nep-bec New Economics Papers
on Business Economics
Issue of 2012‒03‒14
twenty-one papers chosen by
Christian Calmes
Universite du Quebec en Outaouais

  1. The Formal Sector Wage Premium and Firm Size for Self-employed Workers By Olivier Bargain; Eliane El Badaoui; Prudence Kwenda; Eric Strobl; Frank Walsh
  2. Unionization structures in international oligopoly By Pagel, Beatrice; Wey, Christian
  3. Endogenous Timing in Quality Investments and Price Competition By L. Lambertini; A. Tampieri
  4. The Impact of Integration on Productivity and Welfare Distortions Under Monopolistic Competition By Swati Dhingra; John Morrow
  5. The Declining Average Size of Establishments: Evidence and Explanations By Eleanor J. Choi; James R. Spletzer
  6. Smithian Growth Through Creative Organization By Legros, Patrick; Newman, Andrew F; Proto, Eugenio
  7. "Surfeiting, the appetite may sicken": Entrepreneurship and the happiness of nations By Naudé, Wim; Amoros, José Ernesto; Cristi, Oscar
  8. Does Reducing Spatial Differentiation Increase Product Differentiation? Effects of Zoning on Retail Entry and Format Variety By Sumon Datta; K. Sudhir
  9. Lobbying: Buying and utilizing access By Mayer, Wolfgang; Mujumdar, Sudesh
  10. Firm Profitability: Mean-Reverting or Random-Walk Behavior? By Giorgio Canarella; Stephen M. Miller; Mahmoud M. Nourayi
  11. How responsive are people to changes in their bargaining position? Earned bargaining power and the 50–50 norm By Nejat Anbarci; Nick Feltovich
  12. Disentangling Demand and Supply Shocks in the Crude Oil Market: How to Check Sign Restrictions in Structural VARs By Helmut Lütkepohl; Aleksei Netsunajev
  13. Global Value Chains During the Great Trade Collapse: A Bullwhip Effect? By Carlo Altomonte; Filippo Di Mauro; Gianmarco I. P. Ottaviano; Armando Rungi; Vincent Vicard
  14. Food Safety Regulation and Firm Productivity:Evidence from the French Food Industry By Bontemps, Christophe; Nauges, Céline; Réquillart, Vincent; Simioni, Michel
  15. La performance et le développement économiques à long terme du Québec : Les douze travaux d’hercule-Québec (mis à jour, revus et corrigés – 6e édition) By Marcel Boyer
  16. Attirer et retenir les travailleurs âgés : Le rôle de la flexibilité By Ali Béjaoui
  17. Behind the GATE Experiment: Evidence on Effects of and Rationales for Subsidized Entrepreneurship Training By Karlan, Dean
  18. New firm creation and failure: A matching approach By Gries, Thomas; Jungblut, Stefan; Naudé, Wim
  19. Class Struggle and Economic Flactuations: VAR Analysis of the post-War U.S. Economy By Deepankar Basu; Ying Chen; Jong-seok Oh
  20. The strategic interplay between bundling and merging in complementary markets By A. Mantovani; J. Vandekerckhove
  21. The evolvability of business and the role of antitrust By Ian Wilkinson

  1. By: Olivier Bargain (Aix-Marseille School of Economics); Eliane El Badaoui (EconomiX - University Paris 10); Prudence Kwenda (University College Dublin); Eric Strobl (Ecole Polytechnique Paris); Frank Walsh (University College Dublin)
    Abstract: We develop a model where workers may enter self-employment or search for jobs as employees and where there is heterogeneity across workers’ managerial ability. Workers with higher skills will manage larger firms while workers with low managerial ability will run smaller firms and will be in self-employment only when they cannot find a salaried job. For these workers self-employment is a secondary/informal form of employment. The Burdett and Mortensen (1998) equilibrium search model is used for illustration as a special case of our more general framework. Empirical evidence from Mexico is provided and demonstrates that firm size wage effects for employees and selfemployed workers are broadly consistent with the model.
