|
on Industrial Organization |
| By: | Gurkirat Wadhwa |
| Abstract: | In many consumer electronics and appliance markets, manufacturers sell products through competing retailers while simultaneously relying on take-back programs to recover used items for remanufacturing. Designing such programs is challenging when firms compete on prices and consumers differ in their willingness to return products. Motivated by these settings, this paper develops a game theoretic framework to analyze pricing and take-back decisions in a dual-channel closed loop supply chain (CLSC) with two competing manufacturers and two competing retailers. Manufacturers act as Stackelberg leaders, simultaneously determining wholesale prices and consumer take-back bonuses, while retailers engage in Nash competition over retail prices. The model integrates three key elements: (i) segmented linear demand with cross-price effects, (ii) deterministic product returns, and (iii) an inertia responsiveness allocation mechanism governing the distribution of returned products between manufacturers. Closed form Nash equilibria are derived for the retailer subgame, along with symmetric Stackelberg equilibria for manufacturers. We derive a feasibility threshold for take-back incentives, identifying conditions under which firms optimally offer positive bonuses to consumers. The results further demonstrate that higher remanufacturing value or return rates lead the manufacturers to lower wholesale prices in order to expand sales and capture additional return volumes, while high consumer inertia weakens incentives for active collection. Numerical experiments illustrate and reinforce the analytical results, highlighting how consumer behavior, market structure and product substitutability influence prices, bonuses, and return volumes. Overall, the study provides managerial insights for designing effective take-back programs and coordinating pricing decisions in competitive circular supply chains. |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2602.14288 |
| By: | Matthias Lang (LMU Munich); Cédric Wasser (University of Basel) |
| Abstract: | We study the welfare effects of ambiguous product information for a buyer with α-max-min preferences and a price-setting seller. The buyer privately receives information about her valuation. We show that the seller or the buyer can benefit when this information is ambiguous, and we characterize all possible combinations of producer and consumer surplus, as evaluated under ambiguity-sensitive preferences. Ambiguity concerning the valuation perceived by the buyer when making the purchase decision can induce the seller to change the price. Before receiving information, ambiguity concerning the purchase decision can make the buyer optimistic about buying only for high valuations, which relaxes the participation constraint. |
| Keywords: | Ambiguity; uncertainty; information design; bayesian persuasion; strategic learning; pricing; bargaining; |
| JEL: | D42 D81 D82 D83 L12 |
| Date: | 2026–02–12 |
| URL: | https://d.repec.org/n?u=RePEc:rco:dpaper:564 |
| By: | Martin Peitz; Anton Sobolev; Paul Wegener |
| Abstract: | Advertisers place ads on publishers’ websites to attract the attention of multihoming consumers. Because of competition in the product market, advertisers may have an incentive to partially or fully foreclose their rivals. A gatekeeper may be able to limit publishers’ access to some of the consumers. We fully characterize the equilibrium in which the gatekeeper, publishers, and advertisers make strategic pricing decisions. We show how the presence of the gatekeeper affects the advertisers’ foreclosure decisions and the surplus of the different market participants. |
| Keywords: | gatekeeper, ad-funded media, advertiser competition, ad blocking, uniform pricing, foreclosure, imperfect competition |
| JEL: | L12 L13 L15 M37 |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2025_731 |
| By: | Heiko Karle; Marcel Preuss; Markus Reisinger |
| Abstract: | Platforms that provide product recommendations to consumers, such as marketplaces like Amazon or online travel agencies like Expedia, govern a substantial part of transactions in many markets. In addition to selling via platforms, most firms, however, also operate a direct channel. This paper investigates how the interaction between the platform channel and the firms’ direct channel affects platform design and firms' pricing incentives. We provide a rich game-theoretic model in which platforms give recommendations to consumers about products with high match value and facilitate consumer search, but charge sellers commission rates, whereas sellers compete in prices to balance demand across both channels. We show that the interaction between the channels gives rise to novel mechanisms that have counterintuitive effects. First, higher platform fees induce sellers to prioritize their direct channel—where consumers have lower expected match values and are thus more price-sensitive—leading to lower equilibrium prices. Second, improvements in recommendation quality can paradoxically reduce seller prices by intensifying the competitive pressure on the direct channel. Third, we show that for the platform, the quality of recommendations and the commission rate are strategic substitutes, that is, providing better recommendations should optimally be coupled with lower commission rates. This occurs because both instruments have potentially negative effects on seller prices. Finally, we evaluate recent policy interventions within our framework. We find that fee caps and measures that facilitate transactions on the direct channel can have unintended consequences and reduce consumer surplus by distorting the pricing incentives inherent in the dual-channel structure. |
