nep-ind New Economics Papers
on Industrial Organization
Issue of 2014‒03‒08
six papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Monopolistic competition under uncertainty By Shapoval Aleksander; Goncharenko Vasiliy
  2. The Firm Size Distribution across Countries and Skill-Biased Change in Entrepreneurial Technology By Poschke, Markus
  3. Imperfect competition, government spending and estimated markup By Ali Abcha
  4. Measuring Manufacturing: How the Computer and Semiconductor Industries Affect the Numbers and Perceptions By Susan N. Houseman; Timothy J. Bartik; Timothy J. Sturgeon
  5. Mergers and the Incentives to Undertake Product Innovation Oriented R&D: First Steps Towards an Assessment Approach By Benjamin Rene Kern; Juan Manuel Mantilla Contreras
  6. The Impact of R&D Cooperations on Drug Variety Offered on the Market. Evidence from the Pharmaceutical Industry By Tannista Banerjee; Ralph Siebert

  1. By: Shapoval Aleksander; Goncharenko Vasiliy
    Abstract: Inspired by advances in general equilibrium modelling with monopolistic competition were-consider the problem of the choice of firms under uncertainty, explore it in the framework of general equilibrium modelling, and develop a theory of monopolistic competition under demand uncertainty. We distinguish between two cases of uncertainty. In the first case the uncertainty disappears by the moment of trade and the output but not the prices are chosen under uncertainty. Then the uncertainty is established not to affect the equilibrium. The trade under uncertainty, considered in the second case, causes market imperfetions. The supply is bigger (smaller) than the expected demand when the goods are good (bad) substitutes. In contrast to previous study, we show that uncertainty affects basically the prices and demand, but not the output.
    JEL: D81 D11 D41 L11
    Date: 2014–02–26
    URL: http://d.repec.org/n?u=RePEc:eer:wpalle:14/02e&r=ind
  2. By: Poschke, Markus (McGill University)
    Abstract: How and why does the firm size distribution differ across countries? Using two datasets covering more than 30 countries, this paper documents that several features of the firm size distribution are strongly associated with income per capita: the entrepreneurship rate and the fraction of small firms fall with per capita income across countries, while average firm employment, the median and higher percentiles of the firm size distribution, and the dispersion and skewness of employment all rise with per capita income. The paper broadens existing evidence on the first three facts to cover more countries and newly introduces the last three to the literature. It then proposes a simple theory of skill-biased change in entrepreneurial technology motivated by recent microeconomic literature that fits with the evidence. For this, it introduces two additional features into an otherwise standard occupational choice, heterogeneous firm model a la Lucas (1978): technological change does not benefit all potential entrepreneurs equally, and there is a positive relationship between an individual's potential payoffs in working and in entrepreneurship. If some firms consistently benefit more from technological progress than others, they stay closer to the frontier, while others fall behind. Because wages rise for all workers, marginal entrepreneurs exit and become workers. Quantitatively, the model fits both the U.S. time series experience and cross-country patterns well.
    Keywords: occupational choice, entrepreneurship, firm size, skill-biased technical change
    JEL: E24 J24 L11 L26 O30
    Date: 2014–02
    URL: http://d.repec.org/n?u=RePEc:iza:izadps:dp7991&r=ind
  3. By: Ali Abcha
    Abstract: This paper is an empirical study that aims at explaining economic fluctuations and behavior mark-up. Inspired by the method of Roeger (1995), we perform a study of four OECD countries (Denmark, Finland, Italy and the United States) for 17 manufacturing industries covering the period 1986-2008. This study provides a comparison between our estimates of mark-up and other observations on mark-up pricing (Oliveira, Scarpetta and Pilat (1996), Roger (1995) and Rotemberg and Woodford (1992)). It also provides an interpretation of the estimated markups that depend on the type of market structure. An application of a VAR model is used to examine the relationship between imperfect competition and the effects fiscal policy on output and mark-up, based on the method of Rotemberg and Woodford (1999).
