nep-ind New Economics Papers
on Industrial Organization
Issue of 2012‒04‒03
four papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Entry and competition in differentiated products markets By Catherine SCHAUMANS; Frank VERBOVEN
  2. Can competition reduce quality? By Kurt R. Brekke; Luigi Siciliani; Odd Rune Straume
  3. Cournot and Bertrand competition with asymmetric costs in a mixed duopoly revisited By Kangsik , Choi
  4. Researching Mergers & Acquisitions with the Case Study Method: Idiographic Understanding of Longitudinal Integration Processes By Bengtsson, Lars; Larsson, Rikard

  1. By: Catherine SCHAUMANS; Frank VERBOVEN
    Abstract: We propose a methodology for estimating the competition effects from entry when firms sell differentiated products. We first derive precise conditions under which Bresnahan and Reiss’entry threshold ratios (ETRs) can be used to test for the presence and to measure the magnitude of competition effects. We then show how to augment the traditional entry model with a revenue equation. This revenue equation serves to adjust the ETRs by the extent of market expansion from entry, and leads to unbiased estimates of the competition effects from entry. We apply our approach to seven different local service sectors. We find that entry typically leads to significant market expansion, implying that traditional ETRs may substantially underestimate the competition effects from entry. In most sectors, the second entrant reduces markups by at least 30%, whereas the third or subsequent entrants have smaller or insignificant effects. In one sector, we find that even the second entrant does not reduce markups, consistent with a recent decision by the competition authority.
    Date: 2011–09
    URL: http://d.repec.org/n?u=RePEc:ete:ceswps:ces11.23&r=ind
  2. By: Kurt R. Brekke (Department of Economics and Centre and Health Economics Bergen, Norwegian School of Economics); Luigi Siciliani (Department of Economics and Centre for Health Economics, University of York, Heslington); Odd Rune Straume (Department of Economics, University of Minho)
    Abstract: We study the effect of competition on quality in markets such as health care, long-term care and education, when providers choose both prices and quality in a setting of spatial competition. We offer a novel mechanism whereby competition leads to lower quality. This mechanism relies on two key assumptions, namely that the providers are motivated and riskaverse. Our proposed mechanism can help explain several empirical findings of a negative effect of competition on quality.
    Keywords: Quality and price competition; Motivated providers; Risk-averse providers
    JEL: D21 D43 L13 L30
    Date: 2012
    URL: http://d.repec.org/n?u=RePEc:nip:nipewp:05/2012&r=ind
  3. By: Kangsik , Choi
    Abstract: We investigate a differentiated mixed duopoly in which private and public firms can choose to strategically set prices or quantities when the public firm is less efficient than the private firm. Thus, if the Singh and Vives assumption of positive primary outputs holds, (i) Bertrand competition or quantity-price competition can occur depending on the degree of public firm's inefficiency when the goods are substitutes. (ii) regardless of its inefficiency, there can be always sustained Bertrand competition when the goods are complements. (iii) the ranking of a private firm's profit is not reversed. However if we relax the parameter restriction imposed implicitly by Singh and Vives (i.e., we adopt Zanchettin (2006) assumption) to allow for a wider range of cost asymmetry, there can be always sustained multiple subgame Nash perfect equilibria in the contract stage by each critical value of the public firm's inefficiency. In particular, Cournot and Bertrand competition coexist if its inefficiency is sufficiently small or large.
    Keywords: Inefficiency; Cournot-Bertrand Competition; Mixed Duopoly
    JEL: L13 D43 H44
    Date: 2012–03–28
    URL: http://d.repec.org/n?u=RePEc:pra:mprapa:37704&r=ind
  4. By: Bengtsson, Lars (CSIR, Blekinge Inst of Technology); Larsson, Rikard (Lund University)
    Abstract: The purpose with this paper is to highlight the comparative advantages of using case study research to contribute to the Mergers and Acquisitions (M&A) field and provide some recommendations how this can be done well. Based on three reviews of the case study methodological literature, influential M&A case studies, and the methodological case survey of 55 M&A cases, we conclude that the case study method is a powerful, yet much underutilized method in M&A research. Even though there seem to be perhaps more than 20 times as many M&A surveys as case studies (Haleblian at al, 2009), we find that especially influential M&A case studies contribute unique value to M&A research in terms of the rich idiographic understanding of the complex combination and especially integration processes where the longitudinal, multi-aspect, and multi-level strengths of the case study method excel.
    Keywords: Mergers and acquisitions; idiographic research; case studies; integration process
    JEL: L20 M10
    Date: 2012–03–16
    URL: http://d.repec.org/n?u=RePEc:hhs:bthcsi:2012-004&r=ind

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