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on Industrial Organization |
| By: | Kumar Rishabh; Vatsala Shreeti |
| Abstract: | In this paper, we trace the geography and economic characteristics of firms that produce artificial intelligence (AI) products and services. Many economies around the world are evaluating their strategic priorities in AI, yet relatively little is documented about the global distribution of AI production. We construct a new database that identifies 1, 246 AI-producing firms across 32 economies. We map these firms in each economy into the five layers of the AI supply chain: compute, cloud and related infrastructure, data tools, AI models and AI applications. The biggest markets for AI production are China and the US. Most economies specialise only in a few supply chain layers and many focus largely on compute. AI firms in all economies exhibit strong home bias in investment activity, with a focus on downstream applications. Finally, we find that venture capital inflows are strongly correlated with the presence and density of AI firms in a given economy. |
| Keywords: | artificial intelligence, AI supply chain, firm geography, AI measurement |
| JEL: | O33 C81 L86 F23 L16 |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:bis:biswps:1343 |
| By: | Kevin Michael Frick |
| Abstract: | Artificial intelligence algorithms are increasingly used by firms to set prices. Previous research shows that they can exhibit collusive behaviour, but how quickly they can do so has so far remained an open question. I show that a modern deep reinforcement learning model deployed to price goods in a repeated oligopolistic competition game with continuous prices converges to a collusive outcome in an amount of time that matches empirical observations, under reasonable assumptions on the length of a time step. This model shows cooperative behaviour supported by reward-punishment schemes that discourage deviations. |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2604.15825 |
| By: | Jolian McHardy (School of Economics, University of Sheffield, Sheffield S10 2TU, UK) |
| Abstract: | Network oligopolies with sequential or multi-part consumption face double marginalisation across complementary components, motivating constraints on inter-firm pricing. Building on regulatory provisions permitting coordinated pricing for composite or multi-firm products, we study pricing rules that benchmark cross-firm prices against firms’ standalone or bundled prices. Coordination is not inherently welfare improving: discount-based benchmarks can generate equilibrium surcharges. By contrast, a no-discount rule, NDB, ties cross-firm pricing to own-firm bundles, internalising complementarities without propagating markups and raising welfare across a wide range of market sizes and demand parameterisations. However, private and social incentives need not align, so welfare-improving coordination need not arise endogenously. Whilst these results apply broadly to coordinated pricing in network industries, a calibration to the UK bus market illustrates quantitative relevance. NDB delivers substantial consumer-surplus gains (around 20%) and increases ridership, generating external benefits comparable in magnitude to current operating subsidies, up to £0.5 billion p.a. |
| Keywords: | network pricing; coordination regimes; complementary components; pricing benchmarks; competition policy; network industries. |
| JEL: | L13 L51 D43 D62 R48 |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:shf:wpaper:2026003 |
| By: | Juan Sebastián Ivars (University of Balearic Islands) |
| Abstract: | This paper investigates how market competition shapes the design and provision of incentive contracts for managers. We study a moral hazard setting where two principals each employ a risk neutral agent (manager). Each agent makes a decision on effort leading stochastically to an outcome. These outcomes are observable for each principal and used to design incentives based on their joint realizations. We isolate the effect of market competition in two channels: market information and market structure. First, market information captures the correlation between the outcomes generated by the agents. Second, market structure indicates the profits that each principal obtains from a given realization of agents’ outcomes. As a result, the incentive schemes that are optimal from an informational perspective need not be used in equilibrium when competition reduces the returns to effort. This framework provides a unified explanation for variation in incentive design across competitive environments and clarifies how competition affects managerial discipline through the profitability of incentive provision rather than through the design of performance measures. |
| Keywords: | Moral Hazard, Principal-Agent, Competition, Managerial Incentives |
| JEL: | D21 D43 D86 M12 L13 J33 |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:aoz:wpaper:392 |
| By: | Paul S. Koh |
