new product introduction and incumbent response strategies their interrelationship and the role of multimarket contact in this article the author studies the determinants of both new product introduction and incumbent response strategies in a single integrated framework building on previous research in strategic

sticks and carrots two incentive mechanisms supporting intra group cooperation abstract in this note we introduce two distinct incentive mechanisms that support dynamic intra group cooperation in the context of prisoner s dilemma payoffs rewards for cooperating and punishments for defection where the rewarding or punishing party may be outside the relationship

direct estimation of synergy a new approach to the diversity performance debate this study examines the linkages between relatedness and synergy in the context of diversification among u s pharmaceutical firms for the period 1960 1980 rather than assume as in the entropy herfindahl and concentric indices of diversification that the levels of synergy generated by different related combinations of business units are identical we estimate synergy directly using a modified version of the concentric index in addition to estimating synergy using capital market performance of the firm as a whole we examine the effects of nondrug diversification on the innovative productivity of firms pharmaceutical divisions alone our two main findings are that production relatedness such as that between drugs and chemicals in fact did not imply synergy over the period of our study and that the patterns of synergy for different types of relatedness shifted over time with the industry life cycle

umbrella branding with imperfect observability and moral hazard abstract in a framework of repeated purchase experience goods with seller s moral hazard and imperfect monitoring umbrella branding may improve the terms of the implicit contract between seller and buyers whereby the seller invests in quality and buyers pay a high price in some cases umbrella branding leads to a softer punishment of product failure which increases the seller s value in other cases umbrella branding leads to a harsher punishment of product failure which allows for a reputational equilibrium that would otherwise be impossible on the negative side under umbrella branding one bad signal may kill two revenue streams not one combining costs and benefits i determine the set of parameter values such that umbrella branding is an optimal strategy

the role of multilateral institutions in international trade cooperation the world trade organization wfo lacks the power to directly enforce agreements it is therefore important to understand what role the wto can play to facilitate international cooperation and whether a multilateral institution can offer distinct advantages over a web of bilateral agreements this paper examines two potential benefits of a multilateral trade institution first verifying violations of the agreements and informing third parties thus facilitating multilateral reputation mechanisms second promoting multilateral trade negotiations rather than a web of bilateral negotiations the model suggests that a multilateral approach is particularly important when there are strong imbalances in bilateral trading relationships

collusion in multiproduct oligopoly games under a finite horizon applying recent results on finitely repeated games to oligopoly theory the author finds that there exists a class of finite horizon output games in which collusion can be achieved as a subgame perfect equilibrium trigger strategies prevent defection from the cooperative outcome by credibly threatening that the defector will be forced to exit the industry for the case of a multiproduct oligopoly it is shown that collusion in one market can be enforced by the threat of punishment in a second market if someone defects even though the two markets are structurally independent the firms make them strategically interdependent through their strategies copyright 1987 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

multimarket contact imperfect monitoring and implicit collusion abstract this paper presents a theoretical foundation to the possibility that multimarket contact enhances firms ability to sustain implicit collusion when firms operate in a single market and cannot perfectly monitor their opponents choices it is impossible to achieve efficiency even if these firms have a long term strategic relationship we show that when firms encounter each other in a number of distinct markets and the extent of this market contact is large efficiency can be approximately sustained by a perfect equilibrium this efficiency with imperfect monitoring holds under almost the same condition on the discount factor as with perfect monitoring journal of economic literature classification numbers c70 c72 c73 d43 l11 l22 l41

entry exit and performance in airline markets abstract data from the airline industry indicate that 1 entry generally is not induced by price levels substantially above the norm 2 entry reduces fares and increases output and exit increases fares and reduces output and 3 incumbents cut price and maintain output in response to entry and survivors increase both price and output in response to exit these findings cast doubt on the ability of entry to prevent or reverse price increases from anticompetitive mergers

competitive tension the awareness motivation capability perspective this paper investigates competitive tension or the strain between a focal firm and a given rival that is likely to result in the firm taking action against the rival drawing on the awareness motivation capability perspective we show how perceived competitive tension as constructed from managers and industry stakeholders competitor assessments is influenced by the independent and interactive effects of three factors relative scale rival s attack volume and rival s capability to contest our results provide a new avenue for studying competitors and the relationship between competitor analysis and interfirm rivalry in science there is a steady state in which opposing forces hold each other in check until the build up of tension turns the static relationship into dynamic interplay the point when the steel cable snaps the steam chamber s pressure valve opens or one psychological force overwhelms the other in business practice a similar phenomenon exists when tension that one opponent imposes on another triggers rivalrous actions competitor analysis is central to strategy and organization research hitt ireland hoskisson 2005 porter 1980 previous research has explored a number of important issues including conjecture variation amit domowitz fershtman 1988 competitor identification porac thomas 1990 and blind spots zajac bazerman 1991 and has made advances in such areas as theoretical integration of competitor analysis and interfirm rivalry chen 1996 fundamental questions such as who a focal firm s competitors are and how much competition the firm faces from each rival have been implicitly or explicitly addressed by a variety

