nep-ind New Economics Papers
on Industrial Organization
Issue of 2007‒09‒09
four papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Price discrimination By Armstrong, Mark
  2. Mergers as Auctions By Ivaldi, Marc; Motis, Jrissy
  3. Pricing, Investments and Mergers with Intertemporal Capacity Constraints By Christou, Charalambos; Kotseva, Rossitsa; Vettas, Nikolaos
  4. Footloose Monopolies: Regulating a "National Champion" By Calzolari, Giacomo; Scarpa, Carlo

  1. By: Armstrong, Mark
    Abstract: This paper surveys recent economic research on price discrimination, both in monopoly and oligopoly markets. Topics include static and dynamic forms of price discrimination, and both final and input markets are considered. Potential antitrust aspects of price discrimination are highlighted throughout the paper. The paper argues that the informational requirements to make accurate policy are very great, and with most forms of price discrimination a laissez-faire policy may be the best available in practical terms. However, careful case-by-case analysis of situations involving selective price cuts and margin squeeze seems worthwhile.
    Keywords: Price discrimination; bundling; entry deterrence; competition policy
    JEL: L1 L13
    Date: 2006–10
    URL: http://d.repec.org/n?u=RePEc:pra:mprapa:4693&r=ind
  2. By: Ivaldi, Marc; Motis, Jrissy
    Abstract: Most empirical studies that evaluate motives and gains in M&A conclude that acquirers at best do not lose from the deal while targets obtain positive gains. With a database containing merging firms’ characteristics and final bids, we propose a structural approach to infer acquirers’ gains from merging by interpreting a merger as an auction. Using nonparametric methods, we estimate bidders’ private values for targets and informational rents. We provide evidence of significant and positive merging gains. Moreover, investigating for the source of bidders’ private valuation and informational rents, our empirical analysis supports the synergy hypothesis as a motive in horizontal mergers.
    Keywords: auctions; corporate finance; event studies; merger
    JEL: C14 G14 G34 L10 L20
    Date: 2007–08
    URL: http://d.repec.org/n?u=RePEc:cpr:ceprdp:6434&r=ind
  3. By: Christou, Charalambos; Kotseva, Rossitsa; Vettas, Nikolaos
    Abstract: We set up a duopoly model with dynamic capacity constraints under demand uncertainty. We endogenize the investment decisions of the firms, examine their intertemporal pricing behavior, their incentives to merge, as well as the welfare implications of a merger. Whereas under known and constant demand the high capacity firm lets its low capacity rival sell out, under demand uncertainty we obtain a rich set of sales patterns. Each unit of available capacity has an option value (or opportunity cost), which depends on both firms' capacities, the current demand and the remaining horizon. This option value may be higher when the firms act non-cooperatively compared to the case when they merge to form a monopoly. Trade surplus may be higher when a merger takes place, as capacity is more efficiently managed over time. The prospect of a merger also leads to higher investment levels, as each firm wishes to appropriate a higher share of the total surplus. For some levels of the capacity instalment cost, a merger that turns the duopoly into a monopoly is welfare improving.
    Keywords: capacity constraints; dynamic oligopoly; inventories; mergers; price competition
    JEL: D43 L13 L22
    Date: 2007–08
    URL: http://d.repec.org/n?u=RePEc:cpr:ceprdp:6433&r=ind
  4. By: Calzolari, Giacomo; Scarpa, Carlo
    Abstract: We analyze the design of optimal regulation of a domestic monopolist that also competes in an unregulated foreign market. We show how foreign activities by the regulated firm affect domestic regulation, consumers’ surplus and firm’s profits. Although expansion in unregulated foreign markets amplifies the regulatory distortions that are caused by the regulator’s limited information, we also show that allowing the firm to compete abroad does not necessarily harm domestic consumers and we analyze if and when the firm’s decision to expand abroad does in fact coincide with consumers’ interests in the regulated market.
    Keywords: Foreign Competition; Multinational Enterprises; National Champions; Regulation
    JEL: F23 L51
    Date: 2007–08
    URL: http://d.repec.org/n?u=RePEc:cpr:ceprdp:6413&r=ind

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