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  5. Product Differentiation and Oligopoly: A Network Approach

American Economic Review

ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)

Product Differentiation and Oligopoly: A Network Approach

  • Bruno Pellegrino
American Economic Review (Forthcoming)

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 at least three times as large as profits, I 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 USA between 1995 and 2021.

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