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Industrial organizational competition strategy and policy 5th by john wison Industrial organizational competition strategy and policy 5th by john wison Industrial organizational competition strategy and policy 5th by john wison Industrial organizational competition strategy and policy 5th by john wison Industrial organizational competition strategy and policy 5th by john wison Industrial organizational competition strategy and policy 5th by john wison Industrial organizational competition strategy and policy 5th by john wison
Industrial Organization: Competition, Strategy and Policy provides a thorough treatment of the core concepts and theories underlying the economics of industrial organization In this fifth edition, the authors use an array of empirical examples and case studies to analyse the structure, behaviour and performance of firms and industries New to this edition: A chapter on game theory A new section on international diversification Revised case studies Coverage of recent empirical literature A new set of quantitative problems with solutions Revised questions for discussion at the end of each chapter Dr John Lipczynski is retired from the University sector He contributes to the teaching and development of Executive MBA programmes in the private sector Professor John O.S Wilson is Professor of Banking & Finance and Director of Research in the Management School at the University of St Andrews He is Director for the Centre for Responsible Banking & Finance His research interests include industrial organization and banking Professor John Goddard is Professor of Financial Economics and Deputy Head of Bangor Business School at Bangor University His research interests include industrial organization, banking and the economics of professional football INDUSTRIAL ORGANIZATION • • • • • • FIFTH EDITION INDUSTRIAL ORGANIZATION COMPETITION, STRATEGY AND POLICY JOHN LIPCZYNSKI JOHN O S WILSON JOHN GODDARD FIFTH EDITION LIPCZYNSKI WILSON GODDARD www.pearson-books.com Front cover image © akiyoko / Getty Images CVR_LIPCZ_05_21710.indd 05/05/2017 09:44 Industrial Organization A01 Industrial Organization 21710.indd 22/05/2017 17:10 At Pearson, we have a simple mission: to help people make more of their lives through learning We combine innovative learning technology with trusted content and educational expertise to provide engaging and effective learning experiences that serve people wherever and whenever they are learning From classroom to boardroom, our curriculum materials, digital learning tools and testing programmes help to educate millions of people worldwide – more than any other private enterprise Every day our work helps learning flourish, and wherever learning flourishes, so people To learn more, please visit us at www.pearson.com/uk A01 Industrial Organization 21710.indd 22/05/2017 17:10 Industrial Organization Competition, Strategy and Policy Fifth edition John Lipczynski, John O.S Wilson and John Goddard Harlow, England • London • New York • Boston • San Francisco • Toronto • Sydney Dubai • Singapore • Hong Kong • Tokyo • Seoul • Taipei • New Delhi Cape Town • São Paulo • Mexico City • Madrid • Amsterdam • Munich • Paris • Milan A01 Industrial Organization 21710.indd 22/05/2017 17:10 Pearson Education Limited Edinburgh Gate Harlow CM20 2JE United Kingdom Tel: +44 (0)1279 623623 Web: www.pearson.com/uk First published 2001 (print) Second edition published 2005 (print and electronic) Third edition published 2009 (print and electronic) Fourth edition published 2013 (print and electronic) Fifth edition published 2017 (print and electronic) © Pearson Education Limited 2001 (print) © Pearson Education Limited 2005, 2009, 2013, 2017 (print and electronic) The rights of John Lipczynski, John Wilson and John Goddard to be identified as authors of this work have been asserted by them in accordance with the Copyright, Designs and Patents Act 1988 The print publication is protected by copyright Prior to any prohibited reproduction, storage in a retrieval system, distribution or transmission in any form or by any means, electronic, mechanical, recording or otherwise, permission should be obtained from the publisher or, where applicable, a licence permitting restricted copying in the United Kingdom should be obtained from the Copyright Licensing Agency Ltd, Barnard’s Inn, 86 Fetter Lane, London EC4A 1EN The ePublication is protected by copyright and must not be copied, reproduced, transferred, distributed, leased, licensed or publicly performed or used in any way except as specifically permitted in writing by the publishers, as allowed under the terms and conditions under which it was purchased, or as strictly permitted by applicable copyright law Any unauthorised distribution or use of this text may be a direct infringement of the authors’ and the publisher’s rights and those responsible may be liable in law accordingly Pearson Education is not responsible for the content of third-party internet sites The Financial Times With a worldwide network of highly respected journalists, The Financial Times provides global business news, insightful opinion and expert analysis of business, finance and politics With over 500 journalists reporting from 50 countries worldwide, our in-depth coverage of international news is objectively reported and analysed from an independent, global perspective To find out more, visit www.ft.com/pearsonoffer ISBN: 978-1-292-12171-0 (print) 978-1-292-12175-8 (PDF) 978-1-292-12176-5 (ePub) British Library Cataloguing-in-Publication Data A catalogue record for the print edition is available from the British Library Library of Congress Cataloging-in-Publication Data Names: Lipczynski, John, author | Wilson, John O S., author | Goddard, John A., author Title: Industrial organization : competition, strategy and policy / John Lipczynski, John O.S Wilson and John Goddard Description: Fifth edition | Harlow, England ; New York : Pearson, 2017 Identifiers: LCCN 2017002086| ISBN 9781292121710 (Print : alk paper) | ISBN 9781292121758 (PDF) | ISBN 9781292121765 (ePub) Subjects: LCSH: Industrial organization (Economic theory) Classification: LCC HD2326 L53 2017 | DDC 338.6 dc23 LC record available at https://lccn.loc.gov/2017002086 10 21 20 19 18 17 Print edition typeset in 10/12.5pt Times NR MT Std by 35 Printed in Slovakia by Neografia NOTE THAT ANY PAGE CROSS REFERENCES REFER TO THE PRINT EDITION A01 Industrial Organization 21710.indd 22/05/2017 17:10 For Ollie, Benny and Jude A01 Industrial Organization 21710.indd JL For Alison, Kat, Libby and Jean JW For Sarah, Aimée, Thomas and Christine JG 22/05/2017 17:10 