|
on Industrial Organization |
| By: | Hattori, Keisuke; Yoshikawa, Takeshi |
| Abstract: | Entry is commonly thought to harm incumbents in Cournot markets. This paper shows that this need not hold under coopetition. We analyze a two-stage Cournot oligopoly where symmetric firms first invest non-cooperatively in shared demand-expanding activities with non-excludable benefits and then compete in quantities. With convex production costs, entry can increase individual-firm profits despite intensified competition. We further show that this non-monotonicity can create a low-entry trap: no firm enters even though an active equilibrium would be profitable for firms and beneficial to consumers. Because the active equilibrium is self-sustaining, a finite one-time "big push" that assembles a critical mass of entrants suffices to escape the trap-whereas in a standard monotone market with unprofitable monopoly entry, every entrant would require support. The push can be implemented through transitional entry subsidies or coordinated public "seed" investment in the shared activity, and we characterize which instrument is cheaper and when each pays for itself in total surplus. |
| Keywords: | Coopetition, Profit-increasing entry, Critical mass, Low-entry trap, Cournot oligopoly |
| JEL: | D43 L13 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:esprep:343408 |
| By: | Breide, Lukas; Budzinski, Oliver; Mendelsohn, Juliane; Stöhr, Annika |
| Abstract: | This paper develops four proposals to modernize merger control in the European Union and beyond. First, merger control should be reinforced and reinvigorated to prevent the further rising of market power and to stop the ongoing decline of competition intensity. Second, the analysis highlights the need to incorporate systemic and cross-market power into both market definition and competitive assessment. Third, it challenges the traditional presumption that non-horizontal mergers are generally less harmful than horizontal ones, showing that vertical and conglomerate integration may reinforce ecosystem power and foreclose innovation. Finally, the paper proposes the use of rebuttable presumptions to address procedural asymmetries and under-enforcement. Together, these reforms would align merger control with contemporary economic research on digital ecosystems and enhance its capacity to safeguard contestability, innovation, and dynamic competition. |
| Keywords: | merger control, merger guidelines, concentration, systemic market power, digital ecosystems, competition policy, market definition, rebuttable presumptions, competitiveness |
| JEL: | K21 L40 L51 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:tuiedp:343555 |
| By: | Hey, Florian |
| Abstract: | The European Union's Digital Markets Act (DMA) introduces significant transparency obligations regarding price and performance measurement for digital gatekeepers. This paper provides a theoretical economic analysis of these provisions, evaluating them against the ongoing debate on whether advertising is welfare-enhancing (informative) or socially wasteful (persuasive). The analysis suggests that while the DMA effectively targets information asymmetries and the so-called ad tech tax to foster market contestability and fairness, it remains agnostic to the normative implications of the advertising model itself. The paper argues that by lowering costs for advertisers without addressing the persuasive nature of advertising, the regulation risks fueling a zero-sum game, leading to a higher equilibrium volume of socially wasteful advertising. Thus, the respective DMA rules contribute to rent redistribution within the advertising sector rather than mitigating the systematic inefficiencies of an over-advertised digital economy. This suggests that structural or fiscal alternatives may be more appropriate to resolve these issues and their wider implications for the digital economy. |
| Keywords: | Ad Tech, Competition Policy, Digital Markets Act (DMA), Digital Advertising, Gatekeepers, Platform Regulation, Welfare Economics |
| JEL: | K21 L40 L51 L86 M38 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:tuiedp:343552 |
| By: | Hey, Florian; Budzinski, Oliver |
| Abstract: | We develop a sequential game-theoretic model to analyze the compliance incentives of digital gatekeepers under the European Union's Digital Markets Act (DMA). A gatekeeper chooses between full compliance and strategic compliance - a strategy of tactical, superficially lawful implementation that preserves a larger share of monopoly rents. The European Commission decides whether to accept the gatekeeper's compliance or initiate enforcement proceedings. Using backward induction, we show that in high-impact markets, the gatekeeper's equilibrium strategy is strategic compliance, investing in legal complexity to deter enforcement. In low-impact markets, full compliance is the equilibrium outcome. We extend the base model by endogenizing the Commission's enforcement incentives, modeled as increasing in the fine imposed, and derive conditions under which raising fines may paradoxically fail to induce full compliance. The model contributes to an emerging literature on regulatory compliance in digital markets and identifies the negotiation-oriented nature of DMA enforcement as a key determinant of strategic gatekeeper behavior. |
| Keywords: | antitrust, Digital Markets Act (DMA), gatekeeper, platform regulation, strategic compliance |
