nep-ind New Economics Papers
on Industrial Organization
Issue of 2012‒07‒14
three papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Bargaining, vertical mergers and entry By Sapi, Geza
  2. The Impact of Telecommunication Technologies on Competition in Services and Goods Markets: Empirical Evidence By Vahagn Jerbashian; Anna Kochanova
  3. Entry Time Effects and Follow-on Drugs Competition By Luiz Flavio Andrade

  1. By: Sapi, Geza
    Abstract: This paper analyzes vertical integration incentives in a bilaterally duopolistic industry where upstream producers bargain with downstream retailers on terms of supply. In the applied framework integration does not affect the total output produced, but it affects the distribution of rents among players. Vertical integration incentives depend on the strength of substitutability or complementarity between products and the shape of the unit cost function. I demonstrate furthermore that in contrast to the widely prevailing view in competition policy, vertical integration can under particular circumstances convey more bargaining power to the merged entity than a horizontal merger to monopoly. The model is applied to analyze strategic merger incentives to influence entry decisions. Mergers can facilitate and deter entry. While horizontal mergers to deter entry are never profitable, firms on different market levels may strategically choose to integrate vertically to keep a potential entrant out of the market. I provide conditions for such entry-deterring vertical mergers to occur. --
    Keywords: Bargaining,Vertical Mergers,Entry
    JEL: L13 L22 L42
    Date: 2012
    URL: http://d.repec.org/n?u=RePEc:zbw:dicedp:61&r=ind
  2. By: Vahagn Jerbashian; Anna Kochanova
    Abstract: In this paper we empirically show that a more intensive use and wider adoption of telecommunication technologies significantly increases the level of product market competition in services and goods markets. Our result is consistent with the view that the use of telecommunication technologies can lower the costs of entry. This finding is robust to various measures of competition and a range of specification checks.
    Keywords: telecommunication technologies; entry costs; product market competition;
    JEL: L16 O33 O25
    Date: 2012–06
    URL: http://d.repec.org/n?u=RePEc:cer:papers:wp463&r=ind
  3. By: Luiz Flavio Andrade (Gate-Groupe d'analyse théorique et économique)
    Abstract: Pharmaceutical firms have been criticized for concentrating their efforts of R&D on the so called “me-too” or “follow-on” drugs. There have been many comments against and favourable to the dissemination of these incremental innovations but few papers have broached the subject from an empirical point of view, possibly because identification of “me-too” is not so obvious. This paper focuses on the impact of entry order on “follow-on” drugs competition in the French market between years 2001 and 2007. More precisely, this study examines the effects on market share of first entrants in the follow-on drug market and how this possible competitive advantage changes over time. Our results are coherent with theoretical microeconomic issues concerning the importance of being first. We find evidence that first movers in the follow on drug market have the ability to capture and maintain greater market share for a long period of time. The hierarchical market position of follow on drugs does not seem to be affected by generic drugs emergence. From a dynamic perspective, our analysis shows that market share is positively correlated with the ability of follow on drugs to set prices higher than the average follow-on drug price in a specific therapeutic class (ATC) which means that market power remains considerably important for first movers. Finally we found that the optimum level of innovation to maximize market share is the highest one.
    Keywords: Incremental innovation; Follow-on drugs; Entry timing; Market share.
    JEL: I18 I12 L65 L51
    Date: 2012–06
    URL: http://d.repec.org/n?u=RePEc:irh:wpaper:dt49&r=ind

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