nep-com New Economics Papers
on Industrial Competition
Issue of 2015‒02‒16
34 papers chosen by
Russell Pittman
United States Department of Justice

  1. Equilibrium Price Dispersion with Sequential Search By Nicholas Trachter; Guido Menzio
  2. Image Concerns and the Provision of Quality By Friedrichsen, Jana
  3. Second-Degree Price Discrimination on Two-Sided Markets By Böhme, Enrico
  4. Asymmetric and Endogenous Communication in Competition between Groups By Timothy N. Cason; Roman M. Sheremeta; Jingjing Zhang
  5. A Two-Sided Matching Approach for Partner Selection and Assessing Complementarities in Partners’ Attributes in Inter-Firm Alliances By Mindruta , Denisa; Moeen, Mahka
  6. Bargaining Power and Local Heroes By Heimeshoff, Ulrich; Klein, Gordon
  7. Firms’ Innovation Strategies Analyzed and Explained By Tavassoli, Sam; Karlsson, Charlie
  8. Instability And Network Effects In Innovative Markets By Paolo Sgrignoli; Elena Agliari; Raffaella Burioni; Augusto Schianchi
  9. Bidder Contests in International Mergers and Acquisitions: The Impact of Toeholds, Preemptive Bidding, and Termination Fees By Schneck, Colin; Bessler, Wolfgang; Zimmermann, Jan
  10. Network Expansion to Mitigate Market Power: How Increased Integration Fosters Welfare By Zerrahn, Alexander; Huppmann, Daniel
  11. Equilibrium Price Dispersion Across and Within Stores By Menzio, Guido; Trachter, Nicholas
  12. Compulsory Disclosure of Private Information - Theoretical and Experimental Results for the Acquiring-a-Company Game By Zaby, Alexandra; Güth, Werner; Pull, Kerstin; Stadler, Manfred
  13. Remedies vs. Extreme Options in Merger Control By Dertwinkel-Kalt, Markus; Wey, Christian
  14. Do Leniency Policies facilitate Collusion? Experimental Evidence By Rau, Holger; Clemens, Georg
  15. Legal Uncertainty By Lang, Matthias
  16. Games with Strategic Complements and Substitutes By Andrew Monaco; Tarun Sabarwal
  17. Does Competition Eliminate Discrimination? Evidence from the Commercial Sex Market in Singapore By Huailu Li; Kevin Lang; Kaiwen Leong
  18. Cournot Oligopoly, Homogeneous Products and Grappa Market: An Econometric Study By Laura Onofri; Vasco Boatto
  19. Empirical Games of Market Entry and Spatial Competition in Retail Industries By Victor Aguirregabiria; Junichi Suzuki
  20. Scarcity Rents and Incentives for Price Manipulation in Emissions Permit Markets with Stackelberg Competition By André, Francisco J.; de Castro, Luis Miguel
  21. The welfare impact of parallel imports: A structural approach applied to the German market for oral antidiabetics By Suppliet, Moritz; Duso, Tomaso; Herr, Annika
  22. Reference pricing and cost-sharing: Theory and evidence on German off-patent drugs By Herr, Annika; Stühmeier, Torben; Wenzel, Tobias
  23. Competition and R&D Financing Decisions: Theory and Evidence from the Biopharmaceutical Industry By Richard T. Thakor; Andrew W. Lo
  24. The index construction of cross-media concentration in the digital era: A comparative study By Tseng, Kuo-Feng
  25. Separation anxieties: Structural separation and technological diffusion in nascent fibre networks By Howell, Bronwyn
  26. Monopoly Power in the Eighteenth Century British Book Trade: By David Fielding; Shef Rogers
  27. Effects of Mergers and Acquisitions on Shareholder Wealth: Event Study for Latin American Airlines By Lina M. Cortés; John J. García; David Agudelo
  28. Effects of transaction and switching costs on mobile market performance By Basaure, Arturo; Suomi, Henna; Hämmäinen, Heikki
  29. Competition and the Operational Performance of Hospitals: The Role of Hospital Objectives By Andritsos , Dimitrios; Aflaki , Sam
