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on Industrial Organization |
| By: | Charles Taragin; Benjamin Wallace; Eddie Watkins |
| Abstract: | We study how corporate debt influences the competitive outcomes of horizontal and conglomerate mergers. In contrast to standard models where debt does not affect pricing, our framework shows that mergers can spread fixed debt obligations across a broader product portfolio, creating an "insurance effect" against adverse demand shocks. This effect interacts with the traditional recapture effect from reduced competition. Using numerical simulations and a case study of a major casino merger, we find that debt can either dampen or amplify post-merger price increases, depending on the merger's structure and the market environment. |
| Keywords: | Financial structure; Merger simulation; Horizontal markets |
| JEL: | L41 L13 K21 G32 G34 |
| Date: | 2025–09–19 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedgfe:2025-80 |
| By: | Gaétan de Rassenfosse (Ecole polytechnique federale de Lausanne); Ling Zhou (Ecole polytechnique federale de Lausanne); |
| Abstract: | A patent system is a central tool in innovation policy. The prospect of monopolistic pricing supposedly encourages firms to innovate. However, there is scant empirical evidence supporting the existence of higher markups for patent-protected products. Using an original dataset that links consumer products to the patents that protect them, we study the impact of patent protection on product prices. Exploiting exogenous variations in patent status, we find that a loss of patent protection leads to an 8–10 percent drop in product prices. The price drop is larger for more important patents and is more pronounced in more competitive product markets. |
| Keywords: | innovation; markup; patent system; product; R&D incentive |
| JEL: | O31 O34 L11 D42 K11 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:iip:wpaper:29 |
| By: | Max Riegel |
| Abstract: | I study how consumer preferences for one-stop-shopping affect the resource allocation of multiproduct firms. In many markets, consumers prefer to buy multiple products at a single seller. At the same time, multiproduct firms have to split their resources between their products, for instance by allocating R&D budgets or shelf space. One-stop-shoppers treat firms’ products as if offered as bundles. If there are only one-stop-shoppers, firms therefore cannot gain from a comparative advantage over a particular product. I show that firms become more inclined to specialize in different products and gain market power, as the share of one-stop-shoppers decreases. Thereby, industry profits rise, potentially to the detriment of consumers. |
| Keywords: | one-stop-shopping, specialization, multiproduct competition |
| JEL: | D43 L13 L81 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2025_701 |
| By: | Francesc Dilmé; Aaron Kolb |
| Abstract: | We revisit the classic chain-store paradox by introducing a novel element: the arrival of exogenous, public signals about the incumbent’s private type over time. As the horizon lengthens, two opposing forces come into play. On one hand, standard reputational incentives grow stronger; on the other, the increasing availability of information makes it more difficult to sustain a reputation. We show that full deterrence can still emerge as the horizon grows arbitrarily long, though not always, and we provide a complete characterization of the conditions under which it arises. |
| Keywords: | Entry deterrence, reputation, chain-store parardox |
| JEL: | C72 C73 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2025_704 |
| By: | Frédéric Marty (Université Côte d'Azur, GREDEG, CNRS, France); Thierry Warin (HEC Montréal; CIRANO, OBVIA, GPAI/CEIMIA) |
| Abstract: | Digital markets are increasingly dominated by entities that leverage technical specificities such as network effects, economies of scale, and scope, as well as significant advantages in data access and critical infrastructure, including computing power and cloud capacities. The advent of generative artificial intelligence (AI) marks a potential inflection point in this landscape. In this context, the primary barriers to entry are no longer merely data and open source foundation models but the availability of large, high-quality datasets and substantial computing power. This paper examines whether these barriers will entrench the dominant positions of Big Tech companies or if they will catalyze a reshuffling of competitive dynamics. By focusing on the dual challenges of data and computing power, this study identifies the key factors that will shape the future competitive landscape of the generative AI industry. This article contributes to the ongoing debate in industrial economics and strategic management regarding the potentially disruptive effects of generative AI on the market power of Big Tech firms. Can this technological shift recalibrate competitive dynamics, or will it ultimately serve to entrench existing power structures? At its core, the article seeks to interrogate a prevailing narrative - namely, the notion that innovation inherently sustains competitive processes, even in the face of short-term lock-in effects. |
