nep-ind New Economics Papers
on Industrial Organization
Issue of 2009‒12‒19
four papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. A Nonparametric Analysis of the Cournot Model By Andres Carvajal; John K.-H. Quah
  2. Competition, Reputation and Cheating By P. Vanin
  3. The Dynamics of R&D Network in the IT Industry By Nobuyuki Hanaki; Ryo Nakajima; Yoshiaki Ogura
  4. Comparison of Post-Merger performance of Acquiring Firms (India) involved in Domestic and Cross-border acquisitions By Saboo, Sidharth; Gopi, Sunil

  1. By: Andres Carvajal; John K.-H. Quah
    Abstract: An observer makes a number of observations of an industry producing a homogeneous good. Each observation consists of the market price, the output of individual firms and perhaps information on each firm’s production cost. We provide various tests (typically, linear programs) with which the observer can determine if the data set is consistent with the hypothesis that firms in this industry are playing a Cournot game at each observation. When cost information is wholly or partially unavailable, these tests could potentially be used to derive cost information on the firms. This paper is a contribution to the literature that aims to characterize (in various contexts) the restrictions that a data set must satisfy for it to be consistent with Nash outcomes in a game. It is also inspired by the seminal result of Afriat (and the subsequent literature) which addresses similar issues in the context of consumer demand, though one important technical difference from most of these results is that the objective functions of firms in a Cournot game are not necessarily quasiconcave.
    Keywords: Revealed preference, Observable restrictions, Linear programming, Cournot game, Increasing marginal costs
    JEL: C14 C61 C72 D43
    Date: 2009
    URL: http://d.repec.org/n?u=RePEc:oxf:wpaper:465&r=ind
  2. By: P. Vanin
    Abstract: Under repeated market interaction, reputation and competition may drive out of the market those firms that do not comply with their quality promises. One may thus presume that competitive pressure improves average market quality. This paper shows that the opposite may be true in an endogenous entry, repeated interaction, linear demand oligopoly model, in which introductory prices may be used as quality signals. Cheating firms may enter the market, fool even rational consumers, and exit the market when discovered, implying a failure of the basic reputation mechanism and an increasing time path of prices. Markets for closer substitutes tend to have a lower initial average quality and less trusting consumers, whereas the number of competitors has no clear relationship with average quality.
    JEL: L13 L14 L15
    Date: 2009–11
    URL: http://d.repec.org/n?u=RePEc:bol:bodewp:683&r=ind
  3. By: Nobuyuki Hanaki; Ryo Nakajima; Yoshiaki Ogura
    Abstract: In this paper, we provide an empirical analysis of evolving networks of successful R&D collaborations in the IT industry (consisting of firms that obtained patents in the technological category of computers and communication) in the U.S. between 1985 and 1995. We first show that the R&D network has become more extensive, more clustered, and more unequal in the sense that 'stars' have emerged in the network. We then analyze the effect of the existing network structure in the process of new R&D collaboration formation. We control for unobserved similarities among firms based on the community structures within the network that the algorithm developed by Girvan and Newman (2004) identifies and find a significant cyclic closure and preferential attachment effect.
    Date: 2009–08
    URL: http://d.repec.org/n?u=RePEc:tsu:tewpjp:2009-014&r=ind
  4. By: Saboo, Sidharth; Gopi, Sunil
    Abstract: Mergers and acquisitions are used for improving competitiveness of companies and gaining competitive advantage over other firms through gaining greater market share, broadening the portfolio to reduce business risk, entering new markets and geographies, and capitalising on economies of scale etc. India has emerged as one of the top countries with respect to merger and acquisition deals. Indian companies have been actively involved in mergers and acquisitions in India domestically as well as internationally. The value share of deals where India has been a target or an acquirer has risen sharply over the past decade, from $2.2 billion in 1998 to $62 billion in 2007. As India increases its participation in M&A deals, it is instructive to compare the domestic and cross-border acquisitions due to their distinctiveness. The distinction between them is a function of the change in market integration which changes the costs and benefit structure and also the difference in synergies – social, cultural and organisational. This research study was aimed to study the impact of mergers on the operating performance of acquiring firms by examining some pre- merger and post-merger financial ratios of these firms and to see the differences in the pre merger and post merger ratios of the firms that go for domestic acquisitions and the firms that go for the international/cross-border acquisitions. The results suggest that there are variations in terms of impact on performance following mergers, depending on the type of firm acquired – domestic or cross-border. In particular, mergers have had a positive effect on key financial ratios of firms acquiring domestic firms while a slightly negative impact on the firms acquiring cross-border firms.
    Keywords: Mergers and Acquisitions; Domestic Mergers; Cross-border Mergers; Operating performance
    JEL: G34 G3
    Date: 2009–12–10
    URL: http://d.repec.org/n?u=RePEc:pra:mprapa:19274&r=ind

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