product innovation and firm growth evidence from the integrated circuit industry applied research on growth and innovation seems to suggest that successful innovations do not significantly enhance firm growth this paper tests the hypothesis that the level of observation at which applied research is typically conducted hampers identification of a significant association between innovation and sales growth rates exploiting a unique data set we find that product innovations commercialized in the immediate past positively affect the corporate revenue streams of semiconductor companies

assessing firm behavior in carve out markets evidence on the impact of carve out policy abstract airlines wanting to cooperatively set prices for their international air travel service must apply to the relevant authorities for antitrust immunity ati while cooperation may yield benefits it can also have anti competitive effects in markets where partners competed prior to receiving ati a carve out policy forbids ati partners from cooperating in markets policymakers believe will be most harmed by anti competitive effects we examine carve out policy applications to three ati partner pairings and find evidence more consistent with cooperative pricing in carve out markets in spite of the policy calling into question the effectiveness of the policy in achieving intended market outcomes

capital accumulation games of infinite duration abstract consider a market in which firms accumulate capital according to the nerlove arrow capital accumulation equation each player chooses a path of investment and thus an induced path of capital to maximize his total discounted profits which depend on his own capital and the capital stocks of his rivals existence is proved for such a nonzero sum infinite horizon differential game and conditions under which the game converges to a particular stationary point regardless of the initial conditions are shown thus the game possesses the property of conditional global asymptotic stability

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

incomplete contracts and strategic ambiguity why are observed contracts so often incomplete in the sense that they leave contracting parties obligations vague or unspecified traditional answers to this question invoke transaction costs or bounded rationality in contrast the authors argue that such incompleteness is often an essential feature of a well designed contract specifically once some aspects of performance are unverifiable it is often optimal to leave other verifiable aspects of performance unspecified the authors explore the conditions under which this occurs and investigate the structure of optimal contracts when these conditions are satisfied copyright 1998 by american economic association

pricing and financial resources an analysis of the disk drive industry 1980 88 this paper empirically examines the long purse hypothesis formalized by patrick bolton and david scharfstein 1990 that incumbents may drive out entrants through aggressive pricing the author analyzes the pricing of 733 disk drives between 1980 and 1988 drives that are adjacent to those manufactured by thinly capitalized undiversified rivals are priced lower than other drives during the later years in the sample when little equity financing was available to these firms the results are robust to controls for alternative hypotheses and to other specifications of the hedonic regression copyright 1995 by mit press

competitive advantage and collusive optima cost differences may often be important in real oligopolies if side payments are impossible the standard cartel objective total industry profits lacks plausibility when costs differ this essay considers plausible alternatives four different technologies for effecting collusion which are essentially identical when costs are equal define sets of possible profits axiomatic bargaining models are used to select unconstrained optima from among these possibilities simple functional forms are employed low cost firms with large shares in cournot equilibrium may have little to gain from collusion if collusion is effective low cost firms will have relatively low estimated conjectural variations

protecting intellectual property rights are small firms handicapped this paper studies the determinants of patent suits and settlements during 1978 99 by linking information from the u s patent office the federal courts and industry sources we find that litigation risk is much higher for patents that are owned by individuals and firms with small patent portfolios patentees with a large portfolio of patents to trade or other characteristics that facilitate cooperative resolution of disputes are much less likely to prosecute infringement suits however postsuit outcomes do not depend on these characteristics these findings show that small patentees are at a significant disadvantage in protecting their patent rights because their greater litigation risk is not offset by more rapid resolution of their suits our empirical estimates of the heterogeneity in litigation risk can help in developing private patent litigation insurance to mitigate the adverse affects of high enforcement costs

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

resale and collusion in a dynamic market for semidurable goods the paper studies the incentives to form collusive agreements when goods can be traded in second hand markets it will be shown that such incentives crucially depend on the rate of depreciation of the durable good and on consumer heterogeneity the main contribution of the paper shows that an active second hand market may strengthen the incentives to collude as do policies that affect the functioning of the second hand market e g leasing policy and buy back it will also be argued that the oligopoly incentives to adopt strategies that strengthen collusion often differ from the monopoly incentives to increase profits

