nep-ind New Economics Papers
on Industrial Organization
Issue of 2014‒06‒22
six papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Kaplow, Louis: Competition Policy and Price Fixing By David Encaoua
  2. Enforcement vs Deterrence in Merger Control: Can Remedies Lead to Lower Welfare? By Andreea Cosnita-Langlais; Lars Sørgard
  3. Planning Technique for Complex Economic Object’s Synergy at Mergers and Acquisitions By Levitskiy, Stanislav; Frunze, Igor
  4. Bank Competition and Credit Constraints in Developing Countries : New Evidence By Florian LEON
  5. Formation of Bargaining Networks Via Link Sharing By Sofia Priazhkina; Frank Page
  6. Free Trade Agreements and Firm-Product Markups in Chilean Manufacturing By A. R. Lamorgese; A. Linarello; Frederic Warzynski

  1. By: David Encaoua (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris)
    Abstract: Book's Review:Louis Kaplow, Competition Policy and Price Fixing, Princeton University Press, Princeton and Oxford, 2013
    Keywords: collusive behavior: economic and legal approaches
    Date: 2014–04
  2. By: Andreea Cosnita-Langlais; Lars Sørgard
    Abstract: This paper deals with the enforcement of merger policy, and aims to identify situations where the introduction of remedies can lead to a lower welfare. For this we study how merger remedies affect the deterrence accomplished by controlling mergers, and determine the optimal frequency of investigations launched by the agency. We find that when conditional approvals are possible, it may be harder to deter the most welfare-detrimental mergers, and the agency might have to investigate mergers more often. The resulting welfare from merger control can indeed be lower than without remedies.
    Keywords: merger control, merger remedies, enforcement, deterrence.
    JEL: K21 L41
    Date: 2014
  3. By: Levitskiy, Stanislav; Frunze, Igor
    Abstract: The paper reviews integration problems for complex economic objects aiming to achieve a synergy effect from complementary actions of their assets, which total value exceeds isolated functioning results. In the present times in Ukraine problems concerning assessment of synergy effect at M&A of companies are the new among examining objects and that is why need further development. It is shown that application of system approach to investigation the efficiency integration of economic objects at mergers and acquisitions with regards of process design peculiarities of managerial decisions allows maximum accurate analyzing the results of interaction of economic units within unified integrated structure. So, one of the main reasons to make a bargain on M&A is intention to obtain positive synergy effect because basing on management theory its appearance promotes competitiveness and efficiency increase of the company. According to carried out analysis of existing approaches to assessment of expected synergy effect mostly models offer to calculate one-off synergy effect. It is worth noting that different kinds of synergies can appear not just after combining, but with time, that requires further investigations. It has been proposed a planning mechanism developed on the base of conceptual description the function results for integrated formation, which is the key technique tool for mergers and acquisitions.
    Keywords: Planning Technique, Mergers & Acquisitions, Integration, Complex Economic Object
    JEL: D60 L22
    Date: 2014–04–15
  4. By: Florian LEON
    Abstract: Whether competition helps or hinders small firms' access to finance is in itself a much debated question in the economic literature and in policy circles, especially in the developing world. Economic theory offers conflicting predictions and empirical contributions provide mixed results. This paper considers the consequences of interbank competition on credit constraints using firm level data covering 70 developing and emerging countries. In addition to the classical concentration measures, competition is assessed by computing three non-structural measures (Lerner index, Boone indicator, and H-statistics). The results show that bank competition alleviates credit constraints, while bank concentration measures are not robust predictors of a firm's access to finance. Findings highlight that bank competition not only leads to less severe loan approval decisions but also reduces borrowers' discouragement. In addition, a secondary result of this paper documents that banking competition enhances credit availability more by reducing prices than by increasing relationship lending.
    Keywords: Bank competition, access to credit, developing countries, discouraged borrower
    JEL: L10 G20
  5. By: Sofia Priazhkina (Department of Economics, Indiana University); Frank Page (Department of Economics, Indiana University)
    Abstract: This paper presents a model of collusive bargaining networks. Given a status quo network, game is played in two stages: in the first stage, pairs of sellers form the network by signing two-sided contracts that allow sellers to use connections of other sellers; in the second stage, sellers and buyers bargain for the product. We extend the notion of a pairwise Nash stability with transfers to pairwise Nash stability with contracts and characterize the subgame perfect equilibria. The equilibrium rents are determined for all firms based on their collateral and bargaining power. When a stable equilibrium exists, sharing always generates maximum social welfare and eliminates the frictions created by the network structure. The equilibria depend on the initial network setup, likewise bargaining and contractual procedures. In the homogeneous case, equilibria exist when the number of buyers and sellers are relatively unequal. When the number of buyers exceeds number of sellers, bargaining privileges of sellers over buyers and a low sharing transfer are required for the equilibrium to exist. In the networks with relatively few monopolized sellers, sharing leads to a complete reallocation of surplus to sellers and a zero sharing transfer. When the global market is dominated by sellers, surplus is divided relatively equitably. It is also shown that in the special case of the model with only one monopolistic seller and no market entry, the sharing process organizes sellers in the supply chain order.
    Keywords: Social Networks, Oligopoly Pricing, Collusion, Market Sharing Agreements
    JEL: L11 L14 L12
    Date: 2014–05
  6. By: A. R. Lamorgese (Bank of Italy); A. Linarello (Bank of Italy and UPF); Frederic Warzynski (Department of Economics and Business, Aarhus University, Denmark)
    Abstract: In this paper, we use detailed information about firms’ product portfolio to study how trade liberalization affects prices, markups and productivity. We document these effects using firm product level data in Chilean manufacturing following two major trade agreements with the EU and the US. The dataset provides information about the value and quantity of each good produced by the firm, as well as the amount of exports. One additional and unique characteristic of our dataset is that it provides a firm-product level measure of the unit average cost. We use this information to compute a firm-product level measure of the profit margin that a firm can generate. We find that new products start being sold on foreign markets as export tariff fall. Moreover, for those products, we observe a fall in both prices and unit average costs. Those effects are mainly driven by an increase in productivity at the firm-product level. On average, adjustment on the profit margin does not appear to play a role. However, for more differentiated products, we find some evidence of an increase in markups, suggesting that firms do not fully pass-through increases in productivity on prices whenever they have enough bargaining power.
    Keywords: markups, physical productivity, free trade agreements
    JEL: F13 F14 L11
    Date: 2014–06–10

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