IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

Mergers, coordinated effects and efficiency in the Portuguese non-life insurance industry

  • Brito, Duarte
  • Pereira, Pedro
  • Ramalho, Joaquim J.S.

We evaluate the impact on market power and efficiency of a series of mergers on three Portuguese non-life insurance markets. We specify and estimate, with a panel of firm-level data, a structural model which includes: preferences, technology, and a market equilibrium condition. Firms' demand curves are not very elastic. Firms' technologies exhibit scale and scope economies and high cost efficiency scores. We find that, for the period following the mergers, there is no evidence of: (i) an increase in market power through coordinated behavior, or (ii) changes in cost efficiency levels. In addition, social welfare increased.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.sciencedirect.com/science/article/pii/S0167718713000908
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by Elsevier in its journal International Journal of Industrial Organization.

Volume (Year): 31 (2013)
Issue (Month): 5 ()
Pages: 554-568

as
in new window

Handle: RePEc:eee:indorg:v:31:y:2013:i:5:p:554-568
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505551

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Paola Sapienza, 2002. "The Effects of Banking Mergers on Loan Contracts," Journal of Finance, American Finance Association, vol. 57(1), pages 329-367, 02.
  2. Dario Focarelli & Fabio Panetta, 2003. "Are Mergers Beneficial to Consumers? Evidence from the Market for Bank Deposits," American Economic Review, American Economic Association, vol. 93(4), pages 1152-1172, September.
  3. Matthew C. Weinberg, 2011. "More Evidence on the Performance of Merger Simulations," American Economic Review, American Economic Association, vol. 101(3), pages 51-55, May.
  4. Prager, Robin A & Hannan, Timothy H, 1998. "Do Substantial Horizontal Mergers Generate Significant Price Effects? Evidence from the Banking Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 46(4), pages 433-52, December.
  5. Kleibergen, F.R. & Paap, R., 2003. "Generalized Reduced Rank Tests using the Singular Value Decomposition," Econometric Institute Research Papers EI 2003-01, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
  6. Bresnahan, Timothy F, 1987. "Competition and Collusion in the American Automobile Industry: The 1955 Price War," Journal of Industrial Economics, Wiley Blackwell, vol. 35(4), pages 457-82, June.
  7. J. David Cummins & Sharon Tennyson & Mary A. Weiss, 1998. "Consolidation and Efficiency in the U.S. Life Insurance Industry," Center for Financial Institutions Working Papers 98-08, Wharton School Center for Financial Institutions, University of Pennsylvania.
  8. Aviv Nevo, 2000. "Mergers with Differentiated Products: The Case of the Ready-to-Eat Cereal Industry," RAND Journal of Economics, The RAND Corporation, vol. 31(3), pages 395-421, Autumn.
  9. Cummins, J. David & Xie, Xiaoying, 2008. "Mergers and acquisitions in the US property-liability insurance industry: Productivity and efficiency effects," Journal of Banking & Finance, Elsevier, vol. 32(1), pages 30-55, January.
  10. Steven T. Berry, 1994. "Estimating Discrete-Choice Models of Product Differentiation," RAND Journal of Economics, The RAND Corporation, vol. 25(2), pages 242-262, Summer.
  11. Kim, E Han & Singal, Vijay, 1993. "Mergers and Market Power: Evidence from the Airline Industry," American Economic Review, American Economic Association, vol. 83(3), pages 549-69, June.
  12. Elena Argentesi & Lapo Filistrucchi, 2007. "Estimating market power in a two-sided market: The case of newspapers," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 22(7), pages 1247-1266.
  13. Amel, Dean & Barnes, Colleen & Panetta, Fabio & Salleo, Carmelo, 2004. "Consolidation and efficiency in the financial sector: A review of the international evidence," Journal of Banking & Finance, Elsevier, vol. 28(10), pages 2493-2519, October.
  14. Aviv Nevo, 2003. "Measuring Market Power in the Ready-to-Eat Cereal Industry," Microeconomics 0303006, EconWPA.
