nep-ind New Economics Papers
on Industrial Organization
Issue of 2009‒07‒11
six papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Bilateral oligopoly and quantity competition By Alex Dickson; Roger Hartley
  2. Exclusionary Bundling: The Motive for Mergers By Sue Mialon
  3. World Markets for Mergers and Acquisitions By Isil Erel; Rose C. Liao; Michael S. Weisbach
  4. Non-Exclusive Competition in the Market for Lemons By ATTAR, Andrea; MARIOTTI, Thomas; SALANIÉ, François
  5. Do Patents Matter for Commercialization? By Elizabeth Webster; Paul H. Jensen
  6. Predicting Market Power in Wholesale Electricity Markets By David Newbery

  1. By: Alex Dickson; Roger Hartley
    Date: 2009
  2. By: Sue Mialon
    Abstract: This paper models how exclusionary bundling motivates mergers. Firms in two unrelated markets may want to merge only to bundle, even though bundling is possible without a merger. This is because merger is necessary in order to use bundling for an exclusionary purpose. Independently of a merger, firms can always improve their profits from pure bundling. In contrast, a merger is never profitable if not combined with bundling. Moreover, it is more profitable to bundle through strategic alliance than through merger in the short run. Thus, firms choose to merge only if the merger can lead to foreclosure. Although the merger results in losses to a rival in only one of the two markets, foreclosure occurs in both markets, since the other rival firm alone cannot compete against a bundle. In this framework, all mergers are ex ante anti-competitive. Blocking a merger is never welfare-reducing.
    Date: 2009–06
  3. By: Isil Erel; Rose C. Liao; Michael S. Weisbach
    Abstract: Despite the fact that one-third of worldwide mergers involve firms from different countries, the vast majority of the academic literature on mergers studies domestic mergers. What little has been written about cross-border mergers has focused on public firms, usually from the United States. Yet, the vast majority of cross-border mergers involve private firms that are not from the United States. We provide an analysis of a sample of 56,978 cross-border mergers occurring between 1990 and 2007. We first characterize the patterns of who buys whom: Geography matters, with firms being much more likely to purchase firms in nearby countries than in countries far away. Purchasers are usually but not always from developed countries and they tend to purchase firms in countries with lower investor protection and accounting standards. A significant factor in determining acquisition patterns is currency movements; firms tend to purchase firms from countries relative to which the acquirer’s currency has appreciated. In addition economy-wide factors reflected in the country’s stock market returns lead to acquisitions as well. Both the currency and stock market effect could reflect either misvaluation or wealth explanations. Our evidence is more consistent with the wealth explanation than the misvaluation explanation.
    JEL: F3 G34
    Date: 2009–07
  4. By: ATTAR, Andrea; MARIOTTI, Thomas; SALANIÉ, François
    Date: 2009–06
  5. By: Elizabeth Webster (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne); Paul H. Jensen (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne)
    Abstract: In this paper, we take another look at the role that patents play in determining successful commercialization. We address this issue using survey data on 3,736 Australian inventions which were the subject of a patent application between 1986 and 2005. Although almost half of the survey respondents’ patent applications were not granted, many still attempted to commercialize their inventions. This variation in patenting and commercialization outcomes enables us to address the question: do patents matter for commercialization? Our results suggest that while the receipt of a patent grant had a positive and significant effect on most commercialization stages, the magnitude of the effect is quite modest. In fact, the marginal increase in the probability of attempting a commercialization stage due to the presence of a patent varies from 2.0 (export) to 8.0 (mass production stage) percentage points.
    Date: 2009–03
  6. By: David Newbery
    Abstract: The traditional measure of market power is the HHI, which gives implausible results given the low elasticity of demand in electricity spot markets, unless it is adapted to take account of contracting. In its place the Residual Supply Index has been proposed as a more suitable index to measure potential market power in electricity markets, notably in California and more recently in the EU Sector Inquiry. The paper investigates its value in identifying the ability of firms to raise prices in an electricity market with contracts and capacity constraints and find that it is most useful for the case of a single dominant supplier, or with a natural extension, for the case of a symmetric oligoply. Estimates from the Sector Inquiry seem to fit this case better than might be expected, but suggests an alternative defintion of the RSI defined over flexible output that should give a more reliable relationship.
    Keywords: energy policy; electricity; electricity
    Date: 2009–02–15

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