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on Industrial Organization |
| By: | Zhang, Y. |
| Abstract: | Many products generate network spillovers: a user’s value of such a product is higher when her contacts also use it. This paper studies competition between an entrant and an incumbent selling such products. In the model, the firms set personalised prices (for example, via targeted discounts), and consumers embedded in a network choose which product to buy. The pattern of equilibrium consumption is shown to be the same as if firms were to charge a price of 0 to all consumers. The equilibrium prices reflect incumbent advantage and depend on the network structure in nuanced ways. The equilibrium characterisation provides the foundation for studying the profitability of entry and the effects of anti-trust tools in such markets. A key structural feature of the network is found to be cohesiveness – the extent to which consumers within a group are densely connected to one another. Firms are more likely to enter if they have a consumer base that is cohesive and influential. While regulators use interoperability as a tool to improve market contestability, I show that interoperability can actually discourage entry depending on the cohesiveness of consumer bases. |
| Date: | 2026–04–17 |
| URL: | https://d.repec.org/n?u=RePEc:cam:camdae:2634 |
| By: | Akio Kawasaki (Faculty of Economics, Oita University); Noriaki Matsushima (Osaka School of International Public Policy, the University of Osaka) |
| Abstract: | Digital entrants in health care and health insurance often compete against public or mission-oriented organizations rather than only against private rivals. We develop a Hotelling model of mixed competition in which a private data-rich firm chooses the scope of consumer-data collection and then uses the acquired information to personalize offers. The rival supplies a standard service and is either a welfare-maximizing public firm or a profit-maximizing private firm. We characterize equilibrium data collection, prices, consumer surplus, profits, and social welfare. The private digital firm chooses a wider data-harvesting range when its rival is private than when its rival is public, because a public rival uses welfare-oriented pricing to discipline the induced market allocation rather than to maximize its own profit. The welfare ranking is non-monotonic in the value created by personalization. When the benefit from personalization is either small or large, competition against a public rival yields higher welfare; when the benefit is intermediate, competition against a private rival can dominate because it induces a broader rollout of personalized service. These results highlight that the welfare effects of digital entry depend jointly on data-driven personalization and the ownership objective of incumbent health-sector organizations. |
| Keywords: | digital services, personalized pricing, public entities, health services |
| JEL: | I13 L13 D43 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:osp:wpaper:26e005 |
| By: | Benjamin T. Leyden |
| Abstract: | I evaluate the competitive effects of four major U.S. airline mergers (2008-2013) using a continuous difference-in-differences model. Standard merger retrospectives typically rely on binary treatment classifications that collapse important variation in competitive exposure. I construct three continuous route-level exposure measures — simulated ∆HHI (direct competitive overlap), merger share (the merging carriers' combined presence), and non-overlap merger share (merger share on routes where only one merging carrier operated) — and estimate dose-response curves for each. Results reveal substantial heterogeneity both across mergers and within each merger across the exposure distribution, with the three measures yielding different conclusions, as each captures a distinct competitive channel. |
| Keywords: | airline mergers, continuous difference-in-differences, merger retrospective |
| JEL: | L41 L93 C21 L13 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12669 |
| By: | Pan, Xiaojun |
| Abstract: | Can observable managerial incentive contracts substitute for price transparency as a commitment device in two-sided platforms? Extending the framework of Hagiu and Halaburda (2014), we show that under monopoly, two-dimensional public delegation precisely reproduces the transparent-equilibrium allocation. Under Hotelling competition, a network-effect symmetry threshold partitions the parameter space: in the tool region (approximately symmetric network effects), delegation Pareto-dominates no delegation; in the trap region (highly asymmetric), the classical Fershtman-Judd dilemma re-emerges. Total social welfare under delegation equals that under transparency in both regions. Policy implication: in asymmetric markets, restricting asymmetric incentive contracts can resolve the dilemma among platform owners, although the restriction lowers consumer and total welfare relative to the unrestricted equilibrium. |
| Keywords: | Two-sided platforms, strategic delegation, managerial incentive contracts, information transparency, platform regulation |
| JEL: | D43 D82 D86 L13 L86 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:esprep:341118 |
| By: | Sirui Li; Jing Su |
| Abstract: | This paper studies how consumers’ concerns about fairness interact with third-degreeprice discrimination of a two-sided monopoly platform. We show that the presenceof fairness concerns creates a negative demand externality from low-willingness-to-payto high-willingness-to-pay consumers, that is, charging less to the former reduces thelatter’s demand. With this novel externality, price-discriminating among consumerstriggers fairness concerns, which lowers consumer-side demand and ultimately restrictsthe platform’s profit exploitation from the seller side. Hence, a platform whose profitpotential from sellers is larger would take consumers’ fairness concerns more seriouslyand price-discriminate less. The results can explain why some major online platforms—despite the huge profit potential of targeting prices—shy away from price discriminationin response to consumers’ fairness concerns, while others care little about unfairnesscomplaints when price-discriminating among consumers. |
| Keywords: | fairness concerns; price descrimination; two-sided markets |
