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on Industrial Organization |
| By: | Bingyao Liu; Yao Luo |
| Abstract: | Capacity constraints are central to oligopoly competition in many industries, yet existing multiproduct Bertrand theory does not characterize equilibrium when capacity binds across markets. We establish existence and uniqueness of Bertrand–Nash equilibrium in a multimarket, multiproduct oligopoly under multinomial logit demand, with both linear and convex costs. Capacity creates cross-market spillovers: pricing in one market affects the shadow value of capacity in others. Methodologically, we extend the aggregative-games framework to a nested fixed-point structure separating across-market capacity allocation from within-market pricing, using tools from nonsmooth analysis to handle kinks from binding constraints. The framework yields new insights for merger analysis: binding capacity dampens merger-induced price increases through shadow-cost relief, while post-merger reallocation of scarce capacity can raise consumer surplus. However, the merged firm's privately optimal reallocation generally differs from the social optimum, creating a role for merger remedies. |
| Keywords: | Differentiated Products; Capacity Constraints; Mergers; Aggregative Games; Cross-Market Spillovers; Equilibrium Uniqueness |
| JEL: | L13 D24 |
| Date: | 2026–05–22 |
| URL: | https://d.repec.org/n?u=RePEc:tor:tecipa:tecipa-821 |
| By: | Noriaki Matsushima (Osaka School of International Public Policy, the University of Osaka) |
| Abstract: | This paper develops a model of two monopoly markets linked by a common consumer budget constraint. A data-rich firm can set personalized prices in one market, whereas a traditional firm in the other must charge a uniform price. Personalized pricing can expand demand in the data-rich firm's market, but because purchases come from a shared budget, it shrinks the residual demand facing the traditional firm and reduces its profit. When budgets are sufficiently tight, this adjacent-market distortion dominates same-market demand expansion, reducing total surplus. Thus, favorable same-market evidence alone is insufficient to support a benign assessment. |
| Keywords: | personalized pricing, competition law, cross-market effects, consumer budgets |
| JEL: | L13 D43 L41 K21 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:osp:wpaper:26e006 |
| By: | Yuhang Wu; Assaf Zeevi |
| Abstract: | On a platform with many sellers, should a pricing algorithm explicitly model competitors' prices when learning demand? Classical learning arguments suggest an affirmative answer: ignoring competitors induces model misspecification and inefficiency. In contrast, recent work on algorithmic collusion suggests that strategic obliviousness -- deliberately ignoring competitor prices -- may facilitate collusive outcomes and improve profits. We study this modeling choice in a stylized competitive market with unknown noisy demand, in which multiple sellers repeatedly set prices and estimate demand via iterated least squares, and either incorporate competitors' prices into their demand models (informed) or ignore them (oblivious). We first show that, relative to a monopolist, an oblivious seller in a competitive market must explore more aggressively to compensate for the loss of dynamic competitor information. Building on this insight, we characterize market dynamics when all sellers are oblivious and show that prices converge to the competitive outcome under sufficient exploration, while a continuum of pseudo-equilibria arises when exploration decays. Analyzing the resulting price trajectories, we uncover an excursion phenomenon that gives rise to transient collusive patterns that dissipate as learning progresses. In markets with both oblivious and informed sellers, the informed strictly out-earn the oblivious. Read as a strategy game, the modeling choice has a unique Nash equilibrium: the all-informed market, in which prices converge to the competitive outcome efficiently. Overall, our results indicate that collusive patterns are not robust and are not sustained by oblivious modeling; therefore, incorporating competitor information, together with sufficient price exploration, remains a reliable strategy for sellers in competitive markets. |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2606.05363 |
| By: | Giacomo Bonanno (Department of Economics, University of California Davis) |
