|
on Regulation |
| By: | Leonardo Bursztyn; Rafael Jiménez-Durán; Aaron Leonard; Filip Milojević; Christopher Roth |
| Abstract: | Several countries are adopting social media bans for teenagers, yet early evidence suggests limited adherence to the age-based restrictions. Such bans ask platforms to remove profitable customers and teens to give up access to their online social networks. We study an alternative regulatory regime in which platforms remain liable for teens on the adult tier but may offer a safe tier that removes restricted features, such as algorithmic feeds, while preserving interactions with their relevant network. Provision of the safe tier and enforcement are complementary: teens can adhere without giving up access to their network, and platforms can retain displaced adult-tier users as lower-margin customers. This policy design makes the teen decision to avoid the adult tier less dependent on peer dynamics and increases teen welfare for a relevant range of regulatory penalties. |
| JEL: | D18 D62 L51 L86 |
| Date: | 2026–10 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35870 |
| By: | Dihan Zou |
| Abstract: | We study monopoly regulation when capacity is contractible but subsequent output is not. A firm privately observes its production cost before installing costly capacity and then choosing output, while the regulator cannot use transfers. We provide sufficient conditions under which a single capacity floor implements an optimal mechanism with full participation. The floor raises output by changing investment while leaving utilization to the firm after installation costs are sunk. Under additional conditions, the allocation has three regions: laissez-faire, full utilization of the floor, and underutilization. High-cost types knowingly install capacity they will not fully use, yet produce more than under laissez-faire. This physical waste is a necessary evil of optimal regulation that expands service. We also show that underutilization can persist in optimal regulation with capacity-contingent subsidies or a common entry fee. |
| Date: | 2026–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2610.07189 |
| By: | G. Charles-Cadogan |
| Abstract: | This paper develops a revolving-door model in which a regulator designs policy signals that affect a regulated firm's capital structure while holding an implicit career option to leave public service for the regulated firm or its advisers. The model has three linked mechanisms. First, regulatory signals alter the firm's pricing, leverage, and risk choices by changing the tradeoff between consumer surplus and firm profit. Second, because the regulator's outside payoff is convex in regulated-firm value, the career option rises with firm value, leverage, and signal-induced volatility. Third, when signal-induced volatility raises the option vega of firm equity, the same mechanism can increase tail risk and reduce distance to default. A proof-of-concept calibration illustrates leverage-vega warning regions and shows how a regulator-induced signal can move a firm from a go-leverage region into an early-warning or crash-risk region. The calibration includes maturity comparisons, sensitivity grids over compensation convexity and initial leverage, a bank-like parameter anchor, stochastic signal simulations, and a stopping-horizon diagnostic. Evidence from federal payroll data on post-employment restrictions supports the career-option primitive by showing that limits on revolving-door opportunities affect post-agency pay. The exercises also organize historical regulatory failures: Lehman Brothers as a regulatory-vacuum case, Silicon Valley Bank as a distorted-signal and weak-supervision case, and Signature Bank as a converted-signal case involving post-public-service incentives, lighter oversight, rapid growth, uninsured-deposit exposure, and tail risk. The model does not predict collapse dates; it identifies conditions under which regulatory forbearance, weak debt penalties, and career-option incentives can delay oversight until firms cross a leverage-vega warning threshold. |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2610.08804 |
| By: | Alden Cheng; Riley League |
| Abstract: | We study strategic responses by firms to threshold-based regulations. We document extensive bunching in response to additional staffing requirements for California nursing homes with at least 100 beds. To estimate the regulation’s effect on staffing, we develop a novel treatment effects estimator for threshold-based regulations under precise manipulation, by decomposing firms into response types based on counterfactual and realized staffing and size, separating causal effects from selection. We estimate that higher staffing above the threshold is nearly entirely due to selection, with low-staffing facilities manipulating their size to avoid the regulation. These size distortions limit access, particularly for disadvantaged patients. |
