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Technologies that are equally green can yield very different gains in social welfare. I examine whether market-driven innovation in green industries follows the socially optimal technological path when firms face competing options with distinct cost structures, and explore policies that can correct potential inefficiencies in path choices. I estimate a dynamic structural model of Chinese electric vehicle (EV) battery suppliers 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 undertake about four times as much innovation as the market in LFP, which involves higher innovation sunk costs but delivers lower marginal costs in production. By contrast, the market innovates about twice as much as the social plan- ner in NCM, which has the opposite cost structure. I attribute this divergence primarily to vertical separation between battery suppliers and EV makers, competition between EVs, and limited demand for EVs in early years, rather than to innovation spillovers or environmental benefits that firms fail to internalize. Finally, I demonstrate how R&D subsidies could help correct the path choice inefficiency 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 $1.56 trillion in pandemic-related government spending and find that companies receiving more funds experienced faster labor demand recovery. A 1% increase in award amount ($0.48 million) led to a 0.15% increase in job postings relative to the 2019 average. Job creation mainly concentrated in the transportation and construction industries, restoring occupation composition toward pre-COVID levels. However, further analysis shows that firms receiving more funding did not significantly lower their education requirements and did not increase demand for on-site jobs or positions requiring in-person interaction. Our findings suggest that firms used government funds to stabilize their existing employment structures rather than prioritizing the hiring of essential workers.

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.

The location of work in the US changed massively during the COVID-19 pandemic crisis as firms shifted jobs from their business premises to remote locations, primarily workers’ homes, producing a jump in the Work-From-Home (WFH) share of wage & salary (W&S) employment from 6% in February 2020 to 43% in May 2020. When the pandemic receded and firms reopened offices, the WFH share of jobs fell gradually but remained three times its pre-pandemic level through the mid-2020s. This paper use internet job postings – announcements of positions firms seek to fill – to analyze the pandemic increase in demand for remote work in the pandemic and ensuing reduction over time. We develop a cost-effective algorithm to estimate the likelihood that a job posting is amenable to WFH from its text and use this estimated WFH share of postings as our measure of the location of employer demand for labor. Our analysis finds that: the WFH share of postings varies similarly but more volatilely than the WFH share of employment; varies among occupations and industries depending on their technological “tele-portability”. The WFH share also varies among firms seeking workers in the same occupation in the same industry, which suggests an important role for the economic performance of the firm and managerial policies.