A01 Industrial Organization 21710.indd 22/05/2017 17:10 Contents Preface Acknowledgements xxiv xxvii Part I: Theoretical Foundations Industrial organization: an introduction 1.1 1.2 1.3 1.4 Introduction Static and dynamic views of competition The structure–conduct–performance paradigm Strategic management: a short diversion 3 27 Discussion questions Further reading 30 31 32 Production, costs, demand and profit maximization 2.1 2.2 2.3 2.4 Introduction Production and costs Demand, revenue, elasticity and profit maximization Summary 33 33 50 60 Discussion questions Computational questions Further reading 61 62 63 64 The neoclassical theory of the firm 3.1 Introduction 3.2 The neoclassical theory of the firm: historical development 3.3 Theories of perfect competition and monopoly A01 Industrial Organization 21710.indd 64 65 67 22/05/2017 17:10 viii | Contents 3.4 Efficiency and welfare properties of perfect competition and monopoly 3.5 Theory of monopolistic competition 3.6 Summary 73 79 82 Discussion questions Computational questions 83 83 85 Managerial and behavioural theories of the firm 4.1 Introduction 4.2 Critique of the neoclassical theory of the firm 4.3 Separation of ownership from control: managerial theories of the firm 4.4 The behavioural theory of the firm 4.5 Summary 89 100 102 Discussion questions Further reading 103 103 5 Transaction costs, agency and resource-based theories of the firm 5.1 5.2 5.3 5.4 5.5 5.6 5.7 Introduction The Coasian firm Transaction costs and the theory of the firm Agency theory Property rights and the theory of the firm The resource-based theory of the firm Summary Discussion questions Further reading Corporate governance 6.1 6.2 6.3 6.4 6.5 6.6 6.7 6.8 Introduction Agency problems and the need for corporate governance Instruments of corporate governance Corporate governance codes of practice Corporate governance: implementation and empirical evidence Business ethics Corporate social responsibility Summary Discussion questions Further reading A01 Industrial Organization 21710.indd 85 86 104 104 105 109 113 116 117 120 122 122 124 124 126 129 133 136 142 148 157 159 159 22/05/2017 17:10 Contents | ix Part II: Structural Analysis of Industry Oligopoly: non-collusive models 163 7.1 Introduction 7.2 Interdependence, conjectural variation, independent action and collusion 7.3 Models of output determination in duopoly 7.4 Models of price determination in duopoly 7.5 The kinked demand curve and models of price leadership 7.6 Summary 164 Discussion questions Computational questions Further reading 192 192 194 165 166 178 185 190 Oligopoly: collusive models 195 8.1 Introduction 8.2 Collusive action and collusive forms 8.3 Collusive institutions 8.4 Profit-maximizing models of price and output determination for a cartel 8.5 Other motives for collusion 8.6 Factors conducive to cartel formation 8.7 Influences on cartel stability 8.8 Summary 195 196 200 Discussion questions Further reading 226 226 Game theory 9.1 9.2 9.3 9.4 9.5 9.6 9.7 Introduction Dominance and Nash equilibrium The prisoner’s dilemma game Mixed strategies Sequential games Repeated games Summary Discussion questions Computational questions Further reading 10 Concentration: measurement and trends 10.1 Introduction 10.2 Market and industry definition A01 Industrial Organization 21710.indd 203 207 210 215 225 228 229 230 235 239 246 253 255 256 257 259 260 260 261 22/05/2017 17:10 www.downloadslide.com 836 | Index Conner, K.R 118 consolidation 582 constant returns to scale 39 constant-sum game 229 consumer goods price dispersion in 427 product differentiation in 468, 481 consumer ignorance 470 consumer surplus 76 consumer tastes 469 contestable markets 345–7 Contini, B 302 contracts, nexus of, firm as 115–16 control, separation from ownership 89–100 convenience goods 513 Cook, G 622 cooperation and technological change 550–1 coordination challenges in diversification 684 coordination problem 246 copyright 567 core competences and seller concentration 294 Cornett, M 141 corporate control in horizontal mergers 591 corporate effects 367–72 corporate focus and diversification 688–91 corporate governance 124 of banks 140–2 board of directors 129–30 codes of practice 133–6 and company performance 141 competition for products or services 133 and corporate control 132 debt finance 131 dividend policy 131 executive compensation 131–2 implementation 136–42 instruments of 129–33 need for 126–9 shareholders 130–1 share ownership 131–2 women on boards of largest companies 135–6 corporate social responsibility (CSR) 125, 148–56 advertising 525 business case for 151 constituents of 150 Cosh, A 599 cost plus pricing 87, 392–7 costs 33–49 long-run 39–46 Z06 Industrial Organization 21710.indd 836 of R&D 555–6 short-run 34–9 theory 35–9 cost savings in diversification 680–2 in horizontal mergers 586–8 in vertical integration 612–20 and vertical restraints 636–7 coupons 410 Cournot, A 13, 65, 66, 166–8, 171–2, 261 Cournot duopoly model 237–8 Cournot–Nash equilibrium 171–4 Cournot–Nash versus Chamberlin’s prisoner’s dilemma 237–8 Coursey, D 346 Courty, P 405 Cowling, K 107, 713 Cox, J.C 460 Coyle, D 107–8, 666–8 creative destruction 538–40 credence goods 513 credit union sector, industry life cycle of 291–2 Cremer, J 663 Crooks, E 279–80 cross-price elasticity of demand 54, 262 cross-subsidization in diversification 679 Croteau J.T 291 crowdfunding of R&D 557 crunchy 247–8 Cubbin, J.S 383 Curry, B 283 Cuthbert, N 220 Cyert, R.M 100, 103, 187 D Daley, L 689 Dam, L 153 Daneshkhu, S 639 Darby, M 513 D’Aspremont, C 206, 551 Daughety, A.F 174 D’Aveni, R 622 Davidson, K 213 Davies, S.W 284, 290, 303–5, 309, 733–5 Davis, E.P 378 Davis, J 685 Davis, L.E 216 Davis, M 188 Dawkins, R 561 De Bandt, O 378 De Jong, H.W 678 De Young, R 142 deadweight loss 77 decision making in theory of the firm 87 deconglomeration 676, 688–91 decreasing returns to scale 40 dedicated assets 619 Deepwater Horizon oil spill (Gulf of Mexico, 2010) 150 defensive investment strategy 554 Dehandschutter, W 351 Delphi technique 555 demand 50–1 for football tickets 55–9 for network goods and services 651–8 heterogeneous network benefits 652–5 heterogeneous stand-alone benefits 655–8 for R&D 555 demand expansion effect of duopoly 665 demand-side economies of scale 651–2 Demmert, H.H 55 Demsetz, H 18, 114–16, 121, 329, 337, 364, 365, 545 Deneckre, R 639 Denicolò, V 570 Dennis, P.T 220 Department for Innovation, Universities and Skills 555 Department for Trade and Industry 566, 734 dependent investment strategy 554 descending bid auction 437 Deutsch, L 349 Deutsche Post 717 developed market (DM) 700 Devinney, T 685 Dewey, D 591 Diamond, A.M 560 