nep-com New Economics Papers
on Industrial Competition
Issue of 2005‒03‒13
eleven papers chosen by
Russell Pittman
US Department of Justice

  1. Competing or Colluding in a Stochastic Framework By Adriana Breccia; Hector Salgado-Banda
  2. Vertical Differentiation and Entry Deterrence: A Reconsideration. By Lander Beloki; Jose María Usategui
  3. Competition and Efficiency in Markets with Quality Uncertainty By Abhinay Muthoo; Suresh Mutuswami
  4. Vertical integration and technology: theory and evidence By ; Daron Acemoglu; Philippe Aghion; Rachel Griffith; Fabrizio Zillibotti
  5. Consolidation, Scale Economies and Technological Change in Japanese Banking By Solomon Tadesse
  6. The role of R&D technology in asymmetric research joint ventures By Sami Dakhlia; Flavio M. Menezes; Akram Temimi
  7. A note on duplication of R&D and R&D subsidies By Sami Dakhlia; Flavio M. Menezes; Akram Temimi
  8. R&D and M&A : Are cross-border M&A different ? An investigation on OECD countries By Olivier Bertrand; Pluvia Zuniga
  9. The Marketing Structure in Agribusiness during the Transition in Bulgaria By Steve Murray; Yordan Staykov,; Valentin Katzerov
  10. Technology Transfer through Backward Linkages : The Case of the Spanish Manufacturing Industry By Liza Jabbour; Jean-Louis Mucchielli
  11. "Hot Air" and Market Power in International Emission Trading By Florent Pratlong; Denise Van Regemorter; Paul Zagamé