    Keywords: Self-employment, Managerial ability, Informal sector
    Date: 2012–03–05
  2. By: Pagel, Beatrice; Wey, Christian
    Abstract: We examine how competition in international markets affects a union's choice of wage regime which can be either uniform or discriminatory. Firms are heterogenous with regard to international competition. When unions choose their wage regimes sequentially, a discriminatory outcome becomes more likely when international competition increases. However, for intermediate levels a union may stick with a uniform wage regime even if the rival union adopts a discriminatory regime. When competition is sufficiently intense, both unions revert to the discriminatory regime. Paradoxically only in those latter instances all parties (consumers, workers and firms) may be better off (each in aggregate) if all unions adopt a uniform wage regime. We conclude that union incentives to coordinate their wage regimes should then also become largest. --
    Keywords: Unionization,International Oligopoly,Uniform Wages
    JEL: D43 J51 L13
    Date: 2012
  3. By: L. Lambertini; A. Tampieri
    Abstract: We modify the price-setting version of the vertically differentiated duopoly model by Aoki (2003) by introducing an extended game in which firms noncooperatively choose the timing of moves at the quality stage. Our results show that there are multiple equilibria in pure strategies, in which firms always select sequential play at the quality stage. We also investigate the mixed-strategy equilibrium, revealing that the probability of generating outcomes out of equilibrium is higher than its complement to one. In the alternative of full market coverage, we show that the quality stage is solved in dominant strategies and therefore the choice of roles becomes irrelevant as the Nash and Stackelberg solutions coincide.
    JEL: C73 L13
    Date: 2012–03
  4. By: Swati Dhingra; John Morrow
    Abstract: A fundamental question in monopolistic competition theory is whether the market allocates resources efficiently. This paper generalizes the Spence-Dixit-Stiglitz framework to heterogeneous firms, addressing when the market provides optimal quantities, variety and productivity. Under constant elasticity demand, each firm prices above its average cost, yet we show market allocations are efficient. When demand elasticities vary, market allocations are not efficient and reflect the distortions of imperfect competition. After determining the nature of market distortions, we investigate how integration may serve as a remedy to imperfect competition. Both market distortions and the impact of integration depend on two demand side elasticities, and we suggest richer demand structures to pin down these elasticities. We also show that integration eliminates distortions, provided the post-integration market is sufficiently large.
    Keywords: Selection, monopolistic competition, efficiency, productivity, social welfare, demand elasticity
    JEL: F1 L1 D6
    Date: 2012–02
  5. By: Eleanor J. Choi (U.S. Bureau of Labor Statistics); James R. Spletzer (U.S. Bureau of Labor Statistics)
    Abstract: The average size of establishments rose through the expansion of the 1990s, and then fell slightly during the expansion of the 2000s. In this paper, we seek to understand the change in trend in the average size of establishments during the last two decades. We begin with an exploration of the robustness of the basic empirical facts. Both Business Employment Dynamics statistics from the Bureau of Labor Statistics and Business Dynamics Statistics from the Census Bureau show that the average size of businesses – both establishments and firms – is growing slower in the 2000s than in the 1990s. The Census Bureau data also show the trends of average size in the 1990s are similar to the trends from the late 1970s and the 1980s. Our empirical analysis results in two main conclusions. First, the change in trend of the average size of establishments occurs in almost all industries, and our decomposition shows that the sizeable shifts in industry composition that occurred in the U.S. economy during the past two decades account for only about half of the downward trend during the 2000s expansion. Second, we find that the decrease in the average size of establishments during the 2000s expansion can be explained by the age of establishments. Specifically, we find that establishment births are starting smaller and staying smaller.
    Keywords: Establishment Size, Industry Decompoition, Establishment Births
    JEL: J23 L25 L26
    Date: 2012–02
  6. By: Legros, Patrick (ECARES and CEPR); Newman, Andrew F (Boston University and CEPR); Proto, Eugenio (University of warwick)
    Abstract: We consider a model in which appropriate organization fosters innovation, but because of contractibility problems, this benefit cannot be internalized. The organizational design element we focus on is the division of labor, which as Adam Smith argued, facilitates invention by observers of the production process. However, entrepreneurs choose its level only to facilitate monitoring their workers. Whether there is innovation depends on the interaction of the markets for labor and for inventions. A high level of specialization is chosen when the wage share is low. But low wage shares arise only when there are few entrepreneurs, which limits the market for innovations therefore and discourages inventive activity. When there are many entrepreneurs, the innovation market is large, but the rate of invention is low because there is little specialization. Rapid technological progress therefore requires a balance between these opposing e ects, which occurs with a moderate relative scarcity of entrepreneurs and workers. In a dynamic version of the model in which a credit constraint limits entry into entrepreneurship, this relative scarcity depends on the wealth distribution, which evolves endogenously. There is an inverted-U relation between growth rates driven by innovation and the level of inequality. Institutional improvements have ambiguous effects on growth. In light of the model, we offer a reassessment of the mechanism by which organizational innovations such as the factory may have spawned the industrial revolution. Key words: factory system ; industrial revolution ; technological change ; contracts
