nep-ind New Economics Papers
on Industrial Organization
Issue of 2016‒09‒25
three papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Coexistence of service- and facility-based competition: The relevance of access prices for "make-or-buy"-decisions By Bendery, Christian M.; Goetz, Georg
  2. Does environmental regulation create merger incentives? By Anna CRETI; María-Eugenia SANIN
  3. Reverse payments and generic entry competition By WAN, Jiangyun(Yunyun)

  1. By: Bendery, Christian M.; Goetz, Georg
    Abstract: This paper models competition between two firms, which provide broadband In-ternet access in regional markets with different population densities. The firms, an incumbent and an entrant, differ in two ways. First, consumers bear costs when switching to the entrant. Second, the entrant faces a make-or-buy decision in each region and can choose between service-based and facility-based entry. The usual trade-off between static and dynamic efficiency does not apply in the sense that higher access fees might yield both, lower retail prices and higher total coverage. This holds despite a strategic effect in the entrant's investment decision. While investment lowers marginal costs in regions with facility-based entry, it intensifies competition in all regions. We show that the cost-reducing potential of investments dominates the strategic effect: Higher access fees increase facility-based competition, decrease retail prices and increase total demand.
    Keywords: Broadband access markets,facility- and service-based entry,investments,economies of density,switching costs
    JEL: D43 L13 L51 L96
    Date: 2015
  2. By: Anna CRETI (Dauphine University and Ecole Polytechnique); María-Eugenia SANIN (EPEE, Evry-Val-d'Esssone University and Ecole Polytechnique)
    Abstract: This paper studies merger incentives for polluting Cournot firms under a competitive tradable emission permits market. Such setting is relevant to assess the observed mergers between power generators in the Regional Greenhause Gas Initiative (RGGI) allowing us to derive policy recommendations. We find that when firms are symmetric and marginal costs are constant, an horizontal merger that generates efficiency gains is welfare enhancing, but efficiency gains must be high enough with respect to the case without permits markets for the merger to take place. Secondly, the presence of a competitive (or monopolistic) outside market that also trades in the permits market makes profitable a merger that would not happen otherwise. When firms are vertically related in an input-output chain, an horizontal merger in one of the markets increases profits in that market and in the other market due to the decrease in permits price. Finally we consider an oligopoly-fringe model in which firms differ both in their marginal costs of production and in their pollution intensity. A merger between the oligopolistic firms decreases permits price and is always profitable as opposed to the symmetric Cournot case in which there is a critical size for profitability.
    Keywords: mergers, environmental externality, tradable emission permits, social welfare, Cournot competition
    JEL: L13 L41 Q51
    Date: 2016
  3. By: WAN, Jiangyun(Yunyun)
    Abstract: In the United States, brand-name drug manufacturers often pay generic companies to delay marketing of their generic products. In this paper we develop an analytical framework to examine the implications of banning reverse payment settlements. We first find that reverse payment settlements occur when generic firms face relatively high entry cost but do not when entry costs are sufficiently low. We next show cases in which reverse payment settlements are harmful to brands. We also consider the counterfactual case when 180-day marketing exclusivity rights are removed from Hatch-Waxman and find that the absence of marketing exclusivity rights encourages brands to proceed with reverse payment settlements.
    Keywords: reverse payment settlements, generic entry competition, Hatch-Waxman, marketing exclusivity
    JEL: I18 K23 L13
    Date: 2016–08

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