nep-ind New Economics Papers
on Industrial Organization
Issue of 2013‒09‒13
six papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Bertrand Competition under Network Externalities By Masaki Aoyagi
  2. Competition, strategic delegation and delay in technology adoption By A. Mahati; Rupayan Pal
  3. Merger Externalities in Oligopolistic Markets By Klaus Gugler; Florian Szücs
  4. Clustering Properties of Merger Waves: Space, Time or Industry? By Florian Szücs
  5. A primer on damages of cartel suppliers: Determinants, standing US vs. EU and econometric estimation By Bueren, Eckart; Smuda, Florian
  6. Does State Antitrust Enforcement Drive Establishment Exit? By Robert M. Feinberg; Thomas A. Husted; Florian Szücs

  1. By: Masaki Aoyagi
    Abstract: Two sellers engage in price competition to attract buyers located on a network. The value of the good of either seller to any buyer depends on the number of neighbors on the network who consume the same good. For a generic specification of consumption externalities, we show that an equilibrium price equals the marginal cost if and only if the buyer network is complete or cyclic. When the externalities are approximately linear in the size of consumption, we identify the classes of networks in which one of the sellers monopolizes the market, or the two sellers segment the market.
    Date: 2013–09
    URL: http://d.repec.org/n?u=RePEc:dpr:wpaper:0884&r=ind
  2. By: A. Mahati (Indira Gandhi Institute of Development Research); Rupayan Pal (Indira Gandhi Institute of Development Research)
    Abstract: This paper examines how strategic managerial delegation affects firms' timing of adoption of a new technology under different modes of product market competition. It demonstrates that delegation has differential impacts on adoption dates under Cournot and Bertrand competition. Delegation with 'own-performance' based incentive schemes always leads to early adoption in markets with Bertrand competition compared to that under no-delegation, but not necessarily so in markets with Cournot competition. It also shows that the ranking of Cournot and Bertrand equilibria in terms of delay in adoption depends on the type of managerial incentive schemes. Adoption occurs earlier (later) in markets with Cournot competition than in markets with Bertrand competition, if product differentiation is high (low), regardless of whether there is no-delegation or delegation with 'own-performance' based incentive schemes. In contrast, under strategic delegation with 'relative-performance' based incentive schemes, adoption dates do not differ across markets with different modes of competition.
    Keywords: Technology adoption, Strategic delegation, Own-performance, Relative-performance, Cournot, Bertrand
    JEL: L13 L22 O31 O32 O33
    Date: 2013–08
    URL: http://d.repec.org/n?u=RePEc:ind:igiwpp:2013-016&r=ind
  3. By: Klaus Gugler; Florian Szücs
    Abstract: We quantify externalities on profitability and market shares of competing firms in oligopolistic markets through the transition from an n to an n - 1 player oligopoly after a merger. Competitors are identified via the European Commission's market investigations and our methodology allows us to distinguish the externality due to the change in market structure from the merger effect. We obtain results consistent with the predictions of standard oligopoly models: rivals expand their output and increase their profits, whereas merging firms are negatively affected. This indicates that on average the market power effects of large mergers outweigh the efficiencies.
    JEL: L13 L40 G34
    Date: 2013
    URL: http://d.repec.org/n?u=RePEc:diw:diwwpp:dp1321&r=ind
  4. By: Florian Szücs
    Abstract: We study the degree of agglomeration of acquisition activity within clusters of temporal, geographic and industrial proximity based on almost 600,000 individual transactions. The findings indicate that significant clustering occurs in time and across industries, while the results on geographic clustering are mixed. This supports the view that merger waves are mostly driven by neoclassical motives.
    Keywords: Merger wave, clustering, acquisitions, neoclassical, behavioral
    JEL: L2 G3
    Date: 2013
    URL: http://d.repec.org/n?u=RePEc:diw:diwwpp:dp1322&r=ind
  5. By: Bueren, Eckart; Smuda, Florian
    Abstract: While private actions for damages by customers against price-cartels receive much attention, the treatment of other groups affected by such conspiracies is largely unresolved. This article narrows the research gap with respect to suppliers to a downstream price cartel. First, we show that such suppliers incur losses driven by a direct quantity, a price and a cost effect. We then analyze whether suppliers are entitled to claim these losses as damages in the two leading competition law regimes. We find that, while the majority view in the US denies standing, the emerging position in the EU and important member states is to grant supplier standing. We argue that this can indeed be justified in view of the different institutional context and the goals assigned to the right to damages in the EU. We finally present an econometric approach based on residual demand estimation that allows to quantify all determinants of cartel suppliers' damages, thereby showing that supplier damage claims are a viable option in practice that can contribute to full compensation and greater cartel deterrence. --
    Keywords: Competition policy,cartels,suppliers,damage quantification,standing,private enforcement,comparative law
    JEL: L41 K21
    Date: 2013
    URL: http://d.repec.org/n?u=RePEc:zbw:zewdip:13063&r=ind
  6. By: Robert M. Feinberg; Thomas A. Husted; Florian Szücs
    Abstract: Previous work has shown that state-level antitrust enforcement activity may have impacts on entry and relocation behavior by U.S. firms. Significant state-level antitrust activity may be an indicator of a perceived adverse business environment and it is found to deter establishment entry, particularly for larger firms in the retail and wholesale sectors. An obvious question is whether establishment exit is affected in a symmetric way, or whether sunk costs of market entry may lead to a smaller impact in terms of the exit decisions. We first combine US Census establishment exit panel data with data for 1998?2006 on US state-level antitrust activity and other measures of state-level business activities that may affect establishment exit. We also consider establishment exit across different broad industry types -- manufacturing, retail and wholesale -- and several firm size categories. Local business cycle factors seem to be the primary driver of exit, though there is some evidence of political and antitrust determinants as well. In another approach, we examine firmlevel exit decisions and the extent to which these respond to state antitrust enforcement, with some indication of antitrust enforcement effects here as well, especially in the wholesale and retail sectors.
    Keywords: antitrust enforcement, state level, firm exit
    JEL: K21 L41 L60 L81
    Date: 2013
    URL: http://d.repec.org/n?u=RePEc:diw:diwwpp:dp1323&r=ind

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