Copyright (c) 2008 All rights reserved. http://works.bepress.com/armin_schmutzler Recent documents in Armin Schmutzler en-us Wed, 02 Apr 2008 19:39:06 PDT 3600 http://works.bepress.com/armin_schmutzler/15 http://works.bepress.com/armin_schmutzler/15 Mon, 14 May 2007 01:44:37 PDT This paper examines the interplay of endogenous vertical integration and cost-reducing downstream investment in successive oligopoly. Analyzing a linear Cournot model, we establish the following key results: (i) Vertical integration increases own investment and decreases competitor investment (intimidation effect). (ii) Asymmetric integration is a non-degenerate equilibrium outcome. (iii) Compared to a benchmark model without investment, complete vertical separation is a less likely outcome. We argue that these findings generalize beyond the linear Cournot model under reasonable assumptions. Armin Schmutzler Industrial Organisation http://works.bepress.com/armin_schmutzler/14 http://works.bepress.com/armin_schmutzler/14 Mon, 14 May 2007 01:39:39 PDT We consider a reduced form model with acquisitions and entry. There are two investors and several small non-investing firms. One investor can acquire a small firm, the other investor decides about market entry. After that all firms play an oligopoly game. We derive conditions under which increasing market concentration arises with myopic firms. We apply the framework to a Cournot model with cost synergies and a Bertrand model where acquisitions extend the product spectrum of a firm. Zava Aydemir Industrial Organisation http://works.bepress.com/armin_schmutzler/13 http://works.bepress.com/armin_schmutzler/13 Mon, 14 May 2007 01:28:22 PDT This paper studies the effects of introducing competition for local passenger railway markets in the German state of Baden-Württemberg. We compare the evolution of the frequency of service on lines that were exposed to competition for the market with lines procured by direct negotiations with the incumbent. Our results suggest that the competitively procured lines enjoyed a stronger growth of the frequency of service than those that were not procured competitively, even after controlling for various line characteristics that might have had an independent influence on the frequency of service. Our results further suggest that the effects of competition may depend strongly on the operator. Armin Schmutzler Network Industries http://works.bepress.com/armin_schmutzler/12 http://works.bepress.com/armin_schmutzler/12 Fri, 11 May 2007 14:28:42 PDT We analyze a two-country model of Foreign Direct Investment (FDI). Two firms, each of which is originally situated in only one of the two countries, first decide whether to build a plant in the foreign country. Then, they decide whether to relocate R&D activities. Finally, they engage in product-market competition. Our main points are: first, FDI liberalization causes a relocation of R&D activities if intrafirm communication is sufficiently well developed, external spillovers are substantial, competition is not too strong and foreign markets are not too small. Second, such a relocation of R&D activities will usually nevertheless increase domestic welfare since it only occurs if intrafirm communication is well developed and therefore knowledge generated and obtained abroad flows back to the domestic country. Third, the potential of R&D offshoring makes FDI itself more likely. Fourth, when countries are asymmetric, the small-country firm is more likely to offshore its R&D activities into the large country than conversely. Hans Gersbach Innovation and Spillovers http://works.bepress.com/armin_schmutzler/11 http://works.bepress.com/armin_schmutzler/11 Fri, 11 May 2007 14:23:25 PDT We develop a product market theory that explains why firms provide their workers with skills that are sufficiently general to be potentially useful for competitors. We consider a model where firms first decide whether to invest in industry-specific human capital, then make wage offers for each others' trained employees and finally engage in imperfect product market competition. Equilibria with and without training, and multiple equilibria can emerge. If competition is sufficiently soft and returns to the number of trained workers decrease sufficiently,firms may invest in non-specific training if others do the same, because they would otherwise suffer a competitive disadvantage or need to pay high wages in order to attract trained workers. Hans Gersbach The Interaction of Product and Labor Markets http://works.bepress.com/armin_schmutzler/10 http://works.bepress.com/armin_schmutzler/10 Fri, 11 May 2007 14:00:10 PDT To examine the impact of globalization on managerial compensation, we consider a matching model where a number of firms compete both in the product market and in the managerial market. We show that globalization, i.e. the simultaneous integration of product markets and managerial pools, leads to an increase in the heterogeneity of managerial salaries. Typically, while the most able managers obtain a wage increase, less able managers are faced with a reduction in wages. Hence our model can explain the increasing heterogeneity of CEO compensation that has been observed in the last few decades. Armin Schmutzler The Interaction of Product and Labor Markets http://works.bepress.com/armin_schmutzler/9 http://works.bepress.com/armin_schmutzler/9 Fri, 11 May 2007 13:55:51 PDT We analyze the effects of competitive intensity on investment behavior in oligopoly games. To this end, we use an experiment based on two-stage games, where cost-reducing investments are followed by either Cournot or Bertrand competition. In the Cournot case, each player's equilibrium investments are higher than the average investments in each of the asymmetric equilibria in the Bertrand case. Nevertheless, the experiment shows that more aggressive interaction, that is, Bertrand competition, leads to greater investment levels, even though this is inefficient. Dario Sacco Experimental Economics http://works.bepress.com/armin_schmutzler/8 http://works.bepress.com/armin_schmutzler/8 Fri, 11 May 2007 13:47:33 PDT In Germany, competitive franchising is increasingly being used to procure passenger railway services that were previously provided by a state monopolist. This paper analyzes the 77 tenders that have taken place since the railway reform in 1994. The tenders differ with respect to the size of the franchise network, the required frequency of service, the duration of the contract and the proximity to other lines that are already run by competitors of DB Regio, a subsidiary of the successor of the former state monopolist. Our analysis shows that larger networks are less likely to be won by the competitors. Also, more recent auctions have been won by competitors more frequently than earlier auctions. Other control variables such as the duration of the contract and the adjacency to other lines run by entrants are insignificant. Armin Schmutzler Industrial Organisation Network Industries http://works.bepress.com/armin_schmutzler/7 http://works.bepress.com/armin_schmutzler/7 Tue, 13 Feb 2007 06:44:56 PST This paper analyzes a model of oligopolistic competition with ongoing investment. Special cases include incremental investment, patent races, learning-by-doing, and network externalities. We investigate circumstances under which a firm with low costs or high quality will extend its initial lead through investments. To this end, we derive a new comparative statics result for general games with strategic substitutes, which yields the desired conditions for our investment game. Finally, we highlight plausible countervailing effects that arise when investments of leaders are less effective than those of laggards, or in dynamic games when firms are sufficiently patient. Susan Athey Industrial Organisation http://works.bepress.com/armin_schmutzler/6 http://works.bepress.com/armin_schmutzler/6 Tue, 13 Feb 2007 06:37:06 PST This article studies several attributes of a firm's long-run decisions about organizational structure, attributes that affect the firm's short-run innovative activity. We focus on flexibility, which lowers the future costs of implementing innovations, and research capabilities, which improve the future opportunities for innovation. We consider two dimensions of innovation: demand-enhancing (product) and cost-reducing (process). These two types of innovation are complementary in terms of increasing the firm's net revenue in the short run. The complementarities between the firm's short-run decision variables then lead to complementarities between its long-run decisions about product and process flexibility and research capabilities. Armin Schmutzler Industrial Organisation