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on Industrial Competition |
| By: | Qihong Liu (Department of Economics, University of Oklahoma); Konstantinos Serfes (LeBow College of Business, Drexel University) |
| Abstract: | We examine the profitability and the welfare implications of price discrimination in two-sided markets. Platforms have information about the preferences of the agents that allows them to price discriminate within each group. The conventional wisdom from one-sided horizontally differentiated markets is that price discrimination hurts the firms and benefits consumers, prisoners' dilemma. Moreover, it is well-known that the presence of indirect externalities in two-sided markets can intensify the competition. Despite all these, we show that the possibility of price discrimination, in a two-sided market, may actually soften the competition. Therefore, the implications of price discrimination from one-sided markets may not carry over to two-sided markets. This is the case regardless of whether prices are public or private, although private prices boost profits. Our analysis also sheds light on the welfare properties of price discrimination in intermediate goods markets, such as Business-to-Business (B2B) markets. |
| Keywords: | Price discrimination, Two-sided markets, Indirect network externalities, Market segmentation. |
| JEL: | D43 L13 |
| Date: | 2007–09 |
| URL: | http://d.repec.org/n?u=RePEc:net:wpaper:0725&r=com |
| By: | Maarten C.W. Janssen (Tinbergen Institute and Erasmus University); Santanu Roy (Southern Methodist University) |
| Abstract: | Firms signal high quality through high prices even if the market structure is highly competitive and price competition is severe. In a symmetric Bertrand oligopoly where products may differ only in their quality, production cost is increasing in quality and the quality of each firm's product is private information (not known to consumers or to other firms), we show that there exist fully revealing equilibria in mixed strategies. In such equilibria, low quality firms enjoy market power when other firms are of high quality. High quality firms charge higher prices than low quality firms but lose business to rival firms with higher probability. Some of the revealing equilibria involve high degree of market power (price close to full information monopoly level) while others are more "competitive". Under certain conditions, if the number of firms is large enough, information is revealed in every equilibrium. |
| Keywords: | Signaling; Quality; Oligopoly; Incomplete Information. |
| JEL: | L13 L15 D82 D43 |
| Date: | 2007–10 |
| URL: | http://d.repec.org/n?u=RePEc:smu:ecowpa:709&r=com |
| By: | Robert M. Adams; Dean F. Amel |
| Abstract: | The threat of entry is an important factor in the evaluation of the potential competitive effects of proposed mergers and acquisitions. In the evaluation of proposed bank mergers, a high probability of entry, or strong potential competition, is often found to mitigate the potential anticompetitive effect of a proposed horizontal merger. Because the probability of entry is not directly observed for each local market, variables such as per capita income, population growth and past entry are typically used to predict the probability of future entry. This study extends previous research on the determinants of entry into local banking markets. In addition to variables considered by past research, such as market demographic characteristics, branching deregulation and past merger activity, this study considers the effects on future entry of past entry and strategic barriers to entry, which are proxied by changes in incumbent branching, the presence of small incumbent firms and market concentration. The analysis uses data that allow a broader definition of entry than that used in most past research. In most of the previous studies, bank entry is defined as the creation of a new banking institution. We show that this definition is problematic and misses entry due to branch network extension by existing banks, which is substantial. Results of our analysis are consistent with past research where past research exists. In addition, we find significant negative relationships between strategic barriers to entry and entry. Assessment of the quantitative significance of the results, however, finds that very large changes in the explanatory variables are needed to cause substantial changes in the probability of entry into banking markets. |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfe:2007-51&r=com |
| By: | Robin S. Lee (Harvard Busines School and Department of Economics, Harvard University) |