| Abstract: | Within the context of a symmetric duopoly with linear demand and costs, we construct a parameterized family of price-setting games, where the parameter $\gamma\in[0, 2]$ measures the degree or intensity of competition; $\gamma = 0$ corresponds to collusion, a particular value of $\gamma$ between 0 and 1 corresponds to the Cournot outcome, $\gamma=1$ corresponds to the Bertrand outcome and, in general, as $\gamma$ increases the intensity of competition increases. All the games within the parameterized family share the same strategic properties. We also construct a parameterized family of quantity-setting games, where the parameter $\beta\in[0, 2]$ measures the intensity of competition; $\beta = 0$ corresponds to collusion, $\beta=1$ corresponds to the Cournot outcome and a particular value of $\beta$ between 1 and 2 corresponds to the Bertrand outcome. As $\beta$ increases, the intensity of competition increases. As an example of the potential usefulness of this approach, we show that, contrary to the view first put forward by Schumpeter (but later challenged by Arrow), the incentive to introduce a cost-reducing innovation is an increasing function of the intensity of competition (that is, an increasing function of $\gamma$ in the price-setting case and of $\beta$ in the quantity-setting case). |
| Keywords: | Cournot game, Bertrand game, price competition, quantity competition, strategic substitute, strategic complement, degree of competition |
| JEL: | C7 L0 D4 |
| Date: | 2026–05–27 |
| URL: | https://d.repec.org/n?u=RePEc:cda:wpaper:381 |
| By: | Cremer, Helmuth; Borsenberger, Claire; Joram, Denis; Lozachmeur, Jean-Marie; Malavolti, Estelle |
| Abstract: | We study environmental policy in imperfectly competitive markets where firms differ in their objectives. Alongside standard profit-maximizing firms, we consider welfareoriented firms that partially or fully internalize environmental externalities but are subject to financial viability constraints. Wedevelop a Cournot model in which production generates emissions and firms may differ in the extent to which they account for environmental damages. We characterize market equilibria and examine the effects of environmental taxes and output subsidies on emissions, output, profits, and welfare. Our analysis shows that standard Pigouvian prescriptions are modified by the presence of market power and by the break-even constraints faced by welfare-oriented firms. While emissions taxes reduce environmental damages, they may also exacerbate underproduction and threaten the viability of socially responsible firms. Conversely, output subsidies may improve welfare despite increasing emissions. The welfare ranking of policy instruments depends critically on the interaction between environmental externalities, imperfect competition, and firms’ financial constraints. These findings suggest that environmental policy design should account not only for emissions reduction, but also for the market structure and sustainability of firms with socially oriented objectives. |
| Keywords: | Environmental policy; imperfect competition; heterogeneous firm objectives; corporate social responsibility; Pigouvian taxation; break-even constraints. |
| JEL: | H23 L13 D62 Q58 |
| Date: | 2026–05–22 |
| URL: | https://d.repec.org/n?u=RePEc:tse:wpaper:131729 |
| By: | Kossi Messanh Agbekponou; Iaria Fusacchia |
| Abstract: | Global valuechainshavemadefirmboundarydecisionscentraltoperformance, yet their implicationsforexportpricesandshocktransmissionremainpoorlyunderstood. Wedevelopaframeworkinwhichverticalintegrationandproductivityjointlyshape pricing andpass-throughviacostsandmarkupsunderNash-in-Nashbargaining.Inte- gration eliminatesdoublemarginalizationbutintroducesorganizationalcostfrictions, while productivityaffectsbothcostsandorganizationalchoices, generatingacounter- intuitivesortinginwhichlow-productivityfirmsintegrateandhigh-productivityfirms outsource. UsingFrenchcustomsdatamatchedtoAMADEUSbalance-sheetinfor- mation foragri-foodfirms(2002–2017), andaninstrumental-variablestrategybasedon exogenous foreignshocks, wefindthatintegrationreducesexportpricesmainlythrough cumulativemarkupcompression, whileproductivitylowerspricesviacostsbutincreases markups throughsorting.Shocktransmissionisheterogeneous:non-integratedfirms adjust throughmarkups, integratedfirmsthroughcosts, andproductivitydampensboth channels.Pass-throughthusemergesasanequilibriumoutcomeoffirmorganization and productivity. |
