nep-ind New Economics Papers
on Industrial Organization
Issue of 2006‒04‒08
three papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. The relationship between regulation and competition policy for network utilities By David Newbery
  2. Competition and Entry in Banking: Implications for Stability and Capital Regulation By Boot, Arnoud W A; Marinc, Matej
  3. Cross-Border Merger Waves By Fumagalli, Eileen; Vasconcelos, Helder

  1. By: David Newbery
    Abstract: Should regulation of potentially competitive elements of network utilities be left with sector regulators or solely subject to normal competition laws? Britain evolved licenses for network activities overseen by regulators while the EU places more emphasis on making sector regulation consistent with competition law. The paper discusses the appropriateness of the competition law approach for telecoms and electricity. Post-modern utilities like telecoms, in which facilities-based competition is possible, lend themselves to the approach laid out in the Communications Directives, and its application to mobile call termination is discussed. Electricity, where collective dominance is more likely, does not fit comfortably into this approach. Instead, licence conditions retain advantages where it may be necessary to modify market rules in a timely and well-informed manner, as exemplified by the English Electricity Pool.
    Keywords: Regulation, competition policy, telecommunications, electricity, market power
    JEL: G18 L94 L96
    Date: 2006–02
    URL: http://d.repec.org/n?u=RePEc:cam:camdae:0631&r=ind
  2. By: Boot, Arnoud W A; Marinc, Matej
    Abstract: We assess the influence of competition and capital regulation on the stability of the banking system. We particularly ask two questions: i) how does capital regulation affect (endogenous) entry; and ii) how do (exogenous) changes in the competitive environment affect bank monitoring choices and the effectiveness of capital regulation? Our approach deviates from the extant literature in that it recognizes the fixed costs associated with banks’ monitoring technologies. These costs make market share and scale important for the banks’ cost structures. Our most striking result is that increasing (costly) capital requirements can lead to more entry into banking, essentially by reducing the competitive strength of lower quality banks. We also show that competition improves the monitoring incentives of better quality banks and deteriorates the incentives of lower quality banks; and that precisely for those lower quality banks competition typically compromises the effectiveness of capital requirements. We generalize the analysis along a few dimensions, including an analysis of the effects of asymmetric competition, e.g. one country that opens up its banking system for competitors but not vice versa.
    Keywords: banking; capital regulation; competition
    JEL: G21 L13 L50
    Date: 2006–02
    URL: http://d.repec.org/n?u=RePEc:cpr:ceprdp:5518&r=ind
  3. By: Fumagalli, Eileen; Vasconcelos, Helder
    Abstract: This paper proposes a sequential merger formation game with cost synergies to study how trade policy can influence firms' choice between domestic and cross-border mergers in an international Cournot oligopoly. We find that the equilibrium market structure depends heavily on: (i) the level of trade costs; and (ii) whether or not active antitrust authorities are incorporated within the sequential merger game. In addition, it is shown that whenever mergers occur in equilibrium, they occur in waves and the merger wave comprises at least one cross-border merger. We also analyze how the equilibrium market structures are affected by the presence of lobbying efforts.
    Keywords: endogenous mergers; merger waves; tariff-jumping FDI
    JEL: F10 F13 L13 L41
    Date: 2006–03
    URL: http://d.repec.org/n?u=RePEc:cpr:ceprdp:5601&r=ind

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