nep-ind New Economics Papers
on Industrial Organization
Issue of 2013‒07‒15
seven papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Patent protection under endogenous product differentiation By Arijit Mukherjee
  2. Competition and the Efficiency of Markets for Technology By Allain, Marie-Laure; Henry, Emeric; Kyle, Margaret
  3. Production Standards, Competition and Vertical Relationship By Bouamra-Mechemache, Zohra; Jianye, Yu
  4. R&D, Within and Between Patent Competition in the Pharmaceutical Industry By Magazzini Laura; Fabio Pammolli
  5. Ex post or ex ante? On the optimal timing of merger control By Andreea Cosnita-Langlais; Jean-Philippe Tropeano
  6. Corporate Reputation and Social Media: A Game Theory Approach By Thierry Warin; Nathalie de Marcellis-Warin; William Sanger; Bertrand Nembot; Venus Hosseinali Mirza
  7. Competition and Innovation: An inverted-U relationship using Japanese industry data By YAGI Michiyuki; MANAGI Shunsuke

  1. By: Arijit Mukherjee (School of Business and Economics, Loughborough University, UK)
    Abstract: It is generally believed that a weak patent protection makes the consumers and the society better off compared to a strong patent protection by increasing the intensity of competition if the weak patent protection does not affect innovation. We show that this conclusion may not hold if the innovator can take other non-production strategies, such as product differentiation, to reduce the intensity of product-market competition. A weak patent protection may reduce consumer surplus and social welfare by inducing product differentiation by the innovator. We show that the type of product-market competition and the market demand function play important roles in this respect. Hence, there can be an argument for a strong patent protection even if it does not affect innovation.
    Keywords: Patent protection; Product differentiation; Welfare
    JEL: D21 D43 L13 O34
    Date: 2013–07
  2. By: Allain, Marie-Laure; Henry, Emeric; Kyle, Margaret
    Abstract: The sale of R&D projects through licensing facilitates the division of labor between research and development activities. This vertical specialization can improve the overall efficiency of the innovative process. However, these gains depend on the timing of the sale: the buyer of an R&D project should assume development at the stage at which he has an efficiency advantage. We show that in an environment where the seller is overconfident about the value of the project, she may delay the sale to the more efficient firm in order to provide verifiable information about its quality, though this delay implies higher total development costs for the project. We obtain a condition for the equilibrium timing of licensing and examine how factors such as the intensity of competition between potential buyers influence it. We show that a wide array of different explanations, based on differences in information, beliefs or risk profiles, lead to the same qualitative results. We present empirical evidence from pharmaceutical licensing contracts that is consistent with our theoretical predictions.
    Date: 2013–07
  3. By: Bouamra-Mechemache, Zohra; Jianye, Yu
    Abstract: This paper investigates the collective choice of production standards by farmer and pro- cessor groups within a vertical food supply chain, taking into account their competition behaviors. In a context in which raising standards cannot translate into a direct price premium to consumers, we develop a general model to analyze the strategic motive of us- ing standards to limit supply and shift rents among farmers and processors in the vertical chain. We find that such a motive depends on farmers’ cost structure, final demand char- acteristics, and processors’ competition patterns. In particular, farmers prefer a stringent standard when the standard involves creating greater diseconomies of scale in production and when the demand for the final product is inelastic. However, processors only prefer a stringent standard in the presence of oligopsony competition.
    Keywords: Production standards, Vertical relationship, Imperfect competition, Technology choice
    JEL: L13 Q13
    Date: 2013–04
  4. By: Magazzini Laura (Department of Economics, University of Verona); Fabio Pammolli (IMT Lucca Institute for Advanced Studies Author-Name: Massimo Riccaboni; IMT Lucca Institute for Advanced Studies)
    Abstract: : We analyse the consequences of the increasing complexity of R&D on within- and between-patent competition in the pharmaceutical industry. The intensity of competition is measured by jointly considering the timing from market launch to patent expiry, the strength of between-patent competition as well as competition introduced by generic producers. A simple model is proposed that predicts the shrinking of product lifetimes in the presence of correlated parallel R&D projects and market portfolios. The model is tested using data on pharmaceutical products sold in Europe and in the US. Based on our model we are able to estimate the impact of R&D complexity and relatedness among R&D portfolios on the value of innovative drugs.
    Keywords: Patent value, innovation, R&D competition, Pharmaceutical industry.
    JEL: D23 D83 O34 O31 L13
    Date: 2013–07
  5. By: Andreea Cosnita-Langlais; Jean-Philippe Tropeano
    Abstract: We study the optimal timing of merger control by comparing the pre-and post closing enforcement. Mergers have both pro- and anticompetitive e¤ects, and the parties(the agency and the merging …rms) veri…able information on them is endogenous: it depends on the timing of the merger control, as well as on some investment in evidence production. The ex post enforcement turns out optimal whenever the costs of providing veri…able information on both e¢ ciency gains and market power are su¢ ciently low, regardless of whether the …rms know ex ante or not their true merger type.
    Keywords: merger control, competition policy, evidence production
    JEL: L41 K21 D82
    Date: 2013
  6. By: Thierry Warin; Nathalie de Marcellis-Warin; William Sanger; Bertrand Nembot; Venus Hosseinali Mirza
    Abstract: Corporate reputation is more and more the most valuable asset for a firm. In this day and age, corporate reputation, although an intangible asset, is and will grow as the most essential asset to publicize and also protect. Social media are a formidable tool to publicize a firm's brand and improve its reputation. However, it can also be deadly. Associated with social media comes the "buzz", i.e. the means to spread at an unprecedented speed and scale any information, being true or false. In this paper, our aim is to propose a Game Theory approach with both a finite and an infinite horizon. The model presented here helps us evaluate the impact of social media on a firm's reputation. It also highlights the important parameters of a firm's reputation in this new digital era <P>
    Keywords: social media, social economics, brand tribalism, corporate reputation,
    JEL: L14 M14 M21 M31
    Date: 2013–07–01
  7. By: YAGI Michiyuki; MANAGI Shunsuke
    Abstract: This study replicates a model of Aghion et al. ("Competition and Innovation: An inverted-u relationship," <i>Quarterly Journal of Economics</i> 2005; 120(2):701-728), which suggests that an inverted-U relationship exists between competition and innovation. We apply patent data and a competition measure based on Japanese firm-level and industry-average data from 1964 to 2006. In a constant slope model using a full dataset, we find the same inverted-U relationship as did Aghion-Bloom-Blundell-Griffith-Howitt (ABBGH). In decade and industry fixed-effects slope models, we find the inverted-U relationship to be fragile.
    Date: 2013–07

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