nep-hme New Economics Papers
on Heterodox Microeconomics
Issue of 2013‒06‒24
eleven papers chosen by
Frederic S. Lee
University of Missouri-Kansas City

  1. Inter-firm R&D networks in pharmaceutical biotechnology: What determines firm's centrality-based partnering capability By Krogmann, Yin; Riedel, Nadine; Schwalbe, Ulrich
  2. Do cartel breakdowns induce mergers? Evidence from EC cartel cases By Hüschelrath, Kai; Smuda, Florian
  3. From Smith to Schumpeter: A Theory of Take-Off and Convergence to Sustained Growth By Pietro F. Peretto
  4. Production Arrangements and Strategic Brand Level Competition in a Vertically Linked Market By Ahmad, Waseem; Anders, Sven; Marcoul, Philippe
  5. "Union Negotiation and Wage Inequality in Argentina: An Empirical Analysis of Recent Trends" By Juan Pedro Ronconi
  6. Product Downsizing and Hidden Price Increases: Evidence from Japan's Deflationary Period By Satoshi Imai; Tsutomu Watanabe
  7. Innovation for economic performance: The case of Latin American firms By Arias Ortiz, Elena; Crespi, Gustavo; Tacsir, Ezequiel; Vargas, Fernando; Zuniga, Pluvia
  8. New ethics for economics? By Krieger-Boden, Christiane
  9. Do pay-as-bid auctions favor collusion? Evidence from Germany's market for reserve power By Heim, Sven; Götz, Georg
  10. Stability in Organic Milk Farm Prices: A Comparative Study By Su, Ye; Brown, Scott; Cook, Michael
  11. How Firms Respond to Business Cycles: The Role of Firm Age and Firm Size By Teresa C. Fort; John Haltiwanger; Ron S. Jarmin; Javier Miranda

  1. By: Krogmann, Yin; Riedel, Nadine; Schwalbe, Ulrich
    Abstract: This paper analyses the inter-firm R&D network formed in the pharmaceutical biotechnology industry during the 1990s from different perspectives: theoretical network formation, firm's structural positions and its collaborations at the entire network level, and the determinants for firm's centrality-based partnering capability. The results indicate that pharmaceutical biotechnology industry has experienced a significant evolutional change in size and structure during 1991-1998. By considering individual structural positions, the descriptive statistics show that in the 1990s, established pharmaceutical companies developed into dominant star players with multiple partnerships while holding central roles in the R&D network. In the network analysis that emphasized aggregate network level, the degree-based and betweenness-based network centralization were not high implying that the distribution of overall positional advantages in the pharmaceutical biotechnology industry is, to a large degree, not unequal and even though most firms in this sector are linked to the R&D network, some of them are more active than others. The current analysis also shows that firm's efficiency, firm's dependency on its complementary resources and firm's experiences at managing partnerships are important determinants for firm's centrality-based partnering capability, which has important managerial implications for understanding firm's strategic partnering behaviour. --
    Keywords: Inter-firm cooperation,R&D partnerships,Network formation,Social network analysis,Instrumental variable
    JEL: C12 C36 D85 L24 L65 O32
    Date: 2013
  2. By: Hüschelrath, Kai; Smuda, Florian
    Abstract: We investigate the impact of cartel breakdowns on merger activity. Merging information on cartel cases decided by the European Commission (EC) between 2000 and 2011 with a detailed data set of worldwide merger activity, we find that, first, the average number of all merger transactions increase by up to 51 percent when comparing the three years before the cartel breakdowns with the three years afterwards. Second, for the subset of horizontal mergers, merger activity is found to increase even more - by up to 83 percent - after the cartel breakdowns. Our results not only suggest that competition authorities should consider mergers as potential 'second-best' alternative to cartels but also imply that resource (re)allocations in competition authorities, law practices and economic consultancies may become necessary to handle the increase in merger cases. --
    Keywords: antitrust policy,cartels,mergers,cartel breakdown,European Union
    JEL: L41 K21
    Date: 2013
  3. By: Pietro F. Peretto
    Abstract: This paper develops a theory of the emergence of modern innovation-driven Schumpeterian growth. It uses a tractable model that yields a closed-form solution, consisting of an S-shaped (i.e., logistic-like) time path of firm size and a set of equations that express the relevant endogenous variables – GDP, product variety and product quality, consumption, the shares of GDP earned by the factors of production – as functions of firm size. It also obtains closed-form solutions for the dates of the events that drive the economy's phase transitions as functions of the fundamentals. The resulting path of GDP per capita consists of a convex-concave profile replicating the key feature of long-run data: an accelerating phase followed by a deceleration with convergence to a stationary growth rate. Compared to other availables theories, the paper focuses on the within-industry forces that regulate the response of …firms and entrepreneurs to Smithian market expansion.
