Using a proprietary dataset encompassing patent records, R&D expenditures, capital valuation, and firm performance from 2020 to 2024, we examine whether and how innovation, measured by patents and R&D input, translates into economic output. Contrary to established literature, we find that patent output does not significantly contribute to either income or profit among the sampled firms. Further investigation reveals that patents may primarily serve a signaling function to external investors and policymakers, rather than reflecting true innovative productivity. In contrast, R&D expenditure shows a consistent and positive association with firm performance. Through mechanism analysis, we explore three channels (organizational environment, employee quality, and policy-driven incentives) to explain the impact of R&D, identifying capital inflow and valuation as key drivers of R&D investment. Finally, heterogeneity analysis indicates that the effects of R&D are more pronounced in sub-industries such as smart terminals and digital creativity, and for firms based in Shenzhen. Our findings challenge the prevailing assumption that patent output is a universal indicator of innovation success and underscore the context-dependent nature of innovation-performance linkages in emerging markets. |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2507.18227 |
| By: | Jan Malek; Jo Seldeslachts; Reinhilde Veugelers |
| Abstract: | This paper provides empirical evidence on which M&A deals spur innovation, and which stifle it. To do so, we consider not only the product market position of the acquiring firm, but also the position of both target and acquirer in the technology space. Focusing on the antidiabetic drugs market, our dataset tracks the lifecycle and patenting of all individual antidiabetic projects in development between 1997 and 2017. We show that most terminations of acquired projects occur while the projects are still far from product market entry. Nevertheless, a number of these early-stage acquisitions have a positive impact on innovation. These cases arise when incumbents acquire projects close to their own projects in product markets, but only if these projects are also close in technology markets. Those deals are associated with increased subsequent patenting, which is consistent with the exploitation of technological synergies. Our results point to the crucial role of combining both product market and technology market positions in assessing the innovation effects of pharmaceutical M&As. |
| Keywords: | M&As, innovation, R&D, pharmaceutics, technology, novelty, patents |
| Date: | 2025–07–11 |
| URL: | https://d.repec.org/n?u=RePEc:ete:msiper:768578 |
| By: | Zack Cooper; Stuart V. Craig; Aristotelis Epanomeritakis; Matthew Grennan; Joseph R. Martinez; Fiona Scott Morton; Ashley T. Swanson |
| Abstract: | This paper empirically analyzes the effects of mergers between complementary firms on competition and pricing. As these non-horizontal mergers have become more common, there is increasing interest in evaluating both potential efficiencies such as eliminating double marginalization and potential anticompetitive effects such as foreclosure and recapture. The mergers we study – hospital acquisitions of physician practices – have reshaped the $1 trillion US physician industry, nearly doubling the share of physicians working for hospitals between 2008 and 2016. We combine novel data and machine learning algorithms to identify a large number of integration events, spanning a wide range of markets with different competitive circumstances. We merge the integration events with claims data from a large national insurer to study their effects on prices. Focusing on childbirths, the most ubiquitous admission among the privately insured, we find that, on average, these mergers led to price increases for hospitals and physicians of 3.3% and 15.1%, respectively, with no discernible effects on quality measures. Using demand estimation to characterize substitution patterns for both physicians and hospitals, we construct tests that demonstrate price increases are larger among transactions with greater scope for foreclosure and recapture. Our estimates suggest that the costs of these mergers of hospitals and physicians have been substantial, and our mechanism tests offer guidance in predicting where the anticompetitive effects of non-horizontal mergers are likely to be strongest. |
| JEL: | D4 I11 L1 L4 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34039 |
| By: | Yiqun Chen; Marcus Dillender |
| Abstract: | In contracting out, monitoring is an important policy tool to extract information on firm quality and incentivize quality provision. This paper examines a central quality inspection of nursing homes, a sector with significant welfare implications but widespread public concerns about its quality of care. Using data on nursing homes across the US, we find that nursing homes exhibit strategic responses to the inspection. Nursing homes increase the quantity and quality of labor inputs, reduce admissions, increase temporary discharges, and improve patient care in response to the inspection. However, nearly all responses described above drop immediately once the inspection is completed. While inspection rating is unlikely to reflect nursing homes’ absolute quality given the strategic responses, using a quasi-experimental research design we find that inspection rating predicts nursing homes’ relative quality. Finally, we examine the effects of quality deficiency citations issued by the inspection on incentivizing nursing homes to improve quality of care, finding mixed impacts. |
| JEL: | D22 I11 I18 L21 L23 L51 L88 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34037 |
| By: | Michael D. Frakes; Melissa F. Wasserman |
| Abstract: | Biological drugs account for just two percent of prescriptions filled in the U.S. but fifty percent of prescription-drug spending. To explore the role patents play in explaining high biologics prices, we build the first comprehensive database of patents associated with all FDA-approved biologics. We first establish that much of what drives biologic patenting is the desire to block entry by competing biosimilars. For these purposes, we estimate the response to a 2010 Act that created an abbreviated pathway for biosimilars to receive FDA approval. We then document robust evidence consistent with two patenting strategies that may block biosimilar competition: thicketing and evergreening, whereby firms supplement primary patents with a dense web of later-expiring patents on secondary drug features. We conduct various exercises to suggest that these behaviors are undertaken with exclusionary purposes that go beyond the traditional justifications of the patent system. We then set forth various descriptive statistics surrounding biosimilar entry to suggest that these patenting strategies are, in fact, effective at delaying biosimilar entry. Finally, we simulate the degree to which biologics patent portfolios are impacted by policy proposals currently under consideration to address thicketing and evergreening. |
| JEL: | K0 L50 L65 O34 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34024 |
| By: | Koushik Mondal; Balagopal G Menon; Sunil Sahadev |
| Abstract: | The present study considers the rural pharmaceutical retail sector in India, where the arrival of organized retailers and e-retailers is testing the survival strategies of unorganized retailers. Grounded in a field investigation of the Indian pharmaceutical retail sector, this study integrates primary data collection, consumer conjoint analysis and design of experiments to develop an empirically grounded agent-based simulation of multi-channel competition among unorganized, organized and e-pharmaceutical retailers. The results of the conjoint analysis reveal that store attributes of price discount, quality of products offered, variety of assortment, and degree of personalized service, and customer attributes of distance, degree of mobility, and degree of emergency are key determinants of optimal store choice strategies. The primary insight obtained from the agent-based modeling is that the attribute levels of each individual retailer have some effect on other retailers performance. The field-calibrated simulation also evidenced counterintuitive behavior that an increase in unorganized price discounts initially leads to an increase in average footprint at unorganized retailers, but eventually leads to these retailers moving out of the market. Hence, the unorganized retailers should not increase the price discount offered beyond a tipping point or it will be detrimental to them. Another counterintuitive behavior found was that high emergency customers give less importance to variety of assortment than low emergency customers. This study aids in understanding the levers for policy design towards improving the competition dynamics among retail channels in the pharmaceutical retail sector in India. |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2507.17023 |