The role of firm-specific capital in vertical mergers

Article Abstract:

Firm specific capital (FSC) motivates the vertical mergers of businesses. FSC exists when two firms have a relation which is more valuable than they would have with other firms doing the same business transactions. Analysis of residual stock returns shows a correlation with FSC before mergers if the FSC is already in use rather than used after the merger. Samples for analysis included 18 daily cases from 1963 to 1977 and 11 monthly cases from 1953 to 1963.

Acquisitions and mergers, Capital

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Another look at Alcoa: raising rivals' costs does not improve the view

Article Abstract:

The antitrust analysis method that focuses on raising rivals' costs (RRC) is inadequate, as shown by its application to United States v Aluminum Co of America. In fact, the case still stands as an example of an unjust antitrust conviction. Alcoa was found guilty of monopoly in 1945 because it had a large market share. RRC theorists analyzed the case as applicable to bauxite and electricity supply, but Alcoa's position refutes such claims.

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Foreclosure of railroad markets: a test of Chicago leverage theory

Article Abstract:

The Chicago leverage theory of vertical integration and monopolies does not universally hold, as shown by an analysis of railroad markets. The theory claims that a monopoly will prevent effective competition in any other part of a vertical chain, thus inhibiting vertical foreclosure. However, the railroads have competitive benefits even in restricted markets, and policy should foster competition instead of regulation.

Railroads, Criticism and interpretation, Chicago school of economics, Monetarism

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