nep-ind New Economics Papers
on Industrial Organization
Issue of 2008‒03‒25
four papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. The Effect of Mergers on Consumer Prices: Evidence from Five Selected Case Studies By Orley Ashenfelter; Daniel Hosken
  2. Monopoly Behaviour with Speculative Storage By Mitraille, S.; Thille, H.
  3. Competition and quality in regulated markets: a differential-game approach By Kurt R. Brekke; Roberto Cellini; Luigi Siciliani; Odd Rune Straume
  4. Monopoly and the Incentive to Innovate When Adoption Involves Switchover Disruptions By Thomas J. Holmes; David K. Levine; James A. Schmitz, Jr.

  1. 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
  2. By: Mitraille, S.; Thille, H.
    Date: 2008
    URL: http://d.repec.org/n?u=RePEc:gue:guelph:2008-4&r=ind
  3. 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
  4. 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

This nep-ind issue is ©2008 by Kwang Soo Cheong. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at http://nep.repec.org. For comments please write to the director of NEP, Marco Novarese at <director@nep.repec.org>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.