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on Industrial Organization |
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Issue of 2009‒05‒16
nine papers chosen by |
| By: | Joseph A. Clougherty; Tomaso Duso |
| Abstract: | It is commonly perceived that firms do not want to be outsiders to a merger between competitor firms. We instead argue that it is beneficial to be a non-merging rival firm to a large horizontal merger. Using a sample of mergers with expert-identification of relevant rivals and the event-study methodology, we find rivals generally experience positive abnormal returns at the merger announcement date. Further, we find that the stock reaction of rivals to merger events is not sensitive to merger waves; hence, ‘future acquisition probability’ does not drive the positive abnormal returns of rivals. We then build a conceptual framework that encompasses the impact of merger events on both merging and rival firms in order to provide a schematic to elicit more information on merger type. <br> <br> <i>ZUSAMMENFASSUNG - (Die Wirkung von horizontalen Zusammenschlüssen auf Wettbewerber: Der Nutzen einer Außenseiterposition bei Fusionen) <br>Es ist gemeinhin bekannt, dass Unternehmen nicht Außenseiter einer Fusion zwischen eigenen Wettbewerbern sein wollen. In dieser Arbeit zeigen wir, dass es für Unternehmen durchaus vorteilhaft sein kann, sich an einem großen horizontalen Zusammenschluss nicht zu beteiligen. Anhand einer Datenbank von großen Fusionen, in denen die relevanten Wettbewerber der fusionierenden Unternehmen von Experten der Europäischen Kommission identifiziert worden sind, und Mithilfe einer Ereignisstudienmethode, bestätigen wir empirisch, dass Wettbewerber durchschnittlich positive abnormale Gewinne bei der Ankündigung eines Zusammenschlusses erzielen. Darüber hinaus stellen wir fest, dass die Reaktion der Aktienkurse von Konkurrenten bei der Ankündigung eines Zusammenschlusses nicht anfällig für Fusionswellen ist, und dass die abnormalen Gewinne nicht von der "künftigen Firmenübernahmewahrscheinlichkeit" getrieben sind. Schließlich wird in der Studie ein konzeptioneller Rahmen entwickelt, der die Auswirkungen der Fusion sowohl auf die fusionierenden Unternehmen und als auch auf die Wettbewerber zusammenfasst, um die Art des Zusammenschlusses besser identifizieren zu können.<i> |
| Keywords: | Rivals, Mergers, Acquisitions, Event-Study |
| JEL: | G34 G14 M20 L22 |
| Date: | 2008–05 |
| URL: | http://d.repec.org/n?u=RePEc:wzb:wzebiv:spii2008-17r&r=ind |
| By: | Orley C. Ashenfelter (Princeton University); Daniel Hosken (Federal Trade Commission); Matthew Weinberg (Federal Trade Commission) |
| Abstract: | The challenge of effective merger enforcement is tremendous. U.S. antitrust agencies must, by statute, quickly forecast the competitive effects of mergers that occur in virtually every sector of the economy to determine if mergers can proceed. Surprisingly, given the complexity of the regulators task, there is remarkably little empirical evidence on the effects of mergers to guide regulators. This paper describes the necessity of retrospective analysis of past mergers in building an empirical basis for antitrust enforcement, and provides guidance on the key measurement issues researchers confront in estimating the price effects of mergers. We also describe how evidence from merger retrospectives can be used to evaluate the economic models used to predict the competitive effects of mergers. |
| Date: | 2009–03 |
| URL: | http://d.repec.org/n?u=RePEc:pri:cepsud:1137&r=ind |
| By: | Lai, Pei-Chun; Bessler, David |
| Abstract: | We consider the performance of distance-metrics method applied in demand estimation of carbonated soft drink products. Based on preliminary OLS outcome, the estimated coefficients are satisfied our prior expectations and results are consistent with previous research. Brand loyalty and strong substitution between products of the same group is found in our study, as also found in Rojas and others. Our tentative conclusion is that distance metrics method is worthy of further consideration in demand estimation and offers the potential for study of merger simulations. |
| Keywords: | distance metrics, demand, merger simulation, Agribusiness, Industrial Organization, Marketing, L13, C14, |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea09:49352&r=ind |
| By: | E. Bacchiega; L. Lambertini; A. Mantovani |
| Date: | 2008–11 |
| URL: | http://d.repec.org/n?u=RePEc:bol:bodewp:651&r=ind |
| By: | Xia, Tian; Li, Xianghong |
| Abstract: | Through analyzing the effect of a demand characteristic, this paper investigates the reasons for the market phenomenon that farm and/or wholesale price changes are transmitted asymmetrically to retail markets. |
| Keywords: | asymmetric price transmission, demand characteristics, Industrial Organization, |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea09:49400&r=ind |
