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on Industrial Organization |
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Issue of 2016‒04‒23
two papers chosen by |
| By: | Ivaldi, Marc; Lagos, Vicente |
| Abstract: | This paper aims at evaluating the coordinated effects of horizontal mergers by simulating their impact on firms' critical discount factors. We consider a random coefficient model on the demand side and heterogeneous price-setting firms on the supply side. Results suggest that mergers strengthen the incentives to collude among merging parties, but weaken the incentives of non-merging parties, with the former effect being stronger. To assess the magnitudes of these effects, we introduce the concepts of Asymmetry in Payoffs and Change in Payoffs effects, which allow us to identify appropriate screening tools according to the relative pre-merger payoffs of merging parties. |
| Keywords: | Collusion; Coordinated effects; Critical Discount Factor; Merger Simulation |
| JEL: | L41 |
| Date: | 2016–04 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:11218&r=ind |
| By: | Choi, Jay-Pil; Peitz, Martin |
| Abstract: | This paper analyzes a mechanism through which a supplier of unknown quality can overcome its asymmetric information problem by selling via a reputable downstream firm. The supplier's adverse-selection problem can be solved if the downstream firm has established a reputation for delivering high quality vis-à-vis the supplier. The supplier may enter the market by initially renting the downstream firm’s reputation. The downstream firm may optimally source its input externally, even though sourcing internally would be better in terms of productive efficiency. Since an entrant in the downstream market may lack reputation, it may suffer from a reputational barrier to entry arising from higher input costs. |
| Keywords: | Adverse Selection; Barriers to Entry; Branding; Certification Intermediaries; Experience Goods; Incumbency Advantage; Outsourcing |
| JEL: | D4 L12 L4 L43 L51 L52 |
| Date: | 2016–04 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:11220&r=ind |