  15. Vita, Michael G & Sacher, Seth, 2001. "The Competitive Effects of Not-for-Profit Hospital Mergers: A Case Study," Journal of Industrial Economics, Wiley Blackwell, vol. 49(1), pages 63-84, March.
  16. Caplin, A. & Nalebuff, B., 1989. "Aggregation And Imperfect Competition: On The Existence Of Equilibrium," Discussion Papers 1989_30, Columbia University, Department of Economics.
  17. Pedro Pereira & Tiago Ribeiro, 2006. "The Impact on Broadband Access to the Internet of the Dual Ownership of Telephone and Cable Networks," Working Papers 17, Portuguese Competition Authority.
  18. Carlos Pestana Barros & Nazar� Barroso & Maria Rosa Borges, 2005. "Evaluating the Efficiency and Productivity of Insurance Companies with a Malmquist Index: A Case Study for Portugal," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan, vol. 30(2), pages 244-267, April.
  19. Cummins, J. David & Rubio-Misas, Maria, 2006. "Deregulation, Consolidation, and Efficiency: Evidence from the Spanish Insurance Industry," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 38(2), pages 323-355, March.
  20. F. Fecher & D. Kessler & S. Perelman & P. Pestieau, 1993. "Productive performance of the French insurance industry," Journal of Productivity Analysis, Springer, vol. 4(1), pages 77-93, June.
  21. John Simpson & Christopher Taylor, 2008. "Do Gasoline Mergers Affect Consumer Prices? The Marathon Ashland Petroleum and Ultramar Diamond Shamrock Transaction," Journal of Law and Economics, University of Chicago Press, vol. 51(1), pages 135-152, 02.
  22. Karl C. Ennsfellner & Danielle Lewis & Randy I. Anderson, 2004. "Production Efficiency in the Austrian Insurance Industry: A Bayesian Examination," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 71(1), pages 135-159.
  23. Small, Kenneth A & Rosen, Harvey S, 1981. "Applied Welfare Economics with Discrete Choice Models," Econometrica, Econometric Society, vol. 49(1), pages 105-30, January.
  24. Bernhard Mahlberg & Thomas Url, . "Effects of the Single Market on the Austrian Insurance Industry," WIFO Working Papers 97, WIFO.
  25. Kumbhakar, Subal C & Ghosh, Soumendra & McGuckin, J Thomas, 1991. "A Generalized Production Frontier Approach for Estimating Determinants of Inefficiency in U.S. Dairy Farms," Journal of Business & Economic Statistics, American Statistical Association, vol. 9(3), pages 279-86, July.
  26. Slade, Margaret E, 1998. "Beer and the Tie: Did Divestiture of Brewer-Owned Public Houses Lead to Higher Beer Prices?," Economic Journal, Royal Economic Society, vol. 108(448), pages 565-602, May.
  27. Bresnahan, Timothy F., 1989. "Empirical studies of industries with market power," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 2, chapter 17, pages 1011-1057 Elsevier.
  28. Barros, Pedro P, 1996. "Competition Effects of Price Liberalization in Insurance," Journal of Industrial Economics, Wiley Blackwell, vol. 44(3), pages 267-87, September.
  29. J. David Cummins & Giuseppe Turchetti, 1996. "Productivity and Technical Efficiency in the Italian Insurance Industry," Center for Financial Institutions Working Papers 96-10, Wharton School Center for Financial Institutions, University of Pennsylvania.
  30. Fenn, Paul & Vencappa, Dev & Diacon, Stephen & Klumpes, Paul & O'Brien, Chris, 2008. "Market structure and the efficiency of European insurance companies: A stochastic frontier analysis," Journal of Banking & Finance, Elsevier, vol. 32(1), pages 86-100, January.
  31. Martin S. Eichenbaum & Lars Peter Hansen & Kenneth J. Singleton, 1986. "A Time Series Analysis of Representative Agent Models of Consumption andLeisure Choice Under Uncertainty," NBER Working Papers 1981, National Bureau of Economic Research, Inc.
  32. Vellturo, Christopher A, et al, 1992. "Deregulation, Mergers, and Cost Savings in Class I U.S. Railroads, 1974-86," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 1(2), pages 339-69, Summer.
  33. Douglas Staiger & James H. Stock, 1994. "Instrumental Variables Regression with Weak Instruments," NBER Technical Working Papers 0151, National Bureau of Economic Research, Inc.
  34. Borenstein, Severin, 1990. "Airline Mergers, Airport Dominance, and Market Power," American Economic Review, American Economic Association, vol. 80(2), pages 400-404, May.
