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on Industrial Organization |
| By: | Hattori, Keisuke |
| Abstract: | This paper shows that entry can raise each individual firm's profit---not merely industry profits---when Cournot oligopolists finance working capital through a contestable banking sector. Under average-cost pricing of loans, entry dilutes fixed banking costs across greater lending volume, lowering loan rates. Entry raises per-firm profits if and only if equilibrium output lies in an intermediate range where financing relief dominates intensified competition. Bank-side and firm-side frictions play opposing roles: firm-side frictions facilitate profit-increasing entry by amplifying cost relief as firms shrink, while bank-side frictions suppress it by raising funding costs as aggregate lending expands. |
| Keywords: | Profit-increasing entry, Cournot oligopoly, Contestable banking, Financial frictions |
| JEL: | D43 G21 G32 L13 |
| Date: | 2026–01–31 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:127926 |
| By: | Khaw, Rachel (Monash University) |
| Abstract: | This thesis develops a theoretical model of digital platform competition in which moderation choices endogenously generate ideological differentiation. Competing platforms decide which content providers to host, trading off advertising revenues against moderation costs, while consumers sort by ideological proximity and content variety. In equilibrium, breadth competition cancels out, leaving ideological tilt as the key dimension of differentiation. Polarisation emerges as the most robust equilibrium, maximising platform profits but welfare-reducing for moderates, while generalism is socially optimal but privately fragile. By modelling ideology as the outcome of moderation intensity rather than an exogenous stance, the paper clarifies how moderation incentives shape polarisation, welfare, and regulatory trade-offs. |
| Keywords: | Digital platforms ; content moderation ; ideological differentiation ; polarisation ; welfare ; industrial organisation. JEL classifications: L13 ; L82 ; D43 ; D72 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:wrk:wrkesp:98 |
| By: | Nigar Hashimzade; Haoran Sun |
| Abstract: | Industrial policy has returned to the centre of economic governance, particularly in the high-tech sectors where positive network externalities in demand make market dominance self-reinforcing. This paper studies the welfare effects of an industrial policy targeting a sector with network externalities in a two-country model with strategic trade and R&D investment. We show how the welfare consequences of this policy are determined by the interaction between the strength of the externality, the type of R&D, and the degree of product differentiation between the home and the imported goods. When externalities are weak or the goods are close substitutes, the business-stealing effect produces a race to the bottom that dissipates more surplus than it creates. Under sufficiently strong externalities and weak substitutability or complementarity of the goods, industrial policy competition can make both countries simultaneously better off compared to the laissez-faire outcome because of the mutual business-enhancement effect. The case is stronger for the product innovation than for the process innovation, as the former directly affects the demand and triggers a stronger network effects than the latter which operates indirectly through the supply. Thus, the network externalities create an opportunity for a win-win industrial policies, but its realisation depends on the market structure and the nature of innovation. |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2603.29542 |
| By: | Klein, Gordon J.; Klotz, Phil-Adrian; Paha, Johannes |
| Abstract: | This study provides an empirical assessment of whether competition stimulates infrastructure investment within network industries – an issue that remains unresolved through theoretical approaches alone. We examine this question in the context of fiber-optic broadband deployment by internet service providers in Germany, a sector that has drawn regulatory scrutiny amid concerns that incumbent firms engage in strategic duplication of infrastructure to deter market entry. To this end, we construct a novel dataset by applying text mining techniques to systematically extract information on fiber infrastructure duplication from newspaper reports. Employing econometric methods, we estimate the causal impact of competition on investment behavior. Contrary to the expectation that competition may spur infrastructure expansion, our findings indicate that competitive pressure is associated with a deceleration in fiber network rollout. |
| Keywords: | Fiber Rollout, Infrastructure Competition, Telecommunication |
| JEL: | D22 L52 L86 |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:atv:wpaper:2601 |
| By: | Noriaki Matsushima (Osaka School of International Public Policy, the University of Osaka); Kazuki Nishikawa (Graduate School of Economics, the University of Osaka); Jiaying Qiu (Graduate School of Economics, the University of Osaka) |
| Abstract: | A binding minimum wage can raise the regulated firm's profits when labor-market power interacts with product-market competition. We develop a duopoly model in which firms compete in the same product market but hire workers from distinct, geographically segmented labor markets. Because the minimum wage applies only to one firm's labor market, it does not directly raise its rival's costs. With monopsony power, the minimum wage reduces the regulated firm's marginal cost and induces it to expand output, forcing its rival to contract through strategic interaction. Under Cournot competition, this mechanism also increases total employment and consumer surplus. |
| Keywords: | Minimum wage, Monopsony power, Segmented labor markets, Product-market competition |
| JEL: | J38 J42 L13 J23 C72 |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:osp:wpaper:26e003 |
| By: | Ginger Zhe Jin; D. Daniel Sokol; Liad Wagman |
