European Air Transport — Uncabin the Consumer

The deregulation of air routes between London and Dublin has brought travellers the benefits of competition; and, hardly surprisingly, as prices have fallen the numbers making the journey have increased. Sean Barrett, Lecturer in Economics, and Mark Purdy of Trinity College, Dublin, compare the effects of liberalisation with those of the restricted entry to the European air transport market. How long, they ask, will the European consumer be denied similar benefits?     

Economies of scale after deregulation in LTL trucking: a test case for the survivor technique

Early critics of motor carrier deregulation believed that the policy was unwise because strong economies of scale would lead to harmful market concentration, particularly in the industry's LTL segment. Using two methodologies, the survivor technique and the trans‐log cost function, this study finds that economies of scale do extend across the entire spectrum of firm sizes in LTL trucking. Long‐run average cost appears to decline mildly and at a diminishing rate with increases in firm size, however, such that any cost advantage for larger firms has been insufficient to eliminate new entry and competition from smaller rivals. As a result, after the first 20 years of deregulation, the corresponding increase in market concentration has also been mild. Moreover, the consistency of results from the two methodologies gives credibility to the survivor technique as an empirical method of identifying economies of scale. Copyright © 2008 John Wiley & Sons, Ltd.     

A STRATEGIC PERSPECTIVE OF BANK FINANCIAL CONGLOMERATES IN LONDON AFTER THE CRASH

The deregulation of financial markets has led to severe challenges for bank management and banking strategy. Investment banking is a sector that has experienced important and well-publicized changes. London's celebrated ‘Big Bang’ helped to stimulate new banking strategies that were characterized by the formation of so-called ‘bank financial conglomerates’. The October 1987 stock market crash, however, has precipitated strategic and organizational crises for many of these banks active in securities business and capital market products. This article re-examines investment banking strategies in London and some of the lessons associated with the crash experiences.     

Entry deterrence under financial intermediation with private information and hidden contracts

We study how financial intermediation affects market entry when an incumbent monopolist enters into non-public, short-term contracts for outside funds. Financial intermediation serves as a commitment device to avoid costly signalling, but at the same time leads to strategic experimentation by the bank. Without public commitment to the financial contract, signal-jamming affects the bank's strategic experiment. Unlike the previous literature on signalling and signal-jamming in entry deterrence in which entry is unaffected or its change indeterminate, the altered strategic experiment has the effect of increasing the amount of entry to the market. Received: 19 January 2004, Accepted: 18 May 2005 JEL Classification: C73, D8, L1 We thank Markus Daniel, Spiros Bougheas, James Peck, Tony Creane, two anonymous referees, the associate editor and seminar participants at the Wissenschaftszentrum Berlin, Emory, Ohio State, and Royal Holloway Universities and the Universities of Wisconsin, Nottingham and East Anglia, as well as Matt Jackson for editorial assistance.     

Facilitating and inhibiting factors behind strategic change: Evidence in the Spanish private banking industry, 1983–1997

This research explores the main facilitating and inhibiting factors behind strategic change in a single-industry context characterized by substantial environmental turbulence. Based on a dynamic and additive framework which includes theoretical arguments from the traditional strategic management and ecological approaches and an extensive review of several key empirical studies on the antecedents of strategic change, our study captures the cumulative effect of certain external and internal factors for and against strategic change. The results indicate that strategic change has been a frequent event in the chosen industry context. In this setting, the main facilitating factors behind strategic change have been linked to certain factors in the external context (environmental events linked to deregulation process and density) and in the internal context (CEO succession and tenure). But, alternatively, it can also be observed how other factors from both the external context (other environmental events associated with the liberalization process and industry concentration) and from the internal context (size) have acted as potential forces inhibiting the strategic transformation process experienced by most of the firms examined. We conclude by discussing the possible use of our framework in future research, with a view to further extending our understanding of potential antecedents of strategic change.     

Will a matchmaker invite her potential rival in?

This paper analyzes optimal strategies of an incumbent intermediary, who matches agents on the two sides of a market, in the presence of entry threat under alternative scenarios. It shows that, when entry is free, strategic entry accommodation is the optimal choice of the incumbent—not entry deterrence, unless the variation in agents' types is small. Entry accommodation remains optimal for the incumbent for a wide range of parametric configurations even when there is a fixed cost of entry. These results are in sharp contrast to the predictions of existing models of entry.     

