nep-ind New Economics Papers
on Industrial Organization
Issue of 2020‒05‒18
three papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Third-degree price discrimination in oligopoly when markets are covered By Dertwinkel-Kalt, Markus; Wey, Christian
  2. Nowhere Else to Go: The Determinants of Bank-Firm Relationship Discontinuations after Bank Mergers By Oliver Rehbein; Santiago Carbo-Valverde
  3. Merger control for IRPs: Do acquisitions of distressed firms warrant competition scrutiny? By Ram Mohan, M.P.; Raj, Vishakha

  1. By: Dertwinkel-Kalt, Markus; Wey, Christian
    Abstract: We analyze oligopolistic third-degree price discrimination relative to uniform pricing, when markets are always covered. Pricing equilibria are critically determined by supply-side features such as the number of firms and their marginal cost differences. It follows that each firm's Lerner index under uniform pricing is equal to the weighted harmonic mean of the firm's relative margins under discriminatory pricing. Uniform pricing then decreases average prices and raises consumer surplus. We provide an intriguingly simple approach to calculate the consumer surplus gain from uniform pricing only based on market data of the discriminatory equilibrium (prices and quantities).
    Keywords: Third-Degree Price Discrimination,Uniform Pricing,Harmonic Mean Formula,Covered Demand
    JEL: D43 L13 L41 K21
    Date: 2020
    URL: http://d.repec.org/n?u=RePEc:zbw:dicedp:336&r=all
  2. By: Oliver Rehbein; Santiago Carbo-Valverde
    Abstract: The decision to change or terminate a bank-firm relationship has been demonstrated to be crucial to firm performance following bank mergers. We investigate what determines this decision and find both bank competition and the available firm collateral to be important factors. We additionally provide new evidence that firms that are able to add a bank rela- tionship following a merger exhibit much stronger post-merger performance. Our findings are consistent with the interpretation that bank mergers cause a reduction in lending to most firms, leading them to search for alternative sources of finance.
    Keywords: bank mergers, relationship banking, competition
    JEL: G21 G34
    Date: 2020–05
    URL: http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2018_044v2&r=all
  3. By: Ram Mohan, M.P.; Raj, Vishakha
    Abstract: In July 2019, the Competition Law Review Committee Report had recommended that Insolvency Resolution Plans (IRP) which result in combinations should be green-channelled. This would mean that IRP combinations would be automatically approved without any merger scrutiny. The theoretical basis of this recommendation is the ‘failing firm defence’ which allows parties to enter into mergers if they show that the exit of a firm from the market will be more harmful to competition than the merger. This paper assesses the advisability of green-channelling IRPs through the lens of competition law. It examines the IRPs which have been scrutinised by the CCI and examines whether they are treated differently from other mergers. We use the European Union as a point of comparison to describe how the failing firm defence is being implemented and to show that there can be anticompetitive effects to green-channelling IRPs without a full competition assessment. We conclude that while the failure of a firm is an important consideration when assessing mergers, it cannot be the sole determinant of their desirability.
    Date: 2020–05–08
    URL: http://d.repec.org/n?u=RePEc:iim:iimawp:14625&r=all

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