| Keywords: | platform pricing, recommendation quality, consumer search |
| JEL: | D83 L15 L86 M31 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12465 |
| By: | Markus Pasche (Friedrich Schiller University Jena) |
| Abstract: | It is shown that staggered and sticky price adjustment is possible without ad hoc frictions, and without suspending full price flexibility. I consider an oligopoly with n price-setting firms which can strategically choose the timing of price decisions and thus the stage in a n-stage Stackelberg oligopoly game. After a shock, firms can credibly signal to delay their price adjustment for some time to (re-)establish a leader-follower structure. From the calculus behind this decision, it is derived which firm will adjust at which time and henceforth stage of the game. The delays are in general asymmetric with respect to direction and size of the shock, and they depend on market power, making the model consistent with a variety of empirical observations. Strategically delayed adjustment of firm prices implies also inertia in aggregated price level adjustment which plays a key role in macroeconomics. |
| Keywords: | oligopoly, leader-follower structures, price dispersion, delayed price adjustment, cost shock, aggregated price dynamics, inflation |
| JEL: | D21 D43 L11 L16 E31 |
| Date: | 2026–02–11 |
| URL: | https://d.repec.org/n?u=RePEc:jrp:jrpwrp:2026-002 |
| By: | Jong-Hee Hahn (Yonsei University); Seongkyun Kim (Software Policy & Research Institute) |
| Abstract: | This paper examines the welfare effects of most-favored-nation (MFN) clauses in markets where platforms not only act as intermediaries but also compete to offer auxiliary services such as delivery. Analyzing a linear demand model in which platforms set both transaction and service fees, we show that although MFNs intensify competition for service fees, their tendency to elevate transaction fees dominates, reducing aggregate transaction volume and thereby diminishing consumer surplus and overall welfare. This result holds for asymmetric platforms, provided all remain active in the market, and is robust to changes in the intensity of platform competition. |
| Keywords: | Online platform, MFNs, Price parity, Antitrust, Service competition |
| JEL: | L1 L4 D4 D8 |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:yon:wpaper:2026rwp-281 |
| By: | Bruce I. Carlin; Tingting Liu; Micah S. Officer; Agathe Pernoud; Danni Tu |
| Abstract: | Allocation mechanisms in M&A deals are complex, but a main feature is that a target board controls who to invite to the sale. In a theoretical model, we show that it is optimal for the target to invite fewer potential acquirers when they are more homogeneous (i.e., when their values for the target are more correlated). Furthermore, greater correlation (and hence a smaller optimal bidder pool) yields the target a higher surplus from the sale (i.e., higher premium). We test the model empirically and show that M&A deals with smaller bidder pools are associated with higher target returns. This is not a result of synergies in the deals: the target's share of the surplus is simply higher in deals with smaller bidder pools. Finally, we show that cash deals are associated with larger, whereas stock deals have smaller, pools of bidders. |
| JEL: | G34 |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34846 |
| By: | Jong-Hee Hahn (Yonsei University); Seongkyun Kim (Software Policy & Research Institute) |
| Abstract: | This paper investigates the welfare effects of price parity (most-favored-nation, MFN) clauses in platform markets characterized by cross-platform investment externalities. Although price parity clauses can reduce fee competition and elevate retail prices, they may also improve efficiency by incentivizing platforms to increase demand-enhancing investments. Using a representative consumer model, we demonstrate that under conditions of substantial investment leakage and moderate marginal investment costs, the efficiency gains from enhanced investment can outweigh the negative impact of higher prices. We derive sufficient conditions under which platform profits, consumer surplus, and overall social welfare are all increased by the presence of price parity clauses. The stronger the platform competition, the greater the likelihood that price parity clauses will reduce consumer welfare. |
| Keywords: | Price parity (MFN) clauses, Investment externalities, Antitrust, Platform |
| JEL: | L1 L4 D4 D8 |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:yon:wpaper:2026rwp-282 |
| By: | Ville Korpela (Turku School of Economics, University of Turku, Finland); Eero Mäkynen (Turku School of Economics, University of Turku, Finland) |
