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on Industrial Organization |
| By: | Bontems, Philippe; Hamilton, Stephen F.; Lepore, Jason |
| Abstract: | Multisided platforms have emerged as an increasingly important market structure with the rise of the digital economy. In this paper, we consider sequential price setting behavior by platforms and demonstrate sequential pricing outcomes Pareto dominate simultaneous pricing outcomes in terms of firm and industry profits. We compare policy implications and find prices are more balanced across the platform and average prices are higher under sequential pricing than under simultaneous pricing. We also demonstrate that pricing power can be considered independently on each side of the market under multihoming behavior. |
| Keywords: | Network Effects; Two-Sided Markets; Platform Competition |
| JEL: | D43 L13 L40 L86 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:tse:wpaper:130858 |
| By: | Fei Li; Charles Murry; Can Tian; Yiyi Zhou |
| Abstract: | We develop and estimate a spatial search-and-bargaining model to study the role of intermediaries and spatial frictions using data from the used-car market. We find that dealers earn price premiums by leveraging three key advantages: selective acquisition of higher-quality cars, superior matching efficiency, and greater bargaining power. Counterfactual simulations reveal that selective intermediation and spatial segmentation significantly affect market efficiency and consumer welfare. While dealers extract more surplus per transaction than sellers, policies reducing dealers' advantages increase search frictions and lower overall welfare. Counterintuitively, reducing spatial frictions harms consumers by shifting trade to less efficient private-seller channels. |
| JEL: | D83 L15 L62 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34136 |
| By: | José Ignacio Cuesta; Pietro Tebaldi |
| Abstract: | A common approach to markets with adverse selection is to regulate competition to minimize inefficiencies, while preserving consumer choice among firms. We study the role of procurement auctions—leading to sole provision by the winning firm—as an alternative market design. Relative to regulated competition, auctions affect product variety, quality, markups, and remove cream-skimming incentives. We develop a framework to study this comparison and apply it to individual health insurance in the US. We find that procurement auctions would increase consumer welfare in most markets, mainly by limiting inefficiencies from adverse selection and market power, and by increasing quality. |
| JEL: | H42 I13 L13 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34141 |
| By: | Bruno Baránek; Leon Musolff; Vitezslav Titl |
| Abstract: | We develop a method for detecting cartels in multistage auctions. Our approach allows a firm to be collusive when facing members of its cartel yet competitive when facing others. Intuitively, as initial bids are shaded, close initial bids not only imply similar costs but also provide an incentive to undercut. We detect firm pairs that ignore this incentive when facing each other. Our algorithm predicts Ukraine’s Antimonopoly Committee’s sanctions: firm pairs classified as collusive are 8.98 times more likely (standard error 2.65 times) to be sanctioned. It also uncovers additional collusion: 1, 857 collusive firms participate in 15.57% of auctions, increasing costs by 1.95%. |
| Keywords: | public procurement, collusion, online markets |
| JEL: | H57 D44 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12073 |
| By: | Qing Hu (Kansai University); Ryo Masuyama (Kushiro Public University of Economics); Tomomichi Mizuno (Kobe University) |
| Abstract: | It is well known that common ownership lessens competition, which tends to decrease consumer and total surpluses. This study challenges this well known result by introducing downstream firms' voluntary investment. We consider a vertical market with one upstream firm and two downstream firms, where the downstream firms engage in voluntary investment that can reduce the upstream firm's marginal cost. We show that common ownership may increase the consumer and total surpluses if the upstream marginal cost without investment is sufficiently high and the investment is sufficiently efficient. We also find our results are robust even in the market with two supply chains. |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:koe:wpaper:2520 |
| By: | Sudheer Chava; Wendi Du; Indrajit Mitra; Agam Shah; Linghang Zeng |
