Pub Date : 2026-01-27DOI: 10.1016/j.ijindorg.2026.103262
Luca Sandrini , Robert Somogyi
We build a model of the news market where advertisers allocate their ads between a social media platform and a news website. Our objective is to evaluate policy interventions aimed at fostering news creation by transferring revenues from social media to news websites (already introduced in Australia, Canada, and Indonesia). We show that social media may voluntarily contribute to news development, but only suboptimally. Beyond a certain level of state-mandated transfer, the social media platform can credibly threaten to remove news content. We demonstrate that the improvement of zero-click searches may have an adverse equilibrium effect on consumers. Finally, we provide some guidance on how to design a policy that improves welfare by promoting news creation.
{"title":"News media bargaining codes","authors":"Luca Sandrini , Robert Somogyi","doi":"10.1016/j.ijindorg.2026.103262","DOIUrl":"10.1016/j.ijindorg.2026.103262","url":null,"abstract":"<div><div>We build a model of the news market where advertisers allocate their ads between a social media platform and a news website. Our objective is to evaluate policy interventions aimed at fostering news creation by transferring revenues from social media to news websites (already introduced in Australia, Canada, and Indonesia). We show that social media may voluntarily contribute to news development, but only suboptimally. Beyond a certain level of state-mandated transfer, the social media platform can credibly threaten to remove news content. We demonstrate that the improvement of zero-click searches may have an adverse equilibrium effect on consumers. Finally, we provide some guidance on how to design a policy that improves welfare by promoting news creation.</div></div>","PeriodicalId":48127,"journal":{"name":"International Journal of Industrial Organization","volume":"105 ","pages":"Article 103262"},"PeriodicalIF":1.4,"publicationDate":"2026-01-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"146079218","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2026-01-25DOI: 10.1016/j.ijindorg.2026.103264
Jan De Loecker , Catherine Fuss , Nathan Quiller-Doust , Leonard Treuren
We separately observe variable input expenditure and expenditure on fixed inputs and overhead in novel firm-level data covering the Belgian manufacturing sector over the last decades. This permits a deeper investigation of two potential drivers of the globally observed widening gap between firms’ revenue and variable input expenditure: technology and market power. Across the board, cost structures have become less reliant on variable input expenditure over time, while expenditure on fixed inputs and overhead costs have increased in prominence. We relate these changes in firms’ cost structures to performance measures and document that markups and gross profit ratios increase substantially as the role of variable costs in production diminishes. Profit ratios net of fixed input expenditure also increase, but by substantially less than gross profit ratios. Our results suggest that technological change can explain a considerable portion of the widening gap between revenue and variable input expenditure, but that markups increase by somewhat more than necessary to break even. Moreover, this phenomenon operates remarkably similarly across different firms and industries.
{"title":"The anatomy of costs and firm performance: Evidence from Belgium","authors":"Jan De Loecker , Catherine Fuss , Nathan Quiller-Doust , Leonard Treuren","doi":"10.1016/j.ijindorg.2026.103264","DOIUrl":"10.1016/j.ijindorg.2026.103264","url":null,"abstract":"<div><div>We separately observe variable input expenditure and expenditure on fixed inputs and overhead in novel firm-level data covering the Belgian manufacturing sector over the last decades. This permits a deeper investigation of two potential drivers of the globally observed widening gap between firms’ revenue and variable input expenditure: <em>technology</em> and <em>market power</em>. Across the board, cost structures have become less reliant on variable input expenditure over time, while expenditure on fixed inputs and overhead costs have increased in prominence. We relate these changes in firms’ cost structures to performance measures and document that markups and gross profit ratios increase substantially as the role of variable costs in production diminishes. Profit ratios net of fixed input expenditure also increase, but by substantially less than gross profit ratios. Our results suggest that technological change can explain a considerable portion of the widening gap between revenue and variable input expenditure, but that markups increase by somewhat more than necessary to break even. Moreover, this phenomenon operates remarkably similarly across different firms and industries.</div></div>","PeriodicalId":48127,"journal":{"name":"International Journal of Industrial Organization","volume":"105 ","pages":"Article 103264"},"PeriodicalIF":1.4,"publicationDate":"2026-01-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"146079219","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2026-01-24DOI: 10.1016/j.ijindorg.2026.103263
Ivan Kirov , Paolo Mengano , James Traina
When output prices are unobserved, standard production-based markup estimators are biased and inconsistent because they are unable to distinguish whether firms have higher revenues due to higher prices or higher quantities. Building on work designed for competitive environments, we propose a novel method that solves this problem using only revenue data. We flexibly model markups as a specified function of observables and fixed effects, supporting a broad class of variable-markup frameworks. We explicitly adopt a Markovian revenue productivity process, a commonly implicit assumption in the literature. Our suggested two-step approach is simple in concept and implementation, requiring only common regression techniques.
