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on Industrial Organization |
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Issue of 2010‒09‒25
seven papers chosen by |
| By: | Trillas, Francesc (IESE Business School) |
| Abstract: | This paper presents new developments in the economics of federalism to analyze the determinants of specific investments in network industries and the interaction between structural and behavioral regulation. Central or federal policy making is more focused and specialized and makes it more difficult for interest groups to organize. Under some conditions, however, central powers will be associated with more underinvestment than local powers. The latter cannot afford specific regulation due to high fixed administrative costs, but may use other policy objectives as a commitment device. When technology allows the introduction of competition in some segments, the possibilities for organizing the institutional architecture of regulation expand. Liberalization will typically require institutional cooperation, but cooperation has costs and may be inhibited by distributional concerns. |
| Keywords: | Network Industries; Regulatory Jurisdiction; Cooperation; Liberalization; |
| Date: | 2010–05–05 |
| URL: | http://d.repec.org/n?u=RePEc:ebg:iesewp:d-0859&r=ind |
| By: | Erel, Isil (Ohio State University); Liao, Rose C. (Rutgers University); Weisbach, Michael S. (Ohio State University) |
| Abstract: | Despite the fact that one-third of worldwide mergers involve firms from different countries, the vast majority of the academic literature on mergers studies domestic mergers. What little has been written about cross-border mergers has focused on public firms, usually from the United States. Yet, the vast majority of cross-border mergers involve private firms that are not from the United States. We provide an analysis of a sample of 56,978 cross-border mergers occurring between 1990 and 2007. We first characterize the patterns of who buys whom: Geography matters, with firms being much more likely to purchase firms in nearby countries than in countries far away. Purchasers are usually but not always from developed countries and they tend to purchase firms in countries with lower accounting standards. A significant factor in determining acquisition patterns is currency movements; firms tend to purchase firms from countries relative to which the currency of the acquirers country has appreciated. In addition, economy-wide factors reflected in the countrys stock market returns lead to acquisitions as well. Both the currency and stock market effect could suggest either misvaluation or wealth explanations. Our evidence is more consistent with the wealth explanation than the misvaluation explanation. |
| Keywords: | Mergers; Currency movements; Market movements; Valuation |
| JEL: | F30 G34 |
| Date: | 2010–09–20 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:sifrwp:0075&r=ind |
| By: | Ramello, Giovanni B. |
| Abstract: | This article explores the journal publishing industry in order to shed light on the overall economic consequences of copyright in markets. Since the rationale for copyright is among others to promise some market power to the holder of the successful copyrighted item, it also provides incentives to preserve and extend market power. A regular trait of copyright industries is high concentration and the creation of large catalogues of copyrights in the hands of incumbents. This outcome can be observed as the aggregation of rights and is one of the pivotal strategies for obtaining or extending market power, consistently with findings in other cases. Journal publishing is no different in this respect from other copyright industries, and in the last decade has experienced a similar trajectory, leading to a highly concentrated industry in which a handful of large firms increasingly control a substantial part of the market. It also provides a clear example of the effect of copyright dynamics on market structure, suggesting that a different attitude should be taken in lawmaking and law enforcement. |
| Keywords: | copyright and market power, endogenous market structure, journal-publishing industry |
| JEL: | D40 O34 O33 L12 L69 |
| Date: | 2010–09 |
| URL: | http://d.repec.org/n?u=RePEc:uca:ucapdv:146&r=ind |
| By: | Ciliberto, Federico; Schenone, Carola |
| Abstract: | We investigate the effects of Chapter 11 bankruptcy filings on product market competition using data from the US airline industry. We find that bankrupt airlines permanently downsize their national route structure, their airport-specific networks, and their route-specific flight frequency and capacity. We also find that bankrupt airlines lower their route-specific prices while under bankruptcy protection, and increase them after emerging. We do not find robust evidence of significant changes by the bankrupt airline's competitors along any of the dimensions above. Overall, our results are consistent with the hypothesis that bankruptcy is the result of a war of attrition over capacity and network cutbacks. |
| Keywords: | Airline Industry; Bankruptcy; Product Market Competition; Chapter 11; War of Attrition; Capacity Reduction |
| JEL: | K2 G3 L1 |
| Date: | 2010–08–12 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:24914&r=ind |
| By: | Alex Coad (Max Planck Institute of Economics, Evolutionary Economics Group, Kahlaische Strasse 10, D-07745 Jena, Germany); Agustí Segarra (Universitat Rovira i Virgili, Grup de Recerca d’Indústria i Territori, Avda. Universitat 1, 43204 Reus, Spain); Mercedes Teruel (Universitat Rovira i Virgili, Grup de Recerca d’Indústria i Territori, Avda. Universitat 1, 43204 Reus, Spain) |
| Abstract: | Our empirical literature review shows that little is known about how firm performance changes with age, presumably because of the paucity of data on firm age. For Spanish manufacturing firms, we analyse the firm performance related to firm age between 1998 and 2006. We find evidence that firms improve with age, because ageing firms are observed to have steadily increasing levels of productivity, higher profits, larger size, lower debt ratios, and higher equity ratios. Furthermore, older firms are better able to convert sales growth into subsequent growth of profits and productivity. On the other hand, we also found evidence that firm performance deteriorates with age. Older firms have lower expected growth rates of sales, profits and productivity, they have lower profitability levels (when other variables such as size are controlled for), and also that they appear to be less capable to convert employment growth into growth of sales, profits and productivity. |
| Keywords: | firm age, firm growth, LAD, financial structure, vector autoregression |
| JEL: | L25 L20 |
| Date: | 2010–09 |
| URL: | http://d.repec.org/n?u=RePEc:xrp:wpaper:xreap2010-10&r=ind |
| By: | Trillas, Francesc (IESE Business School) |
| Abstract: | The economics of federalism is a broad discipline with more than five decades of experience. It may shed light on how regulatory jurisdiction is allocated in EU electricity and telecommunications markets. Specifically, this paper assesses the evolution of reform up to and including the third EU packages, which continue the liberalization and integration process in these markets. Liberalization has been accompanied by gradual harmonization of national markets to overcome resistance to competitive forces. Less steps than necessary have been undertaken to promote market integration; yet, positive and normative reasons remain for the participation of national or even regional/local powers. Vertical institutional cooperation will remain a necessary condition for a sound regulatory framework, but cooperation may sometimes be inhibited by distributive considerations. |
| Keywords: | federalism; regulation; electricity; telecommunications; |
| JEL: | H77 K23 L50 L94 L96 L97 |
| Date: | 2010–05–07 |
| URL: | http://d.repec.org/n?u=RePEc:ebg:iesewp:d-0861&r=ind |
| By: | Payal Malik |
| Abstract: | In this paper, the different market structure options and the broad organisational forms of restructured wholesale markets for electricity that have emerged, have been critically analysed. [Working Paper No. 95] |
| Keywords: | structure, options, wholesale, markets, electricity |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:ess:wpaper:id:2848&r=ind |