Product Differentiation and Oligopoly: A Network Approach

Bruno Pellegrino

American Economic Review, 2025, vol. 115, issue 4, 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.

JEL-codes: D21 D43 D85 G34 L13 L14 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1257/aer.20201425

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