nep-ind New Economics Papers
on Industrial Organization
Issue of 2009‒03‒14
two papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. The joint estimation of firm-level market power and efficiency By Delis, Manthos D; Tsionas, Efthymios
  2. Coalition formation in the Airport Problem By Mahmoud Farrokhi

  1. By: Delis, Manthos D; Tsionas, Efthymios
    Abstract: The aim of this study is to provide a methodology for the joint estimation of efficiency and market power of individual banks. The proposed method utilizes the separate implications of the new empirical industrial organization and the stochastic frontier literatures and suggests identification using the local maximum likelihood (LML) technique. Through LML, estimation of market power of individual banks becomes feasible, while a number of restrictive theoretical and empirical assumptions are relaxed. The empirical analysis is carried out on the basis of EMU and US bank data and the results suggest small differences in the market power and efficiency levels of banks between the two samples. Market power estimates indicate fairly competitive conduct in general; however, heterogeneity in market power estimates is substantial across banks within each sample. The latter result suggests that while the banking industries examined are fairly competitive in general, the practice of some banks deviates from the average behavior, and this finding has important policy implications. Finally, efficiency and market power present a negative relationship, which is in line with the so-called “quiet life hypothesis”.
    Keywords: Efficiency; market power; local maximum likelihood
    JEL: L11 C14 G21
    Date: 2009–01–07
    URL: http://d.repec.org/n?u=RePEc:pra:mprapa:13947&r=ind
  2. By: Mahmoud Farrokhi (Institute of Mathematical Economics, Bielefeld University)
    Abstract: We have studied the incentives of forming coalitions in the Airport Problem. It has shown that in this class of games, if coalitions form freely, the Shapley value does not lead to the formation of grand or coalitions with many players. Just a coalition with a few number of players forms to act as the producer and other players would be the consumers of the product. We have found the two member coalition which forms and we have checked its stability.
    Date: 2009–03
    URL: http://d.repec.org/n?u=RePEc:bie:wpaper:416&r=ind

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