{"title":"Measuring markups with revenue data","authors":"Ivan Kirov , Paolo Mengano , James Traina","doi":"10.1016/j.ijindorg.2026.103263","DOIUrl":"10.1016/j.ijindorg.2026.103263","url":null,"abstract":"<div><div>When output prices are unobserved, standard production-based markup estimators are biased and inconsistent because they are unable to distinguish whether firms have higher revenues due to higher prices or higher quantities. Building on work designed for competitive environments, we propose a novel method that solves this problem using only revenue data. We flexibly model markups as a specified function of observables and fixed effects, supporting a broad class of variable-markup frameworks. We explicitly adopt a Markovian revenue productivity process, a commonly implicit assumption in the literature. Our suggested two-step approach is simple in concept and implementation, requiring only common regression techniques.</div></div>","PeriodicalId":48127,"journal":{"name":"International Journal of Industrial Organization","volume":"105 ","pages":"Article 103263"},"PeriodicalIF":1.4,"publicationDate":"2026-01-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"146079217","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2026-01-22DOI: 10.1016/j.ijindorg.2026.103261
Christian Rojas , Edward Jaenicke , Elina T. Page
In recent years, increased attention has been paid to how changes in product size-especially downsizing-affect measured inflation. Despite anecdotal examples and widespread media coverage, there is limited empirical evidence on the broader role of package size reductions in inflation measurement. This paper quantifies how changes in package size among packaged food products influence measured inflation and investigates the mechanisms behind these size changes. Using U.S. retail scanner data from 2012 to 2019, we document that the average package size (measured in grams per UPC) declined by 14.6% over the period. We show that these size reductions are not the result of downsizing in the conventional sense-i.e., shrinking of the same product-but are instead driven almost entirely by product turnover: newly introduced products tend to be smaller than the products they replace. To isolate the impact of package size on food inflation, we compute two hedonic price indices: one that adjusts for size and other attributes and a counterpart that omits size. We find that when size is omitted from the hedonic model, annual inflation is understated each year. As a result, over the entire period, accumulated inflation would be 3.7 percentage points lower if size changes were not accounted for. Finally, we explore heterogeneity in size reductions. We find they are more pronounced among products purchased by high-income households, in states without unit pricing regulations, in sugary products, and in non-bulky goods. This suggests that product shrinkage may result from consumer inattention and market segmentation strategies. We benchmark our findings against official inflation statistics and methodological practices to highlight key similarities and differences.
