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This thesis presents three essays on the motives for mergers and the determinants of U.S. horizontal merger antitrust case selection. These essays contribute to the debate on whether mergers increase social welfare and on the efficiency of antitrust intervention. The first essay explores the market power motive for horizontal mergers by examining the relation between the announcement wealth effects to merging firms and their reliant corporate customers. Large sample studies generally conclude that efficiency considerations drive horizontal mergers and find little market power, which implies a non-negative wealth effect relation between these two parties along the supply chain. When I examine the endogenous stock market reactions to merger announcements with instrumentation, however, my results overturn this inference: I find that greater abnormal returns to merging firms systematically relate to lower abnormal returns to reliant customers. This wealth transfer effect exists for deals in industries with little foreign competition but not for deals in industries with intense foreign competition. These results suggest that increased market power is a key driver of horizontal mergers. In the second essay, I investigate the determinants of U.S. antitrust invention by examining horizontal merger antitrust case selection in the U.S. manufacturing sector during 1980-2009. I find no evidence supporting the consumer protection claim of the government's antitrust agencies. Instead, I find that the likelihood of antitrust intervention is negatively related to foreign import pressure. Hitting a market concentration hurdle criterion also predicts intervention. In addition, industry rivals seem able to exert pressure for antitrust intervention to avoid a competitive disadvantage. I identify two rival groups that account for the demand for antitrust regulation, local rivals and rivals producing less specialised products. The third essay examines the motives for related mergers from the perspective of product market similarity. Using Hoberg and Phillips' (2014) text-based product similarity measure, I find that when an acquirer's product is more similar to those of its rivals, a related merger results in a greater post-merger product price and lower market share for the combined firm. Moreover, for related mergers in more homogenous product markets, the stock market reactions to the merger announcement are higher for the combined firm and for product market rivals, but lower for reliant corporate customers. Overall, the evidence on both product market real performance and stock market reactions is consistent with the wealth transfer effect of related mergers, and suggests that the primary motive for firms to merge with product market competitors is to gain market power rather than to achieve efficiencies.

A criação da Organização dos Países Exportadores de Petróleo (OPEP) foi um marco para o mercado internacional de petróleo. Para a opinião pública a OPEP é um cartel devido aos choques do petróleo ocorridos na década de 1970, porém na literatura econômica não existe consenso sobre a OPEP ser ou não um cartel. Sob a ótica da teoria dos cartéis, esta pesquisa tem como objetivo evidenciar o papel da OPEP e verificar se a mesma exerce poder de mercado, demonstrando aspectos históricos que desencadearam na sua criação e suas principais ações ao longo do tempo. No primeiro artigo, através de uma análise fundamentada na distinção entre os países da OPEP e os Não-OPEP, foram utilizados indicadores sobre o mercado internacional de petróleo, destacando os principais detentores das reservas provadas, os produtores, os consumidores, a evolução dos preços, o comércio internacional, as emissões de CO2 geradas a partir da combustão do combustível fóssil e a ascensão dos biocombustíveis. Os resultados mostraram que a dotação natural é fator determinante na produção e no comércio internacional de petróleo, e que os países membros da OPEP são altamente dependentes das divisas geradas das exportações de petróleo para sustentação de importações de outros bens. Verificou-se que os países da OPEP vêm aumentando seu consumo interno de petróleo, gerando maiores emissões de CO2, o que reforça ainda mais a dependência do petróleo como principal fonte na matriz energética destes países. Neste cenário, os biocombustíveis vêm ganhando espaço principalmente nos países Não-OPEP. A OPEP é uma Organização formada por países, assim seus objetivos vão além da maximização de lucros. Entretanto, as diferenças macroeconômicas entre os membros relacionadas aos diferentes regimes políticos, com objetivos destoantes de curto e de longo prazo, são fatores limitadores na ação coordenada entre os membros. No segundo artigo desta pesquisa, através do modelo estático da Nova Organização Industrial Empírica (New Empirical Industrial Organization - NEIO) foi identificado o grau de poder de mercado no comércio internacional de petróleo no período de janeiro de 2003 até março de 2015. Os resultados mostraram que o mercado internacional de petróleo está distante da estrutura de monopólio ou cartel perfeito, e não são estatisticamente descartadas as hipóteses de competição via Cournot