nep-ind New Economics Papers
on Industrial Organization
Issue of 2014‒08‒02
three papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Relative profit maximization in asymmetric oligopoly By Satoh, Atsuhiro; Tanaka, Yasuhito
  2. Supplier Innovation in the Presence of Buyer Power By Zhiqi Chen
  3. Optimal bid disclosure in license auctions with downstream interaction By Fan, Cuihong; Jun, Byoung Heon; Wolfstetter, Elmar G.

  1. By: Satoh, Atsuhiro; Tanaka, Yasuhito
    Abstract: We analyze Bertrand and Cournot equilibria in an asymmetric oligopoly in which the firms produce differentiated substitutable goods and seek to maximize their relative profits instead of their absolute profits. Assuming linear demand functions and constant marginal costs we show the following results. If the marginal cost of a firm is lower (higher) than the average marginal cost over the industry, its output at the Bertrand equilibrium is larger (smaller) than that at the Cournot equilibrium, and the price of its good at the Bertrand equilibrium is lower (higher) than that at the Cournot equilibrium.
    Keywords: relative profit maximization, asymmetric oligopoly, Cournot and Bertrand equilibria
    JEL: D43 L13
    Date: 2014–07–27
    URL: http://d.repec.org/n?u=RePEc:pra:mprapa:57598&r=ind
  2. By: Zhiqi Chen (Department of Economics, Carleton University)
    Abstract: A theoretical framework is constructed to derive general conditions under which increased buyer power weakens or strengthens a supplier’s incentive to innovate. These conditions are then applied to two sets of specific models: one on product innovation and the other on process innovation. The analysis shows that the effects of buyer power depend on the type of innovation, the source of buyer power, and the channel through which buyer power manifests itself. It identifies circumstances under which an increase in buyer power has a negative, positive or zero impact on innovation. The welfare consequences of buyer power are also investigated.
    Keywords: Buyer power, innovation, product variety
    JEL: L1 L4
    Date: 2014–05–14
    URL: http://d.repec.org/n?u=RePEc:car:carecp:14-03&r=ind
  3. By: Fan, Cuihong; Jun, Byoung Heon; Wolfstetter, Elmar G.
    Abstract: The literature on license auctions for process innovations in oligopoly assumed that the auctioneer reveals the winning bid and stressed that this gives firms an incentive to signal strength through their bids, to the benefit of the innovator. In the present paper we examine whether revealing the winning bid is optimal. We consider three disclosure rules: full, partial, and no disclosure of bids, which correspond to standard auctions. We show that more information disclosure increases the total surplus divided between firms and the innovator as well as social surplus. More disclosure also increases bidders’ payoff. However, no disclosure maximizes the innovator’s expected revenue.
    Keywords: Auctions; innovation; licensing; information sharing.
    JEL: D21 D43 D44 D45
    Date: 2014–07
    URL: http://d.repec.org/n?u=RePEc:trf:wpaper:467&r=ind

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