nep-ind New Economics Papers
on Industrial Organization
Issue of 2007‒04‒14
two papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Dynamic R&D incentives with network externalities By Cerquera Dussán, Daniel
  2. VIP-room Contractual System of Macau’s Traditional Casino Industry By Wuyi Wang; William R. Eadington

  1. By: Cerquera Dussán, Daniel
    Abstract: This paper studies the incentives to undertake uncertain R&D initiatives in a dynamic duopoly network industry. It is shown that network externalities positively affect the incentives to invest in R&D. In the model, competition resembles a preemption race and, therefore, market performance implies an overinvestment in R&D in comparison with the social optimum. Moreover, network externalities have an important impact in the dynamic evolution of the industry. Although in the long-run a single firm dominates the market (i.e. wins the race), short-run competition is very fierce and concentrated on neck-and-neck technological configurations. This short-run competition is fiercer and longer, the higher the level of network externalities. Policy measures that increase technological diffusion (i.e. mandatory licensing), increase the level of competition and/or prolong the short-run competition have an important positive impact on consumer welfare and on firms’ R&D incentives.
    Keywords: Network externalities, Innovation, Imperfect Competition, Dynamic Games
    JEL: C73 D85 L13 O31
    Date: 2006
    URL: http://d.repec.org/n?u=RePEc:zbw:zewdip:5487&r=ind
  2. By: Wuyi Wang (Macau Polytechnic Institute); William R. Eadington (Department of Economics, University of Nevada, Reno)
    Abstract: This study provides a systematic analysis of the VIP-room contractual system of Macau’s traditional casino industry. It examines the system’s historical background, its organizational structure, its operational mechanisms, and its role in Macau’s casino industry. This analysis examines the evolving and likely future changes in the VIP-room sector—as well as the mass market sector—caused by the liberalization of Macau’s gaming laws in 2001 and the Free Individual Travelers Scheme, introduced by the Chinese government in 2003. This study develops a framework to explain how the two sectors’ market shares are determined by examining the economic and cultural forces at work. The existing structure of the VIP-room contractual system in Macau’s casino industry will not likely continue in its traditional way, and will be replaced by newly evolving systems consistent with the new competitive realities. However, the VIP business will likely continue in one form or another.
    Keywords: Regulation, gambling, casinos, Macau, baccarat
    JEL: L13 L51 L83
    Date: 2007–01
    URL: http://d.repec.org/n?u=RePEc:unr:wpaper:07-001&r=ind

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