inferring market power under the threat of entry the case of the brazilian cement industry consider a setting where threatened rather than actual import competition restrains a domestic oligopoly s prices i show that not modelling the entry threat may underestimate the true degree of market power as incumbents blunted price responses to demand shocks resemble perfectly competitive behavior evidence from brazilian cement markets points to an important role for imports in determining domestic cement prices despite the near absence of imports on assuming autarky models with market power are rejected in favor of competition among incumbents however allowing a role for imports rejects the autarky assumption and precludes one from rejecting the presence of market power

oligopolistic pricing over the deterministic market demand cycle some evidence from the us portland cement industry abstract haltiwanger and harrington 1991 haltiwanger j harrington j e jr 1991 the impact of cyclical demand movements on collusive behavior rand journal of economics 22 89 104 formulated a theory of self enforcing collusion assuming a deterministic demand cycle they predicted that under a self enforcing non cooperative pricing scheme for any level of demand the price in the rising part of the cycle would always be greater than the price in the falling part of the cycle they also predicted that the path of collusive profits should reach its peak before market demand we test their predictions using data from the portland cement industry the hypotheses are tested using a multi equation system differentiating the boom and the bust periods from 1974 to 1989 the results support both of haltiwanger and harrington s hypotheses

diversification multi market contact and profitability this paper analyses the relationships between diversification multi market contact and industry profitability it focuses on the link between diversification and multi market contact to show that when diversification establishes or increases the extent to which firms meet in more than one market the effect of such multi market contact is to increase the possibility that collusion emerges as an evolutionary stable strategy as a result multi market contact may increase the potential for tacit collusion and so lead to higher profitability the effects of diversification and multi market contact on the price cost margin and the rate of return to capital are estimated using a specially constructed new database for uk manufacturing industry in 1979 this database provides information on the diversification and multi market contact of 418 firms across 134 manufacturing industries thus linking firm and industry level data the results show a clear positive effect of multi market contact on industry profitability

mutual forbearance under experimental conditions since corwin edwards first raised it 30 years ago 4 the question whether conglomerate mergers and diversification will affect competition within markets has remained unanswered diversification or conglomeration has no direct impact on entry conditions or market shares or concentration ratios aside from claims for advantages from size per se and not from conglomeration itself the most promising theoretical rationale to explain potential anticompetitive effects has been the mutual forbearance or spheres of influence theory by mutual forbearance we mean the possible tendency for firms meeting in more than one market to account for rivals reactions across market boundaries by adopting less competitive price and output strategies possibly because real world oligopolists have a large set of decision variables available to act on price output capacity advertising research and development etc the effects of interrelationships among firms such as mutual forbearance have been difficult to determine by subjecting industrial data to statistical testing on the other hand in a controlled laboratory setting the validity of particular behavioral assumptions can be examined with some precision sherman has discussed results of previous oligopoly experiments 19 which generally have supported cournot noncooperative solutions rather than cooperative collusive ones and plott has surveyed experiments related to antitrust and industrial organization issues 17 under various information and

price and seller concentration in cement effective oligopoly or misspecified transportation cost abstract a positive correlation between price and seller concentration in cement markets disappears if a different proxy for transportation costs population density is included in the specification

market structure and import share a regional market analysis in this paper we analyze the relationship between domestic market structure and cement importation into the united states we do this by examining the impact of concentration technology scale costs and demand on imports into twenty independent united states regional cement markets for a number of years by looking at only one industry as opposed to importation across several diverse industries we hope to remove inter industry effects that may mask the relationship between import share and selected structural characteristics the use of time series data allows us to examine import response to variations in demand over the business cycle this paper is divided into six sections the next describes the united states portland cement industry including its geographically segmented nature production methods demand conditions and incentives for importation section iii contains a model that relates import shares to market structure the data to estimate this model are discussed in section iv section v contains

multiple market contact between savings and loans note when firms diversify into new product or geographic markets via entry or merger they may encounter firms with whom they are already competing an important question for study is whether multiple market contact between firms affects their behavior although most traditional theory assumes that behavior of firms in a market is determined by factors in that market alone edwards 1955 advanced the mutual forbearance or linked oligopoly hypothesis starting from the premise that dominant firms in a market are likely to meet one another in other markets edwards hypothesized that a multimarket firm may not take aggressive actions against a competitor in one market if it fears retaliatory actions by that competitor in another market the crux of the hypothesis is that as the number of contact points between dominant firms of a given market increases the less competitive that market will be regardless of the market s level of concentration although edwards suggested that multimarket contact might reduce competition others including solomon 1970 who studied geographic banking markets and scott 1982 who investigated the diversification of manufacturing firms across different lines of business recognized that contact might increase competition neither edwards solomon nor scott presented a formal model however game theoretic models have been constructed that can be used to study the effects of diversification investigators of the chain store paradox e g kreps and wilson 1982 have shown that in a very simple environment rational strategies in one market cannot be influenced by behavior in a second indepen