| Keywords: | Global Value Chains, Vertical Integration, Bargaining Power, Pass-through, Firm Competitiveness |
| JEL: | D21 D22 D43 F12 F14 L11 L22 L23 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:rtr:wpaper:0293 |
| By: | OECD |
| Abstract: | Competition rules governing information sharing must balance two primary risks: permissive rules may facilitate tacit collusion or explicit cartel conduct, while overly restrictive frameworks can chill legitimate collaboration and create market inefficiencies. This paper reviews how different forms of information exchange affect firm incentives and market outcomes, drawing on recent economic literature. It also examines how competition authorities across OECD jurisdictions have approached the issue in practice, including through enforcement, case law and guidance. The paper aims to clarify the main factors that shape competitive risk and how those factors are reflected in current assessment and enforcement. |
| Keywords: | antitrust, cartels, collusion, competition, information exchange, information sharing |
| JEL: | D21 D43 D8 K21 L13 L44 C7 |
| Date: | 2026–06–01 |
| URL: | https://d.repec.org/n?u=RePEc:oec:dafaac:335-en |
| By: | Huang, Hanwei; Manova, Kalina Bojidarova; Perello Perez, Oscar Ignacio; Pischz, Frank |
| Abstract: | How do global production networks and market structure interact to shape the welfare effects of trade and competition policy? We develop a model with two-sided firm heterogeneity, matching frictions, and imperfect supplier competition. More productive buyers match with more suppliers, inducing tougher competition among them, lower input costs, and higher profits. Entry upstream thus benefits primarily high-productivity buyers, while lower trade or matching costs favor mid-productivity buyers. Reduced-form evidence confirms that larger French and Chilean firms import higher quantities at lower prices as more Chinese suppliers enter, and that suppliers charge diversified buyers lower markups. We estimate the model by adapting recent methods for combinatorial, discrete-choice problems. Counterfactuals reveal that the interaction of endogenous networks and markups significantly amplifies the gains from policies that facilitate supplier entry or firm matching, as well as from modern trade agreements that combine trade cost cuts with such policies. |
| Keywords: | Production networks;Matching frictions;Imperfect competition;Gains from trade;Trade;Competition policy |
| JEL: | D24 F10 F12 F14 L11 L22 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:idb:brikps:14594 |
| By: | OECD |
| Abstract: | Competition can control costs and incentivise efficiency in the healthcare sector. This paper examines how regulation interacts with competition in healthcare markets and identifies areas where competition authorities can advocate for pro-competitive regulation. It presents a framework for identifying and reviewing regulatory barriers to competition, and it discusses empirical evidence and relevant experience by competition authorities. It finds that rules such as needs based entry restrictions, or incumbents’ involvement in licensing decisions, can limit entry and reduce capacity. Similar concerns arise in professional regulation, where restrictive definitions of tasks and limited portability of licences can exacerbate workforce shortages and reduce access. The development of digital services can also be slowed down by regulatory barriers, such as the lack of interoperability between electronic records systems. Finally, pro-competitive regulation can support patients and payers by providing them with usable information. |
| Keywords: | advocacy, competition, healthcare, pro-competitive reforms, professional licensing, regulatory barriers to competition |
| JEL: | I11 I18 L11 L4 L5 L8 L44 |
| Date: | 2026–06–01 |
| URL: | https://d.repec.org/n?u=RePEc:oec:dafaac:334-en |
| By: | OECD |
| Abstract: | Digital markets have profoundly transformed the way consumers interact with businesses, offering new opportunities for innovative goods and services, greater choice, and enhanced convenience. These evolving dynamics create new challenges for both competition and consumer protection authorities, as practices that impact competition may also have an effect on consumer autonomy and choice, privacy, as well as trust, and vice versa. Traditional analytical frameworks based on price, output, information and transparency often fail to capture the full competition and consumer implications of conduct in digital environments. This note examines areas where the two policy areas converge, where gaps remain and how authorities can work together to address challenges arising from digitalisation. |
