IDEAS home Printed from https://ideas.repec.org/a/bpj/bejeap/v12y2012i1n9.html
   My bibliography  Save this article

Technology Inertia and the Benefits of Entry

Author

Listed:
  • Bacchiega Emanuele

    (Alma Mater Studiorum - Università di Bologna)

  • Garella Paolo G.

    (Università degli Studi di Milano)

Abstract

We study the effects of entry on price in an industry. This assessment is usually carried out under the implicit assumption of “technological inertia”: incumbents cannot change their technologies in response to entry. We remove this assumption by modeling a game where, before quantity competition, firms choose technologies. We identify parameter configurations where, after entry, the incumbent(s) changes technology. This leads either to a higher price after entry or to a “dampening effect” on price reduction. This effect is shown to be relevant when evaluating the welfare gains from measures intended to foster competition by increasing the number of competitors. The converse proposition could be stated for evaluating the social costs of mergers.

Suggested Citation

  • Bacchiega Emanuele & Garella Paolo G., 2012. "Technology Inertia and the Benefits of Entry," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 12(1), pages 1-18, March.
    • Handle: RePEc:bpj:bejeap:v:12:y:2012:i:1:n:9
    DOI: 10.1515/1935-1682.3133
    as

    Download full text from publisher

    File URL: https://doi.org/10.1515/1935-1682.3133
    Download Restriction: For access to full text, subscription to the journal or payment for the individual article is required.
    File URL: https://libkey.io/10.1515/1935-1682.3133?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Stephen W. Salant & Sheldon Switzer & Robert J. Reynolds, 1983. "Losses From Horizontal Merger: The Effects of an Exogenous Change in Industry Structure on Cournot-Nash Equilibrium," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 98(2), pages 185-199.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jovanovic, Dragan & Wey, Christian, 2012. "An equilibrium analysis of efficiency gains from mergers," DICE Discussion Papers 64, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    2. Kaplow, Louis & Shapiro, Carl, 2007. "Antitrust," Handbook of Law and Economics, in: A. Mitchell Polinsky & Steven Shavell (ed.), Handbook of Law and Economics, edition 1, volume 2, chapter 15, pages 1073-1225, Elsevier.
    3. Marc Escrihuela-Villar & Ramon Faulí-Oller, 2008. "Mergers in asymmetric Stackelberg markets," Spanish Economic Review, Springer;Spanish Economic Association, vol. 10(4), pages 279-288, December.
    4. Zemsky, Peter & Adner, Ron, 2003. "Disruptive Technologies and the Emergence of Competition," CEPR Discussion Papers 3994, C.E.P.R. Discussion Papers.
    5. Andrei Medvedev, 2004. "Efficiency Defense and Administrative Fuzziness in Merger Regulation," CERGE-EI Working Papers wp234, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    6. Horn, Henrik & Persson, Lars, 2001. "Endogenous mergers in concentrated markets," International Journal of Industrial Organization, Elsevier, vol. 19(8), pages 1213-1244, September.
    7. Guangliang Ye & Wenbin Wu, 2015. "Privatization and merger in a mixed oligopoly with spatial price discrimination," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 54(2), pages 561-576, March.
    8. Horn, Henrik & Persson, Lars, 2001. "The equilibrium ownership of an international oligopoly," Journal of International Economics, Elsevier, vol. 53(2), pages 307-333, April.
    9. Joanna Poyago-Theotoky & Ben Ferrett, "undated". "Horizontal Agreements and R&D Complementarities: Merger versus RJV," CRIEFF Discussion Papers 1201, Centre for Research into Industry, Enterprise, Finance and the Firm.
    10. Koki Arai, 2017. "Ex-post examination of mergers: effects on retail prices," Asia-Pacific Journal of Accounting & Economics, Taylor & Francis Journals, vol. 24(1-2), pages 145-162, April.
    11. Werner Neus & Manfred Stadler & Maximiliane Unsorg, 2020. "Market structure, common ownership, and coordinated manager compensation," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 41(7), pages 1262-1268, October.
    12. António Brandão & Joana Pinho & Hélder Vasconcelos, 2014. "Asymmetric Collusion with Growing Demand," Journal of Industry, Competition and Trade, Springer, vol. 14(4), pages 429-472, December.
    13. Satya P. Das & Sarbajit Sengupta, 2001. "Asymmetric Information, Bargaining, and International Mergers," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 10(4), pages 565-590, December.
    14. repec:tcd:wpaper:tep7 is not listed on IDEAS
    15. Elpiniki Bakaouka & Marc Escrihuela-Villar & Walter Ferrarese, 2022. "Endogenous Horizontal Mergers in Homogeneous Goods Industries with Bertrand Competition," DEA Working Papers 96, Universitat de les Illes Balears, Departament d'Economía Aplicada.
    16. Maarten Janssen & Eric Rasmusen, 2002. "Bertrand Competition Under Uncertainty," Journal of Industrial Economics, Wiley Blackwell, vol. 50(1), pages 11-21, March.
    17. Rikard Forslid & Jonas Häckner & Astri Muren, 2011. "Trade costs and the timing of competition policy adoption," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 44(1), pages 171-200, February.
    18. Huck, Steffen & Konrad, Kai A. & Müller, Wieland, 2000. "Profitable horizontal mergers: A market structure-oriented view," SFB 373 Discussion Papers 2000,27, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
    19. R. Rothschild, 2000. "Merger under Spatial Competition," Urban Studies, Urban Studies Journal Limited, vol. 37(3), pages 443-449, March.
    20. Davies, Stephen & Olczak, Matthew & Coles, Heather, 2011. "Tacit collusion, firm asymmetries and numbers: Evidence from EC merger cases," International Journal of Industrial Organization, Elsevier, vol. 29(2), pages 221-231, March.
    21. Ramón Faulí-Oller & Joel Sandonís, 2001. "To Merge Or To License: Implications For Competition Policy," Working Papers. Serie AD 2001-05, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bpj:bejeap:v:12:y:2012:i:1:n:9. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Peter Golla (email available below). General contact details of provider: https://www.degruyter.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.