| Abstract: | This paper develops techniques to analyze the adoption decisions of both consumers and firms for competing platform intermediaries in two-sided markets, and applies the methodology to empirically measure the impact of vertical integration and exclusive contracting in the sixth-generation of the U.S. videogame industry (2000-2005). I first introduce a framework to structurally estimate consumer demand in these types of hardware-software markets which (i) simultaneously analyzes both hardware and software adoption decisions; (ii) accounts for dynamic issues including the selection of heterogenous consumers across platforms, durability of goods, and agents’ timing of purchases; and (iii) explicitly provides the marginal contribution of an individual software title to each platform’s installed base of users. Demand results show the gains obtained by a platform provider from exclusive access to certain software titles can be large, and failure to account for dynamics, consumer heterogeneity, and multiple hardware purchases significantly biases estimates. I next specify dynamic network formation game to model the adoption decision of hardware platforms by software providers. Counterfactual experiments indicate that vertical integration and exclusivity benefited the smaller entrant platforms and not the dominant incumbent, which stands contrary to the interpretation of exclusivity as primarily a means of foreclosure and entry deterrence. |
| Keywords: | platform competition, two-sided markets, vertical integration, exclusive contracting, dynamic demand, network formation, videogame industry |
| JEL: | C61 C63 C73 L13 L14 L42 L86 |
| Date: | 2007–10 |
| URL: | http://d.repec.org/n?u=RePEc:net:wpaper:0739&r=com |
| By: | Claudia Salim |
| Abstract: | We consider a model of a monopolistic network operator who sequentially offers two-parted access charges to symmetric downstream firms. We are particularly interested in analyzing an alternative to current regulatory practice of prescribing access. In particular, we look at the possibility of restraining the input monopolist's market power by endowing downstream firms with a regulatory option: In case they disagree with the contracts proposed to them, downstream firms can claim a regulated access price. It turns out that this form of regulation may prevent foreclosure even though allowing for price discrimination in the intermediary market. It proves itself more beneficial to welfare than the current practice of prescribing access prices above marginal cost. Interestingly, even though one expects discrimination against the first mover, non-discriminatory input prices below cost can occur when the monopolist faces the alternative of a rather strictly cost-oriented regulated access price. Non-discrimination rules will either not become effective or result in less optimal price levels. |
| Keywords: | Price discrimination, vertical contracting, exclusion, regulatory outside option |
| JEL: | D43 L13 L14 L42 |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp731&r=com |
| By: | Doh-Shin Jeon; Sjaak Hurkens |
| Abstract: | We study a retail benchmarking approach to determine access prices for interconnected networks. Instead of considering fixed access charges as in the existing literature, we study access pricing rules that determine the access price that network i pays to network j as a linear function of the marginal costs and the retail prices set by both networks. In the case of competition in linear prices, we show that there is a unique linear rule that implements the Ramsey outcome as the unique equilibrium, independently of the underlying demand conditions. In the case of competition in two-part tariffs, we consider a class of access pricing rules, similar to the optimal one under linear prices but based on average retail prices. We show that firms choose the variable price equal to the marginal cost under this class of rules. Therefore, the regulator (or the competition authority) can choose one among the rules to pursue additional objectives such as consumer surplus, network covera |
| Keywords: | Networks, Access Pricing, Interconnection, Competition |
| JEL: | D4 K21 L41 L51 L96 |
| Date: | 2007–10–18 |
| URL: | http://d.repec.org/n?u=RePEc:aub:autbar:717.07&r=com |
| By: | Nicholas Economides; Joacim Tag |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:ste:nystbu:07-27&r=com |
| By: | Nicholas Economides (Stern School of Business, NYU); V. Brian Viard (Graduate School of Business, Stanford University); Katja Seim (Stanford University) |