  30. Safety in numbers? The effect of network competition on cybersecurity By Gideon, Carolyn; Hogendorn, Christiaan
  31. Alternatives to network neutrality: A South African perspective By Potgieter, Petrus H.
  32. Disruptive competition vs. single standard: The role of risk-averse investors in the decline of the European computer and handset industries By Weber, Arnd
  33. Game-theoretical models of the competitive dynamics in optical network service provision By Waldman, Helio; Bortoletto, Rodrigo Campos
  34. R&D, Patenting and Market Regulation: Evidence from EU Electricity industry By Carlo Cambini; Federico Caviggioli; Giuseppe Scellato

  1. By: Nicholas Trachter (Federal Reserve Bank of Richmond); Guido Menzio (University of Pennsylvania)
    Abstract: We propose a novel theory of equilibrium price dispersion in product markets with search frictions. As in Diamond (1971), buyers search for sellers sequentially. In contrast to Diamond (1971), buyers do not meet all sellers with the same probability. Specifically, a fraction of the buyers’ meetings leads to one particular large seller, while the remaining fraction of the meetings leads to one of a continuum of small sellers. We prove that the unique equilibrium of this model is such that sellers post a non-degenerate distribution of prices and buyers capture a positive fraction of the gains from trade. The fraction of gains from trade accruing to the buyers is hump-shaped with respect to the market power of the large seller. However, for any degree of market power of the large seller, the fraction of gains from trade accruing to the buyers converges to one when search frictions vanish, and converges to zero when search frictions become arbitrarily large.
    Date: 2014
  2. By: Friedrichsen, Jana
    Abstract: Consumption patterns can be indicative of how a consumer wants to be perceived by others. In this paper, I study markets where consumers are heterogeneous with respect to both their concerns for the quality of goods and the image associated with buying them. Consumers with a taste for quality lend a positive image to the product of their choice and thereby increase the product's value to others. A monopolist restricts the product portfolio and charges price premia to allocate image along with quality. Heterogeneity in image concerns thereby provides a rationale for pooling consumers with differing quality preferences. Although image is correlated with a product's quality in equilibrium, an increase in the value of image may decrease quality provision. In a competitive market, premium prices are unsustainable so that image-concerned consumers buy excessive quality instead. By restricting the product space, monopoly allows for more efficient allocation of image and may therefore yield higher welfare than competition. Policy options to remedy the efficiency losses are discussed.
    JEL: D21 D82 L15
    Date: 2014
  3. By: Böhme, Enrico
    Abstract: The paper provides an analysis of the second-degree price discrimination problem on a monopolistic two-sided market. In a simple framework with two distinct types of agents on market side 1, we show that under incomplete information the extent of platform access for high-demand agents is strictly reduced below the benchmark level with complete information. In addition, the paper finds that it is feasible in the monopoly optimum that the bundle for low-demand agents is more expensive than the one for high-demand agents if the extent of interaction with agents from the opposite market side is assumed to be bundle-specific.
    JEL: D42 D82 L12
    Date: 2014
  4. By: Timothy N. Cason (Department of Economics, Krannert School of Management, Purdue University); Roman M. Sheremeta (Department of Economics, Weatherhead School of Management, Case Western Reserve University); Jingjing Zhang (Economics Discipline Group, University of Technology Sydney)
    Abstract: Costless pre-play communication has been shown to effectively facilitate within-group coordination. However, in competitive coordination games, such as rent-seeking contests, better within-group coordination leads to more aggressive competition and lower efficiency. We report an experiment in which two groups compete in a weakest-link contest by expending costly efforts. We find that allowing within-group communication makes groups compete more aggressively. When only one group can communicate, the communicating group coordinates better and expends higher efforts than the non-communicating group. However, the communicating group earns payoffs that are not different from the baseline contest without any communication, while the non-communicating group earns lower payoffs than in this baseline contest. Allowing within-group communication in both groups leads to even more aggressive competition and the lowest payoffs to both groups. Despite such a “harmful” effect of communication, groups vote to endogenously open communication channels even though this leads to lower payoffs and efficiency.
    Keywords: between-group competition, within-group competition, communication, coordination, contests, experiments
    JEL: C70 D72 H41
    Date: 2015
  5. By: Mindruta , Denisa; Moeen, Mahka
    Abstract: Strategic alliances are undertaken to create value through complementarities of resources and capabilities of the partner firms. The authors develop a matching framework to study strategic alliances, taking a market perspective that explicitly incorporates key features of transactions in strategic alliances: two sided decision making in voluntary collaboration; quest for complementarities between indivisible and heterogeneous partner attributes; and competition on each side for partners on the other side. They assess the relative performance of matching models and binary choice models when estimating parameters within simulations based on a known functional relationship. Within the context of research alliances in the bio-pharmaceutical industry, we hypothesize and find support using the matching model framework for complementarity in partner size, and in upstream research capabilities.
