|
on Regulation |
| By: | Jiaming Wei; Dihan Zou |
| Abstract: | We study monopoly regulation under asymmetric information about costs when subsidies are infeasible. A monopolist with privately known marginal cost serves a single product market and sets a price. The regulator maximizes a weighted welfare function using unit taxes as sole policy instrument. We identify a sufficient and necessary condition for when laissez-faire is optimal. When intervention is desired, we provide simple sufficient conditions under which the optimal policy is a progressive price cap: prices below a benchmark face no tax, while higher prices are taxed at increasing and potentially prohibitive rates. This policy combines delegation at low prices with taxation at high prices, balancing access, affordability, and profitability. Our results clarify when taxes act as complements to subsidies and when they serve only as imperfect substitutes, illuminating how feasible policy instruments shape optimal regulatory design. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2512.06525 |
| By: | Erwin J. Sacoto-Cabrera; Luis Guijarro; Jose R. Vidal; Vicent Pla |
| Abstract: | The provision of services by more than one operator over a common network infrastructure, as enabled by 5G network slicing, is analyzed. Two business models to be implemented by a network operator, who owns the network, and a virtual operator, who does not, are proposed. In one business model, named \emph{strategic}, the network operator provides service to its user base and the virtual operator provides service to its user base and pays a per-subscriber fee to the network operator. In the other business model, named \emph{monopolistic}, the network operator provides service to both user bases. The two proposals are analyzed by means of a model that captures both system and economic features. As regards the systems features, the slicing of the network is modeled by means of a Discriminatory Processor Sharing queue. As regards the economic features, the incentives are modeled by means of the user utilities and the operators' revenues; and game theory is used to model the strategic interaction between the users' subscription decision and the operators' pricing decision. In both business models, it is shown that the network operator can be provided with the appropriate economic incentives so that it acquiesces in serving the virtual operator's user base (monopolistic model) and in allowing the virtual operator to provide service over the network operator's infrastructure (strategic model). From the point of view of the users, the strategic model results in a higher subscription rate than the monopolistic model. |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2601.15103 |
| By: | Thibault Deletombe |
| Abstract: | The Net Zero Industry Act (NZIA) promotes non-price criteria in renewable auctions. It aims to unlock green willingness-to-pay and scale up manufacturing capacity for net-zero technologies in the European Union (EU). This paper builds a partial equilibrium model of the European solar module sector and investigates how renewable auction design impacts solar photo- voltaic (PV) manufacturing. First, a formal analysis evaluates the complementarities between the different non-price criteria. Most notably, we find that if local manufacturing development is aligned with climate goals, then non-price criteria in solar auctions do not necessarily increase costs to consumers. Then, a numerical simulation estimates solar module production in 2030 based on NZIA targets, considering various degrees of market integration within the EU. The results show that market fragmentation can inhibit economies of scale and thus increase solar PV manufacturing costs by €2 billion per year. The development of a common framework for the implementation of non-price criteria at the country level is a no-regret solution. Leveraging the common European market with an integrated policy approach represents the first-best strategy. Forming coalitions of willing Member States is a second-best strategy that can significantly reduce fragmentation costs. |
| Keywords: | renewable auction, non-price criteria, market integration, photovoltaics, solar modules |
| JEL: | L51 L52 L60 Q27 Q40 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:diw:diwwpp:dp2153 |
| By: | Jan De Loecker; Catherine Fuss; Nathan Quiller-Doust; Leonard Treuren |
| Abstract: | We separately observe variable input expenditure and expenditure on fixed inputs in novel firm-level data covering the Belgian manufacturing sector over the last decades. This permits a deeper investigation of two potential drivers of the globally observed widening gap between firms’ revenue and variable input expenditure: technology and market power. Across the board, cost structures have become less reliant on variable input expenditure over time, while expenditure on fixed inputs or overhead costs has increased in prominence. We relate these changes in firms’ cost structures to performance measures and document that markups and gross profit rates increase substantially as the role of variable costs in production diminishes. Profit rates net of fixed input expenditure also increase, but by substantially less than gross profit rates. Our results suggest that technological change can explain a considerable portion of the widening gap between revenue and variable input expenditure, but that markups increase by more than necessary to break even, and that this phenomenon operates remarkably similarly across different firms and industries. |