    Date: 2012
  7. By: Naudé, Wim (UNU-MERIT/MGSoG, University of Maastricht, and Maastricht School of Management); Amoros, José Ernesto (School of Business and Economics, Universidad del Desarrollo, Santiago, Chile); Cristi, Oscar (School of Business and Economics, Universidad del Desarrollo, Santiago, Chile)
    Abstract: We know that entrepreneurs - at least those driven by opportunities - can contribute to economic growth, productivity improvements and competitiveness in national economies.. But do they contribute to happiness on the country level? In other words, does the happiness of nations depend on its entrepreneurs? And what about happy nations - are they better places for entrepreneurs to start-up new businesses? In this paper we survey the literature on entrepreneurship and happiness, and use various data sources, including from the Global Entrepreneurship Monitor, to find tentative evidence of an inverse U-shape relationship between (opportunity) entrepreneurship and national happiness. We find little evidence that a nation's happiness drives early-stage entrepreneurial activity but we do find evidence that opportunity-motivated entrepreneurs in happier nations may be less concerned with high firm growth. Thus we conclude that opportunity-motivated entrepreneurship may contribute to a nation's happiness, but only up to a point. Not everybody should become entrepreneurs, and the happiness of a nation cannot be indefinitely increased by boosting the numbers of opportunity entrepreneurs.
    Keywords: Happiness, entrepreneurship, self-employment, life and job satisfaction, development, subjective wellbeing, Global Entrepreneurship Monitor
    JEL: I31 M13 O50
    Date: 2012
  8. By: Sumon Datta (Krannert School of Management, Purdue University); K. Sudhir (Cowles Foundation and Yale School of Management)
    Abstract: This paper investigates the impact of spatial zoning restrictions on retail market outcomes. We estimate a structural model of entry, location and format choice across a large number of markets in the presence of zoning restrictions. The paper contributes to the literature in three ways: First, the paper demonstrates that estimates of factors affecting market potential and competitive intensity in the extant literature on entry and location choice that do not account for zoning restrictions are significantly biased. Second, the cross-market variations in zoning regulations helps us test and provide evidence for the theory that constraints on spatial differentiation will lead to greater product differentiation. Finally, we provide qualitative insight on how zoning impacts retail entry and format variety; in particular we evaluate the impact of prototypical zoning arrangements such as "centralized," "neighborhood," and "outskirt" zoning on entry and format variety.
    Keywords: Product Variety, Zoning, Entry, Location Choice, Retail Competition, Discrete Games, Multiple Equilibria, Structural Modeling
    Date: 2012–03
  9. By: Mayer, Wolfgang; Mujumdar, Sudesh
    Abstract: This paper introduces an alternative to the lobbying literature's standard assumption that money buys policies. Our model - in which influence-seeking requires both money to buy access and managerial time to utilize access - offers three significant benefits. First, it counters criticism that the money-buys-policies assumption is at odds with reality. Second, its much stronger lobbying incentives weaken the free-rider problem and raise incentives for lobby formation. Third, the model yields testable hypotheses on: the determinants of lobbying incentives; the number of lobbying firms in an industry; and the impact on industry lobbying by the size distribution of firms, contribution limits on firms, world price changes, and the ability to adjust labor employment. --
    Keywords: lobbying,free-rider problem,size-distribution-of-firms,world-price,labor-market-flexibility
    JEL: F16 H0 L1
    Date: 2012
  10. By: Giorgio Canarella (California State University, Los Angeles and University of Nevada, Las Vegas); Stephen M. Miller (University of Nevada, Las Vegas and University of Connecticut); Mahmoud M. Nourayi (Loyola Marymount University)
    Abstract: We analyze the stochastic properties of three measures of profitability, return on assets (ROA), return on equity (ROE), and return on investment (ROI), using a balanced panel of US firms during the period 2001-2010. We employ a panel unit-root approach, which assists in identifying competitive outcomes versus situations that require regulatory intervention to achieve more competitive outcomes. Based upon conventional panel unit-root tests, we find substantial evidence supporting mean-reversion, which, in turn, lends support to the long-standing “competitive environment” hypothesis originally set forward by Mueller (1976). These results, however, prove contaminated by the assumption of cross-sectional independence. After controlling for cross-sectional dependence, we find that profitability persists indefinitely across some sectors in the US economy. These sectors experience extremely slow, or non-existent, mean-reversion.