| Abstract: | We study a novel dynamic inspection game in which a regulator commits to a detection technology, and a regulated firm chooses whether to engage in harmful conduct and, if detected and sanctioned, whether to incur a redesign cost that generates a modified violation requiring renewed detection. In this adaptive environment, bounded sanctions give rise to three Markov perfect equilibria: full compliance, harm until recognition, and persistent redesign. We show that AI-augmented monitoring can shift the equilibrium from persistent redesign to harm until recognition, but only when regulatory investment crosses a regime-shifting threshold. Below this threshold, greater monitoring intensity may increase enforcement workload without reducing aggregate harm, as the regulator repeatedly detects adaptive violations while the firm continues to redesign. Thus, partial investments in AI monitoring can generate congestion rather than deterrence. When the firm can also adopt AI to reduce its redesign cost, the regulator’s deterrence threshold rises, reinforcing the strategic interaction between enforcement and evasion technologies. Moreover, congestion becomes particularly salient when AI-flagged violations require human review and regulatory review capacity is binding. In this case, the precision of AI triage—especially its false positive rate—matters as much as detection intensity. Enforcement effectiveness therefore depends not only on expanding detection, but also on allocating scarce human review resources efficiently. |
| JEL: | D82 K21 K42 L40 |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35010 |
| By: | Georgios Gatsios; Christos Genakos; Stella Papadokonstantaki |
| Abstract: | We examine the short-run impact of price ceilings on retail gasoline prices in isolated oligopolistic markets, uniquely observing for which stations the regulation was binding and for which it was not. Leveraging daily pricing data and a difference-in-differences methodology, we find that, while binding stations naturally lowered prices, non-binding stations increased theirs, though there is substantial heterogeneity. Among non-binding stations, those with more favorable characteristics for collusion adjust prices faster, move closer to the ceiling, and exhibit lower price dispersion, consistent with more effective coordination. Our results provide evidence that the price ceiling acted as a focal point for collusion among non-binding stations, consistent with channels identified in tacit collusion theory. |
| Keywords: | price ceiling, tacit collusion, focal point, retail gasoline markets, oligopoly |
| Date: | 2026–04–02 |
| URL: | https://d.repec.org/n?u=RePEc:cep:cepdps:dp2169 |
| By: | Se Yan (Zachary); Han Zhong (Zachary); Zemin (Zachary); Zhong; Wenyu Zhou |
| Abstract: | This paper provides some of the first large-scale descriptive evidence on how consumers adopt and use platform-embedded shopping AI in e-commerce. Using data on 31 million users of Ctrip, China's largest online travel platform, we study "Wendao, " an LLM-based AI assistant integrated into the platform. We document three empirical regularities. First, adoption is highest among older consumers, female users, and highly engaged existing users, reversing the younger, male-dominated profile commonly documented for general-purpose AI tools. Second, AI chat appears in the same broad phase of the purchase journey as traditional search and well before order placement; among journeys containing both chat and search, the most common pattern is interleaving, with users moving back and forth between the two modalities. Third, consumers disproportionately use the assistant for exploratory, hard-to-keyword tasks: attraction queries account for 42% of observed chat requests, and chat intent varies systematically with both the timing of chat relative to search and the category of products later purchased within the same journey. These findings suggest that embedded shopping AI functions less as a substitute for conventional search than as a complementary interface for exploratory product discovery in e-commerce. |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2603.24947 |
| By: | Markiewicz, Zuzanna (University of Warwick) |
| Abstract: | This study examines whether the 2013 FAA First Officer Qualifications (1, 500-hour) rule reshaped competitive dynamics across U.S. legacy and regional carriers, measured by group-level mean changes in offered seat capacity relative to Mexican and Canadian carriers outside the rule’s jurisdiction. Triple-Difference and Difference-in-Differences models are estimated on an airport-pair–carrier–month–year-level data on passenger flights on bidirectional U.S.–Canada and U.S.–Mexico routes market from 2012 to 2014. On average, post-policy, the U.S. legacy–regional capacity gap in offered seats widened by 46% relative to the corresponding foreign legacy–regional gap. U.S. regional carriers reduced offered seats by 19% relative to foreign regional carriers, while U.S. legacy carriers increased offered seats by 34% relative to foreign legacy carriers. Overall, the safety-oriented tightening of pilot-qualification requirements appears to have produced unintended competitive spillovers with asymmetric effects, consistent with wage-sensitive U.S. regional airlines curtailing operations and larger-scale U.S. legacy carriers gaining market power. |
| Keywords: | 1, 500-hour rule ; pilot qualification requirements ; labour supply constraints ; airline competition ; regulatory asymmetry JEL classifications: L93 ; L51 ; L13 ; J44 ; R48 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:wrk:wrkesp:97 |
| By: | Ertian Chen; Lichao Chen; Lars Nesheim |
| Abstract: | The European Union Emissions Trading System is set to substantially increase the effective carbon price faced by airlines. To quantify the impact of this carbon regulation on the European airline industry, we estimate a two-stage model of airline competition with endogenous route entry, flight frequencies, and pricing using European data on market shares and prices. Counterfactual simulations reveal that the impacts of carbon pricing are highly asymmetric across carrier types and market segments. Consumer surplus declines by up to 25% overall, with medium-haul markets bearing the brunt at up to 90%, while short-haul markets experience positive net welfare gains (including carbon revenue and the social value of avoided emissions) as airlines reallocate capacity toward shorter routes. We find that airline profits decline by 8–45% across scenarios, while carbon tax revenue of $0.9–3.1 billion and a social value of avoided CO2 emissions of $0.5–1.4 billion partially offset the welfare losses. We also show that a hypothetical Wizz Air–Ryanair merger primarily benefits firm profits through network expansion synergies. |
| Date: | 2026–03–30 |
| URL: | https://d.repec.org/n?u=RePEc:azt:cemmap:04/26 |