nep-ind New Economics Papers
on Industrial Organization
Issue of 2016‒02‒12
four papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. Bidding for input in oligopoly By Roberto Burguet; Jozsef Sakovics
  2. Innovation Waves, Investor Sentiment, and Mergers By Dicks, David; Fulghieri, Paolo
  3. Patent litigation in Europe By Katrin Cremers; Max Ernicke; Fabian Gaessler; Dietmar Harhoff; Christian Helmers; Luke Mc Donagh; Paula Schliessler; Nicolas van Zeebroeck
  4. Technological Progress and Ownership Structure By Geng, Heng; Hau, Harald; Lai, Sandy

  1. By: Roberto Burguet; Jozsef Sakovics
    Abstract: We present a model where …firms producing substitutes bid for inputs (especially labor) in a decentralized market. We show that downstream market power increases the intensity of competition for input through a new channel: local competitive foreclosure. In our model each unit of input (worker) is sold in a separate local market and …rms try not just to get it, but also to keep it from their rivals. This externality leads to …firms targeting the same units of input and the price of these is bid up. This effect mitigates the output reducing effect of downstream market power and in the limit (linear Cournot with constant returns) can even restore efficiency. As a result of coordination, there exist further equilibria, with prices above cost even with price taking suppliers –in the labor application this leads to involuntary unemployment. When, instead of targeting, fi…rms post prices, coordination no longer plays a role and we have a unique(!) equilibrium that clears the market, still internalizing the externality. Finally, we show that targeting can also result in endogenous market segmentation and price/wage differentials.
    Keywords: competitive foreclosure, efficiency wage, involuntary unemployment, all-win auction
    JEL: D43 L11 L13
    Date: 2016–01–11
  2. By: Dicks, David; Fulghieri, Paolo
    Abstract: We develop a theory of innovation waves, investor sentiment, and merger activity based on uncertainty aversion. Investors must typically decide whether or not to fund an innovative project with very limited knowledge of the odds of success, a situation that is best described as "Knightian uncertainty." We show that uncertainty-averse investors are more optimistic on an innovation if they can also make contemporaneous investments in other innovative ventures. This means that uncertainty aversion makes investment in innovative projects strategic complements, which results in innovation waves. We also show that innovation waves may be sparked by favorable technological shocks in one sector, and then spill over to other contiguous sectors. Thus, innovation waves ripple through the economy amid strong investor sentiment. Finally, we argue that an active M&A market promotes innovative activity and leads to greater innovation rates and firm valuations.
    Keywords: ambiguity aversion; hot IPO markets; innovation
    JEL: G31 G32 G34
    Date: 2016–01
  3. By: Katrin Cremers; Max Ernicke; Fabian Gaessler; Dietmar Harhoff; Christian Helmers; Luke Mc Donagh; Paula Schliessler; Nicolas van Zeebroeck
    Abstract: We compare patent litigation cases across four European jurisdictions – Germany, France, the Netherlands, and the UK – covering cases filed during the period 2000-2008. For our analysis, we assemble a new dataset that contains detailed information at the case, litigant, and patent level for patent cases filed at the major courts in the four jurisdictions. We find substantial differences across jurisdictions in terms of case loads. Courts in Germany hear by far the largest number of cases in absolute terms, but also when taking country size into account. We also find important between-country differences in terms of outcomes, the share of cases that is appealed, as well as the characteristics of litigants and litigated patents. A considerable number of patents are litigated in multiple jurisdictions, but the majority of patents are subject to litigation only in one of the four jurisdictions.
    JEL: O34 K11 K41
    Date: 2016
  4. By: Geng, Heng; Hau, Harald; Lai, Sandy
    Abstract: Innovation processes under patent protection generate hold-up problems if complementary patents are owned by different firms. We show that in line with Hart and Moore (1990), shareholder ownership overlap across firms with patent complementarities helps mitigate such hold-up problems and correlates significantly with higher patent investment and more patent success as measured by future citations. The positive innovation effect is strongest for concentrated overlapping ownership and for the cases when the overlapping shareholders are dedicated investors.
    Keywords: hold-up problems; innovation; institutional ownership; patents
    JEL: G31 G32 L22
    Date: 2016–01

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