nep-ind New Economics Papers
on Industrial Organization
Issue of 2007‒04‒21
eight papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Robust Monopoly Pricing By Dirk Bergemann; Karl Schlag
  2. Exclusionary Pricing and Rebates When Scale Matters By Karlinger, Liliane; Motta, Massimo
  3. Mergers of Equals & Unequals By Smeets, Valérie; Ierulli, Kathryn; Gibbs, Michael
  4. DOWNSTREAM MERGERS AND UPSTREAM INVESTMENT By Ramón Faulí-Oller; Joel Sandonís; Juana Santamaria-Garcia
  5. Retail Price Regulation and Innovation: Reference Pricing in the Pharmaceutical Industry By BARDEY, David; BOMMIER, Antoine; JULLIEN, Bruno
  6. The Intensity of Competition in the Hotelling Model: A New Generalization and Applications By Kim, Jaesoo
  7. "Endogenously determined Quality and Price In a Two-Sector Competitive Service Market With an Application to Down-Hill Skiing" By James G. Mulligan
  8. Oligopolistic Competition in the Japanese Wholesale Electricity Market: A Linear Complementarity Approach By TANAKA Makoto

  1. By: Dirk Bergemann; Karl Schlag
    Date: 2007–04–13
  2. By: Karlinger, Liliane; Motta, Massimo
    Abstract: We consider an incumbent firm and a more efficient entrant, both offering a network good to several asymmetric buyers. The incumbent disposes of an installed base, while the entrant has a network of size zero at the outset, and needs to attract a critical mass of buyers to operate. We analyze different price schemes (uniform pricing, implicit price discrimination - or rebates, explicit price discrimination) and show that the schemes which - for given market structure - induce a higher level of welfare are also those under which the incumbent is more likely to exclude the rival.
    Keywords: abuse of dominance; exclusionary practices; network industry; price discrimination; rebates
    JEL: L11 L14 L42
    Date: 2007–04
  3. By: Smeets, Valérie (Department of Economics, Aarhus School of Business); Ierulli, Kathryn (Graduate School of Business); Gibbs, Michael (Graduate School of Business)
    Abstract: We examine the organizational dynamics of integration post merger. Our basic question is whether <p> there is evidence of conflict between employees from the two merging firms. Such conflict can arise <p> for several reasons, including firm-specific human capital, corporate culture, power, or favoritism. <p> We examine this issue using a sample of Danish mergers. The results are consistent with the basic <p> hypothesis. Controlling for other effects, employees from the acquirer fare better than employees <p> from the acquired firm, suggesting that they have greater power in the newly merged hierarchy. As <p> a separate effect, the more that either firm dominates the other in terms of number of employees, <p> the better do its employees fare compared to employees from the other firm. This suggests that majority <p> / minority status is also important to assimilation of workers, much as in ethnic conflicts. Finally, <p> greater overlap of operations decreases turnover. This finding is inconsistent with the view <p> that workers of the two firms may be better substitutes for each other. However, the result and our <p> other findings are consistent with the view that more similar workers (in terms of either firm- or <p> industry-specific human capital) are easier to integrate post merger
    Keywords: Mergers; internal organization; conflicts; personnel economics
    JEL: G34 J63 M14
    Date: 2006–01–01
  4. By: Ramón Faulí-Oller (Universidad de Alicante); Joel Sandonís (Universidad de Alicante); Juana Santamaria-Garcia (Universidad de Alicante)
    Abstract: In this paper, we show that downstream mergers increase the incentives of an up-stream firm to invest in cost-reducing R&D. The upstream firm revenues increase with industry profits, which in turn increase with concentration downstream and this explains the positive link between concentration and investment. This effect is so important that it outweights the negative effect on prices due to lower competition. Therefore, in our context, horizontal mergers are pro-competitive.
    Keywords: downstream mergers, upstream innovation, competition
    Date: 2007–04
  5. By: BARDEY, David; BOMMIER, Antoine; JULLIEN, Bruno
    JEL: I18 L11 L15 L51
    Date: 2006–12
  6. By: Kim, Jaesoo
    Abstract: I develop a simple Hotelling model which corresponds the distribution of consumer preferences to the intensity of competition. This is a new perspective on consumer distribution in the Hotelling model. I impose two properties, the mean preserving spread (MPS) and monotone likelihood ratio property (MLRP), on distribution functions. These properties provide a way to measure the intensity of competition in Hotelling model. This approach sheds a new light on various issues. Non-uniform distributions can play a significant role in reversing well-known results that the uniform distribution has revealed or in discovering unknown results that the uniform distribution could not demonstrate. As examples, I study three issues such as incentives to innovate, the preference based price discrimination, and the value of information.
    Keywords: Hotelling model; Intensity of competition; Mean-preserving spread (contraction); Monotone likelihood ratio property; Innovation; Preferenced based price discrimination; The value of information
    JEL: L10
    Date: 2007–03
  7. By: James G. Mulligan (Department of Economics,University of Delaware)
    Abstract: This paper illustrates the importance of the role of long-run capacity constraints in a model explaining the effect of real income and transportation cost on long-run lift-ticket prices and lift capacity in a competitive two-sector ski industry. Despite the large number of game-theoretic models in the literature linking excess capacity to higher prices and limited entry, the model explains large increases in capacity and real prices over time despite a static number of skier-days per year without having to resort to an argument based on market power. This approach, thus, has points in common with work by Sutton (1991 and 1998) on endogenous vertical differentiation and persistent market concentration. The distinguishing feature of this paper, however, is that it links endogenous changes in service capacity directly to changes in both quality and price.
    Date: 2006
  8. By: TANAKA Makoto
    Abstract: Using a linear complementarity approach, we simulate the Japanese wholesale electricity market as a transmission-constrained Cournot market. Following Hobbs (2001), our model adopts the Cournot assumption in the energy market and the Bertrand assumption in the transmission market. The Bertrand assumption means that generators consider transmission charges as being exogenous, which can be interpreted as a kind of bounded rationality. We then present a simulation analysis of the Japanese wholesale electricity market, considering eight areas linked by interconnection transmission lines. Specifically, this paper examines the potential effects of both investment in interconnection transmission lines and the divestiture of dominant players' power plants.
    Date: 2007–04

This nep-ind issue is ©2007 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.