| Abstract: | Business dynamism has been slowing globally over the last several decades. In a recent study, Akcigit and Ates (2023) examine the relative importance of different channels behind this development and highlight weakened knowledge diffusion from the technology frontier to followers as a dominant force.1 Their study also suggests that diffusion may weaken endogenously as the technology gap widens and market power accumulates, raising the question of how innovation policy can strengthen diffusion without reducing welfare. In this paper we study leader-to-follower licensing as a policy-relevant diffusion margin, and evaluate licensing subsidies relative to direct R&D subsidies. We develop an endogenous-growth general equilibrium model in which firms compete in prices and invest in R&D; the technology leader endogenously chooses whether to license to the follower, trading off higher static profits against faster follower catch-up through knowledge diffusion. We calibrate the model to Finnish data from 2014–2019. Our first exercise evaluates whether allowing licensing is desirable by shutting down the licensing channel in the calibrated economy. In the Finnish benchmark, shutting down licensing lowers growth but increases consumption-equivalent welfare, because the level effects of reduced concentration dominate the diffusion benefits of licensing. We then vary the diffusion rate through licensing and product substitutability to characterize when licensing becomes welfare-improving. In that region, solving the policymaker’s problem shows a non-trivial interaction: higher R&D subsidies can reduce equilibrium licensing by moving leaders more quickly into the monopoly-pricing states where licensing is privately unattractive, so the optimal policy mix augments R&D support with a non-negligible licensing subsidy to sustain diffusion. |
| Keywords: | Antitrust Policy, Business Dynamism, Endogenous Growth, Innovation Policy, Licensing, Technology Diffusion |
| JEL: | E22 L10 L41 O33 O34 |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:tkk:dpaper:dp174 |
| By: | Filip Premik (Monash University); Dan Yu (University of Alberta) |
| Abstract: | We study how heterogeneity in capital inputs affects firm performance. Drawing on detailed data on municipal bus fleets in Poland, we exploit plausibly exogenous variation generated by public procurement and nationally coordinated sales behavior of bus manufacturers to identify the causal effects of variety in fleet composition across brands and other technical dimensions. More heterogeneous fleets exhibit lower vehicle utilization and, for a fixed level of output, require more units of capital and generate higher costs. Our results emphasize that the pro- ductive capacity of capital depends on its internal structure, not only on its aggregate quantity or value. |
| Keywords: | Productivity, hetergeneous capital , capital utilization , fleet composition , organization of production |
| JEL: | D24 L23 L62 |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:mos:moswps:2026-01 |
| By: | Katarzyna Bilicka; Simone Traini; Katarzyna Anna Bilicka |
| Abstract: | We examine whether the public revelation of sensitive tax information prompts firms to adopt reputation repair policies targeting shareholders. Between 2013 and 2021, the International Consortium of Investigative Journalists (ICIJ) released leaked information on over 800, 000 offshore entities incorporated in tax havens, publicly revealing their use by multinational firms to avoid taxes. Leveraging this setting, we investigate whether firms implicated in the leaks improve their governance, increase investor remuneration, and reorganize their activities to restore shareholder trust relative to unaffected firms. We find that, after the leaks, firms appoint more directors, especially in operations, audit, and finance and accounting, pay higher dividends, and reduce their presence in tax havens, without increasing effective tax rates. Additional analyses suggest that concerns about managerial diversion and public scrutiny may drive these responses. Overall, data leaks appear to change the cost-benefit trade-off of tax strategies in ways that are, on net, favorable to shareholders. |
| Keywords: | offshore subsidiaries, tax havens, data leaks, corporate governance, dividend payouts, reputation repair |
| JEL: | G30 H25 L14 M41 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12435 |
| By: | Keith Head; Thierry Mayer; Marc Melitz; Chenying Yang |
| Abstract: | We model a multi-stage supply chain for EVs from battery production to vehicle distribution. Given industrial policies, firms select where to open facilities at each stage. This is a difficult combinatorial choice problem that we solve with a fast mixed integer linear programming formulation. We estimate the variable and fixed costs parameters using SMM. Counterfactual simulations reveal a tension between boosting EV adoption and promoting domestic supply chains. Due to increasing returns, even unconditional subsidies raise the number of factories in the subsidizing region—by about 16% for EVs and 7% for cells in North America, and even more in Europe. Theoretically, local assembly requirements can push down delivered marginal costs relative to unconditional subsidies. Empirically, local content requirements quadruple the expansion of cell factories in America, but they drive up costs and reduce subsidy uptake, undoing more than half of the EV adoption stimulus coming from pure buyer subsidies. |
| JEL: | C63 F14 F23 L50 L62 |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34884 |