Economics at the Antitrust Division: 2017–2018

This article describes some of the work of Antitrust Division economists over the past year, with a focus on modeling. It begins by illustrating the mapping from evidence to prediction using tools for assessing the effects of mergers using Bertrand, Cournot, and auction models. It then turns to two hot topics in competition policy: the implications of claims of increasing margins for merger enforcement and the validity of claims of increasing concentration. Finally, it considers how mergers affect prices in bargaining models.     

A tool for analysing the interdependence of indoor environmental quality and reported symptoms of the hospitals’ personnel

The working environment and the working conditions can influence the well-being of hospital employees and consequently their performance at work. The present questionnaire-based study (737 valid questionnaires) developed and evaluated a quantitative structural equation model (SEM) that examines the interdependence between the indoor environmental quality (IEQ), the working conditions, the atopic constituents and the reported health complains of employees in three Greek hospitals. The results of the SEM reveal that IEQ could partially explain the employees’ symptoms in the hospitals. The working conditions proved to be a key factor in the relationship between IEQ and symptoms. Multi-group analysis has shown that this interdependence is affected by the building characteristics, by the gender, the smoking habits and the specialty of each participant, but not by their age.     

The economic dimensions of malnutrition in young children

1 billion people - 1/3 of them children under the age of 10 - live on diets that are deficient in essential calories. Focus in this discussion is on the magnitude of the problem. The economic implications of specific intervention programs designed to solve the problem are reviewed. Caloric intake is closely associated with per capita income, and malnutrition characterizes the poorest segments of the population. Since the lowest-income groups have larger families, the incidence of malnutrition among children is certain to be higher than the incidence among adults. 3 factors will determine whether, on the basis of current trends, caloric malnutrition can be expected to be eliminated among the poorest segments of the population of the development countries: 1) the future income growth of the malnourished groups; 2) their propensity to use additional income to increase their caloric consumption; and 3) the future changes in the relative price of the main staples, basically cereals. The problem of malnutrition cannot be resolved quickly enough without explicit measures to raise the level of caloric consumption. Governments can initiate a wide range of programs and policies in an effort to augment the caloric consumption of children in the target population - transfer of cash to target households, target group oriented food programs, and food stamps for certain groups. In order for a food program to have more of an effect on consumption than would an equivalent transfer of income, 2 conditions need to be met: 1) the food must be made available at lower prices and in larger quantities than that previously consumed; and 2) reselling of the food must be precluded. In sum, the only effective solution for dealing with the problem of malnutrition among children of developing countries is either a more equitable distribution of income or supplying the food to the target population at a price far below its normally supply price.     

An empirical investigation of mergers and acquisitions by Chinese listed companies, 1997–2007

We examine 136 M&A deals from 1997 to 2007 initiated by Chinese companies listed on the Shanghai and Shenzhen Stock Exchanges, where the acquirer gains complete control of the target. Our data shows that the Chinese M&A market is dominated by domestic deals with unlisted targets that are either stand-alone private firms or wholly owned subsidiaries. Acquirers experience significant positive abnormal stock returns around the announcement date and over the three years after the acquisition. These results are largely driven by state-owned firms, cash acquirers and firms that acquire related targets. Cross-sectional tests show that announcement period returns are related to the acquirer's ownership status, industry relatedness of the acquirer and target, capital structure changes of the acquirer and the nature of the unlisted target. We find no change in operating performance from the pre to the post acquisition period for the acquirers.     

Oversikt av utländska aktuarietidskrifter

Abstract

Under Makehami's law, life annuities are expressed by incomplete gamma functions.     

YOLO: Mortality Beliefs and Household Finance Puzzles

We study the effect of subjective mortality beliefs on life‐cycle behavior. With new survey evidence, we document that survival is underestimated (overestimated) by the young (old). We calibrate a canonical life‐cycle model to elicited beliefs. Relative to calibrations using actuarial probabilities, the young undersave by 26%, and retirees draw down their assets 27% slower, while the model's fit to consumption data improves by 88%. Cross‐sectional regressions support the model's predictions: Distorted mortality beliefs correlate with savings behavior while controlling for risk preferences, cognitive, and socioeconomic factors. Overweighting the likelihood of rare events contributes to mortality belief distortions.     

Choosing to Cofinance: Analysis of Project-Specific Alliances in the Movie Industry

We use a movie industry project-by-project dataset to analyzethe choice of financing a project internally versus financingit through outside alliances. The results indicate that projectrisk is positively correlated with alliance formation. Moviestudios produce a variety of films and tend to develop theirsafest projects internally. Our findings are consistent withinternal capital market explanations. We find mixed evidenceregarding resource pooling, i.e., sharing the cost of largeprojects. Finally, the evidence shows that projects developedinternally perform similarly to projects developed through outsidealliances.