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

trade costs and multimarket collusion contrary to conventional wisdom this article argues that trade liberalization may facilitate collusion and reduce welfare with the help of a duopoly model in which firms interact repeatedly in multiple markets we first show that if trade costs i e tariffs transport costs and discount factors are not too high efficient cartel agreements necessitate the cross hauling of goods as that entails lower deviation incentives in this setting we then demonstrate that reciprocal trade liberalization always raises total output when trade costs are within a range whose lower bound exceeds a threshold level but may reduce total output and thus be pro collusive when trade costs are below that threshold level

a dynamic theory of countervailing power in this article i develop a model of an infinitely repeated procurement auction with one buyer and several sellers the buyer can accumulate a backlog of unfilled orders which similar to a boom in demand forces the sellers to collude on a low price to prevent undercutting if the buyer s cost of shifiing its consumption over time is low enough then the extent of collusion is bounded away from the joint profit maximizing level even for discount factors approaching one the model is extended to allow for multiple buyers large buyers are shown to obtain lower prices from the sellers buyer mergers increase pro t for all buyers not just the merging pair at the expense of the sellers in contrast buyer growth through addition harms buyers that do not grow and benefits sellers

credible entry threats into contestable markets a symmetric multi market model of contestability the theory of contestable markets emphasizes potential competition yet it is reticent on the identity of potential entrants recent literature discusses the im possibility of hit and run entry for several types of entrants r d cairns and d mahabir 1988 argue that existing firms in related markets are most likely to be capable of hit and run entry but unlikely to be motivated this paper expands their arguments by sketching a multimarket framework and by discussing a model that captures most of the current debate the model marks a first step into revising contestability theory along the lines of this debate copyright 1992 by the london school of economics and political science

economic integration and the sustainability of multimarket collusion abstract we examine the impact of and links between two types of economic integration on the stability of multimarket collusion when firms interact in quantities in segmented markets 1 multilateral trade liberalization captured by a reduction of trade costs across all markets and 2 preferential trade liberalization captured by an expansion in the size of individual markets while holding the level of external trade costs tariffs constant in general collusive stability is non monotonically related to economic integration in the case of multilateral liberalization the effect depends on the initial level of trade costs and the extent of liberalization however on the average the complete elimination of trade costs is pro competitive when these costs are sufficiently high initially in the case of regional integration the effect of liberalization is pro competitive when external trade barriers are sufficiently high but anti competitive when these barriers are sufficiently low

role of linking mechanisms in multitask agency with hidden information we investigate the adverse selection problem where a principal delegates multiple tasks to an agent we characterize the virtually implementable social choice functions by using the linking mechanism proposed by jackson and sonnenschein 2007 that restricts the message spaces the principal does not require any incentive wage schemes and can therefore avoid any information rent and welfare loss we show the resemblance between the functioning of this message space restriction and that of incentive wage schemes we also extend the results of the single agent model to the multi agent model

hypercompetition in a multimarket environment the role of strategic similarity and multimarket contact in competitive de escalation the effect of intra industry heterogeneity on hypercompetitive escalation and de escalation in a multimarket environment is examined the authors study two critical dimensions of intra industry heterogeneity strategic similarity which captures similarity in competitive orientation and multimarket contact which captures the degree of overlap between rivals in the multiple markets of the industry theory predicts that both variables influence the intensity of rivalry and competitive disruption the predictions in the literature about the effect of strategic similarity on the intensity of rivalry are mixed while strategic group theory proposes that strategic similarity may lead to lower rivalry other theories focusing on product differentiation the resource based view of the firm and hypercompetitive escalation predict that strategic similarity may actually increase rivalry those diametrically opposed propositions are captured as alternative hypotheses of the effect of strategic similarity with r

foreign direct investment location strategies in the tire industry we analyze the nature of international competition among multinational firms in the tire industry using the frameworks of the theories of oligopolistic reaction and foreign direct investment we find that the firms investment patterns are related to the number and identities of competitors host country characteristics and foreign experience global tire companies from several nations demonstrate oligopolistic reaction behavior

monopoly with incomplete information recent theoretical research on principal agent relationships has emphasized incentive problems that arise when the parties involved are constrained by either asymmetric information or their inability to monitor each other s actions here we concentrate on the former constraint and consider the case of a single principal the monopolist the main contribution is to show that under a separability assumption strong conclusions can be drawn about the nature of optimal incentive schemes although the primary focus is on optimal quantity discounts in a monopolized market the results also shed light on related topics such as optimal income taxation and commodity bundling

