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To link to full-text access for this article, visit this link: http://dx.doi.org/10.1016/j.ijindorg.2017.01.006 Byline: Michelle Sovinsky Author Affiliation: Department of Economics, University of Mannheim, Germany

Keywords Online shopping platforms; Targeted advertising; Position auction; Price discrimination Highlights * This paper incorporates targeted advertising into the traditional position auction model. * Targeted advertising based on product preference (TP) mitigates competition in both product markets and position auctions, and may lower the publisher's auction payoff. * In contrast, targeted advertising based on search preference (TS) increases the prominent position's valuation and always benefits the publisher. * Consumer surplus is higher under TS, but lower under TP. * Total surplus is higher under TP, but not affected by TS. Abstract This paper examines how an online publisher utilizes its information about consumer preference to target advertising. In our model, two firms first bid for a prominent ad position in a publisher-organized position auction, and then compete on price in the subsequent product marketplace. We consider two dimensions of consumer heterogeneity. First, consumers are heterogeneous in product preference. Based on their tastes, some consumers prefer one product over the other, whereas other consumers may rank the products in an opposite order. Second, consumers differ in search preference, i.e., 'nonshoppers' only consider the advertised product, while 'shoppers' always search both firms' products before buying. We show that targeted advertising based on product preference will mitigate price competition in product markets as well as competition in position auctions, the latter to the detriment of the publisher. In contrast, targeted advertising based on search preference always benefits the publisher, as the winning firm can charge monopoly prices to nonshoppers. We show that the publisher's optimal choice is to utilize only the information about consumer search preference. We also explore the welfare implications of targeted advertising based on different types of consumer preference. Author Affiliation: (a) School of Economics, Renmin University of China; Center for Digital Economy Research, Renmin University of China; Research Institute of State-owned Economy, Renmin University of China, Beijing, 100872, China (b) Institute for Social Governance and Development Research, Tsinghua University, 14F, #2 Shuangqing Building, 77 Shuangqing Road, Beijing, 100085, China (c) School of Economics, Shanghai University of Finance and Economics; Key Laboratory of Mathematical Economics (SUFE), Ministry of Education, 777 Guoding Road, Shanghai 200433, China * Corresponding author. Article History: Received 4 August 2020; Revised 16 January 2023; Accepted 23 January 2023 (footnote)[white star] We are grateful for valuable comments from the Editor Jose L. Moraga-Gonzalez, two anonymous reviewers, Yijuan Chen and participants in seminars at Southwestern University of Finance and Economics and Fudan University. Li thanks the financial support by National Natural Science Foundation of China (grant nos. 71773131; 71922021; 72192801), Beijing Natural Science Foundation (Z220001), and fund for building world-class universities (disciplines) of Renmin University of China; Yu thanks the financial support by National Natural Science Foundation of China (grant no. 72273078), and support from the SUFE Theoretical Economics Gaofeng II Discipline Innovation Project (2018110721). Byline: Sanxi Li [sanxi@ruc.edu.cn] (a), Hailin Sun [sunhailin@mail.tsinghua.edu.cn] (b), Jun Yu [yu.jun@mail.shufe.edu.cn] (*,c)

To link to full-text access for this article, visit this link: http://dx.doi.org/10.1016/j.ijindorg.2015.11.001 Byline: Heski Bar-Isaac

Non-competitve behavior in product and factor markets is examined in the context of the Canadian mill products and pulp and paper industries. Duality theory is used to estimate a model wherein shadow and market price deviations are parameterized. Analysis shows that competitive behavior occurs in both product and factor markets, and in the short-run, coincides with economies of scale. Capital input adjustment costs account for long-run equilibrium deviations, due to the resulting difference between the rental rate and the marginal profit of capital.

Keywords App quality; Android; iOS; Tablet demand Highlights * The tablet PC market is dominated by two platforms: iOS and Android. * Mobile app quality is a determinant of tablet PC demand. * Improvement in app quality benefits tablet producers on the platform with more pronounced for Android tablet devices. * The policy of levelling up the app quality of the two stores favors the tablet producers adopting the lowest quality app store (Google) and stimulates the adoption of tablet PCs. This generates consumer surplus in tablet demand. Abstract The tablet PC market is dominated by two platforms: iOS and Android. In this paper, we combine tablet-level data with data on the quality of the top 1000 mobile applications from these platforms and estimate a structural demand model. We exploit variations over three periods and five European countries to find whether the application quality affects tablet demand. We then run two counterfactuals. The first counterfactual suggests that an improvement in application quality benefits the tablet producers on that platform with a more pronounced effect on the demand for Android-based tablets. The second counterfactual discusses the policy of leveling the app quality of the two stores. It shows that such a policy favors the tablet producers adopting the lowest quality app store (Google) and stimulates the adoption of tablet PCs. This generates consumer surplus in tablet demand. Author Affiliation: (a) Office of Communications UK (b) Dipartimento di Scienze Economiche ed Aziendali 'M. Fanno', Università di Padova, Italy (c) School of Economics and Centre for Competition Policy, University of East Anglia, UK * Corresponding author. Article History: Received 8 August 2022; Revised 6 February 2023; Accepted 7 February 2023 (footnote)[white star] We would like to thank two anonymous referees and the editor, Frank Verboven, for their constructive suggestions. We have revised the manuscript based on their recommendations. We also thank Luis Aguiar, Farasat Bokhari, Steve Davies, Michael Kummer, and Harrison White for useful comments and discussions. Paper presented at the Centre for Competition Policy seminar, IBEO 2019 workshop, EARIE 2019 conference, Jornadas de Economia Industrial 2019 conference, Diginomics Brownbag seminar at the University of Bremen 2021, and CRESSE 2021 conference. Byline: Thanh Doan [thanh.doan@ofcom.org.uk] (a), Fabio M. Manenti [fabio.manenti@unipd.it] (b), Franco Mariuzzo [f.mariuzzo@uea.ac.uk] (*,c)

Keywords Competing manufacturers; Delegates sales; Discretion; Information sharing; List prices Highlights * We study the link between information sharing between competing supply chains and price delegation. * We find that price delegation is more likely with than without information sharing about demand. * We show that there are conditions under which information sharing is jointly profitable for the manufacturers and benefits consumers. Abstract We characterize the degree of price discretion that two competing manufacturers grant their retailers in a framework where demand is uncertain and privately observed by the retailers, while manufacturers only learn it probabilistically. In contrast with the consolidated vertical contracting literature, we assume that manufacturers cannot use monetary incentives to align the retailers' incentives to pass on their unverifiable distribution costs to consumers. Our objective is to study how, in this context, an information-sharing agreement according to which manufacturers share their demand information affects prices, profits and consumer surplus. While equilibria with full price delegation never exist, regardless of whether manufacturers share information, partial delegation equilibria may exist with and without the exchange of information. These equilibria feature binding price caps (list prices) that prevent retailers from passing on their distribution costs to consumers, and are more likely to occur when manufacturers exchange demand information than when they do not share this information. Manufacturers profit from exchanging demand information when products are sufficiently differentiated, and retailers' distribution costs are high enough. Yet, expected prices are unambiguously lower when manufacturers exchange demand information than when they don't, making the information exchange beneficial to consumers. Author Affiliation: (a) Compass Lexecon, Spain (b) Graduate Institute of International and Development Studies, Geneva, CEPR and Compass Lexecon, Belgium (c) Bergamo University and Compass Lexecon, Italy * Corresponding author. Article History: Received 29 March 2022; Revised 24 January 2023; Accepted 29 January 2023 (footnote)[white star] For many helpful comments, we would like to thank Giacomo Calzolari and Armin Schmutzler (the Editors), as well as two anonymous referees, Michele Bisceglia, Giacomo Corneo, Guillaume Duquesne, Raffaele Fiocco, Elena Manzoni, Bartosz Redlicki and Markus Reisinger. This paper was prompted by issues that arose in the context of the Truck case in the EU (Commission decision AT 39824, July 2016). The authors have contributed to submissions made on behalf of DAF NV in the context of damage claims. However, the views expressed in the paper are the authors' sole responsibility and cannot be attributed to Compass Lexecon or its clients. Byline: Enrique Andreu (a), Damien Neven (b), Salvatore Piccolo [salvatore.piccolo@unibg.it] (*,c)

Keywords Capital requirements; Risk shifting; Franchise value effect; Market leakage; Salop model with heterogeneous entry costs; Shadow banks Highlights * Studying effects of capital requirements at the market level offers new insights. * Market structure determines the effects and effectiveness of capital requirements. * Negative feed-back may cause more risk taking following higher capital requirements. * Outside option is interpreted as shadow banks. * Heterogeneous entry costs imply possibility of monopoly in Salop model. Abstract In our model, banks, heterogeneous in terms of entry costs, compete à la Salop for depositors on the unit circle. When capital requirements, intended to prevent risk shifting, are increased, the resulting costs are passed on to depositors in the form of reduced deposit rates or quality of service. This may induce depositors to migrate to unregulated shadow banks, the consequence being a change in the market structure for regulated banks: for low levels of capital requirements we observe monopolistic competition, while for higher levels constrained oligopoly and, finally, local monopoly. Under the latter two types of market structure, higher capital requirements reduce the profit margins and franchise values of banks, which may have the unintended effect of inducing banks to increase the riskiness of their investments. Author Affiliation: (a) Dipartimento di Economia e Finanza, Catholic University of Milan, Via Necchi 5, 20123 Milano, Italy (b) Dipartimento di Matematica per le Scienze Economiche, Finanziarie ed Attuariali, Catholic University of Milan, Largo Gemelli 1, Milano 20123, Italy * Corresponding author. Article History: Received 13 January 2022; Revised 23 February 2023; Accepted 26 February 2023 (footnote)[white star] We thank the editor and two anonymous referees for extensive constructive comments on previous versions of the paper which greatly contributed to bringing it to its final form. Every remaining errors are the sole responsibility of the authors. In addition we thank Vittoria Cerasi, Enrico Enali and Lorenzo Esposito for comments on an earlier version of the paper. We also appreciate suggestions from the audiences of our presentations at the SIE, 2016 Milan meeting, the World Finance Conference (2017 Sardinia), the ESEM 2017 Lisbon meeting, the 5th Workshop in Macro Banking and Finance, Milan 2017, the FINEST 2017 Trani meeting and the Minsky at 100 2019 Workshop. Funding from the following research projects is gratefully acknowledged: The Challenges of the Crisis. Rethinking Micro and Macro Policies, UCSC research project D3.2, and Teorie e modelli matematici per le scienze economiche, D.1--2013, Catholic University of Milan. Byline: Carsten Krabbe Nielsen [carsten.nielsen@unicatt.it] (a), Gerd Weinrich [gerd.weinrich@unicatt.it] (*,b)

