nep-com New Economics Papers
on Industrial Competition
Issue of 2006‒12‒04
ten papers chosen by
Russell Pittman
US Department of Justice

  1. Entry and Vertical Disintegration By Alain de Fontenay; Christiaan Hogendorn
  2. Forward Vertical Integration: The Fixed-Proportion Case Revisited By Bonroy, Olivier; Larue, Bruno
  3. Static inefficiency of compulsory licensing: Quantity vs. price competition. By Cugno, Franco; Ottoz, Elisabetta
  4. Quantitative competition analysis: Stationarity tests in geographic market definition By Willem H Boshoff
  6. Excessive(?) Entry of National Telecom Networks, 1990-2001 By Christiaan Hogendorn
  7. Independent regulatory agencies in emerging economies By Sosay, Gül; Zenginobuz, Unal
  9. Industrial Specific Resource Allocation, Incentive Differentiation and Industrial Development Order: the Function Evolvement of Jiangsu Laver Association in Anti-Trade Barrier Litigation By Zheng, Jianghuai; Jiang, Jing
  10. Wpływ struktury organizacyjno-właścicielskiej na funkcjonowanie bilateralnego monopolu kopalni węgla brunatnego i elektrowni By Jurdziak, Leszek

  1. By: Alain de Fontenay (CITI, Columbia University); Christiaan Hogendorn (Economics Department, Wesleyan University)
    Abstract: We formalize and extend George Stigler’s famous article “The division of labor is limited by the extent of the market.” We emphasize economies of scale in intermediate goods production as a determinant of firm boundaries and vertical control. We show that there are potential coordination failures which may prevent efficient vertical disintegration, and we discuss how these might be either overcome or used to the advantage of incumbent firms.
    Keywords: entry, vertical integration, specialization
    JEL: D23 L22 L23
    Date: 2005–12
  2. By: Bonroy, Olivier; Larue, Bruno
    Abstract: Assuming a fixed-proportion downstream production technology, partial forward integration by an upstream monopolist may be observed whether the monopolist is advantaged or disadvantaged cost-wise relative to fringe firms in the downstream market. Integration need not induce cost predation and the fringe firms’ margin may even increase. The output price falls and welfare unambiguously rises.
    Keywords: Vertical integration; cost predation; cost asymmetries.
    JEL: L22
    Date: 2006–09
  3. By: Cugno, Franco; Ottoz, Elisabetta
    Abstract: A common argument against compulsory licensing of intellectual property maintains that it facilitates the entry of inefficient producers, which may reduce social welfare independently of any effects on R&D incentives. We study the issue in a model where the innovative firm, under the threat of compulsory licensing, react strategically by choosing between quantity and price competition. We show that the risk of a reduction in static welfare due to the entry of highly inefficient firms is avoided if licensing entails a royalty per unit of output and zero fixed fee. The rationale behind this result lies in the fact that compulsory licensing threat works as a disciplining device to improve static social welfare, even when the applicant is a high cost inefficient firm.
    Keywords: compulsory licensing, essential facilities, entry, welfare
    JEL: L49 O34
    Date: 2006–11
  4. By: Willem H Boshoff (Department of Economics, University of Stellenbosch)
    Abstract: The paper focuses on the delineation of geographic markets in competition analysis, investigating the use of both quantitative and qualitative evaluation in the market definition exercise. To this end, the first part is devoted to a conceptual framework for market definition (adopted from Haldrup (2003)). Thereafter, a variety of price tests are explored that can be applied within the quantitative part of the framework. Similar to Forni (2004), the paper emphasizes the use of stationarity tests (that is, tests for the existence of unit roots) – illustrating their application to a recent competition investigation in South Africa.
    Keywords: Market definition, Delineation, Quantitative, Stationarity tests, Prices, Geographic, SSNIP, Hypothetical monopolist, Competition, Unit root, Price ratio, Antitrust
    JEL: L40 L41 L43 D4
    Date: 2006
  5. By: Claudio R. Lucinda; Arthur Barrionuevo Filho
    Date: 2006
  6. By: Christiaan Hogendorn (Economics Department, Wesleyan University)