    Keywords: alliances; two-sided matching; maximum score estimator; bio-pharmaceutical industry; complementarity
    Date: 2014–11–22
  6. By: Heimeshoff, Ulrich; Klein, Gordon
    Abstract: Retailer bargaining power is an important aspect of many international antitrust investigations. Size and market share analysis are often the cornerstones of bargaining power identi cation. However, other factors, like consumer behavior, i.e. "one-stop shopping", can heavily a ect the bargaining environment. We show and quantify, analyzing a natural experiment of a supply boycott of small local beer breweries towards a national retailer, that "one-stop shopping" leads to severe purchasing externalities, which is a novel nding. This results in a shift in the bargaining position in favor of the manufacturer, which is elevant for antitrust investigations. Neglecting those externalities in investigations and focusing mainly on size arguments may lead to a wrong assessment of bargaining power. Therefore a careful a case by case analysis of bargaining power is necessary in antitrust investigations.
    JEL: L42 L81 L13
    Date: 2014
  7. By: Tavassoli, Sam (Centre for Innovation, Research and Competence in the Learning Economy (CIRCLE), Blekinge Institute of Technology.); Karlsson, Charlie (Blekinge Institute of Technology, Jönköping International Business School & Centre of Excellence for Science and Innovation Studies (CESIS))
    Abstract: This paper analyzes various innovation strategies of firms. Using five waves of the Community Innovation Survey in Sweden, we have traced the innovative behaviour of firms over a ten-year period, i.e. between 2002 and 2012. We distinguish between sixteen innovation strategies, which compose of Schumpeterian 4 types of innovations (process, product, marketing, and organizational) plus various combinations of these four types. First, we find that firms are not homogenous in choosing innovation strategies; instead, they have a wide range of preferences when it comes to innovation strategy. Second, using Transition Probability Matrix, we found that firms also persist to have such a diverse innovation strategy preferences. Finally, using Multinomial Logit model, we explained the determinant of each innovation strategies, while we gave special attention to the commonly used innovation strategies among firms.
    Keywords: innovation strategy; product innovations; process innovations; market innovations; organizational innovations; innovation strategies; heterogeneity; firms; persistence; Community Innovation Survey; Sweden
    JEL: D22 L20 O31 O32
    Date: 2015–02–02
  8. By: Paolo Sgrignoli (Department of Economics (University of Verona)); Elena Agliari (University of Parma); Raffaella Burioni (University of Parma); Augusto Schianchi (University of Parma)
    Abstract: We consider a network of interacting agents and we model the process of choice on the adoption of a given innovative product by means of statistical mechanics tools. The modelization allows us to focus on the effects of direct interactions among agents in establishing the success or failure of the product itself. Mimicking real systems, the whole population is divided into two sub-communities called, respectively, Innovators and Followers, where the former are assumed to display more influence power. We study in detail and via numerical simulations on a random graph two different scenarios: no-feedback interaction, where innovators are cohesive and not sensitively affected by the remaining population, and feedback interaction, where the influence of followers on innovators is non negligible. The outcomes are markedly different: in the former case, which corresponds to the creation of a niche in the market, Innovators are able to drive and polarize the whole market. In the latter case the behavior of the market cannot be definitely predicted and become unstable. In both cases we highlight the emergence of collective phenomena and we show how the final outcome, in terms of the number of buyers, is affected by the concentration of innovators and by the interaction strengths among agents.
