nep-ind New Economics Papers
on Industrial Organization
Issue of 2011‒04‒23
four papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. How Effective is European Merger Control? By Tomaso Duso; Klaus Gugler; Burcin B. Yurtoglu
  2. Post-Merger Restructuring and the Boundaries of the Firm By Vojislav Maksimovic; Gordon Phillips; Nagpurnanand Prabhala
  3. Revising Merger Guidelines: Lessons from the Irish Experience By Gorecki, Paul K.
  4. Consumer Preferences for 99-ending prices: the mediating role of price consciousness By Charlotte Gaston-Breton

  1. By: Tomaso Duso (Duesseldorf Institute for Competition Economics (DICE)); Klaus Gugler (Vienna University of Economics and Business); Burcin B. Yurtoglu (WHU - Otto Beisheim School of Management)
    Abstract: This paper applies an intuitive approach based on stock market data to a unique dataset of large concentrations during the period 1990-2002 to assess the effectiveness of European merger control. The basic idea is to relate announcement and decision abnormal returns. Under a set of four maintained assumptions, merger control might be interpreted to be effective if rents accruing due to the increased market power observed around the merger announcement are reversed by the antitrust decision, i.e. if there is a negative relation between announcement and decision abnormal returns. To clearly identify the events’ competitive effects, we explicitly control for the market expectation about the outcome of the merger control procedure and run several robustness checks to assess the role of our maintained assumptions. We find that only outright prohibitions completely reverse the rents measured around a merger’s announcement. On average, remedies seem to be only partially capable of reverting announcement abnormal returns. Yet they seem to be more effective when applied during the first rather than the second investigation phase and in subsamples where our assumptions are more likely to hold. Moreover, the European Commission appears to learn over time.
    Keywords: Merger Control, Remedies, European Commission, Event Studies
    JEL: L4 K21 G34 C2 L2
    Date: 2011–04
    URL: http://d.repec.org/n?u=RePEc:trf:wpaper:354&r=ind
  2. By: Vojislav Maksimovic; Gordon Phillips; Nagpurnanand Prabhala
    Abstract: We examine how firms redraw their boundaries after acquisitions using plant-level data. We find that there is extensive restructuring in a short period following mergers and full-firm acquisitions. Acquirers of full firms sell 27% and close 19% of the plants of target firms within three years of the acquisition. Acquirers with skill in running their peripheral divisions tend to retain more acquired plants. Retained plants increase in productivity whereas sold plants do not. These results suggest that acquirers restructure targets in ways that exploit their comparative advantage.
    Date: 2011–04
    URL: http://d.repec.org/n?u=RePEc:cen:wpaper:11-11&r=ind
  3. By: Gorecki, Paul K.
    Abstract: Competition authorities typically issue Merger Guidelines setting out the framework within which merger assessment is conducted. Ireland is no exception. The Competition Authority is currently in the process of revising its 2002 Guidelines. In this paper we not only comment on the procedure that is being used to revise these Guidelines as well as the substance of the proposed revisions to the Guidelines, but also draw some wider lessons that might be of assistance to other competition authorities, particularly smaller competition authorities, in revising their Guidelines. The lessons include: carefully distinguishing between proposals for revising the Guidelines that incorporate existing merger assessment custom and proposals that mark a significant departure from current Guidelines as well as existing custom and practice. Proposals for revising the Guidelines, particularly when referring to existing custom and practice, should be specific rather than general; and, if multijurisdictional mergers are important particular attention should be paid to the Guidelines in jurisdictions that are commonly included in such multijurisdictional mergers.
    Keywords: competition/Ireland/MERGERS
    Date: 2011–03
    URL: http://d.repec.org/n?u=RePEc:esr:wpaper:wp379&r=ind
  4. By: Charlotte Gaston-Breton
    Abstract: This research addresses the persuasive effect of 99-ending prices and carries out a choice-based conjoint analysis among 318 shoppers. We propose that 99-ending prone consumers engage in a heuristic process either consciously — they consider a 99-ending as a signal for a “good deal”— or unconsciously — they round down 99-ending prices. This conceptual framework leads to non-intuitive and completely new sets of hypotheses in the examination of the drivers, mediator and moderators of 99-ending preferences. Results indicate that consumers who are more price conscious are more likely to choose 99-ending prices. Indeed, low involved shoppers (especially those with a low hedonic and symbolic involvement profile), low educated, low income and younger shoppers are prone to choose the 99-ending option. We also demonstrate that the magnitude of this 99-ending effect depends on the price level of the product category and the positioning of the brands. The theoretical contributions to the manner in which consumers process 99-endings has implications for retailers, pricing managers and social welfare
    Keywords: 99-ending prices, Price information processing, Conjoint analysis
    Date: 2011–04
    URL: http://d.repec.org/n?u=RePEc:cte:wbrepe:wb110503&r=ind

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