nep-ind New Economics Papers
on Industrial Organization
Issue of 2011‒05‒30
six papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Does timing of decisions in a mixed duopoly matter? By Balogh, Tamás L.; Tasnádi, Attila
  2. Patent O¢ ce Governance and Patent System Quality By Pierre M. Picard; Bruno van Pottelsberghe de la Potterie
  3. Quality distortions in vertical relations By Baake, Pio; von Schlippenbach, Vanessa
  4. Ex-post assessment of merger effects: the case of Pfizer and Pharmacia (2003) By Leheyda, Nina; Beschorner, Patrick; Hüschelrath, Kai
  5. Merger Control in Ireland: Too Many Unnecessary Merger Notifications? By Gorecki, Paul K.
  6. Does Quality Make a Difference?: Employment Effects of High- and Low-Quality Start-Ups By Michael Fritsch; Alexandra Schroeter

  1. By: Balogh, Tamás L.; Tasnádi, Attila
    Abstract: We determine the endogenous order of moves in a mixed price-setting duopoly. In contrast to the existing literature on mixed oligopolies we establish the payoff equivalence of the games with an exogenously given order of moves. Hence, it does not matter whether one becomes a leader or a follower. We also establish that replacing a private firm by a public firm in the standard Bertrand-Edgeworth game with capacity constraints increases social welfare and that a pure-strategy equilibrium always exists.
    Keywords: Bertrand-Edgeworth; mixed duopoly; timing games
    JEL: L13 D43
    Date: 2011–05–19
    URL: http://d.repec.org/n?u=RePEc:pra:mprapa:30993&r=ind
  2. By: Pierre M. Picard (CREA, University of Luxembourg (Luxembourg), and CORE, Université catholique de Louvain (Belgium).); Bruno van Pottelsberghe de la Potterie (Université Libre de Bruxelles (ULB), SBS-EM, ECARES, CEB, DULBEA, CEPR and Bruegel)
    Abstract: The present paper discusses the role of quality in patent systems from the perspective of patent offices' behavior and organization. After documenting original stylized facts, the paper presents a model in which patent offices set patent fees and the quality level of their examination processes. Various objectives of patent offices' governors are considered. We show that the quality of the patent system is maximal for the patent offices that maximises either the social welfare or its own proffit. Quality is lower for the self-funded patent office maximizing the number of patent applications and even smaller for the self-funded patent office maximizing the number of granted patents. A labor union improves examination quality and may compensate for the potentialy inappropriate objectives of patent office management.
    Keywords: Patent system, quality, intellectual property, public firm organization
    JEL: L30 O30 O31 O34 O38
    Date: 2011
    URL: http://d.repec.org/n?u=RePEc:luc:wpaper:11-06&r=ind
  3. By: Baake, Pio; von Schlippenbach, Vanessa
    Abstract: This paper examines how delivery tariffs and private quality standards are determined in vertical relations that are subject to asymmetric information. We consider an infinitely repeated game where an upstream firm sells a product to a downstream firm. In each period, the firms negotiate a delivery contract comprising the quality of the good as well as a nonlinear tariff. Assuming asymmetric information about the actual quality of the product and focusing on incentive compatible contracts, we show that from the firms' perspective delivery contracts lead to more efficient contracts and thus higher overall profits the lower the firms' outside options, i.e. the higher their mutual dependency. Buyer power driven by a reduced outside option of the upstream firm enhances the efficiency of vertical relations, while buyer power due to an improved outside option of the downstream firm implies less effcient outcomes. --
    Keywords: Quality Uncertainty,Private Standards,Vertical Relations,Buyer Power
    JEL: D82 L14 L15
    Date: 2011
    URL: http://d.repec.org/n?u=RePEc:zbw:dicedp:18&r=ind
  4. By: Leheyda, Nina; Beschorner, Patrick; Hüschelrath, Kai
    Abstract: The paper studies the effects of the Pfizer and Pharmacia (2003) merger on competition in the Swiss pharmaceutical market and compares the assessment of the Swiss Competition Commission (COMCO) with the post-merger market developments. We find that the merger has had a miniscule impact on the Swiss pharmaceutical market. This has primarily to do with the fact that the product portfolios of both companies have shown no or only slight overlaps. In both cases of potential anticompetitive effects, the companies successfully proposed to divest some of their assets in order to prevent a further strengthening of their dominant position. The remedies included products in the development phase which were not available on the market at the time of the decision. In other markets in which either an overlapping of businesses of both companies existed or in which one of the merging entities held a dominant market position, no significant effects of the merger were noticed. This might have to do with both, existing price regulation in the Swiss drug industry and changes in Pfizer's product portfolio following the merger. Furthermore, with respect to other potentially interesting market characteristics such as investment behaviour, R&D, sales or employment, available data on global company level does not allow an isolation of the possible effects of the merger. --