Highlights * This article explores how multichannel shopping behavior across online and in-store purchasing environments influences purchases and price elasticities. * The paper finds a 0.3 to 1.0 percent increase in the proportion of private label products purchased. * The paper finds a 1 to 2 percent reduction in the proportion of purchases that are 'new' to a household after the online environment becomes available. * The paper finds that own (cross) price elasticities are 1.07 (5.56) times larger when household shop exclusively in the store, compared with when they shop both online and in the store. Abstract This paper analyzes the effect of an online shopping channel on private label purchases, product exploration and price elasticities. Variation in the timing that an online shopping service was introduced is utilized as a source of exogenous variation in the decision to shop online. Event study estimates indicate a 0.3 to 1.0 (1.0 to 2.0) percent increase (reduction) in the proportion of private label (new) products purchased after the introduction of the online shopping service. Price elasticities are then estimated utilizing an Exact Affine Stone Index (EASI) demand model. Comparisons of in-store and multichannel price elasticities indicate that households are, on average, less price sensitive when shopping across both the in-store and online channels. Own-price (cross-price) elasticities are 1.07 (5.56) times larger in-store than they are in a multichannel setting. These findings suggest that retailers manipulate the online search platform and(or) the provision of substitutes to favor private label products, which have a higher margin. Additionally, these results suggest that retailers may find it profit maximizing to raise prices as consumer baskets become more sticky in the multichannel purchasing regime. Author Affiliation: Iowa State University, Department of Economics, Heady Hall, 518 Farm House Lane, Ames, IA 50011, United States Article History: Received 7 December 2021; Revised 26 December 2022; Accepted 27 December 2022 (footnote)[white star] Special thanks to Mike Conlin, Todd Elder, Jeff Wooldridge and Bob Myers for their helpful comments and guidance throughout my work on this project. I would also like to thank the retailer for providing the data and the many employees who answered numerous questions and provided invaluable insights into the purchasing environment. Additional thanks are extended to Emek Basker, participants of the UM-MSU-WU Labor Day conference, the NAREA annual meetings and CeMENT workshop for their helpful comments and suggestions. This work was supported, in part, by Michigan State University through computational resources provided by the Institute for Cyber-Enabled Research. Byline: Katherine Harris-Lagoudakis [kaharris@iastate.edu]

Keywords Pharmaceuticals; Incremental innovation; Market exclusivity; Patents Highlights * To quantify the value of incremental innovation and the associated potential loss of consumer surplus due to market exclusivity. * To estimate a structural model and conduct counterfactual analyses based on MEPS individual-level prescription data with a focus on SSRI antidepressants. * To solve the endogeneity problem in demand-side estimation creatively exploring the advantage of copay data at the individual level. * The market exclusivity granted for incremental innovations in SSRIs has resulted in a loss of social welfare of between $4.78 billion and $11.68 billion over the period 1996--2011. * The result suggests that provisions for granting market exclusivity to incremental innovations merit further study by policymakers. Abstract This paper assesses the welfare gains from incremental innovation in pharmaceuticals. Such innovation can yield consumer gains through improved quality, but the additional market exclusivity granted to innovators may also delay generic entry, a practice referred to as 'ever-greening', and reduce consumer surplus. Quantifying this trade-off is vital in determining the optimal patent policy and regulatory treatment of incremental innovation. To shed light on this problem, I focus on incremental innovations in selective serotonin reuptake inhibitor (SSRI) anti-depressant drugs. Based on individual-level prescription data, I conduct a structural estimation and found that the consumer surplus losses due to market exclusivity extensions far exceed the consumer surplus benefits from incremental innovation. Without considering innovation costs, the benefits to innovators from incremental innovations ranged from $660 million to $2.16 billion even in the absence of market exclusivity. Evidence indicates that the market exclusivity granted for incremental innovations in SSRIs resulted in a loss of social welfare of between $4.78 billion and $11.68 billion over the period 1996--2011. The result suggests that policy makers may need to revisit the provisions for granting market exclusivity to incremental innovations. Author Affiliation: China Center for Human Capital and Labor Market Research, Central University of Finance and Economics, China * Corresponding author at: 615 Academic Hall, 39 South College Road, Central University of Finance and Economics, Haidian District, Beijing, China. Article History: Received 17 June 2021; Revised 23 December 2022; Accepted 28 December 2022 (footnote)[white star] This paper is a revised version of one chapter of my doctoral dissertation at Toulouse School of Economics. I am deeply indebted to my PhD advisor, Margaret Kyle, for her invaluable support and advice. I am also grateful to Pierre Dubois and Mary Olson for their constant support and illumination on this project. And I also appreciate Peter Arcidiacono, Fanny Camara, Andrew Ching, Ying Fan, Yinghua He, Matthew Higgins, Laura Lasio, Thierry Magnac, Martin O'Connell, Alexander Sandukovskiy, Yuya Takahashi, Sergio Urzua, Heidi Williams, Takuro Yamashita, Jianye Yan, and Xiaolan Zhou for their illuminating discussions. As well, I thank all the participants in numerous workshops, seminars and conferences. Lastly, I would like to extend my gratitude to the editor, Frank Verboven, and two anonymous reviewers for their constructive comments. All remaining errors are my own. Byline: Nina Yin [ninayin@cufe.edu.cn] (*)

Keywords conference; submission; presentation; publication; ranking; citations Highlights * Disseminating research results through academic conferences is important for scientific progress * We shed light on this process using data from five annual conferences of EARIE * We find disagreements between reviewers about grades in almost half of the cases * Between 40%-50% of the submitted papers remain unpublished years after the conference * Papers that are published, take over 3 years to get published. * Presentation at the conference is associated with a higher likelihood of publishing in an IO journal, although only 19% of the published papers are in IO journals. * Empirical papers and co-authored papers are more likely to get published and get more citations when published. * Accepted papers receive more citations when published and publications in economics journals receive substantially fewer citations than publications in adjacent fields. Abstract Using data from five annual conferences of the European Association for Research in Industrial Economics (EARIE), we shed light on the role of academic conferences in disseminating research results and on research in IO. Among other things, we find that (i) there are disagreements between members of the scientific committee when they evaluate the same paper in almost half of the cases, though large disagreements are present in only 6% of the cases; (ii) between 40%-50% of the submitted papers remain unpublished years after the conference and those that are published, take on average over 3 years to get published; (iii) presentation at the conference is associated with a higher likelihood of publishing in an IO journal, although only 19% of the published papers appear in IO journals; (iv) empirical papers and co-authored papers are more likely to get published and get more citations when published; (v) accepted papers receive more citations when published than rejected papers; and (vi) publications in economics journals receive substantially fewer citations than publications in adjacent fields like entrepreneurship and finance. Author Affiliation: (a) Coller School of Management, Tel Aviv University, Israel, CEPR, and ZEW (b) Aalto University School of Business, Helsinki GSE, Finland, KU Leuven, and CEPR * Corresponding author. Article History: Received 15 January 2022; Revised 4 May 2022; Accepted 22 May 2022 (footnote)[white star] The two authors were the scientific chairs of the EARIE annual conference in 2010 in Istanbul (Otto Toivanen) and in 2012 in Rome (Yossi Spiegel). We thank Luis Cabral and Patrick Rey (past EARIE presidents) and the EARIE council for granting us access to EARIE data; Tommaso Valletti, Heski Bar-Isaac, and Michelle Sovinsky (EARIE scientific chairs in 2013, 2014, and 2015) for helping us with the data; Ofer Azar, Rosa Ferrer, Nadav Levy, and an anonymous referee for helpful discussions and comments; Christoph Rothe for discussions on estimation; several research assistants and Wytse Joosten for help with collecting publication information, and Itai Spiegel for help with collecting Google Scholar citations. Yossi Spiegel thanks the Henry Crown Institute of Business Research in Israel for financial support. Byline: Yossi Spiegel [spiegel@post.tau.ac.il] (*,a), Otto Toivanen [otto.toivanen@aalto.fi] (b)

Keywords Vaccine; Epidemiology; Externality; Pharmaceutical Highlights * Theoretical analysis of optimal subsidies for a vaccine against endemic diseases requiring continuous vaccination of new cohorts. * Also suits epidemics like Covid-19 if, following Gans (2020), one assumes peaks are leveled by social distancing. * Study market structures ranging from perfect competition to Cournot to monopoly. * Find optimal subsidies are highest for moderately infectious diseases. * Calibrations to HIV, measles, and SARS suggest that optimal vaccine subsidies can be exorbitantly high in some cases, calling for alternative policies such as bulk purchases by governments on behalf of consumers. Abstract In Goodkin-Gold et al. (2021), we analyzed optimal subsidies for a vaccine against an epidemic outbreak like Covid-19. This companion paper alters the underlying epidemiological model to suit endemic diseases requiring continuous vaccination of new cohorts--also suiting an epidemic like Covid-19 if, following Gans (2020), one assumes peaks are leveled by social distancing. We obtain qualitatively similar results: across market structures ranging from perfect competition to monopoly, the subsidy needed to induce first-best vaccination coverage on the private market is highest for moderately infectious diseases, which invite the most free riding; extremely infectious diseases drive more consumers to become vaccinated, attenuating externalities. Stylized calibrations to HIV, among other diseases, suggest that first-best subsidies can be exorbitantly high when suppliers have market power, rationalizing alternative policies observed in practice such as bulk purchases negotiated by the government on behalf of the consumers. Author Affiliation: (a) Department of Economics, Harvard University, Cambridge, Massachusetts, USA (b) Department of Economics, University of Chicago, Chicago, Illinois, USA (c) Department of Economics, Dartmouth College, Hanover, New Hampshire, USA (d) Department of Economics, Stanford University, Stanford, California, USA * Corresponding author. Article History: Received 27 December 2021; Revised 26 February 2022; Accepted 24 March 2022 (footnote)[white star] This paper is one of two companion papers derived from a longer National Bureau of Economic Research working paper, no. 28085, 'Optimal Vaccine Subsidies for Endemic and Epidemic Diseases.' Snyder drew on this paper and other joint work for his presentation in the invited session on 'Policies for Vaccines' at the 2021 EARIE meetings, chaired by Kurt Brekke. The article was substantially improved following insightful suggestions from an anonymous referee and the editor, Elisabetta Iossa. The authors are grateful for helpful comments from Chris Avery, Witold Wiecek, and participants in the EARIE invited session, Harvard Economics Department seminar, Yale School of Medicine seminar, Cornell University's 'Infectious Diseases in Poor Countries and the Social Sciences' conference, DIMACS 'Game Theoretic Approaches to Epidemiology and Ecology' workshop at Rutgers University, 'Economics of the Pharmaceutical Industry' roundtable at the Federal Trade Commission's Bureau of Economics, U.S. National Institutes of Health 'Models of Infectious Disease Agent' study group at the Hutchinson Cancer Research Center in Seattle, the American Economic Association sessions on 'Economics of Infectious Disease' and 'Private and Social Returns to R&D and Vaccine Development,' Health and Pandemics (HELP!) Economics Working Group 'Covid-19 and Vaccines' workshop, and NBER 'Covid-19 and Health Outcomes' conference. Christopher Cardillo, Nishi Jain, Amrita Misha, Ralph Skinner, and Alfian Tjandra provided excellent research assistance. Williams gratefully acknowledges financial support from NIA grant number T32--AG000186 to the NBER. Byline: Matthew Goodkin-Gold (a), Michael Kremer (b), Christopher M. Snyder [chris.snyder@dartmouth.edu] (*,c), Heidi Williams (d)

Keywords Vaccine innovation; Covid-19; Innovation ecosystem; Vaccine hesitancy; Drug prices; European health policy Highlights * The paper analyzes the lessons of the covld vaccine experience for Europe. * It documents the value of the US biotech innovation ecosystem. * It details the challenge of vaccine hesitancy in the overall process. * It suggests extending EU Commission role in drug price negotiations. Abstract This paper analyzes the subsequent steps of the covid vaccine experience in the European Union. It stresses the features of the US innovation ecosystem which were responsible for its success. It argues that the European Union did reasonably well in procuring vaccines and logistically organizing their delivery but that vaccine hesitancy proved to be a key constraint. The paper discusses European countries' vaccination strategies and their plusses and minusses. Finally, it draws some lessons for dealing with the tradeoff between drug and vaccine innovation and affordability, an issue whose importance is bound to grow with promising but costly scientific advances. Author Affiliation: Université libre de Bruxelles (I3h, Solvay Brussels School and ECARES) * Corresponding author: ECARES, Université libre de Bruxelles, Ave. F.D. Roosevelt 50, CP 114/04, 1050 Bruxelles, Belgium Article History: Received 24 January 2022; Revised 6 May 2022; Accepted 22 May 2022 (footnote)1 This paper draws on an invited presentation at the EARIE Annual Meeting, Bergen, August 28, 2021. I thank Sofia Amaral-Garcia, Philippe Aghion, Alain Fischer and Michel Goldman with whom I collaborated on some of the work discussed here, as well as the Editor, Elisabetta Iossa, and an anonymous referee for useful comments. Byline: Mathias Dewatripont [Mathias.dewatripont@ulb.be] (*)