    Keywords: Endogenous Growth, Firm Size, Market Structure, Take-off
    JEL: E10 L16 O31 O40
    Date: 2013
  4. By: Ahmad, Waseem; Anders, Sven; Marcoul, Philippe
    Abstract: This paper develops and tests different theoretical models of competition in a vertically linked market assuming different production arrangements for retailer private label brands (PL). We then empirical estimate retailer manufacturer competitive behavior based on best-fit games and determine the impact of PL production arrangements on pricing strategies for PLs and NBs. Retailers are using different production arrangements to produce PL products. In fact, a retailer may own a production facility, a national brand manufacturer (NB) produces the PL product exclusively for the retailer or the retailer outsources PL production to a non-NB manufacturer. These possible, different production arrangements can have significant implications for the competitive interactions and market outcomes between retailers and NB manufacturers. Existing economic literature has identified a significant degree of variation in the type of competitive interactions across grocery product categories. However, the majority empirical studies in IO have typically imposed assumptions about the nature of vertical production arrangement without formally and explicitly investigating the nature of PL-NB competitive interaction under different production arrangements. The analysis builds on the Non-Nested Model Comparison (NNMC) approach and employs weekly store-level retail scanner data, for a major North American retail chain. The findings from different theoretical models and their empirical application reveal that no consistent pattern of competitive interactions exists between PLs and NBs across different food product categories. Competitive patterns and outcomes vary depending on the nature of the PL production arrangement. Our study contributes to the IO literature by being the first to consistently derive and estimate the impact of PL production arrangement on brand-level competition.
    Keywords: Competition, Bertrand Nash, Stackelberg leader follower, Non-Nested Model Comparison, Canadian retail level, Private label, National brand, Production arrangements, Consumer/Household Economics, Marketing, Production Economics,
    Date: 2013
  5. By: Juan Pedro Ronconi (Universidad de San Andrés)
    Abstract: In conjunction with the recovery of the Argentine economy between 2003 and 2011, income distribution improved considerably. Though it does not provide a quantitative assessment, the relevant literature points to the resurgence of union negotiation as central to this process. This paper provides an account of the evolution of intra-union and inter-union inequality in basic wage agreements signed during this period, and reveals considerable improvements in both. The second part of the paper studies the behavior of the Federación de Camioneros (Truckers’ Federation) and its role in wage negotiations during the same period.
    Date: 2013–06
  6. By: Satoshi Imai (Statistics Bureau of Japan); Tsutomu Watanabe (The University of Tokyo)
    Abstract: Consumer price inflation in Japan has been below zero since the mid-1990s. Given this, it is difficult for firms to raise product prices in response to an increase in marginal cost. One pricing strategy firms have taken in this situation is to reduce the size or the weight of a product while leaving the price more or less unchanged, thereby raising the effective price. In this paper, we empirically examine the extent to which product downsizing occurred in Japan as well as the effects of product downsizing on prices and quantities sold. Using scanner data on prices and quantities for all products sold at about 200 supermarkets over the last ten years, we find that about one third of product replacements that occurred in our sample period were accompanied by a size/weight reduction. The number of product replacements with downsizing has been at a high level since 2007. We also find that prices declined more for product replacements that involved a larger decline in size or weight. Our regression result shows that a 1 percentage point larger size/weight reduction is associated with a 0.45 percentage point larger price decline. Finally, we show that the quantities sold decline with product downsizing, and that the responsiveness of quantity changes to size/weight changes is almost the same as the price elasticity, indicating that consumers are sensitive to size/weight changes as they are to price changes. It implies that quality adjustments based on per-unit prices, which are widely adopted by statistical agencies in various countries, may be an appropriate way to deal with product downsizing.