e de competição perfeita. / The establishment of the Organization of Petroleum Exporting Countries (OPEC) was a historic milestone for the international oil market. For the public opinion the OPEC is considered as a cartel due to the oil shocks in the 1970s, but in the economic literature there is no consensus if OPEC really acts as cartel. However, we use the theory of cartels to highlight the role of OPEC and identify if there is market power exercise in the international oil market. We present historical aspects that led in OPEC creation and its main actions over time. In the first chapter, we use an analysis based on the distinction between the OPEC and non-OPEC countries. We identify the main countries which holds proven reserves, the major producers, consumers, the trend of price, the international trade, the CO2 emissions generated by the fossil fuel combustion and the rise of biofuels production. The results indicate that the natural endowment is a key factor to the production and international trade of oil, and OPEC members are highly dependent on oil exports revenue to sustain other goods imports. OPEC countries increased domestic oil consumption, generating more CO2 emissions, which demonstrates the increase of oil dependency in the energy matrix of these countries. According to the current scenario, the biofuels production has increased mainly in non-OPEC countries. OPEC is an organization formed by countries and their goals are not only to maximize profits, and so, OPEC is a political union that has stability over the years. However, macroeconomic differences among members related to different political regimes with different shortterm and long-term goals that are limiting factors for coordinated action. Therefore, according to the theory of the cartel formation and sustainability, OPEC has difficulties to fix prices or quantity on the international oil market, the Organization does not behave like a cartel most of the time. In the second chapter the static model of the New Empirical Industrial Organization (NEIO) is used to identify the degree of market power in the international oil market during the period from January 2003 to March 2015. The results indicated that the international oil market is not characterized by a cartel, but are not statistically rejected the hypothesis of Cournot competition nor perfect competition.

O Brasil se destaca entre os países que mais utilizou das medidas antidumping desde 1988. Modelos teóricos de comércio mais recentes como o de Melitz e Ottaviano (2008) apontam que mercados maiores e mais integrados elevam a produtividade e reduzem o poder de mercado das firmas. Assim, o presente estudo tem como objetivo avaliar o impacto das medidas antidumping sobre a produtividade e o poder de mercado das firmas industriais brasileiras, por meio de um modelo de diferença em diferenças para as variáveis de markup e produtividade total dos fatores. / Brazil stands out among the countries that have most used antidumping measures since 1988. Recent theoretical models of commerce such as Melitz e Ottaviano (2008) point out that larger and more integrated markets raise productivity and reduce the market power of firms. Thus, the present study aims to evaluate the impact of antidumping measures on the productivity and market power of Brazilian industrial firms, through a difference-in-difference model for the markup and total factor productivity variables.

A criação da Organização dos Países Exportadores de Petróleo (OPEP) foi um marco para o mercado internacional de petróleo. Para a opinião pública a OPEP é um cartel devido aos choques do petróleo ocorridos na década de 1970, porém na literatura econômica não existe consenso sobre a OPEP ser ou não um cartel. Sob a ótica da teoria dos cartéis, esta pesquisa tem como objetivo evidenciar o papel da OPEP e verificar se a mesma exerce poder de mercado, demonstrando aspectos históricos que desencadearam na sua criação e suas principais ações ao longo do tempo. No primeiro artigo, através de uma análise fundamentada na distinção entre os países da OPEP e os Não-OPEP, foram utilizados indicadores sobre o mercado internacional de petróleo, destacando os principais detentores das reservas provadas, os produtores, os consumidores, a evolução dos preços, o comércio internacional, as emissões de CO2 geradas a partir da combustão do combustível fóssil e a ascensão dos biocombustíveis. Os resultados mostraram que a dotação natural é fator determinante na produção e no comércio internacional de petróleo, e que os países membros da OPEP são altamente dependentes das divisas geradas das exportações de petróleo para sustentação de importações de outros bens. Verificou-se que os países da OPEP vêm aumentando seu consumo interno de petróleo, gerando maiores emissões de CO2, o que reforça ainda mais a dependência do petróleo como principal fonte na matriz energética destes países. Neste cenário, os biocombustíveis vêm ganhando espaço principalmente nos países Não-OPEP. A OPEP é uma Organização formada por países, assim seus objetivos vão além da maximização de lucros. Entretanto, as diferenças macroeconômicas entre os membros relacionadas aos diferentes regimes políticos, com objetivos destoantes de