| JEL: | I11 I18 L51 |
| Date: | 2026–10 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35849 |
| By: | Dhaval M. Dave; Jooyoung Kim; Joseph J. Sabia |
| Abstract: | Licensure sales requirements are commonly justified as consumer protection regulations intended to improve seller compliance and reduce harm associated with risky products. However, licensure effects may differ across communities with heterogeneous enforcement intensity and seller responses. We study this question in the context of e-cigarette retail licensure laws (ERLLs), a policy intended to regulate access to e-cigarettes among youth. We find that state ERLLs with strong penalties for non-compliance reduce nicotine vaping among Black youths by 2.5-4.0 percentage points but have no effect on White youths. This racially disparate finding is driven by heterogeneous supply-side responses to increased regulatory burden. Vendors in Black neighborhoods are more likely to be targeted for inspections than those in White neighborhoods despite having lower pre-treatment rates of infractions. Moreover, vendors in Black neighborhoods are also less likely to sell e-cigarettes following ERLL adoption, consistent with a racially disparate regulatory burden. Together, our results suggest important distributional consequences of licensure requirements. |
| JEL: | H22 I12 I18 |
| Date: | 2026–10 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35848 |
| By: | Javier Donna (University of Miami-Rimini Center for Economic Analysis); E. Mina Guler (University of Miami) |
| Abstract: | A federal court blocked JetBlue’s acquisition of Spirit Airlines in January 2024 to protect consumers who relied on Spirit’s low fares. Spirit failed anyway and ceased operations in May 2026. We ask whether the prohibition protected consumers. Using DB1B data for 2022–2025, we estimate the effect of Spirit’s exit across the 1, 427 routes it served. The 5th and 10th percentile fares rise by 8.6 and 5.8 log points; mean and median fares are unaffected. Where a carrier entered, the bottom is unaffected and mean fares fall. Theharm comes from exit without replacement, which entry policy does not reach. |
| Keywords: | Ultra-low-cost carriers; Entry and exit; Merger enforcement; Failing firm defense; Fare distribution; Antitrust |
| JEL: | L93 L41 L13 L51 K21 |
| Date: | 2026–10 |
| URL: | https://d.repec.org/n?u=RePEc:aoz:wpaper:409 |
| By: | Kurt R. Brekke; Odd Rune Straume; Lars Sørgard |
| Abstract: | Book markets are characterised by common distribution through competing bookstores and vertical integration between publishers and bookstore chains, and in many countries publishers are allowed to set fixed book prices (FBP) in the bookstores. Under vertical separation, FBP can reduce retail prices when publishers have sufficiently strong bargaining power, as the elimination of double marginalisation outweighs the loss of intra-brand competition. We show that vertical integration fundamentally changes this trade-off. It eliminates double marginalisation inside the chain, thereby substantially reducing the scope for FBP to lower retail prices. But since FBP eliminates retail price differences on the same title, the allocative distortions are reduced when imposing FBP and consumer welfare and total welfare are no longer aligned. We find that, in the presence of vertical integration, the introduction of FBP is less likely to benefit consumers and more likely to benefit publishers than in an industry with vertical separation. |
| Keywords: | fixed book prices, vertical integration, double common agency |
| JEL: | D43 K21 L42 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_13042 |
| By: | Volker Nocke; Nicolas Schutz |
| Abstract: | We derive closed-form expressions for the welfare distortions arising from oligopolis tic market power. Our analysis covers competition among multiproduct firms facing constant elasticity of substitution (CES) or multinomial logit demand. The derived formulas rely solely on observed (oligopolistic) firm-level market shares and, under CES demand, the elasticity of substitution. Under CES demand, we fully character ize resource misallocation and extend the analysis to general oligopolistic equilibrium, decomposing welfare losses into within- and between-industry components. Taylor ap proximations connect these losses to standard concentration indices: within-industry misallocation is proportional to the difference between the cubic Hannah–Kay index and the squared Herfindahl index, while between-industry misallocation is proportional to the variance of the Herfindahl index across industries. |