| Abstract: | In this paper, we evaluate the consumer welfare effects of entry into residential local phone service in New York State. Residential local phone service competition was an important goal of the 1996 Telecommunications Act. We provide a detailed evaluation of its effects on consumer welfare using household-level data on service choices from the third quarter of 1999 to the first quarter of 2003. Our results indicate that as a result of entry households that subscribe to one of the entrants' services gain on average an equivalent of $2.33 per month in overall welfare from local telecommunications services, or 6.2% of the households' average bill. Averaged across all households including those that remain with the incumbent, households gain the equivalent of $0.83 per month, although benefits vary dramatically across households. Since residential local phone service is sold under a menu of nonlinear tariffs, we develop a method for estimating a mixed discrete/continuous demand model. The econometric model incorporates the simultaneity of the discrete plan and continuous consumption choices by consumers. We allow for flat-rate plans, bundling of services, and unobservable firm quality. Taking advantage of the detailed nature of the data, we decompose the households' overall gains from entry and find that benefits due to firm differentiation and new plan introductions exceed those from price effects. |
| Keywords: | Entry, Nonlinear Pricing, Telecommunications, Discrete/Continuous Demand |
| JEL: | D43 K23 L11 L13 L96 |
| Date: | 2007–10 |
| URL: | http://d.repec.org/n?u=RePEc:net:wpaper:0738&r=com |
| By: | Ramesh Johari (Management Science and Engineering, Stanford University Author-Workplace-Homepage: http://www.stanford.edu/dept/MSandE/); Gabriel Weintraub (Columbia Business School) |
| Abstract: | In this paper we study the implications of service level guarantees (SLGs) in a model of oligopoly competition where providers compete to deliver a service to congestion-sensitive consumers. The SLG is a contractual obligation on the part of the service provider: regardless of how many customers subscribe, the firm is responsible for investing in infrastructure, capacity, or service quality so that the congestion experienced by all subscribers is equal to the SLG. First, we analyze a game where firms compete by setting prices and SLGs simultaneously. We establish that this game can be reduced to standard oligopoly models of price competition, greatly simplifying the analysis of this otherwise complex competitive scenario. Notably, we find that when costs in the original game are convex, the resulting equivalent pricing game also has convex costs. Further, for a broad class of models exhibiting constant returns to investment, the resulting pricing game is equivalent to a standard price game with constant marginal costs; many loss systems, such as those modeled by the Erlang loss formula, exhibit constant returns to investment. We then consider another commonly used contractual agreement between firms and customers: firms first set prices and investment levels simultaneously, and then consumers choose where to subscribe. In this case, firms provide the best possible service given their infrastructure, but without an explicit guarantee. Using the Nash equilibria of the games played by firms, we compare this competitive model with the model where firms set prices and SLGs, in terms of the resulting prices, service levels, firms' profits, and consumers' surplus. |
| Keywords: | competition, game theory, congestion, contracting, pricing. |
| JEL: | D43 L13 L96 M21 |
| Date: | 2007–09 |
| URL: | http://d.repec.org/n?u=RePEc:net:wpaper:0721&r=com |
| By: | Lukasz Grzybowski (Competition Commission, UK); Pedro Pereira (Autoridade da Concorrencia); |
| Abstract: | This article assesses the unilateral effects on prices of a merger in the Portuguese mobile telephony market. We use aggregate quarterly data from 1999 to 2005 and a nested logit model to estimate the price elasticities of demand and the marginal costs of subscription of mobile telephony. Given these estimates, we simulate the effects of the merger. We find that the available mobile telephony subscription products are close substitutes. The merger may cause substantial price increases, even in the presence of large cost efficiencies. On average, prices increase by 7-10% without cost efficiencies, and by about 6-10% with a 10% marginal cost reduction. |
| Keywords: | lock-in, merger simulation, mobile telephony, nested logit, network effects |
| JEL: | L13 L43 L93 |
| Date: | 2007–09 |
| URL: | http://d.repec.org/n?u=RePEc:net:wpaper:0712&r=com |
