nep-ind New Economics Papers
on Industrial Organization
Issue of 2008‒04‒15
eleven papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Bertrand-Edgeworth Equilibrium in Oligopoly By Hirata, Daisuke
  2. A Note on the Excess Entry Theorem in Spatial Models with Elastic Demand By Yiquan Gu; Tobias Wenzel
  3. Price Discrimination with Partial Information: Does it pay off? By Rosa Branca Esteves
  4. Gasoline Prices Jump Up on Mondays: An Outcome of Aggressive Competition? By Oystein Foros; Frode Steen
  5. Brand Names Before the Industrial Revolution By Gary Richardson
  6. Delays in International Patent Application Outcomes By Paul H. Jensen; Alfons Palangkaraya; Julia Witt
  7. Regulation of Energy Prices in Russia By Kari E.O. Alho
  8. Mergers and capital flight in unionised oligopolies: Is there scope for a 'national champion' policy? By Kjell Erik Lommerud; Frode Meland; Odd Rune Straume
  9. An Economic Assessment of EC Merger Control: 1957–2007 By Bruce Lyons
  10. Mergers in Two-Sided Markets: An Application to the Canadian Newspaper Industry By Chandra, Ambarish; Collard-Wexler, Allan
  11. Mergers and Acquisitions in the Indian Pharmaceutical Industry: Nature, Structure and Performance By Beena, S

  1. By: Hirata, Daisuke
    Abstract: This paper investigates simultaneous move capacity constrained price competition game among three firms. I find that equilibria in an asymmetric oligopoly are substantially different from those in the duopoly and symmetric oligopoly. I characterize mixed strategy equilibria and show there exist possibilities of i) the existence of a continuum of equilibria ii) the smallest firm earning the largest profit per capacity and iii) non-identical supports of equilibrium mixed strategies, all of which never arise either in the duopoly or symmetric oligopoly. In particular, the second finding sheds light on a completely new pricing incentive in Bertrand competitions.
    Keywords: Price Competition, Oligopoly, Capacity Constraint, Homogeneous Goods
    JEL: L13 C72
    Date: 2008–03
  2. By: Yiquan Gu; Tobias Wenzel
    Abstract: This paper revisits the excess entry theorem in spatial models à la Vickrey (1964) and Salop (1979) while relaxing the assumption of inelastic demand. Using a demand function with a constant demand elasticity, we show that the number of firms that enter a market decreases with the degree of demand elasticity.We find that the excess entry theorem does only hold when demand is sufficiently inelastic. Otherwise, there is insufficient entry. In the limiting case of unit elastic demand, the market is monopolized. We point out when and how a public policy can be desirable and broaden our results with a more general transportation cost function.
    Keywords: Elastic demand, spatial models, excess entry theorem
    JEL: L11 L13
    Date: 2007–12
  3. By: Rosa Branca Esteves (Universidade do Minho - NIPE)
    Abstract: This paper investigates the profit effects of price discrimination when firms have partial information about consumer preferences. Using a two-dimensional model of product differentiation it shows that price discrimination can boost industriy profit if firms have acess to the right kind of information about consumer preferences while remaining ignorant of othet relevant information.
    Date: 2008
  4. By: Oystein Foros (Norwegian School of Economics and Business Administration); Frode Steen (Norwegian School of Economics and Business Administration)
    Abstract: This paper examines Norwegian gasoline pump prices using daily station-specific observations from March 2003 to March 2006. Whereas studies that have analysed similar price cyclees in other countriees find support for the Edgeworth cycle theory (Maskin and Tirole, 1988), we demonstrate that Norwegian gasoline price cycles involve a form of coordinated behavior. We also show that gasline prices follow a fixed weekly pattern, with prices increasing significantly every Monday at noon, and that gasoline companies appear to use the recommended retail price as a coordination device with a fixed link between the retail and recommended prices. Moreover, the weekly pattern changed in April 2004; whereas Thursday had been the high-price day, Monday now became the high-price day. The price-cost margin also increased significantly after the weekly pattern changed in April 2004.
    Keywords: gasoline prices, coordinated behavior
    Date: 2008–03
  5. By: Gary Richardson
    Abstract: In medieval Europe, manufacturers sold durable goods to anonymous consumers in distant markets, this essay argues, by making products with conspicuous characteristics. Examples of these unique, observable traits included cloth of distinctive colors, fabric with unmistakable weaves, and pewter that resonated at a particular pitch. These attributes identified merchandise because consumers could observe them readily, but counterfeiters could copy them only at great cost, if at all. Conspicuous characteristics fulfilled many of the functions that patents, trademarks, and brand names do today. The words that referred to products with conspicuous characteristics served as brand names in the Middle Ages. Data drawn from an array of industries corroborates this conjecture. The abundance of evidence suggests that conspicuous characteristics played a key role in the expansion of manufacturing before the Industrial Revolution.
