nep-com New Economics Papers
on Industrial Competition
Issue of 2011‒06‒04
ten papers chosen by
Russell Pittman
US Department of Justice

  1. Welfare Analysis of Free Entry in a Dynamic General Equilibrium Model By Koichi Futagami; Tatsuro Iwaisako; Makoto Okamura
  2. Efficiency Considerations in Merger Regulation (Japanese) By KAWAHAMA Noboru; TAKEDA Kuninobu
  3. Per-Unit Royalty vs Fixed Fee: The Case of Weak Patents By Rabah Amir; David Encaoua; Yassine Lefouili
  4. Patent and Knowhow Licensing in Japan (Japanese) By NISHIMURA Junichi; OKADA Yosuke
  5. An Analysis of Transaction and Joint-Patent Application Networks (Japanese) By INOUE Hiroyasu; TAMADA Schumpeter
  6. Do domestic and cross-border M&As differ? Cross-country evidence from the banking sector By Caiazza, Stefano; Pozzolo, Alberto Franco; Trovato, Giovanni
  7. Profit, Cost and Scale Efficiency for Latin American Banks: Concentration-Performance Relationship By Benjamin M. Tabak; Dimas M. Fazio; Daniel O. Cajueiro
  8. The Impact of the New York State Retail Milk Price Regulation on Farm-to-Retail Price Transmission and Supermarket Pricing Strategies in Metropolitan Fluid Milk Markets By Bolotova, Yuliya; Novakovic, Andrew
  9. Enhancing the Efficiency of Water Supply: Product Market Competition versus Trade By Föllmi, Reto; Meister, Urs
  10. Survey evidence on wage and price setting in Estonia By Aurelijus Dabušinskas; Tairi Rõõm

