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Dominant Firm (dominant + firm)

Distribution by Scientific Domains
Business, Economics, Finance and Accounting100%

Selected Abstracts

The Antitrust Implications of Capacity Reallocation by a Dominant Firm

THE JOURNAL OF INDUSTRIAL ECONOMICS, Issue 2 2001
Ian Gale
When a firm acquires rival firms in one market, and moves their capacity to another market, should antitrust authorities be concerned? We address this question by studying a multi-stage game. A dominant firm has the opportunity to acquire fringe firms that operate in the same market. Then, the dominant firm has the opportunity to move capacity from that market to a second market. The model is motivated by a series of acquisitions in the Specialized Mobile Radio industry aimed at establishing a new cellular carrier. We derive necessary and sufficient conditions for the dominant firm to acquire too little capacity relative to the social optimum. The results shed light on the Consent Decree negotiated in US v. Motorola Inc. and Nextel Communications Inc., 1994. [source]

Market-Share Contracts with Asymmetric Information

JOURNAL OF ECONOMICS & MANAGEMENT STRATEGY, Issue 2 2009
Adrian Majumdar
In this paper, a dominant firm and competitive fringe supply substitute goods to a retailer who has private information about demand. We show that it is profitable for the dominant firm to condition payment on how much the retailer buys from the fringe (market-share contracts). The dominant firm thereby creates countervailing incentives for the retailer and, in some cases, is able to obtain the full-information outcome (unlike in standard screening models, where the agent earns an information rent in the high-demand state and output is distorted in the low-demand state). Our results have implications for fidelity rebates, all-units discounts, and competition policy. Although some crowding out of the fringe may occur when demand is low, we show that market-share contracts need not be harmful for welfare. [source]

The Antitrust Implications of Capacity Reallocation by a Dominant Firm

THE JOURNAL OF INDUSTRIAL ECONOMICS, Issue 2 2001
Ian Gale
When a firm acquires rival firms in one market, and moves their capacity to another market, should antitrust authorities be concerned? We address this question by studying a multi-stage game. A dominant firm has the opportunity to acquire fringe firms that operate in the same market. Then, the dominant firm has the opportunity to move capacity from that market to a second market. The model is motivated by a series of acquisitions in the Specialized Mobile Radio industry aimed at establishing a new cellular carrier. We derive necessary and sufficient conditions for the dominant firm to acquire too little capacity relative to the social optimum. The results shed light on the Consent Decree negotiated in US v. Motorola Inc. and Nextel Communications Inc., 1994. [source]

Predation and its rate of return: the sugar industry, 1887,1914

THE RAND JOURNAL OF ECONOMICS, Issue 1 2006
David Genesove
We show that the price wars following two major entry episodes were predatory. Our proof is twofold: by direct comparison of price to marginal cost, and by construction of a lower bound to predicted competitive price-cost margins that we show to exceed observed margins. Predation occurred only when its relative cost to the dominant firm, the American Sugar Refining Company (ASRC), was small. Its most clear effect was to lower the acquisition price of entrants and small incumbents. It may also have deterred future capacity additions and raised ASRC's share of industry profits. Predation operated by strengthening ASRC's reputation as a willing predator. [source]

Profit taxes and the growth of fringe firms

CANADIAN JOURNAL OF ECONOMICS, Issue 4 2002
Marianne Vigneault
In this paper we examine the optimal taxation of corporate profits in a multi,period limit pricing model where a dominant firm faces expansion by a competitive fringe. The optimal policy requires tax rates to vary both intertemporally and across firm sizes, and balances the benefit of fringe growth in eroding the market power of the dominant firm and the cost of displacing the dominant firm's output with the higher cost output of the fringe. The results are relevant for assessing the policy of giving preferential tax treatment to small firms, as practised by several OECD countries. JEL Classification: H32, L11 Impôts sur les profits et croissance des entreprises périphériques. Ce texte examine la fiscalité optimale des profits des sociétés dans un modèle de tarification limite à plusieurs périodes quand une entreprise dominante fait face à l'expansion d'entreprises périphériques qui la concurrencent. La politique optimale requiert des taux d'imposition qui varient à la fois dans le temps et selon la taille des entreprises, et cherche un équilibre entre les avantages d'une croissance à la périphérie qui entame le pouvoir de l'entreprise dominante, et le coût d'un déplacement de la production de l'entreprise dominante vers des entreprises périphériques dont les coûts de production sont plus élevés. Les résultats de l'analyse sont pertinents pour l'évaluation des politiques accordant un traitement fiscal préférentiel aux petites entreprises, comme c'est le cas dans plusieurs pays de l'OCDE. [source]