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on Industrial Organization |
| By: | Massimo Motta; Michele Polo |
| Abstract: | The paper analyzes the design of industrial policies, in the form of sub- sidies to innovation activity or to local production, when domestic firms are inefficient and there is a risk of supply-chain disruption. We forst es- tablish a case for research subsidies, since private investment (to improve the inferior technology) is lower than the socially optimal one. We next show the equivalence with subsidies to (inecient) local production in case of intertemporal economies of scale. Then, within a general frame- work, we analyze profit and welfare maximizing investments and optimal subsidies in case of segmented markets and an integrated market orga- nized as a duopoly, a monopoly or a research joint-venture. We show that research joint ventures or a public research center socially outperform the other environments since they benefit from a larger integrated market and a wider circulation of the innovation while preserving a competitive mar- ket. Finally, in large markets with significant technology gaps, it may be convenient to concentrate all the research in a single lab while maintaining a competitive market. |
| Keywords: | Resilience, industrial policy |
| JEL: | L40 L52 O31 O32 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:upf:upfgen:1895 |
| By: | Muxin Li (IGIER, Bocconi University, Milan, Italy); Ksenia Shakhgildyan (Economics Department and IGIER, Bocconi University, Milan, Italy) |
| Abstract: | We study the competitive effects of the 2018 Apple–Amazon brand-gating agreement, which restricted sales of Apple products on Amazon to a small set of authorized resellers while granting Amazon privileged access to Apple’s portfolio. Using cross-country panel data and dynamic difference-in-difference and triple-differences designs, we document three main findings: (i) a sharp decline in seller participation and product variety, (ii) a substantial increase in Amazon’s Buy Box share and prices, and (iii) no significant improvement in product quality or evidence of counterfeit removal. The results suggest that the agreement reduced intra-brand competition and consumer welfare while reinforcing Amazon’s gatekeeping position, raising concerns for antitrust enforcement and digital platform regulation. |
| Keywords: | Digital Platforms, Brand Gating, Vertical Restraints, Exclusive Dealing. |
| JEL: | L42 D22 L51 L1 L2 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:net:wpaper:2506 |
| By: | Shota Ichihashi (Department of Economics, Queen's University, Kingston, ON, Canada) |
| Abstract: | I study a model of platform-enabled algorithmic pricing. Sellers offer identical products, to which consumers have heterogeneous values. Sellers can post a uniform price outside the platform or join the platform and delegate their pricing decision to the platform's algorithm. I show that the platform can offer a pricing algorithm to attract sellers, stifle off-platform competition, and earn a positive profit. Prohibiting the platform from using consumer data for its algorithm increases consumer surplus but decreases total surplus. A transparency requirement, which mandates the platform to share its data and algorithms with sellers, restores the first-best outcome for consumers. |
| Keywords: | price discrimination, algorithmic pricing, competition, collusion, algorithm |
| JEL: | D43 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:net:wpaper:2503 |
| By: | Aliya Turegeldinova; Bakytzhan Amralinova; Mate Miklos Fodor; Akerkin Eraliyeva; Chen Dayou; Aidos Joldassov |
| Abstract: | Generative AI does more than cut costs. It pulls products toward a shared template, making offerings look and feel more alike while making true originality disproportionately expensive. We capture this centripetal force in a standard two-stage differentiated-competition framework and show how a single capability shift simultaneously compresses perceived differences, lowers marginal cost and raises fixed access costs. The intuition is straightforward. When buyers see smaller differences across products, the payoff to standing apart shrinks just as the effort to do so rises, so firms cluster around the template. Prices fall and customers become more willing to switch. But the same homogenization also squeezes operating margins, and rising fixed outlays deepen the squeeze. The combination yields a structural prediction. There is a capability threshold at which even two firms cannot both cover fixed costs, and in a many-firm extension the sustainable number of firms falls as capability grows. Concentration