nep-ind New Economics Papers
on Industrial Organization
Issue of 2007‒10‒20
three papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Competition and Mergers among Nonprofits By Prufer, J.
  2. Prices vs. Quantities: Environmental Regulation and Imperfect Competition By Erin T. Mansur
  3. Entry Threat and Entry Deterrence: The Timing of Broadband Rollout By Mo Xiao; Peter F. Orazem;

  1. By: Prufer, J. (Tilburg University, Center for Economic Research)
    Abstract: Should mergers among nonprofit organizations be regulated differently than mergers among for-profit firms? The relevant empirical literature is highly controversial, the theoretical literature is scarce. I analyze the question by modeling duopoly competition with quality-differentiated goods. I compare welfare effects of mergers between firms with the effects of mergers between nonprofits dominated by consumers, workers, suppliers, and pure donors respectively. I find that mergers both among firms and among most types of nonprofits do not increase welfare. Mergers among consumerdominated nonprofits, however, can improve welfare. These results imply for competition law and regulation that ?nonprofit? might be too crude a label for organizations with varying goals. Consequently, mergers among certain nonprofit organizations should not necessarily be treated in the same way as mergers among for-profit firms ? a notion that is absent in current merger guidelines both in the US and the EU.
    Keywords: Nonprofits; Mergers; Antitrust; Governance; Owner Objectives; Notfor- profit Sector; Organizational Choice
    JEL: L44 L31 L22
    Date: 2007
  2. By: Erin T. Mansur
    Abstract: In a market subject to environmental regulation, a firm's strategic behavior affects the production and emissions decisions of all firms. If firms are regulated by a Pigouvian tax, changing emissions will not affect the marginal cost of polluting. However, under a tradable permits system, the polluters' decisions affect the permit price. This paper shows that this feedback effect may increase a strategic firm's output. Relative to a tax, tradable permits improve welfare in a market with imperfect competition. As an application, I model strategic and competitive behavior of wholesalers in the Pennsylvania, New Jersey, and Maryland electricity market. Simulations suggest that exercising market power decreased local pollution by approximately nine percent, and therefore, substantially reduced the price of the region's pollution permits. Furthermore, I find that had regulators opted to use a tax instead of permits, the deadweight loss from imperfect competition would have been approximately seven percent greater.
    JEL: L13 L94 Q53
    Date: 2007–10
  3. By: Mo Xiao (Eller College of Management, University of Arizona); Peter F. Orazem (Department of Economics, Iowa State University);
    Abstract: Past empirical literature provides strong evidence that competition increases when new firms enter a market. However, rarely have economists been able to examine how competition changes with the threat of entry. This paper uses the evolution of the zip code level market structure of facilities-based broadband providers from 1999 to 2004 to investigate how a firm adjusts its entry strategy when facing the threat of additional entrants. We identify the potential entrant into a local market as threatened when a neighboring market houses more than firms providing broadband services. We first document that such a market is more likely to accommodate more than firms in the long run. Taking account of endogeneity of entry into neighboring markets, we find that the first 1 to 3 entrants significantly delay their entrance into an open local market facing entry threat. We do not find evidence of delayed entry for firms following the 3rd entrant. The evidence suggests that the mere threat of entry may curb market power associated with oligopolistic market structure.
    Keywords: Entry, Entry Threat, Broadband Providers
    JEL: L13 L8
    Date: 2007–09

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