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on Industrial Organization |
| By: | Jiaming Wei; Dihan Zou |
| Abstract: | We study monopoly regulation under asymmetric information about costs when subsidies are infeasible. A monopolist with privately known marginal cost serves a single product market and sets a price. The regulator maximizes a weighted welfare function using unit taxes as sole policy instrument. We identify a sufficient and necessary condition for when laissez-faire is optimal. When intervention is desired, we provide simple sufficient conditions under which the optimal policy is a progressive price cap: prices below a benchmark face no tax, while higher prices are taxed at increasing and potentially prohibitive rates. This policy combines delegation at low prices with taxation at high prices, balancing access, affordability, and profitability. Our results clarify when taxes act as complements to subsidies and when they serve only as imperfect substitutes, illuminating how feasible policy instruments shape optimal regulatory design. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2512.06525 |
| By: | Laurenz Marstaller (University of Bonn) |
| Abstract: | Heterogeneous search costs enable price discrimination, which I study in the canonical Wolinsky (1986) sequential search setting. Firms observe a public signal of a consumer’s search cost before posting a personalized price. The welfare effects of search-cost-based price discrimination depend on the distribution of search costs. For sufficiently small search costs, all consumers participate, and price discrimination reduces consumer surplus. When search costs are sufficiently dispersed, price discrimination reduces participation; its effect on consumer surplus is ambiguous and decomposed into three forces. This decomposition guides optimal information design: the consumer-surplus-maximizing policy is a binary signal that separates low- and high-search-cost consumers. |
| Keywords: | Privacy, Price Discrimination, Search Costs, Consumer Search Market |
| JEL: | D83 L13 D18 D43 |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:ajk:ajkdps:387 |
| By: | Keita Kuwahara |
| Abstract: | Second-hand markets have expanded rapidly with the growth of online consumer-to-consumer (C2C) platforms. A key feature of C2C markets is that sellers are typically non-professionals and often face uncertainty about the quality of the goods they sell. This creates scope for platforms to introduce systems that reduce sellers' uncertainty about quality. However, an important question remains: is it socially desirable for sellers to have more precise quality information? We present results showing that while improved information always benefits sellers, it can either benefit or harm buyers. We derive a necessary and sufficient condition under which buyers benefit, and show that this condition holds in many cases, especially when buyers' valuations are not too large relative to sellers' costs. These findings suggest that platforms should consider reducing sellers' uncertainty about quality as a means of improving market efficiency. |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2601.04942 |
| By: | Aggey Simons (Semenov) (Department of Economics, University of Ottawa, Canada); Jean Baptiste Tondji (Department of Economics, The University of Texas Rio Grande Valley, USA) |
| Abstract: | We develop an oligopoly theory of brand authenticity as a belief-based credence attribute valued by only a subset of consumers. Firms choose prices and costly authenticity efforts, while managers may derive private non-pecuniary benefits from being perceived as intrinsically motivated. Heterogeneity in consumer preferences and managerial motivations jointly determines equilibrium authenticity provision, pricing, and consumer sorting. Firms led by more authenticity-driven managers invest more and, under standard complementarity conditions, charge price premia. Authenticity is privately unsustainable when the attentive audience is small, viable when it is large, and fragile at intermediate sizes. In this fragile region, laissez-faire equilibrium exhibits inefficient exit despite socially valuable participation, reflecting an extensive-margin inefficiency that can be addressed by participation support or belief-based certification. |
| Keywords: | Authenticity, Authenticity-Driven Motivations, Market Segmentation, Oligopoly Pricing, Non-price Competition, Welfare |
| JEL: | C72 D21 D42 D60 L13 L15 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ott:wpaper:2601e |
| By: | Liang Chen |
