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on Industrial Organization |
By: | Alejandro Herrera-Caicedo; Jessica Jeffers; Elena Prager |
Abstract: | This paper studies whether common leadership, defined as two firms sharing executives or board directors, contributes to collusion. Using an explicit measure of labor market collusion from unsealed court evidence, we find that the probability of collusion between two firms increases by 12 percentage points after the onset of common leadership, compared to a baseline rate of 1.2 percent in the absence of common leaders. These results are not driven by closeness of product or labor market competition. Our findings are consistent with the increasing attention toward common leadership under Clayton Act Section 8. |
JEL: | K21 L4 L41 |
Date: | 2025–05 |
URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33866 |
By: | Gideon Bornstein |
Abstract: | Over the past four decades, the U.S. economy has seen a decline in the share of young firms alongside a rise in the profit share of GDP. This paper explores how population aging contributes to these twin trends through a demand-side channel. The core hypothesis is that younger households exhibit lower consumer inertia—a tendency to stick with previously chosen products—than older households. As demand shifts toward more inertial consumers, entry becomes harder, incumbents raise markups, and market share tilts toward larger firms. To quantify this mechanism, I develop and calibrate a firm dynamics model with overlapping generations of consumers who differ in their degree of inertia. Using detailed micro data, I show that younger households are significantly less inertial. The model implies that population aging accounts for 20%–30% of the observed decline in young firms and rise in profits. Reduced-form evidence across U.S. states and product categories supports the model’s predictions. |
JEL: | D40 E20 J10 L10 |
Date: | 2025–05 |
URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33820 |
By: | Ryo Masuyama (Graduate School of Economics and Junior Research Fellow, Research Institute for Economics & Business Administration (RIEB), Kobe University, JAPAN) |
Abstract: | Targeted pricing is an aggressive strategy to steal demand from rivals. Therefore, it is believed that firms should employ it. However, targeted pricing has rarely been observed. There is a gap between our perceptions in the literature on targeted pricing and reality. This study demonstrates the negative aspects of targeted pricing by considering supply chain competition. When a rival supply chain is vertically separated, targeted pricing lowers the rival’s input price and intensifies competition. Conversely, when the rival firm is vertically integrated, this effect does not occur. Therefore, a firm should confirm its rival's vertical structure when deciding whether to employ targeted pricing. |
Keywords: | Targeted pricing; Uniform pricing; Vertical structure; Supply chain management; Hotelling model |
JEL: | D43 L10 L13 |
Date: | 2025–06 |
URL: | https://d.repec.org/n?u=RePEc:kob:dpaper:dp2025-13 |
By: | Francesco Del Prato; Paolo Zacchia |
Abstract: | In a heterogeneous firm economy with monopolistic competition, could informational asymmetries between entrepreneurs and financial intermediaries sometimes improve welfare? We study this question by developing a model where banks finance entrepreneurs under asymmetric information. While aggregate productivity decreases with informational frictions, we find that welfare can be maximized at intermediate levels of information asymmetry due to a trade-off between productivity and product variety. Additionally, moderate input cost distortions can improve welfare when financial frictions are severe by offsetting the resulting weak firm selection. |
Date: | 2025–05 |
URL: | https://d.repec.org/n?u=RePEc:arx:papers:2505.24460 |
By: | Francesc Dilmé; Daniel F. Garrett |
Abstract: | A seller with commitment power sets prices over time. Risk‐averse buyers arrive to the market and decide when to purchase. We show that it is optimal for the seller to choose a constant high price punctuated by occasional episodes of sequential discounts that occur at random times. This optimal price path has the property that the price a buyer ends up paying is independent of his arrival and purchase times, and only depends on his valuation. Our theory accommodates empirical findings on the timing of discounts. |
Keywords: | dynamic pricing, sales, random mechanisms |
JEL: | D82 |
Date: | 2025–05 |
URL: | https://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2025_688 |
By: | Dandan Xia; Bruno Cassiman; David Wehrheim |
Abstract: | This study leverages advanced text-analysis techniques to investigate how increased product market rivalry, induced by Chinese import competition, affects innovation among incumbent U.S. firms in the electronic and electrical appliance industry. We measure the similarity between the product descriptions of U.S. firms and those of Chinese importers, thus capturing firm-level competitive pressure. Employing a continuous difference-in-differences framework, we compare innovation outcomes of U.S. firms more directly competing with Chinese importers to those facing lower competitive pressure, over a five-year period before and after initial Chinese market entry. We find that incumbent U.S. firms significantly increase their quality-weighted patent production, create more newproduct patents, and strategically diversify into new technological and business segments when confronted with heightened competition. Our findings highlight the role of import-driven rivalry in stimulating strategic innovation and illustrate how text-based similarity measures can effectively quantify firm-level competition, providing novel methodological tools for strategy scholars. |
Date: | 2025–05–23 |
URL: | https://d.repec.org/n?u=RePEc:ete:msiper:765722 |
By: | Patrice Bougette (Université Côte d'Azur; GREDEG CNRS); Oliver Budzinski (Technische Universität Ilmenau); Frédéric Marty (Université Côte d'Azur, France; GREDEG CNRS) |
Abstract: | Digital platforms, ecosystems, and R&D-intensive sectors pose distinctive challenges for merger control. In these fast-evolving markets, shaped by technological change and shifting competitive dynamics, traditional ex-ante reviews often fall short in anticipating long-term outcomes. This paper proposes a multi-step merger control model that includes a mechanism for remedy revision, allowing authorities to adjust behavioral commitments during their implementation. By embedding structured flexibility into merger decisions, our approach enables remedies to evolve in response to market reconfigurations, strategic conduct, or regulatory insights. The framework aims to ensure that remedies remain proportionate, effective, and legally predictable. By bridging ex-ante assessment and ex-post adaptation, it offers a policy instrument better suited to the uncertainties of dynamic competition. |
Keywords: | Merger control, merger remedies, dynamic competition, competition policy uncertainties, innovation, digital markets, mergers & acquisitions, merger waves |
JEL: | K21 L12 L13 L41 |
Date: | 2025–06 |
URL: | https://d.repec.org/n?u=RePEc:gre:wpaper:2025-22 |
By: | Alice Lixuan Xu; Jorge S\'anchez Canales; Chiara Fusar Bassini; Lynn H. Kaack; Lion Hirth |
Abstract: | In wholesale electricity markets, prices fluctuate widely from hour to hour and electricity generators price-hedge their output using longer-term contracts, such as monthly base futures. Consequently, the incentives they face to drive up the power prices by reducing supply has a high hourly specificity, and because of hedging, they regularly also face an incentive to depress prices by inflating supply. In this study, we explain the dynamics between hedging and market power abuse in wholesale electricity markets and use this framework to identify market power abuse in real markets. We estimate the hourly economic incentives to deviate from competitive behavior and examine the empirical association between such incentives and observed generation patterns. Exploiting hourly variation also controls for potential estimation bias that do not correlate with economic incentives at the hourly level, such as unobserved cost factors. Using data of individual generation units in Germany in a six-year period 2019-2024, we find that in hours where it is more profitable to inflate prices, companies indeed tend to withhold capacity. We find that the probability of a generation unit being withheld increases by about 1 % per euro increase in the net profit from withholding one megawatt of capacity. The opposite is also true for hours in which companies benefit financially from lower prices, where we find units being more likely to be pushed into the market by 0.3 % per euro increase in the net profit from capacity push-in. We interpret the result as empirical evidence of systematic market power abuse. |
Date: | 2025–06 |
URL: | https://d.repec.org/n?u=RePEc:arx:papers:2506.03808 |