| JEL: | D42 D91 L11 L86 |
| Date: | 2026–05–11 |
| URL: | https://d.repec.org/n?u=RePEc:eca:wpaper:2013/406859 |
| By: | Robert D. Metcalfe; Alexandre B. Sollaci; Chad Syverson |
| Abstract: | Mergers are commonly evaluated by weighing their expected market power effects against any efficiency gains they create. The larger the market power effect of a proposed merger, the larger must be any efficiencies for it to raise social welfare. We show selection into merger proposal distorts the observed relationship between market power and efficiency effects. Even if market power and efficiency gains are independent (or even positively correlated) across all potential mergers, they will generally be negatively related among proposed mergers. This is because parties propose to merge only if the merger’s expected profitability exceeds a threshold, so the underlying components of profitability become substitutes in clearing that hurdle. It does not rely on managerial bias, behavioral frictions, or strategic misrepresentation. We demonstrate this negative correlation is present under very general conditions when the two effects are uncorrelated among all mergers. We also characterize conditions where this still holds even in the presence of positive underlying correlations and firms’ uncertainty about their own merger’s profitability. Policies that might raise the selection hurdle for proposed mergers do not alleviate the negative correlation; indeed, they would exacerbate it. Our analysis has direct implications for interpreting empirical merger retrospectives and for evaluating efficiency defenses in antitrust policy. |
| JEL: | L0 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35221 |
| By: | Winston Wei Dou; Wei Wang; Wenyu Wang |
| Abstract: | Distressed firms need urgent financing to preserve operations and avoid inefficient liquidation, but they borrow in concentrated markets shaped by existing-creditor blocking power and a small group of specialized lenders. We show that these borrowers pay exceptionally high loan spreads even after removing compensation for credit risk, liquidity risk, and non-risk loan-making costs. To quantify and decompose lender market power, we develop and estimate a dynamic game-theoretic model of distressed lending with latent demand heterogeneity, endogenous lender participation, creditor blocking power, and tacit collusion sustained by repeated syndication. Using granular facility-level data on debtor-in-possession (DIP) loans and highly speculative loans, we find that lender market power explains 533 bps of risk-adjusted spreads in the DIP loan market and 300 bps in the highly speculative loan market, including about 140 bps from tacit collusion in each market. Lender market power is therefore a major source of financial distress costs, reducing survival-critical liquidity by 16–20% and thereby worsening asset-value destruction. |
| JEL: | C11 D43 G12 G18 G2 G21 G23 G28 K21 L13 L4 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35206 |
| By: | Abrell, Jan; Zaklan, Aleksandar |
| Abstract: | We analyze the extent to which marginal producers in four European day-ahead electricity markets pass through short-run marginal cost, and its components fuel and carbon cost, to wholesale electricity prices. Parametric estimates show that pass-through is complete in France and Germany, and incomplete in the Iberian and Dutch markets, mainly driven by fuel cost. For carbon cost, pass-through is more heterogeneous, with the evidence suggesting over-shifting in Germany and the Netherlands. Semi-parametric estimates show that pass-through increases with demand. In sum, we show that despite being located in interconnected power markets, electricity consumers receive different fuel and carbon price signals. |
| JEL: | Q54 Q58 L94 Q41 |
| Date: | 2026–05–07 |
| URL: | https://d.repec.org/n?u=RePEc:bsl:wpaper:2026/04 |
| By: | Brandon Pecoraro; Nicholas C. Hoffman; Martin Lopez-Daneri; Elena C. Derby; Rachel Moore; Shannon E. Sledz |
| Abstract: | Using a panel of confidential corporate tax returns, we provide the first direct estimates of the realized present value of corporate tax benefits from R&D credits and deductions in the United States. Realized tax benefits can deviate from statutory tax benefits because firms in loss status are typically unable to fully utilize credits and deductions to offset current-year taxes and instead must carry these attributes forward. We develop a novel procedure to track the intertemporal firm-level utilization of tax attributes generated by corporate R&D spending, and find that the present value of R&D tax benefits varies substantially with firms’ loss status, age, and size. Old and large firms typically use R&D tax benefits quickly, while young firms – especially those that are small – frequently operate in loss status and use tax attributes more slowly. From 2012–2016, the average firm generated $0.41 in statutory tax benefits per dollar of R&D investment, with a realized present value of $0.36. Young and small firms in a loss position realized only $0.23 per dollar, a 44% decrease relative to the statutory benchmark. |
| JEL: | D22 H25 O30 O38 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35208 |
| By: | Langtry, A.; Taylor, S.; Zhang, Y. |
| Abstract: | This paper proposes a new lens for studying threshold games played on networks when the thresholds are heterogeneous. These are games where agents have two possible actions, and prefer action 1 if and only if enough of their neighbours choose action 1. We propose a transformation of the network that 'absorbs' the heterogeneity in thresholds into the network. This allows us to characterise equilibria in terms of the k-core – a well-studied measure of network cohesiveness – of the transformed network. Our model is also the direct analogy to the workhorse model of Ballester et al. [2006] when actions are 0 or 1. Further, our binary action version exhibits a remarkable stability property. When agents have linear-quadratic preferences, the k-core of the transformed network characterises the unique subgame perfect equilibrium of a sequential move version of the game – no matter what order agents move in. |
| Keywords: | Networks, Threshold Games, Strategic Complements, Contagion, Diffusion, Coordination |
| JEL: | D85 O33 |
| Date: | 2026–04–17 |
| URL: | https://d.repec.org/n?u=RePEc:cam:camdae:2633 |