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on Industrial Competition |
| By: | Grimpe, Christoph; Hussinger, Katrin |
| Abstract: | This paper investigates the motive of pre-empting technology competition through mergers and acquisitions (M&A). Exploiting the patent application procedure at the European Patent Office we introduce a new measure for the possibility to create entry barriers in technology markets. Our results show significant evidence that firms engage in horizontal M&A to pre-empt competition in technology markets. |
| Keywords: | pre-empting technology competition, mergers and acquisitions |
| JEL: | G34 L20 O34 |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:5590&r=com |
| By: | Buccirossi, Paolo; Spagnolo, Giancarlo |
| Abstract: | This chapter examines the relationship between corporate governance and competition, particularly with regard to cartel formation, and discusses how corporate governance and firm agency problems affect optimal law enforcement against cartels, both in terms of sanctions and leniency policies. Many of the conclusions appear applicable, with minor changes, to non-antitrust forms of collusion, such as collusion between auditors and management, and more generally to corporate and organized crime. |
| Keywords: | Amnesty; Antitrust; Cartels; CEO compensation; Collusion; Corporate crime; Corporate fraud; Corporate governance; Corporate liability; Corruption; Deterrence; Employee liability; Fines; Immunity; Imprisonment; Indemnification; Judgement proofness; Leniency; Managerial incentives; Optimal sanctions; Rewards; Whistleblowers |
| JEL: | G30 K00 L20 L40 |
| Date: | 2007–06 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:6349&r=com |
| By: | Paolo Epifani; Gino Gancia |
| Abstract: | We argue that the procompetitive effect of international trade may bring about significant welfare costs that have not been recognized. We formulate a stylized general equilibrium model with a continuum of imperfectly competitive industries to show that, under plausible conditions, a trade-induced increase in competition can actually amplify monopoly distortions. This happens because trade, while lowering the average level of market power, may increase its cross-sectoral dispersion. Using data on US industries, we document a dramatic increase in the dispersion of market power overtime. We also show evidence that trade might be responsible for it and provide some quantifications of the induced welfare cost. Our results suggest that, to avoid some unpleasant effects of globalization, trade integration should be accompanied by procompetitive reforms (i.e., deregulation) in the nontraded sectors. |
| Keywords: | Markups, Dispersion of Market Power, Procompetitive Effect, Trade and Welfare |
| JEL: | F12 F15 |
| Date: | 2007–06 |
| URL: | http://d.repec.org/n?u=RePEc:upf:upfgen:1037&r=com |
| By: | Gonzalez, Jorge; Sismeiro, Catarina; Dutta, Shantanu; Stern, Philip |
| Abstract: | Patent expiration represents a turning point for the brand losing patent protection as bioequivalent generic versions of the drug quickly enter the market at reduced prices. In this paper, we study how physician characteristics and their prescribing decisions impact the competition among molecules of a therapeutic class, once generic versions of one of these molecules enter the market. Specifically, we study the evolution of the Selective Serotonine Reuptake Inhibitors (SSRIs) after the introduction of generic versions of fluoxetine (brand name Prozac) in the United Kingdom (UK). Our results suggest that, to fully understand the market evolution after generic entry, public health officials need to consider the marketing activities of pharmaceutical companies and determine how (1) individual physicians prescribe all competing drugs, and (2) respond to drug prices and marketing actions. For example, we find that a group of physicians sensitive to detailing switch from fluoxetine to non-bioequivalent branded alternatives after patent expiration, as Prozac significantly reduces its marketing support. Consequently, the market share of fluoxetine decreases despite being available at significant price discount under generic form, and despite the increase of prescriptions by price-sensitive physicians. Hence, governments interested in assessing generics diffusion should consider the prescribing across all competitors, whether or not bioequivalent, and determine the size of physician segments sensitive to pharmaceutical marketing activity and prices. |
| JEL: | I1 H51 C50 M31 C11 |
| Date: | 2006–10 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:3717&r=com |
| By: | Boyle, Elette; Echenique, Federico |
| Date: | 2007–06 |
| URL: | http://d.repec.org/n?u=RePEc:clt:sswopa:1269&r=com |