| Keywords: | Market power, oligopoly pricing, misallocation, industry concentration, Herfindahl index, Hannah-Kay indices, sufficient statistics |
| JEL: | L13 D43 D61 E23 |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2025_669v2 |
| By: | Jun Yeong Lee |
| Abstract: | Evidence that pricing algorithms collude comes from markets in which every seller runs the same algorithm. We ask what happens when they do not. Four language models from four providers, each at its cheapest tier, price in a four-firm logit Bertrand market without communication, in every homogeneous, two-by-two and fully mixed composi- tion (11 cells, 20 runs, 200 periods). Collusion is a property of the model: Claude and Gemini markets reach 72 to 79 percent of the monopoly rent, DeepSeek markets 24 percent, and GPT markets none, though GPT prices drift above the monopoly level rather than toward competition. Mixing does not reduce collusion by itself. Markets containing Gemini, which opens at the highest price and settles highest, are more col- lusive than the homogeneous markets they are built from; markets containing Claude, which opens lower and follows its rivals down, are less so; and only the fully mixed market is significantly less collusive than the average homogeneous one. Stability de- pends on the least stable participant: two GPT firms suffice to keep any market from converging. Inside mixed markets the rent is shared in a transitive order, DeepSeek over Claude over Gemini over GPT, that inverts the anchor ranking. The model that raises the price collects the least of the rent, as the price-leadership model predicts. |
| Date: | 2026–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2610.11256 |
| By: | Joshua S. Gans |
| Abstract: | An advertiser in a second-price auction sees what it paid, not the rival bids that supposedly set the price. Akbarpour and Li (2020) show that an auctioneer can therefore charge a winner up to its bid undetected. The Federal Trade Commission alleges that Amazon’s advertising auctions, described as second-price, used soft reserves that did this. We ask whether repeated bidding exposes such charges and what adjustment does to welfare. If each charge equal to the bid is flagged, the soft reserve is exposed quickly, however much the advertiser trusted the description. If reports show only win rates and expected charges, it is indistinguishable from a second-price auction at any fixed bid: an advertiser that trusts the description and bids its value never learns, and one that doubts it but bids for current profit needs a number of auctions at least inversely proportional to its doubt before it considers a soft reserve more likely than not. The second-price description and aggregate reporting are complements. Among informed, symmetric advertisers, the soft reserve raises no more revenue than a second-price auction, and when only some advertisers adjust, placements are misallocated. Disclosure returns surplus to advertisers; removing the surcharge also restores efficiency. |
| JEL: | D44 D83 L86 |
| Date: | 2026–10 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35841 |
| By: | Wilko Bolt; Nicole Jonker |
| Abstract: | This paper investigates whether the primary current account that consumers typically use for their everyday shopping and banking transactions remains an effective cross-selling channel for banks amid digitalisation, regulatory reform and increased competition. Using a unique 2024 consumer survey of 2, 326 Dutch consumers, we find no evidence of a broad structural decline in banks’ overall cross-selling opportunities in the Netherlands. The primary current account continues to “anchor†bank-customer relationships. However, this anchoring role varies by product category and consumer segment. Cross-selling has weakened for savings and investment products, while remaining relatively stable for mortgages. Furthermore, digitalisation is not only associated with more multi-banking but also supports financial product acquisition at the consumers’ main bank, suggesting that it does not uniformly erode incumbent banks’ cross-selling capacity. Consumer preferences are central: perceived benefits of single-banking strengthen cross-selling and reduce multi banking, whereas perceived transparency of financial conditions has a modest effect. |