    Keywords: Innovation diffusion, Agent-based, Collective phenomena, Innovators, Random network
    JEL: D85 O31 O32
    Date: 2014–09
  9. By: Schneck, Colin; Bessler, Wolfgang; Zimmermann, Jan
    Abstract: We study for a sample of international mergers and acquisitions the effectiveness of three takeover bidding strategies first in preventing bidder contests and second, if a contest has occurred, in increasing the probability of a successful offer. Our results indicate that support for the preemptive bidding hypothesis (signaling with a high cash offer) is limited to bidder contests, where a higher percentage of cash payment increases the likelihood of bidder success. However, evidence that a high initial offer preempts competition is confined to the civil law countries. We find strong evidence for the toehold and termination fee hypotheses, especially after controlling for bidder heterogeneity in bidder contests. Nevertheless, the effect of termination fee provision on deterring competition and on offer success varies across time and countries, while we observe no variation with respect to toeholds. Moreover, we find that latent (but unobservable) competition from financial and foreign buyers is generally not sufficient to curb the influence of actual bidder competition on offer success as well as on target and bidder wealth. We also analyze the impact of acquisition experience and of the expertise offered by reputable financial advisors, and find that serial acquirers are more likely to avoid bidder contests and both, experienced acquirers and bidders employing a reputable advisors, complete a larger proportion of deals. Overall, our results offer new and complementary evidence on the role of strategic bidding in international mergers and acquisitions.
    JEL: D44 G34 G34
    Date: 2014
  10. By: Zerrahn, Alexander; Huppmann, Daniel
    Abstract: Lack of transmission capacity hampers the efficient integration of the European electricity market, and thereby precludes reaping the full benefits of competition. We investigate to what extent the expansion of the transmission grid promotes competition, efficiency, and welfare. This work proposes a three-stage model for grid investment: a benevolent planner decides on network upgrades; she considers the welfare benefits of investment through a reduction of market power exertion by strategic generators. These firms anticipate their impact on the Independent System Operator and are able to exert market power, in particular when lines are congested. We illustrate the model on a simple three-node network. Results indicate that network expansion indeed provides a suitable way of enhancing welfare due to a reduction of market power potential.
    JEL: L13 L51 C61
    Date: 2014
  11. By: Menzio, Guido (University of Pennsylvania); Trachter, Nicholas (Federal Reserve Bank of Richmond)
    Abstract: We develop a search-theoretic model of the product market that generates price dispersion across and within stores. Buyers differ with respect to their ability to shop around, both at different stores and at different times. The fact that some buyers can shop from only one seller while others can shop from multiple sellers causes price dispersion across stores. The fact that the buyers who can shop from multiple sellers are more likely to be able to shop at inconvenient times induces price dispersion within stores. Specifically, it causes sellers to post different prices for the same good at different times in order to discriminate between different types of buyers.
    JEL: D43
    Date: 2015–01–15
  12. By: Zaby, Alexandra; Güth, Werner; Pull, Kerstin; Stadler, Manfred
    Abstract: Based on the acquiring-a-company game of Samuelson and Bazerman (1985), we theoretically and experimentally analyze the acquisition of a firm. Thereby we compare cases of symmetrically and asymmetrically informed buyers and sellers. This setting allows us to predict and test the effects of information disclosure as prescribed by two recently implemented directives of the European Union, the Transparency and the Takeover-Bid Directive. Our theoretical and experimental results suggest a welfare-enhancing effect of compulsory information disclosure. Hence, the EU Transparency and the EU Takeover-Bid Directive should both be welfare enhancing.
    JEL: C91 D82 D61
    Date: 2014
  13. By: Dertwinkel-Kalt, Markus; Wey, Christian
    Abstract: We investigate how remedies in merger control affect information acquisition by an antitrust agency. We identify conditions under which an ''extreme options'' regime which does not allow for remedies improves information acquisition by the agency which increases consumer surplus. The legislator (''principal'') and the agency share the same objective function with the only exception that the latter must bear information costs. When remedies are not feasible, then the agency's incentive to acquire information is relatively large as a false decision tends to have large adverse effects. When remedies are feasible, the intermediate option does not involve such risks, so that incentives to acquire information decreases. However, our results depend crucially on the institutional environment. In the case of an adversial system, information acquisition incentives are not per se lower if remedies are feasible.
    JEL: L13 K21 L40
    Date: 2014
  14. By: Rau, Holger; Clemens, Georg
    Abstract: This paper experimentally analyzes the cartel coordination challenge induced by the discrimination of cartel ringleaders in leniency policies. Ringleaders often take a leading role in the coordination and formation of a cartel. A leniency policy which grants amnesty to all "whistleblowers" except for ringleaders may therefore reduce the incentive to become a ringleader and may disrupt cartel formation. We analyze discriminatory and non-discriminatory leniency policies in a multi-stage cartel formation experiment where multiple ringleaders may emerge. Although theory predicts that cartels will always be reported, whistleblowing rarely occurs. Paradoxically the discriminatory leniency policy induces more firms to become ringleaders, which ultimately facilitates coordination in the cartel.