| By: | Omar Licandro; Antonio Navas-Ruiz |
| Abstract: | The aim of this paper is to understand whether international trade may enhance innovation and growth through an increase in competition. We develop a two-country endogenous growth model, both countries producing the same set of goods, with firm specific R&D and a continuum of oligopolistic sectors under Cournot competition. Since countries produce the same set of goods, trade openness makes markets more competitive, reducing prices and raising the incentives to innovate. More general, a reduction on trade barriers enhances growth by reducing domestic firms' market power. |
| Keywords: | Trade openess, competition and growth, R&D |
| JEL: | F13 F43 O3 |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:eui:euiwps:eco2007/19&r=com |
| By: | Cantillo, Miguel (IESE Business School) |
| Abstract: | The paper studies the market reaction to the withdrawal of a prominent private bank -Kuhn Loeb- from the board of several firms. The event study shows that although Kuhn Loeb added significant value to the firms where it had a board seat, most of this value came from reduced industry competition. Moreover, it seems that weaker competition manifested itself in monopoly rather than monopsony power. This article analyzes the event's context -the Armstrong Investigation in 1905- and the political currents that eventually prevented private banks from being activist shareholders in the United States. |
| Keywords: | Antitrust; Corporate governance; Financial history; |
| JEL: | G21 G24 K21 L41 N21 |
| Date: | 2007–07–17 |
| URL: | http://d.repec.org/n?u=RePEc:ebg:iesewp:d-0700&r=com |
| By: | Nikolaos Georgantzis (LEE/LINEEX, Universitat Jaume I and University of Cyprus); Enrique Fatas (LINEEX and Applied Economics Department, University of Valencia); Carlos Gutierrez-Hita (Elx University); Aitor Ciarreta |
| Abstract: | We present experimental results from a series of sessions organized using the Power Market simulator; a software designed to realistically replicate the Spanish Electricity Market. In the experiments reported here we compare the status quo to two alternative treatments which represent alternative market structures. In one of them, labeled as vertical separation, we assume that power generating firms and electricity distributors-endsuppliers belong to separate business groups. In the second, we study the effect of entry by independent end-suppliers. Both alternative scenarios dominate the status quo in terms of market efficiency, whereas the latter of them dominates the former. |
| Keywords: | Experimental economics, Spanish Electricity Market, vertical relations. |
| JEL: | C90 L43 L51 L53 L94 |
| Date: | 2007–09 |
| URL: | http://d.repec.org/n?u=RePEc:net:wpaper:0731&r=com |
| By: | Gual, Jordi (IESE Business School) |
| Abstract: | This paper provides a critical analysis of some of the key features of merger policy as understood and practiced in leading jurisdictions such as the European Community and the United States. It focuses first on a discussion of the gradual move of merger policy towards the examination of unilateral effects. The critical appraisal of this process is based on the practical and theoretical shortcomings of the economic models that underlie the growing prominence of unilateral effects as the key anticompetitive factor arising from a proposed merger. The paper stresses that even if unilateral effects were to lead to an increase in the conventional measures of anticompetitive performance (such as markups), it is not clear that this implies less competitive behavior for many of the most relevant industries in today's advanced economies. Finally, the paper also examines the relationship between competition and welfare, and argues that even if competition does indeed diminish due to a merger, it does not necessarily follow that this is not good in terms of economic welfare, when we take fully into consideration the incentives to innovate and the dynamic welfare gains that arise from new products and production processes. |
| Keywords: | Mergers; Antitrust; Competition Policy; |
| Date: | 2007–05–17 |
| URL: | http://d.repec.org/n?u=RePEc:ebg:iesewp:d-0694&r=com |
| By: | Timothy Dunne; Shawn D. Klimek; Mark J. Roberts; Yi Xu |
