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on Industrial Organization |
| By: | Hoover, D. |
| Abstract: | This paper explores the profitability and impact of opaque selling in a monopolist market with endogenous product characteristics. Opaque selling is a strategy where a firm sells goods through a lottery mechanism that randomly rewards consumers with a product that is revealed after purchase. Using a standard two-good Hotelling model with endogenous product locations, I compare market equilibria for a monopolist under traditional selling and opaque selling. I find that opaque selling always earns the firm a higher profit when product locations are endogenous. Additionally, it generally induces the firm to select more extreme product varieties. Using an extension to the Salop circular city model, I also show that opaque selling results in the firm introducing fewer product varieties. In terms of welfare, opaque selling unambiguously increases producer surplus and reduces consumer surplus. Although consumption of the lottery good is welfare inefficient, opaque selling can potentially increase welfare by inducing the firm to serve more consumers than it would under traditional selling. These results suggest that opaque selling may be a more viable long-term strategy when firms are capable of adjusting their product mix. |
| Keywords: | Opaque Selling, Lottery Goods, Endogenous Products, Product Differentiation |
| JEL: | D42 L11 L12 |
| Date: | 2026–01–09 |
| URL: | https://d.repec.org/n?u=RePEc:cam:camdae:2601 |
| By: | Matěj Bajgar (Charles University, CERGE-EI); Petr Janský (Charles University, CERGE-EI); Tijmen Tuinsma (Tax Justice Network, Charles University) |
| Abstract: | We study whether stronger tax compliance among multinationals can reduce industry concentration. Exploiting the 2016 introduction of country-by-country reporting in the European Union as a natural experiment, we implement a difference-in-differences design comparing large multinational groups subject to the reform with unaffected firms. We find that increased tax compliance led to a significant decline in multinationals’ consolidated global sales, with a one-percentage-point rise in effective tax rates associated with a 1.8% reduction in sales. Sales of the affected multinationals’ subsidiaries also declined, and industry concentration fell in sectors where top firms were subject to the reform. The results suggest that curbing profit-shifting can reduce the competitive advantage of large multinationals and, consequently, industry concentration. |
| Keywords: | tax compliance; tax avoidance; multinational; corporate tax; effective tax rate; industry concentration; European Union |
| JEL: | F23 H26 L11 |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:dbp:wpaper:038 |
| By: | Matěj BAJGAR; Keiko ITO; Jonathan TIMMIS |
| Abstract: | We study how R&D spillovers propagate through buyer–supplier networks. The R&D tax credit for large firms in Japan—originally based on incremental increases in R&D expenditures—was revised in 2003 to cover total R&D expenditures. This reduced the cost of marginal R&D outlays for large firms below the ceiling on R&D expenditure, but not for large firms above the ceiling or for SMEs. In a difference-in-differences setting, we find that the reform increased R&D expenditure, innovative output and sales of the treated firms. We further present evidence of positive forward spillovers to downstream firms: the reform led to productivity increases among firms that had a greater share of suppliers treated by the reform. Conversely, we do not find any evidence of backward spillovers to upstream firms. We also do not find any robust effects of the reform on the R&D expenditure and economic performance of Japanese firms' overseas affiliates. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:eti:dpaper:25127 |