| By: | Allender, William J.; Richards, Timothy J. |
| Abstract: | Though brand loyalty has been studied extensively in the marketing literature, the relationship between brand loyalty and equilibrium pricing strategies is not well understood. Designing sales pricing strategies involves two key decisions: the percentage reduction in price from the existing price point, and the number or frequency of promotions within a category or for a specific product. These decisions, in turn, are critically dependent upon how many consumers can be convinced to switch to a brand by temporarily reducing its price, and how many are instead brand loyal. Theoretical models of how the size and strength of brand loyalty influence optimal promotion strategies have been developed, but there are no rigorous tests of their hypotheses. We test how brand loyalty impacts promotion strategies for a frequently purchased consumer package good category. Our results largely confirm that retailers often promote many brands simultaneously and that depth and breadth can be complementary. |
| Keywords: | Consumer/Household Economics, Food Consumption/Nutrition/Food Safety, Marketing, |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea09:49536&r=ind |
| By: | Michiel J. Bijlsma; Gijsbert T.J. Zwart |
| Abstract: | In the market for wireless telecommunications, radio spectrum is an essential input. We study downstream entry and capacity choice in this market, where licenses to use radio spectrum are owned by vertically integrated duopolists. Prior to network construction, these incumbents may offer contracts for capacity to an entrant, granting service-based access on the network they will construct. Alternatively, when spectrum trading is allowed, they may sell part of their license, allowing the entrant to build its own network and enter as an infrastructure player. We find that in this Cournot setting, access is generally provided, as incumbents compete to appropriate the profits of serving a differentiated market through the entrant. Although selling spectrum rights instead of network capacity leads to a loss of economies of scale in infrastructure construction, infrastructure-based entry may dominate as a result of a strategic effect. By delegating capacity choice to the entrant, the access providing incumbent can commit to compete more aggressively, causing its rival incumbent to reduce capacity. A lower aggregate capacity will increase prices and thereby profits. |
| Keywords: | Telecommunications; Vertical Integration; Vertical Foreclosure; Strategic Delegation |
| JEL: | L13 L42 L96 |
| Date: | 2009–03 |
| URL: | http://d.repec.org/n?u=RePEc:cpb:discus:123&r=ind |
| By: | Helmers, Claes Gustav; Connor, John M.; Florax, Raymond J.G.M.; Vroom, Govert |
| Abstract: | This paper analyses the impact of ownership type on the locating behavior and capacity choice of prospective entrant hotels. An important aspect which has often been neglected in the entry literature is the relevance of the ownership that defines an establishment. A hotel outlet can be company-owned, franchised, or independently owned. As this is an important driver of the incentive structure for a firm as well as a strategic indicator for its (prospective) competitors, this paper argues that ownership form is a necessary explanatory factor in market conduct analysis. We show using a spatial lag model that a disaggregated analysis provide a good understanding of market interaction among hotels. |
| Keywords: | Marketing, |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea09:49561&r=ind |
| By: | Cai, Xiaowei; Stiegert, Kyle W.; Koontz, Stephen R. |
| Abstract: | Based on Green and Porter's (GP) noncooperative game theoretic model, oligopsonists are hypothesized to follow a discontinuous pricing strategy in equilibrium. The model allows for low procurement prices during cooperative phases and high procurement prices (i.e. aggressive purchasing) during noncooperative phases. In this paper, the GP model is applied to the U.S. beef packing industry. Anecdotal evidence of beef packer margins and relevant processing costs suggest part of the margin variability could be attributed breakdowns and returns to cooperative phases. To operationalize the GP framework, we applied Hamilton's regime switching model assuming first order Markov process to test for the cooperative/noncooperative behavior of beef packers in three main fed cattle markets in the central United States and the whole U.S. market. We found that the evidence of cooperative/noncooperative conduct among the beef packers is present in all the markets examined, but the conduct varies across markets. |
| Keywords: | Margin, Beef Packing, Fed Cattle Prices, Markov Regime Switching, Industrial Organization, |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea09:49364&r=ind |