curto e de longo prazo, são fatores limitadores na ação coordenada entre os membros. No segundo artigo desta pesquisa, através do modelo estático da Nova Organização Industrial Empírica (New Empirical Industrial Organization - NEIO) foi identificado o grau de poder de mercado no comércio internacional de petróleo no período de janeiro de 2003 até março de 2015. Os resultados mostraram que o mercado internacional de petróleo está distante da estrutura de monopólio ou cartel perfeito, e não são estatisticamente descartadas as hipóteses de competição via Cournot e de competição perfeita. / The establishment of the Organization of Petroleum Exporting Countries (OPEC) was a historic milestone for the international oil market. For the public opinion the OPEC is considered as a cartel due to the oil shocks in the 1970s, but in the economic literature there is no consensus if OPEC really acts as cartel. However, we use the theory of cartels to highlight the role of OPEC and identify if there is market power exercise in the international oil market. We present historical aspects that led in OPEC creation and its main actions over time. In the first chapter, we use an analysis based on the distinction between the OPEC and non-OPEC countries. We identify the main countries which holds proven reserves, the major producers, consumers, the trend of price, the international trade, the CO2 emissions generated by the fossil fuel combustion and the rise of biofuels production. The results indicate that the natural endowment is a key factor to the production and international trade of oil, and OPEC members are highly dependent on oil exports revenue to sustain other goods imports. OPEC countries increased domestic oil consumption, generating more CO2 emissions, which demonstrates the increase of oil dependency in the energy matrix of these countries. According to the current scenario, the biofuels production has increased mainly in non-OPEC countries. OPEC is an organization formed by countries and their goals are not only to maximize profits, and so, OPEC is a political union that has stability over the years. However, macroeconomic differences among members related to different political regimes with different shortterm and long-term goals that are limiting factors for coordinated action. Therefore, according to the theory of the cartel formation and sustainability, OPEC has difficulties to fix prices or quantity on the international oil market, the Organization does not behave like a cartel most of the time. In the second chapter the static model of the New Empirical Industrial Organization (NEIO) is used to identify the degree of market power in the international oil market during the period from January 2003 to March 2015. The results indicated that the international oil market is not characterized by a cartel, but are not statistically rejected the hypothesis of Cournot competition nor perfect competition.

Doctor of Philosophy / The apparent increase in market concentration and vertical integration in the Indonesian crude palm oil (CPO) industry has led to concerns about the presence of market power. For the Indonesian CPO industry, such concerns attract more attention because of the importance of this sector to the Indonesian economy. CPO is used as the main raw material for cooking oil (which is an essential commodity in Indonesia) and it contributes significantly to export earnings and employment. However, dominant producers argue that the increase in economies of scale and scope lead to an increase in the efficiency, which eventually will be beneficial for the end consumers and export earnings. This research seeks to examine whether the dominant producers do behave competitively and pass the efficiency gains to the end consumers, or they enhance inefficiency through market power instead. In order to identify the most suitable model to measure market power in the Indonesian CPO industry, different market power models are explored. These models can be divided into static and dynamic models. In general, all of them accept the price–cost margins as a measure of market power. However, static models fail to reveal the dynamic behaviour that determines market power; hence the dynamic models are likely to be more appropriate to modelling market power. Among these dynamic models, the adjustment model with a linear quadratic specification is considered to be a more appropriate model to measure market power in the Indonesian CPO industry. In the Indonesian CPO industry, producers can be divided into three groups, namely the public estates, private companies and smallholders. However, based on their ability to influence market price, smallholders are not considered as one of the dominant groups. By using the adjustment cost model, the market power of the dominant groups is estimated. The model is estimated using a Bayesian technique annual data spanning 1968–2003. The public estates and private companies are assumed to engage in a noncooperative game. They are assumed to use Markovian strategies, which permit firms to respond to changes in the state vector. In this case, the vector comprises the firms and their rivals’ previous action, implying that firms respond to changes in their rivals’ previous action. The key contribution of this thesis is the relaxation of the symmetry assumption in the estimation process. Although the existence of an asymmetric condition often complicates the estimation process, the different characteristics of the public estates and private companies lead to a need for relaxing such an assumption. In addition, the adjustment system—which can be seen as a type of reaction function—is not restricted to have downward slopes. Negative reaction functions are commonly assumed for a quantity setting game. However, the reverse may occur in particular circumstances. Without such restrictions, the analysis could reveal the type of interaction between the public estates and private companies. In addition, it provides insights into empirical examples of conditions that might lead to the positive reaction function. Furthermore, the analysis adds to the understanding of the impact of positive reaction functions to avoid the complicated estimation of the asymmetric case. As expected, the public estates act as the leader, while the private companies are the follower. Interestingly, results indicate that as well as the private companies, public estates do exert some degree of market power. Moreover, the public estates enjoy even higher market power than the private companies, as indicated by market power indices of -0.46 and -0.72, respectively. The exertion of market power by both the public estates and the private companies cast some doubts about the effectiveness of some current policies in the Indonesian CPO industry. With market power, the underlying assumption of a perfectly competitive market condition—that serves as the basis for the government interventions—is no longer applicable. Hence, many government interventions are unlikely to have the desired effect. The Indonesian competition law that has been imposed since 1999 might be effective in preventing firms to sign collusive contracts. In fact, even without such an agreement, firms in the CPO industry are likely to exert some degree of market power. As an alternative, eliminating the ‘sources’ of market power might be a better solution. If the public estates have the aim of maximising welfare, privatisation might improve their efficiency, hence they have ability to suppress the private companies’ market power. However, if in fact, the public estates deliberately reduce output to gain higher profit, privatisation might increase the degree of market power of both groups of companies even further. In such a condition, addressing the long term barriers of entry stemming from the requirement of high investment might be a better alternative to address the market power problem in the CPO industry.

This thesis consists of four self-contained papers related to the Nordic electricity market. Paper [I] examine how the reform of the Nordic electricity markets has affected competition in the electric power supply market, Nord Pool. The question is if the common power market has been competitive or if electric power generators have had market power during the period 1996 -2004. Moreover, since there was a stepwise evolution from national markets to a multinational power market, we also ask how the degree of market power has evolved during this integration process. The results show that electric power generators have had a small, but statistically significant, degree of market power during the whole period.  However, studying the integration effect, i.e. how the market power has been affected by additional countries joining Nord Pool, it show that the degree of market power has been reduced and finally vanished as the market has expanded and more countries joined the collaboration. Paper [II] analyse how the deregulation of the Swedish electricity market has affected the price of electric power and how the change in electric power price, in turn, has affected consumers’ welfare. The result shows that the change in pricing principle of electric power following the deregulation has increased consumer welfare over the period studied (1996-2006), with welfare gains about 100 SEK per customer per year, indicating a three per cent welfare gain for the average customer. Paper [III] study whether (and to what extent) the multinational electricity market integration has affected the price dynamics at the Nordic power exchange. The results shows that a larger electricity market seems to reduce the probability of sudden price jumps, but also that the effect on volatility seem to depend on the characteristics, i.e. production structure, of the integrated markets. In Paper [IV] a two-stage study is conducted to investigate the extent to which shocks in the demand and supply for electricity translate into price jumps, and the extent to which this process is affected by the prevailing market structure. The main findings from the study is that whether demand and supply shocks translate into price jumps largely depends on the prevailing market structure, i.e. on how far the market works from capacity constraints. A notable feature of the empirical analysis is also that the marginal effects from positive demand and negative supply shocks on the jump probabilities are mostly insignificant and of small magnitude.

