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on Industrial Organization |
| By: | Vanessa I. Alviarez; Michele Fioretti; Ken Kikkawa; Monica Morlacco |
| Abstract: | This paper derives a closed-form expression linking aggregate markups on imported inputs to concentration in a model of firm-to-firm trade with two-sided market power. Our theory extends standard oligopoly insights in two dimensions. First, it reveals that markups increase with exporter concentration and decrease with importer concentration, reflecting the balance of oligopoly and oligopsony forces. Second, it adapts conventional market definitions to reflect rigid trading relationships, yielding new concentration measures that capture competition in firm-to-firm trade. Analysis of Colombian transaction-level import data shows these differences are key to understanding markup dynamics in international trade. |
| JEL: | F1 F12 F14 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34114 |
| By: | Johannes Johnen; Shiva Shekhar |
| Abstract: | This paper proposes a simple yet useful framework for evaluating vertical mergers in digital markets by distinguishing between product-specific and ecosystem-specific network effects. Vis-a-vis no network effects, product-specific network effects amplify foreclosure and steering incentives, as a rival’s growth directly undermines the platform’s product value. Conversely, ecosystem-specific effects dampen foreclosure incentives, since rivals contribute to the overall value of the platform ecosystem. We develop a formal model illustrating how this distinction shapes platform behavior and competitive outcomes. We apply this distinction to real-world examples to illustrate its potential usefulness. Our distinction implies that regulators may want to adopt a stricter standard with no presumption of efficiencies where product-specific effects dominate. In contrast, when ecosystem-specific effects prevail, merger evaluation should mirror traditional vertical merger analysis. Thus, offering a more nuanced approach to merger evaluation by presenting a practical screening tool to identify problematic vertical mergers in markets featuring network effects. |
| Keywords: | network externalities, platforms, vertical integration |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12040 |
| By: | Kun Zhang |
| Abstract: | When introducing a novel product, a seller sets a price and decides how much information to provide to a buyer, who may incur a search cost to discover an outside option. The buyer knows the outside option distribution; the seller knows only its mean and bounds. Seeking "robustness, " the seller evaluates strategies based on guaranteed profits, balancing search deterrence against surplus extraction. Providing information can deter search and boost demand but requires offering the buyer a higher payoff via a lower price. Results help explain the variations in information provision among new products and suggest that lower search costs can raise prices and lead to noisier information, potentially harming consumers. |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2508.04134 |
| By: | Bryan, Calvin; Donovan, Pierce; Kacker, Kanishka; Pham, Linh |
| Abstract: | Fabra and Imelda (2023) study how the method of payment for renewable energy can reduce the ability of energy producers to exert market power in electricity markets. Their theoretical model provides predictions for dominant and fringe firm behavior under incentives using fixed prices or market exposure. Across several reported specifications, they measure the price depressing effects under both economic instruments. The authors find that in the case of the Spanish electricity market, fixed prices for renewables mitigate market power more than exposure to market pricing. We successfully computationally reproduce 100% of the main claims of the paper. We then explore the robustness of these findings to a placebo event test and modeling choices concerning seasonality and sample selection. These robustness checks typically replicate the main findings of the original paper in sign, but consistently reduce the magnitude and statistical significance of measured results. |
| Keywords: | market power, forward contracts, arbitrage, renewables |
| JEL: | L13 L94 L98 Q42 Q48 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:i4rdps:258 |
| By: | Leonardo Manr\'iquez-M\'endez |
| Abstract: | The United States, a leading global producer and consumer of beef, continues to face substantial challenges in achieving price harmonization across its regional markets. This paper evaluates the validity of the Law of One Price (LOP) in the U.S. beef industry and investigates causal relationships among regional price dynamics. Through a series of econometric tests, we establish that regional price series are integrated of order one, displaying non-stationarity in levels and stationarity in first differences. The analysis reveals partial LOP compliance in the Northeast and West, while full convergence remains elusive at the national level. Although no region demonstrates persistent price leadership, Southern prices appear particularly sensitive to exogenous shocks. These findings reflect asymmetrical integration across U.S. beef markets and suggest the presence of structural frictions that hinder complete market unification. |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2507.21950 |
| By: | Lundin, Erik (Research Institute of Industrial Economics (IFN)) |
| Abstract: | I examine the pricing behavior of municipal and private firms in the unregulated Swedish district heating market, characterized by geographically bounded local monopoly networks. Conditional on exogenous cost factors, private firms charge on average seven percent higher prices compared to their municipal counterparts. Nearly all firms employ two-part pricing. Consistent with standard monopoly theory, the entire price difference can be explained by the fixed price component. Further, foreign-owned private firms charge an additional price premium relative to domestically owned private firms. A descriptive analysis of financial statements confirms that private firms achieve higher profit margins, despite municipal firms being legally required to operate in a business-like manner. These findings demonstrate that, in this market, private firms exercise more market power than public firms, and that the subsequent upward pressure on prices dominates any downward effects from the potential cost efficiencies associated with privatization. |
| Keywords: | Privatization; Two-part pricing; District heating; Natural monopoly; Market power; Network industries |
| JEL: | L12 L43 L97 P18 Q48 |
| Date: | 2025–08–15 |
| URL: | https://d.repec.org/n?u=RePEc:hhs:iuiwop:1532 |
| By: | Mr. Daniel Garcia-Macia; Siddharth Kothari; Yifan Tao |
| Abstract: | This paper quantifies the size of the main industrial policy instruments in China and estimates their impact on domestic factor misallocation and aggregate productivity. The quantification of industrial policy instruments leverages data from financial reports of listed firms and the land registry. The equivalent fiscal cost of industrial policy through cash subsidies, tax benefits, subsidized credit, and subsidized land for favored sectors (including both private and state-owned firms) is estimated at about 4 percent of GDP per year, with a growing share of tax benefits over time. Next, the paper uses a structural model to estimate the relationship between industrial policies and factor misallocation for a broad sample of firms. Various industrial policy instruments are found to affect factor allocations in different ways—subsidies tend to lead to excess production, while trade and regulatory barriers limit production. Overall, factor misallocation from industrial policies is estimated to reduce domestic aggregate TFP by about 1.2 percent. The results resonate with IMF policy recommendations for China to scale back industrial policy and increase its transparency. |
| Keywords: | China; Industrial Policy; Misallocation; Productivity; policy instrument; factor misallocation; land registry; No. 2025/155; IMF policy recommendation; Total factor productivity; Corporate income tax; Manufacturing; Public enterprises |
| Date: | 2025–08–08 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2025/155 |