  1. By: Adriana Breccia; Hector Salgado-Banda
    Abstract: This paper addresses the issue of anticompetitive and collusive practices in a continuous-time real option framework. We extend the symmetrical duopoly under uncertainty model by Dixit and Pindyck (1994), by granting a patent to the first innovator that files an application. The patent-investment race model is used to focus on long-term collusive agreements signed under a cooperative bargaining structure. The contributions are as follows. First, we show that, in a stochastic framework, competition always leads to different forms of inefficiency. Second, it is proved that, when entrepreneurs can sign long-term contracts via cooperative bargaining, collusion is always beneficial ex-ante since inefficiency disappears. Third, we show that whilst collusion always delays innovation, it does not necessarily delay competition. Depending on a number of economic, as well as firm-specific factors, collusion can actually accelerate competition.
    Keywords: Bargaining, Collusion, Competition, Geometric Brownian Motion,Nash Demand Game, Stackelberg Game
    JEL: C7 D8 K4 L13
    Date: 2005–01
  2. By: Lander Beloki (University of Mondragón (Spain)); Jose María Usategui (Universidad del País Vasco)
    Keywords: Vertical differentiation, market coverage, entry deterrence, quality competition
    JEL: L13 D43
    Date: 2005–03–07
  3. By: Abhinay Muthoo; Suresh Mutuswami
    Abstract: This paper addresses the following question: Does competition enhance efficiency in markets with quality uncertainty? Using the mechanism design methodology, we characterize the maximal achievable level of efficiency in such markets, and then use this characterization to analyze how maximal efficiency varies with the degree of market competition. We show that the relationship between them is in general a non-trivial function of the main market parameters. In particular we show: (i) for some set of parameter values maximal efficiency is strictly increasing in the degree of market competition (although it never attains the first-best), but only until competition is sufficiently intense; thereafter, maximal efficiency is strictly decreasing in the degree of competition; (ii) for some set of parameter values maximal efficiency is strictly decreasing in the degree of market competition, attaining the first-best when there is no competition; and (iii) for some set of parameter values maximal efficiency is strictly increasing in the degree of market competition, attains the first-best once competition is sufficiently intense, and then remains at the first-best thereafter.
    Date: 2005–03–07
  4. By: ; Daron Acemoglu; Philippe Aghion (Institute for Fiscal Studies and Harvard University); Rachel Griffith (Institute for Fiscal Studies); Fabrizio Zillibotti (Institute for Fiscal Studies)
    Abstract: This paper investigates the determinants of vertical integration using data from the UK manufacturing sector. We find that the relationship between a downstream (producer) industry and an upstream (supplier) industry us more likely to be vertically integrated when the producing industry is more technology intensive and the supplying industry is less technology intensive. Moreover, both of these effects are stronger when the supplying industry accounts for a large fraction of the producer\\\'s costs. These results are generally robust and hold with alternative measures of technology intensity, with alternative estimation straegies, and with or without contraolling for a number of firm and industry-level characteristics. They are consistent with the incomplete contract theories of the firm that emphasize both the potential costs and benefits of vertical integration in terms of investment incentives.
    Keywords: holdup, incomplete contracts, internal organisation fo the firm, investment, R&D, technology, vertical integration
    JEL: L22 L23 L24 L60
    Date: 2004–12
  5. By: Solomon Tadesse
    Abstract: The paper examines the technological structure of the Japanese banking sector before the onset of the banking crisis and structural reforms of the 90s in order to shade light on the logic of the recent trend to consolidation in the industry. While diseconomies of scale are shown to be pervasive in the large banks, defying the rationale for consolidation, the paper presents evidence of an underlying technological progress that operates to significantly increase the industry’s efficient minimum size, generating economies at larger banks, thus justifying the ongoing trend in consolidation. The results suggest that, to the extent that consumers can benefit from lower costs of bank production, policies that promote a more concentrated banking structure might be consistent with public interest.
    Keywords: Scale Economies; Technical Change; Banking
    JEL: G21 D24 O3
    Date: 2005–02–01
  6. By: Sami Dakhlia (C&BA et CERMSEM); Flavio M. Menezes (EPGE/FGV); Akram Temimi (C&BA)
    Abstract: We characterize asymmetric equilibria in two-stage process innovation games and show that they are prevalent in the different models of R&D technology considered in the literature. This leads to a reassessment of the potential benefits of research cooperative agreements. Indeed, cooperation in R&D may be accompanied by high concentration in the product market. We show that while such an increase may be profitable, it may be socially inefficient.
    Keywords: Research and development; research joint ventures; process innovation games
    JEL: D43 L1 O32
    Date: 2004–06
  7. By: Sami Dakhlia (C&BA et CERMSEM); Flavio M. Menezes (EPGE/FGV); Akram Temimi (C&BA)
    Abstract: We show that the presumed incompatibility of uncoordinated R&D and competition is not fudamental, but hinges on the nature of R&D spillovers. As a consequence, R&D subsidies may be more effective than previously thought.
    Keywords: Research and development; subsidies; process innovation games
    JEL: D43 L1 O32
    Date: 2004–06
  8. By: Olivier Bertrand (TEAM); Pluvia Zuniga (TEAM)
    Abstract: This paper investigates the incidence of national and cross-border M&A on industrial R&D investment in OECD countries over the period 1990-1999. We use generalized method of moments (GMM) estimation techniques for dynamic panel data and control for market-related and technological determinants of R&D production. Our findings show that the last M&A wave contributed to expand domestic R&D activities, especially in high-technology intensive industries. However, further evidence suggests that cross-border M&A (particularly outward M&A), and not domestic ones, have stimulated more significantly R&D spending. This result gives evidence that anti-competition effects are more likely to affect negatively R&D activities with a domestic M&A. Reversely, efficiency gains might be higher in a cross-border operation, encouraging merging firms to raise their R&D investments.
    Keywords: M&A; Industrial restructuring; R&D, technology
    JEL: O30 L10 F23
    Date: 2004–07
  9. By: Steve Murray; Yordan Staykov,; Valentin Katzerov
    Abstract: Bulgaria is moving toward a food processing and marketing system which resembles that of Western Europe and the U.S. Large grocery chains from Germany, Austrai and Turkey are building supermarkets and hypermarkets in Bulgaria’s larger cities. However, income in Bulgaria remains much lower than in Western Europe and most Bulgarian consumers cannot afford to shop in the new stores yet. Neighborhood markets, which serve average Bulgarians, are expanding their product selections and remain the primary shopping venue. Food processing plants in Bulgaria are being upgraded to meet EU standards. Farmers are getting more efficient as land is consolidated. On the whole, the agriculture and agribusiness sectors in Bulgaria are improving.
    Keywords: Bulgaria, food marketing, transition
    JEL: O52 P23 Q13
    Date: 2005–01–01
  10. By: Liza Jabbour (TEAM); Jean-Louis Mucchielli (TEAM)
    Abstract: The aim of this paper is to examine technology transfer through backward linkages between multinational entreprises and local suppliers. This issue is of great interest for several reasons. First of all, the new theory of economic growth suggests that technological innovations are becoming an increasingly important contributor to economic growth. Secondly, an obvious policy issue for governments is whether or not incentives should be offered to multinational firms in order to attract them. The econometric analysis presented here is based on a firm level database from Spain for the period 1990-2000. We use the Olley and Pakes method to estimate the total factor productivity of the firms and measure the effect of downstream FDI on local firm productivity and find positive evidence on the existence of technology transfer through backward linkages. Our results show strong evidence on technology spillovers through backward linkages, especially in the case of export-oriented affiliates and fully-owned affiliates.
    Keywords: Technology spillovers; Backward linkages; foreign direct investment
    JEL: F23
    Date: 2004–07
  11. By: Florent Pratlong (ERASME et EUREQua); Denise Van Regemorter (CES - Katholieke Universiteit Leuven); Paul Zagamé (ERASME et EUREQua)
    Abstract: In respect to GHG emission reduction targets set in the Kyoto Protocol in 1997, a emission quotas trading system will be implemented among the Annex-1 participating countries to lower the mitigation costs of the international cooperation on climate change issue. Nonetheless, in the way the market was designed, the States of the Former Soviet Union and Eastern Europe are likely to become large sellers of carbon as a result of the drop in emissions level due to economic downturn, referring to "Hot Air". Indeed, these countries may exert substantially a dominant position in the international permits market since the US had decided to withdraw from the Kyoto Protocol. This paper aims to develop a better understanding of the consequence of "Hot Air" in the international carbon emission trading, using some policy variants simulated with the computable general equilibrium GEM-E3 World model. The present analyse focuses particularly on the measures of "Hot Air" and the implications of potential market power in the emission trading market. Under various scenario options, the exercise of market power lead to a misallocation of abatement effort accross the remaining Annex-1 countries as a consequence of permits price and welfare effets.
    Keywords: Emission trading; market power; MECG
    JEL: D43 D58 Q48
    Date: 2004–07

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