James Dana, Kamran M. Dadkhah
Date of Award
Doctor of Philosophy
Department or Academic Unit
Graduate School of Arts and Sciences. Department of Economics.
Airlines, Antitrust, Economics, Electricity, Public Policy
The effects of mergers, including mergers in the airline industry, have been examined in a number of papers, but none has directly estimated the effect of a merger that eliminates a potential competitor. The first chapter of my dissertation examines this type of mergers by analyzing the 1987 merger of USAir and Piedmont. Comparing several quarters of operation before and after the merger, we find that elimination of a potential competitor permits a 5.0 to 6.0 percent price increase - less than the 9.0 to 10.2 percent increase where they were direct competitors, but important nonetheless. The results of this chapter present the first direct empirical evidence of anticompetitive effects from elimination of potential competition through mergers. This research should help inform the policy debate on potential competition.
The second chapter examines the state of reliability of electric service, and how it was affected by the introduction of incentive regulation. Incentive regulation mechanisms are expected to lower utility costs. However, these mechanisms can have an adverse side effect on quality of service. This chapter examines the effects of incentive regulation plans on frequency and duration of electric outages in the period from 1994 to 2006. The study finds that incentive regulation is associated with deterioration of electric service both in terms of duration of outages and their frequency. The other question that the study asks is whether these adverse effects can be mitigated with the help of quality provisions that bear financial consequences for utilities. The results indicate that quality provisions help to restore the level of reliability in terms of duration of outages. These provisions, however, are not capable of mitigating negative impact of incentive regulation on frequency of outages. By extending the knowledge about the effects of incentive regulation on quality of electric service the results of the research send a note of caution to regulators that consider introduction of incentive regulation.
The third chapter of my dissertation examines the effects of mergers with claims of cost savings on utilities' operating costs. Merging utilities often promise significant cost savings in the documents they present to the state public utilities commissions in order to secure a merger approval. The main task of the research was to examine whether mergers with claims of cost savings have effect on the level of utilities' operating costs. The results indicate that mergers that were expected to result in cost savings did not perform any better in terms of the level of operating costs than mergers that did not claim any savings. The question of whether there are any scale-related effects of mergers is outside the scope of this study. The implication for the public policy from the results of the study is that claims of merger savings should be viewed carefully.
Shumilkina, Evgenia, "Three essays on merger policy and regulatory policy" (2010). Economics Dissertations. Paper 8. http://hdl.handle.net/2047/d20002792
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