| Abstract: | The relationship between the size of a market and the competitiveness of the market has been of long-standing interest to IO economists. Empirical studies have used the relationship between the size of the geographic market and both the number of firms in the market and the average sales of the firms to draw inferences about the degree of competition in the market. This paper extends this framework to incorporate the analysis of entry and exit flows. A key implication of recent entry and exit models is that current market structure will likely depend upon the history of past participation. The paper explores these issues empirically by examining producer dynamics for two health service industries, dentistry and chiropractic services. |
| Keywords: | Markets ; Industrial organization ; Service industries |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedcwp:0712&r=com |
| By: | Lukasz Grzybowski (Competition Commission, UK); Chiraz Karamti (Telecom Paris - ENST); |
| Abstract: | This paper provides an insight into the antitrust investigation initiated by the French competition authority, which found that mobile operators exchanged strategic information and agreed to fix market shares in years the 2000-2002. The empirical analysis is based on the comparison of mobile markets in France and Germany and uses aggregate industry-level data on subscriptions and prices. The penetration of mobile phones at the end of 1999 was higher in France than in Germany, but this situation was reversed by the end of 2002. In the same time period, minimum prices of mobile services in France, computed for a defined low-usage basket, were on average by about 58% lower than the corresponding prices in Germany. The results of binomial logit demand estimation suggest two explanations for this situation. First, there is a significant difference between price elasticities of demand in these two countries. Second, consumers seem to perceive mobile telephony as a substitute to fixed-line connection in France and as a complement in Germany. However, in a separate reduced-form estimation we do not find a significant effect of prices for fixed-line services on mobile prices in either country. Furthermore, the estimation results suggest that the share-fixing agreement in France could have slowed down subscriptions, but we fail to find that it had an adverse effect on prices. |
| Keywords: | mobile telephony, binomial logit, reduced-form, share-fixing |
| JEL: | L13 L43 L93 |
| Date: | 2007–09 |
| URL: | http://d.repec.org/n?u=RePEc:net:wpaper:0724&r=com |
| By: | Maxim Sinitsyn |
| Abstract: | This paper revisits the theory of oligopoly pricing and shows that for a large class of demand and cost functions, a mixed strategy equilibrium necessarily implies that each firm’s equilibrium strategy is a discrete distribution over a finite number of prices. |
| JEL: | D43 L13 |
| Date: | 2007–06 |
| URL: | http://d.repec.org/n?u=RePEc:mcl:mclwop:2007-08&r=com |
| By: | Andrew Sweeting |
| Abstract: | The ability of firms to reposition their products can determine the effects of demand shocks, mergers and policy interventions in differentiated product markets. This paper estimates a dynamic oligopoly model to measure repositioning costs in the commercial radio industry. Based on a set of markets where industry revenues were around $88 billion, I find that stations may have spent as much as $6 billion on repositioning. However, repositioning costs are not large enough to prevent radio markets adapting quite quickly to demand shocks. |
| JEL: | L1 L13 L82 |
| Date: | 2007–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:13522&r=com |
| By: | Jo Seldeslachts; Joseph A. Clougherty; Pedro Pita Barros |
| Abstract: | Antitrust policy involves not just the regulation of anti-competitive behavior, but also an important deterrence effect. Neither scholars nor policymakers have fully researched the deterrence effects of merger policy tools, as they have been unable to empirically measure these effects. We consider the ability of different antitrust actions - Prohibitions, Remedies, and Monitorings - to deter firms from engaging in mergers. We employ cross-jurisdiction/pan-time data on merger policy to empirically estimate the impact of antitrust actions on future merger frequencies. We find merger prohibitions to lead to decreased merger notifications in subsequent periods, and remedies to weakly increase future merger notifications: in other words, prohibitions involve a deterrence effect but remedies do not. <br> <br> <i>ZUSAMMENFASSUNG - (Auflagen heute, Untersagung morgen: Abschreckungswirkung von Wettbewerbs-intrumenten) <br>Wettbewerbspolitik ist nicht nur Regulierung von wettbewerbsfeindlichem Verhalten, sondern hat auch eine wesentliche Abschreckungswirkung. Weder Wissenschaftler noch politische Entscheidungsträger haben die Abschreckungswirkung von Wettbewerbspolitik vollständig untersucht, da es sehr schwierig ist diese Wirkung empirisch nachzuweisen. Wir untersuchen die Wirkung verschiedener wettbewerbspolitischer Maßnahmen - Untersagung, Auflagen und Monitoring - um Unternehmen von Zusammenschlüssen abzuhalten. Wir nutzen einen Panel-Datensatz, um den Einfluss von Wettbewerbspolitik auf die künftige Anzahl von Firmenzusammenschlüssen zu bewerten. Wir zeigen, dass die Untersagung von Zusammenschlüssen die Fusionsankündigung in der Zukunft reduziert, und dass Fusionsauflagen künftige Ankündigungen schwach ansteigen lassen. Anders gesagt: Untersagungen haben eine führen zu Abschreckungswirkung, Auflagen nicht.</i> |
