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on Industrial Competition |
| By: | Lisa Bruttel; Simeon Schudy |
| Abstract: | We investigate the role of incentives set by a parent firm for competition among its subsidiaries. In a Cournot experiment four subsidiaries of the same parent operate in the same market. Parents earn a speciffic share of the joint profit and can choose how to distribute the remaining surplus (or loss). Results show that parents allocating profits equally among their subsidiaries reach outcomes close to collusion. However, almost half of the parent firms employ a proportional sharing rule instead. These groups end up with profits around the Cournot level. |
| Keywords: | Cournot Competition, Subsidiary, Subcompany, Experiment |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:twi:respas:0062&r=com |
| By: | Klaus M. Schmidt (University of Munich) |
| Abstract: | Technolgical standards give rise to a complements problem that affects pricing and innovation incentives of technology producers. In this paper I discuss how patent pools can be used to solve these problems and what incentives patent holders have to form a patent pool. I offer some suggestions how competition authorities can foster the formation of welfare increasing patent pools. |
| Keywords: | Patent pools, standard setting organisations, innovation, complements problem, patent thicket |
| JEL: | L15 L24 O3 |
| Date: | 2010–09 |
| URL: | http://d.repec.org/n?u=RePEc:trf:wpaper:342&r=com |
| By: | Ivan Ledezma (Université Paris Dauphine, LEDa UMR 225 DIAL, IRD) |
| Abstract: | (english) This paper analyses the potentially defensive behaviour of patent race winners and its effect on aggregate R&D effort. It proposes a quality-ladders model that endogenously determines leaders technology advantages and who innovates. Product market regulation can have either a positive or a negative effect on R&D intensity. The negative effect is likely to be observed in highly deregulated economies. The positive influence arises in more regulated environments and it is stronger for larger innovative jumps. These steady-state equilibrium outcomes are consistent with puzzling and contrasting patterns stemming from data on manufacturing industries for 14 OECD countries during the period 1987-2003. _________________________________ (français) Dans cet article nous étudions le comportement potentiellement défensif des innovateurs et son effet sur l’effort agrégé d’innovation. Un modèle à échelles de qualité est proposé afin d’analyser l’émergence d’avantages technologiques qui, in fine, déterminent qui innove (le leader ou ses concurrents). Dans ce contexte, la réglementation de marché peut avoir un effet positif ou négatif sur l’intensité en R&D. Elle peut être négativement associée à l’effort d’innovation dans des environnements hautement dérèglementés. Par contre, en économies qui dépassent un certain seuil de réglementation, susceptible de limiter effectivement la construction de barrières stratégiques, la réglementation induit des incitations à innover. Ces prédictions sont cohérentes avec des tests empiriques menés sur un échantillon d’industries appartenant à 14 pays de l’OCDE durant la période 1987-2003. |
| Keywords: | Innovative leaders, quality ladders, product market regulation, R&D, Leaders innovants, modèle à échelles de qualité, réglementation. |
| JEL: | L13 O31 O33 |
| Date: | 2010–09 |
| URL: | http://d.repec.org/n?u=RePEc:dia:wpaper:dt201011&r=com |
| By: | Chiara Franco; Manuela Gussoni |
| Abstract: | The aim of this paper is to provide empirical evidence on the issue of ?rms’ R&D cooperation strategies, examining the topic from the point of view of the partner choice. Literature has deeply analyzed the motivations inducing ?rms to form research joint ventures, instead, the investigation of partner selection strategies is disregarded even though it is one of the most critical decisions for a ?rm when forming an alliance. For this reason, by making use of data coming from the fourth Italian innovation survey (2002- 2004), we contribute to the the literature by estimating, through the use of a multinomial logistic model, the determinants that a?ect the ?rms’ choice among di?erent types of potential R&D cooperation partners. We di?erentiate among three cooperation strategies that are: (i) cooperation with only market partners; (ii) with only science partners; and (iii) with both of them. Our ?ndings provide support to the hypothesis that di?erent variables determine di?erent partner choices according to the sector analyzed. In the manufacturing sector, for example, foreign multinational companies or export oriented ?rms prefer to cooperate only with market partners. In the services, ?rms receiving public subsidies for innovation prefer science cooperations to all the other cooperation arrangements leaving room for policy implications. |
