nep-ind New Economics Papers
on Industrial Organization
Issue of 2007‒10‒06
four papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Asymmetric Collusion and Merger Policy By Mattias Ganslandt; Lars Persson; Helder Vasconcelos
  2. Product Differentiation and Relative Performance Evaluation in an Asymmetric Duopoly By Aditi Sengupta
  3. How Airline Markets Work...Or Do They? Regulatory Reform in the Airline Industry By Severin Borenstein; Nancy L. Rose
  4. Distributional effects of price reforms in the Italian utility markets By Raffaele Miniaci; Carlo Scarpa; Paola Valbonesi

  1. By: Mattias Ganslandt (Research Institute of Industrial Economics (IFN)); Lars Persson (Research Institute of Industrial Economics (IFN) and CEPR); Helder Vasconcelos (Universidade Católica Portuguesa (Porto) and CEPR)
    Abstract: In their merger control, EU and the US have considered symmetric size distribution (cost structure) of firms to be a factor potentially leading to collusion. We show that forbidding mergers leading to symmetric market structures can induce mergers leading to asymmetric market structures with higher risk of collusion, when firms face indivisible costs of collusion. In particular, we show that if the rule determining the collusive outcome has the property that the large (efficient) firm benefits sufficiently more from collusion when industry asymmetries increase, collusion can become more likely when firms are moderately asymmetric.
    Keywords: Collusion; Cost Asymmetries; Merger Policy
    JEL: D43 L41
    Date: 2007–08
  2. By: Aditi Sengupta (Southern Methodist University)
    Abstract: In a model of managerial delegation in a duopoly with asymmetric costs, I show that an increase in the intensity of market competition (product differentiation) increases the absolute weight placed on rival's profit (relative performance) in the managerial compensation scheme for both firms and also increases market concentration. The relatively efficient (larger) firm always places higher weight on rival's performance and obtains higher market share.
    Keywords: Strategic Delegation, Relative Performance, Managerial Compensation, Oligopoly
    JEL: D43 L13 M52 M21
    Date: 2007–09
  3. By: Severin Borenstein; Nancy L. Rose
    Abstract: Following a brief review of the U.S. domestic airline industry under regulation (1938-1978), we study the changes that have occurred in pricing, service, and competition in the 28 years since deregulation. We then examine some of the major public policy issues facing the industry: (a) the sustainability of competition and volatility of airline profits, (b) possible market power of dominant airlines, and (c) congestion and investment shortfall in the airport and air traffic infrastructure.
    JEL: L1 L13 L51 L93
    Date: 2007–09
  4. By: Raffaele Miniaci (Università di Brescia); Carlo Scarpa (Università di Brescia); Paola Valbonesi (Università di Padova)
    Abstract: In this paper we analyse some distributional effects of the reforms of water and energy services in Italy. We first document the new regulation setting in these services, illustrating the dynamics of utility prices and of household expenditure in the period 1998-2005. We then propose a way to measure the affordability of public utilities, in order to investigate how many households would incur a potentially excessive burden, if they consumed a minimum quantity of utility services. Finally, we calculate this index on data from the ‘Survey on Family Budgets’. Our results show how the affordability of utility bills varies from region to region depending on climate, income, family endowment and size. The analysis – also based on a counterfactual exercise – finds that so far, utility reforms do not seem to have produced any negative effects on weaker households.
    Keywords: Affordability, Public Utilities, Regulation, Gas, Electricity, Water
    JEL: D12 L51 L97
    Date: 2007–09

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