Diamond Model, Porter’s 318–19 Dias, M 396 Dick, A.A 211, 220, 290, 349 diffusion of R&D 536, 537, 560–6 communication 563–5 employee/trade union resistance 566 marginal inertia 565 model of 560–2 older technology, protecting 565–6 pace of 563–6, 574–7 and regulation 566 risk and liquidity 566 direction of diversification 692 DiSalvo, J 375–6 diseconomies of scale 33, 46–8 Disney, R 352 Disneyland Paris, pricing policy in 416–17 distinctive capabilities 29 and seller concentration 294 19/05/2017 17:00 www.downloadslide.com diversification 9, 675–703 corporate focus and deconglomeration 688–91 empirical evidence 691–6 motives for 678–88 cost savings 680–2 managerial motives 686–7 market power 678–80 transaction costs, reducing 682–6 types 676–8 Dixit, A.K 9, 253, 342, 344, 470, 527–9 Dnes, A 625 Dobson, P 640, 644 Dodd, P 593 Domberger, S 188 dominance equilibrium 230–4 dominant price leadership 188–9 dominant strategy 230–4 dominant strategy equilibrium 233–4 Donsimoni, M.P 206 Dorfman, R 515, 516 Dorfman–Steiner condition 516 Dosi, G 290 double marginalization 605–9 Douglas, R.W 460 Doukas, J.A 684 Douma, S 680, 683–4, 685 Dowell, G 153 downstream vertical integration 604 Droege, S.B 686 Droucopoulos, V 380 Druant, M 396 dumping 398 Dunne, P 288, 300, 302 Dunne, T 302, 349 duopoly 166 Cournot–Nash equilibrium 171–4 Cournot’s model 166–8 isoprofit curves 168–71 joint profit maximization 174–5 leader–follower model 175–8 in network goods and services 663–8 output determination in 166–78 price determination in 178–84 Bertrand model 178–81 Edgeworth model 181–3 reaction functions 168–71 Duracell 583 Duso, T 736 Dutch auction 437 optimal bidding strategies 446–7 Dyer, D 459 Dyer, J.H 597 E Eccles, R 418 Eckard, E.W 365, 531 economically efficient 75 Z06 Industrial Organization 21710.indd 837 Index Economides, N 331, 652 economies of distribution 645 economies of scale 6, 33, 43–5 in advertising 520 as barrier to entry 326–7 in horizontal mergers 586 economies of scope 48–9 in diversification 680–1 The Economist 294, 316, 502, 507, 520 Edberg, J 599 Edgeworth, F 181–3 Edgeworth model 181–3 efficiency hypothesis 26, 362, 365 efficiency properties of competition 73–6 Efroymson, C.W 188 egoism as ethical approach 145 Ehrenberg, Andrew 506 Eisenhardt, K Elango, B 333 elasticity 33, 51–5 Electrolux 279–80 Elimination of government controls 715 Ellison, G 221, 411 Elyasiani, E 141 Elzinga, K.G 263 emerging market (EM) 700 Emons, W 614 empire-building 127 employee resistance to diffusion of R&D 566 EM vs DM, M&A 700–1 energy auction of drilling rights 439–40, 460–1 competition policy in EU 727 English auction 437 optimal bidding strategies 443 English Premier League 280–1 Enright, M.J 316, 319 Enron Corporation 137–8 Enterprise Act (UK 2002) 730 entropy coefficient 274–5 entry conditions costs, raising 635–6 evidence on 349–52 and industry evolution 347–9 and market power 585 entry-deterring strategies 325, 337–42 entry game 250–1 equilibrium equity alliances 598 Erevelles, S 427 Erickson, W.B 210 Eriksen, B 118 Erkens, D 142 Eucaouna, D 188 | 837 European banking, in SCP paradigm 19–24 European Commission 202, 290, 308–9, 314, 316, 416–17, 636, 645, 716, 717, 720, 727 European Funding of R&D 559 European industry, location of 311–20 European Union competition policy in 723–8 evaluation of 733–6 evaluation challenges in diversification 683 Evans, D.S 301, 502 Evans, Judith 731–2 Evans, L 349 Evely, R 304 executive compensation 131, 137 and company performance 142 exit conditions experience goods 502, 513 experimental economics 254 explicit collusion 197 external economies of scale 45 external governance 126, 127 externalities network see network externalities in vertical integration 614–15 Exxon-Valdez oil spill (1989) 149–50 F Fabiani, S 396–7 Fabra, N 221 Fahlenbrach, R 142 failing firm hypothesis 591–2 fake online reviews 732 Fare, R 521 Farrell, J 331, 587, 668 fast food, product differentiation in 470 Federal Trade Commission (FTC) 680, 721 Federal Trade Commission Act (USA 1914) 720, 721 Fellner, W.J 215 female, price of being 412–13 Ferguson, C 291 Fiebig, D.G 188 finance of R&D 556–7 Financial Conduct Authority 282 financial constraints on growth 96–7 financial services advertising in 507 competition policy in EU 727 firm size and technological change 548–52 weaknesses of 46–8 19/05/2017 17:00 www.downloadslide.com 838 | Index firm, theory of as nexus of contracts 115–16 and property rights 116–17 resource-based 117–19 as team-based production 114–15 and transaction costs 109–13 first-degree price discrimination 397, 399–401, 716 first-mover advantage 176 first price sealed bid auction 437 optimal bidding strategies 444–6 five forces model 27–8 fixed cost 37 Fluent, C 525 Fog, B 200, 216 football 245–6 football tickets demand and price for 55–9 price discrimination for 405–7 foreclosure 640–2 Fornell, C 531 Foros, Ø 644 Fortado, Lindsay 335–6 forward vertical integration 604, 609–10 Foss, N.J 118 Fraas, A.G 211 franchise agreements 623–5 franchising 715–16 franchising in fastfoods market 629–30 Franke, G.R 529 Frederiksen, C.S 145 Freedman, C 187 Freeman, C 553, 555, 556 Freeman, R.E 148 free-on-board pricing 411 French, H.E 642 Friedman, M 87, 125, 144, 151, 158, 332 Froeb, L.M 263 Fruity 247–8 Fukugawa, N 563 Fung, M.K 577 Furman, J.L 371 G Gabrielsen, T.S 679 Galbraith, J.K 526, 548 Gale, D 140 Gal-Or, E 622 game theory 229–56 and dominant strategy equilibrium 230–1 mixed strategies 239–46 and Nash equilibrium 233 and Prisoner’s dilemma 235–9 relationship between dominant strategy equilibrium and Nash equilibrium 233–4 Z06 Industrial Organization 21710.indd 838 repeated games 253–5 sequential games 246–53 Gandal, N 642 Garella, P.G 525 Garoupa, N 625 gas auction of drilling rights 439–40, 460–1 Genovese, D 188 geographic concentration 311–12 geographic entry barrier 333–7 geographic market definition 263 geographic product differentiation 468 George, K 283 Gerardi, K.S 426 German discounters 183–4 Geroski, P.A 188, 288, 302–4, 348, 349, 351, 352, 379, 383, 573 Geroski, P.S 383 Gertner, R 592, 622 Ghemawat, P 28, 333 Ghoshal, Sumantra 93 Giaccotto, C 566 Gibrat, R 296, 303 Gil, R 411, 616 Gilbert, B.A 317 Gilbrat’s Law 296 Gillan, L 127 Gillette diversification 685 mergers 583 Gilligan, T.W 638–9 Gilo, D 197 G-index on corporate governance 138–9 Gini, C 277 Gini coefficient 277–9 Glazer, A 520 Glen, J 383 Goddard, J 19, 302, 303, 371, 379, 383 Goddard, J.A 55 Goergen, M 129 Goldsby, M.G 146 Gollop, F.M 691 Gomes-Casseres, B 597 Gompers, P 138, 557 goodwill, protection of 645 Goolsbee, A 346, 427 Gorecki, P.K 288, 302–4, 349, 684, 692–3 Gort, M 595 Goto, M 622 governance 