on the stability of multimarket collusion in price setting supergames abstract in this paper we examine how trade liberalization affects collusive stability in the context of multimarket interactions the model we consider is a segmented markets duopoly with differentiated goods in which price setting firms pool their incentive constraints across markets to sustain their most collusive outcome we find that when goods are very close substitutes and trade costs are sufficiently high a marginal reduction in trade costs facilitates collusion exactly the opposite is true if for any given degree of product substitutability trade costs are sufficiently low we also study the dependence of multimarket collusion on product differentiation

multi market collusion with demand linkages and antitrust enforcement this paper analyzes dynamic cartel formation and antitrust enforcement when firms operate in demand related markets we show that cartel prosecution can have a knock on effect bringing down a cartel in one market reduces profits and cartel stability and leads to the break up of the cartel in the adjacent market cartel prosecution can also have a waterbed effect disrupting a cartel increases cartel stability in the adjacent market and induces cartel formation in previously competitive markets we discuss the impact of dynamic cartel formation on consumer surplus explore antitrust spillovers the optimal scope of antitrust interventions and cartel formation with local firms

further turnpike properties for general capital accumulation games abstract we consider a class of finite and infinite horizon discrete time n player capital accumulation games three turnpike results for the case of open loop nash equilibrium solutions are derived under fairly weak conditions

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

interfirm bundled discounts as a collusive device this paper investigates whether and how firms competing in price with homogeneous goods i e bertrand competitors can achieve supernormal profits using interfirm bundled discounts by committing to offering price discounts conditional on the purchase of a specific brand of other differentiated good the homogeneous good suppliers can separate consumers into distinct groups such brand specific discounts help the firms relax competition and attain a collusive outcome consumers become worse o due to higher effective prices our result shows that in oligopolies it is feasible to leverage other s market power without excluding rivals

principals and agents abstract the allocation of information determines the bargaining position of buyers and sellers low variability in buyer type or producer cost implies a smaller distortion from asymmetric information with informed buyers high variability implies a smaller distortion with informed sellers

leniency programs for multimarket firms the effect of amnesty plus on cartel formation we examine the effect of amnesty plus on dynamic cartel formation in a multimarket setting the amnesty plus program has been adopted as part of the us corporate leniency policy in 1999 and is now vigorously advertised as one of the most compelling tools in generating successful cartel investigations amnesty plus is aimed at attracting amnesty applications by encouraging firms convicted in one market to report their collusive agreements in other markets we show that amnesty plus has two opposite effects on firms ability and incentives to collude which are both increasing in the fine reduction granted first amnesty plus can reduce the deterrence of cartel activities by making it easier for firms to sustain multimarket collusion through strategies involving self reporting after a first cartel detection second it can reduce the expected duration of cartels or delay their formation by increasing firms incentives to self report after a first cartel detection

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

quantifying the coordinated effects of partial horizontal acquisitions abstract recent years have witnessed an increased interest by competition agencies in assessing the competitive effects of partial acquisitions we propose an empirical structural methodology which can deal with settings involving all types of owners and ownership rights to quantify the coordinated effects of partial horizontal acquisitions on differentiated products industries by evaluating the impact of such acquisitions on the minimum discount factors for which coordination can be sustained we also provide an empirical application of the methodology to several acquisitions in the wet shaving industry that give rise to cross and common ownership structures the results are as follows i the incentives to coordinate of the firms that the acquiring party is pre acquisition able to influence are non decreasing with any acquisition ii the incentives to coordinate of the acquired firm are non decreasing with acquisitions involving full or partial both financial and corporate control rights but non increasing with acquisitions involving full or partial solely financial rights and iii the incentives to coordinate of the remaining firms in the industry are non increasing with any acquisition this implies that the coordinated effects of partial horizontal acquisitions are in general ambiguous which illustrates the importance of an empirical structural methodology

trade negotiations domestic policies and the most favored nation clause this paper illustrates how restricting trade instruments to non discrimination links trade agreements to non trade agreements and under certain conditions helps governments further lower tariffs and or domestic standards policies these conditions are i governments objective functions are sufficiently concave with respect to domestic standards policies ii domestic standards are sufficiently valued and iii policies are strategic complements these can then be used as a rationale for restricting safeguard measures to non discrimination ce texte montre comment le fait de restreindre les instruments de politique commerciale a la seule poursuite de liens commerciaux libres de discrimination relie accords commerciaux et non commerciaux et a certaines conditions aide les gouvernements a reduire encore davantage les tarifs douaniers et ou les normes politiques nationales ces conditions sont que i les fonctions objectives soient suffisamment concaves par rapport aux normes politiques nationales ii les normes nationales soient suffisamment valorisees et iii les politiques soient des complements strategiques ces arguments fournissent le rationale pour limiter les mesures de protection a la seule non discrimination