| Abstract: | We develop firm-level measures of input and output price changes using textual analysis of earnings calls. We establish five facts: (1) Input prices increase (decrease) at the median firm once every seven (30) months. (2) Input price changes contain an equal blend of aggregate and firm-specific components. (3) A firm's stock price experiences a –1.15 percent return when our input price change measure is in the top tercile of price increases. (4) Our input price change measure predicts future changes in the cost of goods sold. (5) Firms pass through input price changes to output prices in the same quarter with a magnitude of 0.7. |
| Keywords: | deep learning; input price; cost pass-through |
| JEL: | D24 E12 E44 L11 |
| Date: | 2025–08–19 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedawp:101518 |
| By: | Ashvin Gandhi; Brett Hollenbeck; Zhijian Li |
| Abstract: | Fake product reviews—and the manipulation of reputation systems by sellers more broadly—are a widespread issue for two-sided platforms. We study two primary channels through which such manipulation can affect market outcomes: (i) creating misinformation about the reviewed product, and (ii) breeding mistrust in ratings system overall. To examine these in the Amazon.com marketplace, we measure misinformation by observing products purchasing fake reviews and measure mistrust by eliciting shoppers’ beliefs about the prevalence of fake reviews on Amazon through an incentivized survey experiment. We incorporate these into a structural model of demand in which consumers form beliefs about product quality based on observed reviews and perceptions about their trustworthiness. Counterfactual policy simulations indicate that fake reviews reduce consumer welfare, shift sales from honest to dishonest sellers, and ultimately harm the platform. Welfare losses arise primarily from misinformation that leads to worse purchases. While mistrust also leads to purchasing mistakes, the consumer harms of mistrust are largely offset by increased price competition under a weakened ratings system. Finally, we identify key limitations in platforms’ incentives to police manipulation and evaluate enforcement alternatives. |
| JEL: | L00 L1 L10 L11 L15 M3 M31 M38 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34161 |
| By: | Joshua S. Gans |
| Abstract: | This paper develops a unified model of the cognitive division of labour in a knowledge economy. Building on recent frameworks for knowledge creation and decision making under uncertainty, it distinguishes between specialists, who engage in costly “on the spot” reasoning to generate tacit knowledge around a focal point, and generalists, who search for and interpolate existing knowledge but deliver answers subject to error. The model characterises how these two types of workers should be allocated across a continuum of questions, given the location of codified knowledge points and the distribution of problems. It shows that optimal task assignment depends on the cognitive process through which information is processed rather than on skill endowments or task complexity. When specialists operate around both knowledge points, their allocation is shaped by their absolute advantage over generalists, leading to non‐contiguous specialist domains interspersed with generalist regions. When specialists cluster around a single point, a natural boundary emerges between specialist and generalist domains that shifts but persists despite changes in question distribution. Extending the analysis to a two‐period setting, the paper identifies when specialists should sacrifice static efficiency to codify their tacit discoveries, creating bridges that allow generalists to operate more effectively in the future. These results provide a formal microfoundation for Babbage’s insights into the division of cognitive labour and offer predictions about how knowledge work responds to changes in the knowledge environment, the distribution of questions, and the patience of capital. |
| JEL: | D83 J24 L23 L25 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34145 |
| By: | Christoph Carnehl; Anton Sobolev; Konrad Stahl; André Stenzel |
| Abstract: | We study information design in a vertically differentiated market. Two firms offer products of ex-ante unknown qualities. A third party designs a system to publicly disclose information. More precise information guides consumers toward their preferred product but increases expected product differentiation, allowing firms to raise prices. Full disclosure of the product ranking alone suffices to maximize industry profits. Consumer surplus is maximized, however, whenever no information about the product ranking is disclosed, as the benefit of competitive pricing always dominates the loss from suboptimal choices. The provision of public information on product quality becomes questionable. |
| Keywords: | Information Design, Vertical Product Differentiation, Quality Rankings, Competition |
| JEL: | D43 D82 L13 L15 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2025_700 |
| By: | Chiara Farronato; Andrey Fradkin; Alexander MacKay |