    Abstract: We document entry and capacity expansion in US long-distance fiber-optic networks before and during the “telecom boom.” We disentangle the many swaps and leases between networks in order to measure owned route miles versus route miles shared with other carriers. Entry appears much more moderate when these shared miles are not counted. Strategic behavior can lead to excessive entry, and we find evidence of such behavior regarding total miles (including swaps and leases) but not regarding owned miles. We conclude that entry was excessive only with regard to swaps and leases, but not with regard to the physical building of the networks.
    Keywords: telecommunications, investment, preemption
    JEL: L11 L13 L96
    Date: 2006–01
  7. By: Sosay, Gül; Zenginobuz, Unal
    Abstract: While the diffusion of independent regulatory agencies (IRAs) across economically advanced countries has attracted much scholarly attention in recent years, systematic work on their spread across developing countries is still scarce. In an effort to address this gap in literature, this paper aims to analyze the diffusion of regulatory agencies in emerging economies in Latin America, Asia, and Central and Eastern Europe. At this early stage of our research, we aim to emprically map out regulatory agencies in economic regulation sectors (e.g. competition, finance, and utilities/infrastructure) enjoying some degree of autonomy or independence in emerging economies, rather than limiting our focus solely on those that meet all the criteria for independence in the strictest definition of the term. Such exploratory analysis constitutes the first step towards studying processes of diffusion in general and the mechanisms that lead to the creation of regulatory agencies in these economies in particular. The second objective of this paper is to examine the mechanisms which we expect to be at work in the spread of IRAs in the selected emerging economies. We argue that despite the creation of a number of agencies in the countries concerned before 1990, diffusion has become evident and “interdependent”, as opposed to spurious in the 1990s.
    Keywords: independent regulatory agencies; emerging economies
    JEL: L50 H83
    Date: 2005–09–05
  8. By: Marina Moreira da Gama; Marco Antônio Ribas Cavalieri
    Date: 2006
  9. By: Zheng, Jianghuai; Jiang, Jing
    Abstract: For sake of actualizing anti-trade barrier and changing the situation of price war after China’s taking part in WTO, Jiangsu laver association was founded. By using the Bayesian Cournot model, this paper analyzes the basis of trade association’s foundation is the ability of improving product quality and technique which is distributed heterogeneously in the firm of the industry. The paper defines this kind of ability as industrial specific resources which are formed during the process of industrial competition and development. Actually they are potential rents and laver firms can acquire them selectively by laver association’s enforcement of transaction rules in laver exchange office. It changes the industrial competition from reducing quality and price to upgrading quality and price and forms the basis of association’s existence. Whether the function is strong or not depends on association’s understanding of industrial specific resources and incentive benefits which is given to the member firms. It is not that association comes into being by the appearance of industrial specific resources and dies because of disappearance of industrial specific resources, but that association uses industrial specific resource into firms and it can reach a kind of separated equilibrium during the competition of improving quality and raising price. Association improves the quality of transaction governance continually and keeps the separated equilibrium maintained steadily. It makes the whole industry in good development order.
    Keywords: trade association; industrial specific resources; selective incentive
    JEL: Q13 L31 P23
    Date: 2006–08
  10. By: Jurdziak, Leszek
    Abstract: THE INFLUENCE OF OWNERSHIP AND ORGANIZATIONAL STRUCTURE ON OPERATION OF BILATERAL MONOPOLY OF LIGNITE MINE AND POWER PLANT Lignite mine & power plant can operate as two separate entities (having the same or different owners), two entities operating in one holding (with joint owner) or as one vertically integrated energy producer. Each of these solutions has the influence on operation of this body including realization of its parts and the whole entity objectives, price negotiation etc. In the paper an attempt has been made to show these problems from the point of view of economic effectiveness.
    Keywords: bilateral monopoly; price negotiation; lignite price; Pareto optimal production; Pareto suboptimal solution; co-operation; rivalry; lignite minel power plant
    JEL: L22 L94 L13 L72 D43 L14
    Date: 2006–10–23

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