| Abstract: | This paper studies cost pass-through in differentiated-product oligopoly. I derive a general representation of the pass-through matrix that decomposes equilibrium price responses into the roles of demand curvature, substitution, and multiproduct ownership. This extends the classic insight in single-product monopoly to multiproduct settings in which diversion and ownership also matter. I then develop a tractable first-order approximation that yields a sufficient-statistics characterization for empirically relevant demand systems. Finally, I characterize the small-share limit and show how common demand specifications impose tail restrictions that shape pass-through. The results provide a practical framework for applied work on tax incidence, merger analysis, and related questions in imperfect competition. |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2604.21423 |
| By: | Joshua S. Gans |
| Abstract: | When should a founder act on a strong belief about an opportunity, knowing that rivals assessing the same opportunity may hold very different views? This paper studies entry decisions when entrepreneurs hold heterogeneous beliefs about an opportunity's value and each founder knows only the range of views rivals might hold. In equilibrium, a founder enters only when their conviction exceeds a threshold set by anticipated rival optimism. The relationship between belief dispersion and entry is surprisingly rich: depending on the founder's conviction and the cost of entry, there may be no level of dispersion that supports entry, all levels may support it, or only a middle range may, so that an outside observer may see the most entry at intermediate levels of belief dispersion. When founders can delay, high dispersion that deters immediate entry need not prevent it altogether: the absence of rival action gradually reveals that competitors are less bullish than feared. Finally, not all conviction-building is equal. Validation that only the founder sees strengthens entry incentives fully, whereas validation visible to the whole market partly backfires by encouraging rivals. The paper formalises the intuition that entrepreneurial value comes not from optimism alone but from optimism that the founder anticipates rivals will not share, and derives predictions linking belief dispersion to entry patterns. |
| JEL: | D81 D83 L13 L21 O36 |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35091 |
| By: | Ryo Masuyama (Kushiro Public University of Economics and Kobe University) |
| Abstract: | This study evaluates personalized pricing in supply chain competition. We consider two supply chains, each comprising an upstream firm with Corporate Social Responsibility (CSR) and a downstream firm investing in quality. A downstream firm's quality investment has two effects: it raises its own consumers' utility and induces the rival downstream firm to lower its price, consequently benefiting the rival's consumers. As personalized pricing is exploitative, the former effect is entirely captured. First, we find that under personalized pricing, a downstream firm's investment benefits only the rival's consumers. In response, the upstream firm with CSR sets a higher input price to expand the rival's market share and increase consumer surplus, which weakens downstream investment incentives and moderates quality competition. Second, we find that personalized pricing may harm consumers while remaining profitable for downstream firms. |
| Keywords: | personalized pricingï¼› uniform pricingï¼› Corporate Social Responsibilityï¼› quality investmentï¼› supply chain management |
| JEL: | D43 L10 L13 |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:koe:wpaper:2607 |
| By: | Bardey, David |
| Abstract: | This paper studies competition between television channels in a two-sided market with asymmetric firms. Motivated by a competition case in Colombia, we consider an oligopoly with three channels—two large and one small—that compete for viewers and advertisers. Advertising affects viewers both directly and indirectly through content quality, which is endogenously determined by the share of revenues that channels reinvest rather than distribute to shareholders. We first characterise the equilibrium of the subgame between viewers and advertisers and derive comparative statics linking audience levels to prices and payout policies. We then analyse the equilibrium of the game between channels, which jointly choose advertising prices and payout rates. While equilibrium prices are characterised implicitly, the model delivers closed-form solutions for payout decisions. Our main result is that asymmetries in audience size translate into asymmetric competitive pressure on the advertising side, which weakens the smaller channel. This effect is amplified when advertisers are restricted to single-homing, as in the presence of exclusivity clauses. By concentrating advertising demand on dominant channels, exclusivity reduces the smaller channel’s revenues and its incentives to invest in content quality, thereby limiting its ability to compete. These findings provide a novel mechanism through which exclusivity can generate exclusionary effects in two-sided media markets by affecting both demand allocation and endogenous investment decisions. We find that exclusivity reduces social welfare, mainly due to a decline in advertisers’ surplus that is not offset by improvements on the viewers’ side. |
| Keywords: | Two-sided markets; free-TV; ad-financed business model; competitive bottleneck; exclusivity contracts |
| JEL: | D43 L11 L13 L82 L86 M37 |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:tse:wpaper:131679 |