Federico Diez, Jiayue Fan, Carolina Villegas-Sanchez, 02 August 2019

Studies of the evolution of market power since 2000 have focused mostly on publicly traded US firms. This column introduces a new global study that incorporates private firms, and decomposes the aggregate effect into intensive and extensive margins. It shows the increase in markup is broad-based across countries and sectors, but is driven by a small number of firms. The markup increase is mainly explained by increases in the average markup of incumbents, and reallocation effects towards new firms that gain market share from incumbents. 

Maarten de Ridder, 02 July 2019

The slowdown of productivity growth, the decline of business dynamism, and the rise of market power and firm concentration are three trends that have attracted a lot of attention in academic and policy debates. This column points to the rising use of intangible inputs as a unified explanation for these trends. Firms with high intangible adoption disrupt sectors and initially boost productivity, but negatively affect the entry of new firms and suppress the effect of R&D on innovation and growth in the long run.

Michael Kremer, Christopher Snyder, Albert Chen, 26 March 2019

The deadweight loss from a monopolist’s not producing at all can be much greater than from charging too high a price. The column argues that the potential for this sort of deadweight loss is greatest when the market demand curve has a particular (Zipf) shape. Calibrations based on the world distribution of income generate this shape, with disturbing consequences for potential deadweight loss in global markets.

Will Abel, Silvana Tenreyro, Gregory Thwaites, 23 January 2019

Concentrated labour markets, in which workers have few choices of potential employers, reduce the wages of workers when they are not covered by collective wage bargaining agreements. But these types of agreements have become much less common in the past 20 years. This column uses employee-level data to show that even though UK labour markets have not on average become much more concentrated, concentration – which varies a great deal across regions and industries – is having a bigger impact on wages than before.

Meghana Ayyagari, Asli Demirgüç-Kunt, Vojislav Maksimovic, 08 October 2018

The emergence of ‘superstar’ firms that achieve vastly better returns on invested capital have led to concern that some sectors are too concentrated. The column argues that this difference in returns can be accounted for by better measurement of intangible capital. These firms may not be exercising market power in ways that harm consumers in the short run, but policymakers should ensure that markets remain contestable.

Cristina Caffarra, Oliver Latham, Matthew Bennett, Federico Etro, Pierre Régibeau, Robert Stillman, 27 July 2018

The European Commission’s decision to fine Google €4.34 billion for abuse of market power has been accused of being politically motivated and of risking higher prices for consumers. This column argues that the Commission’s decision has economic merit and falls within established legal precedent. As mobile search is the key gateway to access information, we should be concerned about dominance in this market for its potential distortionary effects on innovation and consumer outcomes across multiple other markets.

Andrea Prat, Tommaso Valletti, 26 July 2018

Competition authorities struggle to evaluate the effect of mergers between social media platforms when prices are zero and standard tools like cross-price elasticities are of little use. This column argues that social media platforms are 'attention brokers' that help incumbents maintain market power in other industries by restricting producers’ targeted access to individual consumers. User overlap is more important as a predictor of competition problems than traditional aggregate usage shares. 

Arindrajit Dube, Jeff Jacobs, Suresh Naidu, Siddharth Suri, 21 May 2018

Monopsony refers to the market power that employers wield in labour markets. This column explores monopsony power in online labour markets, using observational and experimental data from Amazon’s Mechanical Turk platform. Both datasets suggest an employer labour supply elasticity of close to 0.1, suggesting that a 10% reduction in wages would only see a 1% drop in willing labour. This points to substantial employer market power in a supposedly frictionless setting. 

Dan Andrews, Peter Gal, William Witheridge, 11 May 2018

Low inflation at the same time as rising global competition has led to a debate on the importance of globalisation for domestic inflation. This column suggests that greater participation in global value chains has placed downward pressure on inflation. The current higher level of global value chain integration may also dampen inflation by accentuating the impact of global economic slack on domestic inflation. There is a risk that stalling globalisation since the crisis, coupled with stronger aggregate demand and declining market contestability, could lead to inflationary pressures in the medium term.

Ross Levine, Chen Lin, Zigan Wang, 26 June 2017

While the causes and consequences of mergers have received a lot of scholarly attention, geographic factors have thus far been neglected. Using US data, this column argues that greater geographic overlap of the subsidiaries and branches of two bank holding companies increases the likelihood of the two merging, and also boosts the cumulative abnormal returns of the acquirer, target, and merged companies. It also discusses how network overlap can affect synergies and value creation.

Joshua Gans, 11 June 2014

Netflix recently agreed to pay Comcast for faster access to Comcast’s customers, intensifying the debate over ‘net neutrality’ – the principle that internet service providers should treat all data equally. This column argues that without net neutrality regulation, ISPs can capture the benefits of higher-quality content, thereby discouraging innovation from content providers. To be effective, net-neutrality regulation must prevent content-based price discrimination on both sides of the market.

Bruce Blonigen, 28 April 2008

Though policymakers show great concern for market power when discussing antitrust policy, they neglect it when designing trade policies. This column summarises recent empirical research showing that some trade barriers impose significant costs on consumers by substantially raising the market power of domestic firms.

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