nep-ind New Economics Papers
on Industrial Organization
Issue of 2015‒11‒15
five papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Modeling Software Piracy Protection: Monopoly versus Duopoly By Kresimir Zigic; Jiri Strelicky; Michael Kunin
  2. Quality and Competition between Public and Private Firms By Liisa Laine; Ching-To Albert Ma
  3. Industrialisation, Innovation, Inclusion By Naude, Wim; Nagler, Paula
  4. Firms’economic crisis and firm exit: do intangibles matters? By A. Arrighetti; F. Landini; A. Lasagni
  5. Does Reference Pricing Drive Out Generic Competition in Pharmaceutical Markets? Evidence from a Policy Reform By Kurt R. Brekke; Chiara Canta; Odd Rune StraumeAuthor-Email: o.r.straume@eeg.uminho.p

  1. By: Kresimir Zigic; Jiri Strelicky; Michael Kunin
    Abstract: The economic analyses of software piracy typically rely on the simplifying assumption that the product is o¤ered by a single producer. We argue that a realistic description of the software market and associated economic aspects of software piracy might be also captured by studying competition between software developers. Using an illegal version of software violates intellectual property rights (IPR) and, due to public protection (such as copyrights), is punishable when discovered. If a developer nonetheless considers the level of piracy to be high, he may introduce his own private protection. The focus of our analysis is on the interaction between public and private IPR protection in the two market structures under considerations. We show that, unlike in cases of monopolies, there is no conflict of interest between the regulator and producers in duopoly setup. Moreover, unlike in a monopoly, the optimal public IPR protection in duopoly does not affect the developers' choice of software quality.
    Keywords: software piracy; private and public IPR protection; quality and competition effects; vertically differentiated duopoly;
    JEL: D43 L11 L21 O25 O34
    Date: 2015–10
    URL: http://d.repec.org/n?u=RePEc:cer:papers:wp551&r=ind
  2. By: Liisa Laine (Boston University and Dand School of Business and Economics, University of Jyvaskyla); Ching-To Albert Ma (Boston University)
    Abstract: We study a multi-stage, quality-price game between a public firm and a private firm. The market consists of a set of consumers who have different quality valuations. A public firm aims to maximize social surplus, whereas the private firm maximizes profit. In the first stage, both firms simultaneously choose qualities. In the second stage, both firms simultaneously choose prices. There are multiple equilibria. In some, the public firm chooses a low quality, and the private firm chooses a high quality. In others, the opposite is true. We characterize subgame perfect equilibria for general consumer valuation distributions and quality cost functions, and provide conditions for first-best equilibrium qualities. Various policy implications are drawn.
    Keywords: price-quality competition, quality, public firm, private firm
    JEL: D4 L1 L2 L3
    Date: 2015–06
    URL: http://d.repec.org/n?u=RePEc:bos:wpaper:wp2015-006&r=ind
  3. By: Naude, Wim; Nagler, Paula (UNU-MERIT)
    Abstract: Can industrialisation be socially inclusive? Is higher income inequality within and between countries the inevitable outcome of technology-driven industrial development? In this paper, prepared as background for the UNIDO's Industrial Development Report 2015, we examine the role of industrialisation and innovation in socially inclusive development. First, we define social inclusiveness and describe the relationship between technological innovation, structural change and social inclusiveness. Second, we discuss globalisation and technological innovation and their joint impact on income inequality. Third, we explore conditions under which technology-driven industrial development may be consistent with socially inclusive development. In our conclusions we emphasise the importance of education to enable workers to utilise technology, and of fiscal policies to strengthen the resilience of communities when rapid technological change causes disruptions in the labour market. Finally we argue that a 'social contract' between governments, their citizens and corporations is crucial for inclusive industrialisation.
    Keywords: Industrialisation, Inequality, Innovation, Labour, Manufacturing, Structural Change, Technology
    JEL: L16 L26 O14 O15 O33
    Date: 2015
    URL: http://d.repec.org/n?u=RePEc:unm:unumer:2015043&r=ind
  4. By: A. Arrighetti; F. Landini; A. Lasagni
    Abstract: The crisis regarding the Euro area has caused several business closures, especially in the periphery of the EMU. In this paper, we use an original Italian firm-level dataset to determine why firms exit the market during times of economic crisis, paying particular attention to the role of intangibles. We argue that intangibles strengthen a firm’s resilience, which improves the firm’s ability to cope with adverse events and unexpected shocks. We obtain two main results: first, we show that the presence of intangibles significantly reduces the probability of firm exit, especially during the initial phase of the crisis; second, we find that financial constraints become more relevant than intangibles in explaining firm exit during the later stages of the crisis. Thus, the process of firm selection during the crisis has undergone a rapid transformation, with distortions that may lead even skilled firms to exit. Implications of these findings for EU recovery policies are discussed.
    Keywords: intangibles, firm exit, EU crisis, industry dynamics
    JEL: D22 L21 L25 O32
    Date: 2015
    URL: http://d.repec.org/n?u=RePEc:par:dipeco:2015-ep04&r=ind
  5. By: Kurt R. Brekke (Department of Economics, Norwegian School of Economics); Chiara Canta (Department of Economics, Norwegian School of Economics); Odd Rune StraumeAuthor-Email: o.r.straume@eeg.uminho.p (Universidade do Minho - NIPE)
    Abstract: In this paper we study the impact of reference pricing (RP) on entry of generic firms in the pharmaceutical market. For given prices, RP increases generic firms' expected profit, but since RP also stimulates price competition, the impact on generic entry is theoretically ambiguous. In order to empirically test the effects of RP, we exploit a policy reform in Norway in 2005 that exposed a subset of drugs to RP. Having detailed product-level data for a wide set of substances from 2003 to 2013, we find that RP increased the number of generic drugs. We also find that RP increased market shares of generic drugs, reduced the prices of both branded and generic drugs, and led to a (weakly significant) decrease in total drug expenditures. The reduction in total expenditures was relatively smaller than the reduction in average prices, reflecting the fact that lower prices stimulated total demand.
    Keywords: Pharmaceuticals; Reference pricing; Generic entry
    JEL: I11 I18 L13 L65
    Date: 2015
    URL: http://d.repec.org/n?u=RePEc:nip:nipewp:6/2015&r=ind

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