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on Industrial Organization |
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Issue of 2006‒07‒02
three papers chosen by |
| By: | Boone,Jan (Tilburg University, Center for Economic Research) |
| Abstract: | Theoretical IO models of horizontal mergers and acquisitions make the critical assumption of efficiency gains. Without efficiency gains, these models predict either that mergers are not profitable or that mergers are welfare reducing. A problem here is the empirical observation that on average mergers do not create efficiency gains. We analyze mergers in a model where firms cannot equalize marginal costs and marginal revenues over all dimensions in their action space due to constraints. In this type of model mergers can still be profitable and welfare enhancing while they create a loss in efficiency. The merger allows a firm to relax constraints. Further, this set up is consistent with the following stylized facts on mergers and acquisitions: M&A's happen when new opportunities have opened up or industries have become more competitive (due to liberalization), they happen in waves, shareholders of the acquired firms gain while shareholders of the acquiring firms lose from the acquisition. Standard IO merger models do not explain these empirical observations. |
| Keywords: | Pro/anti-competitive mergers;efficiency defence;constraints;merger waves; deregulation |
| JEL: | G34 K21 L40 |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:kubcen:200660&r=ind |
| By: | Patrick Gaulé (Chaire en Economie et Management de l'Innovation, Ecole Polytechnique Fédérale de Lausanne) |
| Abstract: | We analyze the extent to which patent pools (agreements where patent holders agree to license their intellectual property as a package) could be used as an institution to facilitate technology transactions in biotechnology. Patent pools have been used with success in the consumer electronics and other sectors but they are untested in biotechnology despite their transaction cost reducing potential. We suggest two explanations for the fact that patent pools have not been used in this industry. The first is that the current antitrust requirements are difficult to meet in biotechnology. The second is the availability of simpler alternatives that will often be more profitable to patent holders: aggregation of rights by one party and cross-licensing. |
| Keywords: | patent pools, licensing, intellectual property management, biotechnology |
| JEL: | O32 O34 K11 K21 |
| Date: | 2006–04 |
| URL: | http://d.repec.org/n?u=RePEc:cmi:wpaper:cemi-report-2006-010&r=ind |
| By: | Martimort, D.; Poudou, J.-C.; Sand-Zantman, W. |
| Abstract: | This article analyzes the optimal contract design between an inventor and a developer. The inventor is privately informed on the value of his idea. The developer must exert some non-verifiable effort to improve the probability of success of this innovation but may also choose to opt out of the relationship upon learning the quality of the idea. While first-best efficiency requires that all marginal returns on innovation be left to the developer, second-best efficiency taking into account this bilateral asymmetric information leads to distort downwards the developer’s incentives to prevent innovators from overstating the value of their ideas. There exists a trade-off between inviting inventor to reveal their ideas and inducing both effort and participation from the developer. The extent of this trade-off depends on the regime of property rights on ideas, i.e., on how easy to steal ideas. Since decreasing the marginal share of developers makes it more difficult to have them participating to the contract, countervailing incentives might sometimes appear. Taking into account those various effects leads to reduce the responsiveness of the contract to the exact value of the idea and might force to give up additional rents to the developer. Some extensions of our framework, including the cases of limited commitment, partial disclosure and double moral hazard, are studied to show the robustness and limits of our previous findings. |
| Keywords: | Contracts, Innovation, Ideas Stealing, Bilateral Asymmetric Information |
| JEL: | D82 D86 L24 O31 |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:mop:lasrwp:2006.19&r=ind |