INTER‐CITY BUS SERVICES IN CANADA – TIME FOR DEREGULATION

The regulatory framework for inter‐city bus operators in Canada is facing multiple challenges with regard to productivity, consumer satisfaction and cost controls. In spite of government reports calling for deregulation, there has been little action by provincial governments to deregulate entry and pricing. As a result, Canadians are paying higher fares and service quality is lower than in the more deregulated markets of the United Kingdom and the United States.     

Regional deregulation and entrepreneurial growth in China's transition economy

Despite a less favourable national institutional environment, the private entrepreneurial sector has developed rapidly in China's transition economy. To resolve this puzzle, this study argues that regional deregulation plays a significant role in China's entrepreneurial growth because it stimulates free markets and lifts predatory and discriminatory regulatory policies affecting entrepreneurship. I use provincial-level panel data (1998–2003) for hypothesis testing. The results, based on fixed effects estimation, suggest that deregulation indeed has a significantly positive effect on entrepreneurial growth within regions. In addition, this effect is found to be stronger in earlier years, as well as among less developed, inland regions.     

THE SUSTAINED IMPACTS OF TAXI DEREGULATION

The Irish High Court decision in 2000 to deregulate entry to the taxi sector brought a large increase in taxi numbers and reduced waiting times for customers. These developments were sustained through to 2008 with increased output and reduced waiting times. In view of these lasting successes, arguments that taxi deregulation is unwise and unsustainable are examined.     

STRATEGIC ENTRY DETERRENCE: RECENT DEVELOPMENTS IN THE ECONOMICS OF INDUSTRY

Abstract. This paper reviews the recent developments in the economics of industry with respect to strategic entry deterrence. Starting from Bain's (1956) classical analysis, a simple two-stage game between an incumbent firm and a potential entrant is used to present the general structure of the entry deterrence problem. Commitments, credible threat and sub-game perfection are illustrated in this context. The various strategic variables that an incumbent firm can use to bar entry are discussed. The issue of whether a group of incumbents can non-cooperatively deter entry is taken up and some empirical evidence is reviewed.     

The distributive and welfare effects of product and labour market deregulation

This paper studies the effects of product and labour market deregulation on wage inequality and welfare. By constructing an analytically tractable model in which the level of product market competition and the wages are endogenously distributed among sectors, I show that deregulation in goods market has mixed effects on inequality: the wage variance and the Gini index are lower, but the ratio of the highest over the lowest wage paid in the economy increases. Moreover, deregulation in labour markets raises the aggregate level of employment and the average real wage but reduces the welfare of trade unions in sectors with a low level of competition.     

Diversificationas a Strategic Preemptive Weapon

This article examines the role that multimarket operations play in a firm's ability to preempt entry into new markets when presence in a market does not commit the firm to remain there. Success in one market affects a firm's incentives and, in turn, strategic power, to fight a rival fur survival in a related market. This is modeled as a way of attrition, and the risk-dominant equilibrium is derived. The model supports brand proliferation as a credible preemptive strategy for an established firm and also has implications regarding the strategic role of economies of scope and "deep pockets."     

会计师事务所的进入、退出与审计市场的竞争

本文主要从进入、退出的角度研究审计市场的竞争。本文的分析表明,审计市场的市场占有率变动率更为合理地衡量市场的动态变化,审计市场的进入壁垒主要是准入壁垒(管制壁垒),而结构性壁垒和流动性壁垒主要存在于大客户市场,对于小客户市场的影响作用很小。为了防止进入者的进入,在位者通过各种流动性壁垒的设置以提高进入者的成本。但从总体看,审计市场仍然是高度竞争的。     

The effect of enhanced competition on the equity values of the regional bell operating companies

Recent developments in the telecommunications industry have increased the likelihood that the Regional Bell Operating Companies (RBOCs) will face new competition in the market for local telephone services. These developments include (1) regulatory decisions by the Federal Communications Commission (FCC) to facilitate competitive entry or the application of new technologies (e.g. personal communications services) to the local communications market, and (2) strategic decisions by AT&T, MCI Communications, and Time-Warner to enter the local communications market. The entry of new firms is expected to reduce the cash flows of the RBOCs. Using the event study methodology, this paper examines the announcement effects of several of these developments on the values of the RBOCs. Collectively, the announcements are associated with a significant decline in the aggregate value of the RBOCs.     