This thesis examines how industry differences affect both corporate financial policies and valuation. Chapter 1 studies the impact of a firm‟s product market power, through the channel of business risk, on its dividend policy. Using three measures of market power – the Herfindahl-Hirschman index, the degree of import competition and the Lerner Index, I find that market power positively affects a firm‟s dividend decision, both in terms of the probability of paying a dividend and the amount of the dividend. I also provide evidence that the route through which market power affects the dividend decision is business risk: a firm with greater market power is less risky and hence more likely to pay dividends and pay more dividends. Chapter 2 examines industry differences on the level of corporate cash holdings since the 1970s with a focus on high-tech versus non-high-tech firms. In contrast to the average cash-to-assets ratio of non-high-tech firms, which remained stable at a level close to that of the 1970s, the average cash ratio of high-tech firms more than tripled from 1980 to 2007. I find that this difference can be explained by changing firm characteristics across these two industrial sectors. This is due to high-tech new listings, whose changing characteristics and increasing proportion have caused the population characteristics of the high-tech sector to tilt toward those typical of firms that hold more cash. Chapter 3 investigates the industry impact on the marginal value of corporate cash holdings and how it has evolved over time. I find that on average the difference in the marginal value of cash between high-tech and non-high-tech firms has become larger during the sub-period which covers the 1990s and 2000s, as compared to earlier time periods. Furthermore, I show that this increase can be explained by changing firm characteristics related to the precautionary demand for holding cash. Overall, this thesis shows that industry differences, represented by varying degrees of market power and changing firm characteristics, have significantly affected corporate financial policies, both in terms of dividend policy and optimal cash holdings.

This thesis examines how industry differences affect both corporate financial policies and valuation. Chapter 1 studies the impact of a firm‟s product market power, through the channel of business risk, on its dividend policy. Using three measures of market power – the Herfindahl-Hirschman index, the degree of import competition and the Lerner Index, I find that market power positively affects a firm‟s dividend decision, both in terms of the probability of paying a dividend and the amount of the dividend. I also provide evidence that the route through which market power affects the dividend decision is business risk: a firm with greater market power is less risky and hence more likely to pay dividends and pay more dividends. Chapter 2 examines industry differences on the level of corporate cash holdings since the 1970s with a focus on high-tech versus non-high-tech firms. In contrast to the average cash-to-assets ratio of non-high-tech firms, which remained stable at a level close to that of the 1970s, the average cash ratio of high-tech firms more than tripled from 1980 to 2007. I find that this difference can be explained by changing firm characteristics across these two industrial sectors. This is due to high-tech new listings, whose changing characteristics and increasing proportion have caused the population characteristics of the high-tech sector to tilt toward those typical of firms that hold more cash. Chapter 3 investigates the industry impact on the marginal value of corporate cash holdings and how it has evolved over time. I find that on average the difference in the marginal value of cash between high-tech and non-high-tech firms has become larger during the sub-period which covers the 1990s and 2000s, as compared to earlier time periods. Furthermore, I show that this increase can be explained by changing firm characteristics related to the precautionary demand for holding cash. Overall, this thesis shows that industry differences, represented by varying degrees of market power and changing firm characteristics, have significantly affected corporate financial policies, both in terms of dividend policy and optimal cash holdings.

In this dissertation, I investigate hub carriers' competitive advantage in directional markets within their hub and spoke networks. In the first chapter, I examine whether the competitive advantage of hub carriers in attracting hub-to-spoke passengers relative to spoke-to-hub passengers affects rivals' entry decisions in a symmetric way. The hub carrier advantage in attracting passengers at its concentrated hub airport creates an environment in which variation in the composition of demand in hub-to-spoke markets affects entry in a profoundly different way than demand variation in spoke-to-hub markets. In the second chapter, I examine hub carrier fares and price-cost margins in hub and spoke airport pairs. Exploiting variation across airport-pairs, I find that an increase in the proportion of business travelers in hub-to-spoke markets increases fares in these markets, while an increase in the proportion of business travelers in spoke-to-hub markets decreases fares. This result is consistent with the structural asymmetries found in the first chapter. However, the source of these concentration advantages remains ambiguous. These advantages could be due to cost benefits, demand effects, or market power. Exploiting the variation between hub-to-spoke and spoke-to-hub markets within airport pairs isolates the market power effect on fares. I find that difference in hub carrier airport shares explains most of the variation in its hub-to-spoke and spoke-to-hub price-cost margins. Unobserved quality and cost heterogeneity do not bias the result. In the final chapter we look at the relationship between market power and price discrimination. In the presence of price discrimination, at least one price does not equal marginal cost. Therefore, if price discrimination exists, there must be market power. While this logic is sound, it has led many policymakers to believe that price discrimination and market power are positively correlated. We present a model where measured price-discrimination can be low while market power is high and price discrimination can be high while market power is low, thus demonstrating that there is no theoretical connection between the strength of price discrimination and that of market power. We then present new evidence that price discrimination is negatively correlated with market power in the US airlines industry. / text