Journal of the European Economic Association, Sep 1, 2005
This document is made available under Deposit Licence (No Redistribution -no modifications). We g... more This document is made available under Deposit Licence (No Redistribution -no modifications). We grant a non-exclusive, nontransferable, individual and limited right to using this document. This document is solely intended for your personal, noncommercial use. All of the copies of this documents must retain all copyright information and other information regarding legal protection. You are not allowed to alter this document in any way, to copy it for public or commercial purposes, to exhibit the document in public, to perform, distribute or otherwise use the document in public.
Competition between private and public firms can increase service quality and reduce public costs... more Competition between private and public firms can increase service quality and reduce public costs in markets for tax-financed welfare services with non-contractible quality. Synergies arise from combining high-powered incentives for quality provision (emanating from private firms) with low rents (public firms). However, sometimes, the optimal regulation requires the government to provide public firms with better funding than private competitors, e.g. by paying them higher prices or covering their deficits. This additional compensation is not tied to any additional verifiable quality obligations and may therefore violate competitive neutrality rules incorporated to various areas of legislation.
This paper demonstrates that the decisions by workers of different skills to unite to form indust... more This paper demonstrates that the decisions by workers of different skills to unite to form industry unions is closely linked to the egalitarian wage policies that such unions pursue. These results help interpret the stylized facts about unions: that they not only increase wages but also reduce wage inequality. I also demonstrate that political caps on collectively negotiated minimum wages may reduce the wages of all blue-collar workers (cf. "internal devaluation"), but that they may also cause unions to disintegrate in the long run.
We demonstrate a "preemptive merger mechanism" which may explain the empirical puzzle why mergers... more We demonstrate a "preemptive merger mechanism" which may explain the empirical puzzle why mergers reduce pro…ts, and raise share prices. A merger may confer strong negative externalities on the …rms outside the merger. If being an "insider" is better than being an "outsider," …rms may merge to preempt their partner merging with someone else. Furthermore, the pre-merger value of a merging …rm is low, since it re ‡ects the risk of becoming an outsider. These results are derived in a model of endogenous mergers which predicts the conditions under which a merger occurs, when it occurs, and how the surplus is divided.
Does Consumption Make Firms More Flexible? : A Study of Limited Managerial Cognition
A model of procedural decision making in firms is combined with an oligopoly model to study the e... more A model of procedural decision making in firms is combined with an oligopoly model to study the effect of limited managerial cognition on firm flexibility. It is argued that a firm may vary its flexibility, and hence that there exists a tradeoff between decision making costs and costs due to imperfect adjustment to the environment. The main conclusions are that (1) the level of flexibility chosen by firms tends to be too low, from a social welfare point of view; and (2) increased competition tends to reduce flexibility in an individual firm. Aggregated flexibility in the market may, however, increase in which case consumers are unambigously better off
In many intermediate goods markets buyers and sellers both have market power. Contracts are usual... more In many intermediate goods markets buyers and sellers both have market power. Contracts are usually long-term and negotiated bilaterally, codifying many elements in addition to price. We model such bilateral oligopolies as a set of simultaneous Rubinstein-Ståhl bargainings over contracts specifying price and quantity, between pairs of buyers and sellers. Equilibrium quantities are efficient regardless of concentration. The law of one price does not hold. Prices depend on concentration of capital and concentration of sales. If the quantity sold represents a small share of both the firms' sales and purchases, the price is close to the Walrasian price.
Bilateral Collusion in Telecom (Very preliminary. Very incomplete.)
The main result is that bilateral negotiations over access charges may be an e¤ective means to da... more The main result is that bilateral negotiations over access charges may be an e¤ective means to dampen competition for customer bases in a market with only two operators, but that bilateral negotiations may provide operators with little or no market power in a market with three or more operators. Key Words: network competition JEL classi cation: The authors thank the Swedish Competition Authority and the Jan Wallander Foun-dation for nancial support. Address: Research Institute of Industrial Economics (IUI),
Sports organizations, Hollywood studios and TV-channel providers grant satellite and cable networ... more Sports organizations, Hollywood studios and TV-channel providers grant satellite and cable networks exclusive rights to televise their matches, movies and media contents. The common view is that exclusive distribution prevents the viewers from watching attractive programs, and that the TV-distributors dont need to compete with prices when they o¤er di¤erent contents. Exclusive distribution reduces diversity and increases prices. This paper challenges the common view. Exclusive distribution may give providers of contents incentives to invest in higher quality, and also force competitors to reduce prices. Regulatory intervention may harm all viewers, including those that are excluded. Key Words: exclusive contracts, quality, bargaining, advertising, investment JEL: C78, D43, K21, L42 I am grateful for comments from Henrik Horn, Chrysovalantou Milliou, P-J Norbäck, Mariano Selvaggi, Oz Shy, Thomas Tangerås, Frank Verboven, Gregory Werden and seminar participants at the IUI, WZB and II...
This paper demonstrates that the decisions by workers of different skills to unite to form indust... more This paper demonstrates that the decisions by workers of different skills to unite to form industry unions is closely linked to the egalitarian wage policies that such unions pursue. These results help interpret the stylized facts about unions: that they not only increase wages but also reduce wage inequality. I also demonstrate that political caps on collectively negotiated minimum wages may reduce the wages of all blue-collar workers (cf. “internal devaluation”), but that they may also cause unions to disintegrate in the long run.
Competition between private and public firms can increase service quality and reduce public costs... more Competition between private and public firms can increase service quality and reduce public costs in markets for tax-financed welfare services with non-contractible quality. Synergies arise from combining high-powered incentives for quality provision (emanating from private firms) with low rents (public firms). However, sometimes, the optimal regulation requires the government to provide public firms with better funding than private competitors, e.g. by paying them higher prices or covering their deficits. This additional compensation is not tied to any additional verifiable quality obligations and may therefore violate competitive neutrality rules incorporated to various areas of legislation.
In many intermediate goods markets buyers and sellers both have market power. Contracts are usual... more In many intermediate goods markets buyers and sellers both have market power. Contracts are usually long-term and negotiated bilaterally, codifying many elements in addition to price. We model such bilateral oligopolies as a set of simultaneous Rubinstein-Ståhl bargainings between pairs of buyers and sellers, over contracts specifying price and quantity. Equilibrium quantities are efficient regardless of concentration. The law of one price does not hold. Prices depend on concentration of capital and concentration of sales. If the quantity sold represents a small share of both the firms' sales and purchases, then the price is close to the Walrasian price.
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