nep-ind New Economics Papers
on Industrial Organization
Issue of 2009‒04‒25
five papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Market Share, R&D Cooperation, and EU Competition Policy By Richard Rubble; Bruno Versaevel
  2. Optimal Collusion with Limited Severity Constraint By Etienne Billette De Villemeur; Laurent Flochel; Bruno Versaevel
  3. Entry in Collusive Markets: An Experimental Study By Goppelsroeder, Marie
  4. Sunk Entry Costs, Sunk Depreciation costs, and Industry Dynamics By Adelina Gschwandtner; Val E. Lambson
  5. Patent Pools and Cross-Licensing in the Shadow of Patent Litigation By Jay Pil Choi

  1. By: Richard Rubble (EMLYON Business School - EMLYON Business School); Bruno Versaevel (EMLYON Business School - EMLYON Business School, GATE - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - Ecole Normale Supérieure Lettres et Sciences Humaines)
    Abstract: Current EU policy exempts horizontal R&D agreements from antitrust con- cerns when the combined market shares of participants are low enough. This paper argues that existing theory does not support limiting the exemption to low market shares. This is done by introducing a set of non-innovating outside ï¬rms to the standard framework to assess what link might exist between the market share of innovating ï¬rms and the product market beneï¬ts of cooperation. With R&D output choices, the market share criterion, while it rules out the most socially harmful R&D cooperation agreements, also hinders the most beneï¬cial ones. With R&D input choices, cooperation may actually be desirable in concentrated industries, and harmful in more competitive ones. If R&D cooperation does have anti-competitive effects in product markets, it seems that these are therefore best addressed by other tools than market share criteria.
    Keywords: R&D; Cooperation; Competition; Regulation
    Date: 2009
    URL: http://d.repec.org/n?u=RePEc:hal:journl:halshs-00377541_v1&r=ind
  2. By: Etienne Billette De Villemeur (GREMAQ - Groupe de recherche en économie mathématique et quantitative - CNRS : UMR5604 - Université des Sciences Sociales - Toulouse I - Ecole des Hautes Etudes en Sciences Sociales); Laurent Flochel (CRA - Charles River Associates International - Charles River Associates International); Bruno Versaevel (GATE - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - Ecole Normale Supérieure Lettres et Sciences Humaines)
    Abstract: Collusion sustainability depends on ï¬rms' aptitude to impose sufficiently severe punishments in case of deviation from the collusive rule. We characterize the ability of oligopolistic ï¬rms to implement a collusive strategy when their ability to punish deviations over one or several periods is limited by a severity constraint. It captures all situations in which either structural conditions (the form of payoff functions), institutional circumstances (a regulation), or ï¬nancial considerations (proï¬tability requirements) set a lower bound to ï¬rms' losses. The model speciï¬cations encompass the structural assumptions (A1-A3) in Abreu (1986) [Journal of Economic Theory, 39, 191-225]. The optimal punishment scheme is characterized, and the expression of the lowest discount factor for which collusion can be sustained is computed, that both depend on the status of the severity constraint. This extends received results from the literature to a large class of models that include a severity constraint, and uncovers the role of structural parameters that facilitate collusion by relaxing the constraint.
    Keywords: Collusion ; Oligopoly ; Penal codes
    Date: 2009
    URL: http://d.repec.org/n?u=RePEc:hal:journl:halshs-00375798_v1&r=ind
  3. By: Goppelsroeder, Marie
    Abstract: In this paper we present an experiment in which we test the effects of sequential entry on the stability of collusion in oligopoly markets. Theoretical as well as experimental research suggests that a larger number of firms in an industry makes collusion harder to sustain. In this study, we explore to what extent collusion can be upheld with exogenous entry when groups start off small and when it is common knowledge that the entrant is informed about the history of her group prior to entry. We find that collusion is indeed easier to sustain in the latter case than in groups starting large. We conjecture that an implicit coordination problem is resolved more easily in a smaller group and that coordination, once it has been established, can be transferred to the enlarged group by means of a common code of conduct. Moreover, the results suggest that entrants emulate the behavior of their group upon entry.
    Keywords: Collusion; Entry; Experiments
    JEL: L13 C92 C72 L40
    Date: 2009–03–24
    URL: http://d.repec.org/n?u=RePEc:pra:mprapa:14707&r=ind
  4. By: Adelina Gschwandtner; Val E. Lambson
    Abstract: Dynamic competitive models of industry evolution predict higher variability of firm value over time and lower variability of firm activity over time in industries where sunk entry costs are higher. These predictions have done well empirically. Here we extend the theory to allow an additional category of sunk costs---depreciation---and argue that this generates countervailing effects. We test this assertion empirically and find the results are consistent with the theory.
    JEL: L00
    Date: 2009–03
    URL: http://d.repec.org/n?u=RePEc:vie:viennp:0902&r=ind
  5. By: Jay Pil Choi
    Abstract: This paper develops a framework to analyze the incentives to form a patent pool or engage in cross-licensing arrangements in the presence of uncertainty about the validity and coverage of patents that makes disputes inevitable. It analyzes the private incentives to litigate and compares them with the social incentives. It shows that pooling arrangements can have the effect of sheltering invalid patents from challenges. This result has an antitrust implication that patent pools should not be permitted until after patentees have challenged the validity of each otherfs patents if litigation costs are not too large.
    Date: 2009–03
    URL: http://d.repec.org/n?u=RePEc:hst:ghsdps:gd08-044&r=ind

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