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on Industrial Organization |
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Issue of 2005‒10‒15
three papers chosen by |
| By: | Sue Mialon |
| Abstract: | This paper provides a theoretical ratification of efficiency of internal capital markets. The efficiency of internal capital market is examined in the context of horizontal mergers. In Cournot oligopoly, merged firms often optimally select the multidivisional structure in which competition among the merging partners remains in production while the headquarters establishes strong central control over resource allocation to the divisions. Under this structure, mergers not only combine the merging partners’ capital, but also provide the merged firm with a new opportunity to reallocate that capital in an efficient way. Horizontal mergers are profitable due to the efficiency of internal capital markets. Such horizontal mergers also enhance market competition. I discuss the conditions under which the multidivisional structure (the M-form) is optimal for the merged firm while complete fusion of all the merging partners under a single authority is also feasible. |
| Date: | 2005–08 |
| URL: | http://d.repec.org/n?u=RePEc:emo:wp2003:0522&r=ind |
| By: | R. Preston McAfee; Hugo Mialon; Sue Mialon |
| Abstract: | The antitrust laws are intended to permit procompetitive actions by firms and deter anticompetitive actions. We consider firms’ incentives to use the antitrust lawsuits for strategic purposes, in particular to prevent procompetitive efficiency-improvement by rival firms. Our main result is that, ceteris paribus, smaller firms in more fragmented industries are more likely to use the antitrust laws strategically than larger firms in concentrated industries. |
| Date: | 2005–08 |
| URL: | http://d.repec.org/n?u=RePEc:emo:wp2003:0524&r=ind |
| By: | Peter Thompson (Department of Economics, Florida International University); Steven Klepper (Department of Social and Decision Sciences, Carnegie Mellon University) |
| Abstract: | We construct a model of industry evolution in which the central force for change is the creation and destruction of submarkets. Firms expand when they are able to exploit new opportunities that arrive in the form of submarkets; they contract and ultimately exit when the submarkets in which they operate are destroyed. This simple framework can transparently explain a wide range of well-known regularities about industry dynamics, most notably the subtle relationships between size, age, growth, and survival. Data on the laser industry, where submarkets are prominent, further illustrate the ability of the model to explain distinctive patterns in the evolution of industries and firms. |
| Keywords: | Spinoffs, firm growth, survival, firm age, market structure, industry evolution, technological change |
| JEL: | L1 O33 |
| Date: | 2003–12 |
| URL: | http://d.repec.org/n?u=RePEc:fiu:wpaper:0303&r=ind |