{"title":"How package size changes affect food inflation: evidence from scanner data","authors":"Christian Rojas , Edward Jaenicke , Elina T. Page","doi":"10.1016/j.ijindorg.2026.103261","DOIUrl":"10.1016/j.ijindorg.2026.103261","url":null,"abstract":"<div><div>In recent years, increased attention has been paid to how changes in product size-especially downsizing-affect measured inflation. Despite anecdotal examples and widespread media coverage, there is limited empirical evidence on the broader role of package size reductions in inflation measurement. This paper quantifies how changes in package size among packaged food products influence measured inflation and investigates the mechanisms behind these size changes. Using U.S. retail scanner data from 2012 to 2019, we document that the average package size (measured in grams per UPC) declined by 14.6% over the period. We show that these size reductions are not the result of downsizing in the conventional sense-i.e., shrinking of the same product-but are instead driven almost entirely by product turnover: newly introduced products tend to be smaller than the products they replace. To isolate the impact of package size on food inflation, we compute two hedonic price indices: one that adjusts for size and other attributes and a counterpart that omits size. We find that when size is omitted from the hedonic model, annual inflation is understated each year. As a result, over the entire period, accumulated inflation would be 3.7 percentage points lower if size changes were not accounted for. Finally, we explore heterogeneity in size reductions. We find they are more pronounced among products purchased by high-income households, in states without unit pricing regulations, in sugary products, and in non-bulky goods. This suggests that product shrinkage may result from consumer inattention and market segmentation strategies. We benchmark our findings against official inflation statistics and methodological practices to highlight key similarities and differences.</div></div>","PeriodicalId":48127,"journal":{"name":"International Journal of Industrial Organization","volume":"105 ","pages":"Article 103261"},"PeriodicalIF":1.4,"publicationDate":"2026-01-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"146079220","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2026-01-19DOI: 10.1016/j.ijindorg.2026.103258
Carlos Daniel Santos
We document that the kurtosis of firm growth rates increases with firm size, indicating that even the largest firms are susceptible to significant, concentrated risks. To account for these cross-sectional characteristics, we develop a model where aggregate fluctuations are driven by customer concentration. We show that shocks are amplified only when large firms also have highly concentrated customer bases. This mechanism accounts for two stylized facts: the higher volatility of small firms and the heavier-tailed growth distributions of large firms. Customer concentration limits diversification and increases tail risks. Our findings suggest that understanding macroeconomic risk requires considering not just firm size, but also the concentration of their sales.
{"title":"The tails of firm growth, granularity, and business cycles","authors":"Carlos Daniel Santos","doi":"10.1016/j.ijindorg.2026.103258","DOIUrl":"10.1016/j.ijindorg.2026.103258","url":null,"abstract":"<div><div>We document that the kurtosis of firm growth rates increases with firm size, indicating that even the largest firms are susceptible to significant, concentrated risks. To account for these cross-sectional characteristics, we develop a model where aggregate fluctuations are driven by customer concentration. We show that shocks are amplified only when large firms also have highly concentrated customer bases. This mechanism accounts for two stylized facts: the higher volatility of small firms and the heavier-tailed growth distributions of large firms. Customer concentration limits diversification and increases tail risks. Our findings suggest that understanding macroeconomic risk requires considering not just firm size, but also the concentration of their sales.</div></div>","PeriodicalId":48127,"journal":{"name":"International Journal of Industrial Organization","volume":"105 ","pages":"Article 103258"},"PeriodicalIF":1.4,"publicationDate":"2026-01-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"146024412","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2026-01-18DOI: 10.1016/j.ijindorg.2026.103259
Tore Ellingsen , Richard Friberg , John Hassler
We study optimal price setting by a monopolist in an infinite horizon model with stochastic costs, moderate inflation, and costly price adjustment. For realistic parameters, chosen to generate observed frequencies of price changes, the model can account for several aggregate regularities. In particular, price reductions are larger but less frequent than price increases, and prices respond considerably faster to cost increases than to cost decreases. The latter asymmetry is more pronounced when input prices are less volatile, as documented by Pelzman (2000).