| Keywords: | Consumer behaviour; Retail banking; Cross-selling; Multi-banking; Digitalisation; Transparency |
| JEL: | D14 G21 G28 O33 |
| Date: | 2026–10 |
| URL: | https://d.repec.org/n?u=RePEc:dnb:dnbwpp:873 |
| By: | Carballido Cerqueiro, María; Carro, Jesús M.; Siotis, Georgios |
| Abstract: | This paper aims to better understand competitive rivalry in the US airline industry over the last 25 years. First, it contributes to a better understanding of the procompetitive "Southwest effect" over the period 2000-2025. We show that this effect can clearly be identified during the first part of our sample period, but disappears circa 2016, when Southwest culminated a process of strategic re-orientation and appears to have started behaving like legacy carriers. Second, we find that Southwest presence on a route flattened the relationship between air fares and Multimarket Contact (MMC) until the mid-2010s; since then, the two groups of routes have converged. Third, we document that the effect of MMC on fares has diminished over time. We conjecture that this may be due to increased concentration and symmetry among major players. Fourth, our results indicate that a linear specificationto identify the relationship between MMC and fares may be adequate until2007. This is no longer the case afterwards: the data point to a non-monotonic U/V-like shape, first on routes with Southwest and, from 2016, on all routes. Fifth, the pandemic seems to have led to a temporary breakdown in tacit collusion, but only on routes where Southwest was not present; once the COVID-19 crisis ended, the long-run evolution of the MMC-fare relationship resumed. |
| Keywords: | Southwest effect; Multimarket contact; Airline industry; Demand shock; Pandemic |
| Date: | 2026–10–07 |
| URL: | https://d.repec.org/n?u=RePEc:cte:werepe:50949 |
| By: | Robin Ng; Greg Taylor |
| Abstract: | We study how content moderation facilitates communication on online platforms. A sender transmits information to a receiver, exerting effort to signal their truthfulness. Communication fails without moderation because the effort required is prohibitive. Moderation resolves this problem by making effort a more powerful signal of veracity. However, moderation crowds out sender effort, decreasing engagement value of content on the platform. A socially optimal policy may therefore involve limited moderation, but platforms often have an incentive to allow too much false content. We study the interaction between moderation and other strategic platform choices, including a platform’s decision to share revenue with creators, the decision to be a content-hosting platform, and the enablement of AI features. |
| Keywords: | user-generated content, content moderation, creator economy, media platforms, misinformation |
| JEL: | D83 L82 L86 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2025_698v4 |
| By: | Joseph E. Aldy; Michael W. Toffel; Alison J. Ong; Lavender Yang |
| Abstract: | Many large, publicly-traded companies adopt voluntary greenhouse gas emission reduction commitments in the presence of a fragmented public policy landscape. To explore the potential emission implications of such commitments, we develop a framework for understanding how firms’ voluntary emission targets interact with carbon pricing, regulatory mandates, subsidies, and heterogeneous policies across political jurisdictions. This analysis highlights the difficulty of distinguishing incremental voluntary emission abatement from policy-induced emission reductions. We introduce the Salata Institute Corporate Climate Targets Database, which we produced from public domain reports published by Russell 3000 firms over 2000-2024. The database documents the growth, form, scope, and sectoral distribution of voluntary greenhouse gas emission targets, including net-zero, carbon-neutral, carbon-reduction, energy-related, and qualitative commitments. Comparing this database with CDP, a non-profit organization formerly known as the Carbon Disclosure Project and the most common source of corporate emission targets used in the research literature, reveals substantial omissions in their survey-based data, especially in recent years. We show that voluntary corporate targets often mirror government-established goals and public policies, and some firms benchmark their internal carbon prices to existing carbon taxes and emission trading systems. The paper concludes by outlining empirical challenges and future research needs for evaluating the emission impacts of voluntary commitments. |
