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on Regulation |
| By: | Juan-Jose Ganuza (Comision Nacional de los Mercados y la Competencia (CNMC), Spain); Ivan Rendo (Toulouse School of Economics, Toulouse, France) |
| Abstract: | Piracy is central to digital markets, where identical content can be accessed legally or through unauthorized channels. While easier piracy seems likely to intensify competition and lower prices, it also reduces profitability and discourages entry. We develop a circular-city model with free entry in which consumers jointly choose content and access mode. Stronger enforcement raises prices for a fixed number of firms but also attracts competitors. Prices rise with enforcement in less competitive markets but can follow an inverted U in more competitive markets, where entry eventually pushes prices down. Extensions show that piracy can also weaken competition and raise prices by attracting consumers most willing to switch between legal providers. |
| Keywords: | competition; piracy; entry; digital markets |
| JEL: | L13 L82 K42 D43 |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:net:wpaper:2602 |
| By: | Joan Calzada (Universitat de Barcelona, Spain); Néstor Duch-Brown (Joint Research Centre (JRC)); Xavier Fageda (Universitat de Barcelona, Spain); Nicandro Quirós (Universitat de Barcelona, Spain) |
| Abstract: | This paper examines the impact of Google’s Search Engine Results Page (SERP) redesign on web traffic to airline and flight comparison websites. Google implemented the redesign on March 6, 2024, in response to the Digital Markets Act (DMA). The reform removed the Google Flights module from the main results page and introduced two new sections — “Airline Options” and “Flight Sites”— aimed at reducing self-preferencing and increasing the visibility of third-party services. Using a Synthetic Difference-in-Differences (SDiD) approach and domain-level data for four EU countries, with the United Kingdom and the United States as control markets, we estimate the causal effects of the redesign from November 2023 to December 2024. We find that the reform reallocated organic search traffic toward airline and comparison websites with smaller market shares. On desktop devices, organic traffic to low-cost and network airlines increased by 15 percent and 5.5 percent, respectively, while no significant effects are detected on mobile. Traffic to flight comparison websites increased by 20 percent on desktop and 19 percent on mobile, with gains concentrated among smaller platforms. By contrast, we find no detectable effects for large incumbents such as Skyscanner, Booking.com, and Expedia. Overall, the redesign relaxed visibility constraints for smaller market participants, suggesting that digital market regulation can increase contestability at the margin without necessarily altering the position of large incumbents. |
| Keywords: | Digital Markets Act; Self-preferencing; Google, SERP; Air Travel Market |
| JEL: | D40 L41 L86 L93 K21 |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:net:wpaper:2604 |
| By: | OECD |
| Abstract: | Electricity systems power digital societies and they are undergoing profound change. Distributed sources of generation and storage are transforming legacy electricity systems. Simultaneously, overall electricity demand continues to rise, driven in part by the expansion of digital infrastructure such as data centres, which are essential for both artificial intelligence (AI) training and inference. The application of digital technologies, notably AI, across the electricity system, spanning generation, transmission, distribution, storage and end use, is enabling systems to adapt to these challenges. This paper explores how digital innovations are reshaping electricity systems, and trends in policies. Evidence suggests that public funding for digital innovation in electricity systems is declining relative to overall public energy research and development budgets, raising questions about whether sufficient innovation is available to keep pace with societal demands on the electricity system. The paper concludes with policy considerations to promote and sustain digital transformation across electricity systems. |
| Date: | 2026–10–07 |
| URL: | https://d.repec.org/n?u=RePEc:oec:stiaab:387-en |
| By: | Herbert Dawid; Ali Kashefi; Gerd Muehlheusser |
| Abstract: | Should platforms be held legally responsible for harm caused by products or services offered by third-party sellers? We address this question in a novel setting in which product safety (the likelihood of accidents) is determined by third-party sellers, while the consumer price is set by a monopolistic platform that pays sellers a commission. Relevant examples include platforms providing ride-hailing services (e.g. Uber and Lyft) or health care services (e.g. Teladoc). Sellers decide whether or not to become active on the platform, and consumers' willingness to pay for the platform good increases with the number of active sellers (platform externality). When an accident occurs, the harm is divided between the platform and the respective seller according to a liability rule set ex ante by a welfare-maximizing policymaker. Sellers' incentive to provide high product safety is driven by market demand, which in turn is determined by the platform's pricing scheme, balancing the trade-off between market revenue and expected liability costs. The platform may optimally set a price below the monopoly level to boost demand, thereby triggering active sellers to provide high product safety (market channel). The socially optimal liability rule is dichotomous: it either assigns no liability to the platform, or the maximum liability share for which the platform exploits the market channel to induce high product safety from the sellers. Holding the platform liable is socially desirable only when it induces lower consumer prices. |
