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on Industrial Organization |
| By: | Vivek Bhattacharya; Gastón Illanes; Avner A. Kreps; José D. Salas; David Stillerman |
| Abstract: | Prospective merger simulations are a commonly used tool in industrial organization and antitrust, but evidence about their accuracy and predictive ability is limited. We study 101 mergers in consumer packaged goods and compare the realizations of price changes with predictions from merger simulations. In our sample of consummated mergers, predicted price changes from merger simulations are typically larger than realized ones. Despite the overprediction, we find that full merger simulations are more effective than both structural presumptions and approximations of the merger effect at identifying mergers with large price changes. |
| JEL: | D43 K21 L13 L41 |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35473 |
| By: | Vincent Abraham; Florian Ederer; Catarina Marvao |
| Abstract: | We provide the first empirical evidence that common ownership can facilitate explicit collusion. Our unique setting, the population of legal cartels in Sweden, lets us observe cartel formation, duration, and dissolution without the sample-selection bias that plagues studies of detected cartels. Combining hand-collected ownership data with the universe of registered cartels, we compute firm-pair profit weights (κ) that measure how much one firm internalizes a rival's profits. Higher profit weights are associated with a greater likelihood of cartel participation, predict future cartel involvement, and are linked to longer cartel duration. Firms also reduce their profit weights immediately after a cartel dissolves. However, this relationship is concentrated among pairs in which the firm that internalizes the rival firm's profits colludes while the rival does not. Common ownership therefore complements a firm’s own participation in explicit collusion but substitutes for cartel participation by the rival whose profits it internalizes. |
| JEL: | D43 G32 L21 L41 L43 |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35565 |
| By: | Chirantan Chatterjee; Ying Fan; Debi Prasad Mohapatra |
| Abstract: | This paper studies how spillovers across complementary markets shape product variety and firm entry. We examine the Indian cell phone and wireless service markets during the 4G rollout and estimate a structural model of demand, pricing, carrier network expansion, and phone product choice. The estimation results support the economic forces through which complementarity generates spillovers. Counterfactual simulations show that banning budget Chinese phones slows 4G deployment by roughly five quarters and lowers consumer welfare without raising domestic firms' profits. Similarly, an unrestricted subsidy outperforms a domestic-only subsidy in expanding network coverage, increasing consumer welfare, and raising domestic firms' profits. |
| JEL: | F13 L13 L63 L96 O25 O33 |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35522 |
| By: | Francisco Arizala; Diana Ricciulli-Marín; Johanna Schauer |
| Abstract: | This paper studies market power in Mexican industries over the period 2008-23 using establishment-level data from the Mexican Economic Census. We document a substantial increase in the average price markup over marginal costs, from 12 percent in 2008 to 27 percent in 2023. The sources of this increase vary across sectors and time: services, particularly wholesale and retail trade, account for most of the increase in markups until 2018, while manufacturing, led by transportation equipment and export-oriented industries, plays a larger role in more recent years. Rising markups in services are associated with greater local labor market concentration, suggestive of increasing monopsony power. In manufacturing, markup growth is linked to higher capital expenditure, consistent with firms sustaining larger markups to recover higher fixed costs. Moreover, rising markups in manufacturing are positively associated with total factor productivity, whereas in services they are uncorrelated with productivity. Overall, these findings suggest that while market power has increased over time, its underlying drivers have shifted from monopsonistic power in labor markets to higher fixed costs, with more favorable efficiency implications in recent years. |
| Keywords: | Market power; markups; concentration; productivity; capital |
| Date: | 2026–08–28 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2026/181 |
| By: | Bianca Sanesi; Federico Vaccari |
| Abstract: | We study how competition among biased news sources affects information and welfare when sources can misrepresent facts at a cost. Monopolistic and competitive market structures admit many equilibria. We develop a common belief-based selection criterion that applies to both and makes welfare comparisons possible. Under the refined outcomes, adding an oppositely biased source improves the receiver's welfare when that source faces sufficiently high misreporting costs. Competition disciplines the incumbent while introducing a few distortions of its own. Better information need not increase total welfare, and distorted advice from a monopolist can raise total welfare. Competition may improve decision-making without being socially beneficial. |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2608.24129 |
