nep-ind New Economics Papers
on Industrial Organization
Issue of 2010‒03‒20
two papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Mathematical Properties of a Combined Cournot-Stackelberg model. By Fabio Tramontana; Laura Gardini; Tönu Puu
  2. Mergers and sequential innovation: evidence from patent citations By Jessica C. Stahl

  1. By: Fabio Tramontana (Department of Economics, University of Ancona, Italy); Laura Gardini (Department of Economics and Quantitative Methods, University of Urbino, Italy); Tönu Puu (CERUM, Umeå University, SE-90187 Umeå, Sweden)
    Abstract: The object of this work is to perform the global analysis of a new duopoly model which couples the two points of view of Cournot and Stackelberg. The Cournot model is assumed with isoelastic demand function and unit costs. The coupling leads to discontinuous reaction functions, whose bifurcations, mainly border collision bifurcations, are investigates as well as the global structure of the basins of attraction. In particular, new properties are shown, associated with the introduction of horizontal branches, which di¤er significantly when the constant value is zero or positive and small. The good behavior of the model with positive constant is proved, leading to stable cycles of any period.
    Keywords: Cournot-Stackelberg duopoly, Isoelastic demand function, Discontinuous reaction functions, Multistability, Border-collision bifurcations.
    JEL: C15 D24 D43
    Date: 2010
  2. By: Jessica C. Stahl
    Abstract: An extensive literature has investigated the effect of market structure on innovation. A persistent concern is that market structure may be endogenous to innovation. Firms may choose to merge so as to capture information spillovers or they may choose to merge so as to dampen competition in innovation. These two scenarios have very different welfare implications. This paper attempts to distinguish between the two scenarios empirically, looking at recent mergers among public companies in the United States. Using patent citation data, I find evidence that firms increase their rate of sequential innovation in the years preceding a merger, and reduce their rate of sequential innovation in the years following a merger. This suggests that mergers are motivated more by the desire to dampen competition than by the desire to capture information spillovers. I use citation-based measures of patent value to shed light on the welfare implications. The question is relevant for policy, as the FTC and DOJ frequently cite innovation as a reason for concern about a merger.
    Date: 2010

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