Are Sunk Costs a Barrier to Entry?

The received wisdom is that sunk costs create a barrier to entry—if entry fails, then the entrant, unable to recover sunk costs, incurs greater losses. In a strategic context where an incumbent may prey on the entrant, sunk entry costs have a countervailing effect: they may effectively commit the entrant to stay in the market. By providing the entrant with commitment power, sunk investments may soften the reactions of incumbents. The net effect may imply that entry is more profitable when sunk costs are greater.     

The role of productive efficiency on entry and post‐entry performance under different strategic orientation: the case of the Greek plastics and rubber industry

The present study formulates and empirically tests the hypothesis that the post‐entry performance and growth of new firms is affected by the way in which crucial resources are combined during the decision‐making process to enter the industry or not. Further, the study empirically tests the hypothesis that multifaceted productive efficiency influences both the entry decision and the entrants' post‐entry performance. The proposed analytical framework allows for testing these hypotheses under different strategic orientations assumed to be followed by entrants. Results of the estimated partial observability model provide support to these hypotheses in almost all of the examined cases. Copyright © 2008 John Wiley & Sons, Ltd.     

Market reforms in the time of imbalance

We study the consequences of product and labor market reforms in a two-country model with endogenous producer entry and labor market frictions. We focus on the role of business cycle conditions and external constraints at the time of reform implementation (or of a credible commitment to it) in shaping the dynamic effects of such policies. Product market reform is modeled as a reduction in entry costs and takes place in a non-traded sector that produces services used as input in manufacturing production. Labor market reform is modeled as a reduction in firing costs and/or unemployment benefits. We find that business cycle conditions at the time of deregulation significantly affect adjustment. A reduction of firing costs entails larger and more persistent adverse short-run effects on employment and output when implemented in a recession. By contrast, a reduction in unemployment benefits boosts employment and output by more in a recession compared to normal times. The impact of product market reforms is less sensitive to business cycle conditions. Credible announcements about future reforms induce sizable short-run dynamics, regardless of whether the announcement takes place in normal times or during an economic downturn. Whether the immediate effect is expansionary or contractionary varies across reforms. Finally, lack of access to international lending in the wake of reform can amplify the costs of adjustment.     

Potential competition and quality disclosure

This study presents a model of quality disclosure in which an incumbent, through its quality and disclosure choices, influences the potential that a new entrant enters the market. In this regard, we consider a sequential framework in which the incumbent chooses its quality and decides whether to disclose it to the market; subsequently, the entrant makes the same decisions, if it enters the market. We show that the potential competition can create strategic incentives for the incumbent to choose nondisclosure, because the availability of information about the incumbent's quality promotes entry by enhancing the entrant's expected profit from the market. In addition, an analysis of the effects of mandatory disclosure laws suggests that they can be effective in encouraging new market entrants and in improving the product quality of established firms.     

云南水电企业国际化进入战略模式研究

面对经济全球化的挑战,伴随我国经济发展水平的不断提升和企业资金技术实力的不断增强,国际化经营已成为企业未来发展的必然战略选择。本文分析了云南水电企业国际化发展的理论基础,并对云南水电企业国际化进入战略模式进行了深入探讨。     

Strategic Choices at Entry and Relative Survival Advantage of Cooperatives versus Corporations in the US Bio‐Ethanol Industry, 1978‐2015

The sustainability of cooperatives versus corporations is hotly contested. We propose that strategic choices at entry can help to explain the endurance of these two governance modes. We hypothesize that cooperatives have a survival advantage if their major drawback – high coordination costs – is curbed by high levels of member engagement at founding. Our analysis of survival rates in the US bio‐ethanol industry shows that cooperatives outlive corporations (1) if investment size at founding is large (strong financial engagement), (2) if they enter de novo instead of de alio (strong product‐market engagement) and (3) if the cooperative venture has been carefully planned from the start (greenfield entry) instead of built upon the acquisition of an existing plant (strong venture‐building engagement). These findings caution against the view that a particular mode of governance is superior or inferior to another in all circumstances.