| Abstract: | Platform giants in China have operated with persistently compressed margins in highly concentrated markets for much of the past decade, despite market shares exceeding 60\% in core segments. Standard theory predicts otherwise: either the weaker firm exits, or survivors raise prices to monopoly levels. We argue the puzzle dissolves once firms are viewed as ecosystem optimizers rather than single-market profit maximizers. We develop a dynamic game in which a firm's willingness to subsidize depends on the spillover value its users generate in adjacent markets -- what we call \textit{ecosystem complementarity}. When this complementarity is strong enough, perpetual below-cost pricing emerges as the unique stable equilibrium. The result is not predation in the classical sense; there is no recoupment phase. It is a permanent state of subsidized competition, rational for each firm individually but potentially inefficient in aggregate. We characterize the equilibrium, establish its dynamic stability, and show that welfare losses compound over time as capital flows into subsidy wars rather than innovation. The model's predictions are consistent with observed patterns in Chinese platform markets and suggest that effective antitrust intervention should target cross-market capital flows rather than prices. |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2601.15303 |
| By: | Chevalier-Roignant, Benoît; Villeneuve, Stéphane |
| Abstract: | We study the effect of upstream competition and supply shocks on a buyer’s investment decisions, under demand uncertainty. Imperfect upstream competition leads to double marginalization. This effect is mitigated if the supplier pool is larger (when production costs are linear or in case of diseconomies of scale): The resulting lower equilibrium input price ultimately benefits the buyer and makes it more likely to invest sooner. A supply shock—that shrinks the supplier base—may increase the market power of the remaining suppliers and exacerbate double marginalization. Such a shock may arise either exogenously (due to a sudden external event) or endogenously (when profitability upstream is reduced). An exogenous shock, which leads to higher input prices and lower order quantities, reduces the profitability of the buyer, which is then less inclined to invest if more suppliers are affected by it. When the shock arises endogenously, the buyer may be better off and invest sooner if it subsidizes its supplier base as a way to maintain more competition upstream. |
| Keywords: | Supply shock; supply chain; real options; |
| Date: | 2026–01–22 |
| URL: | https://d.repec.org/n?u=RePEc:tse:wpaper:131302 |
| By: | Ali, Amjad; Afzal, Muhammad Bilal; Ahmad, Khalil |
| Abstract: | This study investigates how market concentration, specifically, the degree of competition within a sector impacts different innovation strategies, with particular emphasis on the distinction between long-term and short-term innovation approaches adopted by corporations. The research utilizes a dataset comprising an unbalanced panel of U.S based firms. To generate robust and valid conclusions, the analysis incorporates a suite of statistical and econometric methodologies, such as regression analysis, multicollinearity diagnostics, tests for endogeneity, and comprehensive robustness assessments. These tools are employed to examine the connection between market concentration, measured by the Herfindahl-Hirschman Index, and the innovation horizon, defined as the interval between initial research and development investments and the attainment of innovative outcomes. Furthermore, the robustness analyses confirm the reliability of the findings across various modeling specifications, providing empirical evidence that heightened market concentration correlates significantly with a reduced innovation horizon. The results reveal that firms operating in markets characterized by high concentration are inclined toward short-term innovation strategies, likely as a result of intense competitive dynamics among a limited number of dominant players striving to retain market share. These insights advance the understanding of how market structure shapes the strategic timing of innovation within firms, yielding important implications for innovation policy as well as managerial decision-making. |
| Keywords: | Market Competition, Innovation Horizon, Firm Innovation, Herfindahl-Hirschman Index |
| JEL: | M13 O3 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:127526 |
| By: | Budzinski, Oliver; Kunz-Kaltenhäuser, Philipp |
| Abstract: | The so-called 50plus1-rule in German football is a controversially discussed institution that regulates the investment behavior of professional football teams. This paper provides an empirical analysis of its effects. We gathered panel data on 47 teams in the German Major League Football ("Erste Bundesliga") from the seasons 1989/90 until 2018/2019. This paper applies a Difference-in-Differences approach to examine investment behavior in budgets, as well as sporting success between impacted competitors and those exempted from the rule. Our results do not suggest any equalizing properties of the regulation. By contrast, we find anticompetitive effects and distorting properties of the current regulation. |
| Keywords: | 50plus1-rule, football, sports economics, financial regulation, investment, sport finance, soccer, competition economics, sports antitrust |
| JEL: | Z23 Z21 Z2 J83 L11 L50 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:tuiedp:335039 |