| By: | Batiz-Lazo, Bernardo |
| Abstract: | Through archival research we investigate the impact of the introduction of Automated Teller Machines (ATM) in British retail banking. Contrary to the experience in the US, in the UK the ATM has been largely neglected by historians and management scholars. Technologically, cash dispensers preceded ATM and were originally a British innovation but U.S. (e.g. IBM and NCR) and German manufacturers (e.g. Siemens) took the lead as the ATM became a global technology. The evolution of the ATM illustrates how banks adopted on-line, real-time computing for the entire branch network and highlights the role of network externalities in financial markets. From a business history perspective, the ATM epitomises a shift in bank strategy, namely how applications of computer technology moved from being potential sources of competitive advantage to being a minimum requirement for effective competition in retail finance. Research in this article traces the origins of this process of competitive change in British retail financial markets, by looking at the emergence of proprietary networks and their evolution into a single national network at the same time that cash dispensers transformed into ATM. |
| Keywords: | Automated Teller Machines; UK; clearing banks; network effects |
| JEL: | O33 N24 |
| Date: | 2007–06 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:3689&r=com |
| By: | Gaël Giraud (CES - Centre d'économie de la Sorbonne - [CNRS : UMR8174] - [Université Panthéon-Sorbonne - Paris I]) |
| Abstract: | Static competitive equilibria in economies with incomplete markets are generically constrained suboptimal. Allocations induced by strategic equilibria of imperfectly competitive markets are also generically inefficient. In both cases, there is scope for Pareto-improving amendments. In an extension of the limit-price process introduced in Giraud [20] to incomplete markets (with infinitely many uncertain states) populated by finitely many players, we show that these two inefficiency problems can be partially overcome when rephrased in a non-tatonnement process. Traders are myopic and trade financial securities in continuous time by sending limit-orders so as to select a portfolio that maximizes the first-order approximation of their expected indirect utility. We show that financial trade curves exist and converge to some second-best efficient restpoint unless some miscoordination stops the dynamics at some inefficient, but locally unstable point. |
| Keywords: | Incomplet markets, imperfect competition, second-best efficiency, non-tatonnement. |
| Date: | 2007–06–19 |
| URL: | http://d.repec.org/n?u=RePEc:hal:papers:halshs-00155717_v1&r=com |
| By: | Tsuyoshi Toshimitsu (School of Economics, Kwansei Gakuin University) |
| Abstract: | Employing an environmentally differentiated duopoly model, we analyze how emission standards affect imports, the environment, and social welfare. We show that a strict emission standard is not necessarily import-restrictive, whereas it may possibly degrade the environment. Furthermore, we present evidence that the effect of emission standards on net social surplus depends on the mode of market competition and the degree of marginal social valuation of environmental damage. |
| Keywords: | emission standards, environmentally differentiated duopoly, green market |
| JEL: | D43 F12 F13 L52 Q28 |
| Date: | 2007–06 |
| URL: | http://d.repec.org/n?u=RePEc:kgu:wpaper:34&r=com |
| By: | Julien Pierre Chevallier |
| Abstract: | In international emissions trading schemes such as the Kyoto Protocol and the European Union Emissions Trading Scheme, the suboptimal negotiation of the cap with respect to total pollution minimization leads us to critically examine the proposition that generous allocation of grandfathered permits by the regulator based on recent emissions might pave the way for dominant positions. Stemming from this politically given market imperfection, this paper develops a differential Stackelberg game with two types of noncooperative agents: a large potentially dominant agent and a competitive fringe whose size are exogenously determined. The strategic interactions are modelled on an intra-industry permits markets where agents can freely bank and borrow permits. This paper contributes to the debate on initial permits allocation and market power by focusing on the effects of allowing banking and borrowing. A documented appraisal on whether or not such provisions should be included is frequently overlooked by the debate to introduce the permits market itself among other environmental regulation tools. Results are presented under perfect information. |
| Keywords: | emissions trading, banking borrowing, market power |