    JEL: L41 K21 C92
    Date: 2014
  15. By: Lang, Matthias
    Abstract: This article considers legal uncertainty in competition law. Contrary to perceived wisdom, I show that the uncertainty itself might have positive welfare effects, if it is sufficiently small. Legal uncertainty functions as a screening device provided that the threshold of legality is uncertain. Then, near the threshold, firms decision whether to pursue controversial business practices varies with their type. This allows mitigating the policy restrictions, as the competition authority cannot perfectly observe the types of the firms. Such an effect might influence the trade-off between per-se rules and rules of reason in competition law. In an extension, I discuss the effects of introducing ambiguity about the fine. I prove that this ambiguity mitigates enforcement problems if auditing costs are sufficiently high.
    JEL: K20 K42 L51
    Date: 2014
  16. By: Andrew Monaco (Department of Economics, University of Puget Sound); Tarun Sabarwal (Department of Economics, University of Kansas)
    Abstract: This paper studies games with both strategic substitutes and strategic complements, and more generally, games with strategic heterogeneity (GSH). Such games may behave differently from either games with strategic complements or games with strategic sub- stitutes. Under mild assumptions (on one or two players only), the equilibrium set in a GSH is totally unordered (no two equilibria are comparable in the standard product order). Moreover, under mild assumptions (on one player only), parameterized GSH do not allow decreasing equilibrium selections. In general, this cannot be strengthened to conclude increasing selections. Monotone comparative statics results are presented for games in which some players exhibit strategic substitutes and others exhibit strategic complements. For two-player games with linearly ordered strategy spaces, there is a char- acterization. More generally, there are sufficient conditions. The conditions apply only to players exhibiting strategic substitutes; no additional conditions are needed for players with strategic complements. Several examples highlight the results.
    Keywords: Lattice games, strategic complements, strategic substitutes, strategic hetero- geneity, equilibrium set, monotone comparative statics
    JEL: C70 C72
    Date: 2015–01
  17. By: Huailu Li; Kevin Lang; Kaiwen Leong
    Abstract: The street sex worker market in Geylang, Singapore is highly competitive. Clients can search legally at negligible cost. Sex workers discriminate based on client ethnicity despite an excess supply of sex workers. Workers are more (less) likely to approach and ask a higher (lower) price of Caucasians (Bangladeshis), based on their perceived willingness to pay. They avoid Indians, set a significantly higher price and are less likely to reach an agreement with them, suggesting that Indians face taste discrimination. These findings remain even after controlling for prostitute fixed effects and are consistent with the workers' self-reported attitudes and beliefs.
    JEL: J7 O17
    Date: 2015–01
  18. By: Laura Onofri; Vasco Boatto
    Abstract: In this study, using scanner data, collected from super-market transactions in 2009, we estimate an eight equations simultaneous model with a 3SLS routine, with the objective to empirically analyze the Grappa market structure. Results show that the supply side of the Grappa market is characterized by an oligopolistic structure, where the dominant firms compete as oligopolists à la Cournot with homogeneous products. Firms’ competition is mostly played on the quantity grounds and mostly disregards product differentiation strategies. The dominant firms produce and supply a “cheap”, homogenous product. Interpretation of the results focus on cultural consumption of this very “ancient” liquor and corroborate previous studies, where hedonic analysis of the demand side has shown consumers’ very low/null implicit prices for the product differentiated characteristics.
    Keywords: Cournot oligopoly, 3SLS, scanner data, grappa market.
    JEL: L13 Q11 C3
    Date: 2015–01–01
  19. By: Victor Aguirregabiria; Junichi Suzuki
    Abstract: We survey the recent empirical literature on structural models of market entry and spatial competition in oligopoly retail industries. We start with the description of a framework that encompasses various models that have been estimated in empirical applications. We use this framework to discuss important specification assumptions in this literature: firm heterogeneity; specification of price competition; structure of spatial competition; firms' information; dynamics; multi-store firms; and structure of unobservables. We next describe different types of datasets that have been used in empirical applications. Finally, we discuss econometric issues that researchers should deal with in the estimation of these models, including multiple equilibria and unobserved market heterogeneity. We comment on the advantages and limitations of alternative estimation methods, and how these methods relate to identification restrictions. We conclude with some issues and topics for future research.
