Research Program on Market Structure and Competition
Program Director: Mark Roberts.
Members: Kalyan Chatterjee, Edward Green, James Jordan, Vijay Krishna, Isabelle Perrigne, Joris Pinkse, James Tybout, Quang Vuong.
Competition policy refers to all aspects of government intervention in the market place. One aspect of this field that is of significant interest to both businesses and policy makers is the use of antitrust policy to spur competition. Our faculty members have been actively involved in the empirical analysis of the effects of firm restructuring through mergers and takeovers. They have developed econometric tools to quantify the effects of mergers and applied them to the study of the food industry. They have also developed models of takeovers that take into account the role of managerial compensation.
A second aspect of competition policy involves the direct regulation of firms pricing, entry, exit, and investment strategies by state or federal government agencies. Traditional concerns focused on the control of pricing to limit the exercise of monopoly power in industries dominated by large economies of scale and few producers. Recent experience with market deregulation in the electric power industry have renewed interest in whether or not utilities should be regulated and which mode of regulation should be adopted. Our faculty have relied on recent models of regulation to develop empirical tools to assess the role and impacts of regulation. They have expertise in the regulation of water utilities, public transit, and postal services. They have undertaken projects to study the productivity impacts of environmental regulation on electric utilities, and the role of government regulation to offset effects of credit rationing by banks on the small business sector.
Our faculty are also involved in a number of empirical projects utilizing micro data that study the entry, exit, growth, investment, and pricing decisions of firms. They have studied how patterns of entry and exit are related to underlying differences in profitability and productivity across firms and how investments in physical capital or R&D, adoption of new technologies, or exposure to the export market can improve firms' competitive standing. These studies cover industries from the United States, South America, and East Asia. The pricing strategies of firms have been investigated by several faculty. They have undertaken studies of the effects of the spatial dispersion of competing firms on pricing patterns in wholesale gasoline markets.