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on Industrial Organization |
| By: | Axel Gautier; Jean-Christophe Poudou |
| Abstract: | In many industries, platforms compete with incumbents that are open to all consumers, whereas platforms require user affiliation. Consequently, platforms face two layers of competition: for the market, to attract users, and in the market, to compete with incumbents. We develop a dynamic model integrating these layers, showing that as platform affiliation grows, in the market competition intensifies, pushing incumbents toward more aggressive pricing. Conversely, for the market competition diminishes, reducing the platform's incentive to compete aggressively. This interplay generates dynamic pricing behavior that can be non-monotonic over time, capturing the shifting incentives driving platform-incumbent competition across both dimensions. |
| Keywords: | platform competition, Uber economy, competition for the market, market affiliation |
| JEL: | L11 L13 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12218 |
| By: | Azova, Arina; Lukyanov, Georgy |
| Abstract: | We embed observational learning (BHW) in a symmetric duopoly with random arrivals and search frictions. With fixed posted prices, a mixed-strategy pricing equilibrium exists and yields price dispersion even with ex-ante identical firms. We provide closed-form cascade bands and show wrong cascades occur with positive probability for interior parameters, vanishing as signals become precise or search costs fall; absorption probabilities are invariant to the arrival rate. In equilibrium, the support of mixed prices is connected and overlapping; its width shrinks with signal precision and expands with search costs, and mean prices comove accordingly. Under Calvo price resets (Poisson opportunities), stationary dispersion and mean prices fall; when signals are sufficiently informative, wrong-cascade risk also declines. On welfare, a state-contingent Pigouvian search subsidy implements the planner’s cutoff. Prominence (biased first visits) softens competition and depresses welfare; neutral prominence is ex-ante optimal. |
| Keywords: | social learning; informational cascades; price dispersion; search; vertical differentiation. |
| JEL: | C73 D43 D83 L13 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:tse:wpaper:131066 |
| By: | Pedro Bordalo; Giovanni Burro; Nicola Gennaioli; Gad Nacamulli; Andrei Shleifer |
| Abstract: | Why do we see both advertising and powerful consumer habits for well-known and intrinsically similar brands? We offer an explanation based on the idea that, as in Bordalo et al. (2020), a consumer is more likely to demand a good if she recalls the pleasure it gave her in the past. In turn, the consumer is more likely to recall goods that are consumed more frequently and more similar to cues, subject to interference from other goods. Our model yields context-dependent brand habits where ads work as memory cues. It predicts that ads: i) are more effective for more habitual consumers and ii) exhibit spillovers, within and across products, that are stronger for more habitual consumers and for goods with more similar ads. Using data from NielsenIQ and Nielsen we find support for these predictions in 20 undifferentiated and highly advertised product categories. Memory offers new insights on how advertising affects market competition and consumer welfare. |
| JEL: | L0 M37 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34387 |
| By: | Ciucci, Salvatore |
| Abstract: | There are many evidences which prove that cartels’ price leads to an economic inefficiency, due to the reduced consumers welfare. Antitrust authorities have set up different ways to defeat and prevent collusive agreements, but as widely showed by the literature, deterring collusion may have adverse effects, like higher price in surviving cartels, reduced turnover of firms’ employees, and disincentive for competing firms to cooperate, in the sense that if firms exchange information about the evolution of demand or costs, then they may adopt better choices; moreover, deterring collusion may have even a pro-collusion effect. The paper suggests an additional anti-cartel tool which does not have side effects, and supporting no cost, it can get worse collusion stability. Analysing a supergame of collusion, in a Bertrand duopoly framework in which is run a two-stage lottery, we show that deviation strategy becomes more attractive, even if lottery jackpot tends to zero. |
| Keywords: | Political Economy, Public Economics |
| Date: | 2025–10–22 |
| URL: | https://d.repec.org/n?u=RePEc:ags:feemwp:373385 |
| By: | Seungwhan Chun; Marco Duarte; Cici McNamara; Jason M. Lindo |