    Keywords: Retail industries; Market entry and exit; Spatial competition; Econometrics of discrete choice games
    JEL: L11 L13 L81 R30
    Date: 2015–02–02
  20. By: André, Francisco J.; de Castro, Luis Miguel
    Abstract: Prior research has shown, on the one hand, that firms subject to a cap-and-trade system can enjoy scarcity rents and, on the other hand, that cost effectiveness in a competitive emission permit market could be affected by tacit collusion and price manipulation when the corresponding polluting product market is oligopolistic. It has also been argued that this type of collusive behavior might be responsible for the high prices of permits observed during the first phase of the EU ETS. We analyze these cross market links using a Stackelberg model to show that, under reasonable assumptions, there are no incentives to collude in order to manipulate prices up. However, incentives for manipulating the price of permits upward appear if there is an initial free allocation of permits, which is a policy argument against grandfathering and in favor of auctioning. This effect is increasing with the amount of permits allocated to the leader. The likelihood of observing price manipulation increases with those changes that tend to undermine the leader’s advantage in output production or to reduce the leader’s abatement cost.
    Keywords: Emissions permits, Collusion, Market power, Duopoly, Stackelberg model.
    JEL: D43 L13 Q58
    Date: 2015–02–01
  21. By: Suppliet, Moritz; Duso, Tomaso; Herr, Annika
    Abstract: We investigate the welfare impact of parallel imports using a large panel data set containing monthly information on sales, ex-factory prices, and further product characteristics for all 700 antidiabetic drugs sold in Germany between 2004 and 2010. We estimate a two-stage nested logit model of demand and, based on an oligopolistic model of multi-product firms, we then recover the marginal costs and mark-ups. We finally evaluate the effect of the parallel imports' policy by calculating a counter-factual scenario without parallel trade. According to our estimates, parallel imports reduce the prices for patented and generic drugs by 39% and 0.05%, respectively. This amounts to an increase in the demand-side surplus by 11.4 million per year which is relatively small compared to the market size of around 470million. Manufacturers of original drugs, instead, lose more than half of their variable profits when parallel trade is allowed and only a small fraction of these rents are appropriated by the parallel importers.
    JEL: I11 I18 L13
    Date: 2014
  22. By: Herr, Annika; Stühmeier, Torben; Wenzel, Tobias
    Abstract: This paper evaluates the impact of reference pricing on prices and co-payments in the (German) market for off-patent pharmaceuticals. We present a theoretical model with price-sensitive and loyal consumers that shows that a decrease in the reference price affects the consumers' co-payments in a non-monotonic way: For high reference prices, a marginally lower reference price may lead to lower co-payments. However, for low reference prices a further reduction may result into higher consumer co-payments. We use quarterly data on reference priced drugs covered by the social health insurance in Germany over the period 2007 - 2010 to analyze the empirical effects of reference price reductions. We find that, while prices decrease due to the reduction, co-payments behave non-monotonically and indeed increase if the reference price is sufficiently low.
    JEL: I18 I11 L13
    Date: 2014
  23. By: Richard T. Thakor; Andrew W. Lo
    Abstract: R&D-intensive firms such as biotechnology and pharmaceutical companies follow very different corporate financial policies from firms in less R&D-intensive industries. To account for these differences, we propose an equilibrium model for such firms in which their capital structure, amount of R&D investment, and information disclosure policy are all endogenously determined in response to the degree of competition in the industry. The key results are that, as competition increases, such firms will: (1) increase R&D investment and reduce investment in assets-in-place that support existing products; (2) carry more cash and maintain less net debt; and (3) experience declining betas but greater total stock return volatility due to higher idiosyncratic risk. While the focus is on the biopharmaceutical industry, the results are broadly applicable to other R&D-intensive industries as well. We confirm the model's empirical implications using historical data from the biopharmaceutical industry, and our tests also deal with the endogeneity issue introduced by the fact that a firm's R&D investments and the product-market competition it faces influence each other.
    JEL: D82 D83 G31 G32 L11 L15 L25 L65
    Date: 2015–01
  24. By: Tseng, Kuo-Feng
    Abstract: In the convergence age of media, telecommunication and Internet, firms need more media contents, audiences or platforms to acquire the economics of scale or scope. Some critics argued that the traditional antitrust law handles the violation of horizontal and vertical merger & acquisition, but not for the conglomeration. If the conglomerate's shares are small in each individual market, whether the sum of the total shares will deter new competitors from entering the market requires further discussion. The KEK, the index of cross-media concentration used in German, is applied to examine the degree of multiple market concentration. However, this study found that for most countries they did not analyzed M&A cases by using the similar KEK index because there are many questions raised in the calculation and definition. Currently the antitrust law is practicable enough to keep the cross media competitive if the barrier could be removed and new entry could enter the market.