Keywords Informative advertising; Product differentiation; Monopolistic competition; Welfare Highlights * Modeling of informative advertising in a monopolistically-competitive model. * Both demand creation and matching effects present. * Unlike previous work, provide existence conditions for a market equilibrium. * Unlike previous work, provide conditions for advertising to be socially insufficient. Abstract Firms spend a half-trillion dollars advertising each year. To model and examine the welfare effects of advertising with heterogeneous goods Grossman and Shapiro (1984) model informative advertising in monopolistic competition find that informative advertising is socially excessive for large numbers of sellers. However, it has been noted that their equilibrium may not exist. We present a tractable model of informative advertising in monopolistic competition replacing the standard assumption of a finite number of firms with a continuum of firms. We derive conditions for equilibrium existence and find that in the monopolistically-competitive model, informative advertising is socially insufficient. We also find that with free entry, the measure of the set of active firms is lower than the socially optimal one. The comparison of our results with the results of also shows that a pure-strategy, symmetric equilibrium typically does not exist in the latter model if the number of sellers is large, a fact which accounts for the different conclusions drawn in the two papers. Author Affiliation: (a) Department of Economics, University of Kentucky, Lexington, KY 4506, USA (b) Jönköping University Business School, Jönköping, Sweden * Corresponding author. Article History: Received 10 May 2020; Revised 28 March 2022; Accepted 1 June 2022 (footnote)[white star] We thank two anonymous referees, Simon Anderson, Heski Bar-Isaac, Carl Davidson, Fabrizio Germano and Rgis Renault, as well as participants in the 2019 Oligo Workshop in Nottingham, Midwest Economic Theory Conference at Washington University, and seminars at Pompeu Fabra-- and Sandro Shelegia in particular -- and the University of Kentucky for their valuable and constructive comments. This paper was revised while A. Creane was a visiting scholar at the Department of Economics and Business, Universitat Pompeu Fabra and he is grateful for their support. (footnote)1 All roles equally. Byline: Anthony Creane [a.creane@uky.edu] (a,1), Agostino Manduchi [agostino.manduchi@ju.se] (*,b,1)

Keywords Ad valorem fee; Ancillary goods; App store; Intermediation; 'Razer and blades' pricing Highlights * This paper studies the pricing of ancillary goods when selling on a platform. * Under ad valorem fees, sellers have an incentive to shift revenue to the less taxed good. * A lower fee on the ancillary good may thus increase its price. * Removing Apple's App Store's payment restrictions for in-app purchases can potentially lead to higher prices, increasing developers' profits but decreasing social welfare. * Efficient consumption of the ancillary good is achieved under a fee or tax that increases with the elasticity of demand for the good. Abstract Firms often sell a basic good as well as an ancillary one. When selling through platforms, they pay a fee for intermediated sales. The fee structure affects the pricing of the ancillary good. Under ad valorem fees, sellers have an incentive to shift revenue to the less taxed good. A lower fee on the ancillary good may thus increase its price. As a result, removing Apple's App Store's payment restrictions for in-app purchases can potentially harm consumers and lower welfare. Our analysis also shows that efficient consumption of the ancillary good is achieved under a fee or tax that increases with the elasticity of demand for the good. Author Affiliation: Department of Economics, University of South Carolina, Columbia, SC 29208, USA Article History: Received 14 December 2019; Revised 22 April 2022; Accepted 25 April 2022 (footnote)[white star] This paper was previously circulated under the title 'Intermediation and The Pricing of Ancillary Goods.' I am grateful to participants at the 2019 International Industrial Organization Conference, the 2021 Southern Economic Association Meeting, two anonymous referees, and the Editor for very helpful comments and suggestions. All remaining errors are mine. Byline: Chun-Hui Miao [miao@moore.sc.edu]

Keywords Emissions markets; Electricity markets; Uncoordinated regulation; Optimal investment; Empirical games Highlights * Coordinating regulations across jurisdictions, especially with regard to creating emissions markets, is difficult. * Conventional wisdom tells us that uncoordinated emissions markets are inefficient. We show that this inefficiency can be mitigated if emitting firms participate in an integrated product market and optimally invest in cleaner and more efficient capacity not subject to CO.sub.2 regulations. * We empirically study the role of product reallocation and investment in mitigating inefficiencies from uncoordinated regulations in the context of CO.sub.2 regulation in the PJM Interconnection. Abstract We examine the inefficiency of uncoordinated environmental regulation of CO.sub.2 emissions from electricity generation for a large regional U.S. wholesale electricity market that spans multiple states. We estimate a dynamic structural model of production and investment to compare the social welfare of two counterfactual regulatory scenarios. In both scenarios, emissions targets set by the regulator are met via endogenously determined CO.sub.2 prices in markets aiming to correct the externality. In the first scenario, the CO.sub.2 prices are state-specific. In the second scenario, there is a regional CO.sub.2 price. According to our social welfare estimates, the inefficiency of uncoordinated regulation is mitigated substantially because of the firms' participation in an integrated product market in two main ways. First, firms reallocate output from states with high CO.sub.2 prices to states with low prices. Second, this reallocation spurs investment in cleaner capacity that is exempt from CO.sub.2 regulation. Our finding regarding the mitigation and, potentially, elimination of the inefficiency is robust to alternative models of optimal investment behavior. Author Affiliation: (a) Ohio State University, United States (b) Shultz Professor of Applied Economics, MIT and NBER, United States (c) Carleton University, Canada (d) FGV EPGE, Brazil and Amazon, United States (e) MIT Sloan School of Management and NBER, United States * Corresponding author. Article History: Received 19 May 2020; Revised 2 November 2021; Accepted 11 April 2022 (footnote)[white star] Abito received funding for this project from the Kleinman Center for Energy Policy and from the Dean's Research Fund, at the Wharotn School, University of Pennsylvania. We thank seminar participants in numerous conferences during 2016--2019 for many useful comments. We also thank Erin Mansur for providing some of the data used in the paper, Mushin Abdurrahman from PJM for sharing details about PJM's studies of the Clean Power Plan, as well as Aviv Nevo and Uli Doraszelski for valuable feedback in earlier versions of the paper. The comments of two anonymous referees helped us to significantly improve the current draft. Any remaining errors are ours. Byline: Jose Miguel Abito [abito.1@osu.edu] (*,a), Christopher R. Knittel [knittel@mit.edu] (b,e), Konstantinos Metaxoglou [konstantinos.metaxoglou@carleton.ca] (c), André Trindade [andre.trindade@fgv.br] (d)

Keywords Consumer search; Horizontal differentiation; Price competition Highlights * The paper studies costly consumer search in retail markets and tackles consumers' choice to search for information about products before buying them. * The fact that a consumer may decide to buy a product without knowing how much she wants to pay for it may reverse optimal search order described by Weitzman (1979). * Whether some consumers search for match value information in equilibrium depends on search costs. * The expected price decreases in search costs when the search costs are small and increases if the search costs are high. * The effect of search costs on consumer surplus via prices dominates, and consumer surplus follows the opposite path with respect to search costs than that of the expected price. Abstract This paper studies a duopoly with horizontally differentiated products and costly sequential consumer search. Prices are posted and search costs must be paid to observe the match values of goods. Consumers choose both in what order to inspect the products and whether to inspect the goods before purchasing. When the expected match value is relatively high, consumers always consider the cheaper product first. However if the expected match value is low, then consumers may check the more expensive product first. The fact that a consumer may buy a product without inspection softens price competition. As a result, the comparative statics of prices and surplus division with respect to search costs is different from that of a sequential search model with observable prices. Author Affiliation: Vilnius University and CEPR Article History: Received 19 May 2020; Revised 14 December 2021; Accepted 3 February 2022 (footnote)[white star] I am very grateful to the editor and the referees for their helpful comments and suggestions. I also thank Heski Bar-Isaac, Martin Obradovits, José Luis Moraga-González, Ramon Caminal, Roberto Burguet, Matthew Ellman, Sjaak Hurkens, Johan Lagerlöf, Nick Vikander, Peter Sørensen and other participants of the seminar at the University of Copenhagen, the participants of BECLE 2019, the seminars in IAE (CISC), HECER, the 15th Annual IIOC and EARIE-2017 for their helpful comments and suggestions. I also extend thanks to all editors and referees who spent their invaluable time evaluating my manuscript and providing feedback. The author acknowledges the financial support of the Spanish Ministry of Economy and Competitiveness (grant No. ECO2015-74328-JIN (AEI/FEDER/UE)), 2016 FBBVA grant 'Innovación e Información en la Economía Digital', the Government of Catalonia (grant No. SGR 1136) and the Lithuanian Research Council (grant No. 09.3.3-LMT-K- 712-18-0001). The titles of earlier versions of this paper were 'Time-constrained consumer search and price competition with horizontally differentiated products', 'When consumers do not have enough time to search' and 'Search choice, pricing and obfuscation', 'Market outcomes when consumers decide not to search'. Byline: Vaiva Petrikaite [vaiva.petrikaite@protonmail.com]

Keywords Demand estimation; Random-coefficient discrete choice model; Latent class model Highlights * This paper proposes a simple method to estimate random coefficients logit models. * The method is applicable for models with discrete-type random coefficients. * It uses data on total sales for each consumer type. * They do not have to be observed at the product level. * Such data are sometimes available from public surveys. Abstract This paper proposes a new method for estimating random coefficients logit models using aggregate data. The method analytically obtains the value of the econometric error term and thus does not require numerical calculations, in contrast to the contraction mapping established by Berry et al. (1995). The proposed approach drastically reduces the computation time and is applicable for models with discrete-type heterogeneity in consumer tastes. The approach requires additional data on total sales for each consumer type, though such data do not have to be observed at the product-level. This data requirement implies that the method mainly captures observed heterogeneity. Author Affiliation: Otaru University of Commerce, 3-5-21 Midori, Otaru, Hokkaido, 047-8501, Japan * Corresponding author. Article History: Received 23 December 2020; Revised 8 January 2022; Accepted 12 January 2022 (footnote)[white star] This work was partly carried out while the author was at Sapporo Gakuin University. I thank Frank Verboven, the editor in charge of my submission, for helpful guidance. I am also grateful for the comments and suggestions from the three anonymous referees and participants of the Japan Empirical Industrial Organization Workshop at Osaka. This work was supported by the Japan Society for the Promotion of Science [grant numbers 17K13735, 19H01494, and 20K13472]. Byline: Naoshi Doi [doi.naoshi.1983@gmail.com] (*)

