New Economics Papers
on Industrial Organization
Issue of 2005‒05‒14
four papers chosen by

  1. Merger Failures By Albert Banal-Estañol; Jo Seldeslachts
  2. The Role of R&D Technology in Asymmetric Research Joint Ventures By Sami Dakhlia; Flavio M. Menezes; Akram Temimi
  3. Shattering the Myth of Costless Price Changes: Emerging Perspectives on Dynamic Pricing By Mark Bergen; Mark Ritson; Shantanu Dutta; Daniel Levy; Mark Zbaracki
  4. Pricing, Learning, and Strategic Behavior in a Single-Sale Model By Hector Chade; Virginia Vera de Serio

  1. By: Albert Banal-Estañol; Jo Seldeslachts
    Abstract: This paper proposes an explanation as to why some mergers fail, based on the interaction between the pre-merger gathering of information and the postmerger integration processes. Rational managers acting in the interest of shareholders may still lead their firms into unsuccessfully integrated companies. Firms may agree to merge and may abstain from putting forth integration efforts, counting on the partners to adapt. We explain why mergers among partners with closer corporate cultures can have a lower success rate and why failures should be more frequent during economic booms, consistent with the empirical evidence. Our setup is a global game (integration process) in which players decide whether to participate (merger decision). We show that private signals need to be noisy enough in order to ensure equilibrium uniqueness. <br> <br> <i>ZUSAMMENFASSUNG - (Gescheiterte Fusionen) <br> In dieser Arbeit wird eine Erklärung vorgestellt für das Scheitern von Fusionen. Sie beruht auf einem Modell, das das Verhalten der fusionierenden Firmen vor der Fusion, wenn Erkundungen über den Partner eingeholt werden, und nach der Fusion, wenn sich die Unternehmensteile integrieren müssen, in den Mittelpunkt stellt. Manager können nach diesem Modell durch rationales Verhalten die fusionierte Firma in Verluste und schlechte Aktienwerte führen, obwohl sie eigentlich das Interesse der Aktionäre im Blick haben. Die Firmen stimmen einer Fusion zu, halten sich aber beim Voranbringen der Integrationsbemühungen zurück, da sie darauf zählen, dass sich die Partner anpassen. Wir erklären, warum Fusionen zwischen Partnern mit ähnlichen Unternehmenskulturen eine geringere Erfolgsrate haben können und warum Misserfolge häufiger während eines wirtschaftlichen Booms auftreten. Dies ist konsistent mit empirischen Ergebnissen. Unser Ausgangspunkt ist ein globales Spiel, in dem der Integrationsprozess dargestellt wird und die Spieler entscheiden, ob sie sich am Spiel beteiligen, d.h. der Fusion zustimmen. Wir zeigen, dass ein eindeutiges Gleichgewicht nur garantiert werden kann, wenn die privaten Informationen der fusionierenden Firmen, die dem Fusionspartner nicht bekannt sind, genügend unpräzise sind.</i>
    Keywords: mergers, synergies, information, uncertainty, organizational culture.
    JEL: D74 D82 L20 M14
    Date: 2005–04
  2. By: Sami Dakhlia (University of Alabama); Flavio M. Menezes (Australian National University & EPGE/FGV); Akram Temimi (University of Alabama)
    Abstract: We characterize asymmetric equilibria in two-stage process innovation games and show that they are prevalent in the different models of R&D technology considered in the literature. Indeed, cooperation in R&D may be accompanied by high concentration in the product market. We show that while such an increase may be profitable, it may be socially inefficient.
    Keywords: Research and Development, Research Joint Ventures, Process Innovation Games
    JEL: D43 L1 O32
    Date: 2005–05–12
  3. By: Mark Bergen (University of Minnesota); Mark Ritson (London Business School); Shantanu Dutta (University of Sourthern California); Daniel Levy (Bar-Ilan University); Mark Zbaracki (University of Pennsylvania)
    Abstract: In this paper we argue that pricing is all about price changes, and that the costs of price changes are often simultaneously subtle and substantial. We discuss a framework to deal with the dynamics of changing prices. This framework incorporates customer interpretations of price changes, an awareness of the organizational costs of price changes, investments in future pricing processes, and an understanding of the role that supply chains play in price change strategy. The framework can be used at the tactical level to improve the specific price changes chosen and made, at the managerial level to decide whether or not to make a particular price change at all, and at the strategic level to determine what price adjustment processes should be invested in to improve pricing effectiveness in the future.
    Keywords: Menu Cost, Myth, Costly Price Change, Cost of Price Adjustment, Dynamic Pricing, Customer Cost of Price Adjustment, Organizational Cost of Price Adjustment, Managerial Cost of Price Adjustment, Supply Chain, Investment in Pricing Processes, Price Change Tactic, Price Change Strategy, Pricing Tactics, Pricing Strategy, Pricing Effectiveness
    JEL: M31 M10 M20 L11 L16 E31 D40 D20
    Date: 2005–05–12
  4. By: Hector Chade (W. P. Carey School of Business Department of Economics); Virginia Vera de Serio (Facultad de Ciencias Economicas, Universidad Nacional)
    Abstract: This paper analyzes an infinite horizon model where a seller, who owns an indivisible unit of a good for sale, has incomplete information about the state of the world that determines not only the demand she faces but also her own valuation for the good. Over time, she randomly meets potential buyers who may have incentives to strategically manipulate her learning process. The Perfect Bayesian Equilibria of the game are characterized, as well as some interesting limit properties when agents become almost infinitely patient. Comparative static results regarding the incentives to experiment are presented, and the expected number of periods until the seller trades is calculated.

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