| Keywords: | R&D cooperations; partner selection; industry-university linkages;service sector. |
| JEL: | O32 L10 L8 L6 D78 |
| Date: | 2010–09–10 |
| URL: | http://d.repec.org/n?u=RePEc:pie:dsedps:2010/104&r=com |
| By: | Carlos Carreira (GEMF/Faculdade de Economia, Universidade de Coimbra, Portugal); Paulino Teixeira (GEMF/Faculdade de Economia, Universidade de Coimbra, Portugal) |
| Abstract: | This paper discusses the impact of newly created firms on industry productivity growth. Our central hypothesis is that there are two potential effects of new firms on productivity growth: a direct effect, as entrants may be relatively more productive than established firms; and an indirect effect, through increased competitive pressure that stimulates incumbents to elevate their productivity in order to survive. The results of the decomposition exercise of aggregate productivity growth suggest that the direct contribution of entry is small. In turn, the regression analysis on the effect of entry on productivity growth of incumbents indicates that the higher is the former, the higher is the latter, which is equivalent to say that the greater is the competitive pressure generated by new entrants, the higher is the expected aggregate productivity level. |
| Keywords: | Entry, Firm dynamics, Productivity growth, Competition effect |
| JEL: | L11 L16 L25 O12 O47 L60 |
| Date: | 2010–09 |
| URL: | http://d.repec.org/n?u=RePEc:gmf:wpaper:2010-20&r=com |
| By: | Alessandra Chirco (University of Salento, Lecce, Italy); Marcella Scrimitore (University of Salento, Lecce, Italy; The Rimini Centre for Economic Analysis (RCEA), Rimini, Italy) |
| Abstract: | In this paper we analyze the effects of international competition in a mixed oligopoly framework, with price competition and differentiated products. The properties of equilibria, and the impact of policy measures such as privatizations and cross-border acquisitions, are studied both in a single-country and in a two-country framework, under the hypothesis that all firms share the same linear technology. Besides showing that the international competition in a mixed market allows for efficiency gains which are consistent with binding budget constraints for the public firm, we identify the market structures and the competitive environment which support welfare enhancing privatization policies, independently of any exogenous or endogenous cost differential between public and private producers. In particular, we suggest that the cross-country distribution of firms, the degree of product substitutability and the overall density of the market are the key elements in the assessment of the desirability of public ownership. |
| Keywords: | International mixed oligopoly, price competition, privatization |
| JEL: | F23 L13 L32 |
| Date: | 2010–01 |
| URL: | http://d.repec.org/n?u=RePEc:rim:rimwps:48_10&r=com |
| By: | Maria José Gil-Moltó; Joanna Poyago-Theotoky; Vasileios Zikos |
| Abstract: | We examine the use of subsidies to R&D in a mixed and a private duopoly market. We show that the socially optimal R&D subsidy is increasing in the degree of spillovers but it is lower in the private duopoly. The optimal R&D subsidy leads to an increase in total R&D and production, however, it does not lead to the equalisation of per fi?rm output and therefore to an efficient distribution of production costs. We also find that privatization of the public firm reduces R&D activity and welfare in the duopoly market. This result stands even when optimal R&D subsidies are provided. |
| Keywords: | Keywords: mixed duopoly, process innovation, R&D subsidies, privatization, spillovers. |
| JEL: | L31 L32 O38 L13 L50 |
| Date: | 2010–10 |
| URL: | http://d.repec.org/n?u=RePEc:san:crieff:1008&r=com |
| By: | Ressner, Ludwig |
| Date: | 2010–11–04 |
| URL: | http://d.repec.org/n?u=RePEc:lmu:dissen:12293&r=com |
| By: | Nicola Meccheri (Department of Economics, University of Pisa, Italy; The Rimini Centre for Economic Analysis (RCEA), Italy); Luciano Fanti (Department of Economics, University of Pisa, Italy) |
| Abstract: | This paper studies the interaction between incentive labour contracts, competition à la Cournot and industry profits, in a context where workers’ effort is not verifiable and the probability of the unemployed getting a job can depend on their employment histories according to the degree of product market competition. It is shown that efficiency wages paid by each firm can decrease when competition becomes fiercer. With discretionary bonuses, instead, wages are generally uncorrelated with competition, but there exists an upper threshold for the number of competing firms, over which profits collapse to zero. Moreover, if information about firms’ misbehaviour in paying bonuses flows in the labour market at a low rate, firms can make positive profits only by paying efficiency wages. |