112 government policies as barriers to entry 332 Goyder, D.G 720–19 Grabowski, H 25 Graham, D.A 609 Graham, D.R 346 Grant, R.M 118, 119 Greenbury Report (1995) 135 Greene, D.P 531 Green, E.J 221 Greenhalgh, C 571 Greenspan, A 93 Greer, D.F 211 Greuner, M.R 530 Grimes, W.S 647 Grossman, S 117 Grout, P.A 222–3 Growiec, J 298 growth maximization, theory of 95–8 Gugler, K 592, 595, 600 H Haan, M.A 222, 345 Hagedoorn, J 551 Hall, B.H 301, 570 Hall, R.L 87, 185, 393, 395 Hall, S 395 Hallett, M 312 Haltwanger, J 221 Hamel, G 294, 684 Hampel Report (1998) 135 Handy, C 94 Hannah, L 268–9, 271–5, 297, 304, 600 Hannah and Kay index 272–4 Hannan, T.H 366, 566 Hansen, R.G 459 Harberger, A.C 713 Harbord, D 349 Hardt, M 638 Harford, J 595 Harford, T 412–13, 474–5 Harrigan, K.R 622 Harrington, J 221 Harrington, J.E 212, 216, 222 Harris, M 683 Harrison, B 319 Harsanyi, J 241 Hart, O 116, 117, 133 Hart, P.E 300–2, 304, 601 Hart, R.A 55 Hartley, K 328, 332 Hartmann, W 411 Hawawini, G 370 Hay, D 713 Hayne, S 460 Haynes, M 689–90 Healy, P.M 599 hedge funds 281–2 Heffernan, M 137 Heide, J.B 641 Helfat, C.E 370, 613 19/05/2017 17:00 www.downloadslide.com Henderson, R 570 Hendricks, K 460 Hennessy, D.A 613 Herfindahl–Hirschman (HH) index 271–3 Hernando, I 395, 396 Hersch, P.L 639 Hertzendorf, M.N 525 H-form organizational structure 112 Higgs Report (2003) 135 Himmelberg, C 652 Hirschleifer, J 417, 570 hit-and-run entry 345 Hitch, C.J 87, 185, 393, 395 hobbit approach 107–8 Hoehn, T 349 Hoffman, J 396 Hogarty, T.F 263 Hoje, J 137 Holahan, W.L 218 holding company 627 horizontal agreements 718 horizontal integration 583 horizontal merger 583 cost savings 586–8 empirical evidence 599–601 and merger waves 594–7 non-profit maximizing motives 590–4 profit maximizing motives 584–90 and strategic alliances 584, 597–9 horizontal product differentiation 467, 468 Horstmann, I 525 Hortacsu, A 462 Hoschman, J 527 Hoskisson, R.E 367 Hotelling, H 480–92 Hotelling’s location model 480–92 collusive model 484–6 competition in 489–92 location endogenous, price exogenous 482–4 location exogenous, price endogenous 484–92 non-collusive model 486–9 substitution in 489–92 Houston, J 142 hubris hypothesis in horizontal merger 593 Huck, S 216 Hughes, A 300, 302 human asset specificity 619 Hume, David 125, 143 Hunter, A 200 Hunter, Jr, A.P 611 Hurdle, G.J 346 Hutson, J 643 Z06 Industrial Organization 21710.indd 839 Index Hutton, Will 93 Hyland, D.C 689 Hymer, S 301 I imitative entry 348 imitative investment strategy 554 imperfect competition 67 imperfect information in theory of the firm 86 incomplete contracts 109 increased capital market discipline 715 increased competition 715 increasing returns to scale 39 independent action 165–6 independent private values model 436, 438, 442–9 indivisibilities 44 industrial district 314 industrial organization competition, views of 4–6 contributors to 12–18 SCP paradigm 6–27 strategic management 27–30 industry classification 264–7 definition 261–4 industry concentration 268 trends in 305–11 industry effects 367–72 industry life cycle 290–4 in credit union sector 291–2 information content and effectiveness of advertising 529 information exchange under collusion 209 information search, advertising in 522–5 informative advertising 503, 504, 525 Innes, R 636 Innovate UK of R&D 558 innovation 5, 29, 536 innovative entry 348 installed base 663 institutional theory 151 integration 582 intellectual property 567–8 interdependence 80 in game theory 230 in non-collusive oligopoly 164–6 internal capital market 682–4 internal economies of scale 45 internal governance 126 interoperability in horizontal mergers 587–8 inter-technology competition in network goods and services 669 intertemporal price discrimination 407–10 | 839 intra-technology competition in network goods and services 669–70 invention 536 investment in research and development 553–60 appraisal of 555 Ireland Apple’s tax deal with 425–6 relationship between Wetherspoon and Heineken 642–3 Ishii, J 138 isocost 42 isoprofit curves 168–71 isoquant 42 J Jack, A 510–12 Jackson, T 151 Jacobides, M.G 621 Jacobson, D 314, 563, 613, 620, 678 Jacquemin, A 383, 551 Jagtiani, J 577 James, C 142 Janssen, M.A 239 Japanese kaisha network 627 Japan tobacco revenue 687 Jarle Kind, H 644 Jarrell, G 600, 689 JD Wetherspoon 642–3 Jenny, F 383, 713 Jensen, M 113, 115–17, 121, 128, 626 Jeon, Y 352 Jevons, S 66 Jewkes, J 550 Jia, J 141 John, G 619, 621 John, K 142 Johnson, B 319 Johnson, L 593–4 Johnson, P 309 Johnson, P.S 328, 347 joint profit maximization 174–5 in Hotelling’s location model 484–6 joint ventures 200, 202–3, 537, 584 horizontal mergers as 587, 599 Jonker, N 396 Joskow, P.L 340 junk bonds 137 K Kadiyali, V 352 Kagel, J.H 455, 459 Kaldor, N 526, 527 Kalnins, A 625 Kamerschen, D.R 713 Kamien, M 10, 545, 573 Kan, O.B 684 19/05/2017 17:00 www.downloadslide.com 840 | Index Kantzenbach, E 213 Kaplan, S 689 Kaplow, L 719 Karni, E 513 Karshenas, M 562 Kashyap, A 187 Katsoulacos, Y 468 Katz, M 331, 643, 644, 663, 665 Kay, J 120, 478–9 Kay, J.A 29, 264, 268–9, 271–5, 294, 296, 297, 304, 319–20, 501, 525, 600, 644 Keating, B 380 Keeler, T.E 346 Keynes, J.M 14 Khanna, T 371 Khemani, R.S 351, 383 Kihlstrom, R.E 523 King, A 153 kinked demand curve 164, 185–8 Kirzner, I 6, 88, 504, 720 Klapper, L 332 Klein, B 109, 623, 638 Klein, P.G 110 Kleit, A.N 216, 638 Klemperer, P 213, 330, 331, 454–8 Klenow, P 188 Klepper, S 290 Klimenko, M.M 293 Knight, F 67 Kogut, B 118 Kohers, T 153 Koller, R.H 341 Kolstad, I 146 Konik, R 615 Koutsoyannis 527 Kramer, M.R 151 Krattenmaker, T.G 642 Krickx, G.A 619 Kruger, L 92 Krugman, P 319 Kuehn, D.A 98 Kuhlman, J.M 220 Kultti, K 568 Kumar, M.S 301 Kurucz, E 151 Kurz-Kim, J.-R 396 Kwoka, J.E 284, 622 L Lach, S 426 Lacktorin, M 691 Laeven, L 141 Lafontaine, F 621, 625 Lambin, J.J 530, 531 Lancaster, K 473–9 Lancaster’s product characteristic model 473–9 Z06 Industrial Organization 21710.indd 840 Lang, L.H 689 Langinier, C 328 Langlois, R.L 626 Langlois, R.N 118, 614 large-scale production 44 Larner, R.J 90 Lau, L 372, 375 Laurensen, K 563 Lawler, K 329, 330 Law of Diminishing Returns 33, 546 Law of Proportionate Effect (LPE) 296–303 tests of 301–2 Layson, S 405 leader–follower model in duopoly 175–8 Leahy, A.S 530 Leahy, J 90 learning economies 44 Lee, C 530, 574 Lee, K.