    JEL: L15 L2 N13 N4 N6 O14 O34 O5
    Date: 2008–04
  6. By: Paul H. Jensen (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne); Alfons Palangkaraya (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne); Julia Witt (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne)
    Abstract: One component of the duration of pending patents – why applicants choose to delay the examination process – is modelled. We use a matched sample of 9,597 patent applications. Controlling for differences between patent offices, we find evidence of strategic behaviour by applicants.
    Keywords: Patent examinations; Patent pendency; Strategic behavior
    JEL: O31 O34
    Date: 2007–11
  7. By: Kari E.O. Alho
    Abstract: ABSTRACT : Russia prices its energy commodities domestically much lower than the prices prevailing in the international market. Using a general equilibrium framework, we analyse reasons for why Russia should or should not use such a price regulation. First, being a major exporter of energy commodities and having considerable monopolistic market power, the country is able to use its supply in order to influence the international energy prices. A rational way to channel this rent to the domestic non-energy sector and to domestic consumers is through a lower, i.e., competitive, domestic price on energy than that in the world market. Second, we introduce the classic infant-industry argument with positive intertemporal spillovers through learning-by-doing linked to current production. These spill-overs are likely to be relevant for manufacturing in a transition economy, which argument creates a further reason for a deviation in the pricing of energy to domestic industrial producers from the world market prices. However, an empirical consideration of these results and the estimation of the learning-by-doing curve suggest that the first effect can in principle be sizeable, while the second is only marginal and that, overall, Russia is currently subsidising its domestic energy prices clearly too much. Further, we conclude that the country should not subsidise its domestic consumers more than its domestic industry, as it does in reality. We also derive the optimal domestic energy tax and show that it is modest in comparison to its current rate. The optimal pricing policy could therefore have a marked positive effect on the international supply of energy by Russia.
    Keywords: energy, Russia, international and domestic prices
    Date: 2008–03–26
  8. By: Kjell Erik Lommerud (Department of Economics, University of Bergen, Norway); Frode Meland (Department of Economics, University of Bergen, Norway); Odd Rune Straume (Universidade do Minho - NIPE and University of Bergen (Health Economics Bergen, Department of Economics), Norway)
    Abstract: Many policy makers seem to prefer domestic alternatives to cross-broder mergers. Can such sentiments make sense? We contruct a model where cross-border mergers drive down union-set wages, where domestic mergers have larger non-labour cost synergies than international ones, and where policy evaluators care more about workers than capital owners. Apparently, the stage is set for national champion policies to be sensible. However, we also introduce the possibility of capital flight in the sense that a domestic firm can physically move its production out of the country. Restrictive cross-border merger policies can then seriously backfire, since they do not necessarily bring about a domestic merger - but capital flight instead.
    Keywords: Cross-border merger, national champions, greenfield FDI, trade unions
    JEL: F16 F21 J51 L13
    Date: 2008
  9. By: Bruce Lyons (School of Economics and Centre for Competition Policy, University of East Anglia)
    Abstract: This paper provides an assessment of EC merger policy from three perspectives. First, it places the evolution of merger policy alongside the evolution of economic ideas in relation to competition and industrial organisation. Second, it highlights recent developments in the practical economic appraisal of competition in four areas: unilateral (non-coordinated) effects, particularly the appropriate use of simulation techniques and the efficiency defence; coordinated effects (collective dominance), particularly the role of the Community Courts; non-horizontal effects, particularly the need for the new guidelines; and remedies, particularly weaknesses in current practice. Third, it develops a simple bargaining approach to merger policy evaluation to draw conclusions about the trend in overall effectiveness of EC merger policy since 1989.
    Keywords: merger control, unilateral effects, collective dominance, remedies, merger policy
    JEL: C78 K21 L41
    Date: 2008–03
  10. By: Chandra, Ambarish; Collard-Wexler, Allan
    Abstract: In this paper we study mergers in two-sided industries. While mergers have been studied extensively in traditional industries, and there is a large and rapidly evolving literature on two-sided markets, there has been little work empirically examining mergers in these markets. We present a model that shows that mergers in two-sided markets may not necessarily lead to higher prices for either side of the market. We test our conclusions by examining a spate of mergers in the Canadian newspaper industry in the late 1990s. Specifically, we analyze prices for both circulation and advertising to try to understand the impact that these mergers had on consumer welfare. We find that greater concentration did not lead to higher prices for either newspaper subscribers or advertisers.
    Keywords: Mergers; Two-Sided Markets; Newspapers
    JEL: D43 L4
    Date: 2008–03
  11. By: Beena, S
    Abstract: This paper tries to address the extent, nature and impact of the recent surge in consolidation strategies especially in the form of mergers and acquisitions followed by the firms in the Indian pharmaceutical industry. The study found that many of the firms are implementing these strategies in the new context of globalisation mainly to overcome the acute competition arising out of the pro-market reforms and to strengthen their market portfolio. The study reaches the conclusion that the consolidation strategies followed by the firms enabled them to cut down the wasteful expenses to a greater extent and which resulted in better performance of the merging firms compared to the non-merging firms in this industry.
    Keywords: mergers; acquisitions; consolidation; pharmaceutical industry; performance
    JEL: L6 G34 L80
    Date: 2006–06–28

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