Search results for "jel:L4"
showing 7 items of 7 documents
Co-determination and Merger Incentives from Transfers of Wealth: Firm Owners vs. Workers
2010
When workers can capture rents from their influence on corporate decisions, mergers can become a device to generate transfers of wealth. This paper examines the merger incentives from these transfers of wealth. It is found that worker influence increases merger profitability, in line with the owners’ incentive to use mergers to reduce the rents captured by workers. In contrast, the workers’ merger incentives are shown to be decreasing in their own degree of influence on the merger decision, in line with the view according to which workers can be used by incumbent managers as a defensive instrument in acquisitions.
Anatomy of Cartel Contracts
2013
We study cartel contracts using data on 18 contract clauses of 109 legal Finnish manufacturing cartels. One third of the clauses relate to raising profits; the others deal with instability through incentive compatibility, cartel organization, or external threats. Cartels use three main approaches to raise profits: Price, market allocation, and specialization. These appear to be substitutes. Choosing one has implications on how cartels deal with instability. Simplifying, we find that large cartels agree on prices, cartels in homogenous goods industries allocate markets, and small cartels avoid competition through specialization.
On the evolution of monopoly pricing in Internet-assisted search markets
2014
This study examines the evolution of prices in markets with Internet price-comparison search engines. The empirical study analyzes laboratory data of prices available to informed consumers, for two industry sizes and two conditions on the sample (complete and incomplete). Distributions are typically bimodal. One of the two modes of distribution, corresponding to monopoly pricing, tends to attract such pricing strategies increasingly over time. The second one, corresponding to interior pricing, follows a decreasing trend. Monopoly pricing can serve as a means of insurance against more competitive (but riskier) behavior. In fact, experimental subjects who initially earn low profits due to int…
Equilibrium mergers in a composite good industry with efficiencies
2014
This paper studies equilibrium merging behavior in composite good industries. Component producers face the option to either merge with a similar component producer (horizontal merger) or a complementary one (complementary merger) of a composite good. Focusing only on strategic reasons, complementary mergers arise at equilibrium only when composite goods are very differentiated while horizontal mergers otherwise. Next, when efficiencies are considered, the level of marginal cost saving required for a horizontal merger in a composite industry to result in a non- increase in the upward price pressure index (UPPI) is greater as compared with the one in a regular industry. This result can be use…
The Influence of American Economists on the Clayton and Federal Trade Commission Acts
2011
The aim of this paper is to analyze American economists’ influence in the passing of the Clayton and Federal Trade Commission Acts (1914). Specifically, it is argued and documented that American economists were important in this process in two ways. Many economists exercised an “indirect” influence by discussing in academic journals and books problems concerning trusts, combinations, and the necessary measures to preserve the working of competitive markets. At least as importantly, if not more so, some economists took an active role in the reform movement both contributing to draft proposals for the amendment of existing antitrust legislation and providing help and advice during the Congres…
Cartels Uncovered
2018
How many cartels are there? The answer is important in assessing the efficiency of competition policy. We present a Hidden Markov Model that answers the question, taking into account that often we do not know whether a cartel exists in an industry or not. Our model identifies key policy parameters from data generated under different competition policy regimes and may be used with time-series or panel data. We take the model to data from a period of legal cartels - Finnish manufacturing industries 1951 - 1990. Our estimates suggest that by the end of the period, almost all industries were cartelized.
Adam Smith on Monopoly Theory. Making good a lacuna
2014
This article analyses Adam Smith's views on monopoly by focusing on Book IV and V of The Wealth of Nations. It argues that the majority of scholars have assessed Smith's analysis of monopoly starting from premises different from those, actually though implicitly, used by Smith. We show that Smith makes use of the word 'monopoly' to refer to a heterogeneous collection of market outcomes, besides that of a single seller market, and that Smith's account of monopolists' behaviour is richer than that provided by later theorists. We also show that Smith was aware of the growth-retarding effect of monopoly and urged State regulation. © 2014 Scottish Economic Society.