{"title":"Menu costs and asymmetric price adjustment","authors":"Tore Ellingsen , Richard Friberg , John Hassler","doi":"10.1016/j.ijindorg.2026.103259","DOIUrl":"10.1016/j.ijindorg.2026.103259","url":null,"abstract":"<div><div>We study optimal price setting by a monopolist in an infinite horizon model with stochastic costs, moderate inflation, and costly price adjustment. For realistic parameters, chosen to generate observed frequencies of price changes, the model can account for several aggregate regularities. In particular, price reductions are larger but less frequent than price increases, and prices respond considerably faster to cost increases than to cost decreases. The latter asymmetry is more pronounced when input prices are less volatile, as documented by Pelzman (2000).</div></div>","PeriodicalId":48127,"journal":{"name":"International Journal of Industrial Organization","volume":"105 ","pages":"Article 103259"},"PeriodicalIF":1.4,"publicationDate":"2026-01-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"146024407","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2026-01-18DOI: 10.1016/j.ijindorg.2026.103257
Christopher Conlon
A popular narrative has attributed the post-COVID rise in inflation to a rise in corporate profits. The literature in industrial organization offers three reasons for price increases: greater demand, greater marginal costs, and softening of competition (conduct). I argue that only sensible interpretation of the “Profits-Inflation” hypothesis is that a change in firm conduct was the primary cause of inflation. However, I also find that most of the evidence cited in favor of the “Profits-Inflation” hypothesis, such as elevated profit margins or capital share of income, is unable to distinguish between increased demand and a change in the nature of competition.
{"title":"Did profits cause inflation?","authors":"Christopher Conlon","doi":"10.1016/j.ijindorg.2026.103257","DOIUrl":"10.1016/j.ijindorg.2026.103257","url":null,"abstract":"<div><div>A popular narrative has attributed the post-COVID rise in inflation to a rise in corporate profits. The literature in industrial organization offers three reasons for price increases: greater demand, greater marginal costs, and softening of competition (conduct). I argue that only sensible interpretation of the “Profits-Inflation” hypothesis is that a change in firm conduct was the primary cause of inflation. However, I also find that most of the evidence cited in favor of the “Profits-Inflation” hypothesis, such as elevated profit margins or capital share of income, is unable to distinguish between increased demand and a change in the nature of competition.</div></div>","PeriodicalId":48127,"journal":{"name":"International Journal of Industrial Organization","volume":"105 ","pages":"Article 103257"},"PeriodicalIF":1.4,"publicationDate":"2026-01-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"146024408","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2026-01-14DOI: 10.1016/j.ijindorg.2026.103256
Yiran Hao , Yu Hao
We study how BYD sustained stable price-cost margins of 19–23 % despite losing 74.6 percentage points of market share in Xi’an between 2014 and 2020—a pattern that diverges from standard IO theory predicting entry compresses both share and markups. Using transaction-level microdata, we estimate a structural model and develop a sequential counterfactual decomposition isolating seven drivers of market-share change. We find three core results. First, markup resilience stems from cost leadership: BYD’s vertically integrated battery production enabled aggressive price competition while maintaining profitability. Second, unobserved consumer preference shifts explain 47.9 % of the decline, vastly exceeding subsidy phase-outs (6.5 %). Third, the modest subsidy effect indicates successful infant-industry transition: by policy phase-out, BYD’s dependence had substantially waned. Our findings demonstrate that cost efficiency can decouple market share from profitability in technology-intensive industries.
{"title":"The dynamics of competition in the Chinese electric vehicle market: Insights from BYD’s market evolution","authors":"Yiran Hao , Yu Hao","doi":"10.1016/j.ijindorg.2026.103256","DOIUrl":"10.1016/j.ijindorg.2026.103256","url":null,"abstract":"<div><div>We study how BYD sustained stable price-cost margins of 19–23 % despite losing 74.6 percentage points of market share in Xi’an between 2014 and 2020—a pattern that diverges from standard IO theory predicting entry compresses both share and markups. Using transaction-level microdata, we estimate a structural model and develop a sequential counterfactual decomposition isolating seven drivers of market-share change. We find three core results. First, markup resilience stems from cost leadership: BYD’s vertically integrated battery production enabled aggressive price competition while maintaining profitability. Second, unobserved consumer preference shifts explain 47.9 % of the decline, vastly exceeding subsidy phase-outs (6.5 %). Third, the modest subsidy effect indicates successful infant-industry transition: by policy phase-out, BYD’s dependence had substantially waned. Our findings demonstrate that cost efficiency can decouple market share from profitability in technology-intensive industries.</div></div>","PeriodicalId":48127,"journal":{"name":"International Journal of Industrial Organization","volume":"105 ","pages":"Article 103256"},"PeriodicalIF":1.4,"publicationDate":"2026-01-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145980411","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2026-01-08DOI: 10.1016/j.ijindorg.2026.103248
Gerard Llobet , Álvaro Parra , Javier Suarez
Using an industry-dynamics innovation model, we explore the interplay between patent screening and patent enforcement. When patent enforcement is imperfect, genuine sequential innovators may see their market access blocked by potentially abusive infringement claims from prior innovators. In this case, the patent’s office leniency towards obvious innovators may contribute to reduce the presence of blocking incumbent monopolists, encouraging innovation and improving welfare. This result is robust across multiple extensions of the baseline framework.