| By: | Alvaro Contreras (Boston University); Peter Eccles (Financial Conduct Authority); Paolo Siciliani (Bank of England) |
| Abstract: | Cloud outsourcing may alter competition in banking by allowing smaller competitors to access scalable digital infrastructure. This paper studies the effects of banks’ outsourcing agreements with Cloud Service Providers (CSPs) in the UK banking sector using proprietary bank-provider contract data. We find that CSP spending is associated with lower operating costs and higher deposits, with reduced-form effects concentrated among large institutions. We also find that increases in capital requirements are associated with higher CSP spending, consistent with large institutions using CSP adoption to reduce dependence on legacy IT systems, improve operational efficiency, and strengthen long-term franchise value. We then estimate a structural model of competition in the UK deposit market to quantify depositor-demand effects from CSPs. We find that the demand-side benefits of CSP adoption are substantially larger for small and medium banks and building societies. We use the model to conduct two counterfactual analyses. First, we simulate a scenario in which cloud outsourcing was restricted prior to its widespread adoption. The counterfactual implies higher market concentration, lower market shares for smaller institutions, and lower depositor welfare. Second, we analyse a reduction in capital requirements. While lower capital requirements directly increase welfare through funding-cost effects, they also reduce incentives to invest in CSP adoption, offsetting roughly 32% of the direct welfare gain. Our findings suggest that cloud outsourcing has partly reduced technological barriers to competition in banking markets. |
| Keywords: | Cloud outsourcing;bank competition;process innovation;financial regulation |
| JEL: | G21 G28 O31 D22 |
| Date: | 2026–08–14 |
| URL: | https://d.repec.org/n?u=RePEc:boe:boeewp:023540 |
| By: | Thomas Désiré; Jordan Pandolfo |
| Abstract: | Fixed costs account for an increasing share of operating expenses in the U.S. banking system. From 1995 to 2026, estimated fixed costs rose from 37 percent to 62 percent as a share of total noninterest expense. Over the same period, estimated marginal and average operating costs declined, loan spreads and net interest margins fell, and estimated loan markups increased by 21 percentage points. These trends are pervasive across banks but are most pronounced among large banks. We develop a model of bank industry dynamics with endogenous fixed costs to rationalize these long-run trends and examine pro-competitive effects. While competition increases credit supply, it decreases lending efficiency and increases bank risk-taking. |
| Keywords: | banks; fixed costs; market power; competition; Industry dynamics |
| JEL: | G21 L11 L13 D24 |
| Date: | 2026–09–01 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedkrw:103727 |
| By: | Mary Amiti; Sebastian Heise; David Weinstein |
| Abstract: | Tariffs raise the prices of goods made at home, not just the imports they tax—an effect that standard pass-through estimates largely miss. Studying the 2025 U.S. tariffs, we find that about 26 percent of the tariff increase passes through to consumer prices. These estimates are measured relative to less-exposed goods and hold aggregate conditions fixed. The direct effect accounts for 64 percent of this increase, as tariffs raise the consumer prices of foreign varieties of a good. The remaining 36 percent arises indirectly—tariffs raise the cost of imported inputs used by U.S. producers, and domestic producers raise their markups because they face less competition from higher-priced imports. The direct effect passes through quickly, since tariffs raise import prices almost immediately, but the indirect effect takes nine to twelve months to work its way through supply chains. As a result, tariffs have a larger and more drawn-out impact on consumers than the direct effect alone would suggest. |
| JEL: | E31 F13 F14 |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35561 |
| By: | Maysam Rabbani; Ram Sewak Dubey |
| Abstract: | Hybrid platforms disadvantage third-party sellers through the platform fee and self-preferencing, and regulators have worried that constraining either instrument may intensify the other. We model a platform that chooses both instruments and find the opposite: single-instrument regulation is effective because the instruments are strategic complements, and regulating either instrument curbs the other. We also find that the two instruments achieve what monopolization achieves, higher prices and reduced consumer welfare, while passing every conventional antitrust test. |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2608.02800 |