Keywords Credible certification; Welfare-reducing certification; Asymmetric information; Adverse selection Highlights * In markets with asymmetric information about quality, the presence of high quality is a positive externality that can sustain trade. * Perfect, costless certification of quality leads to a complete internalization of this externality and results in first-best outcomes. * However, even minimal costs or minor errors in a verification/certification process can result in a diminishing the positive externality resulting in a destruction of surplus well in excess of the direct costs of certification or direct costs of errors. * The result is tied to the importance of the interplay of welfare and information across certified and non-certified markets. * This interplay in welfare can also result in improved certification technologies that reduce or eliminate Type-II errors (false labeling) in diminishing welfare. * The findings pose practical implications for certification and labeling policies. Abstract Asymmetric information is a classic example of market failure that undermines the efficiency associated with perfectly competitive market outcomes, as goods or services are not always allocated to those who value them the most. Credible certification that substantiates unobservable characteristics of products that consumers value is a potential solution to such market failure. We examine the welfare effects of certification in markets in which asymmetric information induces a misallocation of goods, and compare the market equilibrium when the certification technology becomes available with the equilibrium without certification. We find that despite certification improving allocative efficiency, overall welfare may decrease when such certification is either only imperfectly accurate or costly to the firm (but not necessarily to society). Most of these findings are tied to the subtle interplay of consumer and producer decisions of self-selecting across two markets: certified and non-certified markets, as the self-selection has welfare implications in both markets. Author Affiliation: (a) Department of Economics, University of Kentucky, USA (b) Department of Economics, Michigan State University, USA (c) Department of Industry and Market Policies, Korea Development Institute, South Korea * Corresponding author. Article History: Received 4 October 2020; Revised 24 January 2022; Accepted 30 January 2022 (footnote)[white star] We thank Hans-Theo Normann and seminar participants at University of Notre Dame, University of Oklahoma, Federal Trade Commission, George Mason University, Bates White, Western Ontario, McMaster University, and the Int. Industrial Organization Conference for their valuable comments. This paper was revised while A. Creane was visiting at the Department of Economics and Business, Universitat Pompeu Fabra, and he thanks them for their support. The paper has benefitted substantially from the comments of thoughtful referees and the editor. Byline: Anthony Creane [a.creane@uky.edu] (*,a), Thomas D. Jeitschko [jeitschko@msu.edu] (b), Kyoungbo Sim [kbsim@kdi.re.kr] (c)

Keywords Patents; Trade secrets; Intellectual property rights; Patent-secret combination Highlights * This paper studies how an inventor protects 'complex' innovations that involve multiple complementary components. * Each component can be protected through either patent or secrecy protection, so that the entire innovation may be protected through a patent-secret combination. * I find that, first, secrecy is optimal when the patent length is relatively short; otherwise, a patent-secret combination is optimal. * Second, the inventor is over-rewarded compared to an inventor with an innovation that is equivalent except that it involves only a single component so that the entire innovation can be protected through either patent or secrecy protection. * Third, a policy that precludes the use of a patent-secret combination enhances allocative efficiency ex-post but may stifle R&D incentives ex-ante. Abstract This paper studies how an inventor protects a 'complex' innovation that involves multiple complementary components. Each component can be protected through either patent or secrecy protection, so that the entire innovation may be protected through a patent-secret combination. Potential entrants might acquire these components either through costly imitation or licensing. I find that, first, secrecy is optimal when the patent length is relatively short; otherwise, a patent-secret combination is optimal; second, the inventor is over-rewarded compared to an inventor with an innovation that is equivalent except that it involves only a single-component so that the entire innovation can be protected through either patent or secrecy protection; and, third, a policy that precludes the use of a patent-secret combination enhances allocative efficiency ex-post but may stifle R&D incentives ex-ante. Author Affiliation: Korea Development Institute, 263 Namsejong-ro, Sejong-si 30149, Korea Article History: Received 7 October 2020; Revised 23 September 2021; Accepted 23 September 2021 (footnote)[white star] I would like to deeply thank Jay Pil Choi for his invaluable guidance and support. I thank the co-editor and two anonymous referees for their constructive comments. For many useful comments and suggestions, I am also indebted to Thomas Jeitschko, Arijit Mukherjee, Aleksandr Yankelevich and seminar participants at Michigan State University, 2016 Missouri Valley Economic Association Meetings and Fall 2016 Midwest Economic Theory Conference. All remaining errors are mine. Byline: Kyoungbo Sim [kbsim@kdi.re.kr]

Keywords FDI; Quality-enhancing technology spillovers; Strategic quality reduction; Vertical product differentiation; Welfare Highlights * We analyze FDI and quality-enhancing spillovers in an international duopoly model. * The Northern firm may reduce its product quality to reduce the amount of spillovers. * This strategic quality reduction leads to new welfare consequences of FDI. * FDI may enhance Southern welfare but reduce Southern consumer surplus. * Also, the globally optimal spillover rate can be below the Southern optimal rate. Abstract When Northern firms undertake FDI in the South, their superior technology spills over to Southern firms and enables Southern firms to enhance their product quality. This paper explores quality-enhancing technology spillovers in an international duopoly model of vertical product differentiation. We find that the Northern firm strategically reduces its product quality to limit the amount of technology spillovers upon FDI. The trade-off between the Northern firm's endogenous product quality choice and technology spillovers--similar to that between R&D and technology spillovers as discussed previously--plays a critical role in welfare consequences and policy implications of quality-enhancing technology spillovers. Author Affiliation: (a) Institute of Economic Research, Hitotsubashi University, Tokyo, Japan (b) Department of Economics, Faculty of Business and Law, Deakin University, Geelong, VIC, Australia * Corresponding author. Article History: Received 11 March 2020; Revised 29 May 2021; Accepted 21 September 2021 (footnote)[white star] We wish to thank the Co-Editor (José L. Moraga) and two anonymous reviewers for helpful and insightful comments that helped us improve the quality of the paper. We thank Simon Anderson, Eric Bond, Jay Pil Choi, Andrew Daughety, Rod Falvey, Taiji Furusawa, Arghya Ghosh, Jota Ishikawa, Tina Kao, Oliver Lorz, James Markusen, Laura Meriluoto, Hiroshi Mukunoki, Alireza Naghavi, Dhimitri Qirjo, Larry Qiu, Martin Richardson, Raymond Riezman, Kamal Saggi, Nicolas Schmitt, Frank Stahler, Don Wright, Kresimir Zigic, participants at seminars at the Australian National University, Hitotsubashi University, Kobe University, the University of New South Wales, the University of Tokyo, and at the Australasian Economic Theory Workshop, the Otago Workshop in International Trade, the Asia Pacific Trade Seminars, the Econometric Society Australasian Meeting, the Midwest International Trade Meeting, and the International Industrial Organization Conference for helpful comments. Hodaka Morita acknowledges financial support from Japan Society for the Promotion of Science (Grants-in-Aid for Scientific Research 16K21741). Byline: Hodaka Morita [hodakamorita@ier.hit-u.ac.jp] (a,*), Xuan Nguyen [xuan.nguyen@deakin.edu.au] (b)

Keywords Consumer search; inertia; income inequality Highlights * Across many industries, there is evidence of an inverse-U relationship between search intensity and consumer income. * We identify potential mechanisms for why low-income households fail to search drawing from many fields of economics. * We discuss supply-side responses to the search-income gradient, which potentially gives rise to regressive price dispersion. * We argue IO has much to contribute to current academic and policy debates over efficiency-equity trade-offs in policy design. Abstract Competition and consumer search costs can lead to price dispersion in an oligopoly. IO research has long identified the existence of search costs and estimated their distribution and is now beginning to study which consumers sit where in the distribution. This paper argues for a view of consumer protection and competition policy that considers distributional outcomes along with efficiency. We discuss the evidence on how consumer search varies over the income distribution and provide a literature review that summarizes research on (i) the search-income gradient; (ii) mechanisms for the gradient; and (iii) how search-based price discrimination can give rise to regressive price dispersion. Through our review, we collect evidence from a wide range of industries that shows that low-income consumers tend not to search. We then draw on research from IO, marketing, finance, urban, and behavioral economics for explanations as to why this pattern persists. Finally, we conclude that IO researchers have much to offer in identifying and quantifying the distributional impacts of market power, thereby contributing to current academic and policy debates on efficiency-equity trade-offs in policy design. Author Affiliation: Department of Economics, The University of Melbourne Level 4, 111 Barry Street, Melbourne, Victoria 3010, Australia * Corresponding author. Article History: Received 22 December 2020; Revised 2 February 2021; Accepted 3 February 2021 (footnote)[white star] We thank Severin Borenstein and Fiona Scott Morton for discussions that inspired us to write this paper. Scott Duke Kominers and Stephan Seiler provided very helpful discussions and references. Jia Sheen Nah and Haikun Zhang provided feedback. We acknowledge support from the Australian Research Council and the Faculty of Business and Economics at The University of Melbourne. All errors are our own. Byline: David P. Byrne [byrned@unimelb.edu.au] (*), Leslie A. Martin [leslie.martin@unimelb.edu.au]

Highlights * This paper analyzes the output effect of third-degree price discrimination in oligopoly. * The sign of the output effect can change when input costs are chosen endogenously by an upstream supplier with market power, rather than fixed exogenously. * When input costs are endogenous, more intense competition in the strong market than in the weak market can make it less likely that discrimination raises aggregate output. Abstract This paper examines the output effect of third-degree price discrimination in symmetrically differentiated oligopoly. We find that when the sellers' input costs are chosen endogenously by an upstream supplier with market power, as opposed to being fixed exogenously, long-standing qualitative conclusions about the effect of price discrimination on aggregate output can be reversed. In contrast to previous findings (e.g., by Holmes, 1989), more intense competition in the strong market than in the weak market can make it less likely that price discrimination raises aggregate output. For linear demand functions, we establish necessary and sufficient conditions under which the output effect changes sign when input costs are endogenized. Author Affiliation: Simon Business School, University of Rochester, United States * Corresponding author. Article History: Received 1 December 2020; Revised 20 January 2021; Accepted 21 January 2021 (footnote)[white star] We thank Leslie Marx and an anonymous referee for insightful comments. Byline: Jeanine Miklós-Thal [jeanine.miklos-thal@simon.rochester.edu] (*), Greg Shaffer [greg.shaffer@simon.rochester.edu]

Keywords Mergers; Innovation; R&d; Patents; Matrix completion Highlights * This paper is a retrospective evaluation of how innovation changed following mergers and subsequent policy interventions after the 5-to-3 consolidation of the worldwide hard disk drive industry in 2012. * Four different measures are employed to define innovation: R&D, patents, the number of new models, and their unit prices. * By adopting this holistic method, we are able to distinguish the magnitude of the merging parties' innovative efforts from the productivity of those efforts. * Our firm-level approach confirms that there is important heterogeneity across the players, which we attribute to differences in the severity of remedies required by competition authorities. Abstract This paper is a retrospective evaluation of how innovation changed following mergers and subsequent policy interventions after the 5-to-3 consolidation of the worldwide hard disk drive industry in 2012. It adopts a holistic view of innovation, employing four different measures: R&D, patents, the number of new models, and their unit prices. This allows us to distinguish the magnitude of the merging parties innovative efforts from the productivity of those efforts. Our firm-level approach confirms that there is important heterogeneity across the players, which we attribute to differences in the severity of remedies required by competition authorities. Author Affiliation: (a) Loughborough University, Epinal Way, Loughborough LE11 3TU, United Kingdom (b) School of Economics and Centre for Competition Policy, University of East Anglia, Norwich Research Park, Norwich, NR4 7TJ, United Kingdom (c) Centre for Competition Policy, University of East Anglia, Norwich Research Park, Norwich, NR4 7TJ, United Kingdom * Corresponding author. Article History: Received 13 October 2020; Revised 13 May 2021; Accepted 19 May 2021 (footnote)[white star] This paper is partially based on a report prepared by the authors for the European Commission, titled 'A feasibility study on the microeconomic impact of enforcement of competition policies on innovation'. The views and opinions expressed in this report are strictly those of the authors. The paper benefited from comments received at the 2019 IIOC conference, the 2018 CCP Seminar Series, and seminars at the CMA and Ofcom. We are also grateful for the comments received from Adriaan Dierx, Niklas Duerr, Tomaso Duso, Giulio Federico, Fabienne Ilzkovitz, Carmine Ornaghi, and Mark Roberts. The data and our main codes are available at: https://github.com/PeterOrmosi/hdd_innovation Byline: Anna Rita Bennato [a.bennato@lboro.ac.uk] (a), Stephen Davies [s.w.davies@uea.ac.uk] (b), Franco Mariuzzo [f.mariuzzo@uea.ac.uk] (b), Peter Ormosi [p.ormosi@uea.ac.uk] (*,c)

