Essays on governmental regulation of private transactions

This dissertation develops models of private behavior in three areas that are heavily regulated by the government---pharmaceutical mergers, industries exhibiting network effects and insider trading. Each chapter models the choices of private parties and analyzes the policy implications of the results estimated by the applicable model.; The first chapter examines the factors that motivate mergers, asset acquisitions and stock repurchases in the pharmaceutical industry. I found that the patent portfolios of pharmaceutical companies play a determining role in their choice among different transactions. Large companies with strong balance sheets and aging patent portfolios strengthen their intellectual property assets by acquiring small companies with valuable patents and weak balance sheets. Small companies that have valuable patents and are in a strong financial position avoid change of control transactions. The estimated model supports a finding of efficient management for both acquirors and targets over alternative explanations for the wave of pharmaceutical mergers in the 1990s.; The second chapter analyzes data on insider trading cases brought by the Securities and Exchange Commission. I found that the Securities and Exchange Commission discriminates in the imposition of civil and criminal penalties based on whether a defendant engaged in insider trading on a single or multiple occasions. I identified various factors that influenced both the ease of prosecution and the penalties imposed on defendants.; The last chapter analyzes the dynamics of competition between a market leader and a follower in the context of a network established by a product sold only by the leader. I examined the effect of different changes in the parameters of the model on the actions of the firms. A policy of breaking up the leader into two independent companies benefits significantly the follower but does not have a significant effect on the size of the market. Such a policy pushes consumers with low technology preferences out of the marketplace and benefits consumers with strong technology preferences. A policy that requires the producer of the network good to sell that product at marginal cost increases the overall market size and the number of customers with low technology preferences.