| Keywords: | STG/23/026#57790427 |
| Date: | 2024–10–10 |
| URL: | https://d.repec.org/n?u=RePEc:ete:ceswps:779663 |
| By: | Liang Chen |
| Abstract: | Platform giants in China have operated with persistently compressed margins in highly concentrated markets for much of the past decade, despite market shares exceeding 60\% in core segments. Standard theory predicts otherwise: either the weaker firm exits, or survivors raise prices to monopoly levels. We argue the puzzle dissolves once firms are viewed as ecosystem optimizers rather than single-market profit maximizers. We develop a dynamic game in which a firm's willingness to subsidize depends on the spillover value its users generate in adjacent markets -- what we call \textit{ecosystem complementarity}. When this complementarity is strong enough, perpetual below-cost pricing emerges as the unique stable equilibrium. The result is not predation in the classical sense; there is no recoupment phase. It is a permanent state of subsidized competition, rational for each firm individually but potentially inefficient in aggregate. We characterize the equilibrium, establish its dynamic stability, and show that welfare losses compound over time as capital flows into subsidy wars rather than innovation. The model's predictions are consistent with observed patterns in Chinese platform markets and suggest that effective antitrust intervention should target cross-market capital flows rather than prices. |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2601.15303 |
| By: | Ashlesha Hota; Shashwat Kumar; Daman Deep Singh; Abolfazl Asudeh; Palash Dey; Abhijnan Chakraborty |
| Abstract: | The concentration of digital payment transactions in just two UPI apps like PhonePe and Google Pay has raised concerns of duopoly in India s digital financial ecosystem. To address this, the National Payments Corporation of India (NPCI) has mandated that no single UPI app should exceed 30 percent of total transaction volume. Enforcing this cap, however, poses a significant computational challenge: how to redistribute user transactions across apps without causing widespread user inconvenience while maintaining capacity limits? In this paper, we formalize this problem as the Minimum Edge Activation Flow (MEAF) problem on a bipartite network of users and apps, where activating an edge corresponds to a new app installation. The objective is to ensure a feasible flow respecting app capacities while minimizing additional activations. We further prove that Minimum Edge Activation Flow is NP-Complete. To address the computational challenge, we propose scalable heuristics, named Decoupled Two-Stage Allocation Strategy (DTAS), that exploit flow structure and capacity reuse. Experiments on large semi-synthetic transaction network data show that DTAS finds solutions close to the optimal ILP within seconds, offering a fast and practical way to enforce transaction caps fairly and efficiently. |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2601.02369 |
| By: | Hey, Florian; Zombek, Max |
| Abstract: | The automotive industry is undergoing a fundamental transformation driven by digitization, enabling original equipment manufacturers (OEMs) to exert increasing control over vehicle functions, data, and - consequently - aftersales markets. Despite high relevance for consumers, regulatory scrutiny remains limited. This paper examines whether these developments constitute digital gatekeeping in a functional sense, and whether they justify increased regulatory attention. We show that OEMs' digital strategiesreinforce their dominance in secondary markets, particularly repair and maintenance. We assess the current European regulatory framework, focusing on the European Motor Vehicle Block Exemption Regulation (MVBER), and argue that it has not kept pace with the realities of software-defined vehicles. The planned MVBER review provides an opportunity to reassess legacy privileges and adapt competition rules to the digital age. We discuss potential reforms, including improved data access, stronger interoperability standards, and a broader definition of aftermarket components. We also examine supplementary measures such as a Right to Repair regime and self-regulation. Our analysis concludes that OEMs increasingly act as digital gatekeepers and that existing frameworks inadequately address the resulting risks. Regulatory recalibration is needed to safeguard innovation, consumer welfare, and long-term market openness. |
| Keywords: | aftermarket, antitrust, car data, competition policy, connected car, data governance, digital ecosystems, Digital Markets Act (DMA), extended vehicle, gatekeeping, interoperability, Motor Vehicle Block Exemption Regulation (MVBER), non-discriminatory terms, Original Equipment Manufacturer (OEM), rent seeking, Right to Repair, software defined vehicle |