    Keywords: Mark-up, Imperfect competition, Fiscal Policy
    JEL: E3 E62
    Date: 2014
    URL: http://d.repec.org/n?u=RePEc:drm:wpaper:2014-11&r=ind
  4. By: Susan N. Houseman (W.E. Upjohn Institute for Employment Research); Timothy J. Bartik (W.E. Upjohn Institute for Employment Research); Timothy J. Sturgeon (MIT)
    Abstract: Growth in U.S. manufacturing’s real value-added has exceeded that of aggregate GDP, except during recessions, leading many to conclude that the sector is healthy and that the 30 percent decline in manufacturing employment since 2000 is largely the consequence of automation. The robust growth in real manufacturing GDP, however, is driven by one industry segment: computers and electronic products. In most of manufacturing, real GDP growth has been weak or negative and productivity growth modest. The extraordinary real GDP growth in computer-related industries reflects prices for computers and semiconductors that, when adjusted for product quality improvements, are falling rapidly. Productivity growth in these industries, in turn, largely reflects product and process improvements from research and development, not automation. Although computer-related industries have driven growth in the manufacturing sector, production has shifted to Asia, and the U.S. trade deficit in these products has soared since the 1990s. The outsized effect computer-related industries have on manufacturing statistics also may distort economic relationships in the data and result in perverse research findings. Statistical agencies should take steps to assure that the influence that computer-related industries have on manufacturing-sector statistics is transparent to data users.
    Keywords: Manufacturing, computers, semiconductors, productivity, globalization, global value chains
    JEL: L60
    Date: 2014–02
    URL: http://d.repec.org/n?u=RePEc:upj:weupjo:14-209&r=ind
  5. By: Benjamin Rene Kern (University of Marburg); Juan Manuel Mantilla Contreras
    Abstract: The firms that compete with one another in terms of innovation do not necessarily coincide with the relevant competitors on pre-innovation product markets. As a consequence, the findings about the ambiguous interrelation between (product) market concentration and innovation cannot be transferred one-to-one to the interrelationship between innovation competition and innovation. By identifying and classifying the most relevant effects, which are decisive for the impact of mergers on the incentives to invest in product innovation oriented R&D, we will demonstrate that the interrelation between innovation competition and innovation is not always as unclear as it seems. Hence, by analyzing the model-theoretic industrial organization literature, this article aims to contribute to the discussion about the development of a decision theoretic assessment framework for analyzing the impact of mergers on innovation and is therefore also in line with the idea of a rule-based competition policy which is, from a law and economics perspective, ought to reduce error costs, give legal guidance and reduce legal uncertainty.
    JEL: K21 L12 L41 O31
    Date: 2014
    URL: http://d.repec.org/n?u=RePEc:mar:magkse:201417&r=ind
  6. By: Tannista Banerjee; Ralph Siebert
    Abstract: Our study puts special attention to the fact that R&D cooperations in the pharmaceutical industry are formed at different stages throughout the drug development process. We study if the timing to engage in R&D cooperations in the pharmaceutical industry has different impacts on the technology and product markets. Using a comprehensive dataset on the pharmaceutical industry, and estimating a heterogeneous treatment effects model (Heckman et al., 2006) our results show that R&D cooperations formed at the early stages increase the number of R&D projects and the number of drugs launched on the product market. Most interestingly, late stage R&D cooperations significantly reduce the number of drugs launched on the market, even though they increased firms’ activity in the technology markets. This result highlights the fact that firms re-optimize their drug development portfolio to avoid wasteful duplication and cannibalizing the sales of the jointly developed drug in R&D cooperations. Our study show that firms cooperating in late stage collaborations re-optimize their individual drug development portfolios, which significantly reduces the number of drugs offered on the market.
    Keywords: drug development, dynamics, co-development, pharmaceutical industry, product variety, product market competition, Research and Development cooperation
    JEL: L24 L25 L65 D22
    Date: 2014
    URL: http://d.repec.org/n?u=RePEc:ces:ceswps:_4567&r=ind

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