nep-ind New Economics Papers
on Industrial Organization
Issue of 2011‒04‒16
three papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Entry decisions after deregulation: the role of incumbents' market power By Lorenzo Ciari; Riccardo De Bonis
  2. Price Signals as Indicators of Profitability at Various Stages of Production in Oklahoma Beef By Williams, Brian R.; Devuyst, Eric A.
  3. Corporate Failure, Supply Shocks and Government Bailouts: A Case Study of Aloha Airlines By Akihiko Kawaura

  1. By: Lorenzo Ciari (European University Institute - Firenze (I)); Riccardo De Bonis (Banca d'Italia, Economics and International Relations Area)
    Abstract: This paper investigates the role of incumbents' market power in shaping the entry decisions of Italian banks after branching liberalization in 1990. Using a unique dataset on 260 banks, we find that entry over the 1990-1995 period was targeted towards markets that were more competitive to begin with, i.e. where banking spreads were smaller. The results confirm the entry deterrent role of market power in the short-run and show a long run effect of regulation that survives after the removal of administrative barriers. The capacity of market power to discourage entry is confirmed in instrumental variables specifications, where we use the characteristics of the local banking markets in 1936, a proxy for tightness of banking regulation, to identify an exogenous source of variation in the spreads.
    Keywords: banking, barriers to entry, deregulation, market power
    JEL: G28 L1 L5
    Date: 2011–04
  2. By: Williams, Brian R.; Devuyst, Eric A.
    Abstract: Cow-calf producers face an annual decision on when to sell their calves. They can sell them at any point between weaning and slaughter, with the objective of finding the profit maximizing selling point. This paper investigates the use of price signals to determine profit maximizing selling points/retention strategies. Three retention strategies, one for fall calving and two for spring calving, are considered. Producers can sell their calves at weaning, after preconditioning, after grass pasture, after wheat pasture, or after the feedlot depending on the retention strategy. These price signals indicate the optimal selling point based on an observable price ratio at weaning. This paper also considers factors such as the level of preconditioning premiums and the length of the preconditioning period required to impact the profit maximizing selling point.
    Keywords: Beef, Producer Profitability, Price Signals, Farm Management, Livestock Production/Industries, Production Economics, Q13, Q10,
    Date: 2011
  3. By: Akihiko Kawaura (Department of Policy Studies, Doshisha University)
    Abstract: This paper investigates the bankruptcy of Aloha Airlines and its exit from Hawaii’s interisland passenger market in order to examine whether government intervention is warranted based on the presumed benefits to the general public. A regression analysis of interisland traffic volume does not identify any substantial decline in interisland passengers immediately following Aloha’s closure. A government’s decision to bailout a firm should incorporate information on market structure, as the presence of excess capacity can alleviate damage to consumers.
    Keywords: bankruptcy; exit; excess capacity; bailout; airline
    JEL: L13 L52 L93
    Date: 2011–03–11

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