Keywords Vertical restraints; Hotel; Non-brand bidding agreement; Online travel agent; Price effects; Search advertising Highlights * Search advertising restrictions decrease the price difference between hotels' websites and online travel agents. * Hotels' websites likely face less competition due to consumers' increased search costs leading to higher prices on hotels' websites. * We identify cases where it is unlikely that hotels pass on possible cost savings such that consumers are compensated. * The anti-competitive effects are larger for hotels violating price parity with the online travel agents. Abstract Some suppliers prohibit their distributors from advertising on search engines if the consumer searches for the supplier's brand name. Such restrictions are referred to as 'non-brand bidding agreements' (NBBAs). This paper investigates the effect of NBBAs on retail prices in the Dutch hotel sector, where some hotels impose NBBAs on online hotel booking platforms. An NBBA may protect the hotel's own website against competition from hotels on booking platforms because booking platforms cannot target consumers searching for the hotel with a search ad. This may lead to higher prices on the hotel website. However, an NBBA may also generate ad savings, which may lead to lower prices. We use hotel prices from a meta-search site and data on NBBAs from two hotel booking platforms. To correct for unobserved heterogeneity between hotels with and without NBBA, we apply a trajectory balancing approach within a synthetic difference-in-differences framework. Compared to non-NBBA-hotels, NBBA-hotels charge higher prices on their website relative to the price on booking platforms, suggesting a price increase. We identify cases where it is unlikely that consumers benefit from passed-on ad savings. Author Affiliation: (a) Netherlands Authority for Consumers and Markets (ACM), the Netherlands (b) Tilburg School of Economics and Management (TiSEM), Tilburg University, the Netherlands * Corresponding author at: Netherlands Authority for Consumers and Markets (ACM), P.O. Box 16326, 2500 BH, The Hague, the Netherlands. Article History: Received 16 August 2019; Revised 26 March 2021; Accepted 31 March 2021 (footnote) This paper is based on data from three anonymous companies active in the Dutch online hotel sector. The ACM requested the data during a market research project ('marktonderzoek', in Dutch), not because of any concrete suspicion of a breach of competition law. The authors gratefully acknowledge that without these data the present study would not have been feasible. (footnote) We thank the editor and two anonymous referees for their valuable comments on an earlier draft of this paper. Byline: Jan Sviták [jan.svitak@acm.nl] (a,b,*), Jan Tichem (a), Stefan Haasbeek (a)

Keywords Platform competition; Complementors; Two-sided markets; Compatibility; Integration; Exclusivity; Subsidy Highlights * We present a model of platform competition in which two firms provide horizontally differentiated platforms and two sets of complementors offer products that are complementary to each platform respectively. * In this model, we characterize the pricing structure when consumers who buy a platform can only consume the complementary goods associated with that platform. * We show that indirect network effects are present in equilibrium: a platform and its complementors benefit when the quality of the platform and the number of complementors in the group increases and when the quality of the platform and the number of complementors in the other group decreases. * We then use this framework to determine the incentives of platforms to subsidize the independent complementors in an equilibrium. * We further analyze the incentives of each platform to form a strategic alliance with complementors through contractual exclusivity or technological compatibility, or to integrate with the complementors, and discuss the welfare consequences of these strategies. Abstract We characterize the pricing structure in a model of platform competition in which two firms offer horizontally differentiated platforms and two sets of complementors offer products that are exclusive to each platform, respectively. We highlight the presence of indirect network effects: platforms and complementors benefit from the quality and number of firms in their group and suffer from the quality and number of firms in the rival's group through their effects on prices and market share. We then determine the incentives of platforms to subsidize the independent complementors in an equilibrium. We further analyze the incentives of each platform to form a strategic alliance with complementors through contractual exclusivity or technological compatibility, or to integrate with the complementors. Finally, we discuss the welfare consequences of these strategies. Author Affiliation: Department of Economics, University of Southern California, Los Angeles, CA 90089, USA * Corresponding author. Article History: Received 25 January 2015; Revised 12 February 2021; Accepted 15 April 2021 (footnote)[white star] This paper is based on an earlier working paper entitled 'Platform Competition: The Role of Multi-homing and Complementors' (). We thank Jiawen Chen, Yongmin Chen, Jay Choi, Jacques Lawarree, Jorge Tamayo, Jean Tirole, Glen Weyl, Ralph Winter, two anonymous referees, and seminar participants at Beijing University, the Canadian Competition Bureau, University of Southern California, University of Washington, and the International Industrial Organization Conference in Boston for helpful comments and suggestions. We also gratefully acknowledge the financial support of the Microsoft Corporation (JC and GT), the NET Institute (GT) and the National Science Foundation grant SES-1851915 (JC). Byline: Juan D. Carrillo [juandc@usc.edu] (a), Guofu Tan [guofutan@usc.edu] (*,a)

Keywords Firm entry deregulation; Hierarchy layers; Internal organization; Product market competition; Span of control; Wage inequality Highlights * We study product market competition, firm reorganization and within-firm wage inequality. * We exploit a comprehensive firm entry deregulation episode as a quasi-natural experiment. * We use linked employer-employee data for the universe of private sector firms and workers. * Deregulation flattens firms' hierarchies: layers are reduced and spans of control increased. * Dropping layers is accompanied by a significant reduction in wage inequality within the firm. Abstract This paper identifies a causal link between changes in product market competition, firm reorganization and within-firm wage inequality. We exploit a unique episode of comprehensive firm entry deregulation as a quasi-natural experiment and use exceptionally detailed linked employer-employee data for the universe of private sector firms and workers in Portugal. Following deregulation affected firms flatten their hierarchies: the number of layers is reduced and managers' span of control increased. Dropping a hierarchy layer is accompanied by a significant reduction in wage inequality within the firm, by 8% for the average pay ratio between the top and the bottom layer and 4.4% for the 90-50 percentile wage ratio, showing that there are real changes arising from firm reorganization. Overall wage dispersion, measured by the standard deviation of hourly pay, is also reduced. We discuss mechanisms and interpretations for these changes. Author Affiliation: (a) University of Exeter, England, United Kingdom (b) University of Minho, NIPE, Portugal * Corresponding author. Article History: Received 21 July 2020; Revised 14 June 2021; Accepted 16 June 2021 (footnote)[white star] We thank two anonymous referees for comments that contributed to improve the paper. Data access from the Portuguese Ministry of Labor and Social Solidarity and the Office for National Statistics (INE) is gratefully acknowledged. The research was partially funded by National Funds of the Portuguese Foundation for Science and Technology (FCT) within the project 'UID/ECO/03182/2019. Byline: Dudley Cooke [d.cooke@exeter.ac.uk] (a), Ana P. Fernandes [a.p.o.fernandes@exeter.ac.uk] (a,*), Priscila Ferreira [priscila@eeg.uminho.pt] (b)

Keywords Cartels; Staggered price increases; Collusive price leadership; Antitrust policy Highlights * The paper studies endogenous, gradual formation of cartels via price staggering. * For intermediate discount factors, a single staggered price increase can only be sustained when the increase is neither too small nor too large. * Two consecutive staggered increases can reach any target price and may involve alternating price leadership. * We discuss how exogenous antitrust detection can affect the sustainability of staggered price increases. * We derive a list of markers which can assist competition authorities in assessing whether price increases are collusive or the outcome of competitive behaviour. Abstract In this paper we investigate the optimal organization of staggered price increases in cartels. Staggered price increases impose a cost during cartel formation as the price leader initially loses sales. We show that for intermediate discount factors, staggered price increases can only be sustained when the increase is neither too small nor too large. When a cartel executes two consecutive price increases, the choice between using the same leader or alternating leadership depends on the initial price level in the industry. We also discuss the choice between simultaneous and staggered price increases with an exogenous antitrust detection function, the allocation of price leadership with cost asymmetry, and the effect of product differentiation on price staggering. Author Affiliation: (a) School of Economics, University of Queensland, St Lucia QLD 4069, Australia (b) Department of Economics, Tulane University, New Orleans, USA * Corresponding author. Article History: Received 12 October 2018; Revised 20 April 2021; Accepted 8 May 2021 (footnote)[white star] We would like to thank the Editor Giacomo Calzolari and two anonymous referees for their valuable comments and suggestions. We also acknowledge helpful comments and discussions in conferences and seminars. Byline: Heiko Gerlach [h.gerlach@uq.edu.au] (*,a), Lan Nguyen [tnnguyen23@tulane.edu] (b)

Keywords Antitrust; Consumer welfare; Wholesale price-parity agreements; Agency business model Highlights * We study the competitive and welfare effects of wholesale price-parity agreements. * These agreements prevent a monopolist to price-discriminate retailers purchasing through intermediaries. * Unlike retail price-parity clauses, they can benefit consumers. * Consumers' preferences align with the intermediaries' but not with the monopolist's. Abstract We study the competitive and welfare effects of wholesale price-parity agreements. These contracts prevent a monopolist, who sells its product to final consumers both directly and indirectly through alternative distribution channels, to charge different input (wholesale) prices to competing intermediaries (e.g., platforms). In a multi-channel and multi-layered industry, organized as an agency business model, we find that the monopolist and the intermediaries do not necessarily have aligned incentives concerning the introduction of wholesale price-parity. While these agreements always hurt the monopolist, they may benefit the intermediaries when competition between the direct and the indirect distribution channels is sufficiently intense. Moreover, when this is the case, in contrast to retail price-parity agreements that typically reduce consumer welfare, wholesale price-parity may also benefit consumers. Author Affiliation: (a) Toulouse School of Economics, France (b) University of Bergamo, Italy (c) Compass Lexecon, USA (d) CSEF, Italy * Corresponding author at: University of Bergamo, Italy. Article History: Received 25 September 2020; Revised 29 March 2021; Accepted 3 April 2021 (footnote)[white star] A previous draft of this paper was circulated under the title 'When Prohibiting Platform Parity Agreements Harms Consumers'. For many helpful comments, we would like to thank Armin Schmutzler (the Editor), two anonymous referees, Raffaele Fiocco and Markus Reisinger. We benefitted from comments and feedback received by the seminar audience at Bergamo, Bicocca, Bocconi, Catholic University of Milan, and CSEF. Jorge Padilla has been involved in litigation concerning wholesale price-parity clauses in the airline ticket distribution industry on behalf of Amadeus SA. However, the views expressed in this paper are the sole responsibility of the authors and cannot be attributed Compass Lexecon or its clients. Byline: Michele Bisceglia (a,b), Jorge Padilla (c), Salvatore Piccolo (*,b,c,d)

To link to full-text access for this article, visit this link: http://dx.doi.org/10.1016/j.ijindorg.2016.12.002 Byline: Marco Buso (a), Frederic Marty (b), Phuong Tra Tran (c) Abstract: * The paper analyses determinants of Public Private Partnership (PPP). * It focuses on testing debt-hiding motivations in a context of budget constraints. * The study implements survival analysis and relies on French data. * Results are identified based on a discontinuity in the PPP accounting law. Author Affiliation: (a) University of Padova, via del Santo 33, Padova 35123, Italy (b) University of Nice Sophia-Antipolis, 28 Avenue Valrose, 06103 Nice, France (c) IPAG Business School, 184 boulevard Saint-Germain, 75006 Paris, France Article History: Received 25 November 2015; Revised 4 November 2016; Accepted 5 December 2016 Article Note: (footnote) [star] We are grateful to Marco Bertoni, Massimiliano Bratti, Alessandro Bucciol, Eshien Chong, Michael Klien, Scott Masten, Johan Nystrom, Stephane Saussier, Stephane Straub, Luciano Greco, Mario Padula, Lorenzo Rocco, Paola Valbonesi, Luigi Moretti, Enrico Rettore, and participants at the PSE Summer School in Microeconometrics 2016, IRSPM 2013, RSSIA 2013, IIPF 2013 conferences and 'The economics of Public Procurement workshop 2013' in Stockholm for their valuable comments and suggestions on different versions of this paper. The authors would also like to thank the Chaire Economie des partenariats public-prive of the Sorbonne Business School and the Mission d'appui au financement des infrastructures (Fin Infra) for providing data and useful information. Any remaining errors are the authors' responsibility. An online appendix is available at https://sites.google.com/site/busomarco/.

