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on Industrial Organization |
| By: | Choi, Jay Pil; Jeon, Doh-Shin; Menicucci, Domenico |
| Abstract: | This paper examines how competition affects the timing of AI deployment under safety risk. We show that competition can generate two distortions relative to joint–profit maximization: a race to the bottom and insufficient entry. A race to the bottom arises when first-mover advantages induce premature deployment and is more likely as technological correlation (homogenization) increases. Conversely, firms may delay entry to free-ride on rivals’ experimentation, leading to insufficient entry. Even when private incentives under joint–profit maximization are aligned with social incentives, competition can still induce socially inefficient early deployment. We discuss policy implications for improving deployment timing. |
| Keywords: | AI, Competition, Optimal Deployment Time, Race to the Bottom. |
| JEL: | D4 L1 L5 |
| Date: | 2026–05–07 |
| URL: | https://d.repec.org/n?u=RePEc:tse:wpaper:131711 |
| By: | Andre, Peter; Heidhues, Paul; Kőszegi, Botond; Murooka, Takeshi |
| Abstract: | We develop a model of price competition with procrastinating consumers in which market discipline is supposed to arise from both the initial selection of providers and the possibility of switching providers. As in other theories, consumers may forego large gains by sticking with their initially chosen offer, so competition at the switching stage is weak. Unlike in other theories, consumers - who falsely expect to switch soon - may also fail to select the best starting offer, so competition at the initial stage is weak as well. This mechanism can translate temporary product differentiation into permanently high prices, greatly enhance the price effect of persistent differentiation, or generate high markups even with perfect substitutes. Reflecting the same mechanism, sign-up deals do not serve their classically hypothesized role of returning ex-post profits to consumers, but instead often exacerbate the failure of price competition. We complement our analysis with a tailored survey of consumers, confirming the logic of procrastination underlying our model. Consumer procrastination thus emerges as a novel source of competition failure that applies where other theories do not, helping to explain high average prices in many markets with switching costs. |
| Keywords: | procrastination, price competition, competition failure, switching, subscription markets, present bias |
| JEL: | L11 L13 D11 D41 D43 D91 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:safewp:340830 |
| By: | Lindhe, Adam (Royal Institute of Technology (KTH)); Orrenius, Johan (Research Institute of Industrial Economics (IFN)) |
| Abstract: | We introduce a choice-set approach to defining markets and a novel method to empirically recover geographic markets using machine learning, Spatial and Categorical Bayesian Clustering (SCBC). SCBC leverages the identity of the seller for each observation to capture market structures in a novel way that is not captured by purely distance-based methods. Applied to real estate agents in Stockholm (Sweden), SCBC classifies sales more accurately than the baseline K-means algorithm. Finally, we investigate the correct number of clusters and find that the optimal number of clusters is close to the validation set based on industry knowledge. |
| Keywords: | Industrial organization; Competition policy; Market regulations |
| JEL: | C60 D47 L10 |
| Date: | 2026–04–29 |
| URL: | https://d.repec.org/n?u=RePEc:hhs:iuiwop:1558 |
| By: | Latka, Catharina; Mittenzwei, Klaus; Heckelei, Thomas |
| Abstract: | Many consumers in high-income countries do not adhere to dietary guidelines. This imposes a threat to their health and to the environment as some of the excessively consumed foods also have high emission footprints. Food price changes (e.g. enforced through taxes) are a promising lever to steer consumers toward a recommended diet. However, a country-level pricing policy fails to only target those consumers that do not follow dietary recommendations but affect all consumers. Here, we estimate individual household-specific demand systems using a locally-weighted approach to capture differences in the preference structure and price sensitivity of consumers. We compare these to a pooled estimation and assess elasticity differences and implications for meat tax simulations. Tax-induced meat consumption reductions, embedded greenhouse gas emission savings and the level of adherence to dietary recommendations are compared at the national level and for consumer groups defined based on their baseline meat intake. Our findings stress that without considering heterogeneity in price responsiveness, we tend to over-estimate benefits from pricing policies. Consumers eating more meat than recommended are less responsive to price changes, but would still contribute most to emission savings and show the largest absolute dietary improvements. |
| Keywords: | Consumer/Household Economics |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:ags:aes026:397876 |
| By: | Florian Heine (Vrije Universiteit Amsterdam); Jasper Sluijs (Utrecht University) |
| Abstract: | State ownership is increasingly positioned as a policy tool for governments towards strategic autonomy and sustainability transition. A possible side effect is the creation or strengthening of dominant state-owned enterprises (SOEs), which theory suggests may engage in exclusionary (predatory) pricing. Disagreement remains, however, over the price thresholds for which exclusionary pricing should be unlawful. We run a laboratory duopoly with a dominant incumbent and a non-dominant entrant across three treatments: a private baseline market; a mixed market with an inefficient SOE incumbent (Mixed–Efficiency); and a mixed market where the SOE incumbent pursues social welfare (Mixed–Social). We measure exclusionary pricing below variable cost, below own break-even level, and above the competitor’s break-even level. We find pervasive exclusionary pricing followed by the competitor's exit in both private and mixed markets. Moreover, after exclusion monopoly pricing by the remaining competitor lowers consumer surplus and total surplus. This finding is remarkable given the professed rarity of exclusionary pricing in previous experimental research. Above break-even exclusion appears in Mixed–Social; below-cost exclusion occurs in all treatments. We observe mirrored outcomes across mixed markets: in Mixed–Efficiency the more efficient private entrant withstands exclusion and eventually displaces the SOE, whereas in Mixed–Social the SOE’s social welfare objective function supports more aggressive pricing that prompts entrant exit. These results argue for more vigilant monitoring of SOEs’ competition-law compliance and for entry-safeguarding policies when creating or strengthening dominant SOEs. |
| Keywords: | Exclusionary Pricing, Predatory Pricing, State-Owned Enterprises, Experiment, Mixed Markets |
| JEL: | C91 L13 L32 |
| Date: | 2026–04–23 |
| URL: | https://d.repec.org/n?u=RePEc:tin:wpaper:20260017 |
| By: | María del Carmen Dircio Palacios Macedo (Department of Economics, Universitat Jaume I, Castellón, Spain); Paula Cruz-García (Department of Economic Analysis, Universitat de Valencia, Spain); Fausto Hernández-Trillo (Center for Research and Teaching in Economics (CIDE), Mexico); Emili Tortosa-Ausina (IVIE, Valencia and IIDL and Department of Economics, Universitat Jaume I, Castellón, Spain) |
| Abstract: | Traditional competition analysis typically relates the exercise of market power in an industry to structural characteristics of a market, such as concentration, barriers to entry, and factor and demand conditions. However, this analysis is incomplete if we do not consider the effects of contact among firms across markets. The objective of this paper is to empirically examine the effect of multimarket contact and of intensity of multimarket contact on bank competition in Mexico for the period of 2011 to 2023, using information at the bank and municipal market level. The Mexican case provides a valuable context for analyzing the relationship between market power and multimarket contacts, given the several regulatory reforms that have occurred in recent years and that have eliminated entry barriers to new competitors, as well as the trend toward consolidation of the banking sector. The main results suggest a positive relationship between market power and the quantity and intensity of multimarket contacts. In this context, the hypothesis of "mutual forbearance" in the Mexican banking sector could not be rejected. These findings have relevant implications for competition policy, suggesting that regulators should account multimarket contact structures when assessing competitive dynamics in the banking sector. |
| Keywords: | bank competition, multimarket contact, mutual forbearance, Mexico |
| JEL: | G21 C33 L40 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:jau:wpaper:2026/07 |