    Keywords: merger,acquisition,conglomerate,concentration,cross media,antitrust law
    Date: 2014
  25. By: Howell, Bronwyn
    Abstract: Vertical separation of upstream network operations from downstream retail activities, as the most extreme form of access regulation, has long been considered a legitimate regulatory remedy against use of market power in upstream infrastructure markets to engage in price- and non-price discrimination to foreclose competition in downstream retail markets. However, the remedy is increasingly being mandated for new networks, sometimes before any investment has been made. This paper uses theories of General Purpose Technologies and regulatory economics to consider how vertical separation - compared to both access regulation and no regulation - poses challenges to the ability to maximise scale economies at the early stage of a network life-cycle. This suggests greater caution in its use at this stage compared to middle and mature phases of the life-cycle. The theories are examined via case studies of two markets where vertical separation has been mandated for Fibre-to-the-Home networks - Australia and New Zealand - and one where it has not - the Netherlands. The case studies suggest that mandatory separation imposes additional constraints on the network owner's ability to achieve scale economies arising from rapid uptake of a new network relative to access regulation when it fails to replicate amongst any retailers the vertically-integrated operator's incentives to engage in aggressive early-stage marketing. Analysis also suggests that contractual limitations may have greater effect on the ability to achieve scale economies than structural impositions and ownership limitations.
    Date: 2014
  26. By: David Fielding (Department of Economics, University of Otago, New Zealand); Shef Rogers (Department of English and Linguistics, University of Otago, New Zealand)
    Abstract: In conventional wisdom, the reform of British copyright law during the eighteenth century brought an end to the monopoly on the sale of books held by the Stationers’ Company, and the resulting competition was one of the driving forces behind the expansion of British book production during the Enlightenment. In this paper, we analyze a new dataset on eighteenth century book prices and author payments, showing that the legal reform brought about only a temporary increase in competition. The data suggest that by the end of the century, informal collusion between publishers had replaced the legal monopoly powers in place at the beginning of the century. The monopoly power of retailers is not so easily undermined.
    Keywords: book trade; publishing; copyright; retail monopoly
    JEL: D42 L12 N83 Z11
    Date: 2014–12
  27. By: Lina M. Cortés; John J. García; David Agudelo
    Abstract: This study analyzes the effectof changes in corporate controlon the way shareholdersbenefit from the announcements of selling and buying airlines, thus contributing to the literature on mergers and acquisitions (M&As) in emerging markets. Using a methodologyof event study, including GARCH and OLS models, we find evidence that some selling companies obtain abnormal returns that are statisticallysignificant after the announcement of the M&A. However, when the merger is not strategic, the companies present statisticallysignificant negative abnormal returns. The resultsare not conclusive when analyzing the effecton the valueof the buying companies.
    Keywords: Mergers and acquisitions; Event study; Airlines; Latin America
    JEL: G14 G34 L21
    Date: 2015–01–01
  28. By: Basaure, Arturo; Suomi, Henna; Hämmäinen, Heikki
    Abstract: The exponential growth in demand of mobile Internet urges mobile network operators (MNOs) to increase the supply of wireless network capacity at a high pace. From this perspective, operators should not only obtain further network capacity but also make a more efficient use of the existing capacity. Latest developments in load balancing solutions address this challenge through two opposite evolution paths, cooperative and competitive. On the one hand, operator-driven cooperative solutions permit operators to trade spectrum capacity at wholesale level through e.g., Dynamic Spectrum Access (DSA) technologies. On the other hand, user-driven competitive solutions enable users to access and switch between different networks e.g., by adopting user multihoming capability and thereby intensifying retail competition. The deployment of these solutions determines the level of transaction and switching costs and consequently the level of retail competition and wholesale trading of spectrum capacity in a mobile market. This paper analyzes the effects of decreasing these costs in different mobile access scenarios, by employing agent-based modelling. Thus, the performed simulations aim to understand the effect of load balancing technologies on market performance. Finally, the paper suggests policy implications for different markets.