To link to full-text access for this article, visit this link: http://dx.doi.org/10.1016/j.ijindorg.2016.09.002 Byline: Seth Freedman (a), Ginger Zhe Jin (b) Abstract: * We study the role of social networks in peer-to-peer lending on the Internet. * Borrowers with social ties are more likely to get funded and with lower interest rates. * Most borrowers with social ties do not perform better ex post. * Lenders may not fully understand the relationship between social ties and borrower quality. * We find evidence of gaming on borrower participation in social networks. Author Affiliation: (a) School of Public and Environmental Affairs, Indiana University, Bloomington, Indiana, United States (b) Department of Economics, University of Maryland, College Park, MD and NBER, United States Article History: Received 23 June 2015; Revised 23 June 2016; Accepted 27 September 2016 Article Note: (footnote) [star] We would like to thank Larry Ausubel, John Haltiwanger, John Ham, Robert Hampshire, Anton Korinek, Phillip Leslie, Russel Cooper, Hongbin Cai, Jim Brickley, Estelle Cantillon, Severin Borenstein, and various seminar attendants at Rochester, Toronto, Northwestern Kellogg, Columbia, University of Pennsylvania Wharton School, University of Maryland Smith School, 2010 NBER IO program meeting, Universiti Libre de Bruxelles, Katholieke Universiteit Leuven and the 2011 Conference on Gaming Incentive Systems for helpful comments. Chris Larsen, Kirk Inglis, Nancy Satoda, Reagan Murray and other Prosper personnel have provided us data support and tirelessly answered our questions about Prosper.com. Adam Weyeneth and other Prosper lenders have generously shared their prosper experience. We are grateful to the UMD Department of Economics, the Kauffman Foundation, and the Net Institute (www.netinst.org) for their generous financial support. An earlier draft has been circulated under the title 'Do Social Networks Solve Information Problems for Peer-to-Peer Lending? Evidence from Prosper.com.' This paper is independent of Prosper.com, all errors are our own, all rights reserved. Disclaimer: Part of the paper was revised when Jin takes leave at the US Federal Trade Commission. Any view expressed here does not represent the view of the Commission or any of its Commissioners.

To link to full-text access for this article, visit this link: http://dx.doi.org/10.1016/j.ijindorg.2016.07.001 Byline: Remco van Eijkel (a), Gerard H. Kuper (b), Jose L. Moraga-Gonzalez (b)(c)(d) Abstract: * This paper presents an empirical strategy to discern whether firms sell forward for strategic reasons, for risk-hedging reasons, or for both. * We use a unique dataset from the Dutch wholesale market for natural gas that includes most forward and spot transactions, the number of active players, churn rates and prices to test for strategic behavior. * We find relatively strong evidence that behind the forward contracting activity of a firm not only risk hedging matters but also market power and strategic play. Author Affiliation: (a) CPB Netherlands Bureau for Economic Policy Analysis, The Hague, Netherlands (b) University of Groningen, Groningen, Netherlands (c) Vrije Universiteit Amsterdam, Amsterdam, Netherlands (d) Tinbergen Institute, CESifo, CEPR and the PPSRC Center (IESE), Amsterdam, Netherlands Article History: Received 26 February 2016; Revised 13 July 2016; Accepted 18 July 2016 Article Note: (footnote) [star] We thank the Editor, two referees, R. Alessie, P. Bekker, R. Caminal, G. Federico, N.-H. von der Fehr, C. von Hirschhausen, S. Hurkens, S. Kortum, M. Machado, A. van der Made, R. van der Meer, J.-P. Montero, A. Neumann, H. Perez-Saiz, F. Salanie, Z. Sandor, S. Stoerch, X. Vives and B. Willems for useful comments. The paper has also benefited from presentations at Ecole Polytechnique Paris, Helsinki School of Economics, Humboldt University Berlin, IESE Business School, University of Cambridge, University of Copenhagen, University Carlos III Madrid, Institute of Economic Analysis (Barcelona), the IIOC 2009 (Boston), ESEM 2009 (Barcelona), EARIE 2009 (Ljubljana) and at the 2010 IDEI conference on Energy Markets (Toulouse). We are also indebted to Mark Hobbelink and Sybren de Jong from Gas Transport Services B.V. for providing us with some of the necessary data, and to Chenlang Tang (Tommy) for his excellent research assistance.

To link to full-text access for this article, visit this link: http://dx.doi.org/10.1016/j.ijindorg.2016.06.005 Byline: Toomas Hinnosaar Abstract: * Real penny auction outcomes are surprising they have high variance and high profit. * I characterize all equilibria of penny auctions with rational risk-neutral bidders. * I conclude that the high variance is a natural property of the auction format. * High profits are inconsistent with rational risk-neutral bidders. * The basic model in penny auctions literature is not robust to small changes. Author Affiliation: Collegio Carlo Alberto, Via Real Collegio, 30, Moncalieri 10024, Torino, Italy Article History: Received 24 February 2015; Revised 2 June 2016; Accepted 3 June 2016 Article Note: (footnote) [star] This paper is based on the third chapter of my Ph.D. thesis at Northwestern University. From 2012-2014, the paper was circulated under the title 'Penny Auctions are Unpredictable.' I would like to thank Eddie Dekel, Jeff Ely, Andrea Gallice, Marit Hinnosaar, Marijan Kostrun, Alessandro Pavan, Todd Sarver, Ron Siegel, and Asher Wolinsky for helpful discussions and comments. Financial support from the Center for Economic Theory in the Department of Economics at Northwestern University is acknowledged.

Keywords Optimal contest; Winner-Take-All; All-Pay auction; Costly entry; Incomplete information; Cross-Rank/scenario transfer Highlights * Entry cost is ubiquitous in real-life contests. * We accommodate costly entry and study the effort-maximizing prize allocation rule in a contest environment of all-pay auction with incomplete information. * The prize allocation rule can be contingent on the number of entrants. * With linear or concave effort cost, winner-take-all is the optimum. * With convex cost, costly entry does make a difference compared to the free-entry case. Abstract Contestants often need to incur an opportunity cost to participate in the competition. In this paper, we accommodate costly entry and study the effort-maximizing prize allocation rule in a contest environment of all-pay auction with incomplete information as in Moldovanu and Sela (2001). As equilibrium entry can be stochastic, our analysis allows prize allocation rule to be contingent on the number of entrants. With free entry, Moldovanu and Sela establish the optimality of winner-take-all when effort cost function is linear or concave. Costly entry introduces a new trade-off between eliciting effort from entrants and encouraging entry of contestants, which might demand a more lenient optimal prize allocation rule. Surprisingly, we find that the optimality of winner-take-all is robust to costly entry when cost function is linear or concave. On the other hand, we provide examples to show that the new trade-off due to costly entry does make a difference to the optimal design when effort cost function is convex. Author Affiliation: (a) School of Management and Economics, CUHK Business School, Shenzhen Finance Institute, The Chinese University of Hong Kong, Shenzhen, China (b) Department of Economics, National University of Singapore 117570, Singapore * Correspondinga author. Article History: Received 25 September 2017; Revised 15 April 2019; Accepted 24 April 2019 (footnote)[white star] We are grateful to the editor in charge Armin Schmutzler and two anonymous reviewers for insightful comments and suggestions, which significantly improved the quality of the paper. We thank Yi-Chun Chen, Chiu Yu Ko, John Quah, Aner Sela, Satoru Takahashi and Jun Xiao for helpful comments and suggestions. Liu gratefully acknowledges financial support from National Natural Science Foundation of China (71703138). Lu gratefully acknowledges the financial support from MOE of Singapore (Grant no.: R-122-000-252-115). The usual disclaimer applies. Byline: Bin Liu [binliu@cuhk.edu.cn] (*,a), Jingfeng Lu [ecsljf@nus.edu.sg] (b)

Keywords Payment cards; Interchange fee; Regulation; Service investment; Two-sided markets Highlights * Analysis of the effects of interchange fee regulation on platform's innovation incentives. * Card platform obtains a double benefit from innovation with full merchant internalization. * Optimally regulated interchange fee can be above the privately optimal one. * Interchange fee of zero and 'tourist test' interchange fee lead to too little investments. * A ban of the no-surcharge rule reduces a platform's investment incentives. Abstract This paper analyzes the impact of interchange fee regulation on the investment incentives of a payment card platform in the presence of full merchant internalization. We distinguish between investment in consumer and retailer services. We find that the optimally regulated interchange fee can be above the privately optimal one to induce the platform to invest more in retailer services. We also demonstrate that the two prominent regulatory benchmarks of a zero interchange fee and regulation according to the 'tourist test' tend to set too low investment incentives under a total welfare standard. Instead, 'tourist test' regulation can be a reasonable approximation under a total user surplus standard. Author Affiliation: (a) Economics Department, Frankfurt School of Finance and Management, Adickesallee 32--34, 60322 Frankfurt am Main, Germany (b) Economics Department, University of Munich, Ludwigstr. 28, 80539 Munich, Germany * Corresponding author. Article History: Received 30 August 2018; Revised 15 February 2019; Accepted 20 May 2019 (footnote)[white star] We thank Justin Johnson (the editor) and an anonymous referee for very helpful comments and suggestions. We also thank Cedric Argenton, Paul Belleflamme, Nicole Jonker, Patrick Rey, and Julian Wright as well as participants at the UECE meetings in Lisbon and the MaCCI conference in Mannheim for their suggestions. This article is a revised version of our eponymous 2015 working paper, at which time the second author was affiliated with CRA International. The views expressed in this article are solely those of the authors and do not necessarily reflect the views or opinions of past or present employers. Byline: Markus Reisinger [m.reisinger@fs.de] (*,a), Hans Zenger [hans@onfund.org] (b)

Keywords Advertising; Entry deterrence; Innovation Highlights * This paper finds that improvements in advertising can lead to costly entry deterrence. * Advertising can spur innovation by spreading product knowledge, but better advertising also raises the threats of entry. * Facing innovation spillover, an incumbent firm has incentives to strategically lower its own innovation to deter entry. * Better advertising in innovation-intensive industries can slow down industry growth and lower consumer welfare. * This paper also investigate the role of innovation spillover on entry deterrence. Abstract With the advent of the Internet and social media platforms, advertising has become cheaper and more effective in reaching consumers. This paper studies the effect of better informative advertising on innovation and industry growth. This paper finds that improvements in informative advertising can lead to costly entry deterrence. Because advertising and innovation are complementary, better advertising raises the threats of entry. When innovation spillover is present in an industry, an incumbent firm has incentives to strategically lower its own innovation to deter entry. As a result, better advertising in innovation-intensive industries can have negative consequences on industry growth and consumer welfare. This paper also investigate the role of innovation spillover on entry deterrence. Author Affiliation: Economics Department, College of William and Mary, P.O. Box 8795, Williamsburg, VA 23187, USA Article History: Received 3 October 2017; Revised 7 September 2018; Accepted 18 September 2018 Byline: Shi Qi [sqi01@wm.edu]

