nep-com New Economics Papers
on Industrial Competition
Issue of 2014‒04‒05
five papers chosen by
Russell Pittman
US Government

  1. Using Quotas to Enhance Competition in Asymmetric Auctions: A Comparison of Theoretical and Experimental Outcomes By Daniel Hellersteina; Nathaniel Higginsa; Michael J. Roberts
  2. Screening for Good Patent Pools through Price Caps on Individual Licenses By Aleksandra Boutin
  3. Specialty Drug Prices and Utilization After Loss of U.S. Patent Exclusivity, 2001-2007 By Rena M. Conti; Ernst R. Berndt
  4. Elasticities of Supply for the US Natural Gas Market By Micaela Ponce; Anne Neumann
  5. Innovation in State-owned Enterprises: Reconsidering the Conventional Wisdom By Belloc, Filippo

  1. By: Daniel Hellersteina (USDA Economic Research Service); Nathaniel Higginsa (USDA Economic Research Service); Michael J. Roberts (Department of Economics, University of Hawaii at Manoa & Sea Grant)
    Abstract: We study multiple-unit asymmetric procurement auctions wherein sellers from two classes draw costs from dierent distributions. When sellers are asymmetric, a cost-minimizing buyer discriminates among classes of sellers to enhance competition [1]. Establishing a quota|a limit on the number of oers that can be accepted from any one class|discriminates simply and eectively. The quota increases demand scarcity from the perspective of low- cost sellers, which causes them to lower their oers. To solve for approximate equilibrium strategies of asymmetric auctions with and without a quota, we develop a new method that is similar but distinctly dierent from the constrained strategic equilibrium (CSE) approach [2]. The new method nds the constrained strategies that minimize the expected gain from a randomly chosen seller unilaterally deviating from the constrained strategy. We nd quota can enhance competition and lower total procurement cost. We subject the same auctions to laboratory testing and nd savings from quota in excess of that predicted by the approximate equilibrium strategies. This study is rst to combine theory and experimental evidence of auctions with quotas, though similar mechanisms are widely used in practice. Because the mechanism is widely used to promote social goals and can also lead to better outcomes for the buyer, our ndings have both positive and normative implications. One potentially interesting application of quota auctions would be for large-scale procurement of ecosystem services like carbon sequestration.
    Keywords: asymmetric auction, optimal auction, experimental auction, multi-unit auction
    JEL: D44 C63 C91
    Date: 2014–03
  2. By: Aleksandra Boutin
    Keywords: technology licensing; patent pools; substitutes and complements; independent licensing; price caps; joint marketing
    JEL: K11 K21 L12 L24 L41 M20
    Date: 2014–03
  3. By: Rena M. Conti; Ernst R. Berndt
    Abstract: We examine the impact of loss of U.S. patent exclusivity (LOE) on the prices and utilization of specialty drugs between 2001 and 2007. We limit our empirical cohort to drugs commonly used to treat cancer and base our analyses on nationally representative data from IMS Health. We begin by describing the average number of manufacturers entering specialty drugs following LOE. We observe the number of firms entering the production of newly generic specialty drugs ranges between two and five per molecule in the years following LOE. However, the existence of time-varying and unobservable contract manufacturing practices complicates the definition of "manufacturers" entering the market. We use pooled data methods to examine whether the neoclassical relationship between price declines and volume increases upon LOE holds among these drugs. First, we examine the extent to which estimated prices of these drugs undergoing LOE fall with generic entry. Second, we estimate reduced form random effect models of utilization subsequent to LOE. We observe substantial price erosion after generic entry; average monthly price declines appear to be larger among physician-administered drugs (38-46.4%) compared to oral drugs (25-26%). Additionally, we find average prices for drugs produced by branded firms rise and prices for drugs produced by generic firms fall upon LOE; the latter effect is particularly large among oral drugs. In pooled models, volume appears to increase following generic entry, but this result appears to be largely driven by oral drugs. Molecule characteristics, number of manufacturers and 2007Q4 revenues are significant predictors of post-2007 drug shortages. We discuss second best welfare consequences of these results.
    JEL: D04 I11 I18 L11 L65
    Date: 2014–03
  4. By: Micaela Ponce; Anne Neumann
    Abstract: In this paper we investigate natural gas producer's reactions to changes in market prices. We estimate price elasticities of aggregated supply in the most competitive market for natural gas: the United States. Using monthly time series data form 1987 to 2012 our analysis is based on an Autoregressive Distributed Lag (ARDL) Bound Cointegration approach to obtain short and long-run elasticities of natural gas supply. Results suggest that natural gas producers in a competitive market are not able to react to prices in the very short-run but respond inelastic in the long-run. These findings are not only of great value for policy makers but also for gas market modelers.
    Keywords: Elasticity of supply, natural gas, ARDL, ECM, competitive markets
    JEL: L95 Q41 C22 C32
    Date: 2014
  5. By: Belloc, Filippo
    Abstract: A very well established economic literature maintains that State-owned enterprises (SOEs) are inefficient comparatively to privately-owned ones (POEs). In this paper we argue that SOEs' inefficiency is not due to the State ownership per se, rather it is caused by some conditions other than ownership which SOEs often, but not necessarily, relate to. In particular, we focus on dynamic efficiency - specifically, the production of technological innovation - of SOEs in manufacturing industries, where SOEs should contend with POEs in a competitive environment. We suggest that targeted measures aimed at increasing managers' commitment to long-term investment strategies and at reducing corruption and political interference, though being complex and difficult to implement, can be much more (positively) incisive on long-run technical progress than the simple privatization of companies. This leaves room for exploration and implementation of policies that might reconcile State ownership and market competition in industrial sectors.
    Keywords: State-owned enterprises; innovation; privatization.
    JEL: H11 L33 O31 P12
    Date: 2013–11–01

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