-P 329, 330 Lee, Y.H 461 Leech, D 90 legal barriers to entry 332–3 Leibenstein, H 75, 556 Lennox, M 153 Lerner, A.P 74 Lerner index 74 Lerner, J 551, 557 Lev, B 686 Levenstein, M 211, 219–20, 222 Levin, D 455, 459 Levin, R.C 573 Levine, P 98, 140 Levine, R 141 Levy, D 187, 380 Lewis, P 118 Lewis, T.R 638 Lianos, T 380 libertarianism as ethical approach 145 licensing agreements 598 Liebeskind, J.P 118, 119 Liefmann, R 200, 208 limit pricing entry barrier 337–40 Lin, P 636 Lins, K 689 Lipczynski, J 213, 216 liquidity and resistance to diffusion of R&D 566 Lisbon, Treaty of 723 Little, I.M.D 304 Littlechild, S.C 527, 713 local banks of R&D 557 location models 467, 470 Hotelling’s 480–92 Salop’s 492–6 Longland, M 571 long run 33 long-run production and costs 39–46 economies of scale 43–5 Lorentzen, J 563 Lorenz, M.O 277 Lorenz curve 277–9 Lott, J.R 459 Lotti, F 302 Love, J.H 532, 551 loyalty discounts 410 Lucking-Reiley, D 449, 462 Luffman, G.A 693 Lundvall, B 319 Luski, I 527 LVMH 688 Lyons, B.R 110, 290, 303, 725, 735 M MacDonald, G 525 MacGregor, D.H 207, 208, 212 Macher, J.T 110 Machlup, F 87, 196–7, 202, 605, 618 Macho-Stadler, I 625 Mahajan, S 308 Mair, J 690 Malerba, F 551 Malmendier, U 139, 461 management 93–4 managerial discretion in horizontal mergers 590–1, 600 managerial profit constraint 97 managerial theories of firm 89–100 constraints on growth 96 managerial utility 99 theory of 99–100 Manne, H 591 Mansfield, E 301, 560, 562 Marayuma, N 383 March, J.G 100, 103 marginal cost 37 marginal inertia and pace of diffusion in R&D 565 marginal product of labour (MPL) 34 marginal revenue 51 Margulis, M.S 598 Marion, B.W 340 market dealing with domestic appliances 279–80 definition 261–4 market concentration 268 market demand function 50 market extension diversification for 677 marketing 10 online fake reviews 732 and R&D 556 marketing economies of firms 45 19/05/2017 17:00 www.downloadslide.com market power enhancement of in diversification 678–80 in vertical restraints 634–6 under oligopoly 584–5 market share, advertising and 531 Markham, J.W 190 Markides, C 684 mark-up test 375–8 Markusen, A 314 Marqués, D 695 Marris, R 9, 95, 97–8, 590, 686, 694 Marshall, A 4, 13, 65, 66, 262, 319, 626 Marshall, R.C 202 Marshallian network 626 Martin, B.R 563 Martin, J.D 689 Martin, R 319 Martin, S 337 Marvel, H 637 Mason, E.S 6, 14 Massini, S 576 Mata, J 295, 296 Mathewson, F 637 Matouschek, N 641 Matsui, A 203 Matten, D 152 Mazzucato, M 303, 557 McAfee, R.P 326, 453–5 McCafferty, K 637 McCloughan, P 298 McCrum, D 281–2 McDowell, J.M 566 McGahan, A.M 290, 370–1 McGee, J 367, 679 McKillop, D 291 McMillan, J 453–5 Mead, W.J 460 Mead, W.S 591 Means, G.C 90, 136 Meckling, W 113, 115–17, 121, 128, 626 Meeks, G 599 Mehran, H 140, 142 Melitz, J 87 merger policy 710, 718 mergers 10, 582 merger waves 584, 594–7 metering 411 Metrick, A 138 M-form organizational structure 111–12 Midgley, D.F 562 Milgrom, P 110, 438, 449, 454, 455, 523–5, 679 Miller, D 118 Miller, S.M 352 Millington, A 153 Z06 Industrial Organization 21710.indd 841 Index Minehart, D 203 Mingardi 557 minimim efficient scale (MES) 49 minimum profit constraint 92 mixed strategy 239–46 Mixed Strategy Nash Equilibrium 243–5 Mixon, F.G 513 mobile phone industry 3G auction (UK) 455–8 vertical disintegration in 294 modular synergies in strategic alliances 597 Molyneux, P 577 Monahan J.L 691 Monbiot, G 137 monitoring of cheating in cartels 218–19 of collusion 214 Monopolies and Merger Commission 327, 469, 596, 611, 638, 729, 734 monopolistic competition 65 and product differentiation 470–3 theory of 79–82 monopoly 5, 6, 65, 67 advertising under 514–17 and competition policy 710 heterogeneous network benefits 659–61 heterogeneous stand-alone benefits 661–2 in network goods and services 658–63 and technological change 541–5 theories of 71–3 welfare properties 662–3 monopoly policy 718 monopoly rights as barrier to entry 332 Monteverde, K 614 Montgomery, C.A 370, 685 Moon, J 152 Moore, J 116 Moore, K 469 Moore, M 408 Moore, T.G 346 moral hazard 113–14 and vertical integration 616–17 Morgan, J 427, 428 Morgenstern, O 15, 229, 242 Morosini, P 317 Morris, D 713 Morris, J.E 302 Morrison, S.A 346 Mortimer, J.H 645 Moschieri C 690 Moser, P 567 | 841 motivational challenges in diversification 684 motor industry product differentiation in 468, 473 Motta, M 585, 641, 722 Mueller, D.C 25, 382, 383, 592, 600, 686, 713 multiple-period game 254 Mund, V.A 202 Murphy, K 638 Murphy, K.M 527 mutually assured destruction 239 Myers, G 341, 679, 717 Myers, S.C 129 Myners Report (2001) 135 N NACE 264–5 Nalebuff, B 646 Narasimhan, C 426 Nash, J 17–18, 171–4, 240–1 Nash equilibrium 230–4, 240 in auction bidding 446–7 in Hotelling’s location model 486–9 Nathan, A 378 national differences 469 National Economic Research Associates (NERA) 213, 263 Nationalization 714 natural monopoly 78–9 in competition policy 713 ownership arrangements under 714–16 franchising 715–16 nationalization 714 privatization 715 natural product differentiation 468 Nawaz, M 526 Neale, John 184 near-neighbour brands 477 Neave, E.H 378 Needham, D 95, 328, 680, 682 Neeman, Z 203 Nelson, M.N 201–2 Nelson, P 513, 524, 527 Nemoto, J 622 neoclassical theory of the firm 4–5, 65–7 critique of 86–9 market sturctures 68 network configuration in horizontal mergers 588 network effects 651 network externalities 649, 651 strong 657–8 weak 656 network externalities entry barrier 331–2 19/05/2017 17:00 www.downloadslide.com 842 | Index network goods and services 649–71 competition over standardization and compatibility 668–71 inter-technology competition 669 intra-technology competition 669–70 mixed competition 670 demand for 651–8 heterogeneous network benefits 652–5 heterogeneous stand-alone benefits 655–8 duopoly in 663–8 perfect competition and monopoly 658–63 heterogeneous network benefits 659–61 heterogeneous stand-alone benefits 661–2 welfare properties 662–3 networks 623, 625–30 Neven, D.J Nevins, A 679 new empirical industrial organization (NEIO) 372–9 Bresnahan and Lau’s mark-up test 375–8 evidence 378–9 Rosse–Panzar revenue test 372–5 new industrial organization 26 Newman, H.H 366 n-firm concentration ratio 269–71 Nichols, L 527 Nightingale, P 329, 332 Nocke, V 635 Noll, R.G 55 non-collusive oligopoly 164–91 conjectural variation 165–6 in Hotelling’s location model 486–9 independent action 165–6 interdependence 165–6 kinked demand curve in 185–90 output determination in 166–78 price leadership in 185–90 non-constant-sum game 230–4 non-excludability in patenting system 567 non-linear pricing 644–5 non-price competition 218 non-profit maximizing motives for horizontal merger 590–4 capital redeployment hypothesis 592 corporate control 591 failing firm hypothesis 591–2 hubris hypothesis 593 managerial discretion 590, 600 non-rivalness in patenting system 567 Noonan, M 425 Z06 Industrial Organization 21710.indd 842 normal profit 37 Norman, G 527–9 Notta, O 530 numbers equivalent of HH index 272 Nyman, S 90 O Oakley, D 92 Öberseder, M 154 Obi, C.P 681 O’Brien, D.P 