Keywords Intellectual property rights; Innovation; Imitation; Duopoly; Developing countries Highlights * The paper studies countries' incentives to protect Intellectual Property Rights. * We propose a model of incremental innovation which enhances the quality of the goods. * Asymmetric IPR, strict in the North and lax in the South, can increase innovation. * IPR enforcement is U-shaped in the relative size of the domestic market. Abstract Developing countries' incentives to protect intellectual property rights (IPR) are studied in a model of vertical innovation. Enforcing IPR boosts export opportunities to advanced economies but slows down technological transfers and incentives to invest in R&D. Asymmetric protection of IPR, strict in the North and lax in the South, leads in many cases to a higher world level of innovation than universal enforcement. IPR enforcement is U-shaped in the relative size of the export market compared to the domestic one: rich countries and small/poor countries enforce IPR, the former to protect their innovations, the latter to access foreign markets, while large emerging countries free-ride on rich countries' technology to serve their internal demand. Author Affiliation: (a) Toulouse School of Economics, France (b) CREM UMR CNRS 6211, France (c) Universite de Cergy-Pontoise, THEMA UMR CNRS 8184, France * Corresponding author. Article History: Received 7 October 2017; Revised 26 October 2018; Accepted 25 January 2019 (footnote)[white star] We thank the editor and two anonymous referees who contributed greatly by their suggestions and their comments to improve the paper content and organization. We would like to thank Zhifeng Yin, Margaret Kyle, Jose de Sousa, Miren Lafourcade, and Nicolas Sahuguet for useful comments and suggestions. We also thank participants of the scientific meetings of the European Union Development Network, DIAL Development Conference, CESIfo Area Conference in Applied Microeconomics, EARIE Stockholm, the 'The Economics of Intellectual Property' Conference held in Toulouse, the Fourteenth CEPR/JIE Conference at the University of Bologna, and seminar participants at THEMA - Universite de Cergy, Universite de Caen Basse-Normandie, Universite de Nanterre, Universite Paris 11, CERDI - Universite de Clermont-Ferrand for their criticisms and suggestions on an earlier version of the paper. Financial support from the IDEI-Nokia research partnership, the Labex MME-DII program (ANR-11-LBX-0023-01) and the Ecos-Sud CONICYT project C15H02 are gratefully aknowledged. All remaining errors are ours. Byline: Emmanuelle Auriol [emmanuelle.auriol@tse-fr.eu] (*,a), Sara Biancini [sara.biancini@u-cergy.fr] (b,c), Rodrigo Paillacar [rodrigo.paillacar@u-cergy.fr] (c)

To link to full-text access for this article, visit this link: http://dx.doi.org/10.1016/j.ijindorg.2016.04.004 Byline: Marc Bourreau, Pinar Dogan, Matthieu Manant Abstract: * We propose an n-firm oligopoly model to study the effect of the degree of cooperation in product development (i.e., the number of jointly developed product components) on the size of the RJV (i.e., the number of RJV participants). * If the degree of product differentiation is not sensitive to the degree of cooperation, then the RJV is industry-wide. * The equilibrium size of the RJV can vary non-monotonically with the degree of cooperation. * The equilibrium size of the RJV is too small from the industry's perspective (unless there is an industry-wide RJV), whereas it is too large from consumers' point of view. Author Affiliation: (a) Telecom ParisTech, Department of Economics and Social Sciences, CREST-LEI, Paris, France (b) John F. Kennedy School of Government, Harvard University, Cambridge, MA, United States (c) RITM, Universite Paris-Sud, Universite Paris-Saclay, Paris, France Article History: Received 10 February 2015; Revised 23 March 2016; Accepted 2 April 2016 Article Note: (footnote) [star] An earlier but substantially different version of this paper was circulated as 'Size of RJVs and Degree of Cooperation in Product Development' (HKS Faculty Research Working Paper Series RWP10-047). We are grateful to Armin Schmutzler (the co-editor) and two anonymous referees for their helpful comments. We would like to thank Paul Belleflamme, Nisvan Erkal, Nicolas Houy and Patrick Waelbroeck for valuable comments and suggestions on earlier drafts. We also thank Katie Naeve and Grant Rafter for their editorial assistance.

To link to full-text access for this article, visit this link: http://dx.doi.org/10.1016/j.ijindorg.2016.01.001 Byline: Katsumasa Nishide, Kyoko Yagi Abstract: In this study, we analyze the investment-timing problem and introduce a model of two firms competing for investment preemption, each of which knows in advance the time at which the economic condition that will have an impact on the investment changes. We qualitatively show how two firms strategically optimize their investment timing, taking into account competition and preemption. Article History: Received 28 November 2012; Revised 5 January 2016; Accepted 5 January 2016 Article Note: (footnote) [star] An earlier version of this paper was circulated under the title 'Competition and the Bad News Principle in a Real Options Framework.' The authors thank the participants at the JAROS 2012 Conference for their comments, especially Makoto Goto and Motoh Tsujimura. We also thank the anonymous referees and the editor for their valuable suggestions, which greatly improved this paper. The first author expresses gratitude for the financial support of the Japanese Ministry of Education, Culture, Sports, Science and Technology (MEXT) Grand-in-Aid for Scientific Research (A)#25245046, (B)#15H02965, and (C)#26380390. We are also grateful for the support of Project Research at KIER, Kyoto University, and the Joint Usage and Research Center. Of course, any errors are the authors'.

To link to full-text access for this article, visit this link: http://dx.doi.org/10.1016/j.ijindorg.2015.10.011 Byline: Gabriel Desgranges, Stephane Gauthier Abstract: This paper studies rationalizability in a linear asymmetric Cournot oligopoly with a unique Nash equilibrium. It shows that mergers favor uniqueness of the rationalizable outcome. When one requires uniqueness of the rationalizable outcome maximization of consumers' surplus may involve a symmetric oligopoly with few firms. We interpret uniqueness of the rationalizable outcome as favoring a dampening of strategic 'coordination' uncertainty. An illustration to the merger between Delta Air Lines and Northwest shows that a reallocation of 1% of market share from a small carrier to a larger one has implied a lower production volatility over time, yielding a 1.5% decrease in the coefficient of variation of number of passengers. Article History: Received 3 April 2014; Revised 27 October 2015; Accepted 29 October 2015 Article Note: (footnote) [star] We thank Jess Benhabib, Gaetano Gaballo, Roger Guesnerie, Laurent Linnemer, Regis Renault, Jean-Philippe Tropeano and Thibault Verge for useful discussions. Alexandra Belova, Philippe Gagnepain, Nicolas Jacquemet, Benoit Rapoport and especially Antoine Terracol provided us generous guidance in the empirical illustration to the airline industry. We are very grateful to two anonymous referees and the editor Pierre Dubois for helping us to improve our paper. The usual disclaimers apply.

To link to full-text access for this article, visit this link: http://dx.doi.org/10.1016/j.ijindorg.2015.10.006 Byline: Vaiva PetrikaitA Abstract: I use standard consumer search models to study how an increase in market transparency (lower search costs or higher share of fully informed consumers) affects cartel stability. When firms sell horizontally differentiated products, cartels become more stable as the search cost increases; with homogeneous products, by contrast, the opposite holds. A higher share of fully informed consumers makes collusion less stable when the market is initially sufficiently transparent, whereas it happens otherwise if the market is originally little transparent. Article History: Received 12 February 2013; Revised 1 October 2015; Accepted 14 October 2015 Article Note: (footnote) [star] I am very obliged to the editor and an anonymous referee for their comments and suggestions, which have helped me to improve the paper greatly. For the same reasons I send my sincere thank you to Jose L. Moraga-Gonzalez. I am also grateful to Christopher Wilson, Marco Haan, Regis Renault, Maarten Janssen, Jan Boone, Bert Schoonbeek, Peter van Santen, Shu Yu, Wim Siekman, Tadas BruA3/4ikas and Willem Boshoff. The paper has also benefited from presentations at the 1st annual BECCLE Competition conference, the EARIE 2012 Conference (Rome), and the department of economics at IESE Business School. Financial support from the Marie Curie Excellence Grant MEXT-CT-2006-042471 is gratefully acknowledged.

To link to full-text access for this article, visit this link: http://dx.doi.org/10.1016/j.ijindorg.2015.10.008 Byline: Francisco Ruiz-Aliseda Abstract: We present a continuous-time game in which two firms must decide at each instant of time whether to be in or out of a market that expands up to a random maturity date and declines thereafter. Firms are initially inactive, and they differ only in the opportunity costs of using their assets (e.g., owing to different redeployment or resale values). After characterizing the unique Markov perfect equilibrium of the entry and exit game under demand uncertainty, we challenge the result that the threat of preemption can partially or even totally dissipate a first mover advantage. When post-entry profits can be negative, the preemption threat of a firm may become weaker because its rival may force it out of the market after entering. As a result, there may be little or no dissipation of the first mover advantage when post-investment profits are not assumed to be always positive. Article History: Received 24 August 2014; Revised 21 October 2015; Accepted 23 October 2015 Article Note: (footnote) [star] This paper was previously circulated as 'Strategic Commitment Versus Flexibility in a Duopoly With Entry and Exit.' I am very grateful to Anne Coughlan, Niko Matouschek, Vicente Salas-Fumas, Daniel Spulber, Timothy Van Zandt, Peter Zemsky, the co-editor (Philipp Schmidt-Dengler), two anonymous referees, as well as to seminar participants at several institutions, for comments that greatly improved the paper. Financial support for my graduate studies from Fundacion 'la Caixa' is gratefully acknowledged. The usual disclaimer applies.

To link to full-text access for this article, visit this link: http://dx.doi.org/10.1016/j.ijindorg.2015.08.004 Byline: Stefano Comino, Clara Graziano Abstract: In this paper, we offer a novel explanation to the surge in patenting observed during the last few years. When PTOs (Patent and Trademark Offices) award bad patents, not only do 'false innovators' have the incentive to file applications but also, and more interestingly, 'true innovators' are forced to patent more intensively in an attempt to signal their type. However, if they are liquidity constrained, true innovators may fail to separate and this fact reduces the incentives to exert effort in R&D. In addition, drawing on the signaling role of patents highlighted by the model, we investigate some of the proposals that have been put forward in order to mitigate the bad patent problem. We provide an intuitive condition under which a tightening of the patentability standards ('raising the bar') reduces the distortions caused by bad patents. Moreover, we show that introducing a two-tiered patent system is unlikely to improve market outcomes. Article History: Received 26 May 2014; Revised 30 July 2015; Accepted 31 August 2015 Article Note: (footnote) [star] An earlier version of this paper was presented at the EARIE conference (Rome 2012), at the Jornadas de Economia Industrial (Segovia 2013) and at the VI NERI Annual Meeting (Pavia 2014). We are grateful to Reiko Aoki, Giovanni Fonseca, Alberto Galasso, Gerard Llobet, Luigi Pace and David Perez-Castrillo for their comments on earlier versions of the paper. We also wish to thank the two anonymous referees and the Co-Editor of IJIO, Martin Peitz, for their very insightful suggestions that helped us improving the paper.