multilateral contracting and the employment relationship this paper studies the structure of the employment relationship in organizations it investigates the trade off firms face between making commitments to their workforce as a whole multilateral relational contracts and making more limited commitments to individuals or smaller groups of employees bilateral relational contracts multilateral contracts bind the firm more strongly to implicit commitments improving motivation but are difficult to adjust in response to changes in the environment bilateral contracts make workforce changes easier to implement the framework helps to explain the use of relative performance evaluation why firms rely on temporary employees and the adoption of two tier workforces

cross licensing of competing patents as a facilitating device this paper hypothesizes that when their products are imperfect substitutes firms can promote collusion by cross licensing their competing patents cross licensing is shown to enhance the degree of collusion achieved in a repeated game by credibly introducing the threat of increased rivalry in the market for each firm s product the paper then examines the consistency of the theory developed with the available evidence antitrust implications of the practice of cross licensing of competing patents are discussed

collusive conduct in duopolies multimarket contact and cross ownership in the mobile telephone industry the deregulation of the telecommunications industry has resulted in a variety of industry structures which have been created in hopes of increasing competition one example is the licensing of cellular telephone services in the united states where the fcc created duopolies in which two firms were granted licenses to compete in strictly defined product and geographic markets taking advantage of the unique regulatory environment we test to what degree duopolistic competition leads to competitive market outcomes we find that cross ownership and multimarket contact are important factors in explaining non competitive prices

overcoming incentive constraints by linking decisions consider a bayesian collective decision problem in which the preferences of agents are private information we provide a general demonstration that the utility costs associated with incentive constraints become negligible when the decision problem is linked with a large number of independent copies of itself this is established by defining a mechanism in which agents must budget their representations of preferences so that the frequency of preferences across problems mirrors the underlying distribution of preferences and then arguing that agents incentives are to satisfy their budget by being as truthful as possible we also show that all equilibria of the linking mechanisms converge to the target utility levels the mechanisms do not require transferable utility or interpersonal comparisons of utility and are immune to manipulations by coalitions

judo economics reconsidered capacity limitation entry and collusion abstract the capacity investment by a new firm into an established market is explored in a repeated price game if the entrant expects collusion to prevail upon entry it may not practice judo economics but instead choose to install enough capacity to serve the entire market this occurs when collusion involves optimal punishment paths if instead collusion is based upon the static nash equilibrium punishment and the incumbent has excess capacity and the entrant is at a cost disadvantage the entrant will strategically limit its capacity so as to restrain the incumbent s price response to entry

conspiracy at the pump abstract on the basis of evidence of price fixing in may 2006 the canadian competition bureau targeted retail gasoline outlets in some local markets in the province of quebec in june 2008 criminal charges were filed against many individuals and companies operating in those local markets we employ a differences in differences approach to determine whether the public announcement of the antitrust investigation triggered a reaction in one of the targeted markets we find that the price of gasoline in the targeted market fell by 1 75 cents per liter after the public announcement of the investigation we also briefly discuss how well the stiglerian theory of collusion performs in this real world conspiracy

tariff wars in the ricardian model with a continuum of goods this paper describes strategic tarichoices within the ricardian framework of dorn busch fischer and samuelson 1977 using ces preferences the optimum tarischedule is uniform across goods and inversely related to the import demand elasticity of the other country in the nash equilibrium of taris larger economies apply higher tarirates pro ductivity adjusted relative size gdp ratio is a su cient statistic for absolute produc tivity advantage and the size of the labor force both countries apply higher tarirates if specialization gains from comparative advantage are high and transportation cost are low a su ciently large economy prefers the ine cient nash equilibrium in taris over free trade due to its quasi monopolistic power on world markets the required threshold size is increasing in comparative advantage and decreasing in transportation cost i discuss the implications of the static nash equilibrium analysis for the sustainability and structure of trade agreements

coalition formation in standard setting alliances we present a theory for predicting how business firms form alliances to develop and sponsor technical standards our basic assumptions are that the utility of a firm for joining a particular standard setting alliance increases with the size of the alliance and decreases with the presence of rivals in the alliance especially close rivals the predicted alliance configurations are simply the nash equilibria i e those sets of alliances for which no single firm has an incentive to switch to another alliance we illustrate our theory by estimating the choices of nine computer companies to join one of two alliances sponsoring competing unix operating system standards in 1988