increases, and prices still fall. Our results hold under broader preference shapes, non-uniform consumer densities, outside options, capability-dependent curvatures, and modest asymmetries. We translate the theory into two sufficient statistics for enforcement. On the one hand, a conduct statistic and a viability statistic. Transactions or platform rules that strengthen template pull or raise fixed access and originality costs can lower prices today yet push the market toward monoculture. Remedies that broaden access and promote template plurality and interoperability preserve the price benefits of AI while protecting entry and variety. The paper thus reconciles a live policy paradox. AI can make prices lower and entry harder at the same time. It prescribes what to measure to tell which force is dominant in practice. |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2510.08337 |
| By: | Holmberg, Pär; Willems, Bert; Ruddell, Keith |
| Abstract: | We characterize Nash equilibria in multi-product markets in which producers commit to vectors of supply functions contingent on all prices. The framework accommodates (dis)economies of scope in production, and goods may be substitutes or complements in demand. We show that equilibrium allocations of underlying goods and payoffs are invariant under bundling. With quadratic costs and linear demand, this invariance reduces the multi-product problem to an equivalent set of single-product markets that can be analyzed independently. We introduce Lerner and pass-through matrices to capture markups and welfare losses; their eigenvalues summarize fundamental market properties, remain invariant under bundling, and lend themselves to comparative statics analysis. |
| Keywords: | Supply function equilibrium; multi-product pricing; divisible-good auction;; bundling; pass-through; welfare |
| JEL: | C62 C72 D43 D44 L94 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:tse:wpaper:130961 |
| By: | Yumin Hu; Luca Macedoni; Mingzhi (Jimmy) Xu |
| Abstract: | Using barcode-level data from the NielsenIQ Homescan Consumer Panel, we study how income inequality affects the prices of identical goods across US counties. We find that higher inequality reduces prices for products with low market shares but increases prices for products with high market shares. With higher inequality, larger firms, which sell more high-market-share goods, tend to raise prices, while smaller firms lower them. We find a similar pattern using Chinese export data across countries. To interpret these findings, we develop a model where a mean-preserving spread in income affects pricing through the convexity of demand and the convexity of the price derivative of demand with respect to income. We derive conditions under which inequality raises the price elasticity for low-market-share products and lowers it for high-market-share products, matching our empirical results. |
| Keywords: | consumer heterogeneity, income inequality, prices, markups |
| JEL: | L11 D31 D43 F14 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12181 |
| By: | Sara Amoroso (DIW Berlin); Simone Vannuccini (Université Côte d'Azur, CNRS, GREDEG, France) |
| Abstract: | The participation of top R&D investors in publicly funded research collaborations is a common, yet largely unexplored phenomenon. It creates opportunities for knowledge spillovers and may increase the chance for a project to be funded. At the same time, the unbalanced nature of such partnerships could exacerbate power asymmetries and hinder the overall performance of such collaborations. In this paper, we examine whether cooperating with top R&D companies affects the innovative performance of publicly funded research consortia. We build a fit-for-purpose dataset that matches information from the European Union's Seventh Framework Programme (FP7) on R&D collaborative projects and proposals with data on the world's top 2, 500 companies with the highest R&D investment (R&D Scoreboard). Accounting for both sample selection and endogeneity in the participation of top R&D investors in a two-part count model framework, we find that teaming up with leading R&D companies increases the probability of obtaining funds. However, this comes at the cost of hindering the innovative performance of the funded projects, both in terms of patents and publications. In light of this evidence, the tradeoffs of mobilizing top R&D players should be carefully leveraged in the evaluation and design of innovation policies aimed at R&D collaboration and technology diffusion. |
| Keywords: | Research collaboration, Public funding, Innovation performance, Appropriability, Top R&D investors |
