nep-ind New Economics Papers
on Industrial Organization
Issue of 2005‒12‒20
five papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. New Anti-Merger Theories: A Critique By Edward J. Lopez
  2. Competition in Large Markets By Jeffrey R. Campbell
  3. Entry and Exit in a Liberalised Market. By Maria J. Gil-Molto; Claudio A. Piga
  4. Cross-Border Mergers and Acquisitions: On Revealed Comparative Advantage and Merger Waves By Steven Brakman; Harry Garretsen; Charles van Marrewijk
  5. Bertrand Equilibria and Sharing Rules By Hoernig, Steffen

  1. By: Edward J. Lopez (San Jose State University)
    Abstract: The purpose of this paper is to evaluate two new anti-merger instruments, innovation markets and unilateral effects, on the basis of economic theory and evidence. I first discuss how the economics of antitrust has developed over the years, with the intention of characterizing the intellectual inheritance of 1990s’ antitrust regulators. Within this context, I then discuss each anti-merger instrument, how it has been applied in specific cases, and how it accords with underlying economic science. On the basis of these arguments, antitrust regulators should pause and reconsider the theoretical and empirical bases of applying unilateral effects and innovation markets to merger investigations.
    Keywords: antitrust, mergers, innovation markets, unilateral effects
    JEL: K
    Date: 2005–12–12
  2. By: Jeffrey R. Campbell
    Abstract: This paper develops a simple and robust implication of free entry followed by competition without substantial strategic interactions: Increasing the number of consumers leaves the distributions of producers' prices and other choices unchanged. In many models featuring non-trivial strategic considerations, producers' prices fall as their numbers increase. Hence, examining the relationship between market size and producers' actions provides a nonparametric tool for empirically discriminating between these distinct approaches to competition. To illustrate its application, I examine observations of restaurants' seating capacities, exit decisions, and prices from 224 U.S. cities. Given factor prices and demographic variables, increasing a city's size increases restaurants' capacities, decreases their exit rate, and decreases their prices. These results suggest that strategic considerations lie at the heart of restaurant pricing and turnover.
    JEL: L11 L81
    Date: 2005–12
  3. By: Maria J. Gil-Molto (Loughborough University Economics Department); Claudio A. Piga (Loughborough University Economics Department)
    Abstract: We analyze the determinants of entry and exit in the European Airline Markets in the post-liberalization period. Unlike previous studies, we find that the presence of charter or seasonal operators and the level of quality provided by the incumbents are relevant to explain entry and exit. Differential traits in the main low cost airlines' entry and exit behavior are also analysed.
    Keywords: Entry, Exit, Airlines, Conditional Logit
    JEL: L11 L93
    Date: 2005–12
  4. By: Steven Brakman; Harry Garretsen; Charles van Marrewijk
    Abstract: By combining two large data sets (on international trade flows and on mergers and acquisitions - M&As), we are able to test two implications of Neary’s (2003, 2004a) recent theoretical work. Analyzing M&As in a General Oligopolistic Equilibrium (GOLE) model incorporating strategic interaction between firms in a general equilibrium setting, we argue that: (i) M&As follow revealed comparative advantage as measured by the Balassa index, and (ii) M&As come in waves. We find convincing support for both hypotheses, thus showing for the first time that there is an empirical connection between export performance and mergers and acquisitions.
    Keywords: comparative advantage, cross border mergers and acquisitions, merger waves, general oligopolistic equilibrium model
    JEL: F10 F12 L13
    Date: 2005
  5. By: Hoernig, Steffen
    Abstract: We analyze how sharing rules affect Nash equilibria in Bertrand games, where the sharing of profits at ties is a decisive assumption. Necessary conditions for either positive or zero equilibrium profits are derived. Zero profit equilibria are shown to exist under weak conditions if the sharing rule is sign-preserving. For Bertrand markets we define the class of expectation sharing rules, where profits at ties are derived from some distribution of quantities. In this class the winner-take-all sharing rule is the only one that is always sign-preserving, while for each pair of demand and cost functions there may be many others.
    Keywords: Bertrand games, Sharing rule, Tie-breaking rule, Sign-preserving sharing rules, Expectation sharing rules
    JEL: C72 D43 L13
    Date: 2005

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