multi market contact and competition evidence from the depression era portland cement industry abstract theoretical work has suggested that contact between firms in different markets can facilitate tacit collusion empirical work on this link has been limited we address the paucity of empirical evidence with a novel plant level dataset for the cement industry during the great depression we find that multi market contact fosters tacit collusion and higher prices based on a new measure of contact that accounts for capacity utilization a one standard deviation increase in our measure of contact increases prices by around 4 3 we then examine the effect of the national industrial recovery act s codes of fair conduct introduced in 1933 to stem deflation through cooperative behavior within industries we find that the effects of the codes were most strongly felt in markets with the highest level of multi market contact this suggests that multi market contact can be a useful tool for firms to support collusive outcomes tacit or otherwise

the dynamics of multimarket competition in exploration and exploitation activities prior studies of multimarket contact have investigated exploitation rather than exploration activities we contrast effects of multimarket contact on entry and exit dynamics in these two settin

multimarket contact among diversified oligopolists multimarket contact appears to be necessary for effective oligopolistic consensus in a concentrated industry when the industry s firms are diversified evidently without multimarket contact coordination breaks down because the diversified sellers have different costs and demands and hence would not independently choose the same price and because price cuts are less easily detected and matched the evidence suggests that bain s seminal observation of the nexus among profits concentration and barriers resulted because of the multimarket contact of the firms in his sample

multimarket contact and pricing evidence from the u s cement industry abstract we empirically examine the effect of multimarket contact on pricing in the u s cement industry a model of price and quantity formation is estimated for a panel of 25 regional cement markets over 16 years the results indicate that the divergence of price from marginal cost in a particular market is directly related to the extent of multimarket contact among firms in that market

institutional activism in the early american automobile industry abstract a common proposition is that new industries gain constitutive legitimacy through claim making by institutional activists yet neoinstitutional research seldom analyzes the effects of claim making on the formation of new organizations and how the effect of claim making is moderated by other sources of constitutive legitimacy advertising legal recognition and a policy regime favorable to business i explore the relationship between claim making by activists and new organization building in a study of the early american automobile industry when auto clubs organized reliability contests to validate the automobile the results show that the visibility of reliability contests within the focal state increased foundings of car firms in the state but that this effect diminished with advertising legal recognition of the car and the existence of a business friendly governor in the focal state taken together these results demonstrate that claim making is crucial in the early phase of gaining legitimacy for new industries

multimarket contact and collusive behavior traditional analyses of industrial behavior typically link the exercise of market power in an industry to internalfeatures such as demand conditions concentration and barriers to entry nevertheless some economists have remained concerned that external factors such as contact across markets may also play a significant role in determining the level of competitiveness in any particular industry in this article we examine the effect of multimarket contact on the degree of cooperation that firms can sustain in settings of repeated competition we isolate conditions under which multimarket contact facilitates collusion and show that these collusive gains are achieved through modes of behavior that have been identified in previous empirical studies of multimarketfirms

pass through in a concentrated industry empirical evidence and regulatory implications we estimate pass through with thirty years of data from a concentrated industry the empirical model accounts for oligopoly interactions yet facilitates estimation with aggregate price data robust statistical evidence supports that industry wide cost changes are more than completely transmitted downstream and that this industry pass through is largely unaected by competitive conditions the industry in question portland cement is a major focus of environmental and antitrust regulators we use our pass through estimates to i evaluate the welfare consequences of marketbased co2 regulation ii predict the magnitude and location of price eects due to a merger under review by antitrust authorities and iii corroborate the simulation based analysis of the epa regarding its impending regulation of local pollutants

a micro econometric model of capital utilization and retirement the case of the u s cement industry the paper presents a micro econometric model of capital utilization and retirement estimates of a firm s discrete decision problem with regard to an existing piece of capital whether to operate hold idle or retire it are obtained in the context of the u s cement industry by solving a discrete choice stochastic dynamic programming model the estimates are then used to simulate the effects of product and input price changes and changes in the size and age of a cement kiln on a firm s propensity to operate hold idle and retire a kiln