| Abstract: | Are state-imposed behavioral remedies effective substitutes for federal antitrust enforcement? We evaluate state regulation of hospital mergers under Certificates of Public Advantage (COPAs). Using hospital data from 1996-2022, we compare COPA-regulated mergers to unregulated mergers with similar anticompetitive potential. In highly concentrated markets, COPA mergers result in 11.1 p.p. lower price growth but 0.5 p.p. greater increases in 30-day mortality rates. We find a negative correlation between price and mortality effects for COPA mergers, consistent with theoretical predictions that binding price caps exacerbate quality deterioration. Our findings suggest that COPA contracts are poor substitutes for traditional antitrust enforcement. |
| JEL: | G38 I11 K21 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34373 |
| By: | KOIKE-MORI, Yasutaka; OKUMURA, Koki |
| Abstract: | This paper investigates how production networks shape firms’ R&D decisions and the resulting aggregate inefficiencies. We develop a dynamic model in which firms form supply chains through a persistent matching process and rely on those links to trade both existing products and newly developed products from R&D. The model features two sources of misallocation: market-power distortions and a network-formation externality. The second novel externality leads firms to fail to internalize that their R&D makes them more attractive to potential partners. We estimate the model using Japanese firm-to-firm transaction and patent data and show that the first-best allocation lies close to the decentralized outcome. Market-power corrections raise R&D incentives for older firms by relieving double marginalization along their long supply chains. Instead, internalizing the network-formation externality tilts R&D toward younger firms that expand their supply chains rapidly. These opposing forces largely offset each other, leaving the planner’s allocation near the decentralized one. |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:hit:tdbcdp:e-2025-01 |
| By: | Neil Mehrotra; Hyunseung Oh; Julio L. Ortiz |
| Abstract: | Using industry-level panel data and plausibly exogenous variation in supply conditions, we estimate the elasticity of retail price margins with respect to inventories along the retailer's optimal pricing curve. We find that this elasticity is negative and statistically significant, implying that lower finished-good inventories lead to higher price margins. We assess the implications of this channel for inflation dynamics within a New Keynesian Phillips curve (NKPC) framework that links inventories to retailers' markup behavior. Incorporating the inventory-sales ratio into the NKPC markedly improves the model's empirical fit and helps account for two notable recent inflation episodes: the missing disinflation of 2009â 2011 and the COVID-era surge. |
| Keywords: | Inflation; Inventories; Supply disruptions; Phillips curve |
| JEL: | E31 E32 E22 |
| Date: | 2025–10–15 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedgif:1424 |
| By: | Roche, Maxime; Comstock, Andrew; Ecker, Olivier |
| Abstract: | Understanding how food demand responds to household income and price changes is essential for anticipating global food needs and designing effective food policies. Yet existing elasticity estimates vary widely due to differences in data, estimation methods, and study settings. This study aims to assess how empirical choices influence elasticity values and examine theory-based predictions related to income growth and inequality, urbanization, and demographic change. It provides the most comprehensive global systematic literature review and meta-analysis of income and price elasticities to date, compiling over 13, 000 elasticity estimates from 215 peer-reviewed studies published between 1974 and 2022. We estimate two-level random effects meta-regressions and use the results to generate predicted elasticities for nine food groups by world region. While most data and methodological choices have little effect on price elasticity estimates, income elasticities are influenced by factors such as demand model type, use of conditional specifications, and the choice of expenditure measure. We find empirical support for Engel’s Law but only partial support for Bennett’s Law. Income elasticities are positively associated with urbanization, particularly in lower-income countries, and negatively associated with population aging. By projecting income elasticities through 2050 under alternative Shared Socioeconomic Pathways, we show that ignoring structural shifts in sociodemographics can yield meaningfully different estimates of future food demand. |
| Keywords: | systematic reviews; forecasting; meta-analysis; prices; elasticities |
| Date: | 2025–09–19 |
| URL: | https://d.repec.org/n?u=RePEc:fpr:ifprid:176595 |