| JEL: | C73 L11 Q52 |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:drm:wpaper:2007-18&r=com |
| By: | Hesse, Heiko |
| Abstract: | This paper uses unique bank-by-bank balance sheet and income statement information to investigate the intermediation efficiency in the Nigerian pre-consolidated banking sector during 2000-05. The author analyzes whether the Central Bank of Nigeria ' s policy of recent banking consolidation can be justified and rationalized by looking at the determinants of spreads. A spread decomposition and panel estimations show that the reform of the banking sector could be the first step to raise the intermediation efficiency of the Nigerian banking sector. The author finds that larger banks have enjoyed lower overhead costs, increased concentration in the banking sector has not been detrimental to the spreads, both increased holdings of liquidity and capital might have led to lower spreads in 2005, and a stable macroeconomic environment is conducive to a more efficient channeling of savings to productive investments. |
| Keywords: | Banks & Banking Reform,Economic Theory & Research,Financial Intermediation,Financial Crisis Management & Restructuring,Investment and Investment Climate |
| Date: | 2007–06–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:4267&r=com |
| By: | Susanne Wied-Nebbeling |
| Abstract: | This paper analyzes a market with three firms. One of them is the dominant firm and the two others are fringe firms. The formulation of demand allows a comparison between price competition with heterogeneous and homogeneous products. Because a parameterization is required to assure that market size is the same in both scenarios, no general conclusions can be drawn. But it can be shown that in large markets with relatively inelastic demand for the fringe firms’ products and a cost advantage of the dominant firm, the fringe firms are better off if they produce a heterogeneous product. |
| Keywords: | dominant firm, competitive fringe, price competition, heterogeneous products |
| JEL: | L11 L13 |
| Date: | 2007–06–26 |
| URL: | http://d.repec.org/n?u=RePEc:kls:series:0031&r=com |
| By: | Lundin, Nannan (Research Institute of Industrial Economics (IFN)); Sjöholm, Fredrik (Research Institute of Industrial Economics (IFN)); He, Ping (National Bureau of Statistics of China); Qian , Jinchang (National Bureau of Statistics of China) |
| Abstract: | FDI can be an important channel for developing countries’ ability to get access to new technology. The impact of FDI on domestically-owned firms’ technology development is less examined but it is frequently argued that technology externalities or demonstration effects could have a positive impact. Another and so far little examined effect of FDI on technology development in domestically-owned firms is through the impact on competition. We examine the effect of FDI on competition in the Chinese manufacturing sector and the effect of competition on firms’ R&D. Our analysis is conducted on a large dataset including all Chinese large and medium sized firms over the period 1998-2004. Our results show that FDI increases competition but there are no strong indications of competition affecting investments in R&D. |
| Keywords: | China; FDI; Competition; R&D |
| JEL: | F23 L11 O31 |
| Date: | 2007–06–21 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:iuiwop:0708&r=com |
| By: | Kevin Mellet |
| Abstract: | Two factors play a decisive role in the structuring of Internet based markets for infomediation (informational intermediation) : network externalities and information processing. First, these are examined separately. The two-sided markets literature focuses on the impact of network externalities in a context of competition among 2-sided platforms. It explains the level of concentrationfragmentation of those markets, and explores its welfare implications. We shall call this model the "horizontal" model of structuring. Symetrically, a "vertical" process of division of labour among the infomediaries' value chain is observed. It results of the complexification of intermediation in a context of strong quality uncertainty and high codification investments. Intermediaries specialize and develop cooperative relationships with each others. Secondly, the paper examines the implications of the simultaneous co-existence of H and D dynamics on the structuring of the market for infomediation. This co-existence generates frictions. Two levels of frictions are distinguished : i) market governance (standards and certifications) ; ii) commercial interactions (the so-called 'coopetition'). Empirical illustrations are taken from the analysis of Internet based labour market intermediaries. |
| Keywords: | Two-sided markets; competition; vertical specialization; regulation; coopetition; labour market intermediaries. |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:drm:wpaper:2007-13&r=com |
