nep-ind New Economics Papers
on Industrial Organization
Issue of 2006‒11‒12
four papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Failing Firm Defense with Entry Deterrence By Alessandro Fedele; Massimo Tognoni
  2. The Quadratic Oil Extraction Oligopoly By John Hartwick
  3. Mobile Phone Mergers and Market Shares Short Term Losses and Long Term Gains By Jeremy T. Fox; Hector Perez
  4. Simulation of Merger in Mobile Telephony in Portugal By Lukasz Grzybowski; Pedro Pereira

  1. By: Alessandro Fedele; Massimo Tognoni
    Abstract: Under the principle of the Failing Firm Defense (FFD) a merger that would be blocked due to its harmful effect on competition could be nevertheless allowed when (i) the acquired firm is actually failing, (ii) there is no less anti-competitive alternative offer of purchase, (iii) absent the merger, the assets to be acquired would exit the market. We focus on potential anti-competitive effects of a myopic application of the third requirement by studying consequences of a horizontal merger on entry in a Cournot oligopoly with a failing firm. If the merger is blocked entry occurs and, when the industry is highly concentrated, consumer welfare is bigger because gains due to augmented competition exceed losses due to shortage of output.
    Keywords: Failing Firm Defense, Entry Deterrence, Consumer Surplus
    JEL: K21 L13 L41
    Date: 2006–10
  2. By: John Hartwick (Queen's University)
    Abstract: Each extractor has a distinct quadratic extraction cost and faces a linear industry demand schedule. We observe that the open loop and closed loop solutions are the same if initial stocks are such that each competitor is extracting in every period in which her competitors are extracting.
    Keywords: oligopoly extractors, closed loop solution
    JEL: D43 Q32
    Date: 2006–09
  3. By: Jeremy T. Fox (University of Chicago); Hector Perez (University of Chicago)
    Abstract: The US mobile phone industry has dramatically consolidated through mergers. We investigate whether a merger increases the performance of a combined carrier over the sum of its constituent parts. We first directly compare the quantities of post-merger carriers to those of their pre-merger predecessors. This analysis considers only two years after a merger, as most carriers engage in new mergers after that time. To examine possible long run implications, we also explore the cross sectional relationship between outcomes and measures of firm size, as firm size is increased in a merger. We examine the market share of new subscribers. We also examine two measures of firm size: the amount of a carrier’s geographic coverage and its past subscriber count.
    Date: 2006–09
  4. By: Lukasz Grzybowski (University of Alicante); Pedro Pereira (Autoridade da Concorrencia, Portugal)
    Abstract: This article assesses the unilateral eects of a merger in the Portuguese mobile telephony market. We use aggregate quarterly data from 1999 to 2005 and a nested logit model to estimate the price elasticities of demand and the marginal costs of subscription to mobile services. We nd that mobile services provided by the rms in the market are close substitutes. Based on these estimates, we simulate the eects of the merger. The merger may result in substantial price increases, even in the presence of large cost eciencies.
    Keywords: mobile telephony, merger simulation, network eects, lock in, nested logit
    JEL: L13 L43 L93
    Date: 2006–10

This nep-ind issue is ©2006 by Kwang Soo Cheong. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.