| JEL: | L24 L25 O33 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:gre:wpaper:2025-41 |
| By: | Emilie Dargaud (Université Lumière Lyon 2, CNRS, Université Jean Monnet Saint Etienne, EMLyon Business School, GATE, 69007 Lyon, France); Mickaël Lallouche (Université Lumière Lyon 2, Université Claude Bernard Lyon 1, ERIC, 69007, Lyon, France); Petros G. Sekeris (TBS Business School, 1 Place A. Jourdain, 31000 Toulouse, France) |
| Abstract: | We analyze corporate groups managing horizontally differentiated, substitutable firms that share cost externalities yet compete strategically. Using a model with two groups each owning two firms producing goods under distinct brands, we study the choice between centralized and decentralized management. Our results show that when cost externalities are low, decentralization can emerge as equilibrium despite centralization being Pareto superior, due to strategic incentives resembling the “merger paradox”. With stronger cost synergies, centralization dominates, though product differentiation creates multiple equilibria. The findings refine our understanding of corporate organizational design in imperfectly competitive markets. |
| Keywords: | Organizational design, Strategic delegation, Horizontal differentiation |
| JEL: | L13 L22 L25 D21 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:gat:wpaper:2520 |
| By: | Ivan Rendo (Toulouse School of Economics, University of Toulouse Capitole) |
| Abstract: | Unregulated online platforms often host extreme and socially undesirable content. As mainstream platforms tighten moderation, some users shift to unmoderated alternatives, leading to a leakage of extreme content. I develop a duopoly model where an ad-funded mainstream platform competes with an unmoderated fringe. Heterogeneous users choose platforms and create content reflecting their views. The mainstream platform trades off attracting fringe users with making content safer for advertisers. With strong network effects, the socially optimal moderation is more lenient than the profit-maximizing one. Therefore, regulation mandating stricter moderation may backfire by increasing overall content unsafety. |
| Keywords: | content moderation, platforms, social media, user-generated content. |
| JEL: | L86 L82 L51 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:net:wpaper:2502 |
| By: | Anna D’Annunzio (Tor Vergata University of Rome, CSEF and Toulouse School of Economics. Email:); Antonio Russo (Institut Mines-Telecom Business School.; University of Naples Federico II, Department of Economics and Statistics, and CSEF) |
| Abstract: | The adtech industry plays a key role in connecting digital publishers and advertisers. This industry is dominated by integrated ecosystems. We study how integration between an adtech intermediary and a major digital publisher affects the ad market and content production. Integration enables the intermediary to leverage exclusive access to data to monopolize the intermediation market and inflate the adtech taxon independent publishers. This depresses investment in content by independent publishers, but boosts the integrated firm’s investment. The net impact of integration on consumer surplus and welfare depends on which effect prevails. Prohibiting data sharing between firms within the ecosystem is not sufficient to restore the market outcome under vertical separation. |
| Keywords: | Online advertising, intermediaries, vertical integration, adtech tax, content quality |
| JEL: | D43 D62 L82 M37 |
| Date: | 2025–09–05 |
| URL: | https://d.repec.org/n?u=RePEc:sef:csefwp:758 |
| By: | Ashvin Gandhi; YoungJun Song; Prabhava Upadrashta |
| Abstract: | This paper studies how product market competition shapes the impact of private equity (PE) acquisitions on consumers. We examine nursing home buyouts and observe that PE-owned facilities exhibit greater competitive sensitivity: competing more aggressively when competitive incentives are strong and exploiting market power more aggressively when competitive incentives are weak. We find that PE-owned facilities are more sensitive to local market competition—even when comparing effects only across facilities purchased as part of the same acquisition—and are more responsive to a pro-competitive policy helping consumers compare facilities. This suggests that the competitive sensitivity of acquirers and the concentration of markets where acquisitions occur are important factors contributing to the effects of a merger, as well as that pro-competitive polices can reshape the effects of PE ownership on consumers. |
| JEL: | G3 G32 G34 G38 I1 I11 I18 L1 L11 L15 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34306 |