| By: | Arnold, Lutz G.; Bauer, Christian J. |
| Abstract: | This paper proves three theorems on growth and competition in a standard increasing variety endogenous growth model and draws conclusions for second-best competition policies. First, no growth may be better than some growth, since modest positive growth potentially requires sizeable static welfare losses. Second, the economy may converge to a steady state with zero growth, even though another (saddle-point stable) steady state with positive growth exists if the initial share of "cheap" competitive markets is sufficiently high, as this implies a relatively low demand for "expensive" innovative goods. Third, such a "no-growth trap" may happen in a world economy made up of several countries engaged in free trade with each other. As for competition policy, this implies that growth-enhancing policies maybe misguided and that quick deregulation as well as quick trade liberalization can lead to stagnation in the long term. |
| Keywords: | endogeneous growth; competition; deregulation; poverty trap; trade liberalization; Armutsfalle; Handelsliberalisierung; Endogenes Wirtschaftswachstum; Wettbewerb; Deregulierung |
| JEL: | O41 O34 O31 F43 F15 |
| Date: | 2007–06–20 |
| URL: | http://d.repec.org/n?u=RePEc:bay:rdwiwi:812&r=com |
| By: | Jürgen Eichberger (University of Heidelberg, Department of Economics); David Kelsey (University of Exeter, Department of Economics); Burkhard C. Schipper (University of California, Davis, Department of Economics) |
| Abstract: | We present a non-technical account of ambiguity in strategic games and show how it may be applied to economics and social sciences. Optimistic and pessimistic responses to ambiguity are formally modelled. We show that pessimism has the effect of increasing (decreasing) equilibrium prices under Cournot (Bertrand) competition. In addition the effects of ambiguity on peace-making are examined. It is shown that ambiguity may select equilibria in coordination games with multiple equilibria. Some comparative statics results are derived for the impact of ambiguity in games with strategic complements. |
| Keywords: | Ambiguity, Optimism, Pessimism, Strategic Games, Oligopoly, Strategic Delegation, Peace-making, Strategic Complements, Choquet Expected Utility |
| JEL: | C72 D43 D62 D81 |
| Date: | 2007–05 |
| URL: | http://d.repec.org/n?u=RePEc:awi:wpaper:0443&r=com |
| By: | Héctor Salgado Banda; Lorenzo E. Bernal Verdugo |
| Abstract: | We use data from the Annual Industrial Survey for 1996-2003. First, we estimate production functions by means of growth accounting exercises and panel data econometrics for the whole sector and for 14 comprehensive groups. Various measures of Multifactor Productivity (MFP) are constructed, as we consider diverse combinations of inputs with capital, labour, electricity and transport. This allows us to compare MFP growth rates between groups. Second, we analyse econometrically some of the determinants of MFP and Labour Productivity (LP) growth. We find that, on the one hand, there is some evidence of a positive relationship between market concentration and technology adoption; on the other hand, both technology adoption and human capital seem to be promoting productivity, whilst market concentration is exerting a negative influence on it. In sum, our results suggest that, once controlling for the effect on technology adoption, more concentration (conversely, less competition) has a negative impact on productivity. |
| Keywords: | Panel data, Productivity, Manufacturing, Competition |
| JEL: | C33 D24 L11 |
| Date: | 2007–05 |
| URL: | http://d.repec.org/n?u=RePEc:bdm:wpaper:2007-09&r=com |
| By: | Aldashev, Gani; Verdier, Thierry |
| Abstract: | Is competition for donations between development NGOs good for welfare? We address this question in a monopolistic competition model à la Salop (1979). NGOs - defined by the non-distribution constraint - compete for donations from donors by exerting fundraising effort. If the market size is fixed, the free-entry equilibrium number of NGOs is usually larger than the optimal number. However, if the market size is endogenous and NGOs both compete and co-operate in attracting new donors, the freeentry equilibrium number of NGOs is generally smaller than the optimal number. If NGOs can divert a part of funds for private use, for a certain range of outside option of NGO entrepreneurs multiple equilibria (with high diversion and no diversion of funds) exist. |
| Keywords: | monopolistic competition; NGOs; non-distribution constraint |
| JEL: | D43 L13 L31 |
| Date: | 2007–06 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:6350&r=com |