| Keywords: | Generative AI, data-based advantage, digital ecosystems, Big Techs |
| JEL: | K21 L12 L13 L41 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:gre:wpaper:2025-38 |
| By: | Jakob Beuschlein; Jósef Sigurdsson; Horng Chern Wong |
| Abstract: | We study the effects of corporate acquisitions on workers using Swedish administrative data and document substantial, persistent earnings losses following acquisitions. These losses reflect both displacement and wage cuts among stayers from target firms. We find no evidence that increased monopsony power accounts for these wage cuts. Instead, they are concentrated in acquisitions where the acquiring-firm CEO sat on the board of the target prior to the transaction. Such acquisitions increase acquiring-firm profits and CEO pay, without affecting total employment or revenue, consistent with rent redistribution. Overall, acquisitions reduce wages and disrupt employment, with profit gains partly extracted from workers. |
| Keywords: | mergers and acquisitions, wages, layoffs, monopsony, firm performance, managers |
| JEL: | G34 J23 J31 J42 J63 L25 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12162 |
| By: | Ganglmair, Bernhard; Klix, Julian; Shin, Dongsoo |
| Abstract: | Many business relationships begin with informal interactions and later transition to formal contracts. Using a repeated-games model with a finite horizon, we show that this hybrid-contracting approach can both prolong cooperation (intensive margin) and enable it across a broader range of settings (extensive margin). We model the contract as a "smooth-landing contract" that limits actions only near the end of the relationship. We show that this flexible design supports early cooperation and outperforms rigid contracts. Our findings are robust to changes in contracting costs and timing, with optimal contract length balancing profitability and implementability. |
| Keywords: | cooperation, hybrid contracting, relational contracts, repeated games, strategic alliances |
| JEL: | C73 D86 K12 L14 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:zewdip:327114 |
| By: | Nuur Rasyiqah Zainuddin (Faculty of Business and Economics, Universiti Malaya, 50603, Kuala Lumpur, Malaysia Author-2-Name: Chen Chen Yong Author-2-Workplace-Name: Faculty of Business and Economics, Universiti Malaya, 50603, Kuala Lumpur, Malaysia Author-3-Name: Author-3-Workplace-Name: Author-4-Name: Author-4-Workplace-Name: Author-5-Name: Author-5-Workplace-Name: Author-6-Name: Author-6-Workplace-Name: Author-7-Name: Author-7-Workplace-Name: Author-8-Name: Author-8-Workplace-Name:) |
| Abstract: | " Objective - This study aims to identify Malaysia's machinery and equipment (M&E) industry local supply chain, classify its key industries, and estimate the economic effects of changes in final demand within the industry. Methodology - This study employs a quantitative input–output analysis to assess both the strength and distance of linkages between the machinery and equipment (M&E) industry and other sectors in Malaysia. Industries are classified according to normalized backward and forward linkages, and multiplier analyses are used to evaluate the economic effects of changes in final demand for the M&E industry. Findings - Results indicate that the M&E industry in Malaysia is primarily a backward linkage-oriented sector, stimulating growth in upstream industries through its demand for inputs. The analysis further identifies five key industries, including M&E, within its supply chain. Scenario-based multiplier simulations reveal negative economic impacts from reduced export demand for the M&E industry, but positive impacts from investment in the M&E sector and its related industries. The results also indicate the M&E industry's reliance on external demand. Novelty - This study demonstrates the value of systems thinking by integrating scenario analysis with supply-chain linkages, industrial classifications, and multiplier effects to produce a more comprehensive economic assessment. The approach highlights potential policy insights for improving public resource allocation in Malaysia. Type of Paper - Empirical" |
| Keywords: | Machinery and Equipment Industry; Input-Output Analysis; Supply Chain |
| JEL: | C67 D57 L60 |
| Date: | 2025–09–30 |
| URL: | https://d.repec.org/n?u=RePEc:gtr:gatrjs:jber262 |