  1. By: Koichi Futagami (Graduate School of Economics, Osaka University); Tatsuro Iwaisako (Graduate School of Economics, Osaka University); Makoto Okamura (Economics Department, Hiroshima University)
    Abstract: This paper presents a welfare analysis of free entry equilibrium in dynamic general equilibrium environments with oligopolistic competition. First, we show that a marginal decrease in the number of firms at the free entry equilibrium improves social welfare. Second, we show that if a government can control the number of entrants intertemporally so as to maximize the level of social welfare, the number of entrants under free entry may be less than the second-best number of entrants. Capital accumulation plays an important role in determining whether excess entry occurs.
    Keywords: Excess entry; Oligopolistic competition; Dynamic general equilibrium
    JEL: D43 L50 O41
    Date: 2011–05
  2. By: KAWAHAMA Noboru; TAKEDA Kuninobu
    Abstract: How is merger-generating efficiency dealt with in antitrust regulation? The Japan Fair Trade Commission (JFTC) presents a consumer welfare standard, which focuses on the change of consumer welfare in evaluating efficiency. Guidelines of U.S. antitrust law and those of EU competition law support this standard as well, and the experience in Canadian competition law reveals the difficulty of applying a total welfare standard. In this paper, we examine the possibility of convergence between market power analysis and efficiency consideration under the consumer welfare standard. Based upon that, we propose a modified consumer welfare standard, under which welfare can be traded off among consumers.
    Date: 2011–03
  3. By: Rabah Amir (University of Arizona - University of Arizona); David Encaoua (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris); Yassine Lefouili (GREMAQ - Groupe de recherche en économie mathématique et quantitative - CNRS : UMR5604 - Université des Sciences Sociales - Toulouse I - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - INRA : UMR)
    Abstract: This paper explores a licensor's choice between charging a per-unit royalty or a …fixed fee when her innovation is covered by a weak patent, i.e. a patent that is likely to be invali- dated by a court if challenged. Using a general model where the nature of competition is not speci…ed, we show that the patent holder prefers to use a per-unit royalty scheme if the strategic e¤ect of an increase in a potential licensee's unit cost on the aggregate equi- librium pro…t is positive. To show the mildness of the latter condition, we establish that it holds in a Cournot (resp. Bertrand) oligopoly with homegenous (resp. heterogenous) products under very general assumptions on the demands faced by …rms. As a byproduct of our analysis, we contribute to the oligopoly literature by o¤ering some new insights of independent interest regarding the e¤ects of cost variations on Cournot and Bertrand equilibria.
    Keywords: Keywords: Licensing Schemes, Weak Patents, Patent Litigation.
    Date: 2011–02
  4. By: NISHIMURA Junichi; OKADA Yosuke
    Abstract: Over the past two decades, utilizing markets for technology through licensing and other outsourcing arrangements has emerged as a key to organizing innovative activity. We examine how the rent dissipation effect affects patent and knowhow licensing, controlling organizational capabilities such as firm size, vertical integration, exports, and diversity. A licensor's profit varies and the incentives to license change depending on the rent dissipation effect, which erodes a licensor's profit due to intensifying competition that results from a licensee's entry into the licensor's market. Firms faced with severe competition are marginally exposed to a small rent dissipation effect when licensing their technologies out to rivals, and they can obtain large royalty revenues through such licensing because there are many potential licensees. Using panel data on about ten thousand Japanese firms for the period 1995-2007, we show that the rent dissipation effect facilitates licensing not only between Japanese firms but also between Japanese and foreign firms.
    Date: 2011–02
  5. By: INOUE Hiroyasu; TAMADA Schumpeter
    Abstract: Many firms these days, forced by increasing international competition and an unstable economy, are opting to specialize rather than generalize as a way of maintaining their competitiveness. Consequently, firms cannot rely solely on themselves, but must cooperate by combining their advantages.<br /><br />To obtain the actual conditions for this cooperation, a multi-layered network based on two different types of data was investigated. The first type was transaction data from Japanese firms. The network created from the data included 961,363 firms and 7,808,760 links. The second type of data was from joint-patent applications in Japan. The joint-patent application network included 54,197 nodes and 154,205 links. These two networks were merged into one network. We analyzed the data from the viewpoint of input-output tables, the ERG model, and Bayesian networks.
    Date: 2011–03
  6. By: Caiazza, Stefano; Pozzolo, Alberto Franco; Trovato, Giovanni
    Abstract: Are the drivers of domestic and cross-border M&As in the banking sector different? Despite the intense research on bank M&As in the last decade, the attention paid to this issue is surprisingly limited. We fill this gap studying the ex-ante determinants of national and international acquisitions in the banking sector in an unbalanced panel of nearly 1,000 banks from 50 world countries, from 1992 to 2007. Our results show that size and profitability have a stronger impact on the probability that a bank is a bidder in a cross-border deal than in a domestic deal. Consistent with the findings of the literature on the determinants of the internationalization of manufacturing firms, international expansion in the banking sector is therefore easier for countries with a number of large “national championsâ€, that are more capable to overcome the fixed costs of internationalization and have a stronger incentive to diversify the idiosyncratic risks of their domestic activities.
    Keywords: M&As, bank internationalization
    JEL: G15 G34 G34
    Date: 2011–05–19
  7. By: Benjamin M. Tabak; Dimas M. Fazio; Daniel O. Cajueiro
    Abstract: Using a sample of 495 Latin American banks over the period 2001-2008, this paper investigates how bank concentration influences cost and profit efficiency. We calculate scale efficiency to assess whether these banks are close to their optimal size. We find that banks are more inefficient in profits than in costs; concentration impairs cost efficiency; larger banks have higher performance, but this advantage decreases in concentrated markets; private and foreign banks are the most efficient; most banks are operating under increasing returns of scale, which contributes to the discussion on Basel III.
    Date: 2011–05
  8. By: Bolotova, Yuliya; Novakovic, Andrew
    Abstract: The New York State Milk Price Gouging Law establishes that the retail prices of fluid milk products are not to exceed 200% of the prices that NYS milk processors py for Class I milk. The enforcement of this law significantly affected the nature of the Class I fluid milk price transmission process and the milk pricing strategies of supermarkets in the five largest cities in New York State: New York City, Albany, Syracuse, Buffalo and Rochester. During the pre-law period, supermarkets used a retail price-stabilization strategy, as evidenced by asymmetric Class I fluid milk price transmission. In contrast, supermarkets use a retail profit stabilization strategy during the law period. This variation of retail milk price control actually creates an institutional environment that facilitates cooperative conduct of supermarkets, acting in an oligopolistic market environment, which caused greater instability in retail milk prices. Differences in the competitive environments of each city impact the effects of the statewide law.
    Keywords: dairy, milk, price regulation, price transmission, asymmetric price response, food retailing, Agribusiness, Agricultural and Food Policy, Demand and Price Analysis, Industrial Organization, Marketing, Q11, Q13, Q18,
    Date: 2011
  9. By: Föllmi, Reto; Meister, Urs
    Abstract: In most developed countries, the provision of water is organized at a local level. The costs and tariffs vary significantly, even between adjacent water utilities. Such heterogeneity is an obvious indication of the sector’s overall inefficiency and stresses a need for institutional adjustments. We show that cooperation by water trade and the introduction of competition by common carriage between adjacent utilities are valuable alternatives to improve the industry’s efficiency, even when mergers are not feasible. Because both approaches require the physical connection of neighboring networks, they may have similar effects. This paper analyzes and compares the relevant welfare gains and shows that production efficiency and retail prices may differ depending on the initial cost differential, the application of regulations and the distribution of bargaining power. Using a theoretical model, we show that at higher initial production cost differentials, welfare is higher under competitive conditions, even in a lowerbound benchmark case without any regulation.
    Keywords: Water, Networks, Product-Market Competition, Trade, Bargaining.
    JEL: L95 L43 D21 Q25
    Date: 2011–05
  10. By: Aurelijus Dabušinskas; Tairi Rõõm
    Abstract: In this paper, we give a comprehensive overview of wage and price adjustment practices in Estonia, drawing from two managerial surveys which were conducted in autumn 2007 and summer 2009 within the framework of the Wage Dynamics Network (WDN), a joint research project by the Eurosystem/ESCB. Our discussion covers a broad range of results, including firm-level descriptive evidence for several institutional and structural characteristics of the Estonian economy such as unionisation and collective bargaining coverage, labour intensity of production, remuneration methods, product market competition, etc., and insights into the wage and price setting behaviour of Estonian firms. To illustrate this behaviour, we give an overview of the frequency and timing of wage and price changes; the extent of downward nominal and real wage rigidity; the determinants of wages paid to newly employed workers; and finally, the nature of firms\' adjustments to cost push and negative demand shocks
    Keywords: survey data, wage setting, price setting, Estonia
    JEL: E3 J3
    Date: 2011–05–27

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