| Keywords: | platform liability, consumer pricing, product safety, product liability |
| JEL: | K13 L13 L15 L86 D42 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_13033 |
| By: | Juan Camilo Castillo (Department of Economics, University of Pennsylvania, Philadelphia, Pennsylvania, and NBER); Alejandro Sabal (Department of Economics, University of Chicago, Chicago, Illinois); Jaume Vives-i-Bastida (Department of Economics, New York University, New York, New York) |
| Abstract: | Delivery platforms provide an easy way for small restaurants to reach a large customer base with little upfront investment. However, small restaurants often face high commissions, while large, anchor restaurants receive preferential rates. We study competition in the delivery app industry and the economic forces behind this market structure. We develop a model in which platforms set commissions for small restaurants and negotiate over listing and commissions with anchor restaurants. Restaurants then set prices, and consumers choose which platforms to install and which restaurants to order from. We estimate our model using order-level data from a major European delivery app. We then run counterfactual simulations to understand what drives high commissions, measure how surplus is split among market participants, and evaluate the effects of additional platform entry. |
| Keywords: | delivery platforms; two-sided markets; bargaining; exclusivity; anchor restaurants |
| JEL: | L14 L83 L86 C78 |
| Date: | 2026–10 |
| URL: | https://d.repec.org/n?u=RePEc:net:wpaper:2606 |
| By: | Julien Combe; Yves Le Yaouanq |
| Abstract: | Many markets are regulated for paternalistic reasons. We develop a mechanism-design framework to derive the optimal policy mix between price regulation and quantity controls. A budget-constrained planner allocates trade between privately informed buyers and sellers while disagreeing with their valuations. When the planner’s valuations preserve the ranking of agents, price instruments (e.g., sin taxes) are optimal. When the planner instead believes that a high willingness to trade indicates a bias, optimal regulation can restrict quantities or even prohibit transactions. De-biasing interventions offer two benefits beyond economic regulation: improving selection into markets and, for virtuous goods, raising the volume of trade. |
| Keywords: | paternalism, mechanism design, market regulation, rationing, sin taxes, nudges |
| JEL: | D82 D90 D47 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_13028 |
| By: | Miguel Risco (IGIER, Bocconi University, Milan, Italy) |
| Abstract: | Interoperability has been proposed to make social media contestable. But platforms are no longer purely network-based: personalization algorithms select much of what users see beyond their network, and an interoperability mandate opens the network but not the discovery layer. We study two platforms, each allocating resources between its network and discovery layers. A reciprocal mandate can raise the leading platform's size even if it is more productive in both, because its comparative advantage in discovery makes the challenger the network specialist, whose specialty the mandate opens. This effect can reverse once investment adjusts. Opening only the leader's network lowers its size, so any increase in concentration under a reciprocal mandate comes from opening the challenger's network. Concentration, challenger profit and user surplus can diverge. Whether recommendation technology, now largely driven by artificial intelligence, becomes a commodity or a moat determines whether the mandate reaches the source of the leader's advantage. |
| Keywords: | interoperability; social media; discovery; recommender systems; platform competition |
| JEL: | L13 L41 L51 L86 |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:net:wpaper:2605 |
| By: | Crescioli, Tommaso; Van Overbeke, Toon |
| Abstract: | How does market power affect the political behavior of small business owners? As the growing market power of large multinational firms has fundamentally changed the opportunity structure for small businesses and their beneficiaries, we try to understand how those economic developments influence European democracies. We argue that growing market power lowers small business owners’ trust in key democratic institutions and the functioning of markets, driving them to reject incumbents and shift their support to radical right parties. We employ firm-level, individual-level, and regional-level data on fourteen European countries to test this argument. Our findings indicate that rising market power, measured by combining mergers and increases in market concentration, is associated with the declining economic performance of micro-firms. In turn, mergers and the declining economic share of these firms are robust predictors of anti-incumbent and increased radical right voting both at the individual and constituency levels. This article provides the first analysis of the effect of market concentration on rich democracies and, in doing so, offers a novel explanation for the surprising radical right support among small business owners in Europe. |