| Keywords: | industry profits, Cournot competition, efficiency wages, performance pay |
| JEL: | J33 J41 L13 |
| Date: | 2010–01 |
| URL: | http://d.repec.org/n?u=RePEc:rim:rimwps:37_10&r=com |
| By: | Laurent Granier (GATE Lyon Saint-Etienne - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - Ecole Normale Supérieure Lettres et Sciences Humaines) |
| Abstract: | This paper analyzes the literature concerning models of endogenous mergers. Traditional models of exogenous mergers analyze mergers as isolated phenomena. However, some empirical facts about M&A don't seem to be explained in this literature. Models of endogenous mergers take into account all interactions created by merger decisions in an industry. By this way, they can give more reliable predictions. In order to better understand the literature, we describe it in two points. First, we investigate models caracteristics. Second, we present the main predictions obtained in the literature. |
| Keywords: | endogenous mergers; game theory; literature |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:halshs-00537413_v1&r=com |
| By: | Frédéric Marty (CNRS UMR 6227 GREDEG - Université de Nice Sophia-Antipolis / OFCE - DRIC Author-Workplace- 250, avenue Albert Einstein 06560 Valbonne France) |
| Abstract: | The paper deals first with the influence of ordo-liberal school of thought on the German competition policy conception and the model of social market economy. After showing to what extend the Freiburg School influence shaped the German economic policy, we analyze what was its influence on the framing of the European competition policy. We show that this one was in fact achieved thought the Court of Justice case law. In this perspective, we assess to what extend a convergence toward a more economic approach in the implementation of Article 102TFEU, is susceptible to impact EU competition authorities decisional practice. |
| Keywords: | competition policy, unilateral practices, exclusionary abuses |
| JEL: | K21 |
| Date: | 2010–11 |
| URL: | http://d.repec.org/n?u=RePEc:fce:doctra:1030&r=com |
| By: | Georg Gebhardt ()) |
| Abstract: | Does the internet increase competition? To address this question, I exploit two institutional details unique to Germany: (1) Some municipalities received glass fibre cables that cannot be upgraded to DSL; I use these municipalities as a treatment group with reduced online competition. (2) German law mandates resale price maintenance for books; I compare three retailing sectors, electronics (price competition), books (no price competition), and food (no online sales), to identify the effect of price competition: The effect of price competition is highly significant. Full broadband access reduces offline electronics retailers’ producer rents by 1.5 percent per year from 1999 to 2007. |
| Keywords: | Internet, Market Structure, Retail Competition, Differences in Differences |
| JEL: | D43 L81 L13 |
| Date: | 2010–11 |
| URL: | http://d.repec.org/n?u=RePEc:trf:wpaper:345&r=com |
| By: | Alexander Matros (University of South Carolina); Andriy Zapechelnyuk (Queen Mary, University of London) |
| Abstract: | In e-commerce, where information collection is essentially costless and geographic location of traders matters very little, fierce competition between providers of similar services is expected. We consider a model where two e-commerce intermediaries (internet shops) compete for sellers. We show that two non-identical shops may coexist in equilibrium if the population of sellers is sufficiently differentiated in their time preferences. In such an equilibrium less patient sellers choose the more popular (with a higher rate of arrival of new buyers) and more expensive shop, while more patient sellers prefer the less popular and cheaper one. |
| Keywords: | E-commerce, Intermediary, Competition, Listing fee, Closing fee |
| JEL: | C73 D43 D82 |
| Date: | 2010–11 |
| URL: | http://d.repec.org/n?u=RePEc:qmw:qmwecw:wp675&r=com |
| By: | Leibtag, Ephraim; Barker, Catherine; Dutko, Paula |
| Abstract: | Nontraditional stores, including mass merchandisers, supercenters, club warehouse stores, and dollar stores, have increased their food offerings over the past 15 years and often promote themselves as lower priced alternatives to traditional supermarkets. How much lower are food prices at these stores? In order to better understand nontraditional storesâ impact on the cost of food, ERS analysts evaluate food price differences between nontraditional and traditional stores at the national and market level using 2004-06 Nielsen Homescan data. Findings show that nontraditional retailers offer lower prices than traditional stores even after controlling for brand and package size. Comparisons of identical items, at the Universal Product Code (UPC) level, show an expenditure-weighted average price discount of 7.5 percent, with differences ranging from 3 to 28 percent lower in nontraditional stores than in traditional stores. Nontraditional stores in metro areas where such stores have a higher-than-average market share have smaller and less frequent price discounts than those in areas where such stores have a lower market share. |