| JEL: | M48 Q54 Q58 |
| Date: | 2026–10 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35869 |
| By: | Comisión Nacional de los Mercados y la Competencia (CNMC) (Comisión Nacional de los Mercados y la Competencia (CNMC)) |
| Abstract: | Los servicios de nube son claves para impulsar la productividad, la eficiencia y la competencia. Existe una elevada y creciente concentración del sector, así como barreras a la entrada y al cambio de proveedor y asimetrías informativas y en el poder de negociación. Estos retos afectan tanto al sector privado como a las administraciones públicas. Para afrontarlos, se plantean las siguientes recomendaciones. Primero, mantener una supervisión reforzada de los servicios de nube, con la aplicación de la política de competencia como primera línea de defensa. Segundo, considerar una aplicación complementaria del DMA a los servicios de nube. Tercero, fomentar un entorno procompetitivo en el ámbito de la economía digital. Cuarto, adoptar un marco procompetitivo para la contratación pública de servicios de nube. |
| Keywords: | regulación, competencia, servicios de nube, mercados digitales. |
| JEL: | K21 K23 L40 L86 L88 |
| Date: | 2026–07–21 |
| URL: | https://d.repec.org/n?u=RePEc:awo:epaper:e/cnmc/001/23 |
| By: | Comisión Nacional de los Mercados y la Competencia (CNMC) (Comisión Nacional de los Mercados y la Competencia (CNMC)) |
| Abstract: | The granting of public aid constitutes one of the most significant forms of public intervention in the economy. However, for aid measures to be effective, they must be implemented in a way that avoids unnecessarily disrupting the efficient functioning of markets. Traditionally, Spanish authorities have focused on ensuring compliance with EU State aid rules and national subsidy legislation. However, this approach cannot and should not be regarded as the only relevant one, since it does not provide answers to equally important questions, such as the type of aid instrument used or the choice of beneficiaries, among others. This Guide provides guidelines for the proper use, design and evaluation of public aid from the perspective of compliance with the principles of better regulation, good administration and free competition. |
| Keywords: | Public aid, State aid, subsidies, industrial policy |
| JEL: | H57 K20 K23 L26 L50 L51 L53 |
| Date: | 2026–06–03 |
| URL: | https://d.repec.org/n?u=RePEc:awo:epaper:g-2025-01_eng |
| By: | Comisión Nacional de los Mercados y la Competencia (CNMC) (Comisión Nacional de los Mercados y la Competencia (CNMC)) |
| Abstract: | Cloud services are essential for boosting productivity, efficiency, and competition. There is high and growing concentration in the sector, as well as barriers to entry and to switching providers, and asymmetries in information and in bargaining power. These challenges affect both the private sector and public administrations. To address them, the following recommendations are proposed. First, to maintain strengthened supervision of cloud services, with the application of competition policy as the first line of defence. Second, to consider a complementary application of the DMA to cloud services. Third, to foster a pro competitive environment in the digital economy. Fourth, to adopt a pro competitive framework for public procurement of cloud services. |
| Keywords: | regulation, competition, cloud services, digital markets |
| JEL: | K21 K23 L40 L86 L88 |
| Date: | 2026–07–21 |
| URL: | https://d.repec.org/n?u=RePEc:awo:epaper:e/cnmc/001/23_eng |
| By: | Comisión Nacional de los Mercados y la Competencia (CNMC) (Comisión Nacional de los Mercados y la Competencia (CNMC)) |
| Abstract: | This report assesses the recommendations of the Study on the Retail Distribution Market for Medicines in Spain (E/CNMC/003/15) and the Study on the Wholesale Distribution Market for Medicines (E/CNMC/002/17). The adoption of these recommendations would bring important benefits in terms of better access to pharmaceutical services and medicines, more competitive prices and greater quality and innovation in the sector, all for the benefit of patients, the sustainability of the Spanish National Health System (SNHS) and the well-being of citizens. The degree of follow-up to the CNMC's recommendations in the wholesale sector would be high, if the regulatory reforms that are underway are approved. It is estimated that its introduction could save around 1, 800 million euros per year in pharmaceutical spending in a scenario of moderate increase in competition. In the retail sector, the degree of adherence to the recommendations is low. Based on the experience of Navarre, it is estimated that reducing restrictions on the opening of pharmacies could create, after 10 years, around 20, 000 new pharmacies and 45, 000 new jobs, most of them skilled. |