  35. Leemore Dafny, 2009. "Estimation and Identification of Merger Effects: An Application to Hospital Mergers," Journal of Law and Economics, University of Chicago Press, vol. 52(3), pages 523-550, 08.
  36. Matthew Weinberg, 2007. "The Price Effects of Horizontal Mergers: A Survey," Working Papers 62, Princeton University, Department of Economics, Center for Economic Policy Studies..
  37. Tenn, Steven & Yun, John M., 2011. "The success of divestitures in merger enforcement: Evidence from the J&J-Pfizer transaction," International Journal of Industrial Organization, Elsevier, vol. 29(2), pages 273-282, March.
  38. Simon P. Anderston & Andre de Palma, 1991. "Multiproduct Firms: A Nested Logit Approach," Discussion Papers 973, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  39. Daniel Hosken & Louis Silvia & Christopher Taylor, 2011. "Does Concentration Matter? Measurement of Petroleum Merger Price Effects," American Economic Review, American Economic Association, vol. 101(3), pages 45-50, May.
  40. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-54, July.
  41. Peters, Craig, 2006. "Evaluating the Performance of Merger Simulation: Evidence from the U.S. Airline Industry," Journal of Law and Economics, University of Chicago Press, vol. 49(2), pages 627-49, October.
  42. Berry, Steven & Levinsohn, James & Pakes, Ariel, 1995. "Automobile Prices in Market Equilibrium," Econometrica, Econometric Society, vol. 63(4), pages 841-90, July.
  43. Orley Ashenfelter & Daniel Hosken, 2010. "The Effect of Mergers on Consumer Prices: Evidence from Five Mergers on the Enforcement Margin," Journal of Law and Economics, University of Chicago Press, vol. 53(3), pages 417 - 466.
  44. Nevo, Aviv, 1998. "Identification of the oligopoly solution concept in a differentiated-products industry," Economics Letters, Elsevier, vol. 59(3), pages 391-395, June.
  45. Kwoka, John & Pollitt, Michael, 2010. "Do mergers improve efficiency? Evidence from restructuring the US electric power sector," International Journal of Industrial Organization, Elsevier, vol. 28(6), pages 645-656, November.
  46. Orley C. Ashenfelter & Daniel S. Hosken & Matthew C. Weinberg, 2011. "The Price Effects of a Large Merger of Manufacturers: A Case Study of Maytag-Whirlpool," NBER Working Papers 17476, National Bureau of Economic Research, Inc.
  47. repec:cup:cbooks:9780521747387 is not listed on IDEAS
  48. Vuong, Quang H, 1989. "Likelihood Ratio Tests for Model Selection and Non-nested Hypotheses," Econometrica, Econometric Society, vol. 57(2), pages 307-33, March.
  49. Orley C. Ashenfelter & Daniel Hosken & Matthew Weinberg, 2009. "Generating Evidence to Guide Merger Enforcement," NBER Working Papers 14798, National Bureau of Economic Research, Inc.
  50. Clifford Winston & Vikram Maheshri & Scott M. Dennis, 2011. "Long-Run Effects of Mergers: The Case of U.S. Western Railroads," Journal of Law and Economics, University of Chicago Press, vol. 54(2), pages 275 - 304.
  51. repec:cup:cbooks:9780521766555 is not listed on IDEAS
  52. repec:cpi:cpijrn:5.1.2009:i=5241 is not listed on IDEAS
  53. Ivaldi, Marc & Jullien, Bruno & Rey, Patrick & Seabright, Paul & Tirole, Jean, 2003. "The Economics of Tacit Collusion," IDEI Working Papers 186, Institut d'Économie Industrielle (IDEI), Toulouse.
  54. John Kwoka & Evgenia Shumilkina, 2010. "The Price Effect Of Eliminating Potential Competition: Evidence From An Airline Merger," Journal of Industrial Economics, Wiley Blackwell, vol. 58(4), pages 767-793, December.
  55. Robert W. Crandall & Clifford Winston, 2003. "Does Antitrust Policy Improve Consumer Welfare? Assessing the Evidence," Journal of Economic Perspectives, American Economic Association, vol. 17(4), pages 3-26, Fall.
  56. David Genesove & Wallace P. Mullin, 1998. "Testing Static Oligopoly Models: Conduct and Cost in the Sugar Industry, 1890-1914," RAND Journal of Economics, The RAND Corporation, vol. 29(2), pages 355-377, Summer.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:eee:indorg:v:31:y:2013:i:5:p:554-568. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.