    Keywords: transaction costs,switching costs,load balancing,dynamic spectrum access,user multihoming,wholesale trading and retail competition
    Date: 2014
  29. By: Andritsos , Dimitrios; Aflaki , Sam
    Abstract: The authors examine the effect of a hospital's objective (i.e., non-profit versus for-profit) in hospital markets for elective care. Using game-theoretic analysis and queueing models to capture the operational performance of hospitals, they compare the equilibrium behavior of three market settings in terms of such criteria as waiting times and the total patient cost from waiting and hospital care payments. In the first setting, patients are served exclusively by a single non-profit hospital; in the second, patients are served by two competing non-profit hospitals. In the third setting, the market is served by one non-profit hospital and one for-profit hospital. A non-profit hospital provides free care to patients, although they may have to wait; for-profit hospitals charge a fee to provide care with minimal waiting. A comparison of the first two settings reveals that competition can hamper a hospital's ability to attain economies of scale and can also increase waiting times. A comparison between the second and third settings indicates that, when the public funder is not financially constrained, the presence of a for-profit sector may allow the funder to lower both the financial costs of providing coverage and the total costs to patients. The authors' analysis suggests that the public funder should exercise caution when using policy tools that support the for-profit sector -- for example, patient subsidies -- because such tools may increase patient costs in the long run; it might be preferable to raise the level of reimbursement to the non-profit sector.
    Keywords: hospitals; for-profit healthcare; non-profit healthcare; queueing models; service provider competition
    Date: 2014–05–26
  30. By: Gideon, Carolyn; Hogendorn, Christiaan
    Abstract: Economic incentives for security investment in elements of the Internet is of increasing concern. This paper contains an exploration of the incentives for Internet service providers (ISP)s to invest in security. The analysis focuses on the spillover effects of ISP security investments to other ISPs, which may be serving a different market or competing in the same market. The findings show that the nature of these spillover effects can change the effect competition in the ISP market has on incentives for investment in cybersecurity by the ISPs.
    Date: 2014
  31. By: Potgieter, Petrus H.
    Abstract: The debate on network neutrality over the past decade has evolved (in the academic sphere but not so much in public) to include sophisticated considerations of the welfare enhancing or reducing effects of mandating network neutrality. For example, in a model by Economides and Hermalin (2012) it can be shown mathematically that among what they term the \feasible discrimination schemes," it will be the case that network neutrality is welfare enhancing. Other authors, often by looking at the European market, have argued against ex ante regulation of network neutrality Crocioni (2011) and have pointed out other dangers inherent in the mandating of network neutrality Yoo (2005). The issue is in the public eye and has, at the time of writing, lead to occasional (\Save our Internet!") street protests in various places. Similarly to Bauer and Obar (2014), this paper suggests a mix of policies and interventions might be the most appropriate way of addressing the concerns raised by activists and industry analysts in the discussion of discrimination on the last-mile network. Our preference is for an approach that can be easily understood by consumers; allows for relatively simple welfare and competition enhancing regulation and allows for the greatest possible degree of freedom for service providers to invest and to pursue their commercial interests.
    Date: 2014
  32. By: Weber, Arnd
    Date: 2014
  33. By: Waldman, Helio; Bortoletto, Rodrigo Campos
    Date: 2014
  34. By: Carlo Cambini; Federico Caviggioli; Giuseppe Scellato
    Abstract: In this paper we study the effects of the changes in the level of product market regulation on the industry-level innovation intensity in the Electricity sector across 16 European countries during years 1990-2009. We matched data on R&D budgets and EPO patent applications from IEA and Eurostat Databases and indexes of market regulation conditions from OECD, in order to test the impact of deregulatory policies on the propensity to innovate in new energy technologies. Our findings indicate an increase in the aggregated Electricity R&D and in patenting activities following market deregulation. Our measure of market regulation intensity is based on the aggregation of three factors that capture respectively entry barriers, public ownership and vertical integration. Econometric results suggest that policies aimed at a reduction in vertical integration have a positive impact on both industry-level R&D and patenting. The reduction of public ownership of incumbent operators and entry barriers are mostly associated to a significant increase in R&D expenditures. In the paper we discuss the implication of this evidence in light of the current trend in investment in the electricity sector in Europe.
    Keywords: Innovation, Patents, Regulation, Electricity.
    JEL: L94
    Date: 2015

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