Issue 2

Volume 9 JOURNAL OF ECONOMICS & MANAGEMENT STRATEGY
Summer 2000

Exercising Market Power in Proprietary Aftermarkets

Severin Borenstein, Jeffrey K. Mackie-Mason and Janet S. Netz
Over 20 recent antitrust cases have turned on whether competition in complex durable-equipment markets prevents manufacturers from exercising market power over proprietary aftermarket products and services. We show that the price in the aftermarket will exceed marginal cost despite competition in the equipment market.

Takeover Waves

Ramon Fauli-Oller
Horizontal takeovers often occur in waves. A sequence of takeovers is obtained in a Cournot setting with cost asymmetries. They are motivated by two different reasons: (1) a low realization of demand increases the profitability of takeovers; (2) takeovers raise the profitability of future takeovers. A possible explanation of merger races is also obtained by showing that firms buying in the first place pay a lower price for their targets.

Vertical Foreclosure, Technological Choice, and Entry on the Intermediate Market

Eric Avenel and Corinne Barlet
This paper analyzes the profitability of vertical integration for an upstream monopoly facing a potential competitor. We show that it depends on the technology used by the firm when it integrates. We distinguish two types of technologies: standard technologies, used by nonintegrated firms, and nonstandard technologies, reserved for integrated firms and implying the complete foreclosure of nonintegrated firms.

Graft, Bribes, and the Practice of Corruption

Juan D. Carrillo
We construct a dynamic model of corruption in organizations where officials privately know their propensity for corruption and clients optimally choose the bribe offered. We show that there is a continuum set of stationary bribe equilibria due exclusively to the dynamic nature of the model and the endogenous determination of bribes.