Estimating economies of scale and scope with flexible technology

The final publication is available at Springer via http://dx.doi.org/10.1007/s11123-016-0467-1Economies of scope are typically modelled and estimated using a cost function that is common to all firms in an industry irrespective of their type, e.g. whether they specialize in a single output or produce multiple outputs. Instead, we estimate a flexible technology model that allows for type-specific technologies and show how it can be estimated using linear parametric forms including the translog. A common technology remains a special case of our model and is testable econometrically. Our sample, of publicly owned US electric utilities, does not support a common technology for integrated and specialized firms. Our empirical results therefore suggest that assuming a common technology might bias estimates of economies of scale and scope. Thus, how we model the production technology clearly influences the policy conclusions we draw from its characteristics

Unscrambling the eggs: Breaking up consummated mergers and dominant firms

Entrenched dominant firms and anticompetitive consummated mergers pose growing problems for antitrust agencies throughout the world. A lot of thought is being given as to how to address these situations but perhaps the most obvious idea--breaking up such firms—is generally dismissed as impractical, the equivalent of trying to unscramble eggs. We disagree. We show that there have been a substantial number of successful breakups of firms, some in antitrust, more in regulated industries, and even more in the private sectors of the U.S. and U.K. as firms initiate their own restructuring. We believe that a policy of breakups can have a much greater chance at success compared to efforts to regulate such firms through rule-making conduct remedies. And we argue that breaking up such firms is facilitated by the fault lines that reveal the natural break points of these heavily merged firms We recommend that breakups be on the policy menu for competition agencies

How Competitive is the US Manufacturing Sector?

This paper assesses the market structure of the US manufacturing sector using a corrected four-firm concentration ratio. The correction is done to the published 1997 CR, using the North American Industry Classification System, and addresses four areas: overaggregation, underaggregation, market locality, and international trade. The paper finds the US manufacturing sector to be fairly competitive with 58.0 percent of its industries operate in competitive markets, 17.5 percent operate in loose oligopoly, 24.5 percent operate in tight oligopoly, and none operates in monopoly markets. Equally important, this research finds international trade to have an important impact on the level of competition in the manufacturing sector. Eastern Economic Journal (2009) 35, 52–70. doi:10.1057/palgrave.eej.9050043

Automobile quality choice under pollution control regulation

Automobile industry, Quality differentiation, CAFE, Self-selection, Fuel tax, ZEV, R40,

Automobile demand, model cycle and age effects

Model life cycle, Automobile demand, Discrete-choice, Differentiated products, D43,