nep-ind New Economics Papers
on Industrial Organization
Issue of 2005‒07‒03
four papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. ENTRY DECISIONS AND ADVERSE SELECTION: AN EMPIRICAL ANALYSIS OF LOCAL CREDIT MARKETS By Giorgio Gobbi; Francesca Lotti
  2. On Monopolistic Competition and Optimal Product Diversity: a Comment on Cost Structure and Workers' Rents By Pierre M. Picard; Eric Toulemonde
  3. Congestion pricing of inputs in vertically related markets By isamu matsukawa
  4. Merger control with asymmetric information : what structural remedies can and cannot achieve. By Andreea Cosnita; Jean-Philippe Tropeano

  1. By: Giorgio Gobbi (Economics Research Department, Bank of Italy); Francesca Lotti (Economics Research Department, Bank of Italy)
    Abstract: During the last decades there has been a widespread relaxation of legal entry barriers into the banking industry, with potential benefits for financial integration and competition. Obstacles to banks' geographical and business expansion have been removed and branching has been substantially liberalized. This paper analyzes the determinants of entry decisions into local credit markets using a unique data set before and after deregulation of the Italian banking industry. We estimate an entry model à la Poisson and find evidence that spreads between loan and deposit rates drive entry only for newly chartered banks, but does not affect the decision to open branches of banks operating in other markets. Branching by outside banks is instead positively correlated with business opportunities in the provision of financial services which do not require the acquisition of substantial proprietary information. Both these results are consistent with the hypothesis that in credit markets incumbents have an informational advantage over new entrants.
    Keywords: Entry, deregulation, informational barriers, count data, overdispersion
    JEL: G21 L22 C25
    Date: 2004–12
    URL: http://d.repec.org/n?u=RePEc:bdi:wptemi:td_535_04&r=ind
  2. By: Pierre M. Picard; Eric Toulemonde
    Abstract: In the Dixit-Stiglitz model of monopolistic competition, entry of firms is socially too small. Other authors have shown that excess entry is also a possibility with other preferences for diversity. We show that the cost structure and workers's rents can also explain excess entry.
    Keywords: monopolistic competition; product diversity
    JEL: D43 J5 L13 L16
    Date: 2005–02
    URL: http://d.repec.org/n?u=RePEc:lau:crdeep:05.02&r=ind
  3. By: isamu matsukawa (musashi university)
    Abstract: This paper conducts a welfare analysis of a two-part tariff that is applied to the congestion pricing of inputs supplied by a natural monopolist with increasing returns to scale to competitive firms that require an input in a fixed proportion to output. Congestion pricing of inputs is optimal for both the welfare-maximizing regulator and the profit-maximizing monopolist if it is applied in the form of a uniform price for the input. However, a two-part tariff for the congestion pricing of inputs is optimal if competition in the downstream market is imperfect or if there is demand uncertainty in the market.
    Keywords: two-part tariff
    JEL: L
    Date: 2005–06–28
    URL: http://d.repec.org/n?u=RePEc:wpa:wuwpio:0506012&r=ind
  4. By: Andreea Cosnita (EUREQua); Jean-Philippe Tropeano (EUREQua)
    Abstract: This paper aims to contribute to the normative economic analysis of mergers by taking into account the possible efficiency gains for the design of structural merger remedies. We show that a larger asset transfer should be requested from a less efficient merged firm than from a more efficient one, wich conforts the proportionality principle advocated by competition policy practitioners. However, since cost savings are private information of merging firms, the Competition Authority will require them to reveal their efficiency gains, so as to tailor the optimal remedy. We propose a revelation mechanism combining the use of divestitures with the regulation of asset sale prices. We discuss the opportunity of such an instrument, and argue that in practice Competition Authorities might be entiled to infer a lot from the sale price of divestitures.
    Keywords: Merger control, structural merger remedies, asymmetric information.
    JEL: D82 L41
    Date: 2005–06
    URL: http://d.repec.org/n?u=RePEc:mse:wpsorb:v05047&r=ind

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