| Keywords: | merger policy tools, deterrence effects, cross-section/time-series data |
| JEL: | L40 L49 K21 |
| Date: | 2007–02 |
| URL: | http://d.repec.org/n?u=RePEc:wzb:wzebiv:spii2007-02&r=com |
| By: | Byung-Cheol Kim (Michigan State University); Jay Pil Choi (Michigan State University) |
| Abstract: | We study oligopolistic firms' incentives to share customer information about past purchase history in a situation where firms are uncertain about whether a particular consumer considers the product offerings complements or substitutes. By addressing this new type of behavior-based price discrimination, we show that both the incentive to share customer information and its effects on consumers depend crucially on the relative magnitudes of the prices that would prevail in the complementary and substitute markets if consumers were fully segmented according to their preferences. This paper has important implications for merger analysis when the primary motive for merger is the acquisition of another firm's customer lists. We also find that the informational regime in which firms reside can have an influence upon the choice of product differentiation. Additionally, our analysis suggests a new role of middlemen as information aggregators. |
| Keywords: | Customer Information Sharing, Complements and Substitutes, Product Differentiation, Behavior-Based Price Discrimination, Merger and Acquisition, Middlemen |
| JEL: | D43 D62 D83 L14 L51 M31 |
| URL: | http://d.repec.org/n?u=RePEc:net:wpaper:0727&r=com |
| By: | Gabriel Jiménez; Jose A. Lopez; Jesús Saurina |
| Abstract: | A common assumption in the academic literature and in the actual supervision of banking systems worldwide is that franchise value plays a key role in limiting bank risk-taking. As the underlying source of franchise value is assumed to be market power, reduced competition has been considered to promote banking stability. Boyd and De Nicolo (2005) propose an alternative view where concentration in the loan market could lead to increased borrower debt loads and a corresponding increase in loan defaults that undermine bank stability. Martinez-Miera and Repullo (2007) encompass both approaches by proposing a nonlinear relationship between competition and bank risk-taking. Using unique datasets for the Spanish banking system, we examine the empirical nature of that relationship. After controlling for macroeconomic conditions and bank characteristics, we find that standard measures of market concentration do not affect the ratio of non-performing commercial loans (NPL), our measure of bank risk. However, using Lerner indexes based on bank-specific interest rates, we find a negative relationship between loan market power and bank risk. This result provides evidence in favor of the franchise value paradigm. |
| Keywords: | Bank competition |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedfwp:2007-23&r=com |
| By: | Anirban Sengupta (Texas A&M University); ; |
| Abstract: | Internet presumably reduces search cost driving price to the competitive level. Evidence from empirical research quantifying dispersion in the electronic based markets has yield mixed results. More recent research has documented near zero dispersion in the electronic markets using transaction prices. This paper is one of only a handful of papers to examine the impact of internet on price dispersion using contemporaneous online and offline transaction data for airline ticket prices. The paper finds strong empirical evidence of lower dispersion in the electronic markets compared to the traditional markets, but fails to find evidence of near zero dispersion in the electronic markets, even with transaction prices. The results suggest that electronic markets exhibits significantly lower but positive dispersion, in contrary to the near zero dispersion as found in more recent empirical literature. |
| Keywords: | Price Dispersion, Search cost, Online, Offline, Transaction Prices |
| JEL: | L9 |
| Date: | 2007–09 |
| URL: | http://d.repec.org/n?u=RePEc:net:wpaper:0726&r=com |
