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on Industrial Organization |
| By: | Takanori ADACHI; Naoshi DOI |
| Abstract: | How does a change in marginal costs affect the final consumer price in imperfectly competitive markets, where price-setting firms can also adjust product quality? In this paper, we study cost pass-through in such an environment. For both symmetric and heterogeneous firms, we show that pass-through for price and quality can be derived in terms of sufficient statistics that do not depend on any particular demand specification-namely, the first- and second-order elasticities of market demand, the Lerner index of market power, and equilibrium prices and quality choices. In addition, we obtain explicit pass-through formulas under firm symmetry. We then argue that under multinomial and random-coefficient logit demand systems, firms may respond to an increase in operational marginal costs by both lowering prices and reducing product quality when the number of symmetric firms is sufficiently small. Overall, our numerical analysis suggests that the random-coefficient logit model is more flexible than the multinomial logit model in that it allows price pass-through to exceed one, which is not possible under the multinomial logit. In addition, quality pass-through can be positive under random-coefficient logit demand. |
| Keywords: | Endogenous quality; Pass-through; Sufficient statistics; Oligopoly. |
| JEL: | D43 H22 L11 L13 |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:kue:epaper:e-25-013 |
| By: | Hugo Hopenhayn; Maryam Saeedi |
| Abstract: | We study optimal simple rating systems that partition sellers into a finite number of tiers. We show that optimal ratings must be threshold partitions, and that for linear supply and Cournot competition with constant marginal cost, optimal thresholds solve a k-means clustering problem requiring only the quality distribution. For convex (concave) supply functions, optimal thresholds are higher (lower) than the k-means solution. For log-concave distributions, two-tier certification captures at least 50 percent of maximum welfare gains from full disclosure, with five tiers typically achieving over 90 percent. Applications to eBay and Medicare Advantage data illustrate our method. |
| JEL: | D21 D47 D60 D82 L11 |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34889 |
| By: | Antoine Dubus; Patrick Legros |
| Abstract: | Firms may share data to discover potential synergies between their data sets and algorithms, eventually leading to more efficient mergers and acquisitions (M&A) decisions. However, data sharing also modifies the competitive balance when firms do not merge, and a companymay be reluctant to share data with potential rivals. Under general conditions, we show thatfirms benefit from (partially) sharing data. By doing so, they can merge conditionally basedon high synergies. Compared to a laissez-faire situation, the presence of a regulator allowingor refusing the M&A may increase or decrease data sharing, with a concomitant increaseor decrease in consumer surplus. Hence, regulation can lower the surplus of consumers it iswilling to protect. We revisit the Google/Fitbit acquisition through the lens of this interplaybetween strategic data sharing and antitrust policy. |
| Keywords: | artificial Intelligence; Synergies; Mergers and Acquisition; incomplete Information; Antitrust |
| JEL: | G34 K21 L10 L21 L24 L50 L86 |
| Date: | 2026–02–05 |
| URL: | https://d.repec.org/n?u=RePEc:eca:wpaper:2013/403154 |
| By: | Philip Z. Maymin |
| Abstract: | I prove that competitive market outcomes require computational intractability. If P = NP, firms can efficiently solve the collusion detection problem, identifying deviations from cooperative agreements in complex, noisy markets and thereby making collusion sustainable as an equilibrium. If P != NP, the collusion detection problem is computationally infeasible for markets satisfying a natural instance-hardness condition on their demand structure, rendering punishment threats non-credible and collusion unstable. Combined with Maymin (2011), who proved that market efficiency requires P = NP, this yields a fundamental impossibility: markets can be informationally efficient or competitive, but not both. Artificial intelligence, by expanding firms' computational capabilities, is pushing markets from the competitive regime toward the collusive regime, explaining the empirical emergence of algorithmic collusion without explicit coordination. |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2602.20415 |
| By: | David P. Brown (University of Alberta); Mar Reguant (Northwestern University) |
| Abstract: | This paper examines how the rapid expansion of wind and solar generation in Spain has reshaped wholesale electricity prices, ancillary service (AS) market costs, and market structure. Using an empirical strategy that exploits exogenous variation in renewable potential, we estimate how market outcomes would have differed under lower renewable capacity (and subsequently, renewable output). We find that rising wind and solar output substantially reduced wholesale prices. However, these reductions are partially offset by increases in AS market procurement and the associated operating costs driven by congestion and other operational challenges of variable generation. We show that while renewable growth reduces concentration in the wholesale market, AS markets remain highly concentrated, with limited scope for competition in key market segments. Our results highlight both the substantial net consumer benefits of renewable expansion on final prices (wholesale plus AS markets), while demonstrating the need for AS market reforms to reduce market concentration and cost-effectively manage increasing levels of renewable generation. |
| Keywords: | Electricity Markets; Energy Transition; Intermittency; Market Power |
| JEL: | L13 L50 L94 Q40 |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:ris:albaec:022362 |
| By: | Benjamin T. Leyden |
| Abstract: | I study how third-party firms respond when a platform owner enters its own marketplace, analyzing Apple's entries into App Store submarkets from 2016-2021. Using text embeddings to define markets and a staggered difference-in-differences design, I find that Apple's entry deters new competitors and shifts incumbents' monetization strategies, but effects vary widely: many markets show no meaningful response, while others move in opposing directions across a host of monetization and quality outcomes. Responses depend on how Apple enters and apps' competitive proximity to Apple. This heterogeneity suggests targeted oversight rather than categorical restrictions on platform-owner entry. |
| Keywords: | digital marketplaces, platform-owner entry, app store, platform regulation |
| JEL: | L13 L86 L40 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12512 |
| By: | Jiayi Hou; Xuan Teng; Xuan Wang |
| Abstract: | This paper studies how commission rates affect app entry across platforms. We examine an increase in Android game commission rate from 30% to 50% in China in 2014 and its impact on Android and iOS app stores, separately, in a difference-in-differences framework. We find a direct negative entry effect on Android by 47%. Meanwhile, the number of new games on the iOS App Store significantly decreased by 30% due to the higher Android commission rate, implying a negative cross-platform spillover effect. Moreover, the share of high-quality new games significantly decreased by 12%, indicating that higher commission rates discourage developers’ quality provision. |
| Keywords: | platform competition, commission rate, complementarity, entry, quality, app stores, mobile applications |
| JEL: | K21 L11 L42 L86 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12378 |
| By: | Loren Brandt; Feitao Jiang; Yao Luo; Yingjun Su |
| Abstract: | This paper examines how the geographic distribution of supply and demand shapes market power in the Chinese steel industry. Drawing on novel data, we develop and estimate an equilibrium model that accommodates spatial demand variations and rich firm heterogeneity—encompassing differences in location, product quality, production coefficients, and cost efficiencies. Using this framework, we simulate the impact of shifts in downstream demand and evaluate the welfare implications of mergers under various market frictions—an issue central to China’s industrial policy. We show that consolidation design is central to welfare outcomes: mergers led by more efficient firms and confined within regions generate substantially larger gains than nationally coordinated consolidation centered on large incumbents. The realized 2018–2024 merger wave achieved only a fraction of attainable welfare improvements. Our simulation results also suggest that as the geographic locus of demand evolves, the effects of industrial reorganization hinge critically on how supply adjusts across regions. |
| Keywords: | Spatial Differentiation, Capacity Misalignment, Market Power, Merger Analysis, Sales Aggregation |
| JEL: | G34 L13 L61 R12 |
| Date: | 2026–02–25 |
| URL: | https://d.repec.org/n?u=RePEc:tor:tecipa:tecipa-820 |