How Strong Buyers Spur Upstream Innovation

We challenge the view that the presence of powerful buyers stifles suppliers´ incentives to innovate. Following Katz (1987), we model buyer power as buyers´ ability to substitute away from a given supplier and isolate several effects that support the opposite view, namely that the presence of powerful buyers induces a supplier to invest more in cost reduction. In contrast in negotiations with smaller buyers, the outcome of negotiations with large buyers is fully determined by their more valuable alternative supply option. This increases the supplier´s incentives to reduce marginal costs, both as the supplier receives a larger fraction of the thereby generated incremental profits and as this makes buyers´ alternative supply option less valuable. The latter effect is due to downstraem competition between buyers and, as we show, is also stronger the larger and thus the more powerful buyers are

Modern Industrial Economics and Competition Policy: Open Problems and Possible Limits

Naturally, competition policy is based on competition economics made applicable in terms of law and its enforcement. Within the different branches of competition economics, modern industrial economics, or more precisely gametheoretic oligopoly theory, has become the dominating paradigm both in the U.S. (since the 1990s Post-Chicago movement) and in the EU (so-called more economic approach in the 2000s). This contribution reviews the state of the art in antitrust-oriented modern industrial economics and, in particular, critically discusses open questions and possible limits of basing antitrust on modern industrial economics. In doing so, it provides some hints how to escape current enforcement problems in industrial economics-based competition policy on both sides of the Atlantic. In particular, the paper advocates a change of the way modern industrial economics is used in competition policy: instead of more and more case-by-cases analyses, the insights from modern industrial economics should be used to design better competition rules

Mergers, Acquisitions, and Convergence: The Strategic Alliances of Broadcasting, Cable Television, and Telephone Services

Convergence through mergers and acquisitions seems to provide the best opportunity for companies to accelerate the implementation of new technologies and at the same time capture a developed customer base. This article addresses the following research questions: (a) What is the pattern of mergers and acquisitions in the broadcasting, cable TV, and telephone industries after the 1996 ownership deregulation? (b) What are the initial merger and acquisition strategies for broadcasting, cable TV, and telephone companies on the way to convergence? (c) Is the convergence being carried out by internal (within industry) mergers and acquisitions or cross-segment integrated strategic alliances?

A Structural Analysis of Media Convergence: Cross-Industry Mergers and Acquisitions in the Information Industries

This article analyzes structural changes in the information industries including publishing, broadcasting, film, cable, telephony, software and data processing, and the Internet in the era of "convergence" before and after 1996. The cross-industry network structure was mapped using annual data on mergers and acquisitions among information industry firms obtained from the Journal of Mergers and Acquisitions. A comparative network analysis of these ownership transactions indicated that the consolidating structure of information industries after 1996 was affected by both deregulation and digitization, and that telephone corporations played the most central role in the transformation of the information industries. As well, cable and Internet industries noticeably transformed their industrial relations over this time period.