209 Odagiri, H 383 O’Donoghue, T 570 Ofek, E 682, 683, 689 offensive investment strategy 553 Office of Fair Trading 213, 216, 222, 263, 333–5, 342, 639, 729, 735 Oi, W.Y 611 Old Mutual 91–2 oligopoly 67, 164–5 advertising under 517–19 instability in 183 market power under 584–5 and technological change 545–8 see also collusive oligopoly; duopoly; non-collusive oligopoly Oliver, C 731 online auctions 461–2 online services competition policy in EU 728 OnTheMarket, competition with 731–3 open source technology 551–2 opportunity cost 37 optimal bidding strategies in auctions 442–7 Dutch auction 446–7 English auction 443 first price sealed bid auction 444–6 second price sealed bid auction 443–4 Ordover, J 341, 646 Organization for Economic Cooperation and Development (OECD) 133, 134, 200, 623, 718 organization complexity in theory of the firm 86 organization goals in theory of the firm 86 organization slack 101 in horizontal mergers 587 Ornstein, S.I 637 Orr, D 349, 350 Orts, E.W 149 Osborne, D.K 217, 218 Oster, S.M 366 Oulton, N 300, 302 Oustapassidis, K 530 outsourcing, NHS 628 Owen, S 596 ownership, separation from conrol 89–100 own sources of R&D 557 Ozanich, G.W 457–8 P pace of diffusion of R&D 563–6, 574–7 Pagliero, M 405 Palsson, H.P 216 Pan, X 428 Panthan, S 141 Panzar, J.C 372–5 Parsons, P 586 Pascoe, G 365 Pashigian, P 301 passive incumbent 343–4 Patel, P 572 patents 566–71 as barriers to entry 327–9, 332 Patinkin, D 204, 207 Paton, D 342, 529, 530, 532 Pautler, P.A 601 Pavitt, K 572 Pavitt, K.L.R 563 payoff in game theory 229 peak-load pricing 413–16 pecuniary economies of scale 45 peer-to-peer platforms 667 Pekar, Jr P 598 Peltzman, S 188 Penrose, E 118, 681, 684, 687, 694 Pérez-Castrillo, J.D 625 perfect competition 65 advertising under 519–20 in network goods and services 658–63 heterogeneous network benefits 659–61 heterogeneous stand-alone benefits 661–2 welfare properties 662–3 and technological change 541–5 theories of 67–71 perfect price discrimination 397 performance European banking industry 21–2 perquisites 127 Perry, M.K 611 personal seat licence 406 persuasive advertising 503, 504, 525–6 Pesendorfer, M 599 Pester, Paul 336 Peston, M.H 95 pharmaceutical firms advertising by 510–12 Phelan, S.E 118 19/05/2017 17:00 www.downloadslide.com Phillips, A 7, 211, 212, 220, 224 Phlips, L 10, 397 physical asset specificity 619 Pickering, J.F 718 Pigou, A.C 397 Pindyck, R.S 216 Piotrowski, R 200 Pissaris, S 139–40 planning challenges in diversification 683 play fair charges on wedding venues 732–3 Plender, J 137 Plimmer, G 628 Plott, C.R 455 poison pill strategy in mergers 591 Pooler, M 279–80 Porter, M.E 27–30, 151, 314–20, 366, 367, 370, 371, 478–9, 532, 688, 690 Porter, R.H 221 Porter’s Diamond Model 318–19 positive synergies in strategic alliances 597 Posner, R.A 24, 216, 221, 637, 641, 647 Prahalad, C.K 118, 294, 684 Prais, S 90, 301, 304 Pratt, J 426 Pratten, C.F 327 predatory competition in diversification 679 predatory pricing entry barrier 337, 340–1 predicting cartels 222–3 Premier League auctions 458–9 Preston, N.E 364 price and advertising 531–2 of football tickets 55–9 of sports bra 640 price banding 406 price bundling 407 price competition 181–3 price concessions 406 price control avoidance and vertical integration 619–20 and vertical restraints 645 price-cost margin 363–4 price determination in duopoly 178–83 price discrimination 397–413 brand labels 410 in competition policy 716–17 coupons 410 examples of 405 first-degree price discrimination 399–401 for football tickets 405–7 free-on-board pricing 411 Z06 Industrial Organization 21710.indd 843 Index intertemporal price discrimination 407–10 loyalty discounts 410 metering 411 second-degree price discrimination 401–3 stock clearance 410–11 third-degree price discrimination 403–5 and vertical integration 611–12 and vertical restraints 645 price dispersion 426–8 price elasticity of demand 33, 51–4 price elasticity of supply 55–9 price leadership 161, 188–90 barometric 189–90 dominant 188–9 price rigidity 186 price taking behaviour 68 price wars, in airline industry 211 pricing policies 10 principal–agent problem 109 prison breakthrough 240–1 Prisoner’s dilemma game 235, 240–1 Cournot–Nash versus Chamberlin’s prisoner’s dilemma 237–8 original 236–7 private equity investors of R&D 557 privatization 715 process innovation 537 producer collusion 637 producer surplus 76–7 producer-to-wholesaler franchise 623 product characteristic model (Lancaster) 473–9 product design 10 product development 537 product differentiation 9, 65 as barrier to entry 329 rate of change of 469 types 468–70 product franchise 623 product innovation 537 production capacity constraint 181–3 and costs 33–49 production function 33, 75 production theory, short-run 34–5 productive capacity of rivals 585 productive efficiency 75 in competition policy 711–13 productive inefficiency in horizontal mergers 587 productivity 11 product market definition 262 product quality 11 product quality, advertising and 531 products as bundles of attributes 474–5 | 843 profitability 10–11 and advertising 530–1 profit extension diversification for 677 profit maximization 59–60, 65 and advertising 514–20 in cartels 203–7 in horizontal mergers 584–90 joint, in oligopoly 174–5 profit, persistence of (POP) 379–83 Prokop, J 217 property rights and theory of firm 116–17 Pryor, F.L 305 purchasing economies of firms 45 in horizontal mergers 586–7 pure common value model 436, 438–42 pure diversification 677 pure strategy 242 Q Qian, Y 142, 593 quality differentiation effect of duopoly 665 quality signalling 522–5 quantity-dependent pricing 644–6 quantity forcing 644 quasi-rent 109 quiet life hypothesis 366 quotas, assignment of in cartels 217–18 QWERTY keyboard 650 R Radice, H.K 98 Ragazzi, E 694 Rajan, M 691 Rakoff, J 148 Ramezzana, P 641 random growth hypothesis 295–304 Ratcliffe, V 700–1 rationalization in horizontal mergers 586 Ravenscraft, D.J 365, 531, 599, 622, 689 Raviv, A 683 reaction functions 168–71 real economies of scale 44 real factors in merger waves 595 reciprocal synergies in strategic alliances 598 reciprocity in diversification 679–80 Reder, M.W 24 Reed, R 693 Reekie, W.D 530 Rees, R 219, 733 regional concentration 311–12 registration as barrier to entry 332 19/05/2017 17:00 www.downloadslide.com 844 | Index regulation and resistance to diffusion of R&D 566 and seller concentration 290 Reid, G.C 302, 720 Reid, S 469 Reinganum, J 426 Reiss, P.C 340 repeated game 230, 253–5 representative consumer models 467, 470 reputation, advertising 520 reputation of firm 29–30 resale price maintenance 637–9 research and development 10, 535–77 business angels 