local appeal and competition in multiple geographic markets evidence from california retail banking between 1900 and 1990 this article assesses the effect of identity related local appeal when firms compete in multiple geographic markets and investigates how local appeal and multimarket advantages collectively determine the competitive strength of an organization compared with numerous studies that identified the benefits for being a chain system recent researches on organizational identity highlight the social sanctions and discount when an organizational form does not fully conform to the norms and expectations at a given market empirical evidence from california retail banks in the 20th century demonstrates that organizational identity can be an important source of competitive strength even when considerable scale and scope advantages exist however when customers are not locally oriented an organization s identity based appeal becomes less meaningful such a finding suggests the scope condition for organizational identity research

optimal cartel equilibria with imperfect monitoring abstract there exist optimal symmetric equilibria in the green porter model 4 8 having an elementary intertemporal structure such an equilibrium is described entirely by two subsets of price space and two quantities the only production levels used by firms in any contingency the central technique employed in the analysis is the reduction of the repeated game to a family of static games

trends in aggregate concentration in the united states i assemble two rarely used data sets to measure aggregate concentration in the u s in the 1980s and 1990s despite the merger waves of those decades aggregate concentration declined in the 1980s and the early 1990s but rose modestly in the late 1990s the levels at the end of the decade were at or below the levels of the late 1980s or early 1990s the average size of firm and the relative importance of larger size classes of firms increased however gini coefficients for employment and payroll shares of companies showed moderate but steady increases from 1988 through 1999

symmetric research joint ventures cooperative substitutes and complements we introduce the concepts of cooperative substitutes and complements and use them to explain when all firms in a research joint venture will choose equal levels of r d we show that the second order conditions for a symmetric optimum take a particularly simple form ruling out both excessive cooperative substitutability and excessive cooperative complementarity and nesting conditions already derived in the literature finally we apply our results to the comparison between cooperative and non cooperative r d and show in an important special case that asymmetric outcomes are only optimal for a very limited range of parameter values

the structure of competition how competition between one s rivals influences imitative market entry this paper investigates how the pattern of encounters between a firm s competitors affects the firm s inclination to follow its competitors into a new market we theorize that direct encounters between a firm s rivals lead to a herding effect making imitative market entry more likely past mutual forbearance between a firm s competitors resulting from asymmetric multimarket competition further strengthens this herding effect by enhancing the firm s expectations of market attractiveness in contrast aggressive past rivalry between the competitors resulting from symmetric multimarket contact dampens these expectations producing a competition effect that makes herding less probable we test our idea in two distinct contexts the chinese pharmaceutical industry and the taiwanese computer hardware industry and find consistent support in both settings we discuss how our analysis of what we call the structure of competition can be extended to research on other forms of firm behavior

reply on comment to small firms and the merger mania research on performance differences between small and large firms is booming it emerges relatively separated from the mainstream industrial organization literature inspired by levy s comment on an earlier paper we try to bridge the gap between the two areas especially we screen non cooperative game theoretical models for predictions on performance differences most of them forecast higher profits for larger firms but there exist also some models which predict the opposite for very specific circumstances

competition in a multimarket environment the case of market exit studies of competition typically have two underlying assumptions that competition occurs within the boundaries of industries or markets and that all firms in a market or industry are affected equally by competitive pressures the concept of multipoint competition challenges both assumptions multipoint theory addresses how different levels of contact between firms across multiple markets affect competition in individual markets its main argument is that high levels of contact between firms across markets will induce mutual forbearance causing multipoint competitors to refrain from aggressively attacking each other the restraint stems from the fact that high levels of intermarket contact enable a firm to respond to an aggressive action by a multipoint rival in markets other than the one in which the action takes place that possibility raises the potential costs of aggressive moves and serves as a credible deterrent especially if a firm can respond in several markets in addition multipoint competiti

commitment in utility regulation a model of reputation and policy applications abstract this paper builds a dynamic model of utility regulation where a government cannot commit to a time inconsistent policy of not expropriating investment by allowing the government s type to change over time i explore how reputation concerns may generate partial commitment restricting attention to equilibria that are strongly renegotiation proof i show that there is a unique perfect bayesian equilibrium this contains episodes of investment and good behaviour followed by periods of expropriation and non investment i then apply the model to consider how the power of the incentive scheme and decentralization may influence the properties of this equilibrium in the case of the power of incentives the model suggests that price caps may worsen commitment in developing countries but not in developed ones similarly the model suggests that decentralisation is likely to have a significant effect on commitment but that this effect will depend on the general ability of the government to commit overall we conclude that the effect of such policies on commitment will be different across countries depending on the institutional environment