| Keywords: | regulation, competition, medicines, national health system |
| JEL: | H4 H51 I11 I18 K2 K32 |
| Date: | 2026–04–07 |
| URL: | https://d.repec.org/n?u=RePEc:awo:epaper:ei/02/2025_eng |
| By: | Gaetano Alfredo Minerva |
| Abstract: | I propose a mechanism for the coexistence of vertical integration and outsourcing within an industry. In a monopolistically competitive model with incomplete contracts, final-good producers under either organizational form combine labor and differentiated inputs to produce fixed capital. Since its unit cost depends on the industry price index, distinct zero-profit conditions can hold, sustaining a mixed free-entry equilibrium. The forms differ in fixed-capital cost per unit of contribution to the price index; this ranking determines comparative statics and whether local stability is possible. I derive a sufficient condition ensuring stability whenever the mixed equilibrium exists. In numerical parameterizations using empirically standard elasticities of substitution, the condition holds throughout the admissible range of vertical-linkage intensity. Within the stable region, larger markets raise the integrated share without changing output prices or supplier bargaining terms. Relative firm size depends on governance costs and upstream bargaining share, so the model imposes no uniform ranking. |
| JEL: | C62 D23 D43 F12 L23 |
| Date: | 2026–10 |
| URL: | https://d.repec.org/n?u=RePEc:bol:bodewp:wp1233 |
| By: | Comisión Nacional de los Mercados y la Competencia (CNMC) (Comisión Nacional de los Mercados y la Competencia (CNMC)) |
| Abstract: | La concesión de ayudas públicas constituye una de las formas más relevantes de intervención pública en la economía, pero para que las ayudas sean efectivas, deben instrumentarse evitando que alteren innecesariamente el funcionamiento eficiente de los mercados. Tradicionalmente, las autoridades españolas han estado centradas en asegurar que aquellas se ajusten a la normativa de ayudas de Estado de la UE y a la nacional de subvenciones. Sin embargo, esta aproximación no puede ni debe ser considerada la única que debe llevarse a cabo porque no ofrece respuesta a cuestiones tan relevantes como el tipo de instrumento de ayuda utilizado o la elección del tipo de beneficiario, entre otras. Esta Guía ofrece pautas para la correcta utilización, diseño y evaluación de las ayudas públicas desde la perspectiva de su adecuación a los principios de buena regulación-administración y de libre competencia. |
| Keywords: | ayudas públicas, ayudas de Estado, subvenciones, política industrial |
| JEL: | H57 K20 K23 L26 L50 L51 L53 |
| Date: | 2026–06–03 |
| URL: | https://d.repec.org/n?u=RePEc:awo:epaper:g-2025-01 |
| By: | Comisión Nacional de los Mercados y la Competencia (CNMC) (Comisión Nacional de los Mercados y la Competencia (CNMC)) |
| Abstract: | Este informe evalúa las recomendaciones del Estudio sobre el mercado de distribución minorista de medicamentos en España (E/CNMC/003/15) y el Estudio sobre el mercado de distribución mayorista de medicamentos (E/CNMC/002/17). La adopción de estas recomendaciones reportaría importantes beneficios en términos de mejor acceso a servicios farmacéuticos y medicamentos, precios más competitivos y mayor calidad e innovación en el sector, todo ello en beneficio de los pacientes, de la sostenibilidad del Sistema Nacional de Salud y del bienestar de la ciudadanía. El grado de seguimiento de las recomendaciones de la CNMC en el ámbito mayorista, de aprobarse las reformas normativas en marcha, sería elevado. Se estima que su introducción podría ahorrar unos 1.800 millones de euros anuales en gasto farmacéutico en un escenario de aumento moderado de la competencia. En el ámbito minorista, el grado de seguimiento de las recomendaciones es bajo. A partir de la experiencia de Navarra, se estima que reducir restricciones a la apertura de farmacias podría crear, al cabo de 10 años, en torno a 20.000 farmacias nuevas y 45.000 nuevos puestos de trabajo, en su mayoría cualificados. |
| Keywords: | regulación, competencia, medicamentos, sistema nacional de salud |
| JEL: | H4 H51 I11 I18 K2 K32 |
| Date: | 2026–04–07 |
| URL: | https://d.repec.org/n?u=RePEc:awo:epaper:ei/02/2025 |