558 costs of 556–7 and creative destruction 538–40 crowdfunding 557 and demand 555 diffusion of 536, 537, 560–6 European funding 559 finance 556–7 in horizontal mergers 586 innovate UK 558 investment in 553–60 local banks 557 marketing 556 open source technology 551–2 own sources 557 and patents 566–71 private equity investors 557 strategies 553 tax relief 558–9 and technological change 536–53 truckmakers accused 564–5 venture capital 558 reserve price 436, 449–50 residual rights 116 residual rights to control 128 resource-based theory of firm 117–19 Restrictive Practices Court 729 restrictive practices policy 710, 718 retail vertical integration of 615 retail banking, barriers to entry in 333–5 retailer collusion 637 returns to scale 39 Revelli, R 302 revenue 50–1 revenue equivalence theorem 436, 447–9 revenue test 372–5 Rey, P 221, 637, 640, 647 Reynolds, R 346 Richard, J.F 459 Rightmove 658 Riordan, M.A 523 Riordan, M.H 635, 642 risk and resistance to diffusion of R&D 566 Z06 Industrial Organization 21710.indd 844 risk averse bidders 450–2 risk management 207–9 risk reduction and diversification 681–2 rivals, productive capacity of 585 Rivkin, J.W 371 Robbins, L 112 Roberts, B 351 Roberts, J 110, 523–5, 679 Roberts, P Robertson, D.H 106 Robertson, P.I 614 Robertson, P.L 626 Robinson, J 4, 14–15, 65, 67 Robinson, W.T 290, 520 Robinson-Patman Act (USA 1936) 721 Rogers, R.T 531 Roll, R 461, 593 Roller, L 203, 586, 600 Rome, Treaty of 723 Rondi, L 693–4 Roper, S 551 Roquebert, J.A 370 Rose, N.L 687 Rosen, S 411 Rosenberg, J 142 Rosenbluth, G 477 Rosenfield, A 411 Rosenthal, R.W 426 Ross, C 353 Ross, D 26, 208, 211, 340, 520, 609, 679 Ross, T.W 213, 646 Rosse, J.N 372–5 Rosse–Panzar revenue test 372–5 Rossi, S 596 rotational challenges in diversification 684 Rotemberg, J.J 221 Roth, A.E 254 Roth, Al 108 Rothschild, M 426 Rothschild, R 212, 218 Rothwell, G 212 Rotwein, E 87 Rubinfeld, D.J 640 Rudholm, N 351 Ruefli, T.W 370 rule of reason 721 Rumelt, R.P 117, 118, 369, 370, 693–4 Rydén, B 599 S Saha, S 555 Saloner, G 221 Salop, S 332, 492–6 Salop, S.C 642 Salop’s location model 492–6 Salter, A 563 Sambharya, R.B 333 sample selection bias 300 Samuals, J.M 301 Samuelson, W.F 455 Sandy, R 55, 406 Santalo, J 695 Sarbanes-Oxley Act (USA, 2002) 138 Sargent, F.P 48, 90 satisficing 101 Sawyer, M.C 26, 301 Sayrak, A 689 Schaeck, K 142 Schankerman, M 570 Scharfstein, D.S 117, 683, 688 Schary, M.A 349 Schelling, Thomas 251 Scherer, F.M 26, 208, 211, 298, 340, 520, 546, 548, 572, 599, 609, 620, 679, 689 Schmalensee, R.C 6, 25–7, 212, 290, 361, 367–70, 398, 411, 469 Schmid M 695 Schohl, F 383 Scholten, P 427 Scholtens, B 153 Schreuder, H 680, 685 Schumpeterian hypothesis 539–40 in competition policy 717 empirical evidence 571–4 Schumpeter, J 4–6, 13–14, 87–8, 348, 537–40, 571–4 Schwalbach, J 351, 383 Schwartz, B 473 Schwartz, M 346 Schwartz, N 10, 545, 573 Schwartzman, D 25 Schwed, F 295–6 Schwert, W.G 600 Scitovsky, T 470 Scotchmer, S 570 Scott, J.T 365 Scott Morton, F.M 521 search goods 502, 513 second-degree price discrimination 398, 401–3, 716 second price sealed bid auction 437 optimal bidding strategies 443–4 security, enhancement 207–9 selection challenges in diversification 683 seller concentration 210–11, 216, 260–1 agglomeration in 319 determinants 287–94 and horizontal mergers 585, 600 measures of 267–82 and number of firms 210–11, 216 and seller distribution trends in 304–5 seller’s optimal auction design 449–50 19/05/2017 17:00 www.downloadslide.com sellers, power Selten, Reinhard 241, 251 Sembenelli, A 694 semi-collusion 200, 203 Sen, A 145–6 Sena, V 550 Seneca, J 200, 209–11, 213 sequential game 230, 246–53 sequential synergies in strategic alliances 598 Servaes, H 689, 691 services delivery of 686 deterioration of 635 Shaffer, S 375–8 Shamroukh, N 577 Shamsie, J 118 Shankar, V 427, 428 Shapiro, C 331, 587, 663, 665 Shapiro, D.M 351, 383 Shapiro, K.H 426 Shapley, Lloyd 108 shareholders 91–4, 130–1 Sharman, A 640 Sharp, Byron 505–6 Shaw, W.H 144 Shelanski, H.A 110 Shen, C.-H 153 Shepard, A 687 Shepherd, W.G 305, 346, 347, 526, 634, 719 Sherman, R 295–6 Sherman Act (USA, 1890) 720–2 Sherwin, R.A 263 Shipley, D 395 Shivakumar, R 203 Shleifer, A 128 shopping goods 513 short run 33 short-run production and costs 34–9 Shubber, K 642–3 side-payments 101 Siegel, D 525 Siegfried, J.A 349 Siggelkow, N 689 signalling commitment 342–5 committed incumbent 343–5 passive incumbent 343–4 signalling quality, advertising 522–5 Silberman, I.H 298 Silbertson, A 90 Simon, H.A 17, 101, 300, 613 Simpson, W.G 153 simultaneous game 229 Singer, E.M 640 Singh, A 98, 301, 370 Singh, S 294, 340 Sirower, M.L 600 Z06 Industrial Organization 21710.indd 845 Index site specificity 619 Skaggs, B.C 686 Slade, M 366, 621 Sleuwaegen, L 351 slotting allowances 643–4 smart devices services competition policy in EU 728 Smiley, R 340, 350 Smirlock, M 365 Smith, A 12, 65, 125, 143–4 Smith, M 427 Smith, N.C 154 Smith, V 455 Smith Report (2003) 135 Snyder, C.M 220 socially optimal product differentiation 470–3 Soete, L 553, 555, 556 Solberg, E.J 183 Sonderegger, S 222–3 Sorenson, A.T 426 Sørgard, L 203 Sosnick, S.H 7, 720 Sovall, O 317, 319 Spanos, Y 371 spatial models 467, 470 specialization 311–14 specific rights 116 Spector, D 646 Spence, M 44, 253 Spengler, J.J 605, 609 Spiegel, P 701–3 Spiller, P.T 621 sports bra price-fixing 639–40 Spulber, D.F 28, 325, 342, 426 Sraffa, P Stackelberg, H von 175–8 Stackelberg equilibrium 177 Stahl, D.O 426 Staiger, R.W 221 stakeholders 125, 126 Stalk, G 684 standardization, competition over in network goods and services 668–71 Standard Oil 720–1 Standifird, S 637 Stanley, M.H.R 298 start-up costs, advertising 520 state-sponsored collusion 200, 203 Steen, F 203 Stefanadis, C 646 Steiner, M 320 Steiner, P.O 515, 516 Stephen, F.H 532 Stigler, G.J 6, 16, 186, 187, 206, 207, 218–20, 263, 264, 324, 337, 340, 426, 522–3, 527, 532, 620, 646, 720 | 845 Stiglitz, J.E 332, 470 Stillman, R 622 Stiroh, K 682 stock clearance 410–11 Stoneman, P 536, 562 Stough, R 347 Strassmann, D.L 347 strategic alliances 584, 597–9 strategic groups 366–7 strategic product differentiation 468 strategy in game theory 229 strict dominance 231 strictly dominant strategy 231 structure-conduct-performance (SCP) paradigm 6–27, 359–60 conduct 9–10 criticisms 25–7 empirical tests of 360–6 European banking industry 19–24 feedback effects government policy, role of 11–12, 24–7 new empirical industrial organization (NEIO) 372–9 performance 10–11 profitability, variation in 367–72 profit, persistence of (POP) 379–83 strategic groups 366–7 structure 8–9 Strudler, A 149 Stuckey, J 611 Stulz, R 142 Stulz, R.M 141, 689 