sales at risk a test of the mutual forbearance theory of conglomerate behavior in seeking to understand the implications of the large amount of diversification and conglomeration that has occurred in the united states since the mid 1960s some economists have revived the mutual forbearance hypothesis first presented by edwards 1955 several papers have attempted to formalize or test this hypothesis which states that multimarket contacts mmcs among firms have the potential for facilitating collusion in one or more of the markets where these contacts occur using 1976 data from the federal trade commission s line of business study an earlier paper feinberg 1982 developed a framework for evaluating mmcs and inthis paper tests the mutual forbearance theory of conglomerate behavior at both company and industry levels using 1976 data from the federal trade commission s line of business program this theory states that companies meeting rivals in more than one market will be able to facilitate collusion in one or all of those markets at the company level the evidence supports the theory showing salesat risk a measure of the importance of multimarket contacts to increase price cost margins in the moderate range of concentration where collusion is feasible but difficult to achieve without mutual forbearance the industry level results are weaker casting some doubt on the hypothesis associate professor of economics pennsylvania state university this paper was begun while i was a consultant to the line of business program at the federal trade commission the manager of the line of business program has certified that he has reviewed and approved the disclosure avoidance procedures used by the staff of the line of business program to insure that the data included in this paper do not identify individual company line of business data views expressed here are my own and not necessarily those of the federal trade commission i would like to thank william long george pascoe david ravenscraft melvin reder and an anonymous referee for their help on this project 1 these studies often refer to terms other than mutual forbearance e g spheres of influence extended interdependence they include adams 1974 reynolds 1976 heggestad and rhoades 1978 areeda and turner 1979 strickland 1980 feinberg 1982 1984 scott 1982 and feinberg and sherman 1985

multimarket contact competition and pricing in banking abstract in this paper we assess the impact of multimarket contact of banks on their market power by means of a simultaneous equation model in which the divergence of price from marginal cost is a function of multimarket linkages the model is estimated using aggregate data from the italian regions for the years 1997 2009 our results show that multimarket contact is positively and significantly correlated to the market power index and is also connected to both home and non home market concentration the evidence is robust to changes in model specification and multimarket contact measures and supports the idea that firms which have a greater amount of contact are more likely to collude

purposive diversification as a motive for merger abstract conglomerate mergers can increase the symmetry of diversified competitors operations theory and evidence about such symmetry show that the classic horizontal merger issue efficiency loss because of increased monopoly power versus efficiency gain because of reduced costs is the antitrust economics issue in conglomerate mergers even when there is no concern about the loss of potential competition

dangerous interactions problems in interpreting tests of conditional aid effectiveness there is now a substantial empirical literature examining the determinants of aid effectiveness a large part of this makes inferences based on a regression incorporating aid as a share of recipient gdp interacted with some institutional or policy variable recently some authors have questioned the statistical robustness of such regressions pointing out that results vary according to the way aid is measured and the estimator applied to the data moreover the regression equations used to test hypotheses about the determinants of aid effectiveness are often introduced without any corresponding formal theory we explore aid policy interaction terms in the context of a simple theoretical model showing how different nonlinearities may be conflated the resulting difficulties in the interpretation of aid growth regressions are illustrated in the context of a seminal paper in the conditional aid effectiveness literature one simple change in the way that aid is measured in per capita terms rather than as a fraction of gdp completely changes the regression results this indicates that adding interaction terms to otherwise linear regression equations is an inadequate way of capturing the nonlinearities in the growth process our aim is to re emphasise the importance of grounding

living by the golden rule multimarket contact in the u s airline industry this paper examines empirically the effects of multimarket contact on pricing in the u s airline industry the analysis of the time series and cross sectional variability of airline fares in the 1000 largest domestic city pair routes reveals the presence of statistically significant and quantitatively important multimarket effects fares are higher in city pair markets served by carriers with extensive interroute contacts these findings are consistent with the claims of industry experts that airlines live by the golden rule i e that they refrain from initiating aggressive pricing actions in a given route for fear of what their competitors might do in other jointly contested routes during his testimony mr steven b elkins senior director of marketing systems development for northwest airlines cited an example in which northwest lowered fares on night flights that were flying with empty seats in a number of routes from minneapolis and upper midwest cities to various west coast cities he said that continental airlines swiftly responded by cutting prices in important northwest markets mr elkins s memo advises northwest pricing analysts we will live by the golden rule in his testimony he explained that the golden rule in that context was that i did not want my pricing analyst initiating actions in another carrier s market like chicago for fear of what that other carrier might do to retaliate wall street journal october 9 1990 p b1

partial identification and mergers this paper discusses policy choice under ambiguity in the context of merger simulation we do so by incorporating the uncertainty about post merger conduct into a simple merger simulation model we isolate the problem of uncertainty regarding post merger conduct by working with a simple conduct parameters model in the spirit of bresnahan 1982 and lau 1982 we then apply manski s 2011 analysis and discuss policy choice under the maxmin minimax regret and expected utility criteria