Product Differentiation and Oligopoly: A Network Approach
American Economic Review · 2025 · Volume 115 · Issue 4
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.
Keywords
Firm Behavior: Theory, Market Structure, Pricing, and Design: Oligopoly and Other Forms of Market Imperfection, Network Formation and Analysis: Theory, Mergers, Acquisitions, Restructuring, Voting, Proxy Contests, Corporate Governance, Oligopoly and Other Imperfect Markets, Transactional Relationships, Contracts and Reputation, Networks
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