| JEL: | C72 K20 K21 L40 L51 L86 M21 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:tuiedp:343557 |
| By: | Florian Ederer; Regina Seibel; Timothy Simcoe |
| Abstract: | This paper examines innovation outcomes before and after 1, 200 startup acquisitions by eight major technology firms. Linking patent and workforce data to these deals, we document four main findings. First, most acquired startups hold no patents, but those with patents tend to operate in technology areas where the acquirer already has a presence and that see further acquisition activity. Second, innovation typically rises before an acquisition, continues afterward only where further acquisitions follow, and falls back once acquisition activity ends. We propose a stylized model in which beliefs about commercial viability drive both startup entry and acquisitions to explain how these patterns arise through selection rather than effects of the deals. Third, acquired patents receive significantly more citations after the acquisition than comparable patents, not only from the acquirer but also from firms that hire the targets’ employees. Fourth, although 31% of employees and 23% of inventors depart within a year, inventors who stay go on to patent substantially more, while stayers and leavers were equally productive beforehand. In the aggregate, we find little evidence that acquisitions by digital incumbents suppress innovation, even though serial acquisitions go hand in hand with growing patent consolidation. |
| JEL: | L41 L63 L86 O31 O34 |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35762 |
| By: | Coville, Aidan; Osman, Adam; Piza, Caio |
| Abstract: | Expanding market access via digital technologies is seen as a key pathway for growth, yet adoption remains low among small enterprises. This paper investigates barriers to entry through two randomized experiments in the country of Georgia. The findings show that a "supply-side" training intervention failed to increase digital participation, despite high initial interest. In contrast, a "demand-side" conditional purchase order increased market access by 24 percentage points, while a payment six times larger generated only a modest additional increase. The analysis finds no complementarity between training and demand incentives. The results highlight demand-side incentives as a cost-effective policy to kickstart adoption. Although the effects largely dissipate over time as control firms catch up, firms with higher baseline readiness for e-commerce remain more likely to engage in digital markets several years later, with suggestive evidence that the demand shock accelerated adoption among this group. The paper shows that the remaining barriers to growth are likely behavioral and organizational frictions rather than simple skill or capital deficits. |
| Date: | 2026–09–21 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:11460 |
| By: | Guy Aridor; Winston Chou; Nathan Kallus; Antoine Scheid; Allen Tran; Kevin Zielnicki |
| Abstract: | We study an experiment with 8.5 million users on Netflix's recommender system to measure how improvements in recommendation technology affect the set of products that get consumed. Improvements increase total consumption and users' reliance on recommendations while diffusing recommendations and consumption away from the most popular products ("superstars") toward a larger number of moderately popular products ("middle-tail"), with minimal effects on the most niche products ("long-tail"). Our results challenge the notion that recommender systems polarize consumption — raising the consumption shares of the head and tail at the expense of the middle — and suggest that the returns to investing in middle-tail products grow as algorithms improve and platforms scale. |
| Keywords: | personalization, recommendation systems, field experiment |
| JEL: | D83 D82 C93 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12981 |
| By: | Sang-Seung Yi |
| Abstract: | Qualcomm's No License, No Chips policy let it levy a royalty surcharge on every handset, whether or not it used a Qualcomm modem chip. In FTC v. Qualcomm, the Ninth Circuit reversed the district court after accepting Qualcomm's argument that, because the surcharge did not vary with the chip, it was "chip neutral" and left handset makers' choices undistorted. I develop an equilibrium model of the modem chip market and show the defense to be wrong: the surcharge's facial neutrality does not imply economic neutrality. For per handset surcharges, a surcharge and an equal government tax affect the rival's pricing identically, but not Qualcomm's: a tax is remitted to the Treasury, whereas Qualcomm collects the surcharge -- including on handsets using a rival's chip. Raising its own price therefore yields Qualcomm a smaller gain under the surcharge (the surcharge it collects on the demand diverted to the rival) than under the tax (the tax it avoids on its own lost sales), because the diversion ratio is less than one. Under the very conditions that would make a tax chip neutral, the surcharge raises the rival's all in price by strictly more than Qualcomm's -- and, under symmetric demand, lowers its output by more as well -- tilting handset makers toward Qualcomm. For ad valorem surcharges, the defense fails for a different reason: even a non discriminatory tax is generically chip neutral only if the FRAND royalty rate is zero, so the argument's premise itself does not hold. I also analyze discriminatory surcharges. |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.18161 |