| By: | Mario Pagliero |
| Abstract: | This paper provides the first empirical evidence of a positive impact of the quality and number of potential entrants on entry requirements in professional markets. The estimated effects are so large that increases in the quality of candidates are completely offset by increases in exam difficulty and therefore do not lead to any long run increase in the number of successful candidates. Variations in the number of candidates are also significantly (but not completely) offset by changes in exam difficulty. About one third of the additional candidates that otherwise would have passed the examination fail because of the increase in standards. These results are not in line with public interest theory of licensing. The classic rent seeking view of licensing can explain some (but not all) of the results. |
| Keywords: | professional licensing, legal market, bar exam, minimum standards, entry regulation. |
| JEL: | L4 L5 J4 K2 |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:cca:wpaper:53&r=com |
| By: | Itai Ater (Stanford University, Economics Department); ; |
| Abstract: | Empirical research on the relationship between market congestion and the market competitive level largely falsifies the positive relationship predicted by theoretical models. In this paper, I exploit the airline industry network structure and focus on the level of congestion during periods in which passengers cross-connect to their final destinations. About 70% of hub airport flights depart or land during these periods. The empirical analysis establishes a strong positive relationship. Furthermore, based on a simple theoretical model, I am able to quantify the potential time savings from eliminating congestion externalities and find that, on average, a flight can save 2 minutes of flight time at its departing airport and another 1.5 minutes at its destination airport. I also find that airlines choose to pad their schedule particularly on competitive routes, presumably to attract uninformed passengers. JEL classification: L93; R41; |
| Keywords: | Congestion; Air Transportation; |
| Date: | 2007–09 |
| URL: | http://d.repec.org/n?u=RePEc:net:wpaper:0728&r=com |
| By: | Andrés Rodríguez-Pose (London School of Economics); Hans-Martin Zademach (University of Munich) |
| Abstract: | This paper investigates the patterns of corporate mergers and acquisitions (M&As) involving firms located in the EU25 as well as in the four EFTA countries between 1998 and 2003. It first uncovers the \'cross-border balance\' of M&As across European states, before identifying, through quantitative multiple regression analysis and insights from qualitative, interview-based research, the extent to which the spatial perspective sheds light onto the factors that may explain the detected levels and patterns of corporate takeovers across Europe. The results indicate that the traditional motives of access to new and core markets, the effects of geographical proximity, and the internalisation of \'localised capabilities\' (proxied by a skilled and innovative labour pool) represent the key drivers of European M&As. Institutional factors, such as European integration, assessments of country risk, or language barriers, as well as structural factors (e.g. unemployment or education) appear to be - at least at the intra-European scale - less influential. |
| Keywords: | mergers & acquisitions; theory of the firm; spatial proximity; agglomeration economies; localised capabilities; economic integration; Europe |
| Date: | 2007–09–24 |
| URL: | http://d.repec.org/n?u=RePEc:imd:wpaper:wp2007-19&r=com |
| By: | Ricardo Ribeiro (STICERD, The London School of Economics and Political Science); João Vareda (Faculdade de Economia, Universidade Nova de Lisboa,); |
| Abstract: | There is a substantial number of cases where the a priori relationship between products is not at all clear in the sense that although apparent to be clear substitutes may turn out to be in fact complements, or vice-versa. This paper aims to study the relationship between fixed and mobile telephony in the United Kingdom and, in particular, address the question if mobile communications crowded out fixed telephony or if, on the other hand, the two types of communications are in fact complements. We estimate a structural continuous-choice demand model following Pinkse et al. (2002), Pinkse and Slade (2004), and Slade (2004) and we find that at the current diffusion stage, fixed and mobile communications appear to be complements. Given that the model is micro-founded, we also address the question of how the evolution of the price differential between the two types of communication may, respectively, affect the welfare of consumers and firms. We find that the continuation of these price trends have substantial welfare benefits for subscribers and at the same time have no significant impact on the profits for firms. Finally, we present some economic policy implications, especially about the need to (de)regulate telecommunications provision. |