    Keywords: mergers,ex-post evaluation,pharmaceutical markets
    JEL: K21 L42 L62
    Date: 2011
    URL: http://d.repec.org/n?u=RePEc:zbw:zewdip:11035&r=ind
  5. By: Gorecki, Paul K.
    Abstract: The market for corporate control plays an important role in ensuring that assets are deployed in an efficient and effective manner. However, on occasion, mergers might lead to a reduction in competition and a consequent rise in prices and/or other anticompetitive effects. The Competition Act 2002 provides that all mergers that meet certain financial thresholds must be notified to the Competition Authority in order that they are subject to a competitive effects assessment. However, there are concerns that the notification thresholds result in many mergers with little or no nexus to Ireland being notified. While it is the case that the vast majority of merger notifications do not raise competition concerns, Ireland is not out of line with other jurisdictions which have mandatory notification thresholds such as the EU and the US. Nevertheless, that should not lead to complacency. The paper quantifies the impact of reforms made in 2006 and 2007 by the Competition Authority and the Minister of Enterprise, Trade and Employment to the merger notification thresholds. The evidence suggests that these tighter better specified thresholds led to a reduction of at least 40-50 per cent in the number of merger notifications. However, more could be done, albeit probably to a lesser extent than the earlier reforms. Applying the International Competition Network's Recommended Practices for Merger Notification Procedures, a series of proposals are made in the paper for revising the merger notification thresholds to better select mergers with a nexus to Ireland. Such moves should facilitate a more effective and efficient market for merger control by reducing transaction costs involved in the merger process as well as allowing Competition Authority resources to be deployed elsewhere, a not inconsiderable advantage in a period of austerity.
    Keywords: Ireland/MERGERS/competition/competition act/US/employment/cost
    Date: 2011–04
    URL: http://d.repec.org/n?u=RePEc:esr:wpaper:wp383&r=ind
  6. By: Michael Fritsch; Alexandra Schroeter
    Abstract: This paper investigates the impact of new firms' quality on the magnitude of their employment effects. Our results clearly show that the quality of start-ups, measured by their affiliation with sectors and innovative industries, strongly influences the direct and the overall employment contribution of new firms. In particular, start-ups in manufacturing industries generate larger direct and overall growth effects than those in services. Moreover, new businesses in innovative manufacturing and in knowledge-intensive service industries make a larger direct contribution to employment than start-ups affiliated with other industries. We also find a relatively strong overall effect of new business formation in knowledge-intensive service industries. However, the impact of start-ups in innovative manufacturing industries on overall regional employment growth is not statistically significant, which may be mainly due to their rather small share in all start-ups and because they impact more on firms and employment in other regions than do start-ups in non-innovative manufacturing. Finally, we discuss the implications for entrepreneurship policy that can be derived from our findings.
    Keywords: Entrepreneurship, new business formation, innovative industries, regional development, entrepreneurship policy
    JEL: L26 M13 O1 O18 R11
    Date: 2011
    URL: http://d.repec.org/n?u=RePEc:diw:diwwpp:dp1128&r=ind

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