| Abstract: | Platforms, retailers, and other firms often offer their own products alongside products sold by competitors. We study the effects of this practice by combining a field experiment that hides brands owned by Amazon (i.e., private labels) from shoppers on Amazon.com with model-based counterfactuals and welfare analysis. In the absence of private labels, consumers substitute toward products that are similar along most observable dimensions. Removing Amazon brands does not change consumers' search effort or their propensity to shop at other retail websites. Despite the ample availability of observably similar alternatives, our welfare estimates imply that, for the categories we study, removing Amazon brands would reduce consumer surplus by 5.5 percent in the short run, with approximately 10 percent of the impact due to equilibrium price increases by other sellers. The effects are heterogeneous, with consumer surplus reductions exceeding 10 percent in some categories, while other categories realize much smaller decreases when Amazon brands are removed. Demoting private labels in search results to counteract potential self-preferencing does not lead to gains in consumer surplus. This outcome arises because a subset of consumers derive greater utility from private labels and benefit from their high placement in search results. |
| JEL: | C93 D12 K21 L13 L40 L81 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34135 |
| By: | David Dranove; Martin Gaynor; Eilidh Geddes |
| Abstract: | While numerous papers document the effects of mergers on cost and quality, the effects of hospital mergers on access to care are less certain. Merging hospitals may limit access by closing one of the affected hospitals or eliminating individual service lines. However, hospital systems may have more resources to improve care delivery. We study the impact of hospital mergers on obstetric care in rural markets, where there may be heightened concern about the availability of local care options. Using a differences-in-differences approach, we find that when rural hospitals are acquired, there are substantial increases in the probability of obstetric unit closures, with resulting large reductions in the number of births at the hospital. We find mixed effects on health outcomes: there are small increases in maternal morbidity, but no changes in newborn outcomes on average. However, there are improvements of newborns with Medicaid coverage. Additionally, we find decreases in maternal transfers and increases in procedures consistent with women delivering in more resourced hospitals. |
| JEL: | I11 L1 L4 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34159 |
| By: | Erkut Y. Ozbay; Ariel Rava; Sergio S. Urzúa; Emanuel Zur |
| Abstract: | In 2019, the United States implemented new regulations for Organ Procurement Organizations (OPOs) aimed at increasing transparency and strengthening accountability. These rules introduced stronger performance incentives designed to improve organ procurement outcomes. This paper examines the impact of the reform on organ donations, transplant activity, and associated system costs, with a particular focus on kidneys, given their clinical characteristics and the structure of the reform’s organizational incentives. We estimate that the new policy led to an average increase of 7.13 kidneys procured per OPO per month, relative to a baseline mean of 24.78. The largest effects are observed among top-performing OPOs prior to the reform, with similar patterns for transplanted organs. Consistent with these findings, we document an overall rise in total OPO costs, with statistically significant increases concentrated among low-performing OPOs. Finally, we present a back-of-the-envelope calculation estimating the fiscal impact of the reform. |
| JEL: | I11 I18 L3 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34140 |
| By: | Youngjin Hong; In Kyung Kim; Kyoo il Kim |
| Abstract: | This paper empirically examines the extent to which a favorable view of a firm, shaped by its social contributions, influences consumer choices and firm sales. Using a favorability rating that reflects media exposure of each firm's corporate social responsibility (CSR) activities in the Korean instant noodles market during the 2010s, we find evidence that improvements in the corporate image of Ottogi - one of the country's largest instant noodle producers - positively affected consumer utility for the firm's products. Notably, Ottogi's annual sales of its major brands increased by an average of 23.7 million packages, or 6.7%, as a result of CSR activities and the associated rise in consumer favorability. This effect is comparable in magnitude to that of a nearly 60% increase in advertising spending. Our findings suggest that CSR can foster firm growth by boosting product sales. |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2507.05782 |