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on Industrial Organization |
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Issue of 2008‒03‒25
four papers chosen by |
| By: | Orley Ashenfelter; Daniel Hosken |
| Abstract: | In this paper we propose a method to evaluate the effectiveness of U.S. horizontal merger policy and apply it to the study of five recent consumer product mergers. We selected the mergers from those that, from the public record, seemed to be most problematic for the antitrust agencies. Thus we estimate an upper bound on the likely price effect of completed mergers. Our study employs retail scanner data and uses familiar panel data program evaluation procedures to measure price changes. Our results indicate that four of the five mergers resulted in some increases in consumer prices, while the fifth merger had little effect. |
| JEL: | L1 L41 L66 L71 L73 |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:13859&r=ind |
| By: | Mitraille, S.; Thille, H. |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:gue:guelph:2008-4&r=ind |
| By: | Kurt R. Brekke (Department of Economics, Norwegian School of Economics and Business Administration, and Health Economics Bergen); Roberto Cellini (Department of Economics, University of Catania); Luigi Siciliani (Department of Economics and Related Studies, and Centre for Health Economics, University of York); Odd Rune Straume (Universidade do Minho - NIPE) |
| Abstract: | We investigate the effect of competition on quality in regulated markets (e.g., health care, higher education, public utilities) taking a differential game approach, in which quality is a stock variable. Using a Hotelling framework, we derive the open-loop solution (providers commit to an optimal investment plan at the initial period) and the closed-loop solution (providers move investments in response to the dynamics of the states). If the marginal provision cost is constant, the open-loop and closed-loop solutions coincide, implying that static models are robust to a dynamic specification. If the marginal provision cost is increasing, investment and quality are lower in the closed-loop solution: in fact, quality drops to the minimum level in steady state, implying that quality competition is effectively eliminated. In this case, static models tend to exaggerate the positive effect of competition on quality. Our results can explain the mixed empirical evidence on competition and quality for regulated markets. |
| Keywords: | Regulated markets; Competition; Quality. |
| JEL: | H42 I11 I18 L13 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:nip:nipewp:08/2008&r=ind |
| By: | Thomas J. Holmes; David K. Levine; James A. Schmitz, Jr. |
| Abstract: | When considering the incentive of a monopolist to adopt an innovation, the textbook model assumes that it can instantaneously and seamlessly introduce the new technology. In fact, firms often face major problems in integrating new technologies. In some cases, firms have to (temporarily) produce at levels substantially below capacity upon adoption. We call such phenomena switchover disruptions, and present extensive evidence on them. If firms face switchover disruptions, then they may temporarily lose some unit sales upon adoption. If the firm loses unit sales, then a cost of adoption is the foregone rents on the sales of those units. Hence, greater market power will mean higher prices on those lost units of output, and hence a reduced incentive to innovate. We introduce switchover disruptions into some standard models in the literature, show they can overturn some famous results, and then show they can help explain evidence that firms in more competitive environments are more likely to adopt technologies and increase productivity. |
| JEL: | L10 L12 |
| Date: | 2008–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:13864&r=ind |