nep-ind New Economics Papers
on Industrial Organization
Issue of 2013‒04‒20
four papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Search Advertising By Alexandre de Cornière
  2. Competition and dynamics of takeover contests By Riccardo Calcagno; Sonia Falconieri
  3. Mergers, managerial incentives, and efficiencies By Jovanovic, Dragan
  4. Beyond Industrial Policy: Emerging Issues and New Trends By Ken Warwick

  1. By: Alexandre de Cornière
    Abstract: Search engines enable advertisers to target consumers based on the query they have entered.  In a framework with horizontal product differentiation, imperfect product information and in which consumers incur search costs, I study a game in which advertisers have to choose a price and a set of relevant keywords.  The targeting mechanism brings about three kinds of efficiency gains, namely lower search costs, better matching, and more intense product market price-competition.  A monopolistic search engine charges advertisers too high a price, and has incentives to provide a suboptimal matching quality.  Competition among search engines eliminates the latter distortion, but exacerbates the former.
    Keywords: Search engine, targeted advertising, consumer search
    JEL: D43 D83 L13 M37
    Date: 2013–03–20
  2. By: Riccardo Calcagno; Sonia Falconieri
    Abstract: This paper investigates the effect of potential competition on takeovers which we model as a bargaining game with alternating offers where calling an auction represents an outside option for each bidder at each stage of the game. The model aims to answer three main questions: who wins the takeover? when? and how? Our results are able to explain why the takeover premium resulting from a negotiated deal is not significantly different from that resulting from an auction, and why tender offers are rarely observed in reality. Furthermore, the model allows us to draw conclusions on how other dimensions of the takeover process, such as termination fees, target resistance and tender offer costs, affect its dynamics and outcome.
    Keywords: takeover negotiations, auctions, bargaining, outside option.
    JEL: G34 C78
    Date: 2013
  3. By: Jovanovic, Dragan
    Abstract: We analyze the effects of synergies from horizontal mergers on managerial incentives. In contrast to synergies, efficiency gains resulting from managerial effort are not merger specific, i.e., they may be realized by all firms before and after a merger. We show that synergies suppress managerial incentives within the non-merging firms, whereas the effect on the merged firm critically depends on the number of agents employed by its principal. An important implication for merger policy is that consumer surplus may be monotonically decreasing in the synergy level, which opposes the use of an efficiency defense in merger control. --
    Keywords: Managerial Incentives,Horizontal Mergers,Antitrust,Productive Efficiency Gains,Synergies,Moral Hazard,Efficiency Defense
    JEL: D21 D86 L22 L41
    Date: 2013
  4. By: Ken Warwick
    Abstract: This paper reviews the evidence on emerging thinking and new trends in the sphere of industrial policy. The paper adopts a broad and inclusive definition of industrial policy, and proposes a new typology based on the orientation of policy and the policy domain. Looking at a typology according to the policy domain, the paper proposes a framework based on growth accounting, which parallels the evolution of thinking about the rationale for industrial policy interventions, which has moved from a traditional approach based largely on product market interventions (production subsidies, state ownership, tariff protection), through market failure-correcting taxes and subsidies operating mainly on factor markets (R&D incentives, training subsidies, investment allowances, help with access to finance) to a focus on interventions that help build systems, create networks, develop institutions and align strategic priorities.
    Date: 2013–04–05

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