market power information and efficiency the link between solutions and equilibrium distortions the extent of competition generally determines both the location and the extent of distortions due to information asymmetries when agents have private information increased competition raises agent welfare at the expense of uninformed principals nevertheless increased competition among principals may lower total surplus the losses sustained by principals as a group exceed the benefits realized by agents as a group when there is a sufficiently large proportion of agents with high cost of agent effort these results are independent of the correlation between the agent s marginal cost and the principal s marginal benefit of agent effort copyright 1993 by blackwell publishing ltd

forward and backward intergenerational goods why is social security good for the environment this paper studies the ability of nonmarket institutions to invest optimally in forward intergenerational goods figs such as education and the environment when agents are selfish or exhibit paternalistic altruism we show that backward intergenerational goods bigs such as social security play a crucial role in sustaining investment in figs without them investment is inefficiently low but with them optimal investment is possible we also show that making the provision of bigs mandatory crowds out the voluntary provision of figs and that population aging can increase investment in figs

on interdependent supergames multimarket contact concavity and collusion abstract following bernheim and whinston 1990 this paper addresses the effects of multimarket contact on firms ability to collude real world imperfections tend to make firms objective function strictly concave and market supergames interdependent firms payoffs in each market depend on how they are doing in others then multimarket contact always facilitates collusion it may even make collusion sustainable in all markets when otherwise it would not be sustainable in any the effects of conglomeration are discussed multigame contact is shown to facilitate cooperation in supergames other than oligopolies as long as agents objective function is submodular in material payoffs journal of economic literature classification numbers c72 d43 l13 l21

turnpike properties of capital accumulation games abstract a differential game is considered in which players accumulate capital their payoff functions depend upon the capital stocks of both players and their cost functions are convex previous existence and stability results are relied upon to show that the game under an additional assumption possesses the following properties a every equilibrium of the infinite horizon game converges to the unique stationary equilibrium b for a time horizon long enough the finite horizon equilibrium stays in the neighborhood of the infinite horizon equilibrium except for some final time c for a time horizon long enough the finite horizon equilibrium stays in the neighborhood of the stationary equilibrium except for some initial and final time

the co2 abatement game costs incentives and the enforceability of a sub global coalition abstract this paper studies the economic incentives and the institutional issues governing the outcomes of a short term climate change policy package guided by the united nations framework convention on climate change and the berlin mandate initiatives game theoretic tools and the global trade environment interface are explored within a 26 region 13 commodity computable general equilibrium framework to characterize the incentives of oecd regions to comply with a non binding agreement in a carbon abatement coalition the results showed that in the absence of side payments the achievement of such a coalition might require the design of suitable trade instruments

hubs and high fares dominance and market power in the u s airline industry this article estimates the importance of route and airport dominance in determining the degree of market power exercised by an airline the results indicate that an airline s share of passengers on a route and at the endpoint airports significantly influences its ability to mark up price above cost the high markups of a dominant airline however do not create much of an umbrella effect from which carriers with smaller operations in the same markets can benefit the article suggests a number of possible explanations for this asymmetry

concentration in the european electricity industry the internal market as solution abstract this article offers an analysis of the present competitive and regulatory framework of the european electricity sector and the results achieved with the liberalisation process considering the reactions of incumbents to the liberalisation the focus in this work is mainly on the problem of market concentration in the sector the new trends toward the creation of national champions as well as recent mergers between gas suppliers and electricity producers raise serious concerns about abuses of market power and risk of future collusion in particular the strategic linkage of existing markets and the expansion into new ones are analyzed in the light of the multimarket contact theory considering investment in interconnection among member states the internal market issue is investigated as a solution to the risks coming from liberalisation

multimarket contact economies of scope and firm performance we integrate the efficiency and competitive effects of product market scope choice into a comprehensive model of economic performance and empirically test the model in the context of the u s airli

analysis of nash equilibria in a class of capital accumulation games in a simple capital accumulation game we study existence and dynamic properties of the cooperative solution two kinds of markov perfect equilibria mpe and a trigger strategy equilibrium in the cooperative solution the stock always converges towards a steady state this property is shared by our first mpe whereas the second type of mpe may result in complicated dynamics a pareto comparison of both mpe depends on the parameter specifications but can turn out either way finally we show how the players can achieve the efficient payoffs of the cooperative solution as an equilibrium outcome by using trigger strategies