| Keywords: | Telecommunications, Mobile, Fixed, Demand, Substitution, Complementarity |
| JEL: | C13 D12 L51 L96 |
| URL: | http://d.repec.org/n?u=RePEc:net:wpaper:0733&r=com |
| By: | Pelnar, Gregory |
| Abstract: | I present an overview of the antitrust literature on sports leagues, with particular emphasis on the National Collegiate Athletic Association, the National Football League, Major League Baseball, the National Basketball Association, and the National Hockey League, as well as on sanctioning organizations such as NASCAR. I review the major antitrust court decisions, the commentaries of the leading antitrust experts on these decisions, and the extensive sports economics literature touching on issues raised in these cases, particularly empirical studies assessing the anticompetitive and procompetitive effects of various league rules and policies. I also review the broader industrial organization literature on issues such as factors affecting the stability of joint ventures. I conclude with a summary of proposals for addressing the monopoly power of sports leagues. |
| Keywords: | antitrust; sports leagues |
| JEL: | L83 L4 L1 |
| Date: | 2007–10–12 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:5382&r=com |
| By: | Parimal Bag (University of Surrey); Paul Levine (University of Surrey); Neil Rickman (University of Surrey and CEPR) |
| Abstract: | Treating spectrum of different bandwidths as essentially distinct inputs needed for possibly different types of services has formed the core of spectrum analysis in academic research so far. New technological advances, such as cognitive radio, now allow us to move away from this inflexibility and to open up the new possibility of making different spectrum bands compatible. Spectrum, it is envisaged, is to become divisible and homogeneous. Auctions for this case have not been previously analyzed. By suitably adapting the Anglo-Dutch spectrum auction of Binmore and Klemperer (2000) and the split-award procurement auction of Anton and Yao (1989) and combining the adapted versions, we set out an ‘Anglo-Dutch split-award auction’ for divisible and homogeneous radio spectrum. An important feature of the game is a post-auction stage where the firms who have acquired some spectrum compete in the production of radio services. The equilibrium of the complete information game is completely characterized and important differences with the procurement auction highlighted. Finally, we compare the performance of our auction mechanism with a complete information form of the Binmore – Klemperer mechanism. |
| Keywords: | radio spectrum, spectrum trading, imperfect competition |
| JEL: | L10 L50 L96 |
| Date: | 2007–10 |
| URL: | http://d.repec.org/n?u=RePEc:sur:surrec:0507&r=com |
| By: | Antonio Romero-Medina; Matteo Triossi |
| Abstract: | The paper studies two games of capacity manipulation in hospital-intern markets. The focus is on the stability of Nash equilibrium outcomes. We provide minimal necessary and sufficient conditions guaranteeing the existence of pure strategy Nash Equilibria and the stability of outcomes. |
| Keywords: | Stable Matchings, Capacity, Nash Equilibrium, Cycles. |
| JEL: | C71 C78 D71 D78 J44 |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:cca:wpaper:52&r=com |
| By: | Alvin E. Roth |
| Abstract: | This essay discusses some things we have learned about markets, in the process of designing marketplaces to fix market failures. To work well, marketplaces have to provide thickness, i.e. they need to attract a large enough proportion of the potential participants in the market; they have to overcome the congestion that thickness can bring, by making it possible to consider enough alternative transactions to arrive at good ones; and they need to make it safe and sufficiently simple to participate in the market, as opposed to transacting outside of the market, or having to engage in costly and risky strategic behavior. I'll draw on recent examples of market design ranging from labor markets for doctors and new economists, to kidney exchange, and school choice in New York City and Boston. |
| JEL: | A11 C78 D02 D4 L1 |
| Date: | 2007–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:13530&r=com |