| JEL: | D72 K21 L40 L42 L50 L51 L62 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:tuiedp:335043 |
| By: | Bougette, Patrice; Budzinski, Oliver; Marty, Frédéric |
| 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 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:tuiedp:335044 |
| By: | Stöhr, Annika; Budzinski, Oliver |
| Abstract: | Identifying the boundaries of a market belongs to the important practices in most areas of antitrust and competition policy. While they are established practices for market definition and delineation, dynamic processes of competition and the new phenomenon of (digital) ecosystems of markets provide new challenges: market boundaries become (i) inherently dynamic and subject to evolutionary change, as well as (ii) subject to the deliberate design of powerful companies. Therefore, the prediction of post-event effects - e.g., competitive effects of a merger or such of an abuse of market power - may fail if they rely on a static or stationary market definition. If market boundaries change inherently through dynamic market competition, identifying these boundaries and their evolution becomes an integral part of a dynamic approach to competition policy - and not just preparatory work. Furthermore, if companies enjoying systemic market power in ecosystems (like e.g., cross-market power) and, thus, the power to shape market boundaries and deliberately change (previous) market delineations, then the identification of market boundaries cannot be viewed independent of the exploitation of market power. Both dynamics of market boundaries require a strongly different approach to market definition than the one of the Commission's 2024 Market Definition Note. |
| Keywords: | dynamic market boundaries, market definition, market delineation, antitrust, competition policy, industrial economics, dynamic competition, digital ecosystems, merger control, systemic market power, cross-market power |
| JEL: | D40 K21 L10 L40 L86 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:tuiedp:335040 |
| By: | Budzinski, Oliver; Stöhr, Annika |
| Abstract: | Algorithm- and data-based recommendation systems (DARS) have become a central component of the digital economy, shaping how users access, evaluate, and consume information and goods. These systems encompass both search rankings tailored to estimated user preferences and direct recommendations such as "watch next" or "users also bought". Their growing influence has prompted regulatory interest worldwide, with debates centering on their economic, social, and cultural implications. Drawing on attention economics and behavioral insights, the paper highlights the functional necessity of pre-selection mechanisms in information-overload environments. Personalized DARS improve preference matching, expand the diversity of content receiving attention, and tend to intensify competition - particularly in comparison to one-size-fits-all or editorially curated systems. However, DARS also carry significant risks: they may reinforce biases through self-preferencing, amplify echo chambers, limit exposure to diverse viewpoints, and raise privacy concerns due to their reliance on granular behavioral data. Based on these challenges, this paper provides a comparative institutional analysis of regulatory options for DARS, evaluated through a modern, economicsbased framework. It examines regulatory effects across three key dimensions: (i) preference fit, (ii) information transparency, and (iii) competition intensity. The paper evaluates a range of regulatory strategies, such as transparency obligations, interoperability obligations, randomized rankings, editorial curation, and structural interventions. While each option addresses specific risks, the analysis shows that more interventionist regimes often come at the cost of reduced competition and diminished content diversity. The paper concludes that effective regulation should avoid substituting personalized DARS altogether and instead focus on addressing core pitfalls - particularly those arising from vertical integration and opacity - without eroding the systems' welfare-enhancing functions. |
| Keywords: | recommender systems, attention economics, institutional economics, regulation, competition, algorithms, data, digital economy, privacy |
| JEL: | B52 D02 D80 K20 L51 L81 L82 L86 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:tuiedp:335046 |
| By: | Stöhr, Annika; Budzinski, Oliver |