| Keywords: | market power;political economy;voting behavior;radical right;democratic institutions |
| JEL: | D72 D74 L12 |
| Date: | 2026–10–04 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:141231 |
| By: | Joshua S. Gans |
| Abstract: | How much liability should AI providers bear when their services enable both attack and defence? Liability can improve welfare while increasing harm. Providers sell a common input to productive users, attackers and defenders. Within a defended contest, a higher common price reduces effort without changing attack success or attacker profits, saving resources and improving the target's security payoff. Compensation weakens defence and raises attacker profits. Optimal liability balances these effects against productive exclusion. Greater competition can lower optimal liability; every such decline must end at an outcome retaining defence. With cybersecurity access fixed, monopoly can warrant partial liability but never full liability when provision is worthwhile. When guardrails preserving productive uses are available, strong competition favours universal guarding socially but encourages unilateral removal at insufficient liability. At a fixed provider count, sufficiently many productive users ensure a pure equilibrium with universal guarding under high liability. A universal-guarding requirement makes liability redundant. Under monopoly, adoption follows a unique liability threshold, while zero liability remains uniquely optimal for a range of parameters with sufficiently many productive users. |
| JEL: | D62 K13 L13 L51 L86 |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35828 |
| By: | Ehsan Sabzizadeh (Tilburg University, Tilburg, Netherlands); Ulrich Laitenberger (Tilburg University, Tilburg, Netherlands); Florian Pethig (Tilburg University, Tilburg, Netherlands) |
| Abstract: | Platforms often justify new rules as consumer protection. When such a rule governs infrastructure that rival marketplaces depend on, it can make trading on those rivals riskier while leaving the platform's own marketplace unchanged, and can thus work against platform leakage. We study Valve's Trade Protection policy of July 2025, which made peer-to-peer transfers of Counter-Strike~2 items reversible for seven days while exempting purchases on Steam's own Community Market; third-party marketplaces complete every sale through such a transfer while settling the payment on their own platforms. Using item-week data from Steam and two third-party marketplaces, CSFloat and MarketCSGO, we estimate a difference-in-differences model that compares trading around the policy date with the same calendar weeks in 2024. Trading volume on the third-party marketplaces fell by about half and did not return to its pre-policy level within our window, while Steam's number of trades did not rise. Both results hold in a regression discontinuity in time, and the Steam result also holds when other Steam games serve as controls. Steam's turnover, however, rose by 18 to 24\%, with volume gains concentrated among high-price items and items with a high pre-policy share of third-party trading. The policy thus shifted high-value trading toward the focal platform, while much of the lost third-party trading was not absorbed by Steam. |
| Keywords: | Platform governance, digital marketplace, platform leakage, cross-platform spillovers |
| JEL: | D43 L22 L86 |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:net:wpaper:2607 |
| By: | Sylvain C. Chassang (Princeton University) |
| Abstract: | I argue that in long-term consumer–producer relationships, menus of contracts can be advantageously replaced by a single generous contract such that, at any point in time, the sum of a consumer’s transfers is equal to the sum of transfers they would have made under the contract that is the best for them in hindsight. Such generous long-term contracts can increase skeptical consumers’ demand for complex and higher-powered contracts while approximately implementing the same outcomes as the underlying menu evaluated by a rational decision maker. Applications include voluntary load shedding in retail electricity markets and cost sharing in health insurance. |
| JEL: | D11 D12 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:pri:cepsud:354 |
| By: | Leidorf-Tidå, B.J.A.; König, Pascal |
| Abstract: | Trust in artificial intelligence (AI) applications is deemed crucial for uptake of the technology and the development of an AI market. In the present article, we argue that the institutional design of regulatory regimes matters for whether citizens trust AI systems. We study how trust in AI systems depends on who the responsible regulator is, the scope of the regulator’s scrutiny of AI systems, and the involvement of external stakeholders in regulatory oversight. Based on a conjoint design, we examine how respondents value these institutional design choices for the case of high-risk AI systems used in health care. Using samples from Lithuania, Romania, Sweden, and the Netherlands, with 4001 respondents overall, the pre-registered experiment shows that citizens have more trust in AI systems if vendors, civil society and especially independent researchers are involved in oversight, and if regulators actively scrutinize AI systems rather than relying solely on self-reporting. At least in two countries, citizens also seem to have more trust in AI systems if the sectoral health care regulator is the responsible regulator instead of a cross-sectoral regulator such as the national Data Protection Authority or a specific AI regulator. |