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

do credible domestic institutions promote credible international agreements we examine the relationship between international policy coordination and domestic policy reputation when both are self sustaining we show that domestic policy commitment does not necessarily facilitate international cooperation rather efficient policies may be most easily sustained when governments are unable to pre commit to policy domestically moreover the lack of domestic commitment is more likely to facilitate international cooperation the larger the international spillovers of domestic policies are

collusion versus differential efficiency testing alternative hypotheses the predictions of collusion and efficiency based static equilibrium explanations of interindustry profitability differences are formally developed and tested using appropriate econometric techniques with intraindustry data on seventy u s internal revenue service minor manufacturing industries in 1963 and 1972 none of the explanations has much explanatory power the 1963 data are consistent with collusion based models while the 1972 data are inconsistent with all non null hypotheses considered patterns of profitability are sharply different in the two years in complex ways apparently unrelated to cyclical forces or the phase ii price controls implications of these results are discussed copyright 1987 by blackwell publishing ltd

price discrimination or uniform pricing which colludes more abstract conventional wisdom attributes different economic outcomes of uniform pricing and price discrimination to the heterogeneity in market conditions or market participants such as differences in demand elasticity or production costs we offer a new explanation for the observed differences that relates to behavioral aspects rather than demand or supply side effects in particular in a symmetric bertrand duopoly laboratory experiment for which theory predicts no differences between the two pricing regimes we find that tacit price collusion is systematically higher under price discrimination than under uniform pricing

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

adjustment costs and the sequencing of trade liberalisation a common feature of trade agreements between countries is that the integration of markets proceeds in stages this paper examin es conceptually the role played by adjustment costs in determining the best way to structure an agreement between two countries when there are multiple sectors to be liberalised adjustment costs to liberalisatio n of industries might influence the timing of liberalisatio n with the analysis bearing similarity to why tariff reductions tend to be phased in over time when two industries have no spillover eff ects trade agreements with sequential liberalisation will be less costly to sustain however if the liberalisation of one in dustry influences permanently the flow of benefits from liberalising the other industry simultaneous liberalisation may be easier to sustain

collusion at the extensive margin abstract we augment the multi market collusion model of bernheim and whinston 1990 by allowing for firm entry into and exit from individual markets we show that this gives rise to a new mechanism by which a cartel can sustain a collusive agreement collusion at the extensive margin whereby firms collude by avoiding entry into each other s markets or territories we characterise parameter values that sustain this type of collusion and identify the assumptions where this collusion is more likely to hold than its intensive margin counterpart specifically it is demonstrated that where duopoly competition is fierce collusion at the extensive margin is always sustainable finally we provide a theoretic foundation for the use of a proportional response enforcement mechanism

managing valuable knowledge in weak ip protection countries although knowledge assets provide multinational corporations mncs with competitive advantages in foreign markets it can be difficult for firms to protect their knowledge in foreign countries especially countries with weak intellectual property ip protection building on and extending the knowledge management institutional theory and expatriate literatures this article explores whether home country expatriates can substitute for weak ip protection and drive an increase in more and more valuable knowledge transfers to foreign operations located in weak ip protection countries because of their ties to headquarters knowledge of parent firm assets priorities and routines and activities in local operations i argue that home country expatriates can transform the local operation to offer higher protection for parent firm knowledge in weak ip countries in ways that local managers cannot the results from a comprehensive panel of us multinationals suggest that home country expatriates can substitute for weak ip protection but that this effect is contingent on the manufacturing and knowledge capabilities of foreign operations for higher value parent firm knowledge transfers overall this article extends our understanding of the global management and protection of knowledge by mncs by exploring how organizational practices can buffer country level institutional deficiencies for firm knowledge

market share pioneering advantage a theoretical approach in this paper we present an industry in which a pioneer has entered accumulated capital in the form of goodwill and in his monopoly period has also reduced his cost of production as a result of some form of learning by doing at some later date a newcomer enters his production cost is higher than that of the monopolist at that date however due to diffusion of information the costs of the two firms equate at some future date once the new firm enters the market a duopolistic game begins in which the firms choose prices and investment rates analyzing this game we discover the conditions under which the final market shares no longer depend on the order of entry the initial cost advantage the length of the monopoly period or the length of time it took the newcomer to overcome the pioneer s cost advantage we analyze the speed and pattern of convergence to the final market shares and the capital path of the pioneer in his monopoly period depending on his beliefs concerning the possibility of entry

competition in european aviation pricing policy and market structure the purpose of this paper is to analyze the impact of liberal bilateral agreements on some european air routes in terms of price competition and market structure the author proposes a model that explains firms behavior and shows that after the liberalization firms exploit their cost advantages and differentiate their products more but market structure still depends on access to airport facilities and other ancillary services controlled by the flag carriers these results differ from american evidence in that the author finds that the effect of airport presence on prices through lower costs more than offsets the effect through higher perceived quality copyright 1995 by blackwell publishing ltd