    Date: 2013–06
  7. By: Arias Ortiz, Elena (Education Division, Inter-American Development Bank); Crespi, Gustavo (Competitiveness and Innovation Division, Inter-American Development Bank); Tacsir, Ezequiel (UNU-MERIT / MGSoG, and Competitiveness and Innovation Division, Inter-American Development Bank); Vargas, Fernando (Competitiveness and Innovation Division, Inter-American Development Bank); Zuniga, Pluvia (UNU-MERIT / MGSoG)
    Abstract: In this paper, a wide range of innovation indicators are analysed in order to describe the innovation behaviour of manufacturing firms in LAC using the recently released Enterprise Surveys 2010. The Enterprise Surveys define innovation rates as the share of firms introducing product and process innovations. The survey also measures the proportion of firms investing in research and development (R&D) and filing for intellectual property rights (IPRs). The aim of this note is to understand the main characteristics of innovative firms and to gather new evidence with regard to the nature of the innovation process in the region. Statistics about the performance of LAC firms are provided using different types of indicators to measure firms' innovative behaviour. In particular, differences in innovation performance and effort by country, sector, and key firm characteristics, such as being a multinational or exporter, are explored. Those firms in LAC that are top R&D performers are identified, and the analysis closes with an exploration of firm characteristics that strongly correlate with the probability of being a top R&D performer in the region.
    Keywords: innovation, research and development, Latin America, enterprise surveys
    JEL: D22 O31 O33 O34
    Date: 2013
  8. By: Krieger-Boden, Christiane
    Abstract: [Introduction] In autumn and winter 2011, more or less out of a sudden, the movement 'Occupy Wall Street' arose and almost immediately attracted an amazing amount of public attention. Young people in New York, Baltimore, California, Madrid, Frankfurt and Zurich started bristling at a loss of decency and morals in economic processes, at growing inequality, at lacking justice regarding gains and merits, and at the destabilization of the globalized economy by unleashed financial markets. Meanwhile, the excitement surrounding the 'Occupy' movement has abated largely. Still, certain renewed resentment against capitalism, in general, and against the rules assumed to guide our economic system, in particular, has risen in the public, and has echoed into the mainstream of economic science. Within the economic discipline, a hot debate on the paradigm of economic theory has unfolded. While this debate is not free of unspoken allegations and silent misunderstandings, e.g., as to what actually is the paradigm that should be debated, still it seems fair to state that the discipline is on the move, perhaps more fundamentally than ever within at least the last twenty years. (...) --
    Date: 2013
  9. By: Heim, Sven; Götz, Georg
    Abstract: We analyze a drastic price increase in the German auction market for reserve power, which did not appear to be driven by increased costs. Studying the market structure and individual bidding strategies, we find evidence for collusive behavior in an environment with repeated auctions, pivotal suppliers and inelastic demand. The price increase can be traced back to an abuse of the auction's pay-as-bid mechanism by the two largest firms. In contrast to theoretical findings, we show that pay-as-bid auctions do not necessarily reduce incentives for strategic capacity withholding and collusive behavior, but can even increase them. --
    Keywords: Auctions,Collusion,Market Power,Energy Markets,Reserve Power,Balancing Power
    JEL: D43 D44 L11 L13
    Date: 2013
  10. By: Su, Ye; Brown, Scott; Cook, Michael
    Abstract: The organic milk pay price is more stable year round and increases every year. However, the conventional milk price varies within the year and from year to year. As an emerging segment of the milk industry, consumer demand for organic milk is increasing rapidly. The growth in demand relative to supply provides organic milk producers and processors large premiums over the conventional milk price. Many conventional dairy farms have converted to organic operations for the more stable price. The objective of this study is to understand the stability of organic milk price relative to conventional milk price, differences in pricing mechanisms between organic milk and conventional milk, and shed light on the policy implications for organic milk and conventional milk markets. Farm price and retail price of organic milk and conventional milk are compared and analyzed. The comparative stability and volatility of the farm and retail price of organic milk and conventional milk are investigated. Seasonality and volatility of milk price are examined. The supply and demand patterns and profit margins are compared between conventional and organic milk. Additionally, we explore the market structures of the organic milk industry. Our analysis develops hypothesis for future work on the organic milk pay price phenomenon.
    Keywords: Demand and Price Analysis, Livestock Production/Industries, Productivity Analysis,
    Date: 2013
  11. By: Teresa C. Fort; John Haltiwanger; Ron S. Jarmin; Javier Miranda
    Abstract: There remains considerable debate in the theoretical and empirical literature about the differences in the cyclical dynamics of firms by firm size. This paper contributes to the debate in two ways. First, the key distinction between firm size and firm age is introduced. The evidence presented in this paper shows that young businesses (that are typically small) exhibit very different cyclical dynamics than small/older businesses. The second contribution is to present evidence and explore explanations for the finding that young/small businesses were hit especially hard in the Great Recession. The collapse in housing prices accounts for a significant part of the large decline of young/small businesses in the Great Recession.
    Date: 2013–06

This nep-hme issue is ©2013 by Frederic S. Lee. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.