| Keywords: | retail food prices, price variation, Nielsen Homescan, supercenter, club warehouse store, dollar store, traditional food retailers, nontraditional food retailers, Demand and Price Analysis, Food Consumption/Nutrition/Food Safety, Industrial Organization, Marketing, |
| Date: | 2010–10 |
| URL: | http://d.repec.org/n?u=RePEc:ags:uersrr:96767&r=com |
| By: | Artashes Karapetyan (Norges Bank (Central Bank of Norway)); Bogdan Stacescu (Norwegian School of Management (BI)) |
| Abstract: | Since information asymmetries have been identified as an important source of bank profits, it may seem that the establishment of information sharing (e.g., introducing credit bureaus or public registers) will lead to lower investment in acquiring information. However, banks base their decisions on both hard and soft information, and it is only the former type of data that can be communicated credibly. We show that when hard information is shared, banks will invest more in soft information. These will produce more accurate lending decisions, provide higher welfare, lead to an increased focus on relationship banking and favor informationally opaque borrowers. We test our theory using a large sample of firm-level data from 24 countries. |
| Keywords: | Bank competition, information sharing, relationship bank, hard, soft |
| JEL: | G21 L13 |
| Date: | 2010–11–25 |
| URL: | http://d.repec.org/n?u=RePEc:bno:worpap:2010_24&r=com |
| By: | Bos Jaap; Lamoen Ryan van; Economidou Claire (METEOR) |
| Abstract: | This paper examines whether large U.S. banks have become ''too big to innovate''. We extend the theoretical work of Aghion et al. (2005b) by relaxing their assumption that unit costs are independent from output levels in order to investigate the effect of scale (dis)economies on the competition-innovation nexus. With our model we can derive conditions under which the innovation behavior of firms with scale diseconomies becomes more or less responsive to competitive changes. Our empirical results show that decreases in thelevel of competition lead to very large drops in innovation. Large banks, already operating beyond the minimum efficient scale, have indeed become ''too big to innovate''. |
| Keywords: | Industrial Organization; |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:umamet:2010054&r=com |
| By: | Xiao, Mo; Orazem, Peter |
| Abstract: | We study the importance of sunk costs in determining entry conditions and inferences about firm conduct in an adapted Bresnahan and Reiss (1991, 1994) framework. In our framework, entrants incur sunk costs to enter, while incumbents disregard these costs in deciding on continuation or exit. We apply this framework to study entry and competition in the local U.S. broadband markets from 1999 to 2003. Ignoring sunk costs generates unreasonable variation in firms’ competitive conduct over time. This variation disappears when entry costs are allowed. Once the market has one to three incumbent firms, the fourth entrant has little effect on competitive conduct. |
| Keywords: | entry; market structure; Sunk Costs; Broadband Market |
| JEL: | L13 L8 |
| Date: | 2010–11–27 |
| URL: | http://d.repec.org/n?u=RePEc:isu:genres:32147&r=com |
| By: | Fabio Pieri; Enrico Zaninotto (DISA, Faculty of Economics, Trento University) |
| Abstract: | This paper analyzes the relationship between firm efficiency and vertical integration in the Italian machine tool (MT) industry. A theoretical model of entry and competition within an industry has been set up. In this model firms can choose either to be vertically integrated or not: the most efficientfirms self-select in being vertically integrated, while less efficientfirms prefer a disintegrated structure and they both coexist in equilibrium. In the second part of the paper the relationship between efficiency and vertical integration has been tested using a stochastic frontier framework in an novel panel dataset including around 500 MT builders. The theoretical prediction is confirmed: outsourcing seems a rational choice for less efficient firms to make positive operating profits and stay in the market; on the other hand, more efficient firms exploit their efficiency advantage to control a greater part of the production chain, possibly benefiting from greater coordination among different phases and tailored intermediate inputs. |
| Keywords: | vertical integration; technical efficiency; firm heterogeneity; heteroskedastic frontier model |
| JEL: | D24 L23 L25 L64 |
| Date: | 2010–11 |
| URL: | http://d.repec.org/n?u=RePEc:trt:disawp:1006&r=com |