subgame perfect equilibrium 248, 256 substitutes 54, 262 Sugden, P 107 Sundqvist, S 577 sunk costs 109 and barriers to entry 325 and seller concentration 287–90 Sunley, P 319 support challenges in diversification 684 survivorship bias 300 Suslow, V 211, 219, 222 Sutton, C.J 684 Sutton, J 288, 530 Swann, D 209 Sweetheart tax, EU 701–3 Sweezy, P 185 switching costs 213 as barrier to entry 330 Syberson, C 346 Sylos-Labini, P 338 Symeonides, G 211, 213, 218 synergies in strategic alliances 597–9 synergy 127, 584 19/05/2017 17:00 www.downloadslide.com 846 | Index T Taber, M 605, 618 tacit collusion 197 Tadelis, S 520 Takalo, T 570 takeovers 582 tangency solution 80 Tang, F 427 Tate, G 139 tax avoidance and vertical integration 619–20 tax exposure, reduction of 682 tax relief of R&D 558–9 team-based production, form as 114–15 technically efficient 75 technological change 536–53 collusion and cooperation 550–1 in competition policy 717 and firm size 548–52 under oligopoly 545–8 pace of 541–53 in vertical integration 612–13 technological product differentiation 468 technological progress 11 technological standards game 248–50 Tedlow, R.S 501 Teece, D.J 613, 614, 684 telecoms networks competition policy in EU 727–8 Tellis, G.J 531 Telser, L 527, 530, 646, 679 territorial exclusivity 643 third-degree price discrimination 398, 403–5, 716 ‘Third Italy’ network 626–7 Thomas, D 731 Thomas, H 367 Thomas, L.A 531 Thompson, S 351 3G mobile phone auction (UK) 455–8 Ting, X 427 Tirole, J 27, 551, 605, 640, 647 Tobin’s q 139, 362–3, 365 Tomlin, K 300, 302 total cost 37 total revenue 51 tournament theory 139 trade associations 200–2 trademark franchise 623 trademarks 468–9 trade union resistance to diffusion of R&D 566 transaction costs 105, 106 and collusion 214–15 internalization of 110 Z06 Industrial Organization 21710.indd 846 reducing, in diversification 682–6 and theory of firm 109–13 transaction costs, reducing in diversification 682–6 transfer pricing 417–26 with imperfectly competitive external market 423–4 implications 424–5 with no external market 418–20 with perfectly competitive external market 420–3 transnational corporations (TNCs) 700 Tremblay, C.H 591 Tremblay, V.J 591 Tsou, T 570 Turker, D 152 Turnbull Report (1999) 135 Turolla, S 736 two-part tariff 400, 644–5 tying 330 in diversification 679–80 in vertical restraints 645–6 Type Industry 288–90 Type Industry 288–90 U Uber, competition 666–8, 671 U-form organizational structure 110–11 uncertainity in collusion 214 and diversification 681–2 and theory of firm 86 and vertical integration 613–14 Union Carbide pesticide plant, Bhopal, India (1984) 149 United Kingdom competition policy in 728–30 evaluation of 733–6 price of sports bra 640 mini-price war 183–4 model agencies 199–200 United Parcel Service 717 United States competition policy in 720–3 Universities of R&D 559–60 unsatisfactory performance under collusion 209–10 upstream vertical integration 604 US Steel 721–2 utilitarianism as ethical approach 145 Utton, M.A 284, 301, 680, 713, 733 V Vakratsas, D 531 valuation ratio 97 value chain 28–9 Van de Ven, B 145 Van Oijen, A 683–4 Vanlommel, E 284 variable cost 37 Varian, H 426 variance decomposition anslysis 367 Vaughan Williams, L 530, 532 Veblen, T 90 venture capital network 627 venture capital of R&D 558 Vernon, J.M 609 Veronese, G 396 Vertical agreements 718 vertical disintegration 605, 620–1 vertical integration 9, 214, 583, 604 asset specificity 617–19 assured supply 614 backward vertical integration 610–11 complexity 616 cost savings 612–20 double marginalization 605–9 empirical evidence 621–2 enhancement of market power 605–12 externalities 614–15 forward vertical integration 609–10 moral hazard 616–17 motives 612–20 price discrimination 611–12 tax or price controls 619–20 technological conditions 612–13 uncertainty 613–14 vertical merger 583 vertical product differentiation 467, 468 vertical restraints 583, 633 anticompetitive or benign? 646–7 bundling 646 in competition policy 717 foreclosure 640–2 forms 637–47 motives for 634–7 cost savings 636–7 market power, enhancement of 634–6 quantity-dependent pricing 644–6 resale price maintenance 637–9 slotting allowances 643–4 territorial exclusivity 643 tying 645–6 Vestager, M 730 Vickers, J 623, 636, 718 Vickrey, W 437 Vickrey auction 437 Villalonga, B 383 Vishny, R.W 128 19/05/2017 17:00 www.downloadslide.com Vitaliano, D.F 525 Volpin, P.F 596 Von Neumann, J 15, 229, 242 Vyas, A 141 W Wagner, J 302 Waldman, M 646 Walker, C 263 Wall Street and Technology 680 Wall Street Journal 224 Walsh, M 395 Walter, I 695 Wang, H 639 Ware, R 378 Waring, G.F 383 Waterson, M 470 Watt, R 568 Weber, A.P 383, 713 Weber, R.J 438, 449, 454 Weinberg, M 599 Weinland, Don 629–30 Weinstein, M 637 Weir, C 734 Weisbach, M 689 Weiss, L.W 364, 365, 520, 530 Weitz, B.A 619, 621 Z06 Industrial Organization 21710.indd 847 Index welfare properties of 74 properties of network goods and services 662–3 Werden, G.J 263, 719 Wernerfelt, B 118, 370, 685 Weston, J.F 679 Whinston, M 642, 646 Whipp, Lindsay 629–30 White, L 635 Whittington, G 301 wholesaler-to-retailer franchise 623 Wiggins, R.R 370 Wilcox, C 200 Wilder, R.P 361 Williams, J.M 302 Williams, M 733 Williamson, O.E 9, 18, 47, 95, 99–100, 109, 112, 117, 121, 126, 214–15, 219, 612, 619, 682, 694, 712 Williamson, P.J 684 Willis, M.S 531 Wilson, J.O.S 302, 379, 383 Wilson, T 329, 526 winner’s curse 436, 439–42, 453–4 Winston, C 346 Winter, R.A 637 | 847 Wolf, R.H 202 Woodbury, J 513 workable competition 710, 720 X’ x-efficient 75 horizontal mergers 587 and technological change 542 Y Yamawaki, H 340, 383 Yamey, B.S 219, 224, 340, 405 Yang, C 570 Yates, A 395 year effects 369 Yellen, J 646 Yoon, S 366 Young, G Youssef, M.I 221 Yurtoglu, B.B 592 Z Zander, U 118 zero-sum game 229 Ziedonis, R.H 570 Zulehner, C 592 19/05/2017 17:00 www.downloadslide.com Z06 Industrial Organization 21710.indd 848 19/05/2017 17:00 www.downloadslide.com Z06 Industrial Organization 21710.indd 849 19/05/2017 17:00 www.downloadslide.com Z06 Industrial Organization 21710.indd 850 19/05/2017 17:00 ... Lipczynski, John, author | Wilson, John O S., author | Goddard, John A., author Title: Industrial organization : competition, strategy and policy / John Lipczynski, John O.S Wilson and John Goddard... A01 Industrial Organization 21710.indd 22/05/2017 17:10 Industrial Organization Competition, Strategy and Policy Fifth edition John Lipczynski, John O.S Wilson and John Goddard Harlow, England... (print and electronic) The rights of John Lipczynski, John Wilson and John Goddard to be identified as authors of this work have been asserted by them in accordance with the Copyright, Designs and