| Date: | 2026–10–01 |
| URL: | https://d.repec.org/n?u=RePEc:osf:socarx:by96n_v1 |
| By: | Elizabeth Baldwin; Paul Klemperer; Edwin Lock |
| Abstract: | Arctic product-mix auctions allow budget-constrained bidders to express preferences over multiple substitute goods. We give the first strongly polynomial algorithm to find the competitive equilibria when the auctioneer has separable convex piecewise-linear costs. It combines a strongly polynomial reduction to the costless Arctic auction with an existing strongly polynomial algorithm for costless Arctic auctions. We also give a polynomial-time Turing reduction from costless Arctic auctions to linear Fisher markets, and a strongly polynomial many-to-one reduction to linear Arrow-Debreu exchange markets. If a good is sold in positive quantity in two competitive equilibria, its price is the same in both. |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.36346 |
| By: | Tingyi Lin; Shawn Yu; Ruoran Lai; Huanxi Zhang |
| Abstract: | A coalition that deviates once can profit many times when what it sells keeps working. In a threshold-encrypted mempool, a leading defense against maximal extractable value (MEV), a quorum of the decryption committee that sells its decryption capability to a front-runner exposes every later block that the capability still decrypts. We ask how large a penalty, such as slashable stake, deters this kind of collusion. In our repeated game, a single leak by any coalition in a monotone family of authorized coalitions (for example, any $k$ of the $n$ committee members) unlocks a set of future rounds, costs a one-time penalty, and ends the coalition's participation. We show that every dynamic deviation reduces to choosing a leak time, so deterrence holds if and only if each coalition's penalty covers the largest discounted value that a single leak reaches. Without discounting, over $T$ rounds of unit value full reuse needs a penalty of $T$ while binding each leak to its own round needs $1$, so no penalty that is constant in the horizon deters unbounded reuse; a reuse window of $w$ rounds costs at most $w$ times the largest per-round value. The cheapest profile of per-party stakes that deters every coalition solves a covering linear program. For blockchain design, per-epoch keys cut the required stake from the value of a key's lifetime to the value of one epoch; we calibrate the gap on Ethereum front-running data and place Ferveo and Shutter in the model. The analysis extends to sealed-bid auctions, multi-authority voting, and federated learning under a shared key. |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.36667 |
| By: | Marcut Mirela (European Commission - JRC); Rodriguez Müller Paula (European Commission - JRC); Reimeris Ramojus (European Commission - JRC) |
| Abstract: | Experimental governance helps administrations manage uncertainty and complexity by mobilising actors, experimenting in safe spaces, coordinating across boundaries, balancing competing interests, and institutionalising lessons learned. Strong governance and innovation performance are closely linked. Regions with higher quality of government attract more innovation funding and produce better outcomes, underscoring the role that public sector capacity plays in innovation ecosystems. Case studies show experimental governance in practice, revealing how different policy contexts shape which functions are prioritised and how they interact. Recommendations include developing tools to empower public administrations to engage in experimental governance: support for experimental clauses, developing sharing repositories, developing internal staff capacity to engage in innovation |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:ipt:iptwpa:jrc147951 |
| By: | Nicoli, Francesco; Lombardi, Lorenzo |
| Abstract: | Research on the politicisation of the European Union has concentrated on reactive, bottom-up contestation of existing EU action. This article argues that such an understanding is incomplete because it conflates politicisation of issues with politicisation of institutions. We distinguish three faces of politicisation. Reactive politicisation refers to the public contestation of existing EU competences. Proactive politicisation occurs when supranational actors claim a political mandate in order to justify wider discretion. Induced politicisation emerges when intergovernmental conflict over already politicized state functions creates a vacuum that the Commission can try to fill, thereby inheriting the political character of the function itself. The empirical sections focus on induced politicisation. They reconstruct three episodes: Jean-Claude Juncker's attempt to use EMU deadlock to place the Commission at the centre of euro-area reform; the failed institutionalisation of an EU Finance Minister, a euro-area fiscal capacity, and a more political treasury function; and Ursula von der Leyen's attempts to centralise foreign-policy initiative during successive geopolitical crises. The argument is that politicisation does not only constrain supranational action. Under specific institutional conditions it can also widen supranational authority by transforming the Commission from guardian of the Treaties into a proto-governmental executive. |
| Date: | 2025–09–29 |
| URL: | https://d.repec.org/n?u=RePEc:osf:socarx:d3e6a_v2 |