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on Industrial Organization |
| By: | Pallavi Pal |
| Abstract: | When a parent company acquires a horizontal competitor on the same side of a multi-sided market, it must decide whether to fully integrate the acquired platform or keep it as a separate brand. We study this in the context of Uber’s acquisition of Postmates, using novel consumer receipt data that tracks food delivery spending. Employing an Age–Period–Cohort (APC) decomposition, we isolate the merger’s effect on consumer spending while controlling for lifecycle and cohort effects. We find that Postmates users sharply reduced their spending on the platform after the merger, but spending shifted not only to UberEats, but also to competitors like DoorDash and Grubhub. Consumers who used multiple platforms and had low pre-merger activity on Postmates were more "sticky", showing little change. Comparing our APC results with a standard Difference-in-Differences (DiD) design, we find the DiD underestimates the merger’s total impact by missing market-wide effects. Our findings suggest that in multi-sided markets, keeping acquired platforms separate can be beneficial; dissolving them may push demand to competitors, and some sticky multihoming users may not shift spending at all. |
| Keywords: | platform , merger |
| JEL: | D43 L11 L42 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12754 |
| By: | Jolian McHardy (School of Economics, University of Sheffield, Sheffield S10 2TU, UK) |
| Abstract: | Discount pricing is widely observed in network industries based on complementary products, yet little is known about the incentives governing firms’ choice of pricing structure. This paper develops a tractable n-firm model of endogenous pricing-regime adoption that yields closed-form equilibrium outcomes for all asymmetric adoption configurations. The analysis identifies a pricing-regime Prisoner’s Dilemma. Although universal undiscounted pricing maximises welfare, consumer surplus and, over a wide range of parameter values, aggregate industry profit, individually profitable discount adoption drives the industry towards universal discounting as the unique equilibrium despite its inferior welfare properties. Each adoption benefits the adopting firm at the expense of every rival firm, creating a negative profit externality that progressively reduces welfare and consumer surplus. Policies restricting discount pricing increase welfare, but their incidence depends critically on scope: narrow interventions disadvantage regulated firms, whereas broader restrictions can coordinate firms on a more efficient pricing regime. The results show that pricing structures are themselves strategic objects of competition and that expanding firms’ pricing opportunities can leave both firms and consumers collectively worse off. |
| Keywords: | network industries; pricing regimes; discount pricing; endogenous adoption; Prisoner’s Dilemma. |
| JEL: | D43 L11 L13 L41 |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:shf:wpaper:2026006 |
| By: | Leonardo Madio; Fabio M. Manenti; Massimo Motta |
| Abstract: | We study on-platform tying by a dominant platform that controls a primary access point and operates an adjacent specialised service. A rival service can reach users both through the dominant platform and through a direct channel. In a two-sided market where platforms charge sellers and seller participation affects consumer demand, tying improves the integrated service, but also shifts demand away from the rival. We show that lower mediated demand reduces seller participation on the rival platform, weakening the rival also for users who access it directly. As a result, tying can reduce consumer surplus and welfare once the direct channel is sufficiently large. We also compare tying with demotion and with a common-access policy, and show that our main insights carry over to a one-sided model in which network effects operate among consumers who pay directly for the specialised service. |
| Keywords: | abuse of dominance, digital platforms, network effects, self-preferencing, tying |
| JEL: | D42 K21 L12 L41 |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:bge:wpaper:1585 |
| By: | Xiaoming Cai; Pieter Gautier; Ronald Wolthoff; Pieter A. Gautier |
| Abstract: | We study a monopoly platform that sets meeting rates between buyers and two seller types: niche sellers, whose higher-quality good appeals to only some buyers, and mass-market sellers, whose good appeals to all. Sellers compete by posting prices à la Burdett and Judd (1983), so buyer surplus requires competition, while platform revenue requires seller rents. This tension creates a systematic distortion: as search capacity grows, the platform keeps niche exposure just past the saturation point---where extra attention erodes rents---and diverts the rest to mass-market sellers. Applied to Amazon product search and Google passage-ranking data, the model indicates buyer-surplus losses of 63 and 44 percent of the planner's benchmark, respectively. Letting buyer participation respond to the platform's recommendations disciplines it and shrinks this loss. |
| Keywords: | attention allocation, Recommendation systems, search frictions, two-sided markets, enshittification of internet |
| JEL: | D62 D83 L12 L40 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12760 |
| By: | OECD |
| Abstract: | Artificial intelligence (AI) can reshape markets, yet its implications for competition remain underexplored. This paper develops a conceptual framework distinguishing AI users from developers, and generative (GenAI) from non-generative AI, showing how competitive mechanisms differ across these dimensions. Using multiple microdata sources, the analysis documents several findings. Adoption of non-GenAI is not associated with significant increases in market power. Descriptive evidence on firms’ exposure to GenAI suggests opportunities for smaller firms alongside advantages for firms with stronger existing capabilities. Concentration in AI innovation is correlated with higher sales concentration. AI-related patenting is associated with faster markup growth, particularly in the ICT sector, where AI is an output. The AI start-up ecosystem is dynamic and attracts substantial venture capital, but start-ups are frequently acquired by large incumbents. Overall, the evidence points to a dynamic yet uneven landscape, underscoring the need for continued monitoring as AI diffusion progresses. |
| Keywords: | AI, Artificial Intelligence, Competition |
| Date: | 2026–07–30 |
| URL: | https://d.repec.org/n?u=RePEc:oec:comaaa:64-en |
| By: | David Huffman; Lamar Pierce; Germ\'an Reyes; Alex Rees-Jones |
| Abstract: | We examine a choice between bonus contracts offered to dealers of a U.S. auto manufacturer. In our data, dealers select the non-profit-maximizing option in 20 percent of observations, costing the mistaken dealers $18, 453 per year on average. We examine how the propensity to make this mistake varies with competition, identified both cross-sectionally and within dealers over time. Both analyses show that greater competition substantially lowers the rate of mistakes. However, even in the most competitive markets, consequential mistakes persist. Our results suggest that competition disciplines mainly through within-dealer changes in behavior rather than entry and exit. |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2606.32011 |