nep-ind New Economics Papers
on Industrial Organization
Issue of 2006‒12‒04
two papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Entry and Vertical Disintegration By Alain de Fontenay; Christiaan Hogendorn
  2. Excessive(?) Entry of National Telecom Networks, 1990-2001 By Christiaan Hogendorn

  1. By: Alain de Fontenay (CITI, Columbia University); Christiaan Hogendorn (Economics Department, Wesleyan University)
    Abstract: We formalize and extend George Stigler’s famous article “The division of labor is limited by the extent of the market.” We emphasize economies of scale in intermediate goods production as a determinant of firm boundaries and vertical control. We show that there are potential coordination failures which may prevent efficient vertical disintegration, and we discuss how these might be either overcome or used to the advantage of incumbent firms.
    Keywords: entry, vertical integration, specialization
    JEL: D23 L22 L23
    Date: 2005–12
  2. By: Christiaan Hogendorn (Economics Department, Wesleyan University)
    Abstract: We document entry and capacity expansion in US long-distance fiber-optic networks before and during the “telecom boom.” We disentangle the many swaps and leases between networks in order to measure owned route miles versus route miles shared with other carriers. Entry appears much more moderate when these shared miles are not counted. Strategic behavior can lead to excessive entry, and we find evidence of such behavior regarding total miles (including swaps and leases) but not regarding owned miles. We conclude that entry was excessive only with regard to swaps and leases, but not with regard to the physical building of the networks.
    Keywords: telecommunications, investment, preemption
    JEL: L11 L13 L96
    Date: 2006–01

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