American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Product Differentiation and Oligopoly: A Network Approach
American Economic Review
vol. 115,
no. 4, April 2025
(pp. 1170–1225)
Abstract
I present a new theory of oligopoly and markups in general equilibrium, based on an innovative, scalable hedonic demand system, which I take to the data for the universe of US public firms. In my model, firms compete in a network of product market rivalries that emerge endogenously out of the characteristics of the products they supply. I estimate that consumer surplus is almost three times as large as profits; decompose firm-level markups into metrics of quality-adjusted productivity and market centrality; and analyze the extent, evolution, and drivers of monopoly power in the United States between 1995 and 2021.Citation
Pellegrino, Bruno. 2025. "Product Differentiation and Oligopoly: A Network Approach." American Economic Review 115 (4): 1170–1225. DOI: 10.1257/aer.20201425Additional Materials
JEL Classification
- D21 Firm Behavior: Theory
- D43 Market Structure, Pricing, and Design: Oligopoly and Other Forms of Market Imperfection
- D85 Network Formation and Analysis: Theory
- G34 Mergers; Acquisitions; Restructuring; Voting; Proxy Contests; Corporate Governance
- L13 Oligopoly and Other Imperfect Markets
- L14 Transactional Relationships; Contracts and Reputation; Networks