{"title":"Optimal patent screening with imperfect enforcement","authors":"Gerard Llobet , Álvaro Parra , Javier Suarez","doi":"10.1016/j.ijindorg.2026.103248","DOIUrl":"10.1016/j.ijindorg.2026.103248","url":null,"abstract":"<div><div>Using an industry-dynamics innovation model, we explore the interplay between patent screening and patent enforcement. When patent enforcement is imperfect, genuine sequential innovators may see their market access blocked by potentially abusive infringement claims from prior innovators. In this case, the patent’s office leniency towards obvious innovators may contribute to reduce the presence of blocking incumbent monopolists, encouraging innovation and improving welfare. This result is robust across multiple extensions of the baseline framework.</div></div>","PeriodicalId":48127,"journal":{"name":"International Journal of Industrial Organization","volume":"105 ","pages":"Article 103248"},"PeriodicalIF":1.4,"publicationDate":"2026-01-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"146079221","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2026-01-05DOI: 10.1016/j.ijindorg.2025.103246
Apoorva Gupta
Can being innovative help firms to shield themselves from the disruptive effects of a recession? Using data for Spanish manufacturing firms, this paper finds that in industries hit severely by the Great Recession, firms with prior investment in R&D performed relatively better than non-innovative firms during the recession. The resilience of innovative firms is explained by their ability to promptly introduce product innovations. These firms do not seem to engage in process innovation to lower costs or improve production efficiency to adapt to a negative demand shock. Consequently, being innovative matters most for resilience in industries with a high scope for product differentiation. Matching innovative and non-innovative firms within industry groups along several firm characteristics and their pre-recession growth trajectory, and controlling for firm financing constraints, product-market scope, differences in labour adjustment costs or management quality supports the findings. The paper, thus, provides evidence for how investment in R&D today helps firms to cope with a dramatically changed external environment.
{"title":"R&D and firm resilience during bad times","authors":"Apoorva Gupta","doi":"10.1016/j.ijindorg.2025.103246","DOIUrl":"10.1016/j.ijindorg.2025.103246","url":null,"abstract":"<div><div>Can being innovative help firms to shield themselves from the disruptive effects of a recession? Using data for Spanish manufacturing firms, this paper finds that in industries hit severely by the Great Recession, firms with prior investment in R&D performed relatively better than non-innovative firms during the recession. The resilience of innovative firms is explained by their ability to promptly introduce product innovations. These firms do not seem to engage in process innovation to lower costs or improve production efficiency to adapt to a negative demand shock. Consequently, being innovative matters most for resilience in industries with a high scope for product differentiation. Matching innovative and non-innovative firms within industry groups along several firm characteristics and their pre-recession growth trajectory, and controlling for firm financing constraints, product-market scope, differences in labour adjustment costs or management quality supports the findings. The paper, thus, provides evidence for how investment in R&D today helps firms to cope with a dramatically changed external environment.</div></div>","PeriodicalId":48127,"journal":{"name":"International Journal of Industrial Organization","volume":"105 ","pages":"Article 103246"},"PeriodicalIF":1.4,"publicationDate":"2026-01-05","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145915370","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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