To link to full-text access for this article, visit this link: http://dx.doi.org/10.1016/j.ijindorg.2015.07.009 Byline: Anna D'Annunzio, Antonio Russo Abstract: We investigate the relation between Net Neutrality regulation and Internet fragmentation. We model a two-sided market, where Content Providers (CPs) and consumers interact through Internet Service Providers (ISPs), and CPs sell consumers' attention to advertisers. Under Net Neutrality, a zero-price rule is enforced. By contrast, in the Unregulated Regime, ISPs make access to their subscribers for CPs conditional on payment of a termination fee. Multiple impressions of an ad on the same consumer are partially wasteful. Thus, equilibrium ad rates decrease when audiences overlap. We show that ISPs may strategically set termination fees to induce fragmentation. This takes place when advertising revenues are potentially large but strongly diminished by competition among CPs, and when consumers are not highly sensitive to content availability. We therefore identify an important link between termination fees, the online advertising market and Internet fragmentation. We extend the model to account for multi-homing consumers, vertically integrated ISPs, third-party advertising platforms and heterogeneous CPs. Article History: Received 6 November 2013; Revised 9 July 2015; Accepted 30 July 2015 Article Note: (footnote) [star] An earlier version of this paper circulated with the title: 'Network neutrality, access to content and online advertising'. We thank Bruno Jullien for his important advice. We also thank Charles Angelucci, Marc Bourreau, Carlo Cambini, Jacques Cremer, Raffaele Fiocco, Oystein Foros, Gorm Gronnevet, Bjorn Hansen, Carole Haritchabalet, Heiko Karle, Marko Kothenburger, Jan Kramer, Yassine Lefouili, Pierfrancesco Reverberi, Wilfried Sand-Zantman, Paul Seabright, Lars Sorgard and the audiences at CRESSE 2013, EARIE 2013 and NHH Bergen for helpful comments and discussions. Finally, we thank the Editor, Giacomo Calzolari, and two anonymous Referees for valuable comments that greatly helped improve the paper. All errors are ours alone. The views expressed in this paper are those of the authors only and not those of Telenor. The Supplementary Appendix to this paper is available on the authors' website.

To link to full-text access for this article, visit this link: http://dx.doi.org/10.1016/j.ijindorg.2015.03.005 Byline: James D. Dana, Kathryn E. Spier Abstract: Tying, bundling, minimum purchase requirements, loyalty discounts, exclusive dealing, and other purchase restraints can create stronger incentives for firms to invest in product quality. In our first example, the firm sells a durable experience good and a complementary non-durable good to a representative consumer. Tying shifts profits from the durable to the non-durable good, making profits more sensitive to the consumer's experience. In our second example, the firm sells a single experience good to consumers with heterogeneous demands. Minimum purchase requirements screen out the low-volume consumers who would otherwise free ride on the superior monitoring of the high-volume consumers. The examples illustrate that purchase restraints can increase both firm profits and consumer surplus by making firm profits more sensitive to consumer experience, either directly by giving the consumer more control over the stream of profits or indirectly by constraining consumers to monitor more intensively. Article Note: (footnote) [star] We would like to thank our editor, Heski Bar-Isaac, two anonymous referees, Louis Kaplow, Barry Nalebuff, Marco Ottaviani, Martin Peitz, Patrick Rey, and Mike Whinston, as well as the seminar participants at the E.A.R.I.E. 2014 Annual Conference in Milan, Italy for their helpful comments. James Dana was on sabbatical at Harvard Business School and Yale University while working on this research. Kathryn Spier acknowledges financial support from the John M. Olin Center for Law, Economics, and Business at the Harvard Law School and NSF Grant SES-1155761. Some of the content of this paper and it's companion paper (Dana and Spier, 2014) was previously circulated in our unpublished working paper titled 'Product Bundling and Reputation.'

To link to full-text access for this article, visit this link: http://dx.doi.org/10.1016/j.ijindorg.2015.07.008 Byline: Yiquan Gu, Tobias Wenzel Abstract: The paper reports the results of an experiment where asymmetric sellers of a product can obfuscate the market. We show that policy measures may have unintended effects of increasing obfuscation incentives. We find that policies that limit the effectiveness of obfuscation and policies that promote parity between firms can lead less prominent firms to increase their obfuscation efforts. Despite this unintended effect, however, the former type of policies is effective in boosting consumer welfare. Article History: Received 1 August 2014; Revised 1 July 2015; Accepted 24 July 2015 Article Note: (footnote) [star] We thank Volker Benndorf, Sen Geng, Claudia Mollers, Hans-Theo Normann, Martin Peitz, Rune Stenbacka, Fangfang Tan, Jonathan Tan, and Chris Wilson for helpful suggestions and discussions. We are grateful to the editors and two anonymous referees for their valuable comments and suggestions which have substantially improved the paper. We also thank seminar audiences at the Universities of Durham, East Anglia, Liverpool and Nottingham, participants at Asia-Pacific Regional Meeting of the Economic Science Association in Xiamen, MaCCI Conference in Mannheim, IIOC in Arlington and the Royal Economic Society Annual Conference in Cambridge for helpful comments. Julia Frison provided valuable research assistance.

To link to full-text access for this article, visit this link: http://dx.doi.org/10.1016/j.ijindorg.2015.07.005 Byline: Joseph E. Harrington, Kai Huschelrath, Ulrich Laitenberger, Florian Smuda Abstract: We hypothesize a particular source of cartel instability and explore its relevance to understanding cartel dynamics. The cartel instability is rooted in the observation that, upon cartel formation, the relative positions of firms are often fixed which may lead some growth-conscious members to be discontent. This incongruity between a cartel member's allocated market share and its desired market share may result in systematic deviations and the eventual collapse of the cartel. This hypothesis is then taken to the German cement cartel of 1991-2002. We argue that Readymix was such a discontent cartel member and, using a rich pricing data set, are able to characterize how Readymix deviated, how other firms responded, and how it led to the collapse of the cartel. Article History: Received 11 November 2014; Revised 6 June 2015; Accepted 17 July 2015 Article Note: (footnote) [star] The project was financially supported by the research program Strengthening Efficiency and Competitiveness in the European Knowledge Economies (SEEK) launched by the State Government of Baden-Wurttemberg, Germany and by the National Science Foundation (SES-1148129)., [star][star] We are grateful to Cartel Damage Claims (CDC), Brussels for providing us with the data set. We are further indebted to two anonymous reviewers, Yongmin Chen, Emanuela Ciapanna, Nicolas de Roos, Jo Seldeslachts, Otto Toivanen, Christine Zulehner as well as the audiences at the 2015 International Industrial Organization Conference, the Microeconometrics and Public Policy Seminar at University of Sydney and the Faculty Seminar at the Catholic University of Leuven for valuable comments and suggestions on earlier versions of the paper. We would also like to thank Bastian Sattelberger, Cung Truong Hoang and Max Wei for excellent research assistance. Huschelrath was involved in a study on cartel damage estimations which was financially supported by CDC. The study is published in German (Huschelrath, K., N. Leheyda, K. Muller, T. Veith (2012), Schadensermittlung und Schadensersatz bei Hardcore-Kartellen: Okonomische Methoden und rechtlicher Rahmen, Baden-Baden). The present paper is the result of a separate research project.

To link to full-text access for this article, visit this link: http://dx.doi.org/10.1016/j.ijindorg.2015.06.004 Byline: Joshua S. Gans Abstract: This paper examines an environment where original content can be remixed by follow-on creators. The modelling innovation is to assume that original content creators and remixers can negotiate over the 'amount' of original content that is used by the follow-on creator in the shadow of various rights regimes. The following results are demonstrated. First, traditional copyright protection where the original content creators can block any use of their content provides more incentives for content creators and also more remixing than no copyright protection. This is because that regime incentivises original content creators to consider the value of remixing and permit it in negotiations. Second, fair use can improve on traditional copyright protection in some instances by mitigating potential hold-up of follow-on creators by original content providers. Finally, remix rights can significantly avoid the need for any negotiations over use by granting those rights to follow-on innovators in return for a set compensation regime. However, while these rights are sometimes optimal when the returns to remixing are relatively low, standard copyright protection can afford more opportunities to engage in remixing when remixing returns are relatively high. Article History: Received 23 December 2014; Revised 8 June 2015; Accepted 20 June 2015 Article Note: (footnote) [star] I thank Ariel Katz, Shane Greenstein, Avi Goldfarb, an anonymous referee, and seminar participants at the University of Toronto Law School for helpful comments. The latest version of this paper is available at research.joshuagans.com.

To link to full-text access for this article, visit this link: http://dx.doi.org/10.1016/j.ijindorg.2015.06.001 Byline: Didier Laussel, Ngo Van Long, Joana Resende Abstract: This paper investigates the expansion of the network of a monopolist firm that produces a durable good and is also involved in the corresponding aftermarket. We characterize the Markov Perfect Equilibrium of the continuous time dynamic game played by the monopolist and the forward-looking consumers, under the assumption that consumers benefit from the subsequent expansion of the network. The paper contributes to the theoretical discussion on the validity of the Coase conjecture, analyzing whether Coase's prediction that the monopolist serves the market in a 'twinkling of an eye' remains valid in our setup. We conclude that the equilibrium network development may actually be gradual, contradicting Coase's conjecture. We find that a necessary condition for such a result is the existence of aftermarket network effects that accrue (at least partly) to the monopolist firm. Article History: Received 22 June 2013; Revised 27 May 2015; Accepted 2 June 2015

To link to full-text access for this article, visit this link: http://dx.doi.org/10.1016/j.ijindorg.2015.05.003 Byline: Aditya Bhattacharjea, Uday Bhanu Sinha Abstract: We develop a supergame model of collusion between price-setting oligopolists located in different markets separated by trade costs. The firms produce a homogeneous good and sustain collusion based on territorial allocation of markets. We first show, in a much more general framework than some earlier literature, that a reduction in trade costs can paradoxically increase the sustainability of collusion. Then we prove a new paradox in which the scope for collusion may be enhanced by an increase in the number of firms. The paper thus highlights several hitherto unknown theoretical implications of collusion under price competition. Article History: Received 29 March 2014; Revised 7 May 2015; Accepted 11 May 2015 Article Note: (footnote) [star] We are grateful to two anonymous referees of this journal and its co-editor Kate Ho for very helpful comments and suggestions. This paper is adapted from a working paper (Bhattacharjea and Sinha, 2012). We are grateful to Abhijit Banerji and Sabyasachi Kar for useful discussion at different stages of writing this paper. All remaining errors are ours.

Keywords Security bid; Auction; Information acquisition; Investment; Security design; Oil and gas lease auctions Highlights * Securities auctions with post-auction information acquisitions and project development. * Steep securities reduce winning bidders' incentives to acquire productive information. * Optimal securities auctions minimize distortions in investment and information acquisitions. * Debt auction is optimal when bidders are protected by limited liability. Abstract This paper analyzes securities auctions in which bidders have an option to acquire information after winning the right to develop a project. The payment consists of an up-front cash bid and a contingent security bid, which distorts investment and information acquisition relative to the first-best. We order securities in terms of their steepness: the payment of a steeper security is more sensitive to high project values. The agent's incentives to acquire information that prevents either cost overruns (Type I errors) or false cancellations (Type II errors) decrease with the steepness of securities. The optimal limited-liability securities auction involves bidding debt that minimizes the distortions in the agent's incentives to acquire performance-enhancing information. The model delivers implications on the practices commonly observed in oil lease auctions. Author Affiliation: (a) Department of Quantitative Finance, National Tsing Hua University, Taiwan (b) Department of Economics, National Tsing Hua University, Taiwan * Corresponding author. Article History: Received 28 May 2021; Revised 31 January 2023; Accepted 2 February 2023 (footnote)[white star] We are grateful to the editor (Giacomo Calzolari) and two anonymous referees for help comments. We also benefit from the discussions with Kim-Sau Chung, Zhiguo He, Buqu Gao, Shingo Ishiguro (discussant), Yunan Li, Hsuan-Chih Lin (discussant), Tingjun Liu, Melody Lo, Alice Su, Wing Suen, and conference participants at Japan-Taiwan-Hong Kong Contract Theory Conference and Taiwan Economics Research. Ariel Lei provided excellent research assistance. Byline: Tak-Yuen Wong [etywong110@gmail.com] (*,a), Ho-Po Crystal Wong (b)