| Abstract: | State-owned firms from third countries play an increasingly significant role in international mergers and acquisitions, raising concerns about distortions of competition. These distortions arise from state-backed financial advantages, preferential treatment, and industrial policy objectives, potentially undermining market competition. This paper categorises different forms of competitive distortions, focusing on acquisitions financed by foreign state resources. Through an analysis of German and EU merger control cases (2012-2023), we assess the extent of this phenomenon and the treatment of such transactions by the respective competition authorities. While direct state involvement remains rare, it is prevalent in strategic industries such as energy and transport. We discuss potential policy responses, including expanded notification requirements, revised theories of harm, and stricter intervention criteria. However, we caution against excessive regulatory overreach that could lead to protectionist distortions. Our findings advocate for a nuanced approach to merger control that ensures competitive neutrality while safeguarding against state-driven market distortions. |
| Keywords: | competition policy, state-owned enterprises, merger control, foreign subsidies, EU competition law |
| JEL: | K21 L40 L44 L50 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:tuiedp:335042 |
| By: | Budzinski, Oliver; Stöhr, Annika |
| Abstract: | Since Mario Draghi's 2024 report on "The Future of European Competitiveness", identifying European (i) weaknesses in global innovation and, consequently, in global market impact, as well as (ii) regulatory overburden, the term competitiveness has been propelled into massive popularity. For instance, competitiveness has been established as a core guiding principle for the work of the European Commission (the competitiveness compass as a new roadmap for EU economic policy. But what does competitiveness exactly mean and how does it relate to competition? This contribution addresses possible concepts of competitiveness and their relationship with concepts of competition. Furthermore, we compare current narratives surrounding the competition-competitiveness interrelation with stylized academic empirical evidence. We conclude that (i) it should always be explicitly specified which notion and concept of the term competitiveness is referred to, (ii) effective competitiveness policies must be competition-based (i.e., promote competitiveness through competition), (iii) a selective firmor industry-focused competitiveness policy is likely to decrease welfare in a world where lobbyism, rent-seeking, and imperfect political incentives are prevalent, (iv) narratives that we have experienced a specifically competition-centric era during the last decades are not supported by scientific findings, and (v) competition policy and merger control should be reinvigorated to promote public interest goals such as social welfare and economic resilience. |
| Keywords: | competitiveness, competition, antitrust, industrial policy, resilience, lobbyism, locational competition, innovation, rent-seeking |
| JEL: | L40 L50 L52 F13 K21 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:tuiedp:335048 |
| By: | Budzinski, Oliver |
| Abstract: | Commercial sports belong to the biggest entertainment industries in the world and, at the same time, are regularly raising antitrust concerns. This is partly due to the omnipresence of powerful market-internal regulators. These sport governing bodies set, implement, and enforce the rules and additionally engage in commercial activities. In a series of four judgments within less than a year, the European Court of Justice found (potential) antitrust violations in cases of deterring market entry, distorting competition, and exploiting players. This contribution adds economic comments to the predominantly legal literature on these judgements. It concludes that despite important steps in the right direction, more antitrust enforcement is necessary to protect competition in this unique entertainment industry vis-à-vis the presence of market-internal, private regulators. Next to limiting their scope (where the court provided progress), also the incentives for anticompetitive conduct must be addressed. |
| Keywords: | sport markets, sport governance, competition policy, antitrust, sports associations, institutions, market-internal regulators, European Court of Justice, competition economics, sports economics |
| JEL: | K21 L40 L50 L83 Z20 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:tuiedp:335047 |
| By: | Budzinski, Oliver; Kunz-Kaltenhäuser, Philipp |
| Abstract: | The so-called 50plus1-rule in German football is a controversially discussed institution that regulates the investment behavior of professional football teams. This paper provides an empirical analysis of its effects. We gathered panel data on 47 teams in the German Major League Football ("Erste Bundesliga") from the seasons 1989/90 until 2018/2019. This paper applies a Difference-in-Differences approach to examine investment behavior in budgets, as well as sporting success between impacted competitors and those exempted from the rule. Our results do not suggest any equalizing properties of the regulation. By contrast, we find anticompetitive effects and distorting properties of the current regulation. |
| Keywords: | 50plus1-rule, football, sports economics, financial regulation, investment, sport finance, soccer, competition economics, sports antitrust |
| JEL: | Z23 Z21 Z2 J83 L11 L50 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:tuiedp:335039 |