nep-ind New Economics Papers
on Industrial Organization
Issue of 2007‒09‒16
five papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Robust Monopoly Pricing By Dirk Bergemann; Karl Schlag
  2. Mergers and collusion with asymmetric capacities By Emilie Dargaud
  3. Structural Remedies in Merger Regulation in a Cournot Framework By Andrei Medvedev
  4. Market-Share Contracts with Asymmetric Information By Adrian Majumdar; Greg Shaffer
  5. Entry, Exit and Productivity Empirical Results for German Manufacturing Industries By Joachim Wagner

  1. By: Dirk Bergemann (Cowles Foundation, Yale University); Karl Schlag
    Abstract: We consider a robust version of the classic problem of optimal monopoly pricing with incomplete information. In the robust version of the problem the seller only knows that demand will be in a neighborhood of a given model distribution. We characterize the optimal pricing policy under two distinct, but related, decision criteria with multiple priors: (i) maximin expected utility and (ii) minimax expected regret. While the classic monopoly policy and the maximin criterion yield a single deterministic price, minimax regret always prescribes a random pricing policy, or equivalently, a multi-item menu policy. The resulting optimal pricing policy under either criterion is robust to the model uncertainty. Finally we derive distinct implications of how a monopolist responds to an increase in ambiguity under each criterion.
    Keywords: Monopoly, Optimal pricing, Robustness, Multiple priors, Regret
    JEL: C79 D82
    Date: 2005–07
    URL: http://d.repec.org/n?u=RePEc:cwl:cwldpp:1527r&r=ind
  2. By: Emilie Dargaud (GATE CNRS)
    Abstract: When it examines the risk of coordinated effects, an antitrust authority will usually compare the situation where the merger is accepted with an attendant risk of collusion with the benchmark case in which competition is present ex-post. The main objective of this paper is to show that the antitrust authority must take into account the possibility for firms to collude if a merger is rejected. In fact, firms can have incitations to make collusion ex-post (after a rejection of a merger) whereas they would not make collusion ex-ante. All the papers on mergers and collusion tend to look at a minimal discount factor threshold for collusion to be sustained. This article does not only suggest necessary and sufficient conditions for collusion to be enforced but it also analyses the choice which firms have as to whether to collude. We consider an industry with cost-asymmetric firms and we study the analysis of collusion under leniency programmes.
    Keywords: leniency programme, merger, oligopoly supergame
    JEL: K42 L11 L41
    Date: 2007–04
    URL: http://d.repec.org/n?u=RePEc:gat:wpaper:0708&r=ind
  3. By: Andrei Medvedev (Centre for Competition Policy, University of East Anglia)
    Abstract: To prevent possible abuse of market power, an antitrust agency can force merging firms to divest some of their assets. The divested assets can be sold via auction either to existing competitors or to a new entrant. Divestiture of assets extends the range of parameters when a merger satisfies a consumer surplus standard and should be approved. If the agency takes a more active stance toward the selection of a purchaser of the assets (e.g. to exclude an incumbent from the auction), then it could lead to a favourable outcome for consumers and merging firms.
    Keywords: Merger regulation, structural remedies, divestiture
    JEL: D43 K21 L51
    Date: 2007–08
    URL: http://d.repec.org/n?u=RePEc:ccp:wpaper:wp07-16&r=ind
  4. By: Adrian Majumdar (Centre for Competition Policy, University of East Anglia); Greg Shaffer (Simon School of Business, University of Rochester)
    Abstract: In this paper, a dominant supplier and competitive fringe supply goods to a common buyer who has private information about the state of demand. We give conditions under which market-share contracts are profitable, and we show that, in some cases, the full-information outcome can be obtained (unlike in standard screening models, where the agents earns an information rent in the high state and demand is distorted in the low state). Our results also inform the antitrust debate on bundling, fidelity rebates and all-units discounts. We provide a new motive for a dominant firm to bundle its own product with a competitively supplied product (with ambiguous consequences for welfare), and we show that the market-share contracts, which are a subset of fidelity rebates, are more profitable than all-units discounts.
    Keywords: Adverse selection, screening, bundling, fidelity rebates, all-units discounts
    JEL: L13 L41 L42
    Date: 2007–09
    URL: http://d.repec.org/n?u=RePEc:ccp:wpaper:wp07-17&r=ind
  5. By: Joachim Wagner (University of Lueneburg and Max Planck Institute of Economics)
    Abstract: Using panel data from Spain Farinas and Ruano (IJIO 2005) test three hypotheses from a model by Hopenhayn (Econometrica 1992): (H1) Firms that exit in year t were in t-1 less productive than firms that continue to produce in t. (H2) Firms that enter in year t are less productive than incumbent firms in year t. (H3) Surviving firms from an entry cohort were more productive than non-surviving firms from this cohort in the start year. Results for Spain support all three hypotheses. This paper replicates the study using a unique newly available panel data sets for all manufacturing plants from Germany (1995 - 2002). Again, all three hypotheses are supported empirically.
    Keywords: entry, exit, productivity
    JEL: L11 L60
    Date: 2007–09–12
    URL: http://d.repec.org/n?u=RePEc:jrp:jrpwrp:2007-064&r=ind

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