    Keywords: Cross-sectional dependence, unit roots, panel data, hysteresis, firm profitability
    JEL: C23 D22 L25
    Date: 2012–02
  11. By: Nejat Anbarci; Nick Feltovich
    Abstract: Previous research has shown that individuals do not respond to changes in their bargaining position to the extent predicted by standard bargaining theories. Most of these results come from experiments with bargaining power allocated exogenously, so that individuals may perceive it as having been “unearned” and thus be reluctant to exploit it. Typically these experiments also allowed equal splits of the “cake” (the amount bargained over) as equilibrium outcomes, leading to a powerful tendency toward 50-50 splits. We conduct a bargaining experiment in which subjects earn their bargaining power through a real–effort task. Treatments are based on the Nash demand game (NDG) and an unstructured bargaining game (UBG). Subjects bargain over a fixed amount of money, with disagreement payments determined entirely by the number of units of the real–effort task successfully completed. Task parameters are set to allow disagreement payoffs above half the cake size, in which case 50–50 splits are not individually rational, and thus not consistent with equilibrium. We find that subjects are least responsive to changes in own and opponent disagreement payoffs in the NDG with both disagreement payments below half the cake size. Responsiveness is higher in the UBG, and in the NDG when one disagreement payment is more than half the cake size, but in both cases it is still less than predicted. It is only in the UBG when a disagreement payment is more than half the cake size that responsiveness to disagreement payoffs reaches the predicted level. Our results imply that even when real–life bargaining position is determined by past behaviour rather than luck, the extent to which actual bargaining corresponds to theoretical predictions will depend on (1) the institutions within which bargaining takes place, and (2) the distribution of bargaining power; in particular, whether the 50–50 norm is a viable outcome.
    Keywords: Nash demand game, unstructured bargaining, real effort, disagreement, experiment
    JEL: C78 C72 D81
    Date: 2012–03–07
  12. By: Helmut Lütkepohl; Aleksei Netsunajev
    Abstract: Given the growing dissatisfaction with exclusion and long-run restrictions in structural vector autoregressive analysis, sign restrictions are becoming increasingly popular. So far there are no techniques for validating the shocks identified via such restrictions. Although in an ideal setting the sign restrictions specify shocks of interest, sign restrictions may be invalidated by measurement errors, data adjustments or omitted variables. We model changes in the volatility of the shocks via a Markov switching (MS) mechanism and use this devise to give the data a chance to object to sign restrictions. The approach is illustrated by considering a small model for the market of crude oil.
    Keywords: Markov switching model, vector autoregression, heteroskedasticity, crude oil market
    JEL: C32 Q43
    Date: 2012
  13. By: Carlo Altomonte; Filippo Di Mauro; Gianmarco I. P. Ottaviano; Armando Rungi; Vincent Vicard
    Abstract: This paper analyzes the performance of global value chains during the trade collapse. To do so, it exploits a unique transaction-level dataset on French firms containing information on cross-border monthly transactions matched with data on worldwide intra-.rm linkages as defined by property rights (multinational business groups, hierarchies of firms). This newly assembled dataset allows us to distinguish firm-level transactions among two alternative organizational modes of global value chains: internalization of activities (intra- group trade/trade among related parties) or establishment of supply contracts (arm's length trade/trade among unrelated parties). After an overall assessment of the role of global value chains during the trade collapse, we document that intra-group trade in intermediates was characterized by a faster drop followed by a faster recovery than arm's length trade. Amplified fluctuations in terms of trade elasticities by value chains have been referred to as the "bullwhip effect" and have been attributed to the adjustment of inventories within supply chains. In this paper we first con.rm the existence of such an effect due to trade in inter- mediates, and we underline the role that different organizational modes can play in driving this adjustment.
    Keywords: trade collapse, multinational firms, global value chains, hierarchies of firms, vertical integration
    JEL: F23 F15 L22
    Date: 2012–02
  14. By: Bontemps, Christophe (GREMAQ,INRA); Nauges, Céline (LERNA-INRA); Réquillart, Vincent (TSE,GREMAQ,INRA,IDEI); Simioni, Michel (GREMAQ,INRA)
    Abstract: The purpose of this article is to assess whether food safety regulations imposed by the European Union in the 2000s may have induced a slow-down in the productivity of firms in the food processing sector. The impact of regulations on costs and productivity has seldom been studied. This article contributes to the literature by measuring productivity change using a panel of French food processing firms for the years 1996 to 2006. To do so, we develop an original iterative testing procedure based on the comparison of the distribution of efficiency scores of a set of firms. Our results confirm that productivity decreased in two major food processing sectors (poultry and cheese) at the time when safety regulation was reinforced.
