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Not all green technologies are equally beneficial for society. This paper examines whether market-driven innovation in green industries follows the socially optimal technological path when firms face competing options with different cost structures, and considers policies that can narrow the gap. I estimate a dynamic model of Chinese EV battery producers choosing how much to innovate along two competing paths: Lithium-Ion–Ferro–Phosphate (LFP) and Nickel–Cobalt–Manganese (NCM). The analysis shows that a social planner would place greater investment in LFP, which involves higher innovation costs but delivers lower marginal battery costs. I trace this divergence to key forces like differences in cost structure, firms’ market power, and spillovers and environmental benefits that firms fail to internalize. Finally, I demonstrate how R&D subsidies could help correct these distortions and shift innovation toward the socially preferred path.

Traditional measures of market concentration used when screening for anticom- petitive mergers, or applying structural presumptions, such as the market-level HHI, depend on the concentration of sales among non-merging rivals, as well as the shares of the merging parties. While the size of cost efficiencies needed to offset the market power effects of a merger, assuming static Nash equilibrium play both before and after a merger, depends only on the shares, characteristics and margins of the merging firms (Nocke and Whinston, 2022), we illustrate how, conditional on the shares and margins of the merging firms, rival market structure is often highly correlated with how rivals’ prices and outputs would change in response to changes in the prices or outputs of the parties, which in turn affects the profitability of mergers and the magnitude of any post-merger price and quantity changes when other efficiencies, or no efficiencies, are realized. We show that a simply calculated rival HHI measure is correlated with these changes for both price- and quantity-competition, for a variety of demand systems. We also illustrate how rival market structure can affect the incentives of a merged firm to engage in strategic behavior that may obscure the size of its realized efficiencies.

This paper examines the joint welfare effects of monopoly and monopsony power in the U.S. economy, where firms often exert market power in both product and factor markets. We develop a general equilibrium framework that captures the network of firm interactions through supply chains, product competition, and labor markets. Using data on publicly traded firms, we estimate that combined market power reduced total surplus by 5.7% in 2015. Importantly, monopoly and monopsony effects are sub-additive. Furthermore, we find that accounting for monopsony in factor markets not only exacerbates the welfare damages of hypothetical mergers but also renders Cournot competition welfare-superior to Bertrand, highlighting the nuanced interplay of dual market power.

We analyze a novel transaction-level pandemic-related government spending of $1.27 trillion and document that companies receiving more government funding experienced faster recovery in labor demand— a one percent increase in the award amount (0.48 million) led to 0.15% more job postings relative to the 2019 average. To gauge the magnitude, we find that a job posting response of one percent additional COVID spending is equivalent to a 1.55 percent revenue increase. New job creation mainly concentrates on transportation and construction industries and restores the occupation composition toward pre-COVID labor demand. However, further exploring the heterogeneity of job creation, we find that firms that receive more funding require only slightly lower education, and no evidence shows a stronger demand for on-site jobs or occupations with more in-person interaction. Our findings are consistent with the view that firms use government fiscal expenditure to insure themselves against the pandemic shocks and maintain standard employment structures, rather than disproportionately hiring necessary workers for COVID-19.

Using novel granular data covering price and booking information of flights in China, we test the theory that predicts how the competition will affect price dispersion. We complement past price dispersion studies by making two contributions: First, we accurately identify and isolate three types of price dispersion originating from either third-degree price discrimination or peak-lead pricing. Second, we test the relative contribution of industry-elasticity and cross-price elasticity to price dispersion. Results suggest that both cross-price elasticity and industry-elasticity are crucial in determining the relationship between price dispersion and competition. Consistent with Borenstein and Rose (1994), we find that more competition will increase both intertemporal price dispersion and across-date price dispersion but not the across-departure-time price dispersion. Buying tickets earlier and buying flights on non-popular dates benefit more from competition.

We consider models of repeated oligopoly competition where firms set quantities and have private information about their serially correlated marginal costs. This structure creates strategic incentives for firms to signal information about their costs using output choices. We show that effects on outputs, production efficiency and welfare can be much larger than the effects of incomplete information in one-shot models, and that these differences persist even in oligopolies with large numbers of firms. In contrast, in price-setting games, we always find smaller effects in less concentrated markets. We illustrate these effects in an application by extending Aryal and Zincenko (2024) analysis of the world crude oil market, showing that allowing signaling changes conclusions and counterfactuals significantly.

The practice of overselling, while contentious, has remained a legal strategy in the airline industry for a long time. On one hand, overselling exposes passengers to the risk of being involuntarily bumped from their flights. On the other hand, overselling enables airlines to keep efficient operations and maintain low fares. This paper aims to study the welfare implications of overselling, examine the potential effects of a ban on this practice and explore alternative remedies. We start with a reduced-form analysis, centering on the public relations debacle involving United Airlines (UA) in 2017. The results highlight a substantial increase in the lower end of UA's price distribution and a corresponding decrease in its load factor following a reduction in overselling. Subsequently, we construct a novel structural model that incorporates consumer considerations of bumping risk in their decision-making process, while carriers strategically leverage no-shows to facilitate overselling. Finally, we contemplate three counterfactual scenarios: the prohibition of overselling, heightened public awareness, and increased bumping compensation.

Using detailed data on firm-to-firm transactions and firm-to-firm shareholder network encompassing nearly 8 million firms, we enhance the conventional industry-level definition of vertical merger by introducing a novel definition at the product level. Contrary to theoretical expectations but aligning with findings by Hortacsu and Syverson (2014) and Magyari (2017), approximately one-third of vertically integrated entities exhibit no transactions both before and after integration. Among these non-transactional merging entities, most of them share common inputs and suppliers and they experienced a significant spike in input prices prior to the merger but a stable price after the merger, which implies that the merger motivation could be coping with the increasing cost pressure from the common input.