nep-ind New Economics Papers
on Industrial Organization
Issue of 2009‒05‒23
four papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Horizontal Mergers, Involuntary Unemployment, and Welfare By Oliver Budzinski; Jürgen-Peter Kretschmer
  2. Dynamic Duopoly with Intertemporal Capacity Constraints By Berg Anita H.J. van den; Herings P. Jean-Jacques; Peters Hans J.M.
  3. Competition, Regulation, and Broadband Access to the Internet By Georg Götz
  4. Loyalty/Requirement Rebates and the Antitrust Modernization Commission: What is the Appropriate Liability Standard? By Nicholas Economides

  1. By: Oliver Budzinski (Department of Environmental and Business Economics, University of Southern Denmark); Jürgen-Peter Kretschmer (Economic Policy Unit, Philipps-University of Marburg, Germany)
    Abstract: Standard welfare analysis of horizontal mergers usually refers to two effects: the anticompetitive market power effect reduces welfare by enabling firms to charge prices above marginal costs, whereas the procompetitive efficiency ef-fect increases welfare by reducing the costs of production (synergies). How-ever, demand-side effects of synergies are usually neglected. We introduce them into a standard oligopoly model of horizontal merger by assuming an (empirically supported) decrease in labour demand due to merger-specific synergies and derive welfare effects. We find that efficiency benefits from horizontal mergers are substantially decreased, if involuntary unemployment exists. However, in full employment economies, demand-side effects remain negligible. Eventually, policy conclusions for merger control are discussed.
    Keywords: Horizontal mergers, involuntary unemployment, efficiency defense, oligopoly, competition
    JEL: L13 L41 J01 L16
    Date: 2009–04
    URL: http://d.repec.org/n?u=RePEc:sdk:wpaper:90&r=ind
  2. By: Berg Anita H.J. van den; Herings P. Jean-Jacques; Peters Hans J.M. (METEOR)
    Abstract: We analyze strategic firm behavior in settings where the production stage is followed by several periods during which only sales take place. We analyze the dynamics of the market structure, the development of prices and sales over time, and the implications for profits and consumer surplus. Two specific settings are analyzed. In the first, a firm can commit up-front to a sales strategy that does not depend on the actual sales of its competitor. In this case there is a unique Nash equilibrium and price increases over time. In the second setting,there is no commitment and firms can adjust their sales in response to observed supply of their competitor in the previous period. It is shown that in this case a subgame perfect Nash equilibrium does not always exist. Equilibria can have surprising features. For some parameter constellations, price may decrease over time. It is also possible that the firm increases its pro…t by destroying some of its production. When firms have equal size, the equilibrium outcome is the same in both the commitment and the non-commitment setting. In general, the setting without commitment is bene…cial to the larger firm, whereas the setting with commitment leads to higher pro…ts for the smaller firm.
    Keywords: mathematical economics;
    Date: 2009
    URL: http://d.repec.org/n?u=RePEc:dgr:umamet:2009020&r=ind
  3. By: Georg Götz (Justus-Liebig-University Gießen, Department of Economics)
    Abstract: This paper reexamines the effect of the regulatory regime on both penetration and coverage of broadband access to the internet. The framework also allows for an evaluation of different public policy measures such as subsidization of broadband demand and supply. A welfare analysis asks what the optimal regulatory regime is and whether and how high-speed access to the internet should be subsidized. Using an approach similar to Valletti et al. (2002), the paper highlights the importance of population density for whether firms invest to provide internet access. The analysis reveals a trade-off between coverage and penetration.
    Keywords: Broadband, coverage, penetration, investment, population density
    JEL: L51 L96 L12
    Date: 2009
    URL: http://d.repec.org/n?u=RePEc:mar:magkse:200924&r=ind
  4. By: Nicholas Economides (Stern School of Business, NYU)
    Abstract: I discuss and assess the various standards for establishing liability for loyalty discounts offered under a requirement contract. I find that the standard proposed by the Antitrust Modernization Commission is likely to result in many cases of violation that are not caught. The safe harbor defined by the AMC would permit activity that is in fact anticompetitive. I propose instead a structured rule of reason test that relies on consumers’ surplus comparisons under the loyalty /requirement practice and the but-for world. The proposed standard does not have a safe harbor based on a price/cost comparison because such comparisons do not generally correspond to consumers’ surplus comparisons.
    Keywords: bundling, loyalty discounts, requirement contracts, monopolization, antitrust
    Date: 2009–03
    URL: http://d.repec.org/n?u=RePEc:net:wpaper:0902&r=ind

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