    Date: 2012–01
  15. By: Marcel Boyer
    Abstract: I characterize the performance of the Québec economy over the last three decades 1981-2010. Many indicators are presented: GDP, GDP per capita, population, job creation, employment rates, average weekly earnings, private investments, productivity, trade and commerce, debt, R&D. In spite of some strong sectors, the global economic performance of Québec has been significantly lower than that of the rest of Canada and the United States. Many challenges are confronting us. Québec is in a sense condemned to be more efficient, more innovative and more entrepreneurial than its main competitors and partners in order to reverse the current trend towards marginality. We need a significant program of change capable of both reaffirming the social-democratic goals and principles that have become synonymous with modern Québec and implementing a radically different set of policies, ways, and means. We need in fact a new quiet revolution to reenact the entrepreneurial spirit, both at the corporate and social level, which has generated the first, to replace our traditional past-oriented social-democracy by a competitive social-democracy, resolutely open toward futurity and modernity. <P>Je caractérise dans ce rapport la performance économique du Québec au cours des trois dernières décennies 1981 à 2010. Plusieurs indicateurs sont présentés : PIB, PIB par habitant, population, création d’emplois, taux d’emploi, rémunération hebdomadaire moyenne, investissements des entreprises, productivité, commerce extérieur, dette, R&D. Malgré la présence de secteurs en plein développement, la performance économique globale du Québec traîne dangereusement derrière celle du reste du Canada et des États-Unis. Plusieurs défis doivent être relevés. Nous sommes d’une certaine manière condamnés à être plus efficaces, plus innovateurs et plus entrepreneurs que nos principaux concurrents et partenaires afin de renverser la tendance actuelle vers la marginalité. Pour nous rapprocher de la tête du peloton, nous avons besoin de changements en profondeur incarnant les mêmes principes sociaux-démocrates que ceux qui ont présidé à l’avènement du Québec moderne mais s’appuyant sur des politiques, modalités et moyens radicalement différents. Nous avons besoin en réalité d’une nouvelle révolution tranquille pour renouer avec l’esprit entrepreneurial, tant corporatif que social, qui a présidé à la première, pour passer d’une social-démocratie traditionnelle tournée vers le passé à une social-démocratie concurrentielle résolument ouverte sur l’avenir et la modernité.
    Keywords: performance indicators, Hercules, competitive social-democracy., indicateurs de performance, Hercule, social-démocratie concurrentielle
    Date: 2012–01–01
  16. By: Ali Béjaoui
    Abstract: <P>Le prolongement de la vie active des travailleurs âgés constitue un défi de taille pour les politiques publiques dans un contexte de vieillissement de la population et de sortie fragile d’une récession. Bien que le Québec émerge relativement bien de la récession, il demeure que le phénomène de retraite précoce (avant l’âge de 60 ans) demeure alarmant. L’approche moins coercitive adoptée par le Québec, qui consiste à instaurer la retraite progressive et à introduire des incitatifs pour dissuader la retraite anticipée, ne pourrait donner les résultats escomptés que si les individus sont motivés à demeurer actifs sur le marché du travail et, surtout, si les employeurs sont capables de les attirer et les retenir. Or nous avons constaté une divergence entre les aspirations des travailleurs âgés et les stratégies poursuivies par les entreprises. Il apert que les employeurs, pris avec un déséquilibre démographique de leur effectif en faveur des travailleurs âgés, ont tendance à recourir à des stratégies de flexibilisation pour contenir leur masse salariale. Le recours à la rémunération variable (basée sur la performance individuelle ou collective) et le recours à la flexibilité numérique (temps partiel et contrat à durée déterminée) sont des exemples de stratégies poursuivies par les entreprises. Ces deux tendances coïncidaient avec un vieillissement de la main-d’œuvre, une intensification de la concurrence étrangère ainsi qu’une féminisation et une tertiarisation du marché du travail. Bien que le travail à temps partiel puisse répondre au besoin de flexibilité des travailleurs âgés, il ne répond que partiellement aux attentes de ces derniers. Une meilleure qualité de travail (intéressant, moins stressant ou moins demandant physiquement) et une flexibilité des conditions de travail qui permettraient de concilier le travail et la vie personnelle, sont des facteurs aussi importants que le travail à temps partiel dans la décision de demeurer sur le marché du travail. Par ailleurs, bien que le recours à la flexibilité numérique puisse être une voie prometteuse pour attirer et retenir une main-d’œuvre vieillissante, elle présente des risques à long terme. En effet, le recours accru à cette flexibilité pourrait générer, à long terme, un sous investissement dans la formation et un manque d’accès aux avantages sociaux, particulièrement les régimes de retraite. Alors que le problème d’accès aux régimes de retraite fait partie des préoccupations récentes des politiques publiques, celui de l’accès à la formation n’a pas eu la même attention. Sachant que les travailleurs âgés seront appelés à changer d’employeur, de profession et même de secteur d’activité s’ils veulent demeurer actifs, l’acquisition et la mise à jour des compétences sont une condition sine qua non à la réussite des stratégies qui visent le prolongement de la vie active des travailleurs âgés.