| JEL: | D12 D18 K21 L13 L40 L41 |
| Date: | 2026–05–28 |
| URL: | https://d.repec.org/n?u=RePEc:oec:dafaac:332-en |
| By: | OECD |
| Abstract: | National security considerations are becoming increasingly prominent in economic policymaking, reflecting geopolitical developments, technological change and growing attention to economic security, resilience and technological capability. As these considerations extend beyond traditional defence-related domains, they are intersecting more frequently with competition enforcement across a widening range of sectors, such as energy, telecommunications and advanced technologies. This paper examines the implications for competition authorities. It develops an analytical framework to distinguish between concerns that can be assessed using established competition law tools, where they can be expressed as competition-relevant effects, and those that fall outside the analytical remit of competition authorities and require assessment by governments or specialised bodies. Drawing on cross-jurisdictional experience, the paper analyses how national security considerations arise in the assessment of competitive constraints, merger control, co-ordinated conduct, unilateral conduct and remedy design. It identifies key considerations for preserving analytical boundaries, institutional roles, legal predictability and effective enforcement in an evolving policy environment. |
| Keywords: | competition, competition policy, defence capabilities, enforcement, national security, self-reliance, sovereignty, strategic autonomy, supply chain resilience |
| JEL: | D4 D47 F5 F52 F6 H5 H56 K21 L1 L4 L5 L78 L98 F1 |
| Date: | 2026–06–02 |
| URL: | https://d.repec.org/n?u=RePEc:oec:dafaac:336-en |
| By: | Robert M. Hunt; Konstantinos Serfes; Yin Zhang |
| Abstract: | This paper develops a two-sided model of the payment card market with elastic consumer demand, merchant and network market power, ad valorem interchange fees, cardholder rewards and cash as an alternative payment method. Drawing on insights from public finance, we define a credit card tax—an endogenous wedge between consumer and merchant prices generated by interchange fees, rewards, and credit card adoption. We show how this tax affects equilibrium prices, platform profits and welfare. Our analysis yields a novel and policy-relevant result: Contrary to conventional wisdom, capping interchange fees can increase equilibrium rewards when consumer demand is relatively inelastic. This, in turn, raises credit card adoption and intensifies cross-subsidization, benefiting card users, potentially at the expense of cash users. By contrast, when demand is more elastic, fee caps reduce rewards and card usage, improving outcomes for both groups. We also characterize the conditions under which interchange fee caps enhance allocative efficiency and encourage socially desirable payment choices. Overall, the paper offers new theoretical insights into the regulation of two-sided payment markets. |
| Keywords: | credit cards; two-sided networks; merchant competition; interchange fees; regulation |
| JEL: | L13 L40 G28 E42 |
| Date: | 2026–05–28 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedpwp:103315 |
| By: | Filip Premik; Paul Thambar; Chengsi Wang; Frank Yao; Dan Yu |
| Abstract: | Co-operatives are different from standard profit-maximizing firms. They instead maximize their members’ benefits. In this report, we examine their role across three key sectors in Australia: Retail, Care, and Farming. We lay out new economic theories about this less common type of firm organization. We discuss the implications of the existence and development of co-operatives on entry, competition, inclusion, and consumer welfare. Further discussion is devoted to evaluating policies regarding co-operatives. |
| Keywords: | Co-operatives, Ownership structure, Market entry, Regional and remote markets, Competition policy |
| JEL: | L31 L13 D21 |
| Date: | 2026–02–19 |
| URL: | https://d.repec.org/n?u=RePEc:mos:moswps:paper_1773636919735_919 |