2003 – München

Annual Meeting of the Committee for Industrial Economics, 10–11 March, 2003

Topic: Economics of Networks

Sunday, 9 March, 2003

  • from 7.00 pm: Get together at Mövenpick Restaurant at Künstlerhaus

Monday, 10 March, 2003

  • 8.30 - 8.45 am: Welcome
  • 8.45 - 10.00: am Paul Heidhues, "On the Desirability of an Efficiency Defense in Merger Control"

We develop a model in which two firms that have proposed to merge are privately informed about merger-specific efficiencies. This enables the firms to influence the merger control procedure by strategically revealing their information to an antitrust authority. Although the information improves upon the quality of the authority’s decision, the influence activities may be detrimental to welfare if information processing/gathering is excessively costly. Whether this is the case depends on the merger control institution and, in particular, whether it involves an efficiency defense. We derive the optimal institution and provide conditions under which an efficiency defense is desirable. We also discuss the implications for antitrust policy and outline a three-step procedure that takes the influence activities into consideration.
Discussant: Karl Morasch

  • 10.00 - 10.30 am: Coffee
  • 10.30 - 11.45 am: Sabine Böckem, "Transfer Pricing, Hold-Ups, and Double Marginalization in Supply Chains"

We consider the hold-up problem under symmetric information if more than two parties form a "supply chain". We extend option contracts, as suggested by Nöldeke and Schmidt (1995) and fixed-quantitiy contracts, in the sense of Edlin and Reichelstein's (1995, 1996) approach. We show that these extensions yield first-best allocations in supply chains.
Discussant: Klaus Ritzberger

  • 11.45 - 1.00 pm: Knut Blind, "Idiosyncrasies of the Software Development Process and their Relation to Software Patents: Theoretical Considerations and Empirical Evidence"

Discussant: Harald Wiese

  • 1.00 - 2.15 pm: Lunch
  • 2.15 - 3.30 pm: Klaus Gugler, "The Effects of Mergers on Company Employment in the USA and Europe"

We systematically analyse the effects of mergers and acquisitions on the demand for labour in the USA and Europe. We do not find adverse effects of mergers on labour demand in the USA, however we do find negative effects in Europe of the order of –10% compared to pre-merger levels. We attribute this significant difference to more rigid labour markets in Europe than in the USA.

Discussant: Christoph Schmidt

  • 3.30 - 3.45 pm: Coffee
  • 3.45 - 5.00 pm: Roman Inderst, "Buyer Power and Upstream Incentives"

This paper investigates how the formation of larger buyers affects a supplier's profits and, by doing so, his incentives to undertake non-contractible activities. We first identify two channels of buyer power, which allows larger buyers to obtain discounts. We subsequently examine the effects of buyer power on the supplier's incentives and on social welfare. Contrary to some informal claims in the policy debate on buyer power, we find that the exercise of buyer power -even though reducing supplier's profits- may often increase a supplier's incentive to undertake welfare enhancing activities.

Discussant: Ulrich Schwalbe

  • 5.00 - 6.15 pm: Presentation Werner Netzel, Vice President of the Savings Banks Finance Group Bavaria, "Competitiveness of the Savings Banks Finance Group Bavaria"
  • 6.15 - 7.00 pm: General assembly
  • approx. 7 pm: Diner at Restaurant "Altes Hackerhaus"

Tuesday, 11 March, 2003

  • 8.30 - 9.45 am: Martin Peitz, "With a Little Help from my Enemy: Comparative Advertising "

Comparative advertising content differs from generic. We discover that dissipative advertising has consequences depending upon content and cost. Comparison advertising may trigger legal action by rival …rms that are named. In the model an entrant signals its product quality. By a comparative ad the entrant refers to the incumbent’s product. We show that comparison can enhance the signaling potential of dissipative advertising. From the viewpoint of the entrant, the choice of comparative advertising empowers the rival with the option to sue; generic does not. Consumers therefore infer that if the entrant uses comparative instead of generic ads it has a strong case.

Discussant: Christian Wey

  • 9.45 - 11.00 am: Dalia Marin, "Financial Crisis, Economic Recovery and Banking Development in Former Soviet Union Economies"

This paper explains both the onset of the financial crisis in 1998 and the striking economic recovery afterwards in Russia and other Former Soviet Union (FSU) economies. Before the crisis banks do not lend to the real sector of the economy and firms use non-bank finance, including trade credits and barter trade, to finance production. The banking failure arises due to the coexistence of adverse selection in a lemons credit market jointly with high government borrowing. The collapse of the treasury bills market in the financial crisis of August 1998 triggers a change in banks’ lending behavior. A strong economic recovery follows which provides initial conditions for banking development.

Discussant: Norbert Schulz

  • 11.00 - 11.30 am: Coffee
  • 11.30 - 12.45 am: Alexander Karmann , "Measuring and Comparing the (In)Efficiency of German and Swiss Hospitals"

A nonparametric Data Envelopment Analysis (DEA) is performed on hospitals in the federal state of Saxony (Germany) and in Switzerland. This study is of interest from three points of view. First, contrary to most existing work, patient days are not treated as an output but as an input. Second, the usual DEA assumption of a homogeneous sample is tested and rejected for a large part of the observations. The proposed solution is to restrict DEA to comparable observations in the two countries. Finally, hospital beds are treated as a discretionary input in one DEA and as a fixed input in the other, and the effect on efficiency is related to differences in hospital planning in Germany and Switzerland. Based on the comparable observations, hospitals of Saxony have higher efficiency scores than their Swiss counterparts.

Discussant: Oliver Fabel

  • 12.45 am: Conclusion and end of Meeting