    Date: 2012–02–01
  17. By: Karlan, Dean (Yale University)
    Abstract: We use randomized program offers and multiple follow-up survey waves to examine the effects of entrepreneurship training on a broad set of outcomes. Training increases short-run business ownership and employment, but there is no evidence of broader or longer-run effects. We also test whether training mitigates market frictions by estimating heterogeneous treatment effects. Training does not have strong effects (in either relative or absolute terms) on those most likely to face credit or human capital constraints, or labor market discrimination. Training does have a relatively strong short-run effect on business ownership for those unemployed at baseline, but not at other horizons or for other outcomes.
    JEL: D04 D14 D22 H32 H43 I38 J21 J24
    Date: 2012–01
  18. By: Gries, Thomas (Economics Department, University of Paderborn); Jungblut, Stefan (Economics Department, University of Paderborn); Naudé, Wim (UNU-MERIT/MGSoG, University of Maastricht, and Maastricht School of Management)
    Abstract: We propose that the rate of creation and failure of new firm start-ups can be modelled as a search and matching process, as in labor market matching models. Deriving a novel Entrepreneurship-Beveridge curve, we show that a successful start-up depends on the efficiency with which entrepreneurial ability is matched with business opportunity, and outline a number of possible applications of this matching approach to formalize the economics of entrepreneurship.
    Keywords: Entrepreneurship, start-ups, labor market matching
    JEL: L26 M13 O10 O14
    Date: 2012
  19. By: Deepankar Basu (Universty of Massachusetts); Ying Chen (University of Massachusetts-Amherst); Jong-seok Oh (University of Massachusetts-Amherst)
    Abstract: Building on Marx’s insights in Chapter 25, Volume I of Capital, an augmented version of the cyclical profit squeeze (CPS) theory offers a plausible explanation of macroeconomic fluctuations under capitalism. The pattern of dynamic interactions that emerges from a 3-variable (profit share, unemployment rate and nonresidential fixed investment) vector autoregression estimated with quarterly data for the postwar U.S. economy is consistent with the CPS theory for the regulated (1949Q1–1975Q1) as well as for the neoliberal periods (starting in 1980 or in 1985). Hence, the CPS mechanism seems to be in operation even under neoliberalism. JEL Categories: B51; C22
    Keywords: cyclical profit squeeze, vector autoregression
    Date: 2012–02
  20. By: A. Mantovani; J. Vandekerckhove
    Abstract: In this paper, two pairs of complementors have to decide whether to merge and eventually bundle their products. Depending on the degree of competitive pressure in the market, either both pairs decide to merge (with or without bundling), or only one pair merges and bundles, while rivals remain independent. The latter case can very harmful for consumers as it brings surge in prices. We also consider the case in which one pair moves first. Interestingly, we find a parametric region where first movers merge but refrain from bundling, to not induce rivals to merge as well.
    JEL: D43 L13 L41
    Date: 2012–03
  21. By: Ian Wilkinson (The University of Sydney)
    Abstract: In this paper, based on theories of complex adaptive systems, I argue that the main case for antitrust policy should be extended to include the criteria of "evolvability." To date, the main case focuses on economizing, including market power as a key filter for identifying suspect cases. Both production and transaction costs are considered as part of economizing and other factors are use to consider the benefits of different industry structures. CAS analysis focuses attention on dynamics, evolution and networks. As I will show, the criteria of evolvability requires us to consider various types of direct and indirect network impacts in business that go beyond the traditional focus on production and transaction costs. These network impacts stem from the connections between transactions and relations over time and place, including how business arrangements at one time, limit or enable arrangements in the future. An assessment of the impacts, I argue, can and should be included in the rules of antitrust and in the processes of antitrust case analysis and decision making.
    Date: 2012–03

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